<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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<TABLE>
<C> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 3, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________TO ____________
</TABLE>
COMMISSION FILE NUMBER 0-25848
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SLI, INC.
(Exact Name of Registrant as specified in its charter)
<TABLE>
<S> <C>
OKLAHOMA 73-1412000
(State of incorporation) (I.R.S. Employer Identification No.)
500 CHAPMAN STREET, CANTON, MASSACHUSETTS 02021
(Address of principal executive officers) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (781)828-2948
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SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
Common Stock, par value $.01 per share
(Title of Class)
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. No [ ]
As of January 3, 1999 there were 29,346,498 shares outstanding of the
registrant's Common Stock, par value $.01 per share, its only class of common
stock, and the aggregate market value of the Common Stock held by non-affiliates
of the registrant (approximately 14,000,000 shares) was approximately
$374,500,000, as computed by reference to the NYSE closing price of such common
equity, $26.75, as of the same date.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy statement pursuant to Section 14(a) of the Securities Exchange Act of
1934 for use in connection with the registrant's 1999 Annual Meeting of
Shareholders.
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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
The discussion in this Report 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 Report. Statements contained in this Report 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 1999 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 listed
below in "Risk Factors."
RISK FACTORS
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 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.
INTERNATIONAL OPERATIONS
At January 3, 1999, the Company had 31 manufacturing facilities, as well as
sales offices and distribution facilities in more than 30 countries and sells
its products worldwide. For Fiscal 1998, approximately 79% and 81% of the
Company's net sales and operating income, respectively, were 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.
FOREIGN CURRENCIES AND INTEREST RATE RISK
A significant amount of the Company's net sales are generated in foreign
currencies. For Fiscal 1998, approximately 60% of the Company's net sales were
denominated in European currencies, 21% in U.S. dollars, and the remaining 19%
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.
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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.
SOURCES OF RAW MATERIALS
For Fiscal 1998, 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. The joint
venture agreement automatically renews for a two-year term unless notice of
termination is provided by either party 12 months prior to the automatic renewal
date. The Osram agreement automatically renews for a one-year term unless notice
of termination is provided by either party 24 months prior to the automatic
renewal date. As of the date hereof, the Company has not received notice of
termination for either agreement. There can be no assurance that such agreements
will be renewed in the future. The termination of either agreement could have a
material adverse effect on the Company. The Company purchases certain of its
other raw materials, including plastic, metals, glass, copper, filaments, gases,
electrodes, electronic components, wire and resistors for use in the manufacture
of lamps, fixtures, ballasts and miniature lighting assemblies. All such raw
materials are readily available and are generally purchased from a variety of
independent, non-competing suppliers. Substantially all light emitting diodes
("LEDs") used by the Company in its miniature lighting assemblies are currently
imported from the Pacific Rim. The Company recently acquired a European company
primarily engaged in the production of LEDs which now supplies the Company with
a small portion of its LED requirements. 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.
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.
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. The loss of the services of Mr. Ward could have a material
adverse effect on the Company and may constitute a default under the Company's
revolving credit facility.
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OWNERSHIP AND SIGNIFICANT INFLUENCE OF PRINCIPAL SHAREHOLDERS
Mr. Ward and trusts established for members of his immediate family own in
the aggregate approximately 49% 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 for shares of Common Stock.
NO DIVIDENDS ANTICIPATED
The Company intends to retain all future earnings for use in the
development of its business and does not anticipate paying any cash dividends in
the foreseeable future. In addition, cash dividend payments are prohibited under
the terms of the Company's revolving credit facility until 2002.
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.
3
<PAGE> 5
PART I
ITEM 1. 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 20 acquisitions since 1992 as part of its growth strategy, with its
most significant acquisition, Sylvania Lighting International, B.V. ("SLI,
B.V.") being consummated in the year ended November 30, 1997 ("Fiscal 1997").
SLI, B.V. is the third largest lighting company in Europe and a major global
lighting company, which sells a variety of products in its principal markets
under recognized brand names, including Sylvania. 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.
Primarily as a result of the Company's acquisition strategy, net sales
increased from $94.2 million for the year ended December 1, 1996 ("Fiscal 1996")
to $773 million for the year ended January 3, 1999 ("Fiscal 1998"). In addition,
operating income increased from $18.5 million to $59.3 million over the same
period. For Fiscal 1998, approximately 79% and 81% of the Company's net sales
and operating income, respectively, were derived from operations outside the
United States and, the sale of lamps, fixtures and ballasts accounted for
approximately 51%, 23% and 10%, respectively, of total sales.
The Company offers 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). In addition, the Company
also operates the third largest U.S. lighting maintenance service provider.
The Company's strategy is to operate as a vertically integrated
manufacturer providing "one stop" lighting solutions for its customers' lighting
requirements by offering both discrete lighting components and value-added
integrated products. Through its acquisition of SLI, B.V., as well as several
niche businesses, the Company is able to offer its global customers extensive
design, engineering and manufacturing capabilities, while at the same time
providing local, responsive service. At January 3, 1999, the Company had 31
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.
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
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Company's product offerings and channels of distribution, (iii) provide
additional manufacturing facilities, (iv) access global markets, and/or (v)
effect cost reduction opportunities and other operational synergies. For
example, the acquisition of SLI, B.V., a large user of ballasts with no ballast
manufacturing capability, produced 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), to market and sell the Company's products worldwide.
Moreover, the Company's international operations have broad product lines of
consumer and industrial lamps and fixtures which the Company plans to market
domestically. In addition, the Company plans to aggressively market
complementary products such as ballasts which can be offered with linear and
compact fluorescent and HID lighting products manufactured by SLI, B.V.
Introduce New Lighting Technologies. Through the introduction of new
lighting technologies, the Company has been able to participate in the high
growth and high margin segment of the lighting market. Further, because lighting
products and the related manufacturing technology are becoming increasingly
sophisticated, the Company has sought to enhance its technological capabilities
in order to fulfill its customers' outsourcing and "just-in-time" requirements
and adjust to shifts in demand. Through the acquisition of various niche
businesses operating within the lighting industry, the Company's technological
expertise has expanded, thus enabling it to manufacture more sophisticated
products. As a result of its technical know-how, the Company believes that it
can expand its business by developing new products and entering new niche
markets in which it can be one of a few leading suppliers. For example, the
Company is currently exploring opportunities for the development and integration
of fiber optic products for the automotive, aviation and consumer markets.
Diversify Geographic Operations. An important element of the Company's
growth strategy is to continue to establish manufacturing operations in areas of
high customer density or where manufacturing efficiencies can be realized. The
Company's operations are currently located in the Americas, Europe and the
Pacific Rim. 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
position as a leading international 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
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power. Certain of these acquired businesses had been operating at significantly
lower margins than the Company's base business, resulting in a contraction of
consolidated margins.
Focus on Responsiveness and Quality. The Company's ability to conceive,
design and engineer new products in a short period of time is a significant
competitive advantage. Management has developed "Competency Centers" within its
manufacturing facilities to optimize the expertise of the Company's design,
engineering, manufacturing and technical sales support teams. In addition, the
Company has developed technology to monitor and control its production
performance. As a result of various quality initiatives, the Company has
achieved a preferred supplier designation for its miniature lighting products
from several of its OEM customers, including Q-1 certification from Ford Motor
Company and a Quality Excellence award from Chrysler Corp. In addition, certain
of the Company's facilities have received QS-9000, ISO 9001 and Euro-Net ISO
9000 and 9001 certifications. Such certifications in many instances are a
pre-requisite for contractual orders, particularly with large industrial users
of the Company's products.
ACQUISITIONS
The following table sets forth the 20 acquisitions which have been
consummated by the Company since October 1992:
<TABLE>
<CAPTION>
DATE OF
BUSINESS ACQUISITION TYPE OF OPERATION LOCATION
- -------- -------------- ---------------------------- ------------------
<S> <C> <C> <C>
Chicago Miniature Lamp, Inc.... October 1992 Supplier of miniature Buffalo Grove,
(CML-Delaware)(a) lighting components Illinois, USA
Glolite Sales, Ltd............. April 1993 Manufacturer of miniature Pauls Valley,
neon and incandescent bulb Oklahoma, USA
and string lighting products
Industrial Devices, Inc. May 1994 Designer and manufacturer of Hackensack,
(IDI)........................ miniature lighting products New Jersey, USA
Plastomer, Inc................. March 1995 Manufacturer and supplier of Barrie, Ontario,
(CML Canada) miniature lighting Canada
assemblies and bulb sockets
Fredon Industrial.............. August 1995 Manufacturer of machine Newton,
Development, Inc. (Fredon) tools and dies New Jersey, USA
STT Holdings Limited........... November 1995 Engineer and designer of Byfleet, Surrey,
(Badalex)(b) lamp-making equipment United Kingdom
Electro Fiberoptics, Inc....... December 1995 Manufacturer of fiber optic Marlborough,
(CML Fiberoptics) lighting products Massachusetts, USA
Phoenix Lighting (U.K.) December 1995 Manufacturer of halogen and Coalville,
Limited...................... specialty lamps Leicestershire,
(CML Europe) 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
("PLP"))
Sylvania Lighting.............. September 1997 Designer and manufacturer of Haarlem,
International, B.V. (SLI, integrated lighting systems Netherlands
B.V.) including lamps and fixtures
Solium, Inc. (Solium).......... November 1997 Designer and manufacturer of Randolph,
electronic ballasts Massachusetts, USA
ELECTRO-MAG Industrial, Inc.... March 1998 Ballast technology El Paso, Texas,
USA
Topluz S.A..................... March 1998 Manufacturer of lamps Bogota, Colombia
</TABLE>
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<TABLE>
<CAPTION>
DATE OF
BUSINESS ACQUISITION TYPE OF OPERATION LOCATION
- -------- -------------- ---------------------------- ------------------
<S> <C> <C> <C>
OSA Elektronik GmbH............ May 1998 Manufacturer of light Berlin, Germany
emitting diodes
VCH International Limited...... May 1998 Manufacturer of miniature Bury St. Edmond,
lamps and systems United Kingdom
SOCOP S.A...................... July 1998 Manufacture of miniature Besancon, France
lighting products
IllumElex Corporation.......... November 1998 Lighting maintenance Raleigh, North
Carolina, USA
Lighting Partner B.V........... January 1999 Manufacturer of lighting Goes, Netherlands
fixtures
</TABLE>
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(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").
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
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professional outdoor applications such as street lighting, amenity and public
lighting, port, tunnels and security lighting. The display and decorative
fixtures market includes applications for shop window displays and other public
buildings. Continued demand will be dependent upon economic growth, especially
industrial and commercial construction. As with lamps, economic development in
Eastern Europe and Central and South America is expected to provide accelerated
growth opportunities.
The miniature lighting market exhibits slow product obsolescence, stable
underlying demand and moderate growth. Purchasers for miniature lighting
assemblies are primarily OEMs in the automotive, electronics and communications,
appliance and aviation industries, whose products require a wide variety of
illumination and status indicators. Miniature lamps are inserted in lighting
assemblies that may be used in circuit board and panel mount applications that
can be incorporated into a wide variety of OEM products. There has been
increased acceptance by OEMs of the use of lighting manufacturers for the
production of miniature lighting assemblies. Many OEMs have adopted and are
becoming increasingly reliant upon the outsourcing of customized assemblies, and
the Company believes that this trend will continue as OEMs attempt to (i) reduce
time to market, (ii) reduce capital investment, (iii) gain access to leading
technological solutions, and (iv) improve inventory management.
The ballast market is estimated at approximately $3.2 billion annually and
is experiencing growth due to an increasing need to conserve energy, better
luminescence output, increased lamp life and less color shift. Ballasts are used
to supply power to start and operate fluorescent, compact fluorescent and HID
lamps and signage products.
Management believes that the following trends may also lead to increased
global use of lighting products: (i) increased lighting usage by manufacturing
and service companies, operating overtime or second and third shifts, (ii)
development of more energy-efficient and user-friendly lamps, despite an
increase in cost, and (iii) increased demand by developing countries, including
Eastern Europe, Central and South America and Asia, for lighting products.
PRODUCTS AND MARKETS
Prior to 1997, nearly two-thirds of the Company's net sales were
attributable to miniature lighting assemblies, with miniature discrete bulbs and
LEDs accounting for the bulk of the remainder. The Company's product category
profile has changed significantly with the addition of PLP and SLI, B.V. The
following table sets forth the percentage of net sales by product category for
Fiscal 1996, Fiscal 1997 and Fiscal 1998.
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
PRODUCT 12/01/96 11/30/97 1/3/99
- ------- -------- -------- ------
(ACTUAL) (ACTUAL)
<S> <C> <C> <C>
Lamps....................................................... 27% 38% 51%
Fixtures.................................................... -- 15 23
Miniature Lighting Assemblies............................... 59 21 9
Ballasts.................................................... -- 23 10
Other....................................................... 14 3 7
--- --- ---
Total............................................. 100% 100% 100%
=== === ===
</TABLE>
The Company's manufacturing and developmental activities are focused as
follows:
Lamps. The Company intends to continue to address the market's
demands for affordable, energy-efficient lamps with longer life cycles. In
this regard, the Company has produced and is continuing to develop, among
other lighting products, (i) compact fluorescent lamps with novel features
and performance characteristics, (ii) tungsten halogen lamps using line
voltage, which have the capability of replacing standard incandescent
lamps, (iii) twin-arc high pressure sodium ("SHP") and mercury-free SHP
lamps for general lighting as well as special applications such as film and
theater use, (iv) triphosphor fluorescent lamps with improved lumen
maintenance, and (v) metal halide lamps that combine energy efficient
illumination, long lamp life, excellent color rendition and compact lamp
size. Through the introduction of a new range of "high voltage" halogen
reflector lamps, known as "Hi-Spot,"
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<PAGE> 10
which has been supplemented with a miniature 50 millimeter line voltage
lamp, SLI, B.V. 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 low glare
fixture development by the Company has been launched in response to
guidelines recommended by certain international engineering industry groups
for reducing the potential harmful effects 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. A
portion of the ballasts produced by Power Lighting Products is being used
by SLI, B.V.
The Company sells its products under a variety of brand names in over 30
countries. Its flagship brand, Sylvania, is one of the world's leading lighting
brands and covers a full line of lamps, industrial and commercial fixtures, and
specialty products. Other lamp and fixture lines include Concord, architectural
and display lighting; Claude, consumer and industrial and commercial lamps and
fixtures; Lumiance, display lighting fixtures; Linolite, residential and
commercial task lighting fixtures; and Le Dauphin, high fashion table fixtures.
Ballasts are sold under the Power Lighting Products brand label. Miniature
lighting assemblies are sold under the Chicago Miniature Lamp and Alba labels.
While the Company generally sells its products under its own brand names, it
also sells under its customers' private brand labels, a practice which is common
in the retail sector. The Company also sells its products to other lighting
companies under such companies' brand labels.
CUSTOMERS
The Company's customer profile has also changed significantly since the
acquisition of SLI, B.V. The Company's customers currently include wholesalers,
OEMs, retailers, architects, designers and contractors whereas, prior to the PLP
and SLI, B.V. acquisitions, the Company's primary customers for its miniature
lighting products were distributors and OEMs in the electronics and
communications, automotive, appliance and aviation industries. For Fiscal 1998,
the Company's main customer base for lamps and industrial and commercial
fixtures was the wholesale channel (approximately 42% of the Company's revenue,
of which more than 10% 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 10% of net sales in Fiscal 1998.
MANUFACTURING
The Company has 31 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
9
<PAGE> 11
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 1998, 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 1998, 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. The joint
venture agreement automatically renews for a two-year term unless notice of
termination is provided by either party 12 months prior to the automatic renewal
date. The Osram agreement automatically renews for a one-year term unless notice
of termination is provided by either party 24 months prior to the automatic
renewal date. As of the date hereof, the Company has not received notice of
termination for either agreement. There can be no assurance that such agreements
will be renewed in the future. The termination of either agreement could have a
material adverse effect on the Company. The Company purchases certain of its
other raw materials, including plastic, metals, glass, copper, filaments, gases,
electrodes, electronic components, wire and resistors for use in the manufacture
of lamps, fixtures, ballasts and miniature lighting assemblies. All such raw
materials are readily available and are generally purchased from a variety of
independent, non-competing suppliers. Substantially all LEDs used by the Company
in its miniature lighting assemblies are currently imported from the Pacific
Rim. The Company recently acquired a European company engaged in the production
of LEDs which now supplies the Company with a small portion of its LED
requirements. 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 financial
condition and operations.
RESEARCH AND DEVELOPMENT
The Company's research and development expenditures were $7.5 million for
Fiscal 1998. The Company'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
the focus has been directed toward improvements in material science to improve
lamp photometric performance, energy-efficiency and miniaturization as well as
to lengthen the life of its products and reduce or eliminate the use of
environmentally hazardous materials. Through a technical agreement, in effect
from January 1993 to September 1997, SLI, B.V. was entitled to royalty-free use
of Osram's worldwide intellectual property including patents, research and
development, product and process know-how for use outside the United States,
Canada, Mexico and Puerto Rico. The agreement provides that, as of September
1997, SLI, B.V. no longer had the right to receive new Osram technology and
know-how although SLI, B.V. continues to have the right to use all of the
information and know-how acquired up to 1997 within its existing business
outside the United States, Canada, Mexico and Puerto Rico. This restriction does
not prohibit the Company from selling a broad range of lighting products, which
are not dependent upon Osram technology, in such areas. The Company has devoted
substantial resources to research and development over the past few years in
10
<PAGE> 12
anticipation of the expiration of such arrangements with Osram and does not
believe that their expiration will have a material adverse effect on the
Company. Certain of the Company's competitors are significantly larger than the
Company and devote a substantial amount of money to research and development.
SALES AND MARKETING
The Company sells its lighting products through a direct sales force, sales
representatives and distribution companies. The Company currently employs
approximately 1,046 people in sales and marketing, with 695 in Europe, 87 in the
U.S., 3 in Canada, 92 in Australia, 131 in Central and South America and 38 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 79% of the Company's net sales for Fiscal 1998 were derived
from outside the United States. The Company currently operates in more than 30
countries located in the Americas, Europe, and the Pacific Rim. 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
--------------------------------
12/01/96 11/30/97 1/03/99
-------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net Sales:
United States............................................. $ 49,843 $129,120 $159,565
Canada.................................................... 13,084 14,605 18,426
Europe.................................................... 22,801 135,719 463,491
Pacific Rim............................................... -- 15,621 47,535
Central and South America................................. 8,443 34,894 84,051
-------- -------- --------
Total............................................. $ 94,171 $329,959 $773,068
======== ======== ========
Total Assets:
United States............................................. $140,721 $127,777 $160,172
Canada.................................................... 9,887 10,459 10,937
Europe.................................................... 50,080 429,418 491,042
Pacific Rim............................................... -- 32,602 25,783
Central and South America................................. 11,314 51,405 87,529
-------- -------- --------
Total............................................. $212,002 $651,661 $775,463
======== ======== ========
</TABLE>
THE SLI, B.V. ACQUISITION
In September 1997, the Company consummated the purchase of all of the
outstanding shares of capital stock of SLI, B.V., a privately held company
headquartered in Geneva, Switzerland for $161.5 million cash, financed with the
Company's internal cash and borrowings under its revolving credit facility. SLI,
B.V. originally formed part of Sylvania Lighting, which has been in the business
of producing lamps since 1900. GTE acquired the business in 1959, at which time
Sylvania Lighting did business exclusively in the United States. Under GTE's
ownership, Sylvania Lighting expanded into Europe in 1961, initially with its
camera "flash cube" product. Between 1966 and 1985, GTE grew the worldwide
operations of Sylvania Lighting, setting up plants in Central and South America
between 1966 and 1979 and opening operations in Australia
11
<PAGE> 13
and Asia during the 1970's. In the 1980's, Sylvania Lighting made two
acquisitions; Claude Lamp Company, a French lamp and fixture manufacturer, and
Rotaflex Plc, a European fixture manufacturer. In 1993, GTE sold the
international operations of Sylvania Lighting, excluding the North American
business, to a group of private investors and sold the North American business,
including the trademark Sylvania for use in the United States, Canada, Mexico
and Puerto Rico, to Osram GmbH.
SLI, B.V. is an integrated designer and manufacturer of lighting systems
which are comprised of lamps and fixtures. SLI, B.V. manufactures and offers a
wide range of lamps (incandescent, fluorescent, compact fluorescent, HID,
halogen, and special lamps) and a substantially complete range of fixtures to
meet the lighting needs of its customers, which include wholesalers, OEMs,
retailers, architects, designers and contractors. SLI, B.V.'s product portfolio
is sold under several brands, most notably the Sylvania name, for which SLI,
B.V. has rights in all regions with the exception of the United States, Canada,
Mexico and Puerto Rico. SLI, B.V. manufactures approximately 90% of all its
product requirements in-house through 13 plants in nine countries; seven plants
are in Europe, four are in Central and South America and two are in Australia.
SLI, B.V. conducts its operations in over 30 countries through sales and
distribution facilities.
COMPETITION
The industry in which the Company operates is highly competitive. Most of
the Company's competitors offer products in some but not all of the markets
served by the Company. The Company competes primarily on the basis of brand
awareness, price, product quality, design and engineering, customer service and
distribution strength. The lamp manufacturing industry is dominated by Philips,
Osram and General Electric. The Company believes that it is the third largest
lighting company in Europe, behind Philips and Osram. The fixture and miniature
lighting assembly markets are highly fragmented with many suppliers. The ballast
market is dominated by several large companies including Power Lighting
Products. PLP's competitors in the ballast market include MagneTek, Advance
Transformer (a division of Philips) and Motorola. Some of the Company's
competitors have substantially greater resources than the Company.
ENVIRONMENTAL REGULATIONS
The Company's operations are subject to federal, state, local and foreign
laws and regulations relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances and wastes.
While the Company believes that it is currently in material compliance with
these laws and regulations, there can be no assurance that the Company will not
incur significant costs to remediate violations thereof or to comply with
changes in existing laws and regulations (or the enforcement thereof). Such
costs could have a material adverse effect on the Company's results of
operations.
The Company uses a radioactive gas in its manufacture of neon bulbs in the
United States, and maintains a U.S. Nuclear Regulatory Commission license for
the use of such gas. The Company must comply with federal, state and local
regulations pertaining to the storage and discharge of radioactive materials. In
view of the low dosage of radioactivity in the gas used, the requirements for
compliance with these regulations do not, and the Company anticipates will not,
have any material adverse effect upon its capital expenditures, results of
operations or financial condition.
PATENTS, LICENSES AND TRADEMARKS
The Company owns and has obtained licenses to various domestic and foreign
patents, patent applications and trademarks related to its products, processes
and business. While these patents and patent applications in the aggregate are
important to the Company's competitive position, no single patent or patent
application is material to the Company. The trademark Sylvania is owned by
Osram-Sylvania, Inc. in the United States, Canada, Mexico and Puerto Rico and by
the Company in all other jurisdictions where the name is registered. The
Company's license agreements generally have a duration which coincides with
either the patents or the trademarks (which have an indefinite life) covered
thereby. SLI, B.V.'s intellectual property rights are licensed from Osram, which
is a competitor of the Company, and there is no assurance that the Company's
licenses may not be subject to challenge by Osram arising out of any future
sales by the Company in the United States, Canada, Mexico and Puerto Rico.
12
<PAGE> 14
EMPLOYEES
As of January 3, 1999, the Company employed approximately 8,760 employees
of whom 4,191 were employed in Europe, 897 in the U.S., 91 in Canada, 3,280 in
Central and South America, 232 in Australia and 69 in Asia. Manufacturing and
engineering operations employed 7,209 people, sales and marketing employed 1,046
people, and administration and finance employed 505 people. Union recognition
and collective bargaining arrangements are in place in 7 countries (including
the United States), covering a total of approximately 3,268 persons (167 in the
United States). These agreements are with various labor unions and consortiums
and expire at various dates. Management believes that it generally has a good
relationship with its unionized and non-unionized employees.
ITEM 2. PROPERTIES
At March 1, 1999, 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
Besancon, France(b)................ 44,000 miniature lighting, stamping and
tooling
Besancon, France(b)................ 37,000 lighting systems
Besancon, France(b)................ 12,000 lampholder assemblies
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
Berlin, Germany(a)................. 12,000 LED manufacturing
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
Bury St. Edmonds, United 59,000 miniature lamp manufacturing and
Kingdom(b)....................... assembly
Tienen, Belgium(b)................. 308,000* HID lamps, halogen lamps for low
and line voltage and general
lighting service ("GLS") lamps
Goes, Netherlands(a)............... 7,700* display fixtures
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
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE PRODUCT
- -------- -------------- -------
<S> <C> <C>
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
Bogota, Colombia(b)................ 155,000 Incandescent and fluorescent glass
and 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 1999 will be approximately $10.0
million. See Note 9 to Notes to the Company's Consolidated Financial
Statements.
(b) Owned.
(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.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in legal proceedings from
time to time in the ordinary course of its business. As of the date of the
filing neither the Company nor any of its subsidiaries are a party to any law
suits or proceedings which individually or in the aggregate, in the opinion of
management, is likely to have a material adverse effect on the financial
condition, results of operations or cash flow of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no meetings of shareholders during the fourth quarter of the
fiscal year covered by this report.
ITEM 4A. EXECUTIVE OFFICERS OF REGISTRANT.
The following table sets forth the names and ages of all executive officers
of the Registrant, including all positions and offices with the Registrant held
by him, and the period during which he has served as such.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Frank M. Ward.......................... 55 President and Chief Executive Officer
Frederick B. Howard.................... 62 Executive Vice President
Richard F. Parenti..................... 45 Vice President -- Finance, Secretary
and Chief Accounting Officer
Robert J. Mancini...................... 43 Treasurer
</TABLE>
Each of the executive officers listed above serves at the pleasure of the
Board of Directors for a term until his or her successor is duly elected and
qualified. The following is a summary of the business experience during the past
five years of each of the Company's executive officers.
Frank M. Ward has served as President and Chief Executive Officer and
Director of the Company and its predecessor, Xenell Corporation ("Xenell"),
since 1985. Prior to 1985, Mr. Ward was President of Xenell
14
<PAGE> 16
Marketing Corporation, an organization formed to manage the product development,
marketing and distribution of the products of Xenell. Mr. Ward received a
Bachelor of Science degree in Electrical Engineering from Northeastern
University and has completed post graduate studies in physics and metallurgy.
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 and appointed executive vice-president
in September 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 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.
Robert J. Mancini joined the Company in February 1998 and was appointed
treasurer in September 1998. Prior to joining the Company he was Assistant
Treasurer of Hasbro, Inc. (1986 to 1998), a toy manufacturing company, where he
was responsible for foreign exchange, cash management and capital markets. Mr.
Mancini has a Bachelor of Science degree in accounting from Boston College.
PART II
ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Until May 4, 1998, the Company's Common Stock traded on the Nasdaq National
Market. Since that date, the Common Stock has traded on The New York Stock
Exchange. The following table sets forth the range of high and low sales prices
for the Company's Common Stock for each period indicated (adjusted for stock
splits).
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL 1997
First Quarter............................................... $29.50 $11.08
Second Quarter.............................................. 16.67 11.33
Third Quarter............................................... 21.56 15.50
Fourth Quarter.............................................. 25.67 18.00
FISCAL 1998
First Quarter(1)............................................ 40.63 22.17
Second Quarter.............................................. 41.87 24.50
Third Quarter............................................... 27.13 9.25
Fourth Quarter.............................................. 27.75 10.13
FISCAL 1999
First Quarter (through March 18, 1999)...................... 28.25 20.63
</TABLE>
- ---------------
(1) Includes transition month of December 1997.
Such market quotations reflect inter-dealer prices, without retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions.
As of January 3, 1999, the approximate number of holders of record of the
Company's Common Stock was 164 and the number of beneficial holders, including
individual participants in security position listings with clearing agencies,
was estimated at approximately 6000.
15
<PAGE> 17
DIVIDENDS
No dividends have been paid during the two most recent fiscal years, and
the Company does not intend to pay dividends in the foreseeable future as it
intends to retain any earnings for the operation and expansion of its business.
In addition, the payment of cash dividends by the Company is prohibited under
the terms of its revolving credit agreement until 2002. 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.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table presents selected historical financial information of
the Company, as of the dates and for the periods indicated and was derived from
the audited consolidated financial statements of the Company. The selected
financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's audited consolidated financial statements and notes thereto.
<TABLE>
<CAPTION>
NINE ONE
MONTHS YEAR YEAR YEAR MONTH YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
11/27/94(A) 12/3/95 12/1/96 11/30/97 1/4/98(B) 1/3/99
----------- ------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(C):
Net sales............................................... $31,729 $57,402 $ 94,171 $329,959 $ 53,866 $773,068
Cost of products sold................................... 21,113 36,726 61,147 231,933 40,199 533,484
------- ------- -------- -------- -------- --------
Gross margin............................................ 10,616 20,676 33,024 98,026 13,667 239,584
Selling, general and administrative expenses............ 7,777 8,462 14,552 65,549 14,004 178,235
Restructuring costs..................................... -- -- -- 5,115 -- 2,022
------- ------- -------- -------- -------- --------
Operating income (loss)............................... 2,839 12,214 18,472 27,362 (337) 59,327
Interest expense, net................................... 936 803 301 1,156 1,206 16,892
Other (income) expense, net............................. (7) (47) (1,294) (2,326) (471) 1,247
------- ------- -------- -------- -------- --------
Income (loss) before income taxes....................... 1,910 11,458 19,465 28,532 (1,072) 41,188
Income taxes............................................ 800 2,993 6,029 7,591 (525) 8,156
------- ------- -------- -------- -------- --------
Net Income (loss)..................................... $ 1,110 $8,465 $ 13,436 $ 20,941 $ (547) $ 33,032
======= ======= ======== ======== ======== ========
Net Income (loss) per common share -- basic(d).......... $ 0.06 $ 0.41 $ 0.55 $ 0.73 $ (0.02) $ 1.14
======= ======= ======== ======== ======== ========
Weighted average shares outstanding -- basic(d)......... 18,744 20,880 24,357 28,761 28,659 28,898
======= ======= ======== ======== ======== ========
Net Income per common share -- diluted(d)............... $ -- $ 0.41 $ 0.55 $ 0.71 $ (0.02) $ 1.10
======= ======= ======== ======== ======== ========
Weighted average shares outstanding -- diluted(d)....... -- 20,899 24,488 29,331 29,298 30,132
======= ======= ======== ======== ======== ========
BALANCE SHEET DATA AT END OF PERIOD(C):
Working capital......................................... $ (270) $9,923 $ 98,308 $117,606 $ 97,790
Total assets............................................ 32,929 59,630 212,002 651,661 775,463
Short-term debt......................................... 9,114 65 25,174 14,821 29,874
Long-term debt, less current portion.................... 9,015 3,147 5,607 185,434 238,530
Stockholders' equity.................................... 2,673 34,921 151,164 166,051 217,810
</TABLE>
- ---------------
(a) 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.
(b) In January 1998, the Company changed its financial reporting year end from
the Sunday nearest December 1 to the Sunday nearest December 31. As a result
of this change, the Company had a one-month transition period ending January
4, 1998.
(c) Revenues, expenses, assets and liabilities have been significantly affected
by the number and timing of acquisitions made by the Company.
(d) 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. In August 1996 and February 1998, the Company effected 3-for-2 stock
splits in the form of 50% stock dividends.
16
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company is a leading, vertically integrated manufacturer and supplier
of lighting systems, which include lamps, fixtures and ballasts. The Company has
grown from a specialized manufacturer of neon lamps and miniature lighting
products into a manufacturer and supplier of a wide variety of lighting
products, including lamps, (incandescent, fluorescent, compact fluorescent, HID,
halogen, miniature incandescent neon, LED's and special lamps), fixtures,
magnetic and electronic ballasts and fiber optic lighting systems. The Company
believes that it is one of the six largest global lighting companies and one of
only three major international producers to offer an integrated package of
lamps, fixtures and ballasts. The Company serves a diverse, international
customer base and at January 3, 1999 had 31 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
the Company has completed 16 acquisitions, the most significant being the
acquisition in September 1997 of SLI, B.V., a privately held company
headquartered in Geneva, Switzerland, for $161.5 million in cash. SLI, B.V. is
the third largest lighting company in Europe and a major global lighting
company, which sells a variety of products in its principal markets under
recognized brand names, including Sylvania. See "Business -- Acquisitions."
The Company's acquisition strategy has had a significant impact on year to
year comparisons of revenues and earnings. SLI, Inc. acquired 6 companies in
1998, 4 companies in 1997 and 3 companies in 1996.
In January 1998, the Company changed its financial reporting year-end from
the Sunday nearest to December 1 to the Sunday nearest to December 31. The
Company has included financial results for the one month ended January 4, 1998
herein.
The following discussion and analysis of the results of operations for the
year ended January 3, 1999 should be read in conjunction with the Company's
Consolidated Financial Statements and accompanying notes. Except for historical
matters contained herein, the matters discussed herein are forward-looking
statements and are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
reflect assumptions and involve risks and uncertainties which may affect the
Company's business and prospects and cause actual results to differ materially
from these forward-looking statements and should be read in conjunction with the
"Risk Factors" section of this Report on Form 10-K.
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
---------------------------
12/1/96 11/30/97 1/3/99
------- -------- ------
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
Cost of products sold....................................... 64.9 70.3 69.0
----- ----- -----
Gross margin.............................................. 35.1 29.7 31.0
Selling, general and administrative expenses................ 15.4 19.8 23.0
Restructuring costs......................................... -- 1.6 .3
----- ----- -----
Operating income.......................................... 19.7 8.3 7.7
Interest (income) expense, net.............................. .3 .4 2.2
Other (income) expense...................................... (1.3) (.7) .2
----- ----- -----
Income before income taxes.................................. 20.7 8.6 5.3
Income taxes................................................ 6.4 2.3 1.0
----- ----- -----
Net income................................................ 14.3 6.3 4.3
===== ===== =====
</TABLE>
17
<PAGE> 19
Year ended January 3, 1999 compared to the year ended November 30, 1997.
Net sales. Net sales increased 134.3% from $330.0 million for the year
ended November 30, 1997 to $773.1 million for the year ended January 3, 1999.
The acquisition of SLI, B.V. accounted for 119.1% of the net sales increase.
Included in the year ended January 3, 1999 was a full year of sales contribution
from SLI, B.V., totaling $542.2 million, compared to three months in the year
ended November 30, 1997, totalling $149.2 million. The remaining increase in net
sales of 15.2% was primarily due to generic growth generated from the
integration of the 1998 acquisitions into ongoing operations.
Gross Margin. Gross margin increased 144.5% from $98.0 million for the
year ended November 30, 1997 to $239.6 million for the year ended January 3,
1999, due primarily to the increase in sales volume attributed to the SLI, B.V.
acquisition. Gross margin, as a percentage of net sales, increased from 29.7%
for the year ended November 30, 1997 to 31.0%, for the year ended January 3,
1999. The SLI, B.V. gross margin, as a percentage of SLI, B.V. sales, was 31.3%
for the year ended January 3, 1999. The gross margin of the Company is expected
to improve as further integration of the 1997 and 1998 acquisitions into the
Company evolves. The Company's gross margin percentage is subject to the impact
of seasonality and product mix.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $65.5 million for the year ended November
30, 1997 to $178.2 million for the year ended January 3, 1999. This increase was
largely due to the impact of the SLI, B.V. acquisition. As a percentage of net
sales, selling, general and administrative expenses increased from 19.8% for the
year ended November 30, 1997 to 23.0% for the year ended January 3, 1999,
primarily as a result of the SLI, B.V. acquisition. Included in the year ended
January 3, 1999 are one time charges totaling $525,000 related to a proposed
public offering withdrawn in May 1998, severance costs totaling $543,000 and one
time charges related to the closure of one of the Company's Colombia
manufacturing operations and the United Kingdom machinery making operations
totaling $709,000. Selling, general and administrative expenses as a percentage
of net sales is expected to decrease as the full year effects of the 1997 and
1998 reorganization and restructuring plans take effect. Additionally, the
Company seeks to decrease the selling, general and administrative expenses as a
percentage of net sales by utilizing the infrastructure of its 1997 and 1998
acquisitions as a base for further sales growth.
Restructuring costs
In fiscal 1997, and in connection with the acquisition of SLI, B.V., the
Company developed and approved restructuring plans for existing operations which
resulted in charges of approximately $5.1 million including $3.5 million of
severance costs. The restructuring included the plant closure, personnel
termination, and asset liquidation of a lamp-making operation in the United
Kingdom which became redundant due to the SLI B.V. acquisition. The facility's
land and building was sold, and the equipment was sold or scrapped. Employee
severance cost at the Company's United Kingdom machinery making operation
resulted from the downsizing due to the duplication of functions after the SLI
B.V. acquisition. Additionally, the Company's leased Illinois warehouse and
distribution location was closed and personnel were terminated. Also, the
Company's Oklahoma manufacturing operation was considered redundant in light of
the SLI B.V. acquisition and the lamp making equipment was disposed of. This
restructuring plan was completed in 1998 with cash provided from operations used
to cover the costs incurred. The Company expects to realize approximately $3.0
million in annualized cost savings over the next two year period as a result of
reduced employee expense of $2.9 million and reduced depreciation expense of
$60,000.
In fiscal 1998, the Company developed and approved restructuring plans for
existing operations which resulted in charges of $2.0 million. The restructuring
plans included closure costs associated with the Company's Colombia lamp
manufacturing operation and the Company's United Kingdom machinery making
operation. Included in these costs were the net effect of severance costs
totaling $600,000 and the write-off of lamp making equipment disposed of
totaling $1.1 million. This restructuring plan was completed in 1998 with cash
provided from operations used to cover the costs incurred. The Company expects
to realize approximately
18
<PAGE> 20
$1.5 million in annualized cost savings beginning in 1999 as a result of reduced
employee expense of $1.4 million and reduced depreciation expense of $55,000.
In connection with the purchase price accounting for the acquisition of
SLI, B.V., the Company approved a restructuring plan which resulted in
reorganization accruals of $25 million. As part of the finalization of the
reorganization accruals, $8 million of the amount initially recorded was
reversed to property, plant and equipment in 1998 leaving recorded
reorganization accruals of $17 million. The reorganization plan affected
employee terminations in Europe, Latin America, Australia and Asia and includes
the closure of leased warehouses and administrative facilities. The warehouse
closures will occur in Scandanavia and the administrative office closures will
occur in Switzerland, France, Austria and Benelux. The purchase liabilities
include severance costs, remaining payments on non-cancellable operating leases,
costs to return the facilities to the condition at the outset of the lease, the
write-off of the remaining net book value of leasehold improvements and the cost
to relocate employees. Accrued lease costs are for costs to be incurred
subsequent to the Company vacating facilities. The costs in connection with
these reorganization plans will be incurred through 1999 and will be paid from
cash provided by operations. The Company expects to realize annualized savings
of approximately $18 million by the end of 1999 as result of reduced employee
expense of approximately $13.4 million, reduced lease cost of approximately $4.5
million and reduced depreciation expense of approximately $100,000.
The Company believes that these restructuring plans are a necessary action
based on the termination of certain activities and are required to maintain a
competitive position. See Note 8 of Notes to the Company's Consolidated
Financial Statements.
Interest (income) expense, net. Interest expense, net, increased from $1.2
million for the year ended November 30, 1997 to interest expense, net, of $16.9
million for the year ended January 3, 1999, primarily as a result of the bank
debt incurred in connection with the SLI, B.V. acquisition. Interest income of
approximately $4.1 million was generated, for the year ended November 30, 1997,
primarily from the investment of unused proceeds from the Company's secondary
offering in October 1996. Interest income for the year ended January 3, 1999
totalled $917,000.
Other (income) expense. The other income for the year ended November 30,
1997 includes the effects of foreign exchange transactions and a $985,000 gain
for the sale of 49% interest in CML Fiberoptics to Schott Corporation in
connection with the formation of the Schott-CML Fiberoptic joint venture.
Included in other (income) expense for the year ended January 3, 1999 was a loss
on sale of assets totalling $408,000. Substantially all of the remainder of
other (income) expense resulted from recording the effects of foreign exchange
transactions. The Company, which has substantial foreign operations and
activity, enters into foreign currency contracts to protect the Company from the
risk that sales and purchases of products in foreign currencies will be
adversely affected by changes in exchange rates. The Company does not hold or
issue financial instruments for trading purposes. Reference Note 13 of the
Company's Consolidated Financial Statements.
Income before income taxes. As a result of the above factors, income
before income taxes increased 44.2%, from $28.5 million for year ended November
30, 1997 to $41.2 million for the year ended January 3, 1999. As a percentage of
net sales, income before provision for income taxes decreased from 8.6% for the
year ended November 30, 1997 to 5.3% for the year ended January 3, 1999.
Income taxes. For the year ended January 3, 1999, the Company recorded a
tax provision of $8.2 million on pretax income of $41.2 million, for an
effective rate of 19.9%, compared to an effective rate of 26.6% for the year
ended November 30, 1997. The lower than U.S. statutory tax rate is 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. 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. Reference Note 5 of the Company's Consolidated
Financial Statements.
19
<PAGE> 21
Fiscal Year Transition Period
As a result of the change in the Company's fiscal year end from the Sunday
nearest to December 1 to the Sunday nearest to December 31, the Company is
presenting financial results for the one month period ended January 4, 1998.
Revenues were effected in the month of December by a natural slow down in the
trade cycle in the countries where the Company operates due to the holiday
season. The net loss for this transition period was due primarily to the
seasonally low revenues and increases in selling, general and administrative
expenses resulting from the acquisition of SLI, B.V. See the Company's Condensed
Consolidated Financial Statements included elsewhere herein. For the period
ended January 4, 1998, the Company recorded a tax provision benefit of $525,000
on a pre-tax loss of $1.1 million, for an effective benefit rate of 49%. This
rate was affected by business results for the one month period and the resultant
effects of the Company's operating in many tax jurisdictions with varied rates
and special tax agreements.
Year ended November 30, 1997 compared to year ended December 1, 1996.
Net sales. Net sales increased from $94.2 million for the year ended
December 1, 1996 to $330.0 million for Fiscal 1997. This increase was primarily
attributable to the impact of the PLP and SLI, B.V. acquisitions and to a lesser
extent, growth from existing operations. Net sales of PLP totaled $70.5 million
from January 31, 1997 (the effective date of acquisition) to November 30, 1997
and net sales of SLI, B.V. totaled $149.2 million from September 1, 1997 (the
effective date of acquisition) to November 30, 1997. The Company's strategy of
integrating acquisitions can affect sales comparisons as existing capacity is
utilized for internal purposes.
Gross margin. Gross margin increased from $33.0 million for the year ended
December 1, 1996 to $98.0 million for Fiscal 1997, due primarily to the increase
in sales volume attributable to the PLP and SLI, B.V. acquisitions. PLP
contributed $15.0 million to the total gross margin from the date of acquisition
and the gross margin of SLI, B.V. was $47.7 million for the period from the date
of acquisition to November 30, 1997. Gross margin, as a percentage of net sales,
decreased from 35.1% for the year ended December 1, 1996 to 29.7% for Fiscal
1997, due primarily to the impact of the lower gross margin of the ballast
business of PLP, which business has traditionally had lower gross margins than
the Company's other products. This gross margin percentage is expected to
improve as restructuring plans developed at the time of acquisition are
implemented.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $14.6 million for the year ended December
1, 1996 to $65.5 million for Fiscal 1997. This increase was largely due to the
impact of the PLP and SLI, B.V. acquisitions. As a percentage of net sales,
selling, general and administrative expenses increased from 15.4% for the year
ended December 1, 1996 to 19.8% for Fiscal 1997, primarily as a result of the
impact of the PLP and SLI, B.V. acquisitions. The Company's strategy is to
decrease selling, general and administrative expenses attributable to the
acquired companies through restructuring plans which are currently being
implemented.
In fiscal 1997, and in connection with the acquisition of SLI B.V., the
Company developed and approved restructuring plans for existing operations,
which resulted in charges of approximately $5.1 million. The restructuring
included the plant closure, personnel termination, and asset liquidation of the
lamp-making operation of CML Europe, which became redundant due to the SLI B.V.
acquisition. The facility's land and building was sold, and the equipment was
sold or scrapped. Employee severance cost at the Company's Badalex (U.K.)
machinery making operation resulted from the downsizing due to the duplication
of functions after the SLI B.V. acquisition. Additionally, the Company's leased
Illinois warehouse and distribution location was closed and personnel were
terminated. Also, the Company's Oklahoma manufacturing operation was considered
redundant in light of the SLI B.V. acquisition and the lamp making equipment was
disposed. Substantially, this entire restructuring plan has been completed. The
cash, for the remaining restructuring, will be expended prior to the end of
1998. The Company expects to realize approximately $3.0 million in cost savings
over the next two-year period as a result of reduced employee expense of $2.9
million and reduced depreciation expense of $60,000.
In connection with the purchase price accounting for the acquisition of SLI
B.V., the Company accrued a provision for reorganization pursuant to an initial
plan put in place at the time of acquisition, amounting to
20
<PAGE> 22
$25.0 million. The reorganization plan includes employee terminations in Europe,
Latin America, Australia and Asia and the closure of leased warehouses and
administrative facilities. The warehouse closures will occur in France, Belgium
and Scandinavia, and the administrative closures will occur in Switzerland,
France, Austria and Benelux. The purchase liabilities include severance costs,
remaining payments on non-cancelable operating leases, costs to return the
facilities to the condition at the outset of the lease, the write-off of the
remaining net book value of leasehold improvements and the cost to relocate
employees. Accrued lease costs are for costs to be incurred subsequent to the
Company vacating facilities. The costs in connection with these reorganization
plans will be incurred over the next two years and will be paid from cash
provided by operations. The Company expects to realize savings of approximately
$18 million by 1999 as a result of reduced employee expense of approximately $12
million, reduced lease cost of approximately $5.9 million and reduced
depreciation expense of approximately $100,000.
The Company believes that these restructuring plans are a necessary action
based on the exiting of these activities and are required to maintain a
competitive position. See Note 8 of 'Notes to the Company's Consolidated
Financial Statements'.
Interest expense, net. Interest expense, net, increased from $301,000 for
the year ended December 1, 1996 to $1,156,000 for Fiscal 1997, primarily as a
result of the bank financing in connection with the acquisition of SLI, B.V.
Interest income of approximately $4.1 million was generated in Fiscal 1997,
primarily from the investment of $98.3 million in proceeds from the Company's
public offering completed in October 1996. A portion of these proceeds was used
during the year for the PLP and SLI, B.V. acquisitions ($65.0 million), the
repurchase of Common Stock ($8.7 million) and for other capital expenditures.
Other income. Other income increased from $1.3 million in the year ended
December 1, 1996 to $2.3 million in Fiscal 1997. This increase included a
$985,000 gain from the sale by CML Fiberoptics to Schott Corporation ('Schott')
of a 49% interest in a newly-created entity, Schott-CML Fiberoptics, LLC. See
'Business -- Joint Venture.' The remainder of the increase and substantially all
of the remaining balance of other income for Fiscal 1997 was the result of
recording the effects of foreign exchange transactions.
Income before income taxes. As a result of the above factors, income
before provision for income taxes increased from $19.5 million for the year
ended December 1, 1996 to $28.5 million for Fiscal 1997. As a percentage of net
sales, income before provision for income taxes decreased from 20.7% for the
year ended December 1, 1996, to 8.6% for Fiscal 1997.
Income taxes. For Fiscal 1997, the Company recorded a tax provision of
$7.6 million on pre-tax income of $28.5 million, for an effective rate of 26.6%,
compared to a tax provision of $6.0 million on pre-tax income of $19.5 million,
for an effective rate of 31.0%, for the year ended December 1, 1996. The lower
effective tax rate in Fiscal 1997 was due to the impact of income in countries
with effective tax rates lower than those in the U.S. and realization of tax
attributes, including net operating loss carry forwards, attributable to the
acquisition of SLI, B.V. An effective tax rate lower than the U.S. statutory
effective tax rate is expected to continue for several years due to the
significant international operations of the Company. See Note 5 of Notes to the
Company's Consolidated Financial Statements.
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 January 3, 1999, the Company's cash on hand was $27.4 million. For
Fiscal 1998, net cash provided by operating activities was $17.6 million and
cash used in investing activities totaled $74.2 million. The investing
activities included (i) capital expenditures, primarily for production
equipment, totaling $49.0 million and (ii) the 1998 acquisitions in connection
with which the Company paid an aggregate amount of
21
<PAGE> 23
approximately $27.7 million, net of cash. Net cash provided by financing
activities in Fiscal 1998 aggregated $30.9 million, which included $35 million
in net borrowings under the Company's credit facilities, repurchases of Common
Stock totaling $7.2 million and proceeds from the exercise of stock options
totaling $3.1 million.
In connection with the acquisition of SLI, B.V., the Company entered into a
bank financing agreement providing for a $250 million revolving credit facility
(the "Existing Credit Facility"). The Company used $40 million of internal cash
on hand and borrowed approximately $121.5 million under the Existing Credit
Facility to finance the acquisition of SLI, B.V. Additionally, the Company
borrowed approximately $108.2 million under the existing facility to (i)
refinance indebtedness of the Company and certain of its subsidiaries, (ii)
finance the 1998 acquisitions, (iii) pay various expenses incurred in connection
with the acquisition of SLI, B.V. and the 1998 acquisitions and (iv) fund
certain capital expenditures. As of January 3, 1999, the Company had available
borrowings of approximately $20.3 million under the Existing Credit Facility,
and the face amount of letters of credit issued and outstanding under the
Existing Credit Facility totaled approximately $63,000.
The Company completed an amendment of its existing credit facility on
February 22, 1999, providing to the Company and its domestic subsidiaries a $300
million multi-currency revolving credit facility including a $10 million
swing-line facility and a $15 million letter of credit facility. Non-US-dollar
borrowings are limited to $75 million. There are not scheduled amortization
payments or repayment penalties. The facility terminates and is repayable in
full on August 30, 2002.
The Company conducts business in countries outside of the United States
which exposes the Company to fluctuations in foreign currency exchange rates.
The Company may enter into short-term forward exchange contracts to hedge this
risk; nevertheless, fluctuations in foreign currency exchange rates could have
an adverse effect on the Company's business. The Company does not hold or issue
financial instruments for trading or speculative purposes. The Company has
significant operations in Europe and, to a lesser extent, in Latin America. The
introduction of a single European currency is expected to reduce the currency
risks associated with inter-European transactions. However, risks will remain
with respect to transactions with customers or suppliers outside of the zone
covered by the single European currency. The Company's operations in Latin
America are carried out primarily in Brazil, Costa Rica and Colombia. Although
currently not classified as a hyper-inflationary country, Brazil has been
classified as such in the past.
The Company believes that the cash from operations and borrowings available
under the Company's revolving credit facility will be sufficient to meet the
Company's working capital and capital expenditure needs for the next twelve
months and for the foreseeable future thereafter. Capital expenditures during
the next twelve months are expected to approximate $30 million, assuming that
the Company does not make any acquisitions.
NET OPERATING LOSS CARRY FORWARDS
The Company had net operating loss carryforwards for tax purposes of
approximately $117.4 million at January 30, 1999, of which approximately $43.9
million expire through 2008 and $73.5 million do not expire.
SEASONALITY
As a result of the acquisition of SLI, B.V., it is expected that the
Company's operations will experience certain seasonal patterns. Generally, SLI,
B.V.'s sales have been highest in the fourth quarter of each year due to
abbreviated daylight hours and increased holiday light usage.
IMPACT OF YEAR 2000
The year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a
22
<PAGE> 24
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.
In addressing the year 2000 issue, the Company has identified the following
phases. In the awareness phase, the Company defined the year 2000 issue and
obtained executive level support and funding. In the Inventory phase, the
Company collected a comprehensive list of items that may be affected by Year
2000 compliance issues. Such items include facilities and related
non-information technology systems (embedded technology) used in production and
manufacturing systems, computer systems, hardware, and services and products
provided by third parties. In the Assessment phase, the Company evaluated the
items and affected systems identified in the Inventory phase to determine which
will need to be remediated and prioritized remediation based on the potential
impact to the Company. Affected systems include automated assembly lines and
related robotic technologies used in various aspects of the manufacturing
process. However, based on a review of its product line, the Company has
determined that most of the products it has sold and will continue to sell do
not require remediation to be year 2000 compliant. Accordingly, the Company does
not believe that the Year 2000 presents a material exposure as it relates to its
products. The remediation phase includes an analysis of the items that are
affected by Year 2000, the identification of problem areas and the repair or
replacement of non-compliant items. In the ordinary course of replacing computer
equipment and software, the Company attempts to obtain replacements that it
believes are Year 2000 compliant and requests representations from
manufacturers. The Testing phase includes testing of all proposed repairs,
including present and forward date testing which simulates dates in the Year
2000. The Implementation phase consists of placing all items that have been
remediated and successfully tested into production.
Utilizing both internal and external resources to reprogram, or replace,
test, and implement the software and operating equipment for year 2000
modifications, the Company currently anticipates that its Year 2000
identification, assessment, remediation and testing efforts will be completed by
December 31, 1999 and that such efforts will be completed prior to any currently
anticipated impact on computer equipment and software. The Company estimates
that as of January 3, 1999, it had completed approximately 45% of the
initiatives that it believes will be necessary to fully address potential Year
2000 issues relating to computer equipment and software. The total cost of the
Year 2000 project is estimated at $9.8 million and is being funded through
operating cash flows. To date the Company has incurred approximately $5.1
million ($4.6 million capitalized for new systems and equipment and $.5 million
expensed), related to all phases of the Year 2000 project. Of the total
remaining project costs, approximately $4.3 million is attributable to the
purchase of new software and operating equipment, which will be capitalized. The
remaining $.4 million relates to repair of hardware and software and will be
expensed as incurred.
Management of the Company believes it has an effective program in place to
resolve the Year 2000 issued in a timely manner. As noted above, the Company has
not yet completed all necessary phases of the year 2000 program. In the event
that the Company does not complete any additional phases, the Company would be
unable to take orders, manufacture and ship products, invoice customers or
collect payments. In addition, disruptions in the economy generally resulting
from Year 2000 issues could also materially adversely affect the Company. The
Company could be subject to litigation for computer systems product failure, for
example, equipment shutdown or failure to properly date business records. The
amount of potential liability and lost revenue cannot be reasonably estimated at
this time.
Although the Company has not developed a comprehensive contingency plan to
address situations that may result if the Company or any of the third parties
upon which the Company is dependent is unable to achieve Year 2000 readiness,
the Company's Year 2000 compliance program is on-going and its ultimate scope,
as well as the consideration of contingency plans, will continue to be evaluated
as new information becomes available. These contingency plans involve, among
other actions, manual workarounds, increasing inventories, and adjusting
staffing strategies.
The foregoing Year 2000 discussion contains "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
There are many uncertainties involved in the Year 2000 issue, including the
extent to which the Company will be able to successfully remediate systems and
adequately provide for contingencies that may arise, as well as the broader
scope of the year 2000 issues as it
23
<PAGE> 25
may affect third parties that are not controlled by the Company. Accordingly,
the costs and results of the Company's Year 2000 program and the extent of any
impact on the Company's operations could vary materially from those stated
herein.
ITEM 7A. MARKET RISK
The tables below summarize information on instruments and transactions that
are sensitive to foreign currency exchange rates including foreign currency
forward exchange agreements and foreign currency denominated debt obligations.
Reference is made to Notes 4 and 13 of the Notes to the Company's Consolidated
Financial Statements.
Debt Denominated in Foreign Currencies is as follows:
<TABLE>
<CAPTION>
FAIR
THERE- VALUE
1999 2000 2001 2002 2003 AFTER TOTAL 1/3/99
----- ----- ----- ----- ----- ------ ----- ------
(DOLLAR EQUIVALENTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Belgium Francs
Variable Rate......................... 5.4 -- -- -- -- -- 5.4 5.4
Avg. Interest Rate.................... 5.2% -- -- -- -- -- -- --
Avg. Forward Currency.................
Exchange Rate...................... 0.029 -- -- -- -- -- -- --
Deutsche Marks
Variable Rate......................... 7.8 -- -- -- -- -- 7.8 7.8
Avg. Interest Rate.................... 5.2% -- -- -- -- -- -- --
Avg. Forward Currency.................
Exchange Rate...................... 0.598 -- -- -- -- -- -- --
Japanese Yen
Variable Rate......................... 9.5 -- -- -- -- -- 9.5 9.5
Avg. Interest Rate.................... 2.1% -- -- -- -- -- -- --
Avg. Forward Currency.................
Exchange Rate...................... 0.009 -- -- -- -- -- -- --
</TABLE>
Foreign Currency Forward Exchange Contracts are as follows:
<TABLE>
<CAPTION>
CONTRACTUAL AMOUNT
------------------------------------------------- AVERAGE FAIR
FUNCTIONAL THERE- CONTRACT VALUE
BUY CONTRACTS CURRENCY 1999 2000 2001 2002 2003 AFTER TOTAL RATE 1/3/99
- ------------- ---------------------- ---- ---- ---- ---- ---- ------ ----- -------- ------
(DOLLAR EQUIVALENTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Euro Dollar................. British Pound Sterling 20.2 -- -- -- -- -- 20.2 1.436 20.6
United States Dollar........ British Pound Sterling 3.3 -- -- -- -- -- 3.3 1.645 3.3
United States Dollar........ Deutsche Marks 1.9 -- -- -- -- -- 1.9 0.600 1.9
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is found immediately following the
signature page of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
24
<PAGE> 26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Reference is made to the Company's definitive proxy statement for the 1999
annual shareholders meeting involving the election of directors, which will be
filed with the Commission within 120 days after the end of the fiscal year
covered by this Report. The information required by this Item and contained in
such definitive proxy statement is incorporated herein by reference. Reference
is also made to Item 4A in Part I of this Report with respect to the executive
officers of Registrant.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the Company's definitive proxy statement for the 1999
annual shareholders meeting involving the election of directors, which will be
filed with the Commission within 120 days after the end of the fiscal year
covered by this Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the Company's definitive proxy statement for the 1999
annual shareholders meeting involving the election of directors, which will be
filed with the Commission within 120 days after the end of the fiscal year
covered by this Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the Company's definitive proxy statement for the 1999
annual shareholders meeting involving the election of directors, which will be
filed with the Commission within 120 days after the end of the fiscal year
covered by this Report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
1. Financial Statements filed as part of this Report:
(a) SLI, Inc. and subsidiaries
Report of Independent Auditors -- Ernst & Young LLP
Consolidated Balance Sheets of Registrant dated January 3, 1999 and
November 30, 1997
Consolidated Statements of Operations of Registrant for the fiscal years
ended January 3, 1999, November 30, 1997 and December 1, 1996 and the
month ended January 4, 1998
Consolidated Statements of Stockholders' Equity for the fiscal years
ended January 3, 1999, November 30, 1997 and December 1, 1996 and the
month ended January 4, 1998
Consolidated Statements of Cash Flows of Registrant for the fiscal years
ended January 3, 1999, November 30, 1997 and December 1, 1996 and the
month ended January 4, 1998
Notes to Consolidated Financial Statements of Registrant
(b) CML Canada, Inc.
Report of Hards Pearson
Balance Sheets of CML Canada dated January 3, 1999 and November 30,
1997
Statements of Income for years ended January 3, 1999, November 30,
1997 and December 1, 1996 and the month ended January 4, 1998
Statements of Retained Earnings for years ended January 3, 1999,
November 30, 1997, and December 1, 1996 and the month ended January
4, 1998
Statements of Cash Flows for the years ended January 3, 1999, November
30, 1997 and December 1, 1996 and the month ended January 4, 1998
Notes to Financial Statements
25
<PAGE> 27
2. Schedules.
All schedules other than Schedule II, Valuation and Qualifying Accounts,
set forth below, are omitted as the required information is inapplicable or is
presented in the financial statements or related notes which are incorporated
herein by reference.
3. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
3.1 (b) -- Amended and Restated Certificate of Incorporation*
3.1 (c) -- Amendment to Company's Certificate of Incorporation changing
the name of the Company to SLI, Inc.*
3.2 -- Bylaws(1)
4.1 -- Reference is made to Exhibits 3.1 and 3.2
4.2 -- Form of Common Stock Certificate(1)
10.1 -- Copy of Company's Incentive and Non-Statutory Stock Option
Plan(1)
10.1 (a) -- Copy of Amendment to Company's Incentive and Non-Statutory
Stock Option Plan(1)
10.1 (b) -- Copy of Amendment to Company's Incentive and Non-Statutory
Stock Option Plan*
10.1 (c) -- Copy of Special 1997 Stock Option Plan*
10.2 -- Copy of Share Purchase Agreement by and between Xenell Corp.
and VCH International Limited dated October 1, 1992(1)
10.3 -- Copy of Agreement for the Sale of Assets and Intellectual
Property Rights by and between VCH International Limited,
VCH Limited, Xenell Corp. and CML-Delaware dated October 20,
1992(1)
10.4 -- Copy of Asset Purchase Agreement by and between Glolite
Sales, Ltd. and the Company dated March 1, 1993(1)
10.5 -- Copy of Contract for Purchase and Sale of Stock by and
between the shareholders of Industrial Devices, Inc. and the
Company dated March 31, 1994(1)
10.6 -- Copy of Agreement of Merger by and between Xenell Corp. and
its shareholders and the Company and its shareholders dated
December 15, 1993(1)
10.13 -- Copy of Contract for Purchase and Sale of Stock by and
between the shareholders of Plastomer, Inc. and the Company
dated March 28, 1995(1)
10.17 -- Copy of Contract for Purchase and Sale of Stock by and
between the shareholders of Fredon Development Industries,
Inc. and the Company dated August 11, 1995(2)
10.18 -- Copy of Agreement for purchase of certain assets among STT
Holdings Limited, STT Badalex Limited, STI Lighting Limited,
PRT Shipping Limited, CML-Badalex Limited, PRT Industrial
Holdings Limited and PRT Group Limited dated November 10,
1995(4)
10.19 -- Copy of Contract for Purchase and Sale of stock by and
between the shareholders of Electro Fiberoptics, Inc. and
the Company dated December 1, 1995(2)
10.20 -- Copy of Agreement for purchase of assets of Phoenix Lighting
(UK) Limited by and among Phoenix Lighting (UK) Limited,
Lynn Robert Bailey, Christopher John Barlow and the Company
dated December 18, 1995(3)
10.23 -- Copy of Agreement on the Sale and Transfer of Shares and
Interests in the Alba/Albrecht Group dated May 15, 1996(5)
10.24 -- Copy of Contract for Exchange of Stock by and between Werner
A. Arnold and the Company dated May 15, 1996(5)
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
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*
10.33 -- Amended and Restated Credit Agreement dated as of October
30, 1997 and amendments thereto*
10.34 -- Framework Agreement for Supply Contracts between Osram GmbH
and EDIL International Lighting B.V.*
10.35 -- Amended and Restated Intellectual Property Allocation and
License Agreement dated August 6, 1992 among EDIL
International Lighting B.V. and Osram Acquisition
Corporation and Osram GmbH*
10.36 -- Supply contract dated February 19, 1985 between Osram and
Sylvania*
10.37 -- Purchase Agreement dated March 4, 1996 between Philips
Lighting B.V. and Sylvania N.V.*
10.38 -- Settlement Agreement dated August 14, 1997 between Sylvania
Lighting International B.V. and Osram GmbH*
10.39 -- Framework Agreement dated as of January 29, 1997 between
Osram Sylvania Products, Inc. and Osram Sylvania and
Sylvania Lighting International B.V.*
10.40 -- Agreement dated June 6, 1982 between Emgo and GTE Sylvania*
10.41 -- Employment agreement between the Company and Mr. Frank Ward*
10.42 -- Employment agreement between the Company and Mr. Richard
Parenti*
10.48 -- Employment agreement between the Company and Mr. Fredrick
Howard*
21.1 -- List of subsidiaries*
23.1 (a) -- Consent of Ernst & Young LLP*
23.1 (b) -- Consent of Hards Pearson*
27.1 -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* Filed herewith
(1) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-1, File No. 33-90416.
(2) Incorporated by reference to the Exhibits included in the Company's Form
10-K for the year ended December 3, 1995, File No. 0-25848.
(3) Incorporated by reference to the Exhibits included in the Company's Form
10-Q for the quarter ended March 3, 1996, File No. 0-25848.
27
<PAGE> 29
(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.
28
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 24, 1999 SLI, INC.
By: /s/ FRANK M. WARD
------------------------------------
Frank M. Ward
Chief Executive and Financial
Officer
By: /s/ RICHARD F. PARENTI
------------------------------------
Richard F. Parenti
Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ FRANK M. WARD Director March 24, 1999
- -----------------------------------------------------
Frank M. Ward
/s/ WERNER ARNOLD Director March 24, 1999
- -----------------------------------------------------
Werner Arnold
Director March 24, 1999
- -----------------------------------------------------
Donald S. Dewsnap
/s/ RICHARD INGRAM Director March 24, 1999
- -----------------------------------------------------
Richard Ingram
/s/ FRED HOWARD Director March 24, 1999
- -----------------------------------------------------
Fred Howard
/s/ MAURICE B. HARE Director March 24, 1999
- -----------------------------------------------------
Maurice B. Hare
</TABLE>
29
<PAGE> 31
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
SLI, Inc. (formerly Chicago Miniature Lamp, Inc.)
We have audited the accompanying consolidated balance sheets of SLI, Inc.
(formerly Chicago Miniature Lamp, Inc.) and subsidiaries as of January 3, 1999
and November 30, 1997, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended January 3, 1999,
November 30, 1997, and December 1, 1996, and for the month ended January 4,
1998. Our audits also included the financial statement schedule for the years
ended January 3, 1999, November 30, 1997, and December 1, 1996 and for the month
ended January 4, 1998, 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 net sales and income before income taxes of approximately
$18,426,000 and $3,406,000, $14,605,000 and $2,671,000 and $13,031,000 and
$2,281,000 for the years ended January 3, 1999, November 30, 1997, and December
1, 1996, respectively, and $1,087,000 and $83,000 for the month ended January 4,
1998. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to data included for
Chicago Miniature Lamp (Canada), Inc., is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provides a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of SLI, Inc. (formerly Chicago Miniature
Lamp, Inc.) and subsidiaries at January 3, 1999 and November 30, 1997, and the
consolidated results of their operations and their cash flows for the years
ended January 3, 1999, November 30, 1997, and December 1, 1996, and for the
month ended January 4, 1998 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule for
the years ended January 3, 1999, November 30, 1997, and December 1, 1996 and for
the month ended January 4, 1998, 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
February 12, 1999
30
<PAGE> 32
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 27,390 $ 73,416
Accounts receivable, less allowances for doubtful accounts
of $9,369 in 1999 and $7,889 in 1997................... 160,582 140,380
Inventories............................................... 149,453 124,086
Prepaid expenses and other................................ 15,735 12,120
-------- --------
Total current assets.............................. 353,160 350,002
Property, plant, and equipment, net......................... 341,210 269,650
Other assets:
Goodwill, net of accumulated amortization................. 38,353 7,651
Other intangible assets, net of accumulated
amortization........................................... 29,091 12,039
Other..................................................... 13,649 12,319
-------- --------
Total assets...................................... $775,463 $651,661
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term notes payable.................................. $ 28,086 $ 5,432
Current portion of long-term debt......................... 1,788 9,389
Accounts payable.......................................... 121,484 102,104
Accrued expenses.......................................... 100,778 107,616
Income taxes payable...................................... 3,234 7,855
-------- --------
Total current liabilities......................... 255,370 232,396
Long-term debt, less current portion........................ 238,530 185,434
Other liabilities:
Deferred income taxes..................................... 10,952 5,532
Other long-term liabilities............................... 52,801 62,248
-------- --------
Total other liabilities........................... 63,753 67,780
Commitments and contingencies
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 -- 29,346,498 and 29,302,796 shares in
1999 and 1997, respectively............................ 293 293
Common stock to be issued................................. 8,419 --
Additional paid-in capital................................ 131,399 126,835
Retained earnings......................................... 77,703 45,218
Cumulative translation adjustment......................... 4,080 2,377
Less: Treasury stock at cost, 315,900 and 643,345 shares
in 1999 and 1997....................................... (4,084) (8,672)
-------- --------
Total stockholders' equity........................ 217,810 166,051
-------- --------
Total liabilities and stockholders' equity........ $775,463 $651,661
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 33
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------- MONTH ENDED
JANUARY 3, NOVEMBER 30, DECEMBER 1, JANUARY 4,
1999 1997 1996 1998
-------------- ---------------- --------------- --------------
(NOTE 2)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................. $ 773,068 $ 329,959 $ 94,171 $ 53,866
Cost of products sold................. 533,484 231,933 61,147 40,199
----------- ----------- ----------- -----------
Gross margin.......................... 239,584 98,026 33,024 13,667
Selling, general, and administrative
expenses............................ 178,235 65,549 14,552 14,004
Restructuring costs................... 2,022 5,115 -- --
----------- ----------- ----------- -----------
Operating income (loss)............... 59,327 27,362 18,472 (337)
Other (income) expenses:
Interest expense.................... 17,809 5,238 936 1,312
Interest income..................... (917) (4,082) (635) (106)
Other, net.......................... 1,247 (2,326) (1,294) (471)
----------- ----------- ----------- -----------
Income (loss) before income taxes..... 41,188 28,532 19,465 (1,072)
Income taxes.......................... 8,156 7,591 6,029 (525)
----------- ----------- ----------- -----------
Net income (loss)..................... $ 33,032 $ 20,941 $ 13,436 (547)
=========== =========== =========== ===========
Net income (loss) per common share --
Basic............................... $ 1.14 $ .73 $ .55 $ (.02)
=========== =========== =========== ===========
Weighted-average shares outstanding --
Basic............................... 28,898,124 28,760,505 24,357,099 28,658,634
=========== =========== =========== ===========
Net income (loss) per common share --
Dilutive............................ $ 1.10 $ .71 $ .55 $ (.02)
=========== =========== =========== ===========
Weighted-average shares outstanding --
Dilutive............................ 30,131,604 29,330,889 24,487,855 29,298,133
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 34
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------ COMMON
NUMBER STOCK ADDITIONAL CUMULATIVE
OF PAR TO BE PAID-IN TREASURY RETAINED TRANSLATION
SHARES VALUE ISSUED CAPITAL STOCK EARNINGS ADJUSTMENT TOTAL
---------- ----- ------ ---------- -------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 3,
1995...................... 23,558,171 $236 $ -- $ 23,805 -- $10,841 $ 39 $ 34,921
Comprehensive income:
Net income................ -- -- -- -- -- 13,436 -- 13,436
Translation adjustment
(net of taxes of
$180)................... -- -- -- -- -- -- 551 551
--------
Comprehensive income........ 13,987
Issuance of common stock:
Public offering, including
over allotment, net of
offering costs.......... 5,287,125 53 -- 98,291 -- -- -- 98,344
Acquisition............... 225,000 2 -- 3,248 -- -- -- 3,250
Exercise of stock
options................. 116,394 1 -- 661 -- -- -- 662
---------- ---- ------ -------- ------- ------- ------- --------
Balance at December 1,
1996...................... 29,186,690 292 -- 126,005 -- 24,277 590 151,164
Comprehensive income:
Net income................ -- -- -- -- -- 20,941 -- 20,941
Translation adjustment
(net of taxes of
$771)................... -- -- -- -- -- -- 1,787 1,787
--------
Comprehensive income...... 22,728
Issuance of common stock:
Additional offering
costs................... -- -- -- (212) -- -- -- (212)
Acquisition............... 4,500 -- -- 100 -- -- -- 100
Exercise of stock
options................. 111,606 1 -- 942 -- -- -- 943
Purchase of 643,345 shares
for treasury.............. -- -- -- (8,672) -- -- (8,672)
---------- ---- ------ -------- ------- ------- ------- --------
Balance at November 30,
1997...................... 29,302,796 293 -- 126,835 (8,672) 45,218 2,377 166,051
Comprehensive income:
Net income................ -- -- -- -- -- (547) -- (547)
Translation adjustment
(net of taxes of
$738)................... -- -- -- -- -- -- (3,210) (3,210)
Comprehensive income
(loss).................... -- -- -- -- -- -- -- (3,757)
---------- ---- ------ -------- ------- ------- ------- --------
Balance at January 4,
1998...................... 29,302,796 293 -- 126,835 (8,672) 44,671 (833) 162,294
Comprehensive income:
Net income................ -- -- -- -- -- 33,032 -- 33,032
Translation adjustment (net
of taxes of $2,101)....... -- -- -- -- -- -- 4,913 4,913
--------
Comprehensive income........ 37,945
Issuance of common stock:
Acquisitions.............. 680,000 7 8,419 12,591 -- -- -- 21,017
Exercise of stock
options................. 295,947 2 3,770 3,772
Purchase 604,800 shares
for treasury............ -- -- -- -- (7,218) -- -- (7,218)
Retire treasury shares.... (932,245) (9) -- (11,797) 11,806 -- -- --
---------- ---- ------ -------- ------- ------- ------- --------
Balance at January 3,
1999...................... 29,346,498 $293 $8,419 $131,399 $(4,084) $77,703 $ 4,080 $217,810
========== ==== ====== ======== ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 35
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ONE
YEAR ENDED MONTH
------------------------------------------- ENDED
JANUARY 3, NOVEMBER 30, DECEMBER 1, JANUARY 4,
1999 1997 1996 1998
-------------- ------------ ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................ $ 33,032 $ 20,941 $ 13,436 $ (547)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities:
Depreciation and amortization.................. 17,280 7,252 3,165 1,462
Deferred income taxes.......................... 470 (3,094) 907 (566)
Changes in operating assets and liabilities:
Accounts receivable......................... 2,361 (15,597) (5,110) 7,141
Inventories................................. (14,009) 695 (4,873) (2,709)
Prepaid expenses and other.................. 1,715 (182) (440) (12,628)
Accounts payable............................ 2,084 21,051 (3,478) (8,292)
Accrued expenses............................ (14,555) (4,669) 1,452 (988)
Income taxes payable........................ 1,268 (1,825) (652) (45)
Stockholder payable/receivable.............. (53) 594 (594) 303
Other long-term liabilities................. (12,012) 5,617 (3,420) (1,778)
-------- --------- -------- --------
Net cash provided by (used in) operating
activities..................................... 17,581 30,783 393 (18,647)
INVESTING ACTIVITIES
Purchases of property, plant, and equipment...... (48,970) (23,116) (8,921) (1,966)
Proceeds from disposal of property, plant and
equipment...................................... 2,529 -- -- --
Acquisitions, net of cash acquired............... (27,721) (165,325) (10,293) --
Maturities of held-to-maturity investments....... -- 2,102 --
-------- --------- -------- --------
Net cash used for investing activities........... (74,162) (188,441) (17,112) (1,966)
FINANCING ACTIVITIES
Net borrowings (repayments) of short term debt... 313 (4,541) 1,804 858
Net borrowings of revolving credit line.......... 50,494 183,375 -- --
Proceeds from long-term debt..................... 7,214 5,730 24,442 (1,089)
Payments of long-term debt....................... (22,967) (52,128) (3,214) --
Payment of deferred financing costs.............. -- (2,616) (297) --
Proceeds from issuance of common stock -- Net of
offering costs................................. -- (212) 98,344 --
Repurchase of shares for treasury................ (7,218) (8,672) -- --
Exercise of stock options........................ 3,079 943 662 --
-------- --------- -------- --------
Net cash provided by (used in) financing
activities..................................... 30,915 121,879 121,741 (231)
Effect of exchange rate changes on cash.......... 484 168 -- --
-------- --------- -------- --------
Net increase (decrease) in cash and cash
equivalents.................................... (25,182) (35,611) 105,022 (20,844)
Cash and cash equivalents, beginning of year..... 52,572 109,027 4,005 73,416
-------- --------- -------- --------
Cash and cash equivalents, end of year........... $ 27,390 $ 73,416 $109,027 $ 52,572
======== ========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest....................................... $ 18,120 $ 2,097 $ 936 $ 0
Income taxes................................... $ 4,138 $ 7,447 $ 3,802 $ 1,510
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE> 36
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITIONS
SLI, Inc. (formerly Chicago Miniature Lamp, Inc. (an Oklahoma corporation))
and subsidiaries (collectively, the Company) operates in a single business
segment and is a vertically integrated manufacturer and supplier of lighting
systems, which include lamps, fixtures and ballasts. Through its 20 acquisitions
completed since 1992, the Company has grown from a specialized 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 serves a diverse, international customer base and
at January 3, 1999 had 31 manufacturing plants in 13 countries.
SLI Inc. acquired 6 companies in 1998 for approximately $31.9 million in
cash and 905,000 of newly issued common shares valued at approximately $21.0
million and the assumption of approximately $27 million in debt. In 1997, the
Company acquired 4 companies for approximately $187.1 million in cash and the
assumption of approximately $1.4 million of debt. The Company acquired 3
companies in 1996 for approximately $12.5 million in cash and 225,000 of newly
issued common shares valued at approximately $3.3 million and the assumption of
approximately $4.9 million of debt. These acquisitions were accounted for as
purchases, and accordingly, the assets and liabilities of the acquired entities
have been recorded at their estimated fair values at the dates of acquisition.
The excess of purchase price over the estimated values of the net assets
acquired, in the amount of $33.7 million in 1998 and $800,000 in 1997 has been
recorded in goodwill and amortized over estimated useful lives. The purchase
price allocation for one of the 1998 acquisitions is subject to adjustment upon
the completion of an asset appraisal. Any adjustment is not expected to be
material.
The largest acquisition occurred in 1997, when the Company acquired all the
outstanding capital stock of Sylvania Lighting International, B.V. and its
subsidiaries (SLI B.V.) for $161.5 million in cash financed with the Company's
cash and the Company's credit facility (Note 4). SLI, B.V. is an integrated
designer, manufacturer and seller of lighting systems. SLI, B.V. has a total of
15 manufacturing facilities in Europe, Latin America and Australia and sells to
customers throughout the world. There was no excess of purchase price over the
fair value of assets acquired.
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 acquired in 1997 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........................................ .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. Pro forma data has not been presented for 1998 because the
effect of the 1998 acquisitions on operations was not significant.
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.
35
<PAGE> 37
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. Accordingly, the accompanying statements of
operations, stockholders' equity and cash flows include results for the one
month transition period ending January 4, 1998. All references herein for the
years 1996, 1997 and 1998 represent the fiscal years ended December 1, 1996,
November 30, 1997 and January 3, 1999.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost, determined by the first in,
first out (FIFO) method, or market. Inventories consist of the following
(dollars in thousands):
<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
<S> <C> <C>
Raw materials............................................... $ 35,638 $ 28,262
Work in process............................................. 17,389 14,693
Finished goods.............................................. 96,426 81,131
-------- --------
$149,453 $124,086
======== ========
</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 the respective
useful lives which range from 25 to 40 years. Accumulated amortization is
approximately $855,000 and $593,000 at January 3, 1999 and November 30, 1997,
respectively. Amortization expense was
36
<PAGE> 38
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $253,000, $216,000, $200,000, and $53,000, for fiscal 1998, 1997,
and 1996, respectively and $9,000 for the one month ended January 4, 1998. The
Company continually evaluates the value and future benefits of its goodwill. The
Company assesses recoverability from future operations using income from
operations of the related acquired business as a measure. Under this approach,
the carrying value of goodwill would be reduced to undiscounted future cash
flows if it becomes probable that the Company's best estimate for expected
undiscounted future cash flows of the related business would be less than the
carrying amount of goodwill over its remaining amortization period. There have
been no adjustments to the carrying amounts of goodwill resulting from these
evaluations.
OTHER INTANGIBLE ASSETS
Other intangible assets include the fair value of engineering technology,
patents, noncompete, and other agreements associated with the 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 $3,105,000 and
$2,290,000 at January 3, 1999 and November 30, 1997, respectively. Amortization
expense was approximately $684,000, $480,000, and $392,000 for fiscal 1998,
1997, and 1996, respectively and $57,000 for the one month ended January 4,
1998.
TREASURY STOCK
The board of directors has authorized, subject to certain business and
market conditions, the repurchase of shares of the Company's stock. At January
3, 1999, a total of 1,248,145 shares have been repurchased under these plans.
Retirements of treasury stock totaled 932,245 shares as of January 3, 1999.
FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments to reduce its exposure to
adverse fluctuations in interest and foreign exchange rates. Financial
instruments are not used for trading purposes.
The Company and its subsidiaries utilize forward foreign currency exchange
contracts to minimize the impact of currency movements, principally on
anticipated intercompany inventory purchases and loans denominated in currencies
other than their functional currencies.
The Company may enter into interest rate swap agreements to limit the
effect of increases in the interest rates on any floating rate debt. The
differential is accrued as interest rates change and is recorded in interest
expense. Upon termination of interest rate swap agreements any resulting gain or
loss is recognized over the remaining term of the underlying debt obligation.
REVENUE RECOGNITION
Revenues from product sales are recognized at the time of shipment.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations in the year
incurred and totaled $7,533,000 and $1,926,000 for fiscal 1998 and 1997,
respectively and $628,000 for the one month ended January 4, 1998. The costs
incurred in fiscal 1996 were not material.
37
<PAGE> 39
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING COSTS
Advertising costs are charged to expense in the period incurred.
Advertising expense for 1998, 1997, and 1996 was approximately $10,500,000,
$4,535,000 and $250,000, 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.
Tax benefits subsequently realized which are related to deferred tax assets with
a valuation allowance recorded in connection with a business acquisition will
first reduce goodwill and other non-current assets related to the acquisition to
zero and any remaining tax benefit will be accounted for in the current
statement of operations.
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 comprehensive income.
STOCK SPLITS AND RECAPITALIZATION
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 was 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 as of the earliest period presented.
EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
became effective in the fourth quarter of 1997 and requires presentations of
earnings per share -- "basic" and "diluted." Basic earnings per share is
computed by dividing income available to common stockholders (the numerator) by
the weighted-average number of common shares (the denominator) for the period.
The computation of the diluted earnings per share is similar to the basic
earnings per share, except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potentially dilutive common shares had been issued.
The numerator in calculating both basic and diluted earnings per share for
each year is reported net income. The denominator is based on the following
weighted-average number of common shares:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Basic.............................................. 28,898,124 28,760,505 24,357,099
Diluted............................................ 30,131,604 29,330,889 24,487,855
========== ========== ==========
</TABLE>
38
<PAGE> 40
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The difference between basic and diluted weighted-average common shares
results from the assumption that dilutive stock options outstanding were
exercised.
The following stock options are not included in the diluted earnings per
share calculation since in each case the exercised price is greater than the
average market price:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Stock options............................................. 181,606 -- --
======= ======= =======
</TABLE>
ADOPTION OF ACCOUNTING PRINCIPLES
The Company has adopted Financial Accounting Standards Board's Statement of
Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income.
Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this Statement
had no impact on the Company's net income or shareholders' equity. Statement 130
requires the Company's foreign currency translation adjustments, which prior to
adoption were reported separately in shareholders' equity, to be included in
other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.
The Company has adopted the SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information (Statement 131), Statement 131 superseded
FASB Statement No. 14, Financial Reporting For Segments of a Business
Enterprise. 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. The adoption of Statement 131 is solely a reporting requirement and
therefore did not have an effect on the Company's financial position or results
of operations.
The Company has adopted the SFAS No. 132, Employer's Disclosures about
Pensions and Other Postretirement Benefits (Statement 132). Statement 132
standardizes the disclosure requirements for pensions and other postretirement
benefits, requires additional information on changes in the benefit obligation
and fair values of plan assets and eliminates certain disclosures. The adoption
of Statement 132 is solely a reporting requirement and therefore did not have an
effect on the Company's financial position or results of operations.
In June 1998, the SFAS No. 133 Accounting for Derivative Instruments and
Hedging Activities (Statement 133), which is required to be adopted in fiscal
years beginning after June 15, 1999. Statement 133 requires all derivatives to
be recognized in the balance sheet as either assets or liabilities at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in income. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company has not
yet determined what the effect of Statement 133 will be on the earnings and
financial position of the Company.
RECLASSIFICATIONS
Certain amounts in the fiscal 1997 and 1996 financial statements have been
reclassified to conform with the fiscal 1998 presentation.
39
<PAGE> 41
SLI, INC.
(FORMERLY 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>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 11,810 $ 8,051
Buildings and improvements.................................. 70,545 66,726
Machinery and equipment..................................... 268,442 189,748
Molds....................................................... 14,460 10,662
Furniture and fixtures...................................... 6,058 6,493
-------- --------
371,315 281,680
Less: Accumulated depreciation.............................. 30,105 12,030
-------- --------
$341,210 $269,650
======== ========
</TABLE>
Depreciation expense was approximately $16,175,000, $6,500,000, $2,700,000
and $1,167,000 for fiscal 1998, 1997 and 1996 and the one month ended January 4,
1998, respectively.
4. DEBT
LONG TERM DEBT
Long-term Debt consists of the following:
<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revolving credit facility................................... $229,749 183,375
Other debt.................................................. 10,569 11,448
-------- --------
240,318 194,823
Less: Current portion....................................... 1,788 9,389
-------- --------
Total long term debt.............................. $238,530 $185,434
======== ========
</TABLE>
The Company has an existing credit facility which provides for a $300
million multi-currency revolving credit facility including a $10 million
swing-line loan facility and a $15 million letter of credit facility. Non US
dollar borrowings are limited to $75 million. Borrowings under this agreement
totaled $229,749,000 at January 3, 1999. This agreement expires August 30, 2002.
At the Company's option, the U.S. dollar loans bear interest at LIBOR (5.1% at
January 3, 1999) plus a margin, or an adjusted base rate (7.8% at January 3,
1999) plus a margin, payable quarterly. Foreign-denominated loans bear interest
at local spot rates. The interest margin of 1.5% for LIBOR loans and .5% for
prime loans at January 3, 1999 fluctuates on the Company's leverage ratio. The
agreement provides for a quarterly commitment fee, based on the Company's
leverage ratio as it relates to the available portion of the commitment (37.5
basis points at January 3, 1999). Mandatory prepayments are required upon the
occurrence of additional debt, or offering of equity, as defined in the
agreement.
The Company is required to comply with a number of affirmative and negative
covenants under its credit agreements. Among other things, the credit agreements
require the Company to satisfy certain financial tests and ratios (including
minimum interest coverage ratios, maximum leverage ratios, and minimum net worth
requirements).
40
<PAGE> 42
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At January 3, 1999, long-term debt includes $7,848,000 denominated in
Deutsche Marks (bearing interest at 5.24% per annum), $5,422,000 denominated in
Belgian Francs (bearing interest at 5.15% per annum) and $9,479,000 in Japanese
Yen (bearing interest at 2.05% per annum) under the credit agreement.
The Company uses interest rate swaps to reduce the impact on interest
expense of fluctuating interest rates on its variable rate debt (Note 13).
Interest expense was $17,809,000 , $5,238,000, and $936,000, for fiscal
1998, 1997, and 1996, respectively and $1,312,000 for the one month period ended
January 4, 1998.
As of January 3, 1999, annual debt principal payments required were as
follows (dollars in thousands):
<TABLE>
<S> <C>
1999........................................................ $ 1,788
2000........................................................ 2,415
2001........................................................ 1,369
2002........................................................ 230,590
2003........................................................ 771
Thereafter.................................................. 3,385
--------
$240,318
========
</TABLE>
SHORT-TERM DEBT
Short-term borrowings in the amounts of approximately $28.1 million and
$5.4 million at January 3, 1999 and November 30, 1997, respectively, primarily
consisted of borrowings by subsidiaries located outside of the United States
under the terms of uncommitted lines of credit or other short-term borrowing
arrangements. The weighted average interest rate on short term borrowings
outstanding at January 3, 1999 was 8.4%. No material compensating balances are
required or maintained.
5. INCOME TAXES
The following is a summary of income (loss) before income taxes (dollars in
thousands):
<TABLE>
<CAPTION>
ONE
YEAR ENDED MONTH
--------------------------------------- ENDED
JANUARY 3, NOVEMBER 30, DECEMBER 1, JANUARY 4,
1999 1997 1996 1998
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Domestic operations......................... $(5,249) $14,005 $ 9,280 $(1,170)
Foreign operations.......................... 46,437 14,527 10,185 98
------- ------- ------- -------
$41,188 $28,532 $19,465 $(1,072)
======= ======= ======= =======
</TABLE>
41
<PAGE> 43
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of the provision (benefit) for income taxes
(dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED ONE MONTH
--------------------------------------- ENDED
JANUARY 3, NOVEMBER 30, DECEMBER 1, JANUARY 4,
1999 1997 1996 1998
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Federal:
Current................................... $(1,050) $ 7,729 $3,082 $(307)
Deferred.................................. 390 (3,002) 632 (28)
------- ------- ------ -----
(660) 4,727 3,714 (335)
State:
Current................................... (295) 1,005 425 (27)
Deferred.................................. 16 (413) (49) (3)
------- ------- ------ -----
(279) 592 376 (30)
Foreign:
Current................................... 7,800 1,951 1,615 (249)
Deferred.................................. 1,295 321 324 89
------- ------- ------ -----
9,095 2,272 1,939 (160)
------- ------- ------ -----
$ 8,156 $ 7,591 $6,029 $(525)
======= ======= ====== =====
</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 $905,000 or $.03 per share for fiscal 1998, $1,393,000 or $.05
per share for fiscal 1997 and $1,309,000 or $.05 per share for fiscal 1996.
A reconciliation between the provision (benefit) for income taxes computed
at statutory rates and the amount reflected in the accompanying consolidated
statements of operations is as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED ONE MONTH
--------------------------------------- ENDED
JANUARY 3, NOVEMBER 30, DECEMBER 1, JANUARY 4,
1999 1997 1996 1998
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Computed federal tax provision (benefit) at
U.S. statutory rates...................... $14,416 $9,986 $ 6,618 $(375)
Increase (decrease) in taxes resulting from:
Amortization of goodwill.................. 70 118 35 30
Nonstatutory stock options................ (880) (185) -- --
State income taxes (benefit), net of
federal benefit (taxes)................ (130) 396 205 (70)
Effect of different income taxes of other
countries.............................. (2,400) (573) (1,484) (381)
Net operating losses not benefited........ 1,276 -- -- 271
Utilization of net operating loss
carryforwards.......................... (4,196) (2,211) -- --
Other..................................... -- 60 655 --
------- ------ ------- -----
$ 8,156 $7,591 $ 6,029 $(525)
======= ====== ======= =====
</TABLE>
42
<PAGE> 44
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant items comprising net deferred tax liabilities are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
JANUARY 3, 1999 NOVEMBER 30, 1997
--------------- -----------------
<S> <C> <C>
Assets:
Net operating loss carryforwards...................... $ 45,565 $ 46,065
Reserves.............................................. 1,063 4,608
Accruals.............................................. 1,019 573
Other................................................. 1,717 416
-------- --------
Total assets.................................. 49,364 51,662
Liabilities:
Accelerated tax depreciation.......................... (11,521) (9,984)
Other................................................. (4,391) (2,383)
-------- --------
Total liabilities............................. (15,912) (12,367)
-------- --------
33,452 39,295
Less: Valuation allowance for net operating loss
carryforwards......................................... (44,404) (44,827)
-------- --------
Net deferred tax liabilities............................ $(10,952) $ (5,532)
======== ========
</TABLE>
For tax purposes, the Company had available at January 3, 1999, net
operating loss carryforwards for foreign tax purposes of approximately $117,
351,000.
The expiration dates of operating loss carryforwards at January 3, 1999 are
as follows (dollars in thousands):
<TABLE>
<S> <C>
1999........................................................ $ 11,438
2000........................................................ 5,823
2001........................................................ 4,212
2002........................................................ 14,924
2003........................................................ 4,809
Thereafter.................................................. 2,676
No expiration date.......................................... 73,469
--------
$117,351
========
</TABLE>
6. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Payroll and related expenses................................ $ 29,013 $ 27,596
Warranty and customer rebates............................... 22,159 27,036
Restructuring expenses...................................... 6,552 17,147
Value-added taxes payable................................... 5,327 7,249
Other....................................................... 37,727 28,588
-------- --------
$100,778 $107,616
======== ========
</TABLE>
43
<PAGE> 45
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of the following:
<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Pension..................................................... $25,558 $18,240
Restructuring expenses...................................... -- 18,831
Other....................................................... 27,243 25,177
------- -------
$52,801 $62,248
======= =======
</TABLE>
8. RESTRUCTURING
RESTRUCTURING OF EXISTING OPERATIONS
In fiscal 1997, the Company approved restructuring plans which resulted in
charges of approximately $5.1 million, including $3.5 million of severance
costs. This restructuring included the plant closure, personnel termination, and
asset liquidation of a lamp-making operation in the United Kingdom (U.K.), which
became redundant due to the SLI B.V. acquisition. The facility's land and
building were sold, and the equipment was sold or scrapped. Employee severance
cost at the Company's U.K. machinery making operation resulted from the
downsizing due to the duplication of functions after the SLI B.V. acquisition.
Additionally, the Company's leased Chicago, Illinois warehouse and distribution
location was closed and personnel were terminated. Also, the Company's Pauls
Valley, Oklahoma manufacturing operation was considered redundant in light of
the SLI B.V. acquisition and the lamp making equipment was disposed of and the
building held pending rehabilitation for an undesignated future use. Severance
costs of $3.5 million included the elimination of redundancies of 92 employees
at the U.K. lamp making location, 67 employees at the U.K. machinery making
location and 23 employees at the Chicago, Illinois location. The restructuring
plan was completed in 1998 and restructuring accruals were fully used.
In fiscal 1998, the Company developed and approved restructuring plans for
existing operations which resulted in charges of $2.0 million. The restructuring
plans included closure costs associated with the Company's Colombia lamp
manufacturing operations and the Company's U.K. machinery making operation.
Included in these costs were the net effect of severance costs totaling $600,000
and the write-off of lamp making equipment disposed of totaling $1.1 million.
Severance costs relate to the elimination of 171 employees at the Company's
Colombia operation. This restructuring plan was completed in 1998 and
restructuring accruals were fully used. The results of operations of the
activities which will not be continued were not significant to the consolidated
financial statements.
RESTRUCTURING OF ACQUIRED OPERATIONS
In connection with the purchase price accounting for the acquisition of SLI
B.V., effective September 1, 1997, the Company approved a restructuring plan,
which resulted in reorganization accruals of $25.0 million. $8 million of the
amount initially recorded was reversed in fiscal 1998 through an adjustment to
property, plant and equipment. The remaining purchase liabilities recorded
include the following:
(i) Severance costs of $12.9 million include the termination of 180
employees in Europe, 268 employees in Latin America, 19 employees in
Australia and 28 employees in Asia. Approximately $9.2 million of severance
cost was paid as of January 3, 1999. The remainder will be paid in fiscal
1999.
44
<PAGE> 46
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ii) Costs of $4.1 million are associated with the closure of leased
warehouse and administrative facilities. These costs represent remaining
payments on non-cancelable operating leases (which expire through 2000),
costs to return the facilities to the condition at the outset of the lease,
the write-off of the remaining net book value of leasehold improvements and
the cost to relocate employees. Accrued lease costs are for costs to be
incurred subsequent to the Company vacating the facilities. The warehouse
closures will occur in France, Belgium and Scandanavia and the
administrative office closures will occur in Switzerland, France, Austria
and Benelux. As of January 3, 1999, $2.6 million of the accrual had been
utilized.
9. COMMITMENTS AND CONTINGENCIES
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 January 3, 1999, the aggregate minimum future commitments under
operating leases are as follows (dollars in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 9,958
2001........................................................ 8,493
2002........................................................ 5,035
2003........................................................ 3,837
2004........................................................ 3,088
Thereafter.................................................. 4,831
-------
$35,242
=======
</TABLE>
Rent expense for fiscal 1998, 1997, and 1996, was approximately
$10,622,000, $2,846,000 and $948,000, respectively and $238,000 for the one
month ended January 4, 1998.
10. STOCK OPTION PLAN
The Company's Board of Directors has approved amended stock option plans
for up to 6,000,000 shares of common stock. The first plan provides for the
granting of both incentive stock options (as defined in section 422 of the
Internal Revenue Code) and nonqualified stock options. The second plan provides
for the granting of incentive stock options to employees outside the U.S. and
Canada and certain other persons. Options may be granted under the plans 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.
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 fiscal
1998, 1997 and 1996, respectively: weighted average risk-free interest rates of
5.3%, 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.
45
<PAGE> 47
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 2001.
The Company's pro forma net income and pro forma net income per share -- basic
and net income per share -- dilutive would be $21,912,000, $.76 and $.73;
$18,248, $.63 and $.62; and $13,039, $.54 and $.53 for the years ended January
3, 1999, November 30, 1997 and December 1, 1996 respectively.
The table below summarized option activity through January 3, 1999:
<TABLE>
<CAPTION>
WEIGHTED-
RANGE OF AVERAGE
NUMBER OF EXERCISE EXERCISE
OPTIONS PRICES PRICE
----------------- -------------- ---------
<S> <C> <C> <C>
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............... (116,394) 5.555-7.167 6.440
Options canceled during 1996................ (187,505) 5.555-9.111 7.568
----------
Outstanding at December 1, 1996............. 553,351 5.555-15.554 10.474
Options granted during 1997................. 3,297,700 12.917-19.917 17,822
Options exercised during 1997............... (111,606) 5.555-12.667 8.449
Options canceled during 1997................ (46,802) 12.667-15.167 14.125
----------
Outstanding at November 30, 1997............ 3,692,643 5.555-19.917 17.051
Options canceled during the month ended
January 4, 1998........................... (15,000) 13.000 13.000
----------
Outstanding at January 4, 1998.............. 3,677,643 5.555-19.917 17.067
Options granted during 1998................. 2,912,100 9.938-33.688 12.520
Options exercised during 1998............... (295,947) 5.555-18.667 11.877
Options canceled during 1998................ (2,599,001) 9.938-33.688 18.054
----------
Outstanding at January 3, 1999.............. 3,694,795 13.206
==========
</TABLE>
Information with respect to stock options outstanding and stock options
exercisable at January 3, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED
OUTSTANDING AT REMAINING AVERAGE
RANGE OF EXERCISE PRICES JANUARY 3, 1999 CONTRACTUAL LIFE EXERCISE PRICE
- ------------------------ --------------- ---------------- --------------
<S> <C> <C> <C>
$5.555 - 9.938............................. 2,245,650 9.48 years $ 9.731
10.250 - 15.167............................. 338,000 9.40 years 11.208
16.000 - 20.563............................. 873,645 8.77 years 18.614
23.938 - 32.417............................. 237,500 9.41 years 29.012
---------
3,694,795
=========
</TABLE>
46
<PAGE> 48
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
--------------------------------
NUMBER WEIGHTED
EXERCISABLE AT AVERAGE
RANGE OF EXERCISE PRICES JANUARY 3, 1999 EXERCISE PRICE
------------------------ --------------- --------------
<S> <C> <C>
$ 5.555 - 9.938............................................ 587,250 $ 9.147
10.250 - 15.167........................................... 27,000 14.296
16.000 - 20.563........................................... 163,145 18.569
-------
777,395
=======
</TABLE>
11. EMPLOYEE BENEFIT PLANS
The Company sponsors separate noncontributory, defined-benefit pension
plans (the Plans) covering eligible employees, including employees in foreign
countries. The domestic plans cover union employees of SLI, Inc. As a result of
the SLI B.V. acquisition in 1997, the Company also has plans covering employees
in various foreign locations. The principal locations are Germany, the United
Kingdom, and Switzerland. Benefits are based on years of service and
compensation. The Plans' 1998 and 1997 combined funded status (based on the most
recent valuations) and the amounts recognized in the accompanying consolidated
balance sheets are as follows (dollars in thousands):
<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year..................... $ 55,586 $ 1,268
Service cost................................................ 2,011 427
Interest cost............................................... 3,820 859
Actuarial loss (gain)....................................... 4,207 1,034
Acquisitions................................................ -- 50,530
Translation difference...................................... 1,142 1,997
Benefits paid............................................... (3,543) (529)
-------- --------
Benefit obligation at end of year........................... $ 63,223 $ 55,586
======== ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year.............. $ 41,880 $ 1,063
Actual return on plan assets................................ 6,951 783
Acquisitions................................................ -- 38,483
Translation difference...................................... 332 1,688
Employer contribution....................................... 3,081 392
Benefits paid............................................... (3,543) (529)
-------- --------
Fair value of plan assets at end of year.................... $ 48,701 $ 41,880
======== ========
Funded status of the plan (underfunded)..................... $(14,522) $(13,706)
Unrecognized transition amount.............................. 80 75
Unrecognized net actuarial loss............................. 822 1,196
Unrecognized prior service cost............................. 16 14
-------- --------
Accrued benefit cost........................................ $(13,604) $(12,421)
======== ========
</TABLE>
47
<PAGE> 49
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of net periodic pension cost are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ----
<S> <C> <C> <C>
Service cost................................................ $ 2,011 $ 608 $ 44
Interest cost............................................... 3,820 1,149 81
Expected return on plan assets.............................. (3,266) (814) (63)
Net amortization and deferral............................... -- -- (7)
------- ------ ----
Net pension cost............................................ $ 2,565 $ 943 $ 55
======= ====== ====
</TABLE>
ASSUMPTIONS
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------- ------------
(U.S. ONLY)
<S> <C> <C> <C>
Discount rate............................... 4.3% to 17% 4.5% to 24% 6.5% to 7.5%
Expected return on plan assets.............. 5.0% to 7.5% 5.0% to 8.5% 6.5% to 9%
Assumed rate of compensation increase....... 2.5% to 15% 2.5% to 19% 5%
</TABLE>
The Company also maintains separate defined benefit plans for which
actuarial valuations were not obtained. These plans have benefit obligations of
approximately $4.6 million and $4.4 million at January 3, 1999 and November 30,
1997, respectively. The pension expense for these plans, consisting primarily of
interest cost, for fiscal 1998, 1997, and 1996 was approximately $300,000,
$344,000, and $124,000.
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 $2,674,000, $650,000, and $38,000, for fiscal 1998, 1997, and
1996, 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 January 3, 1999, 3,694,795 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, which expires February 2, 2001, 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 January 3, 1999, the notional principal
amounts of fixed interest rate swap agreements was $40 million having a fixed
rate of 5.82%.
48
<PAGE> 50
SLI, INC.
(FORMERLY 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 effective through February 2, 2001, whereby the counterparty
may terminate the swap agreement on January 29, 1999. The fair value of the
option at January 3, 1999, was estimated to be approximately $672,288.
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 from 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 (losses) gains recorded in fiscal 1998, 1997, and 1996 were
approximately ($329,554), $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.
The following table summarizes by major currency the contractual amounts of
the Company's forward contracts in U.S. dollars. Foreign currency amounts are
translated at year-end rates at the respective reporting date. The "buy" amounts
represent the U.S. equivalent of commitments to purchase foreign currencies and
"sell" amounts represent the U.S. equivalent of commitments to sell foreign
currencies according to local needs in foreign subsidiaries. Some of the forward
contracts involve the exchange of two foreign currencies according to local
needs in foreign subsidiaries.
At January 3, 1999 and November 30, 1997, the contractual amounts were:
<TABLE>
<CAPTION>
JANUARY 3, 1999 NOVEMBER 30, 1997
---------------- ------------------
BUY SELL BUY SELL
------- ------ -------- -------
<S> <C> <C> <C> <C>
Belgium francs...................................... $ -- $ -- $ 6,170 $ --
Deutsche marks...................................... -- -- 8,759 --
French francs....................................... -- -- 2,516 --
Swiss francs........................................ -- -- 2,179 1,236
U.S. dollars........................................ 5,096 -- 4,695 --
Euro................................................ 20,174 -- --
Other............................................... -- -- 3,290 --
------- ------ ------- ------
Total..................................... $25,270 $ -- $27,609 $1,236
======= ====== ======= ======
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
All financial instruments are held for purposes other than trading. 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 estimated fair
value for long-term debt at January 3, 1999 and November 30, 1997 was
approximately equal to the carrying amounts at those dates. At January 3, 1999
and November 30, 1997 the carrying value of forward exchange contracts were
$359,000 and ($657,000), respectively and fair value was approximately equal to
the carrying amounts.
49
<PAGE> 51
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. SELECTED QUARTERLY FINANCIAL DATA
The following is a summary of unaudited quarterly financial data for fiscal
1998 and 1997. Fiscal 1997 information has been restated to reflect the new
reporting period.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1998
Net sales..................................... $192,420 $185,669 $181,957 $213,022
Gross margin.................................. 58,827 56,572 55,996 68,189
Net income.................................... 9,117 7,518 6,661 9,736
Net income per common share-Basic............. .32 .26 .23 .34
Net income per common share-Diluted........... .30 .25 .23 .32
1997
Net sales..................................... $ 46,188 $ 49,289 $ 94,622 $186,027
Gross margin.................................. 13,993 14,278 28,479 53,314
Net income.................................... 6,108 4,650 3,591 5,372
Net income per common share -- Basic.......... .21 .16 .13 .19
Net income per common share -- Diluted........ .21 .16 .12 .18
</TABLE>
15. GEOGRAPHIC SEGMENT INFORMATION
Financial Information for the fiscal years 1998, 1997 and 1996 and for the
month ended January 4, 1998 summarized by geographic area is as follows:
<TABLE>
<CAPTION>
MONTH
1998 1997 1996 ENDED
------------------- ------------------- -------- 1/4/98
REVENUES ASSETS REVENUES ASSETS REVENUES REVENUES
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
United States................ $159,565 $160,172 $129,120 $127,777 $49,843 $ 9,986
Canada....................... 18,426 10,937 14,605 10,459 13,084 1,687
Europe....................... 463,491 491,042 135,719 429,418 22,801 31,383
Latin America................ 84,051 87,529 34,894 51,405 8,443 6,580
Other........................ 47,535 25,783 15,621 32,602 -- 4,230
-------- -------- -------- -------- ------- -------
Total.............. $773,068 $775,463 $329,959 $651,661 $94,171 $53,866
======== ======== ======== ======== ======= =======
</TABLE>
50
<PAGE> 52
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AUDITOR'S REPORT
To the Shareholder of
Chicago Miniature Lamp (Canada) Inc.
We have audited the balance sheets of Chicago Miniature Lamp (Canada) Inc.
as at January 3, 1999, January 4, 1998, November 30, 1997 and December 1, 1996
and the statements of income, retained earnings and cash flows for the periods
then ended. 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 January 3, 1999, January
4, 1998, November 30, 1997, and December 1, 1996 and the results of its
operations and the changes in its financial position for the periods then ended
in accordance with generally accepted accounting principles in the United
States.
Hards Pearson
Chartered Accountants
Barrie, Canada,
January 29, 1999.
51
<PAGE> 53
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CHICAGO MINIATURE LAMP (CANADA) INC.
BALANCE SHEET
AS AT JANUARY 3, 1999
CANADIAN $
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT
Cash........................................ $ -- $ 1,156,194 $ 1,476,387 $ 985,424
Accounts receivable......................... 4,121,696 3,310,152 2,996,235 2,630,575
Inventory (note 3).......................... 2,943,649 1,557,128 1,360,003 1,661,931
Prepaid expenses............................ 38,060 49,278 45,695 31,019
Due from related parties (note 4)........... 4,145,066 291,029 254,974 --
----------- ----------- ----------- -----------
Total current assets.............. 11,248,471 6,363,781 6,133,294 5,308,949
Fixed assets (note 5)....................... 8,559,505 8,066,973 8,007,320 6,779,361
Goodwill (note 6)........................... 1,110,101 1,140,724 1,143,277 1,261,167
----------- ----------- ----------- -----------
$20,918,077 $15,571,478 $15,283,891 $13,349,477
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT
Bank indebtedness........................... $ 41,355 $ -- $ -- $ --
Accounts payable and accrued charges........ 2,027,279 1,586,085 1,503,962 1,350,297
Income taxes payable........................ 906,916 119,129 73,301 614,565
Due to related parties (note 4)............. -- -- -- 471,450
----------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES......... 2,975,550 1,705,214 1,577,263 2,436,312
Due to SLI, Inc. (note 7)................... 2,932,821 2,011,075 1,939,000 1,353,400
Accrued start-up costs...................... -- -- -- 333,058
Deferred income taxes....................... 2,127,172 1,927,172 1,919,672 1,683,081
----------- ----------- ----------- -----------
Total liabilities................. 8,035,543 5,643,461 5,435,935 5,805,851
----------- ----------- ----------- -----------
SHAREHOLDER'S EQUITY
Capital stock (note 8)...................... 5,000,000 5,000,000 5,000,000 5,000,000
Deferred translation loss (note 9).......... (156,496) -- -- --
Retained earnings........................... 8,039,030 4,928,017 4,847,956 2,543,626
----------- ----------- ----------- -----------
Total shareholder's equity........ 12,882,534 9,928,017 9,847,956 7,543,626
----------- ----------- ----------- -----------
$20,918,077 $15,571,478 $15,283,891 $13,349,477
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
52
<PAGE> 54
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CHICAGO MINIATURE LAMP (CANADA) INC.
STATEMENT OF INCOME
CANADIAN $
PERIOD ENDED JANUARY 3, 1999
(WITH COMPARATIVE FIGURES FOR THE ONE MONTH ENDED JANUARY 4, 1998
AND THE YEARS ENDED NOVEMBER 30, 1997 AND DECEMBER 1, 1996)
<TABLE>
<CAPTION>
1999 1998 1997 1996
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES.................................... $26,915,467 $1,494,358 $19,465,058 $16,872,470
Direct materials and labour.................. 17,340,282 1,108,442 10,661,542 9,710,805
----------- ---------- ----------- -----------
Contributions to overhead.................... 9,575,185 385,916 8,803,516 7,161,665
----------- ---------- ----------- -----------
OVERHEAD COSTS
Manufacturing expenses....................... 3,367,940 267,826 2,686,135 2,547,175
Depreciation and amortization................ 685,963 56,973 587,045 491,816
----------- ---------- ----------- -----------
4,053,903 324,799 3,273,180 3,038,991
Inventory change and capitalized variances... (898,565) (198,096) 670,242 (290,943)
----------- ---------- ----------- -----------
3,155,338 126,703 3,943,422 2,748,048
----------- ---------- ----------- -----------
GROSS MARGIN................................. 6,419,847 259,213 4,860,094 4,413,617
Distribution costs........................... 152,749 11,804 120,702 117,504
Tooling income............................... -- -- (3,058) (15,890)
----------- ---------- ----------- -----------
GROSS PROFIT................................. 6,267,098 247,409 4,742,450 4,312,003
Administration............................... 465,624 69,645 563,120 657,707
----------- ---------- ----------- -----------
INCOME BEFORE INTEREST AND MANAGEMENT FEE.... 5,801,474 177,764 4,179,330 3,654,296
Interest on long-term debt................... -- -- -- 55,662
Management fee............................... 790,461 44,375 525,000 510,000
----------- ---------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES..... 5,011,013 133,389 3,654,330 3,088,634
----------- ---------- ----------- -----------
Provision for income taxes
Current.................................... 1,700,000 45,828 1,180,000 946,100
Deferred................................... 200,000 7,500 170,000 152,907
----------- ---------- ----------- -----------
1,900,000 53,328 1,350,000 1,099,007
----------- ---------- ----------- -----------
NET INCOME FOR THE PERIOD.......... $ 3,111,013 $ 80,061 $ 2,304,330 $ 1,989,627
=========== ========== =========== ===========
</TABLE>
See accompanying notes.
53
<PAGE> 55
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CHICAGO MINIATURE LAMP (CANADA) INC.
STATEMENT OF RETAINED EARNINGS
CANADIAN $
PERIOD ENDED JANUARY 3, 1999
(WITH COMPARATIVE FIGURES FOR THE ONE MONTH ENDED JANUARY 4, 1998
AND THE YEARS ENDED NOVEMBER 30, 1997 AND DECEMBER 1, 1996)
<TABLE>
<CAPTION>
1999 1998 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
RETAINED EARNINGS, BEGINNING OF PERIOD.......... $4,928,017 $4,847,956 $2,543,626 $ 553,999
Net income for the period....................... 3,111,013 80,061 2,304,330 1,989,627
---------- ---------- ---------- ----------
RETAINED EARNINGS, END OF PERIOD................ 8,039,030 4,928,017 4,847,956 2,543,626
========== ========== ========== ==========
</TABLE>
See accompanying notes.
54
<PAGE> 56
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CHICAGO MINIATURE LAMP (CANADA) INC.
STATEMENT OF CASH FLOWS
CANADIAN $
PERIOD ENDED JANUARY 3, 1999
(WITH COMPARATIVE FIGURES FOR THE ONE MONTH ENDED JANUARY 4, 1998
AND THE YEARS ENDED NOVEMBER 30, 1997 AND DECEMBER 1, 1996)
<TABLE>
<CAPTION>
1999 1998 1997 1996
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income for the period.................... $ 3,111,013 $ 80,061 $ 2,304,330 $ 1,989,627
Add charges to income not resulting in a
current outlay of cash
Depreciation and amortization.............. 685,963 56,973 587,045 494,518
Deferred income taxes...................... 200,000 7,500 170,000 152,907
Loss on sale of fixed assets............... -- -- 4,975 83,643
----------- ---------- ----------- -----------
3,996,976 144,534 3,066,350 2,720,695
Net decrease in accrued start-up costs....... -- -- (333,058) (322,871)
Adjustment to deferred taxes and goodwill
recorded upon amalgamation................. -- -- 165,254 --
Net change in non-cash working capital
balances (note 10)......................... (957,866) (386,674) (466,007) (212,175)
----------- ---------- ----------- -----------
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES................................. 3,039,110 (242,140) 2,432,539 2,185,649
----------- ---------- ----------- -----------
FINANCING ACTIVITIES
Advances from (to) related parties........... (3,088,787) 36,020 (140,824) 89,513
Reduction in long-term debt.................. -- -- -- (793,400)
----------- ---------- ----------- -----------
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES................................. (3,088,787) 36,020 (140,824) (703,887)
----------- ---------- ----------- -----------
INVESTING ACTIVITIES
Purchase of fixed assets..................... (1,147,872) (114,073) (1,836,156) (1,645,604)
Proceeds on disposal of fixed assets......... -- -- 35,404 234,954
----------- ---------- ----------- -----------
CASH USED IN INVESTING ACTIVITIES............ (1,147,872) (114,073) (1,800,752) (1,410,650)
----------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH DURING THE
PERIOD..................................... (1,197,549) (320,193) 490,963 71,112
Cash, beginning of period.................... 1,156,194 1,476,387 985,424 914,312
----------- ---------- ----------- -----------
CASH (BANK INDEBTEDNESS), END OF PERIOD...... (41,355) 1,156,194 1,476,387 985,424
=========== ========== =========== ===========
</TABLE>
See accompanying notes.
55
<PAGE> 57
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CHICAGO MINIATURE LAMP (CANADA) INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 3, 1999
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.
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 period. 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 amount. Depreciation is provided when the asset is placed into
service on the straight-line basis, with half rates applied in the year of
acquisition, over the following periods:
<TABLE>
<S> <C>
Buildings................................................... 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 period have been included in net income.
56
<PAGE> 58
CHICAGO MINIATURE LAMP (CANADA) INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
3. INVENTORY
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Raw materials................................. $1,543,765 $ 824,676 $ 820,977 $1,029,503
Work-in-progress and finished goods........... 1,239,563 681,763 488,337 625,370
Capitalized variances......................... 53,810 (49,310) (49,310) (27,175)
Tooling....................................... 106,511 99,999 99,999 34,233
---------- ---------- ---------- ----------
$2,943,649 $1,557,128 $1,360,003 $1,661,931
========== ========== ========== ==========
</TABLE>
4. DUE FROM (TO) RELATED PARTIES
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Canadian Dollars
Power Lighting Products, Inc. ................... $ 24,567 $ 24,712 $ 12,625 $ --
British Pounds
Badalex Ltd. .................................... -- (54,320) (54,320) (88,962)
Exchange....................................... -- (70,888) (76,048) (106,754)
United States Dollars
SLI, Inc. ....................................... 3,161,951 275,698 264,438 (205,797)
Socop Industries................................. 9,899 -- -- --
SLI Miniature Lighting Ltd. ..................... (481,300) -- -- --
Exchange....................................... 1,429,949 115,827 108,279 (69,937)
---------- -------- -------- ---------
$4,145,066 $291,029 $254,974 $(471,450)
========== ======== ======== =========
</TABLE>
The following is a summary of the related party transactions for the
period:
<TABLE>
<S> <C>
INTERCOMPANY SALES (IN CANADIAN DOLLARS)
Socop Industries............................................ $ 41,649
SLI Miniature Lighting Ltd. ................................ 8,994
SLI, Inc. .................................................. 386,728
----------
$ 437,371
==========
OTHER RELATED PARTY TRANSACTIONS
Lamps purchased from SLI Miniature Lighting Ltd. ........... $1,781,166
Capital equipment purchased from Bruckner................... 435,082
Insurance premiums paid to SLI, B.V. ....................... 22,524
Rework performed for IDI Internacional, S.A. (Costa Rica)... 30,816
Management fees paid to SLI, Inc. .......................... 790,461
==========
</TABLE>
The above corporations deal on terms that are substantially the same as
independent customers. SLI, 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.
57
<PAGE> 59
CHICAGO MINIATURE LAMP (CANADA) INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
5. FIXED ASSETS
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Land........................................... $ 75,000 $ 75,000 $ 75,000 $ 75,000
Buildings...................................... 1,353,926 1,387,000 1,391,090 1,434,107
Machinery and equipment........................ 4,775,234 4,829,048 4,641,387 3,475,312
Moulds and dies................................ 1,300,184 1,391,400 1,260,623 884,760
Software....................................... 48,648 30,255 31,355 42,700
Construction-in-progress....................... 1,006,513 354,270 607,865 867,482
---------- ---------- ---------- ----------
$8,559,505 $8,066,973 $8,007,320 $6,779,361
========== ========== ========== ==========
</TABLE>
The fixed assets are shown at cost less accumulated depreciation.
6. GOODWILL
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Cost........................................... $1,224,939 $1,224,939 $1,224,939 $1,323,602
Less accumulated amortization.................. (114,838) (84,215) (81,662) (62,435)
---------- ---------- ---------- ----------
$1,110,101 $1,140,724 $1,143,277 $1,261,167
========== ========== ========== ==========
</TABLE>
7. DUE TO SLI, INC.
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
United States Dollars
Note payable................................... $1,916,250 $1,416,250 $1,385,000 $1,010,000
Exchange..................................... 1,016,571 594,825 554,000 343,400
---------- ---------- ---------- ----------
$2,932,821 $2,011,075 $1,939,000 $1,353,400
========== ========== ========== ==========
</TABLE>
No interest and no specific terms of repayment have been negotiated.
8. CAPITAL STOCK
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <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 $5,000,000 $5,000,000
========== ========== ========== ==========
</TABLE>
9. DEFERRED TRANSLATION LOSS
The unrealized loss on translation of foreign exchange on the balance due
to SLI, Inc. has been deferred to reflect the long-term nature of this advance.
58
<PAGE> 60
CHICAGO MINIATURE LAMP (CANADA) INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
10. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Accounts receivable............................ (811,544) $(313,917) (365,660) $ 10,922
Income taxes receivable........................ -- -- -- 133,139
Inventory...................................... (1,386,521) (197,125) 301,928 (205,552)
Prepaid expenses............................... 11,218 (3,583) (14,676) 3,637
Accounts payable and accrued charges........... 441,194 82,123 153,665 (768,886)
Income taxes payable........................... 787,787 45,828 (541,264) 614,565
----------- --------- --------- ---------
$ (957,866) $(386,674) $(466,007) $(212,175)
=========== ========= ========= =========
</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.
11. PENSION PLAN
Prior to July 31, 1997 the company maintained a defined benefit pension
plan of which substantially all employees were members. Current and past service
costs were charged to income as incurred and funded as required by actuarial
valuations.
The pension expense, all for current service costs, was $62,579 in 1997.
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 were distributed to the
members for transfer to a "locked-in" Registered Retirement Savings Plan.
12. OPERATING LEASES
Minimum lease payments over the next three years with respect to vehicle
and office equipment operating leases are as follows:
<TABLE>
<S> <C>
2000........................................................ $27,963
2001........................................................ 13,348
2002........................................................ 5,510
-------
$46,821
=======
</TABLE>
13. FINANCIAL INSTRUMENTS
It is management's opinion that the company is not exposed to significant
interest, currency, or credit risks arising from financial instruments. The fair
values of short-term investments, accounts receivable, accounts payable and
accrued liabilities and long-term debt are represented by their carrying values.
14. CONTINGENT LIABILITIES
(A) GUARANTEES
The company has pledged an unlimited guarantee in favour of BANKBOSTON,
N.A. over the indebtedness of its parent company, SLI, Inc.
(B) INCOME TAXES
In April 1998 Revenue Canada issued a Notice of Assessment with respect to
the year ended December 30, 1994 and Notices of Reassessment for the periods
ended March 29th and December 3rd, 1995.
59
<PAGE> 61
CHICAGO MINIATURE LAMP (CANADA) INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
The effect of these Notices is to disallow certain deductions and
Investment Tax Credits pursuant to Section 37 of the Income Tax Act. The Company
has not paid any amount in respect of the Notices and has responded by filing
Notices of Objection for each of the tax periods in question.
Based on the information currently available, if these assessments were to
be upheld, the Company's exposure would be approximately $190,000 less any
amount recovered under certain warranties.
If any payment is ultimately required, it will be recorded in the period
paid.
15. COMMITMENTS
The company has committed to $225,000 of capital asset purchases for the
coming year. Progress payments totaling $105,000 have been made to suppliers as
a result of these commitments. These payments are included under
"Construction-in-progress" [Note 5] in the financial statements.
The company is also committed to the transfer of certain equipment to Socop
Industries (a fully-owned subsidiary of SLI Miniature Lighting Ltd. and a
related party) in the coming year. The items to be transferred are as follows:
<TABLE>
<S> <C>
Production equipment........................................ $500,157
Tooling inventory........................................... 101,312
Dies........................................................ 145,570
Raw materials............................................... 11,257
--------
$758,296
========
</TABLE>
The items will be transferred at cost with no specific terms of repayment.
16. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect and entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
17. COMPARATIVE AMOUNTS
Certain comparative amounts have been reclassified from those previously
presented to confirm to the presentation of the current period's financial
statements.
60
<PAGE> 62
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES
(Dollars in Thousands)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OTHERS(1) PERIOD
----------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Year end January 3, 1999:
Reserves and allowances deducted from asset
account:
Allowance for uncollectible accounts... $ 7,677 $616 $(1,372) $2,448 $ 9,369
Inventory reserves for excess and
obsolete............................... 13,727 835 (2,553) 4,090 16,099
Month end January 4, 1998:
Reserves and allowances deducted from asset
account:
Allowance for uncollectible accounts... 7,889 26 (46) (192) 7,677
Year end November 30, 1997:
Reserves and allowances deducted from asset
account:
Allowance for uncollectible accounts... 524 771 (367) 6,961 7,889
Year end December 1, 1996:
Reserves and allowances deducted from asset
account:
Allowance for uncollectible accounts... 118 105 70 231 524
</TABLE>
- ---------------
(1) Represents allowance for doubtful accounts and inventory reserves for excess
and obsolete acquired as a result of acquisitions, and the currency
translation adjustments in these accounts during the period.
61
<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 3.1(c)
AMENDMENT TO THE AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
OF
CHICAGO MINIATURE LAMP, INC.
We, the undersigned officers of Chicago Miniature Lamp, Inc., an
Oklahoma corporation, do hereby file this Amendment to the Amended and Restated
Certificate of Incorporation, to reflect an amendment to the Amended and
Restated Certificate of Incorporation filed with the Oklahoma Secretary of State
on December 30, 1996, which amendment is set forth below:
Article I of the Amended and Restated Certificate of Incorporation is
hereby amended to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is SLI, Inc.
The foregoing amendment was adopted in accordance with the procedures
set forth in Section 1077 of the Oklahoma General Corporation Act.
IN WITNESS WHEREOF, the Corporation has caused this amendment to be
signed by its President and attested by its Secretary, this 27th day of April,
1998.
CHICAGO MINIATURE LAMP, INC.
By /s/ Frank M. Ward
-----------------------------------
Frank M. Ward, President
ATTEST:
/s/ Richard F. Parenti
- -------------------------------
Richard F. Parenti, Secretary
<PAGE> 1
EXHIBIT 10.1(b)
AMENDMENT TO
CHICAGO MINIATURE LAMP, INC
1995 INCENTIVE AND
NON-STATUTORY STOCK OPTION PLAN
The Board of Directors of Chicago Miniature Lamp, Inc. (the "Company")
approved the amendment of the Company's 1995 Incentive and Non-Statutory Stock
Option Plan (the "Plan") to increase the number of shares of Common Stock
available for grant under the Plan from 1,500,000 to 3,000,000, an increase of
1,500,000 shares of Common Stock. The amendment will cause Section 3.1 of the
Plan to be replaced with the following revised Section 3.1.
3.1 Shares Subject to Plan. The stock subject to the options granted
under the Plan shall be shares of the Company's authorized buy
unissued common stock, par value $.01 per share ("Common Stock"). The
total of shares that may be issued pursuant to options granted under
the Plan shall not exceed 3,000,000 shares of Common Stock.
Dated: April 27, 1998
<PAGE> 1
EXHIBIT 10.1(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 10.31
ASSET PURCHASE AND SECURITY AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
this 21st day of November, 1997 by and among CHICAGO MINIATURE LAMP, INC., a
corporation ("Purchaser"), and SOLIUM, INC., a Massachusetts corporation
("Solium") and PACIFIC SCIENTIFIC COMPANY, a California corporation ("Pacific
Scientific") (Solium and Pacific Scientific are sometimes collectively referred
to herein as "Seller").
RECITALS
Seller is engaged in the business of designing, manufacturing and
distributing the electronic ballasts described more fully on Exhibit A (such
business now being conducted by Solium is known as the "Solium Product Line"
and is referred to herein in its entirety as the "Business"). In accordance
with this Agreement, Purchaser desires to purchase, and Seller desires to sell,
the "Assets" described herein.
NOW, THEREFORE, in consideration of the foregoing and the provisions
set forth in this Agreement, the parties hereby agree as follows:
ARTICLE 1: SALE OF ASSETS
1.1 Purchase and Sale of Assets. Subject to the terms and
conditions set forth in this Agreement, at the Closing (as defined in Section
3.1) Seller shall sell to Purchaser, and Purchaser shall purchase and acquire
from Seller, all of Seller's right, title and interest in and to the following
assets (collectively, the "Assets"):
(a) The machinery, fixtures, tools, equipment and other
tangible personal property used in the Business listed on Schedule 1.1(a) (the
"Equipment"); and
(b) Copies of the technical data, specifications, test
procedures, drawings, models, prototypes, manuals, documentation, and other
information relating to the manufacturing and production of the Solium Product
Line listed on Schedule 1.1(b) (the "Materials").
1.2 Excluded Assets: Taxes. All books, records, office furniture,
rights, assets or properties of Seller not specifically listed in Section 1.1
above shall be excluded from the definition of Assets and shall not be acquired
by Purchaser pursuant to this Agreement. Purchaser agrees to pay all sales
taxes, transfer taxes, and similar taxes or charges relating to the sale of the
Assets, but will not be responsible for taxes or other governmental charges
based on the Seller's income or gain from the sale of the Assets.
1.3 No Assumed Liabilities. Purchaser is not assuming any
obligations or liabilities of Seller in connection with the transactions
contemplated hereby, except as expressly set forth in this Agreement. Purchaser
shall assume and perform all obligations arising out of or in connection with
the Assets and any products sold by Purchaser after the Closing.
1.4 Archival and Use of the Materials. Prior to the Closing,
Seller has the right to copy and retain copies of the Materials in any form it
deems necessary (the "Archived Materials"). After the Closing, Seller may copy,
use, distribute, sell, revise, or otherwise utilize the Archived Materials: (a)
in accordance with the terms of the License Agreement; (b) upon the occurrence
of an Event of
<PAGE> 2
Default (as defined in Section 10.3); and (c) in the manner Seller deems
necessary if it or any of its representatives or affiliates become legally
compelled (by oral questions, interrogatories, requests for information or
documents, document production, subpoena, civil or criminal investigative
demand, or similar process) or required by any authority or regulatory body to
make any disclosure concerning the information contained in the Archived
Materials.
1.5 Purchase Price. The purchase price to be paid by Purchaser
for the Assets shall be Two Million Five Hundred Thousand ($2,500,000) (the
"Assets Purchase Price").
ARTICLE 2: CLOSING
2.1 Closing. Subject to fulfillment of all conditions precedent,
the consummation of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Solium located at 41 Pacella
Park, Randolph, Massachusetts on November 24, 1997 at 10:00 A.M., local time,
or at such other time, date or place as Purchaser and Seller mutually may agree
upon (the "Closing Date"). All transactions at the Closing shall be deemed to
take place simultaneously and no transaction at the Closing shall be deemed to
have been completed until all documents set forth in this Article 3 have been
delivered by the parties hereto.
2.2 Obligations of Seller. At the Closing, Seller shall deliver
to Purchaser:
(a) The License Agreement substantially in the form
attached hereto as Exhibit B (the "License
Agreement"), executed by Seller;
(b) The Inventory schedule required by Section 3.1
below; and
(c) Such other documents as may be reasonably requested
by Purchaser to convey the Assets to Purchaser in
accordance with the provisions of this Agreement.
2.3 Obligations of Purchaser. At the Closing, Purchaser shall
deliver to Seller:
(a) The Assets Purchase Price, payable by wire transfer
or bank or certified check;
(b) The License Agreement, executed by Purchaser;
(c) The Inventory Purchase Order required by Section 3.1
below, executed by Purchaser;
(d) The financing statements and other filings required
by Section 10.5 below, executed by Purchaser; and
(e) Such other instruments and documents as may be
reasonably requested by Seller to fully and
effectively evidence the obligations of Purchaser
pursuant hereto.
ARTICLE 3: INVENTORIES AND WARRANTY REPAIRS
3.1 Purchase of Inventory. Approximately twenty-four hours prior
to the Closing, Seller shall prepare a schedule listing all inventory in stock
on such date used in connection with the production and repair of the current
models of the Solium Product Line (the "Inventory"). At the Closing, Purchaser
shall issue to Seller a purchase order (the "Inventory Purchase Order")
purchasing all the Inventory listed on the schedule prepared by Purchaser in
the previous sentence. The purchase price for the Inventory shall be equal to
fifty percent of Seller's cost of the Inventory as set forth on the schedule
and shall be payable in four equal quarterly installments on February 28, 1998,
May 31, 1998, August 31, 1998, and November 30, 1998. Purchaser shall be
responsible for all costs of shipment of the Inventory.
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<PAGE> 3
3.2 Warranty Repair. For a period of sixty (60) months after the Closing,
Purchaser shall agree to perform on behalf of Seller all warranty work relating
to any products sold in connection with the Business by Seller prior to the
Closing Date. Notwithstanding the foregoing, Purchaser is not assuming any
warranty obligation relating to any products sold in connection with the
Business by Seller prior to the Closing Date. All such warranty work and
repairs shall be conducted in a professional, prompt and workmanlike manner,
and in accordance with the terms of the original warranties for such products
provided by Seller. Purchaser shall charge Seller for such warranty work and
repairs in accordance with Schedule 3.2 attached hereto.
ARTICLE 4: REPRESENTATIONS AND WARRANTIES
4.1 Mutual Representations. Each of the parties hereto represents and
warrants as follows:
(a) It has the requisite power and full legal rights to execute and
deliver this Agreement, consummate the transactions contemplated hereby, and
perform its obligations hereunder in accordance with the terms hereof:
(b) This Agreement and the transactions contemplated hereby have
been duly approved and authorized by all requisite corporate action on its part
and this Agreement has been duly executed and delivered by it and constitutes
its legal, valid and binding obligation, enforceable against it in accordance
with its terms; and
(c) Its execution, delivery and performance of this Agreement and its
consummation of the transactions contemplated hereby will not result in (with or
without the giving of notice or lapse of time or both) any conflict, violation,
breach or default or the creation of any lien, or the termination, acceleration,
vesting or modification of any right or obligation, under or in respect of its
charter documents or bylaws, that any judgement, order, decree, statute, rule or
regulation binding on it or applicable to it, or any agreement or instrument to
which it is a party or which it or any of its assets are bound.
4.2 By Seller. Seller represents and warrants to Purchaser that Seller
has good and marketable title to the Assets owned by it and the Assets are
owned free and clear of all liens, claims, and encumbrances, except for liens
of current taxes not yet due or payable. Seller is selling the Assets and the
Inventory strictly on an "AS-IS" basis.
4.3 By Purchaser. Purchaser represents and warrants to Seller that it is
familiar with the condition of the Assets and the Inventory, the business and
the Solium Product Line and acknowledges that neither Seller nor any agent,
representative or employee of Seller has made any representations or warranties
regarding the condition of the Assets, except as set forth expressly in the
previous paragraphs.
4.4 Disclaimer of Other Warranties. EXCEPT AS EXPRESSLY SET FORTH ABOVE
IN THIS ARTICLE 4, NONE OF THE PARTIES HERETO MAKES ANY OTHER REPRESENTATIONS
OR WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
WARRANTIES AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
ARTICLE 5: ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Training. For a period of 90 days following the Closing Date, Seller
shall provide, at mutually convenient times, up to 500 man-hours of training
and assistance to Purchaser in the use and
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<PAGE> 4
maintenance of the Equipment. Seller and Purchaser shall mutually cooperate in
connection with the scheduling of such training and assistance. Purchaser shall
reimburse Seller for all out-of-pocket costs incurred in connection with the
training and assistance. Neither Seller nor any of its employees or
representatives shall be liable for any actions or omissions with respect to the
training.
5.2 Seller's Name. As promptly as practicable after the Closing Date,
Purchaser shall remove the "Pacific Scientific" name and trademark from all
Assets and Inventory transferred under this Agreement. Within a reasonable
time after the Closing, Solium shall change its name to a name not utilizing
"Solium."
5.3 Payments Received. Purchaser agrees that after the Closing, Purchaser
will hold and promptly transfer and deliver to Seller, from time to time as and
when received by Purchaser, any cash, checks with appropriate endorsements
(using their best efforts not to convert such checks into cash), or other
property that Purchaser may receive on or after the Closing which properly
belongs to Seller and will account to Seller for all such receipts. Purchaser
agrees to cooperate with Seller in a reasonable manner in order to assist Seller
to collect any accounts receivable outstanding as of the Closing.
5.4 No Public Announcement. Neither of the parties hereto shall, without
the approval of the other party (which may not unreasonably withheld), make any
press release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that such party
shall determine is required by law or the rules and regulations of any exchange
upon which a party's securities are traded (which determination shall be made
by such party based upon the advice of its counsel), in which case the other
party shall be advised in advance and the parties shall use their best efforts
to cause a mutually agreeable release or public announcement regarding the
consummation of the transactions contemplated hereby.
5.5 Custody and Removal of Assets. All title and risk of loss to the
Assets and the Inventory will vest in Buyer effective as of the Closing.
Notwithstanding the foregoing, the parties agree that one full and complete
production line currently at Solium's premises which constitutes part of the
Equipment and which is currently used by Seller shall remain intact at its
current location and may be used exclusively by Seller without cost until
December 31, 1997. After December 31, 1997 and before February 28, 1998,
Purchaser shall remove such production line from Solium's premises. During
Seller's use of this production line, Seller shall be responsible for all
routine maintenance and repairs relating to such equipment. The second full
production line which constitutes part of the Equipment shall be removed by
Purchaser at any time after the Closing Date and prior to February 28, 1998. All
costs and expenses associated with removal of the Assets shall be borne by
Purchaser.
ARTICLE 6: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to purchase the Assets and to carry out its
other obligations under this Agreement shall be subject to the fulfillment of
the following express conditions precedent on or before the Closing, unless
waived in writing by Purchaser or as a otherwise provided herein:
6.1 Absence of Litigation. No action or proceeding shall have been
instituted and remain pending before a court or other governmental body by any
applicable government agency thereof of any person to restrain or prohibit the
consummation of the transactions contemplated by this Agreement.
6.2 Deliveries. Seller shall have executed and delivered to Purchaser the
documents and agreements required to be delivered by Seller to Purchaser at the
Closing in accordance with Section 2.2 above.
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<PAGE> 5
ARTICLE 7: CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligations of Seller to transfer and deliver to Purchaser all of
Seller's rights, title, and interest in and to the Assets and to carry out its
other obligations under this Agreement shall be subject to the fulfillment of
the following express conditions precedent on or before the Closing, unless
waived in writing by Seller:
7.1 ABSENCE OF LITIGATION. No action or proceeding shall have been
instituted and remain pending before a court or other applicable governmental
body or agency thereof or any person to restrain or prohibit the consummation
of the transactions contemplated by this Agreement.
7.2 DELIVERIES. Seller shall have received payment of the Assets
Purchase Price and Purchaser shall have executed and delivered to Seller the
documents and agreements required to be delivered by Purchaser to Seller at the
Closing in accordance with Section 2.3 above.
ARTICLE 8: SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATIONS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants made in this Agreement or in any certificate or other
document delivered pursuant hereto or in connection herewith shall survive the
Closing Date.
8.2 INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify, defend
and hold harmless Purchaser and its agents, directors, officers, employees,
consultants and shareholders from and against any and all claims, liabilities,
losses, fines, penalties, costs and expenses including, without limitation,
reasonable attorneys' fees (singularly, a "Liability," and collectively,
"Liabilities"), that arise out of or relate to (a) any breach of, or failure by
Seller to perform any of its representations, warranties or covenants contained
in the Transaction Documents (as defined in Section 10.2 below) or in any other
instrument or document furnished by Seller pursuant to the Transaction
Documents or (b) the operation of the Business or the Assets prior to the
Closing.
8.3 INDEMNIFICATION BY PURCHASER. Purchaser hereby agrees to indemnify,
defend and hold harmless Seller and its agents, directors, officers, employees,
consultants and shareholders from and against any and all Liabilities that
arise out of or relate to (a) any breach of, or failure by Purchaser to perform
any of its representations, warranties or covenants contained in the
Transaction Documents or in any other instrument or document furnished or to be
furnished by Purchaser pursuant to the Transaction Documents or (b) the
operation of the Business or the Assets on or after the Closing.
8.4 LIMITATION ON INDEMNIFICATION. Notwithstanding anything contained
this Article 8 to the contrary, neither Seller nor Purchaser shall be obligated
to indemnify the other unless the amount of any Liability incurred or suffered
by Purchaser or Seller, as the case may be, exceeds $25,000 on per item basis
and then only to the extent that the amount of such Liability exceeds $25,000
(any per item amount which equals or is under $25,000 is hereinafter referred
to as a "Non-Indemnified Loss"). At such time as the aggregate amount of all
Non-Indemnified Losses incurred by any one party exceeds $100,000, then the
party incurring such Non-Indemnifiable Losses shall be entitled to
indemnification by the other party for the full amount of all Liabilities first
incurred or suffered by such party. The maximum amount of liability which
either Seller or Purchaser may be subject to under the indemnification provided
for in this Section 8 shall not exceed $2,500,000.
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<PAGE> 6
ARTICLE 9: TERMINATION
9.1 TERMINATION. This Agreement may be terminated prior to Closing:
(a) By mutual consent of Purchaser and Seller; or
(b) By written notice from Seller, if the conditions in Article 7 of
this Agreement have not been satisfied by the Closing Date; or
(c) By written notice from the Purchaser, if the conditions in
Article 6 of this Agreement have not been satisfied by the Closing Date; or
(d) By either Purchaser or Seller in accordance with Section 9.2
below; or
(e) By written notice from either Purchaser or Seller if the Closing
does not occur on or prior to November 24, 1997.
The earlier of the events listed in subclauses (a) through (e) above to
occur is referred to herein as the "Termination Date." In the event that this
Agreement is terminated pursuant to the provisions of this Section 9.1, this
Agreement shall become null and void and shall have no further effect, and no
party shall have any liability with respect thereto except to the extent that
such termination results from the willful breach by a party hereto of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE 10: GRANT OF SECURITY INTEREST
10.1 GRANT OF SECURITY INTEREST. Purchaser hereby grants to Seller a
continuing security interest in all of the Assets sold to Purchaser pursuant to
this Agreement, together with all present and future accessories, additions,
attachments, proceeds, products, improvements, replacements and substitutions
of or to any of the foregoing (collectively the "Collateral").
10.2 OBLIGATIONS SECURED. The security interest created by this
Agreement is given for the purpose of securing (a) all obligations under this
Agreement and the License Agreement (collectively the "Transaction Documents"),
and (b) any and all amendments, modifications, renewals and/or extensions to
any of the Transaction Documents (collectively the "Obligations").
10.3 EVENTS OF DEFAULT. Each of the following shall constitute an event
of default ("Event of Default") under this Agreement:
(a) Purchaser shall fail to pay when due the payment obligations due
under the Transaction Documents or Purchaser breaches or fails to perform any
other covenant set forth in the Transaction Documents; or
(b) Any representation or warranty made by Purchaser in the
Transaction Documents is false, misleading or incomplete in any material
respect; or
(c) Purchaser commences a voluntary case or proceeding seeking
liquidation, relief or reorganization under any bankruptcy, insolvency or
similar law or seeks the appointment of a trustee, receiver, liquidator or
other similar official or any involuntary case or other proceeding shall be
commenced against Purchaser seeking liquidation, reorganization or other relief
with respect to its debts.
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<PAGE> 7
If an Event of Default shall occur, the unpaid portion of any payment due under
any Transaction Documents shall be immediately due and payable without
presentment, demand, protest or further notice of any kind. If any payment is
not made when due, the unpaid portion thereof, to the extent permitted by law,
shall bear interest at the rate of ten percent (10%) per annum, payable upon
demand of Seller until such unpaid amount is paid in full.
10.4 REMEDIES. Upon the occurrence and during the continuance of an Event
of Default, Seller shall have the following rights:
(a) All the rights and remedies of a secured party under the
Massachusetts Uniform Commercial Code or other similar law;
(b) The right to enter the premises of Purchaser where the
Collateral is located and kept, and remove the Collateral therefrom to the
premises of Seller or any agent of Seller and to require Purchaser to assemble
the Collateral and make it available to Seller at a place designated by Seller;
(c) To do all acts and things, in Seller's sold discretion, to
fulfill Purchaser's obligations under this Agreement, including endorsing the
name of the Purchaser on any documents, instruments, bills of lading or other
documents relating to the Collateral and using the information recorded on or
contained in any data processing equipment and computer hardware and software
relating to the Collateral; and
(d) Sell or otherwise dispose of all or any of the Collateral at a
private or public sale, in lots or in bulk, all as Seller may in its sole
discretion deem advisable.
The proceeds realized from any sale of Collateral shall be applied first to the
costs, expenses and attorneys' fees incurred by Seller for collection and for
acquisition, protection, storage and sale and delivery of the Collateral;
second to interest due on any of the Obligations, and third to the principal of
the Obligations. If any deficiency shall arise, Purchaser shall remain liable
to Seller therefor.
10.5 INITIAL COVENANTS. Purchaser agrees to execute such documents
(including UCC financing statements) and take such other actions as Seller
deems necessary or desirable to create and perfect a security interest in the
Collateral and not to move the Collateral without twenty (20) days prior notice
to Seller. Seller shall maintain in good condition and repair the Collateral
and discharge all taxes and liens on the Collateral prior to delinquency.
Seller shall insure the Collateral against loss or damage, theft and other
insurable risks in a commercially reasonable manner.
ARTICLE 11: MISCELLANEOUS
11.1 EXPENSES. Each party to this Agreement shall bear and pay its own
costs and expenses incurred in connection with the preparation, execution, and
delivery of this Agreement and the transactions contemplated by this Agreement.
11.2 NOTICES. All notices, claims, certificates, requests, demands and
other communications under this Agreement shall be made in writing and shall be
delivered by hand or sent by prepaid telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service,
and shall be deemed given when so delivered by hand, or telecopied, or if
mailed, three (3) days after mailing (one (1) business day in the case of
express mail or overnight courier service) to the parties at the addresses
specified on the Signature Page of this Agreement, or at such other address for
a party as shall be specified by like notice.
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<PAGE> 8
11.3 NO FINDER OR BROKER. Each of Purchaser and Seller represent and
warrant to the other that neither has paid or has become obligated to pay any
fee or commission to any broker or finder in connection with the transactions
contemplated by the Transaction Documents.
11.4 NO ASSIGNMENT. The rights and obligations of each party under this
Agreement shall not be assignable prior to, on or after the Closing without the
written consent of the other party hereto, which consent shall not be
unreasonable withheld. The obligations of Seller and Purchaser hereunder shall
be binding upon their respective successors and permitted assigns. Any
assignment in contravention of the foregoing shall be void and of no further
force or effect.
11.5 BENEFITS. Nothing expressed or referred to in this Agreement is
intended or shall be construed to give any person or entity, other than the
parties to this Agreement, or their respective successors and assigns, any
legal or equitable right, remedy or claim under or in respect thereof or any
provision contained herein, it being the intention of the parties that this
Agreement is for the sole and exclusive benefit of such parties, and such
successors and assign of this Agreement and for the benefit of no other person
or entity.
11.6 AMENDMENTS; HEADINGS. This Agreement may be amended or modified
only by a written instrument executed by the parties to this Agreement. The
paragraph and other headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
11.7 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement and the exhibits
hereto, and the other letters, schedules and documents referred to herein or
exchanged contemporaneously between the parties hereto constitutes the entire
agreement of the parties with respect to the subject matter of this Agreement
and supersedes all prior agreements, understandings, or representations
relating to the subject matter of this Agreement. This Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same agreement.
11.8 SEVERABILITY. If any provision of this Agreement, or any covenant,
obligation or agreement contained herein is determined by a court to be invalid
or unenforceable, such determination shall not affect any other provision,
covenant, obligation or agreement, each of which shall be construed and enforced
as, if such invalid or unenforceable provision were not contained herein. Such
invalidity or unenforceability shall not affect any valid and enforceable
application thereof and each such provision, covenant, obligation or agreement
shall be deemed to be effective, operative, made, entered into or taken in the
matter and to the full extent permitted by law.
11.9 GOVERNING LAWS; ARBITRATION. This Agreement shall be construed in
accordance with, and governed by, the internal laws of the State of California
(and not the laws of conflict of law). All controversies, disputes or claims
arising out of or in connection with this Agreement shall be resolved by
submission to binding arbitration in the offices in Orange County, California,
of J.A.M.S./ENDISPUTE("J.A.M.S.") or its successor. Either party may commence
the arbitration by filing a written demand for arbitration with J.A.M.S., with
a copy to the other party. The notice sent by the aggrieved party initiating
the arbitration shall describe the dispute amount involved and the remedy
sought. The parties may agree on a single arbitrator form a panel of potential
arbitrators provided by J.A.M.S. If the parties are unable to agree, J.A.M.S.
will provide a list of three arbitrators, Seller and Purchaser may each strike
one name from the list and the remaining arbitrator shall serve as the
arbitrator. The parties agree to participate in the arbitration in good faith
and shall share equally it costs. Nothing in this paragraph shall obligate the
parties to arbitrate any of the provisions of the License Agreement.
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<PAGE> 9
IN WITNESS WHEREOF, Seller and Purchaser have caused their respective duly
authorized officers to execute this Asset Purchase Agreement as of the day and
year first above written.
PURCHASER: SELLER:
CHICAGO MINIATURE LAMP, INC. PACIFIC SCIENTIFIC COMPANY, a
California corporation
By: /s/F.M. Ward By: /s/
------------------------------- ----------------------------------
Title: Chairman, CEO Title: President - Solium Inc.
By: SOLIUM, INC., a Massachusetts corporation
-------------------------------
Title:
----------------------------
By: /s/
----------------------------------
Title: Chairman
-------------------------------
ADDRESS FOR NOTICES: ADDRESS FOR NOTICES:
Pacific Scientist Company
500 Chapman Street 620 Newport Center Drive, Suite 700
Canton, Massachusetts 02021 Newport Beach, CA 92658
Attention: Frank Wood Attention: Chief Executive Officer
<PAGE> 10
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is made and entered into as of
November 21, 1997, by and among PACIFIC SCIENTIFIC COMPANY, a California
corporation ("PSC"), SOLIUM, INC., a Massachusetts corporation and wholly-owned
subsidiary of PSC ("Solium") (PSC and Solium are sometimes collectively
referred to herein as "Licensor"), and CHICAGO MINIATURE LAMP, INC., an
Oklahoma corporation ("Licensee").
A. Solium is the owner of (1) certain technology, known-how and trade
secrets (the "Technology") relating to electronic ballasts and lighting controls
for fluorescent lamps, as more particularly described on Exhibit A attached
hereto, (2) the United States Patents and patent applications, and their
counterpart patents and patent applications in other countries, all as set forth
on Exhibit B attached hereto (collectively, the "Patents"), and all rights
thereunder, all rights under any extensions, reissues, renewals, continuations,
continuations in part, or divisions thereof, all rights to make, have made, use,
develop and commercialize the inventions or processes described therein, all
rights to sue and recover damages for any past, present or future infringement
thereof, and any and all proprietary or other rights secured thereby or
comprised therein (collectively, the "Patent Rights"), and (3) the entire right,
title and interest in and to the "SOLIUM" and "SENSE-A-VOLT" trademarks,
together with the goodwill associated therewith (collectively, the
"Trademarks"), the uniqueness of which is hereby acknowledged by Licensee.
B. Pursuant to the terms of the Asset Purchase Agreement between Licensor
and Licensee dated as of the date hereof (the "Asset Agreement"), Licensor has
transferred and assigned to Licensee certain assets relating to electronic
ballasts and lighting controls for fluorescent lamps.
C. Licensee desires to secure from Licensor, and Licensor desires to
grant to Licensee, a license to use the Technology, Patents, Patent Rights and
Trademarks (the "Rights") subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties agree
as follows:
1. DEFINITIONS. Unless otherwise defined herein, the capitalized terms used
in this Agreement shall have the meanings assigned to them in this Section 1.
"AFFILIATE" shall mean, with respect to any party, any officer, director,
shareholder, employee, representative, or agent of such party, or any entity
directly or indirectly controlling, controlled by or under common control with
such party.
"CONFIDENTIAL INFORMATION" shall mean all secret, confidential and
proprietary information, including without limitation all trade secrets,
relating to the Rights. Confidential Information shall include, by way of
example and not of limitation, all things, ideas, models, devices, plans,
specifications, drawings, documents, notes, sales and marketing information,
<PAGE> 11
manufacturing procedures, testing procedures, products, materials, processes,
computer source code, computer object code, computer programs, business and
marketing plans, tooling and equipment which are trade secrets or which include
proprietary know-how or information.
"Copyrights" include any copyrightable subject matter included in the
Technology.
"Products" shall mean (i) a product that is covered in whole or in
part by, or is manufactured using a process that is covered in whole or in part
by, a Patent or Patent Right or (ii) a product that unless made, used or sold
pursuant to this Agreement, would infringe a Patent or Patent Right.
2. License. Subject to the remaining provisions of this Agreement,
Licensor hereby grants to Licensee an exclusive and non-transferable license
(the "License") to use and practice the Rights in connection with the design,
manufacture, production, advertisement, promotion, sale and distribution of the
Products throughout the world. Nothing in this Section 2 or otherwise in this
Agreement shall be construed as conferring any right to use in any manner any
name, trademark, service mark, logo or trade name of Licensor other than the
Trademarks. Licensee shall have no right to sublicense any of its rights or
obligations under the License to any third party without the prior written
consent of Licensor.
3. Obligations of Licensee.
3.1 Compliance With Laws. During the term of this Agreement,
Licensee shall use the Rights, shall manufacture, advertise, sell and
distribute the Products, and shall otherwise conduct its business in compliance
with all applicable laws, statutes, rules and regulations.
3.2 Intellectual Property.
3.2.1 Execution of Documents. Licensee shall make all
necessary disclosures, execute, acknowledge and deliver all instruments and
perform all acts requested by Licensor to secure and maintain in the name of
Licensor, or its designee, patent and other intellectual property protection
for the Rights. In the event Licensor is unable, for any reason whatsoever, to
obtain the signature of Licensee to any document or instrument necessary or
desirable to obtain ownership of, apply for protection of, or enforce any
action with respect to, any patent, copyright, trade secret or other
intellectual property right, Licensee hereby irrevocably designates and
appoints Licensor, and its duly authorized officers and agents, as Licensee's
agent and attorney-in-fact, whose power is expressly coupled with an interest,
to act for and on behalf of Licensee, to execute such documents and to take all
of the lawfully permitted actions to protect Licensor's interest in any patent,
copyright, trade secret or other intellectual property right with the same
legal force and effect as if executed by Licensee.
3.2.2 Marking of Products. Licensee shall mark all
Products with such patent and/or trademark legends as Licensor may from time
to time prescribe in writing in such manner and form as Licensor may require
from time to time.
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<PAGE> 12
3.2.3 Use of the Trademarks. Licensee acknowledges that
the maintenance of the high quality of the Products is a material condition of
this Agreement. Accordingly, Licensor shall have the right to receive, at no
cost to Licensor, and test for approval purposes samples of all Products
incorporating the Trademarks, prior the sale, use or distribution of any such
Products. In addition, all advertising, promotional materials, packaging and
other materials containing or displaying any of the Trademarks shall be
forwarded to Licensor for its written approval prior to any use thereof by
Licensee. Licensee shall not sell, use or distribute any Product or material
disapproved by Licensor. Licensor acknowledges and agrees that Licensor is the
sole and exclusive owner of the Trademarks, and Licensee shall obtain no right
or interest in the Trademarks by virtue of its use thereof (all use of the
Trademarks by Licensee inuring to benefit of Licensor). Licensor shall not take
any action which is inconsistent with Licensor's exclusive ownership of and use
of the Trademarks, except as expressly provided herein.
3.3 Confidentiality. During the term of this Agreement and
thereafter, Licensee (a) shall not directly or indirectly use, communicate or
divulge or enable another to use, communicate or divulge any Confidential
Information, and (b) shall not divulge to Licensor confidential information of
any other party the use, communication or disclosure of which is protected by
comparable confidentiality commitments, except as expressly permitted by this
Agreement.
3.4 Best Efforts. Licensee shall at all times at its own cost and
expense use its best efforts and all due diligence energetically and
aggressively to develop the market for the Products throughout the world, to
promote the sale, distribution and use of the Products therein, and to enhance
the reputation and goodwill associated with the Products and the Trademarks.
See Rider 3.4 which is incorporated herein.
3.5 Reasonable Restrictions. Licensee acknowledges and agrees
that (a) the provisions of Sections 3.2 and 3.3 hereof are reasonable and
necessary to protect the legitimate interests of Licensor, (b) the restrictions
contained in Sections 3.2 and 3.3 will not prevent Licensee from earning or
seeking a livelihood, (c) the restrictions contained in Sections 3.2 and 3.3
shall apply in all areas where such application is permitted by law, and (d)
any violation of this Agreement by Licensee would result in irreparable harm to
Licensor. Accordingly, Licensee consents and agrees that, if it violates any of
the provisions of this Agreement, Licensor shall be entitled to, in addition to
other remedies available to it, an injunction to be issued by any court of
competent jurisdiction restraining Licensee from committing or continuing any
violation of this Agreement, without being required to post a bond or other
security, or any other undertaking. In the event that the whole or any part of
any provision of Sections 3.2 or 3.3 hereof shall be determined to be invalid
by reason of the extent, duration, scope or other provision set forth therein,
the extent, duration, scope or other provision of that section shall be reduced
so as to cure such invalidity and in its reduced from the provisions of
Sections 3.2 and 3.3 shall be enforceable in the manner contemplated hereby.
3.6 Inspection. Upon reasonable advance notice to Licensee, Licensee
shall permit Licensor and Licensor's employees or representatives to enter and
examine Licensee's facility and places of business and to inspect the Products,
its inventories of the Products, service records and other relevant documents
related to the Products and any components thereof.
-3-
<PAGE> 13
4. License Consideration.
4.1 License Royalty Fee. Licensee shall pay to Licensor a royalty
fee equal to two percent (2%) of all gross sales of the Products (other than
Products sold more than 3 years after the date hereof which are covered solely
by a patent application; provided that such royalty fee shall not be less than
the guaranteed minimum royalty fee for each calendar quarter, as set forth
below; provided further that if the cumulative amount of royalty fees paid by
Licensee exceeds the guaranteed minimum cumulative royalty fee for such
calendar quarter, as set forth below, Licensee shall not be required to pay the
guaranteed minimum royalty fee for such calendar quarter. In no event shall the
foregoing proviso be deemed to release Licensee from its obligations to pay
Licensor the royalty fees as described above. If Licensee fails to pay the
guaranteed minimum royalty fee for any calendar quarter for a period of more
than 10 days following receipt of notice by Licensee of such failure, then in
addition to the right to demand and collect the guaranteed minimum royalty,
Licensor may declare the License to be non-exclusive. Upon such declaration,
Licensor shall be entitled, without liability or charge, to use, copy, promote,
distribute, sell, encumber, create derivative works of, revise and modify,
license, develop, manufacture, advertise, sale, distribute, or exploit, in any
manner, any or all of the Rights.
<TABLE>
<CAPTION>
Guaranteed Guaranteed Minimum
Minimum Cumulative
Date Quarterly Royalty Payments Royalty Payments
---- -------------------------- ------------------
<S> <C> <C>
June 30, 1998 $ 10,000 $ 10,000
September 30, 1998 $ 30,000 $ 40,000
December 31, 1998 $ 60,000 $ 100,000
March 31, 1998 $100,000 $ 200,000
June 30, 1998 $200,000 $ 400,000
September 30, 1998 $300,000 $ 700,000
December 31, 1998 $300,000 $1,000,000
</TABLE>
4.2 Payment of Royalty Fees. The royalty fees due hereunder shall
be paid by Licensee to Licensor within twenty (20) days after the close of each
calendar quarter. Time is of the essence with respect to all provisions of this
Agreement relating to the payment of money. A failure by Licensee to make any
payment required hereunder in a timely fashion shall constitute a material
breach of this Agreement. All payments to Licensor hereunder shall be in U.S.
dollars by bank transfer to such bank account as Licensor may from time to time
designate in writing and shall be accompanied by a remittance advice
identifying the specific payments made. In the event of any underpayment or
late payment of any royalty fee payable hereunder, Licensee shall immediately
remit to Licensor the full amount owed, together with a late payment charge
calculated at a rate of one and one-half percent (1 1/2%) per month, compounded
on a monthly basis, or maximum rate permitted by law, whichever is less. In
addition, if the amount of such underpayment is in excess of two percent (2%)
of the amount properly payable by Licensee, Licensee shall promptly reimburse
Licensor for the cost of any examination or audit.
4.3 Accounting and Reporting.
-4-
<PAGE> 14
4.3.1 Records and Inspection. Licensee shall keep accurate
books of account, records and invoices concerning its business consistent with
generally accepted accounting principles. Said books, records and invoices
shall be maintained for a period of at least three (3) years after termination
or expiration of this Agreement and shall be available for inspection and
copying by Licensor or its duly appointed representative during regular
business hours and upon reasonable notice. Licensee shall cooperate fully with
Licensor in conducting such inspection.
4.3.2 Reporting. On or before the date specified in
Section 4.2 above for each quarterly payment of the royalty, Licensee shall
submit to Licensor a statement setting forth all sales of the Products (by
product category, style, units, dollars, and customer names and telephone
numbers), Licensee's aggregate gross revenues during such calendar quarter, the
total amount of the royalty fee payable to Licensor and the difference between
the quarterly royalty and the monthly royalty fee payable to Licensor pursuant
to Section 4.1, or a statement that no sales of the Products were made during
such month. Each quarterly statement shall be accompanied by a written
certification from the chief financial officer of Licensee that the statement
is correct and complete and prepared in compliance with this Agreement. Within
ninety (90) days after the end of each calendar year of this Agreement,
Licensee shall submit to Licensor, at Licensee's sole expense, an audited
financial statement for the preceding calendar year (by independent public
accountants acceptable to Licensor), and setting forth the aggregate royalty
fee for the preceding calendar year and the basis of calculation. Licensee
shall submit to Licensor within ninety (90) days after termination or
expiration of this Agreement a written statement certified by Licensee's chief
financial officer identifying all revenues upon which the royalty fee is
payable hereunder but which were not previously reported.
5. Term and Termination.
5.1 Term and Termination. Subject to the remaining provisions of
this Section 5, the term of this Agreement shall commence as of the date hereof
and shall terminate upon the expiration of the last of the Patents to expire
(as the life of such Patent may be extended or prolonged by any extensions,
renewals, continuations, continuations in part, or divisions thereof). This
Agreement may be terminated by Licensor immediately upon notice to Licensee
upon the occurrence of an "Event of Default" as defined in Section 10.1 of the
Asset Agreement or in the event that Licensee does any of the following: (a)
files a petition in bankruptcy or is adjudicated bankrupt or insolvent, or
makes an assignment for the benefit of creditors, or an arrangement pursuant to
any bankruptcy law, or if a receiver is appointed for Licensee or for
Licensee's business and such receiver is not discharged within thirty (30)
days, provided that the bankruptcy laws permit such Action by Licensor, (b)
fails to continue its business in the manner now conducted, (c) is late more
than 10 days in making its royalty payments or providing its royalty statements
more than twice during any one (1) calendar year, (d) attempts to sublicense or
assign any of its rights or obligations under this Agreement without Licensor's
prior written approval, (e) fails to make any guaranteed minimum royalty
payment for a period of 180 or more days, (f) fails to obtain or maintain
insurance in the amount and of the type provided for herein, (g) engages in any
conduct or practice which in Licensor's judgment is detrimental to the good
name, goodwill or reputation of Licensor, any Affiliate of Licensor or the
Trademarks, or (h) directly or indirectly,
-5-
<PAGE> 15
contests, opposes, or challenges any of the Rights, attempts to obtain
ownership of the Rights in any country, or assists any third party with
respect to the foregoing.
5.2 Consequences of Termination or Expiration. Upon termination or
expiration of this Agreement for any reason, (a) the License granted hereunder
shall immediately terminate, (b) Licensee shall immediately and forever cease
from using the Rights, (c) Licensee shall immediately pay to Licensor all
amounts due to Licensor pursuant to Section 4 hereof for all Products sold
prior to the date of termination or expiration of this Agreement and any
guaranteed minimum royalty payments then due, (d) Licensor shall be entitled,
without liability or charge, to use, copy, promote, distribute, sell, encumber,
create derivative works of, revise and modify, license, develop, manufacture,
advertise, sale, distribute, or exploit, in any manner, any or all of the
Rights, and (e) Licenesee shall promptly return to Licensor all documents in
its possession or under its control relating to the Rights or to the rights
assigned in Subsection 3.2.2, together with any and all copies thereof. The
provisions of this Section 5.2, as well the provisions of Sections 3.2, 3.3,
3.4, 3.5, 4, 6 and 8, shall survive the expiration or termination of this
Agreement, irrespective of the reason therefor.
6. Warranties: Disclaimers. Licensee acknowledges and agrees that the Rights
are being licensed to Licensee "AS IS," with absolutely no warranties of any
kind. Licensee further acknowledges that John Ossenmacher ("Ossenmacher"), an
officer of Licensee, was formerly president of Solium and, therefore, is
intimately familiar with the Rights. Moreover, with the assistance of
Ossenmacher, Licensee has evaluated for itself the Rights, their actual and
potential applications and their actual and potential commercial value and
viability. Licensor shall have no obligation to obtain or maintain Patent
protection for the Rights in any nation, provided that if LICENSOR elects not
to obtain or maintain any issued patent(s) or patent application(s) Licensee
may authorized and reimburse Licensor for the costs and attorney fees for
maintaining such patent(s) or patent application(s). Licensee is aware that
Licensor intends to abandon a significant number of its pending patent
applications unless Licensee elects to pay for the prosecution of such
applications. Without limiting the generality of the foregoing, LICENSOR (A)
SPECIFICALLY DISCLAIMS ALL WARRANTIES OF ANY KIND REGARDING THE RIGHTS,
INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, (B) MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING THE SUITABILITY
OF THE RIGHTS FOR LICENSEE'S OR ANY THIRD PARTY'S ACTUAL OR INTENDED USES, AND
(C) NO REPRESENTATIONS OR WARRANTIES AS TO WHETHER THE RIGHTS INFRINGE ON THE
PATENT, TRADEMARK OR OTHER PROPRIETARY RIGHT OF ANY THIRD PARTY. IN NO EVENT
SHALL THE LICENSOR (OR ANY AFFILIATE OF LICENSOR) BE LIABLE TO LICENSEE OR ANY
THIRD PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
RESULTING FROM THE USE, OR INABILITY TO USE, THE RIGHTS, OR OTHERWISE ARISING
OUT OF THIS AGREEMENT.
7. Infringement. In the event that Licensee or Licensor learns of any
infringement by any third party of any of the Rights, it shall promptly notify
the other party in writing. At any time after any such notice, Licensor shall
have the exclusive right but not the obligation, at Licensor's expense, to
commence legal action against such infringer and may settle or compromise any
such
-6-
<PAGE> 16
action. Licensor shall be entitled to all payments recovered in connection with
such action, to the exclusion of Licensee. Licensee may not commence any such
action without the prior written consent of Licensor. In the event any third
party commences a legal action, suit or proceeding against Licensee alleging
that its use of the Rights infringe or violate any right of such third party,
Licensee shall promptly notify Licensor in writing. At any time after any such
notice, Licensor shall have the first right but not the obligation, at
Licensor's cost and expense, assume the defense of such action and, in
connection therewith, settle or compromise any such action. If Licensor does
not assume the defense of such action within thirty (30) days of such notice,
Licensee may, at Licensee's sole cost and expense, defend itself in such
action; provided that Licensee shall not settle any action without the prior
written consent of Licensor. Licensee and Licensor shall assist and cooperate
fully with each other in connection with any legal action.
8. Indemnification and Insurance. Licensor shall have no liability to Licensee
or any third party with respect to the use of the Rights or in connection with
the design, manufacture, production, advertisement, promotion, sale and
distribution of the Products throughout the world pursuant to this Agreement.
Licensee shall indemnify, defend, and hold harmless Licensor and Licensor's
Affiliates from and against any and all claims, suits, losses, damages, fees and
expenses, including without limitation attorneys' fees and costs, arising out of
or relating to the design, manufacture, production, advertisement, promotion,
sale and distribution of the Products, all components thereof and Licensee's use
of the Rights, in any country or subdivision thereof, including, without
limitation any claims by third parties that the Rights infringe on the rights of
any third parties. During the term of this Agreement, Licensee shall obtain and
maintain employer's liability, workers' compensation, comprehensive general
liability, and product and completed operations insurance, with limits of
liability and issued by insurers approved in writing by Licensor, and shall
furnish Licensor with a certificate of insurance naming Licensor as an
additional insured, providing for such insurance and requiring sixty (60) days'
prior written notice to Licensor of any cancellation or modification of such
insurance. In no event shall Licensee sell, distribute or advertise the Products
prior to obtaining the insurance provided above.
9. Miscellaneous.
9.1 Assignability. Licensee shall not, without the prior written consent
of Licensor, assign, transfer, sell or encumber, by operation of law or
otherwise, this Agreement or any of its rights or obligations hereunder. Subject
to the foregoing, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. Nothing
expressed or implied in this Agreement is intended or shall be construed to
confer upon or give to any person, other than the parties to this Agreement, any
right, remedy or claim under or by reason of this Agreement or of any term,
covenant or condition of this Agreement, including, without limitation, any
claims by third parties that the Rights infringe on the rights of any Third
Parties.
9.2 Notices. All notices, requests or consents required or permitted
under this Agreement shall be made in writing and shall be given to the other
party by personal delivery, overnight air courier (with receipt signature) or
facsimile transmission (with "answerback" confirmation of transmission), sent
to such party's address or facsimile number as are set forth
-7-
<PAGE> 17
below such party's signature to this Agreement, or such other address or
facsimile number of which such party has given notice pursuant to this
Subsection 9.2. Each such notice, request or consent shall be deemed effective
upon the date of actual receipt, receipt signature or confirmation of
transmission, as applicable, except as may otherwise be expressly provided for
herein.
9.3 Amendments; Waivers; Severability. This Agreement may be amended,
modified, superseded, canceled, renewed or extended and the terms or covenants
of this Agreement may be waived only by a written instrument executed by the
parties to this Agreement or, in the case of a waiver, by the party waiving
compliance. The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
right at a later time to enforce the same. No waiver by any party of the breach
of any term or provision contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a waiver of the
breach of any other term or covenant contained in this Agreement. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.4 Relationship of Parties. Licensor and Licensee are and intend to
remain independent parties. Nothing contained in this Agreement shall be deemed
or construed to create the relationship of principal and agent or of
partnership or joint venture, and neither party shall hold itself out as an
agent, legal representative, partner, subsidiary, joint venturer, servant or
employee of the other. Neither party nor any officer or employee thereof shall,
in any event, have any right collectively or individually, to bind the other
party, to make any representations or warranties, to accept service of process,
to receive notice or to perform any act or thing on behalf of the other party,
except as authorized in writing by such other party in its sole discretion.
9.5 Controversies; Venue. This Agreement shall be governed by and
construed and enforced in accordance with the internal substantive laws of the
State of California. Licensor and Licensee hereby consent to the exclusive
jurisdiction of the courts of the State of California and the United States
courts located in the County of Los Angeles, State of California, in
connection with any lawsuit, action or proceeding arising out of or relating to
this Agreement, and such courts shall be the only courts having jurisdiction of
any such controversies. Both parties hereby waive any defense of lack of in
personam jurisdiction, improper venue and forum non conveniens, and agree that
service of process of such court may be made upon each of them by personal
delivery or by mailing certified or registered mail, return receipt requested,
to the other party at the address referenced in Section 9.2 above. If any legal
action or other proceeding is brought by any party for the enforcement of this
Agreement because of any alleged breach, default, or misrepresentation in
connection with any of the provisions of this Agreement, the prevailing party
shall be entitled to recover from the non-prevailing party its attorney's fees
and other costs and expenses incurred in connection therewith, in addition to
any other relief to which it might be entitled. Unless expressly set forth
herein to the contrary, all remedies set forth herein are cumulative and are in
addition to any and all remedies provided either party at law or in equity.
-8-
<PAGE> 18
9.6 Entire Agreement. This Agreement constitutes the whole agreement of
the parties hereto in reference to any of the matters of things herein provided
for, all prior agreements, promises, representations and understandings
relative thereto being herein merged.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
SOLIUM, INC.
By: /s/ Kenneth Owens
---------------------------------------------
Name: Kenneth Owens
-------------------------------------------
Title: President - Solium, Inc.
------------------------------------------
Address: c/o Pacific Scientific
620 Newport Center Drive, Seventh Floor
Newport Beach, California 92660
Facsimile: (714) 720-1714
PACIFIC SCIENTIFIC COMPANY
By: /s/ Lester Hill
---------------------------------------------
Name: Lester Hill
-------------------------------------------
Title: Chairman
------------------------------------------
Address: 620 Newport Center Drive, Seventh Floor
Newport Beach, California 92660
Facsimile: (714) 720-1714
With a copy to: Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626-1924
Attention: William J. Simpson, Esq.
Facsimile: (714) 979-1921
CHICAGO MINIATURE LAMP, INC.
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
Address:
----------------------------------------
----------------------------------------
Facsimile:
--------------------------------------
-9-
<PAGE> 19
EXHIBIT A
The Technology:
A. Electronic ballasts for the control of fluorescent lighting that operate
fluorescent lamps across a range of input voltages. This technology is
trade marked as Sense-A-Volt.
Major design elements include:
- Variable Voltage Input
- Expanded Power Factor Correction
- Thermal Protection
- Lamp Length Compensation
- Lamp Quantity Compensation
- End of Life Protection
- Low Stress Starting Methodology
- Complex Resonating Circuit
B. Electronic ballasts for the control of fluorescent lighting that dim
fluorescent lamps across a range of light output from 20-100% of lamp
capability.
Major design elements include:
- SCR Dimming
- Boost Circuit
- Deep Dimming Stability Circuit
- Programmed Start
- End of Life Protection
- Complex Resonating Circuit
- Lamp Starting Near End of Life
- Inherent Thermal Protection
- Starting With Dimmer Preset at Low
C. Electronic ballasts for the control of fluorescent lighting that dim
fluorescent lamps using a standard "3-Way" incandescent switched socket.
Major design elements include:
- 3-Way Step Dimming
- Use of Opto Coupler
- Inherent Thermal Compensation
- Rapid Start Operation
- End of Life Protection
- Power Factor Correction
D. Electronic ballasts for the fluorescent lighting that are standard
non-featured "on-off" products incorporating design features listed in A
through C as above.
<PAGE> 20
EXHIBIT B
The "Patents"
<TABLE>
<CAPTION>
Patents:
- --------
Patent Number Issue Date
------------- ----------
<S> <C>
5,596,247 01/21/97
<CAPTION>
Patent Application:
- -------------------
Application Number Filing Date
------------------ -----------
<S> <C>
08/316395 09/30/94
08/488387 06/06/95
08/723289 09/30/96
08/786037 01/21/97
08/725914 10/04/96
60/005033 10/06/95
29/045040 10/06/95
29/045246 10/13/95
08/625629 02/29/96
08/300423 09/01/94
08/647030 05/09/96
08/761658 12/06/96
08/749106 11/14/96
08/768508 12/18/96
08/690456 08/08/96
08/872957 06/11/97
08/873274 06/11/97
60/044259 04/24/97
60/044929 04/25/97
Not Available 07/25/97
Not Available 08/01/97
</TABLE>
-12-
<PAGE> 21
RIDER 3.4
Every 24 months the parties shall confer regarding Licensee's compliance with
the terms of the preceding sentence (the "Requirements"). In the event
Licensor concurs that Licensee has complied with the Requirements, Licensor
shall put such concurrence in writing, which shall be deemed to constitute a
waiver of any claims of Licensor with respect to Licensee's compliance with the
Requirements for the immediately receding 24 months period. Notwithstanding
any terms of the Asset Agreement, a default of Licensee with respect to the
Requirements shall not constitute a default by Licensee under the Asset
Agreement or otherwise adversely affect Licensee's rights under the Asset
Agreement.
APPROVED:
SOLIUM, INC.
By: /s/ Kenneth Owens
----------------------------------
Name: Kenneth Owens
--------------------------------
PACIFIC SCIENTIFIC COMPANY
By: /s/ Kenneth Owens
----------------------------------
Name: Kenneth Owens
--------------------------------
CHICAGO MINIATURE LAMP, INC.
By:
----------------------------------
Name:
--------------------------------
<PAGE> 1
EXHIBIT 10.32
Document no. /1997
- --------------------------
ACQUISITION AGREEMENT
Occurring January 1997
January nineteen hundred ninety-seven-
Before me, notary
there appears:
Mr.
acting here not his own behalf rather - subject to submission of authorization -
for
1. Mr. Juegen Brueckner,
residing at
in turn acting in his own name as well as the individual with the sole
power to represent, under release of the restrictions of section 181
German Civil Code
1.1 Gustav Brueckner GmbH
with its statutory seat in Coburg,
1.2 Brueckner Beteiligungs-GmbH i.G.
with its statutory seat in Coburg,
an acting as the personally liable shareholder with sole power of
representation of
Gustav Brueckner Verwaltungs GmbH & Co. KG
with its statutory seat in Coburg,
<PAGE> 2
-2-
2. Mr. Werner A. Arnold, diplomat engineer, residing at Wildensorger
Hauptststrasse 8, 96049 Bamberg,
himself acting not in his own name rather as the managing director with
sole power of representation of
ALBA Speziallampen Holding GmbH
with its statutory seat in Bamberg,
3. The firm
Chicago Miniature Lamp, Inc.
with its statutory seat in Canton, Massachusetts.
The notary certifies the powers of attorney based on
The person appearing identifies himself by , deposing and
declaring with his request for notarization as follows:
<PAGE> 3
-3-
ACQUISITION AGREEMENT
A. RECITALS
(1) Mr. Jurgen Bruckner is a shareholder in
Gustav Bruckner GmbH
with its statutory seat in Coburg
- hereinafter "Corporation" -
with the following shares:
1. Share with a par value of DM 195,000,--
2. Share with a par value of DM 105,000,--
--------------
SHARE CAPITAL DM 300,000,--
The shares are fully paid in.
(2) Mr. Jurgen Bruckner is the owner of all shares in Bruckner
Beteiligungs-GmbH i.G. and the single limited partner of Gustav Bruckner
Verwaltungs GmbH & Co. KG. Bruckner Beteiligungs-GmbH i.G. is the single
personally liable shareholder of Gustav Bruckner Verwaltungs GmbH & Co. KG
(hereinafter "KG"). All assets of the prior enterprise Gustav Bruckner
Verwaltungs KG, owner Jurgen Bruckner (hereinafter "KG (alt)") were
contributed to the KG in December of 1996.
(3) Mr. Jurgen Bruckner intends to sell all shares in the corporation and the
KG intends to sell of its movable property (with the exception of office
furniture) to ALBA Speziallampen Holding GmbH (hereinafter "ALBA"). ALBA
intends to acquire the same shares and properties.
(4) The KG intends to lease the prior production and office building in
accordance with the planned diagram (an attachment to the Lease Agreement)
to ALBA. ALBA intends to lease the same from the KG.
<PAGE> 4
-4-
(5) Mr. Jurgen Bruckner intends to continue to work for the corporation as the
managing director. ALBA is very interested in the continuing activity of
Mr. Bruckner.
(6) With this in mind, the parties close the following Acquisition Agreement.
<PAGE> 5
-5-
B. ACQUISITION AGREEMENT
SS. 1
PARTIES AND OBJECTIVE OF THE AGREEMENT
(1) Mr. Jurgen Bruckner sells and transfers herewith all shares in the
corporation with par values of DM 195.000,-- and DM 105.000,-- to
ALBA. ALBA accepts such sale and transfer.
(2) Mr. Bruckner consents to the sale and transfer in his capacity as
managing director of the corporation. Sale and transfer are reported
to the corporation in accordance with section 16 para. 1 Limited
Liability Company's Law (GmbHGesetz).
(3) The KG sells herewith its movable properties with exception of office
furniture. Included herewith are especially the objects listed in the
attachment to section 1 para. 3. ALBA accepts the sale. The parties
agree on the transfer of ownership in the above-referenced objects.
The transfer shall occur on the instruction of Mr. Werner Arnold as
managing director of ALBA.
Should the transfer or ownership in a particular case be dependent
upon the consent of third parties or other transactions, the parties
shall promptly engage in all transactions required for such transfer
of ownership. Should such be temporarily not possible, the KG shall
put ALBA in a position as if ALBA were the owner.
<PAGE> 6
-6-
SS. 2
PURCHASE PRICE
(1) The purchase price for all shares of the corporation and the movable
property sold shall be
DM 400.000,--
(i.w. four hundred thousand German Marks).
(2) The purchase price is due immediately.
SS. 3
WARRANTIES
(1) Mr. Jurgen Bruckner warrants (sichert zu), that the shares sold are
his property, are fully paid and non-assessable.
(2) Mr. Bruckner and the KG warrant (sichern zu), that the property sold
by the KG is the property of the KG, is not encumbered with the rights
of third parties, and is not subject to any limitation whatsoever,
furthermore, that in the fiscal year 1996 and through this date, no
property belonging to the KG (alt) and the KG have been lost and the
KG is the unrestricted owner of all property belonging to the KG (alt).
(3) Otherwise, every other warranty is excluded, insofar as no particular
provision is included in this Agreement.
<PAGE> 7
- 7 -
SS. 4
TAKE-OVER DATE, DIVIDENDS
Take-over date is today. Dividends on the sold shares, which are to be
distributed after the take-over date shall be paid to ALBA. Before the
take-over date no dividends were distributed.
SS. 5
BANK SURETY
(1) ALBA issued the exemption declarations listed in the attachment to section
5 para. 1.
(2) The parties shall endeavour to obtain the declarations of exemption with
the content of all contents similar to that in the attachment to section 5
para. 2 from the Commerzbank AG, Coburg, Deutsche Bank AG, Coburg, and
Bayerische Hypotheken- und Wechselbank, Coburg. Should this be temporarily
not possible, ALBA shall exempt Mr. Bruckner as against ALBA itself.
SS. 6
LOANS OF THE KG, LIFE INSURANCE
(1) The corporation will promptly repay the loan that the KG made to the
corporation up to the following maximum amount. The maximum amount is
DM 2,400,000.-- minus the bank debts of the corporation through December
16, 1996.
(2) Furthermore, the remaining amount of the loan claim shall be extinguished
by the transfer of the life insurance PAX as redemption value to the KG
with all
<PAGE> 8
- 8 -
rights and duties. The corporation and the KG agree on the transfer of all
rights and duties from this life insurance contract and will make all
declarations necessary as against third parties to the effectiveness of
this transfer.
(3) The KG and Mr. Jurgen Bruckner waive any remaining claim on the loan, as
against the corporation after reduction by the redemption value of the
life insurance. The corporation accepts this waiver.
SS. 7
RENTAL RELATIONSHIP
The corporation and the KG conclude herewith a rental agreement with the
content determinable from the attachment to section 7.
SS. 8
EMPLOYMENT AGREEMENT
The corporation and Mr. Bruckner conclude herewith an employment agreement with
the content determinable from the attachment to section 8.
SS. 9
NON-COMPETITION AGREEMENT
(1) For the period of five years after the termination of Mr. Bruckner's
activities as managing director for the corporation or for another
enterprise of the Chicago Miniature Lamp, Inc. enterprise group, Mr.
Bruckner and the KG may do no
<PAGE> 9
-9-
business for their own benefit or for the benefit of third parties in
the branch of business of the corporation as well as related branches
as they existed the time of the termination of the employment
agreement in accordance with section 8. Without explicit consent,
they are also forbidden to participate, directly or indirectly, in
other enterprise which are active in these branches to be employed by
or in any other way to promote the interests of such enterprises. The
ban on competition also includes a ban on the active recruitment of
employees of the corporation and the enterprise group Chicago
Miniature Lamp.
(2) For every case of a breach of this non-competition agreement, Mr.
Bruckner shall pay the corporation a contractual penalty of DM
200,000.--. The contractual penalty arises in addition to other
claims of ALBA and the corporation. In the case of a continuing
breach, each thirty days shall be considered an independent breach in
the sense of sentence 1 of this paragraph.
SS. 10
Taxes and Cost
(1) Taxes incurred by Mr. Jurgen Bruckner because of the sale of his
shares and by the KG because of the sale of its assets, are to be paid
by them.
(2) The costs of this contract and its fulfillment shall be borne by
ALBA. The costs of counsel shall be borne by each party itself.
SS. 11
Closing Provisions
(1) German law is applicable to this contract.
<PAGE> 10
-10-
(2) Place for the fulfillment of the contract and venue is, as far as
legally permissible, Bamberg.
(3) Should particular provisions of this Agreement be or become invalid,
the validity of the remainder of the content of this Agreement shall
not be affected thereby. The invalid provision shall be replaced by a
provision which most nearly effects the economic intent of the
invalid provision.
* * * *
The person appearing requests the distribution of duplicates of this
document as follows:
a) for each party
one duplicate original,
b) for Dr. Lothar Herer,
Bahnhofstrasse 19, 96450 Coburg,
one certified copy,
c) for Dr. Michael Oltmanns, Attorney-at-law,
Mittlerer Pfad 15, 70499 Stuttgart,
one certified copy.
The notary has made the declaration required by the Notarization Law.
This document together with attachments was read to the
persons appearing by the notary, approved by them, and
signed by all in their own hands:
<PAGE> 1
EXHIBIT 10.33
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.
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<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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<PAGE> 48
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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<PAGE> 52
(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
49
<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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<PAGE> 57
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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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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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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(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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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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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:
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Title:
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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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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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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:
109
<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
-3-
<PAGE> 136
PAGE LEFT INTENTIONALLY BLANK
-----------------------------
-4-
<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
-5-
<PAGE> 138
-6-
<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
-7-
<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:
-8-
<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:
-9-
<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:
-10-
<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:
-11-
<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.
-2-
<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.
-3-
<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
-4-
<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________________________________
-5-
<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:
-6-
<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:
-7-
<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:
-8-
<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:
-9-
<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 10.34
DATED 29TH JANUARY 1993
(1) OSRAM GMBH
and
(2) EDIL INTERNATIONAL LIGHTING B.V.
-------------------------------
FRAMEWORK AGREEMENT FOR
SUPPLY CONTRACTS
-------------------------------
Clifford Chance
200 Aldersgate Street
London EC1A 4JJ
Tel: 071 600 1000
Fax: 071 600 5555
Ref: MS/C0791/04338/JBW
(Document ref: AJQM248D.50)
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
ARTICLE I
Definitions
ARTICLE II
SUPPLY OF LAMP MATERIALS BY OSRAM TO EDIL AND BY EDIL TO OSRAM
SECTION 2.1 Scope of Article II ............................ 5
SECTION 2.2 Long-term Supply Agreements .................... 5
SECTION 2.3 Terms and Conditions ........................... 6
SECTION 2.4 Equal Treatment ................................ 16
ARTICLE III
CONTINUATION OF CERTAIN SUPPLY AGREEMENTS BETWEEN OSRAM
GROUP AND IL
SECTION 3.1 Lynx-L Compact Fluorescent Lamps ............... 17
SECTION 3.2 Supply Agreement for Bulbs between GTE Sylvania
S.A. and EMGO ......................................... 17
SECTION 3.3 The supply agreement between OSRAM GmbH and SABA
Schwaraweider ........................................ 18
SECTION 3.4 The Supply Agreement Between GTE de Brasil S/A
Industria e Comerco and OSRAM de Brazil Compantia de
Lampadas Eletricas for the supply of bulbs and tubes
("the Brazilian Glass Contract") ...................... 20
SECTION 3.5 Equipment for the Double Twin Compact
Fluorescent Line at Shipley, United Kingdom ........... 21
ARTICLE IV
CONTINUATION OF SUPPLY ARRANGEMENTS FOR FINISHED LAMPS
BETWEEN OSRAM, NAL AND IL
SECTION 4.1 Scope of Article IV ............................ 21
SECTION 4.2 Long-term Supply and Purchase Contracts ........ 21
SECTION 4.3 Terms and Conditions ........................... 22
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V
SUPPLY OF MANUFACTURING APPARATUS
ARTICLE VI
SECTION 5.1 Governing Law ................................. 33
SECTION 5.2 Arbitration ................................... 33
SECTION 5.3 Amendments .................................... 33
SECTION 5.4 Assignment .................................... 34
SECTION 5.5 Notices ....................................... 34
SECTION 5.6 Waiver ........................................ 35
SECTION 5.7 Severability .................................. 35
SECTION 5.8 Entire Agreement .............................. 36
SECTION 5.9 Counterparts .................................. 36
SECTION 5.10 Headings ...................................... 36
SECTION 5.11 Confidentiality ............................... 36
SECTION 5.12 U.N. Convention ............................... 36
SECTION 5.13 Inconsistent terms ............................ 36
</TABLE>
<PAGE> 4
FRAMEWORK AGREEMENT FOR SUPPLY CONTRACTS
This Framework Agreement for supply contracts is made on the 29th day of
January, 1993, between OSRAM GmbH, a company incorporated in Munich, Germany,
with a principal place of business at Hellabrunner Strasse 1 D-8000, Munich 90,
Germany ("OSRAM") and EDIL International Lighting B.V., a private limited
liability company (beslotenvensootschap met beperlcte aansparkelijkheid)
incorporated under the laws of the Netherlands and established in Amsterdam,
the Netherlands, whose registered office is at Appollolaan 171, 1077 A.S,
Amsterdam, The Netherlands ("EDIL").
Whereas, Siemens Aktiengesellschaft, ("Siemens") OSRAM, EDIL, and Citicorp
Capital Investors Europe Limited entered into a Master Agreement on August 6th
1992 whereby EDIL and OSRAM agreed to procure that the relevant members of their
respective groups enter into supply agreements corresponding to the terms set
forth in Supply Agreement Term Sheets attached in form to be aforesaid Master
Agreement.
Whereas, certain existing supply arrangements between OSRAM GmbH, NAL and IL
are to be continued.
Whereas, within twelve months of Closing, the parties shall, in good faith,
negotiate long-term supply agreements in respect of the most significant Lamp
Materials and Lamps to be supplied by OSRAM Group to EDIL Group and by EDIL
Group to OSRAM Group Provided that unless and until such long-term supply
agreements are concluded, Lamp Materials and Lamps shall be supplied by OSRAM
Group to EDIL Group, and by EDIL Group to OSRAM Group on the terms and
conditions of this Framework Agreement.
Therefore, the Parties hereto agree, for themselves and for and on behalf of
their respective Subsidiaries, as follows:
-1-
<PAGE> 5
ARTICLE I
1. Definitions
For the purposes of this Agreement, the following terms shall have the
meanings set forth below:
"Accessories" means any device designed or adapted for mounting or
supporting Lamps or for controlling the light thereof, together with
parts, materials and components for such devices, other than fixtures.
"Best Efforts" means serious and reasonable endeavours but not including
any unreasonable act or money payment.
"Buying Party" means in respect of each transaction hereunder either the
member of the EDIL Group which is purchasing Lamp Materials or Lamps from
a member of the OSRAM Group OR the member of the OSRAM Group which is
purchasing Lamp Materials or Lamps from a member of the EDIL Group.
"Buying Party Group" means whichever of the OSRAM Group or EDIL Group the
Buying Party belongs.
"Calendar Quarter Start Day" means either 1st January, 1st April, 1st July
or 1st October.
"Closing" means "Initial Closing" as defined in the IL Purchase Agreements
and "Closing" as defined in the NAL Purchase Agreements.
"Europe" means Portugal, Spain, Republic of Ireland, France, United
Kingdom, Germany, Italy, Belgium, Luxenbourg, the Netherlands, Denmark,
Greece, Sweden, Norway, Switzerland, Austria, Finland, Liechtenstein,
Poland, Hungary, Czech Republic, Rumania, Cyprus, Malta, Turkey,
Yugoslavia (as formerly constituted (including Croatia, Bosnia Herc),
Macedonia, Albania, Slovenia, Bulgaria, Russia, Ukraine and all other
former members of the Soviet Union (including the members of the CIS and
Baltic states).
"EDIL Group" means EDIL and any Subsidiaries of EDIL (including IL).
-2-
<PAGE> 6
"IL" means that part of GTE Electrical Products Group lighting business
(principally excluding North America) purchased by EDIL pursuant to the
terms and conditions of the IL Purchase Agreements.
"IL Purchase Agreements" means the Amended and Restated Stock Purchase
Agreement and the related agreements for the sale and purchase of IL
between EDIL and GTE Corporation, GTE Products of Connecticut Corporation
and GTE International Incorporated dated 6th August 1992, as amended and
restated by the IL Supplemental Stock Purchase Agreement and Amended and
Restated IL Intellectual Property Non-competition, Environmental and
Assurance Agreements dated 29th January 1993.
"Lamps" means any device which in operation emits ultraviolet, visible
and/or infra-red radiation of between 100 angstroms and 1,000,000 angstroms
in wavelength, including, without limitation, incandescent lamps,
photoflash products (including photoflash lamps), fluorescent lamps
(including sub-miniature fluorescent lamps), high intensity discharge
lamps, and other gaseous discharge lamps but shall not include devices
designed primarily for display of variable images, or for light storage or
intensification or conversion or for processing information bearing signals
or infra-red radiators and other heating devices which do not operate in a
hermetically sealed container or which are provided with a sealed metal
envelope, unless such infra-red radiators and other heating devices are
designed for use in connection with Lamps, Lamp Parts, Accessories or Power
Sources.
"Lamp Competitor" means any corporation (together with its Subsidiaries)
(excluding Siemens and its Subsidiaries) which during the calendar year
immediately preceding the relevant date of the determination of its status
as a Lamp Competitor manufactured Lamps and had aggregate worldwide sales
of Lamps, Lamp Parts, Accessories and Power Sources exceeding:
(i) in the case of corporations and their Subsidiaries whose ultimate
holding company is incorporated in Japan, Taiwan, Singapore, North
Korea, South Korea or China, twenty million United States dollars
(US$20,000,000); and
(ii) in the case of any other corporation and their Subsidiaries, fifty
million United States dollars (US$50,000,000).
"Lamp Materials" means all or any of Lamp Parts, Accessories, Power
Sources, globottles and starters;
-3-
<PAGE> 7
"Lamp Parts" means all of the components, materials and parts from which
Lamps are assembled and the materials used in the production of such
components and parts.
"NAL" means that part of GTE Electrical Products Group lighting business
(principally the North American business) purchased by OSRAM Acquisition
Corporation pursuant to the terms and conditions of the NAL Purchase
Agreements.
"NAL Purchase Agreements" means the stock purchase agreement and the asset
purchase agreement for the sale and purchase of NAL between OSRAM
Acquisition Corporation and Siemens Corporation and GTE Corporation. GTE
Products of Connecticut Corporation and GTE International Incorporated
dated 6th August 1992.
"North America" means the United States of America and Canada.
"OSRAM" means OSRAM GmbH and its Subsidiaries (including NAL and its
Subsidiaries) and any successors thereto in the lamp and lighting business
or Persons within the Siemens Group who after the date hereof carry out
any of the Lamp, Lamp Part, Accessory, Power Source or Manufacturing
Apparatus research and development, production engineering, manufacturing
activities and other operations and business currently conducted by OSRAM
and any of its Subsidiaries (including NAL and its Subsidiaries).
"Person" means an association, a corporation, an individual, a
partnership, a university, and bank, a trust, or any other entity or
organisation.
"Power Sources" means apparatus having an operating frequency (including
carrier or modulation frequencies) between 0 hertz and 500 megahertz
(including starting, operating or control circuits)for energising and
operating Lamps, together with parts and components for such apparatus.
"Preferred Supplier" means that the parties hereto shall purchase Lamp
Materials and Lamps from each other in preference to other suppliers.
Provided that the terms on which such Lamp Materials or Lamps and Similar
Products are offered (including, without limitation, price, quantity,
delivery terms, specification and quality) are at least equal to the terms
offered by other suppliers of such Lamp Materials or Lamps or Similar
Products.
-4-
<PAGE> 8
"Research and Development and Engineering Support Agreement" means the
Research and Development and Engineering Support Agreement between OSRAM
GmbH and EDIL entered into at Closing.
"Selling Party" means in respect of each transaction hereunder either the
member of the OSRAM Group which is obliged to supply Lamp Materials or
Lamps to a member of the EDIL GROUP OR the member of the EDIL Group which
is obliged to supply Lamp Materials or Lamps to a member of the OSRAM
Group.
"Selling Party Group" means whichever of the OSRAM Group or EDIL Group the
Selling Party belongs.
"Signing" means August 6, 1992.
"Similar Product" means, in relation to a Lamp, Lamp Part, Accessory or
Power Source, a product which is of the same or similar type which means
that it is not materially different from such Lamp, Lamp Part, Accessory or
Power Source.
"Subsidiaries" means with respect to any Person, any other Person in which
such Person has a direct or indirect voting equity or voting ownership
interest in excess of 50% or is entitled to vote for the election of the
majority of directors or persons performing similar functions in such
Person.
ARTICLE II
SUPPLY OF LAMP MATERIALS BY OSRAM TO EDIL AND BY EDIL TO OSRAM
SECTION 2.1 Scope of Article II
Subject to Section 2.2 below, this Article II sets out the terms and conditions
upon which Lamp Materials which were supplied by NAL to IL, and by IL to NAL,
in the twelve (12) months prior to Closing (including those types of Lamp
Materials listed in the attached parts I and II of Schedule A) or Similar
Products shall be supplied by OSRAM Group to EDIL Group, and by EDIL Group to
OSRAM Group, for the period set out in Section 2.3k) in respect of UV Phosphors
and for a period until 31 December 2003 following Closing for all other Lamp
Materials.
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For the avoidance of doubt, the terms on which Lamp Materials are to be supplied
pursuant to this Article II shall not apply to Lamp Materials to be supplied
pursuant to supply agreements referred to in Article III which, save as amended
in Article III, shall continue on their terms.
SECTION 2.2 Long-term Supply Agreements
a) Within twelve (12) months of Closing the parties shall, in good faith,
negotiate long-term supply agreements for the most significant Lamp
Materials to be supplied by OSRAM Group to EDIL Group, and by EDIL Group
to OSRAM Group hereunder which agreements shall unless otherwise agreed
incorporate the terms and conditions set out in Section 2.3 and provide
for a commitment to purchase on the part of the purchaser (including
minimum quantities where appropriate) and fixed prices for such Lamp
Materials calculated in accordance with Section 2.3 c).
b) In the event that the parties agree and sign a long-term supply
agreement for a Lamp Material(s), the terms on which such Lamp Material(s)
shall be supplied thereafter will be as set out in such long-term supply
agreement and, for the avoidance of doubt, the terms of this Framework
Agreement shall thenceforth not apply to the supply of such Lamp Materials.
c) Notwithstanding the above, the parties shall be committed to supply or
procure the supply of Lamp Materials to the other party and its
Subsidiaries pursuant to its commitment in Section 2.3 a) unless and until
the parties agree that such commitment is replaced in respect of certain
Lamp Materials by a long term supply agreement.
SECTION 2.3. Terms and Conditions
a) Supply Commitments
OSRAM hereby agrees to itself and to procure that relevant members of the
OSRAM Group shall supply Lamp Materials (excluding Lamp Materials for sale
as lamp parts for, or for use in, motor vehicle lamps) which were supplied
by NAL to IL in the twelve months prior to Closing or Similar Products to
EDIL Group on the terms and conditions set out below, and EDIL hereby
agrees to itself and to procure that relevant members of the EDIL Group
shall supply starters and globottles which are supplied by IL to NAL in the
twelve months prior to Closing or Similar Products to OSRAM Group on the
terms and conditions set out below.
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For the avoidance of doubt, neither party shall be obliged to purchase
Lamp Materials from the other, other than in accordance with the rolling
forecast and firm orders mechanism set out in sub-section 2.3 e) below,
save that for the first 12 months following Closing, OSRAM Group and EDIL
Group shall be each other's Preferred Supplier of Lamp Materials or
Similar Products with NAL and IL supplied to each other in the 12 months
prior to Closing.
b) Duration
OSRAM and EDIL's respective supply commitments hereunder shall commence on
the date of Closing and shall continue for the period set out in Section
2.3k in respect of UV Phosphors and in respect of all other Lamp Materials
for a period of ____________ from Closing and such commitments shall not be
terminated prior to such date unless the parties shall have mutually agreed
in writing.
c) Prices
1) The prices for Lamp Materials or Similar Products to be supplied
hereunder shall be the prices charged by NAL to IL and by IL to NAL
prior to Closing (unless such prices have been increased since
Signing by an amount in excess of what can be justified under
paragraph 2 below in which case the prices shall be those charged
prior to the Signing) for the period of one year following the date
of Closing and thereafter unless and until such prices have been
charged pursuant to this section 2.3 c). The parties currently
believe that such prices are correctly set out in Parts I and II of
Schedule A.
2) Following the first anniversary of this Agreement and upon the
provision of six months' notice to the Buying Party, the Selling
Party may only change the prices for the Lamp Materials supplied
hereunder (see Parts I and II of Schedule A) if such change can be
justified by the Selling Party by reference to a corresponding change
(a) in the Selling Party's cost of labour, materials or energy used
in the production of such Lamp Materials; (b) in the reasonable costs
of environmental protection measures undertaken by the Selling Party
in connection with the facilities used in the production of such Lamp
Materials; (c) in the Selling Party's productivity in connection with
such Lamp Materials; and (d) in the cost of transportation of such
Lamp Materials from the Selling Party to the relevant port or Buying
Party facility where delivery is FOB, FAS, CIF or C&F (INCOTERMS
1990).
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<PAGE> 11
3) Notwithstanding the above, the parties each undertake that the price
charged by it or any of its Subsidiaries for a Lamp Material supplied
to the other party and its Subsidiaries hereunder shall not on average
exceed the price charged by it or its Subsidiaries to other
manufacturers (including original lighting manufacturers) for such
Lamp Material at arm's length in the ordinary course of business
having regard to quantity, quality, delivery, payment and
transportation terms.
d) Payment Terms
The payment terms for the supply of Lamp materials the subject of this
Article shall be the same as applied between NAL and IL prior to Closing
(believed to be correctly set out in Parts I and II of Schedule A). The
date of invoice shall be the date of shipment or any date thereafter. The
method of payment shall be as the Selling Party shall reasonably specify
from time to time.
e) Rolling Forecasts and Firm Orders
The parties shall implement the following forecasts and firm orders
mechanism:
1) For the period from Closing to July 1st 1993, the parties will have
placed legally binding firm orders for Lamp Materials with each other
as set out in Part I of Schedule B and it is agreed that such orders
will be fulfilled in accordance with the terms of such orders as
set out in Part I of Schedule B.
2) The Buying Party shall within two weeks of Closing submit to the
Selling Party in writing its bona fide estimate of its requirements
for Lamp Materials for the 12 month period commencing on 1st April
1993 and shall thereafter submit, at least six weeks before each
Calendar Quarter Start Day, its bona fide best estimate of its
requirements for Lamp Materials for the twelve commencing months on
such Calendar Quarter Start Day.
3) Each such twelve month estimate shall show the Buying Party's
anticipated requirements in the first and second calendar quarters
separately (broken down by month) and the third and forth calendar
quarters together.
4) At the same time as the aforesaid twelve month estimate is submitted
to the Selling Party (except the first such estimate), the Buying
Party shall procure that it and its Subsidiaries
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<PAGE> 12
submit legally binding firm orders to the Selling Party for Lamp
Materials for the first quarter (the "Committed Quarter") of such
estimate. All such firm orders shall be sent to the Selling Party's
head office in the country from where Lamp Materials are to be
supplied and a copy of orders and acceptances shall be sent to the
parties' nominated representatives.
5) The Buying Party's actual requirements for each Lamp Material in the
Committed Quarter shall not vary by more than 10 per cent from the
previous forecast for such quarter unless, after the Buying Party had
submitted its forecast for such quarter, the Selling Party has
altered the terms on which such Lamp Material(s) will be supplied.
6) Subject to sub-section 2.3f) below, OSRAM shall ensure that the
relevant member of the OSRAM Group shall accept EDIL Group's orders
for the Committed Quarter and that such relevant member of the OSRAM
Group shall confirm receipt and acceptance of EDIL Group's orders in
writing within 14 days of receipt.
7) Subject to sub-section 2.3f below, EDIL shall ensure that the
relevant member of the EDIL Group shall accept OSRAM Group's orders
for the Committed Quarter and that such relevant member of the EDIL
Group shall confirm receipt and acceptance of OSRAM Group orders in
writing within 14 days of receipt.
8) OSRAM and EDIL shall each nominate a representative to manage this
rolling forecast and firm orders procedure. Such nominated
representatives shall act as the point of first contact in the event
of supply difficulties and shall, in good faith, seek to resolve any
disputes which may arise. Any dispute relating to this rolling
forecast and firm orders procedure which cannot be resolved by the
nominated representatives shall be referred to a senior executive of
each of the parties, currently Mr. Swaanen for EDIL Group and Mr.
Waaser for OSRAM Group. Either party shall give the other at least
14 days' notice of any change in its nominees from time to time.
f) Quantity
Subject to sub-section 2.3 q) below, OSRAM hereby agrees to itself and to
procure that OSRAM Group supply to EDIL Group all its requirements for
each Lamp Material of the type supplied by NAL to IL in the twelve months
prior to Closing or Similar Products thereto in the quantities ordered by
EDIL Group pursuant to sub-section 2.3 e) above and EDIL hereby agrees to
supply
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OSRAM Group with all its requirements for globottles and starters in the
quantities ordered by OSRAM Group pursuant to sub-section 2.3 e) above
Provided that in the event that the Selling Party notifies the Buying
Party on 6 months notice that Supplying Party has no capacity to
manufacture Lamp Materials or Similar Products or within 14 days of such
firm order that there is a reasonable shortage in production of such Lamp
Material, then the Selling Party shall only be obliged to supply to the
Buying Party the Lamp Material ordered for any quarter up to the greater
of:
1) the quantity of such Lamp Material or Similar Product supplied by the
Selling Party's Group to the Buying Party's Group in the relevant
quarter of the twelve month period prior to Closing or such date; or
2) a pro-rata share of the Selling Party's Group total available supplies
of such Lamp Material having regard to the Buying Party's Group orders
or purchases of such Lamp Material or Similar Product from the Selling
Party's Group and the purchases of such Lamp Material or Similar
Product by other customers of the Selling Party Group in the relevant
quarter of the twelve month period prior to Closing or such date,
and for the purposes of this sub-section f), where the Selling Party or
Buying Party is a member of the OSRAM Group, supplies to or from NAL or
for OSRAM Group's own use shall be included in such calculation, and where
the Selling Party or Buying Party is a member of the EDIL Group, supplies
to or from IL or for EDIL Group's own use shall be included in such
calculation.
g) Short Orders
1) In addition to the rolling forecasts and firm orders procedure set
out in sub-section e) above, and the supply obligations set out in
sub-section f) above, the Buying Party may from time to time order
Lamp Materials from the Selling Party to meet its unanticipated
requirements for such Lamp Materials.
2) The Selling Party shall supply such Lamp Materials within 14 days of
receipt of the Buying Party's order in respect of any Lamp Materials
which are in the Selling Party Groups stock and not assigned to any
customer or to the Selling Party's own factories at the time of order
and the relevant party hereto agrees to use reasonable efforts in all
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<PAGE> 14
other circumstances to manufacture and deliver such Lamp Materials to
the Buying Party as soon as possible.
h) Quality
The quality of the Lamp Materials to be supplied by OSRAM Group or EDIL
Group to members of the other party's group pursuant to this Article II
shall equal the quality of such Lamp Materials supplied by OSRAM Group or
EDIL Group (as appropriate) to its own lamp manufacturing facilities or,
if not so supplied, the quality of similar lamp materials supplied to its
own lamp manufacturing facilities.
i) Amendment of Terms
1) The Selling Party may not amend specifications of Lamp Materials the
bulk of the Buying Party's requirements for which are purchased at
the time of such proposed amendment from the Selling Party and which
will affect the Buying Party's production of Lamps incorporating such
Lamp Materials, unless the Buying Party shall have consented in
writing to such amendments (such consent not to be unreasonably
withheld).
2) The Buying Party may from time to time with 6 month's prior written
notice require the Selling Party to reasonably amend the
specifications of Lamp Materials and the relevant party hereto shall
ensure that the Selling Party shall comply with such request unless
in the Selling Party's sole discretion said amendment has an adverse
affect on the Selling Party's production costs or schedule or
manufacturing process. In the event that the Selling Party amends
the specifications of a Lamp Material at the Buying Party's request,
the Selling Party may alter the price or schedule at which such Lamp
Material is supplied to the Buying Party to reflect any additional
production expenses or time delays reasonably caused to the Selling
Party as a result of such amendment.
3) The Selling Party may only amend terms relating to the availability
of Lamp Materials in the event that the Selling Party Group
permanently ceases production of such Lamp Materials or Similar
Products and the Buying Party Group has been given six months' notice
of such change.
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<PAGE> 15
4) The Selling Party may only amend terms relating to quality if:
a) the same amendments have been made to the terms on which Lamp
Materials are supplied to the Selling Party's Group own lamp
manufacturing facilities; and
b) the Buying Party's Group has been given six months' notice of
such change.
j) Assignment
Without prejudice to OSRAM's commitment to supply Lamp Materials to EDIL Group,
in the event of a sale by EDIL or any of its Subsidiaries of a company or of the
whole or part of its business from time to time to any Person OSRAM shall enter
into a new supply contract for the duration of the unexpired term of this
Agreement at such time with the purchaser of such company or business on the
same terms as set out in this Article II in respect of the type of Lamp
Materials purchased by such company or business at the time of such sale
(including as to price, quantity, quality, delivery and payment terms.)
K) Exclusivity
1) Except as provided in sub-section 2) and 3) below, the Selling Party
shall supply Lamp Materials to the Buying Party hereunder on a
non-exclusive basis.
2) For a period of 7 years OSRAM hereby appoint the EDIL Group as the
OSRAM Group's exclusive distributor in Europe for suntanning and
therapeutic Lamps manufactured using UV phosphors (including UV
phosphors set out in paragraph 3 below) manufactured and/or supplied
by NAL and OSRAM shall not and shall ensure that no member of the
OSRAM Group shall itself distribute or appoint any third party to
distribute suntanning and therapeutic Lamps in Europe which
incorporate UV phosphors manufactured and/or supplied by NAL. For the
avoidance of doubt OSRAM amy source UV phosphors from third parties or
manufacture such UV phosphors by itself but OSRAM shall not be
entitled to source UV phosphors from NAL.
3) Without prejudice to the above, for the duration of the supply
contract dated March 12th 1992 and amended July 8th 1992 between GTE
Licht GmbH and Kosmedico Kosmetische und Medizmische Lampan GmbH,
however, in no case longer than until December 31 2001 OSRAM shall
procure that OSRAM Group shall supply to EDIL Group on an exclusive
basis in Europe the following phosphors (currently) manufactured in
Towanda
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<PAGE> 16
Pennsylvania) for use by EDIL Group in the manufacture of sun-tanning
and therapeutic lamps and the sale of such lamps in Europe through the
aforesaid distributor:
UV Phosphor No. 2090
UV Phosphor No. 2091
UV Phosphor No. GS 2011
UV Phosphor No. 2093
UV Phosphor No. 2094
UV Phosphor No. 2096
UV Phosphor No. 2097
For the duration of the aforesaid contract OSRAM shall not and shall ensure
that no member of the OSRAM Group shall manufacture or supply sun-tanning
or therapeutic Lamps incorporating the aforesaid phosphors in Europe, and
shall ensure that no member of the OSRAM Group shall supply such phosphors
for use by third parties in the manufacture of sun-tanning or therapeutic
Lamps for sale in Europe provided that EDIL Group purchase from OSRAM Group
a minimum quantity of the aforesaid phosphors needed for the manufacture of
two and a half (2.5) million items in the first and subsequent years of
this Agreement.
l) Delivery
1) Lamp Materials shall be delivered on the terms set out in Parts I and
II of Schedule A and for the avoidance of doubt any terms used shall
be INCOTERMS 1990.
2) In the event that the Selling Party fails to deliver Lamp Materials
to the Buying Party in the week stipulated by the Buying Party, the
Selling Party shall use all reasonable efforts to deliver such Lamp
Materials to the Buying Party as soon as practicable thereafter.
m) Warranty
1) The parties each undertake that it and the relevant members of the
Selling Party Group shall in respect of Lamp Materials supplied by it
and/or its Subsidiaries to a member of the Buying Party Group warrant
such Lamp Materials shall (a) be free from defects in material and
workmanship; (b) comply with the agreed functional and performance
specifications for that type of Lamp Material; and (c) equal the
quality of the same or
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<PAGE> 17
similar type of Lamp Materials supplied to the Selling Party Group's
own manufacturing facilities.
Except as set out above, there are no other warranties express or
implied, including the warranties of merchantability and of fitness
for a particular purpose with respect to the Lamp Materials to be
supplied under this Article.
2) The Buying Party may within thirty days of the date of delivery,
reject delivered Lamp Materials which do not comply with the above
warranty by notifying the Selling Party in writing and the Selling
Party shall, at the Buying Party's option, either replace such Lamp
Materials within thirty days from the date of the Buying Party's
notice of rejection or issue a credit note for the respective invoice
amount and freight. The Selling Party shall be responsible for the
costs of re-transportation of rejected Lamp Materials back to the
Selling Party and delivery by air freight (if reasonably required by
the Buying Party) of any replacement Lamp Materials and, if necessary,
in order to effect such replacement as soon as possible the Selling
Party Group shall reschedule production and do everything in its power
to give the re-supply of Lamp Materials to the Buying Party the
highest priority.
3) The Selling Party shall not be liable for consequential, indirect,
special or incidental damages.
n) Taxes
Prices for Lamp Materials listed in Schedule A are exclusive of all taxes,
tariffs, duties and other charges whatsoever unless otherwise stated in
Schedule A.
o) Patents
1) Each party hereby warrants and represents to the best of its
knowledge and belief that the sale or use of Lamp Materials supplied
by it or any of its Subsidiaries to the Buying Party Group hereunder
shall not infringe the patent or other intellectual property rights of
a third party, and such party shall notify the Buying Party (in the
form of a patent infringement study to the extent available and to be
kept strictly confidential) of the existence or possibility of the use
or sale of such Lamp Material (whether as part of a
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<PAGE> 18
Lamp or otherwise) infringing the patent or other intellectual
property rights of a third party.
2) Each party hereby undertakes to indemnify and hold harmless the other
party and its Subsidiaries from and against any and all losses,
damages or expenses, suffered or incurred by such other party and its
Subsidiaries arising from any claim by a third party that the use or
sale of Lamp Materials (whether as part of a Lamp or otherwise)
supplied by it or any of its Subsidiaries infringes such third parties
patents or other intellectual property rights.
3) Where a Lamp Material has been supplied to the Buying Party, and the
Buying Party's use or sale of such Lamp Material would constitute or
has constituted an infringement of the patent or other intellectual
property rights of a third party, the Selling Party shall issue a
credit note in return for such Lamp Materials equal to the respective
invoice amount for such Lamp Material and costs of freight.
4) Neither party shall be liable to the other party for consequential,
indirect, special or incidental damages.
5) Neither party shall be obliged to deliver Lamp Materials to the other
party in the event that it reasonably considers that the sale or use
of such Lamp Materials would infringe the patent or other intellectual
property rights of a third party.
p) Labelling and Packaging
1) The Lamp Materials (including packaging supplied hereunder) shall bear
such trade marks as the Buying Party may request. Such application of
the Buying Party's requested trade marks is made at the sole and
exclusive risk of the Buying Party regarding the validity or
infringement of any trade mark or other intellectual property right
and the Buying Party expressly undertakes to indemnify and hold the
Selling Party harmless from and against any and all claims, damages or
expenses which may arise by reason of applying trade marks, labels or
inscriptions to Lamp Materials at the instruction of the Buying Party.
2) The interior and exterior packaging of Lamp Materials supplied by the
Selling Party to the Buying Party under this Article II shall be the
packaging existing at the date of
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<PAGE> 19
Closing, and any changes thereto which will or are likely to adversely
affect the Buying Party, require the Buying Party's prior written
consent, such consent not to be unreasonably withheld.
3) The labeling of Lamp Materials supplied by the Selling Party to the
Buying Party under this Article II shall be the labeling existing at
the date of Closing (except that the use of the trade mark "GTE" shall
be phased out) and any changes thereto require the Buying Party's
prior written consent, such consent not to be unreasonably withheld.
4) Any costs incurred by the Selling Party in making changes to the
packaging and labelling of Lamp Materials requested by the Buying
Party shall be for the Buying Party's account, except any changes
required as a consequence of the IL Purchase Agreements. All other
changes to labelling and packaging (including all costs connected with
removing the "GTE" and other trade marks associated with GTE
Corporation and its Subsidiaries) shall be made at the Selling Party's
cost and shall not increase the price of Lamp Materials supplied
hereunder.
q) Force Majeure
The Selling Party shall not be liable for failure to fulfil the orders of
the Buying Party where such failure or delay is due to force majeure
including, without limitation, fire; act of God; acts, restrictions or
failure to act of any government authority, domestic or foreign; strikes or
labour disputes; equipment failure; shortages of materials in the market
which were unforeseeable and which a prudent manufacturing company could
not reasonably have avoided; war or civil commotion; delays in
transportation or any other cause beyond its reasonable control, Provided,
however, that in such event the Selling Party shall use reasonable efforts
to fulfil the Buying Party's orders insofar as practicable and shall at
least supply to the Buying Party the quantity of Lamp Materials or Similar
Products equal to the percentage of the Selling Party's capacity to supply
such Lamp Materials at that time, such percentage to be determined by the
ratio of the Buying Party's firm orders to the Selling Party's sales to all
its customers and its own use of such Lamp Material, for the twelve (12)
month period preceding the force majeure event, for the duration of the
event constituting force majeure.
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4) CONFIDENTIALITY
The parties undertake to, and shall procure that their respective
Subsidiaries shall hold, so far as reasonably possible, the terms of any
supply arrangement to which this Article is applicable in confidence.
Neither EDIL nor OSRAM nor their respective Subsidiaries shall make any
reference to the origin of Lamp Materials supplied hereunder in their sales
promotion.
5) MINOR PRODUCT LINES
The parties shall within 12 months of Closing consider the continued
viability and practicality of each party supplying the other with small
quantities of Lamp Materials and in the event that the parties agree that
the Selling Party's costs of manufacturing such small quantities outweigh
the commercial benefits to the Buying Party of being supplied the same on
the terms and conditions set out herein then the Selling Party's
obligations to supply the Buying Party with such type of Lamp Materials
hereunder may be terminated by agreement.
SECTION 2.4 EQUAL TREATMENT
1) Upon request by EDIL, OSRAM agrees to authorise and consent to third
party suppliers using OSRAM Group's intellectual property rights,
tooling and manufacturing apparatus to make and sell Lamp Materials
(which are the same as or similar to those supplied by such third party
to OSRAM Group) to EDIL Group on the same terms and conditions as OSRAM
Group receives the same Provided that where OSRAM Group has financed the
tooling or manufacturing apparatus used by a third party, the price
charged to EDIL Group may reflect the cost of the OSRAM Group
investment.
2) OSRAM shall use its Best Efforts to ensure that any future joint
venture between OSRAM or any member of the OSRAM Group and a third
party agrees to supply Lamp Materials to EDIL Group on favourable terms
(including price) in a manner similar to that in which IL is currently
supplied with Lamp Materials from Eurospace maatschappij voor fabricage
en verkoop van gloeilam penonderdelen ("EMGO") including, but without
limitation, the price which shall be the same price as that paid by the
shareholders plus three and a half percent. Provided that EDIL Group
undertakes to purchase the bulk of its requirements from the said joint
venture.
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ARTICLE III
CONTINUATION OF CERTAIN SUPPLY AGREEMENTS BETWEEN OSRAM GROUP AND IL
SECTION 3.1 LYNX-L COMPACT FLOURESCENT LAMPS
The parties hereto shall, within 2 months of Closing, procure that the first
paragraph of Section 11.1 of the Supply Agreement between OSRAM GmbH and GTE
Sylvania S.A. dated March 31, 1992, regarding the supply of Lynx-L Compact
Flourescent Lamps shall be amended to read as follows:
"The Agreement comes into force on January 1, 1992, and will remain in full
force and effect until December 31, 1996, when it shall automatically terminate
unless otherwise agreed upon by the parties in writing."
SECTION 3.2 SUPPLY AGREEMENT FOR BULBS BETWEEN GTE SYLVANIA S.A. AND EMGO
a) EDIL will promptly approach Europese maatschappij voor fabricage en verkoop
van gloeilampenonderdelen of Lommel, Belgium ("EMGO") and propose the
amendment of the existing supply agreement dated December 6, 1982, between
GTE Sylvania S.A. and EMGO on the following terms:
1) the term of the agreement shall be extended for ten years after
signing;
2) a firm order for 120 million light bulbs for the first year is to be
given by EDIL on behalf of its Subsidiaries, and thereafter EDIL is
to acquire the bulk of its European light bulb requirements from EMGO;
3) the price to be charged to EDIL Group is to be 3 1/2% above the price
charged for such light bulbs by EMGO to EMGO's shareholders, with GTE
Sylvania S.A. to have the right to verify such price through audits.
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<PAGE> 22
b) OSRAM will itself and procure that its trustees recommend to its joint
venture partner in EMGO that EMGO accept a proposal made by EDIL in
accordance with the terms set forth in the foregoing subparagraphs.
SECTION 3.3 The supply agreement between OSRAM GmbH and SABA Schwarzwalder
Apparate-Bau-Anstalt August Schwer Sohne GmbH ("GTE Licht") dated November 11,
1978, for the supply of glass for fluorescent lamps ("German Glass Contract").
a) The parties hereby agree that the German Glass Contract shall be amended
as follows:
1) Add the following recitals:
WHEREAS pursuant to Heads of Agreement dated 6 June 1992 and a Master
Agreement between Siemens Aktiengesellschaft, OSRAM GmbH ("OSRAM"),
Citicorp Capital Investors Europe Limited and Edil International
Lighting B.V. ("Edil") dated 6 August 1992 Edil agreed to purchase the
International Lighting Division including GTE Licht GmbH ("GTE"
Licht") from GTE Corporation and GTE International Incorporated on
condition, inter alia, that OSRAM agree to continue to supply GTE
Licht or its successors with glass and such party agrees to source
glass for flourescent lamps on the terms of the agreement between
OSRAM and GTE Licht originally concluded on 30 October 1978 as amended
by an amendment dated 19 February 1985 (the "Agreement") for as long
as the Erlangen plant continues its production of fluorescent lamps.
AND WHEREAS the parties to this Agreement wish to amend the Agreement
to ensure that OSRAM will supply and GTE Licht or its successors will
source the same glass for fluorescent lamps on the terms of the
Agreement for as long as the Erlangen plant continues its production
of fluorescent lamps.
It is now hereby agreed that:
2) Clause 1 (last paragraph) to be amended to read as follows:
"OSRAM undertakes to orientate its capacity at its plant at Augsburg
such that all the requirements of GTE Licht, as projected twelve
months in advance, can be met. The foregoing is subject to the
reservation that the obligation of OSRAM to supply all GTE
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<PAGE> 23
Licht requirements shall not extend beyond 90 million units per
annum. Notwithstanding such capacity limitation, in the event that
the OSRAM Group extends the capacity for such glass at such plant or
at any other OSRAM Group plant in the future OSRAM hereby agree to
favourably consider an increase in supplies beyond 90 million units
per annum to GTE Licht on the same terms and conditions of this
Agreement.
3) Clause 14 to be replaced by the following clause:
"Clause 14 Term of Agreement, Termination
This Agreement shall run indefinitely. It will terminate, however,
if the production of bulbs for linear and ring lamps at the Erlangen
plant of GTE Licht is finally discontinued. It may also be
terminated by either party by giving at least 24 months' notice to
the end of the calendar year in writing to the other party, such
termination, however, not to take effect before 31 December 2005.
The right to terminate the Agreement for good cause remains
unaffected by the above."
4) New Clause 14A Assignment to include the following right:
GTE Licht may at any time assign all its rights and obligations under
this Agreement to EDIL International Lighting B.V. or any of its
Subsidiaries from time to time and OSRAM hereby assents to such
assignments.
b) The parties hereby agree that if the German Glass Contract is terminated
by OSRAM for any reason whatsoever except for a material breach by GTE
Light thereunder OSRAM shall immediatetely enter into a new agreement for
the supply of glass for fluorescent lamps on the same terms as the German
Glass Contract (as amended herein), save that the term of the renewed
agreement shall be for so long as the Erlangen plant continues production
of fluorescent lamps of, if less, 15 years.
c) EDIL may, at any time, assign the right to require OSRAM to enter into a
new agreement pursuant to subparagraph 3.3 b) above to any of its
Subsidiaries from time to time, and OSRAM hereby assents to such
assignment. Furthermore, EDIL may assign such right and the German Glass
Contract or any replacement thereof to the purchaser of a portion of whole
of
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<PAGE> 24
EDIL's business making use of the light bulbs delivered or to be delivered
thereunder Provided the the purchaser of such business is not a Lamp
Competitor.
SECTION 3.4 The Supply Agreement between GTE do Brasil S/A Industria e Comerco
and OSRAM do Brasil Compantia de Limpadas Eletricas for the supply of bulbs and
tubes ("the Brazilian Glass Contract").
a) The parties hereby agree that the Brazilian Glass Contract shall be
amended to effect the following agreement:
1) Extend the term of the Brazilian Glass Contract from 31st December
1996 to the 31st December 2000;
2) From the 1st January 1997 until 31st December 2000 OSRAM shall
purchase all its requirements for glass (of the type currently
purchased from IL) for its Brazilian lamp and lighting manufacturing
operations from the Brazilian glass manufacturing facility currently
operated by GTE do Brasil S/A Industria e Comerco ("Brazil Glass
Facility") (excluding those quantities of glass which it is obliged
to purchase from GE or Vitroarma under and for the period of glass
contracts in force with such parties as at Closing) except for the
period and/or to the extent that EDIL notify OSRAM (on 12 month's
notice) that such Brazil Glass Facility has no further capacity to
meet all of OSRAM's requirements in which case OSRAM may purchase
such quantities of glass that the Brazil Glass Facility cannot supply
for that period from elsewhere. EDIL shall for this period procure
that glass supplied under the Brazilian Glass Contract is continued
to be supplied on competitive terms.
b) OSRAM hereby consents to the assignment of the Brazilian Glass Contract to
EDIL or any of its Subsidiaries and to assignments within the EDIL Group
and OSRAM also agrees for and on behalf of its Subsidiaries to waive any
right that it or any of its Subsidiaries may have to terminate the
Brazilian Glass Contract pursuant to Clause 16 of the Brazilian Glass
Contract. Osram continues to be entitled to terminate the Brazilian Glass
Contract for material breach.
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<PAGE> 25
SECTION 3.5 Equipment for the Double Twin Compact Flourescent Line at Shipley,
United Kingdom
a) OSRAM agrees to sell EDIL the equipment necessary for the completion of
the double twin compact fluorescent line at EDIL's facility at Shipley,
United Kingdom (the "Shipley Line") on favourable terms, but in no event
at a price which is less than OSRAM's costs for such equipment.
b) OSRAM shall fulfill orders for equipment for the Shipley Line that are
outstanding as of Signing on the terms agreed upon by the relevant parties
at the time such orders were placed.
--------------------------
ARTICLE IV
CONTINUATION OF SUPPLY ARRANGEMENTS FOR FINISHED LAMPS
BETWEEN OSRAM, NAL AND IL
SECTION 4.1 Scope of Article IV
Subject to Section 4.3 below, this Article IV sets out the terms and conditions
upon which Lamps which were supplied by NAL to IL, by IL to NAL, by OSRAM Group
to IL and by IL to OSRAM Group in the twelve (12) months prior to Closing or
Similar Products, and Lamps which, although not supplied, were available to be
supplied by NAL to IL during such period as listed in Schedule D, shall be
supplied by OSRAM Group to EDIL Group, and by EDIL Group to OSRAM Group, for
the period set out in section 4.31 in respect of the Lamps set out on schedule
E and in respect of all other Lamps for a period of 4 years following Closing.
For the avoidance of doubt, the terms on which Lamps are to be supplied
pursuant to this Article IV shall not apply to Lamps supplied pursuant to
supply agreements referred to in Article III which, save as amended in Article
III, shall continue on their terms.
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<PAGE> 26
SECTION 4.2 LONG-TERM SUPPLY AND PURCHASE CONTRACTS
a) Within twelve (12) months of Closing, the parties shall, in good faith,
negotiate long-term supply agreements for the most significant Lamps to be
supplied by OSRAM Group to EDIL Group, and by EDIL Group to OSRAM Group
hereunder which agreements shall incorporate the terms and conditions set
out in Section 4.3 and provide for a commitment to purchase on the part of
the purchaser (including minimum quantities where appropriate) and fixed
prices for such Lamps calculated pursuant to Section 4.3 c) unless
otherwise agreed.
b) In the event that the parties agree and sign a long-term agreement for a
Lamp(s), the terms on which such Lamp(s) shall be supplied thereafter will
be as set out in such long-term supply agreement and, for the avoidance of
doubt, the terms of this Framework Agreement shall thenceforth not apply to
such Lamps.
c) Notwithstanding the above, the parties shall be committed to supply or
procure the supply of Lamps to the other party and its Subsidiaries
pursuant to its commitment in Section 4.3 a) unless and until the parties
agree that such commitment is replaced in respect of certain Lamps by a
long term Supply Agreement.
SECTION 4.3 TERMS AND CONDITIONS
a) SUPPLY COMMITMENTS
OSRAM hereby agrees itself and to procure that relevant members of the
OSRAM Group shall supply to EDIL Group, Lamps of a type which were offered
to be supplied by NAL to IL (as set out in Schedule D) and were supplied by
OSRAM Group to IL, in the 12 months prior to Closing or Similar Products on
the terms and conditions set out below and EDIL hereby agrees itself to and
to procure that relevant members of the EDIL Group shall Supply to OSRAM
Group Lamps of a type which were supplied by IL to NAL or OSRAM Group in
the twelve months prior to Closing or Similar products on the terms and
conditions in this Section 4.3.
For the avoidance of doubt, neither party shall be obliged to purchase
Lamps from the other, other than in accordance with the rolling forecast
and firm orders mechanism set out in Section 4.3 e) below, save that for
the first 12 months following Closing OSRAM Group and EDIL Group shall be
each other's Preferred Supplier of Lams or Similar Products which NAL and
IL supplied to each other (or which were available to the other) in the 12
months prior to Closing.
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<PAGE> 27
b) DURATION
OSRAM and EDIL's respective supply commitments for Lamps hereunder shall
commence on the date of Closing and shall continue (except in respect of
those type of lamps subject to long term supply agreements entered into
pursuant to Section 4.2) for the period set out in Section 4.3(j) in
respect of the Lamps set out in Schedule E and in respect of all other
Lamps for a minimum period of four years from the date of Closing and such
commitments shall not be terminated prior to such dates (and then or
thereafter only on twelve months advance written notice) unless the parties
shall have mutually agreed in writing.
c) PRICE
1) The prices for Lamps or Similar Products to be supplied hereunder shall
be the prices charged or if not purchased, quoted by the OSRAM Group
and EDIL Group to the other as at Closing (unless such prices have been
increased since Signing by an amount in excess of what can be justified
under paragraph 2 below in which case the prices shall be those charged
or quoted prior to Signing) for the period of one year following the
date of Closing and thereafter unless and until such prices have been
changed pursuant to this Section 4.3 c). The parties currently believe
that such prices are correctly set out in Schedule D.
2) Following the first anniversary of this Agreement and upon the
provision of six month's notice to the Buying Party, the Selling Party
may only change the prices for Lamps supplied hereunder to the extent
necessary to reflect increases or decreases (a) in the cost of labour,
materials or energy used in the production of such Lamps; (b) in the
reasonable costs of environmental protection measures undertaken by the
Selling Party in connection with the facilities used in the production
of such Lamps; and (c) in the Selling Party's productivity in
connection with such Lamps.
3) Notwithstanding the above, the parties hereby each undertake that the
price charged by it or its Subsidiaries for a Lamp supplied to the
other party or its Subsidiaries hereunder shall not on average exceed
the net price charged by it or its Subsidiaries to its most favoured
group of wholesalers, distributors, and original equipment
manufacturers less a reasonable margin in respect of such Lamps or for
similar quantities the price paid by original lamp manufacturers.
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<PAGE> 28
4) OSRAM will use its best efforts that for as long as OSRAM Group is the
exclusive Supplier of Lamps in Schedule E to EDIL Group in Europe the
price of such Lamps to the EDIL Group shall enable the EDIL Group to
remain competitive in the relevant market place.
d) Payment Terms
The payment terms for the supply of Lamps the subject of this Article shall
be those which applied between the OSRAM Group and EDIL Group prior to
Closing (believed to be set out in Schedule D) Provided that in respect of
Lamps supplied to EDIL Group, payment shall be due no sooner than 60 days
from the date of invoice for deliveries of Lamps of the type listed on
Schedule D and all other Lamps except in the case of deliveries of any
Lamps from OSRAM's European locations to EDIL Group European locations of
Lamps previously supplied by OSRAM to IL where payment shall be due no
sooner than 30 days from the date of invoice. The date of invoice shall be
the date of shipment or any date thereafter. The method of payment shall be
as the Selling Party shall reasonably specify from time to time.
e) Rolling Forecasts and Firm Orders
The Selling Party and the Buying Party shall implement the following
rolling forecasts and firm orders mechanism:
1) For the period from Closing to July 1, 1993, the parties will have
placed legally binding firm orders for Lamps with each other as set
out in Part II of Schedule B and it is agreed that such orders will be
fulfilled in accordance with the terms of such orders as set out in
Part II of Schedule B.
2) The Buying Party shall within two weeks of Closing submit to the
Selling Party in writing its bona fide best estimate of its
requirements for Lamps for the 12 month period commencing on 1st April
1993 and shall thereafter submit, at least six weeks before each
Calendar Quarter Start Day its bona fide best estimate of its
requirements for Lamps for the twelve months commencing on such
Calendar Quarter Start Day.
3) Each such twelve month estimate shall show the Buying Party's
anticipated requirements in the first and second calendar quarters
separately (broken down by month) and the third and fourth calendar
quarters together.
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<PAGE> 29
4) At the same time as the aforesaid twelve month estimate is submitted
to the Selling Party (except the first such estimate), the Buying
Party shall procure that its Subsidiaries submit legally binding firm
orders to the Selling Party for Lamps for the first quarter (the
"Committed Quarter") of such estimate. All such firm orders shall be
sent to the Selling Party's head office in the country from where
Lamps are to be supplied and a copy of orders and acceptances shall be
sent to the parties' nominated representatives.
5) The Buying Party's actual requirements for each Lamp in the Committed
Quarter shall not vary by more than 10 per cent from the previous
forecast for such quarter unless, after the Buying Party had submitted
its forecast for such quarter, the Selling Party has altered the terms
on which such Lamp(s) will be supplied.
6) Subject to sub-section 4.3 f) below, OSRAM shall ensure that the
relevant member of the OSRAM Group shall accept EDIL Group's orders
for the Committed Quarter and that such relevant member of the OSRAM
Group shall confirm receipt and acceptance of EDIL's Group's order in
writing within 14 days of receipt.
7) Subject to sub-section 4.3 f) below, EDIL shall ensure that the
relevant member of the EDIL Group shall accept OSRAM Group's orders
for the Committed Quarter and that such relevant member of the EDIL
Group shall confirm receipt and acceptance of OSRAM Group orders in
writing within 14 days of receipt.
8) OSRAM and EDIL shall each nominate a representative to manage this
rolling forecast and firm orders procedure. Such nominated
representative shall act as the point of first contact in the event of
supply difficulties and shall, in good faith, seek to resolve any
disputes which may arise. Any dispute relating to this rolling
forecast and firm orders procedure which cannot be resolved by the
nominated representatives shall be referred to a senior executive of
each of the parties, currently Mr. Swaanen for EDIL Group and Mr.
Wasser for OSRAM Group. Either party shall give the other at least 14
days notice of any change in its nominees from time to time.
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<PAGE> 30
f) Quantity
Subject to sub-section 4.3 p) below, OSRAM hereby agrees itself and to
procure that the OSRAM Group supply to EDIL Group all its requirements for
each Lamp of the type listed on Schedule D or supplied by OSRAM Group to IL
in the twelve months prior to Closing or Similar Products in the quantities
ordered by EDIL Group pursuant to Section 4.3 e) above and EDIL hereby
agrees itself and to procure that the EDIL Group supply to OSRAM Group all
its requirements for Lamps of a type supplied by IL to NAL in the twelve
months prior to Closing or Similar Products Provided that in the event that
the Selling Party notifies the Buying Party on 6 months notice that
Supplying Party has no capacity to manufacture Lamps or Similar Products,
or within 14 days of such firm order that there is a reasonable shortage in
production of such Lamp, then the Selling Party shall be obliged to supply
to the Buying Party the Lamps ordered for any quarter up to the greater of:
1) the quantity of such Lamp or Similar Product Supplied by the Selling
Party Group to the Buying Party Group in the relevant quarter of the
twelve month period to Closing or such date; or
2) a pro-rata share of the Selling Party Group total available supplies
of such Lamp having regard to the Buying Party's Group orders or
purchases of such Lamp or Similar Product from the Selling Party Group
and the purchases of such Lamp or Similar Product by other customers
of the Selling Party in the relevant quarter of the twelve month
period prior to Closing or such date; or
3) in respect of sub-miniature fluorescent Lamps or Similar Products 15%
of OSRAM Groups worldwide production capacity of such Lamps.
and for the purposes of this sub-section, where the Selling Party or Buying
Party is a member of the OSRAM Group, supplies to or from NAL or for OSRAM
Group's own use shall be included in such calculation, and where the Selling
Party or Buying Party is EDIL Group a member of the supplies to or from IL or
for EDIL Group's own use shall be included in such calculation.
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<PAGE> 31
g) Quality
The quality of Lamps to be supplied by the Selling Party Group to the
Buying Party Group pursuant to this Article shall at least equal the
quality of Lamps manufactured for sale under the Selling Party's Group
trade marks in Europe or, if not supplied in Europe, such other relevant
territory.
h) Amendment of Terms
1) The Selling Party may only amend terms relating to the availability of
Lamps supplied under this Article in the event that such party
permanently ceases production of such Lamps or Similar Products and
the Buying Party has been given six months' notice of such change;
2) The Selling Party may only amend terms relating to the quality and
specification of Lamps supplied under this Article if:
A) the same amendments have been made to the terms on which such
Lamps are supplied to the Selling Party's own Lamp manufacturing
facilities; and
B) the Buying Party has been given six months' notice of such
change.
i) Assignment
Without prejudice to OSRAM's commitment to supply Lamps to EDIL and its
Subsidiaries hereunder, in the event of a sale by EDIL or any of its
Subsidiaries of a company or of the whole or part of its business from time
to time to any Person OSRAM shall enter into a new supply contract for the
duration of the unexpired term of this Agreement at such time with the
purchaser of such company or business on the same terms as set out in this
Article IV in respect of the type of Lamps purchased by such company or
business at the time of such sale (including as to price, quantity,
quality, delivery and payment terms).
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<PAGE> 32
j) Exclusivity
1) Except as set out in paragraph 2) below the supply agreements
covered by this Article shall be on a non-exclusive basis.
2) For a period of 7 years OSRAM hereby appoint the EDIL Group as the
OSRAM Group's exclusive distributor in Europe for the Lamp Products
manufactured and/or supplied by NAL (except as limited by paragraph
3) below) listed in Schedule E and OSRAM shall not and shall ensure
that no member of the OSRAM Group shall distribute and sell or
appoint any third party to distribute and sell such Lamp Products in
Europe during this term. For the avoidance of doubt OSRAM may source
the Lamps listed in Schedule E from third parties or manufacture such
Lamps itself but shall not be entitled to source such Lamps (except
as permitted in paragraph 3 below) from NAL for distribution in
Europe.
3) Notwithstanding paragraph 2 above, OSRAM shall be entitled to sell
itself (but not through any third parties) the following Lamps
manufactured and supplied by NAL in the territories listed below:
(i) OSRAM may continue to sell VHO and HO Lamps and slimline
fluorescent Lamps in the United Kingdom up to a limit of the
same quantities of such Lamps as it currently sells in the
United Kingdom;
(ii) OSRAM may continue to sell Par 64 Lamps in Germany;
(iii) OSRAM may sell sub-miniature florescent Lamps throughout Europe
in any quantities but shall not sell any such Lamps to the
eight customers whom IL have sent quotations to prior to
Closing and who will be notified to OSRAM by EDIL within two
weeks of Closing. Furthermore EDIL assures OSRAM that it has
established a business relationship with such customers prior
to Closing.
4) Subject to paragraphs 4.3 L and N, EDIL hereby agree to indemnify
OSRAM Group against any losses, damages or expenses suffered or
incurred by OSRAM Group arising from any claim by a third party that
the use of sun-tanning or therapeutic lamps supplied by EDIL Group
has brought such third party health problems provided that the UV
Phosphors supplied to EDIL group and used in
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<PAGE> 33
such lamps meet the agreed specification and comply with the
other warranties in paragraphs 4.3 L and N below. In the event
that such health claims are brought against OSRAM or EDIL and
as a result OSRAM Group withdraw completely from the
manufacture and sale of suntanning and therapeutic Lamps in
Europe then the distribution agreement in respect of such Lamps
supplied by NAL shall terminate forthwith.
k) Delivery
1) Lamps shall be delivered to the Buying Party on the terms as agreed
prior to Closing (set out in Schedule D) and for the avoidance of
doubt terms used in the schedule shall be INCOTERMS 1990.
2) In the event that the Selling Party fails to deliver Lamps to the
Buying Party in the month stipulated by such party, the Selling Party
shall use all reasonable efforts to deliver such Lamps to the Buying
Party as soon as practicable thereafter.
l) Warranty
1) The parties each undertake that it and the relevant members of the
Selling Party's Group shall in respect of Lamps supplied by it and/or
its Subsidiaries to a member of the Buying Party's Group warrant such
Lamps shall
(a) be free from defects in material and workmanship;
(b) comply with the agreed functional and performance
specifications for that Lamp; and
(c) equal the quality of the same or similar type of Lamps
supplied to the Selling Party's Group own manufacturing
facilities.
Except as set out above, there are no warranties express or implied,
including warranties of merchantability and of fitness for a
particular purpose with respect to the Lamps supplied under this
Article.
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<PAGE> 34
2) The Buying Party may, within thirty days of the date of delivery,
reject delivered Lamps which do not comply with the above warranty by
notifying the Selling Party in writing. The Selling Party shall, at the
Buying Party's option, either replace such Lamps within thirty days from
the date of the Buying Party's notice of rejection or issue a credit
note for the respective invoice amount and freight. The Selling Party
shall be responsible for the costs of re-transportation of any rejected
Lamps and delivery by air freight (if reasonably required by Buying
Party) of any replacement lamps, and if necessary, in order to effect
such replacement as soon as possible the Selling Party Group shall
reschedule production and do everything in its power to give the
re-supply of Lamps to the Buying Party the highest priority.
3) The Selling Party shall not be liable for consequential, indirect,
special or incidental damages.
m) TAXES
Prices for the Lamps listed in Schedule D are exclusive of all taxes,
tariffs, duties and other charges whatsoever unless otherwise stated
in Schedule D.
n) PATENTS
1) Each party hereby warrants and represents to the best of its knowledge
and belief that the sale or use of Lamps supplied by it or any of its
Subsidiaries to the Buying Party Group hereunder shall not infringe the
patent or other intellectual property rights of a third party, and such
party shall notify the Buying Party (in the form of a patent
infringement study to the extent available and to be kept strictly
confidential) of the existence or possibility of the use or sale of
such Lamp constituting an Infringement of the patent or other
intellectual property rights of a third party.
2) Each Party hereby undertakes to indemnify and hold harmless the other
party and its Subsidiaries from and against any and all losses, damages
or expenses, suffered or incurred by such other party and its
Subsidiaries arising from any claim by a third party that the use or
sale of Lamps supplied by it or any of its Subsidiaries to the other
party and its Subsidiaries infringes such third parties patents or
other intellectual property rights.
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<PAGE> 35
3) Where a Lamp has been supplied to the Buying Party, and the Buying
Party's use or sale of such Lamp would constitute or has constituted an
infringement of the patent or other intellectual property rights of a
third party, the Selling Party shall issue a credit note in return for
such Lamp equal to the respective invoice amount for such Lamp and costs
of freight
4) Neither party shall be liable to the other party for consequential,
indirect, special or incidental damages.
5) Neither party shall be obliged to deliver Lamps to the other party in
the event that it reasonably considers that the sale or use of such
Lamps would infringe the patent or intellectual property rights of a
third party.
0) LABELLING AND PACKAGING
1) The Lamps (including packaging supplied hereunder) shall bear such trade
marks as the Buying Party may request. Such application of the Buying
Party's requested trade marks is made at the sole and exclusive risk of
the Buying Party regarding the validity or infringement of any trade
mark or other intellectual property right and the Buying Party expressly
undertakes to indemnify and hold the Selling Party harmless from and
against any and all claims, damages or expenses which may arise by
reason of applying trade marks, labels, or inscriptions to Lamps at the
instruction of the Buying Party.
2) The interior and exterior packaging of Lamps supplied by the Selling
Party to the Buying Party under this Article IV shall be the packaging
existing at the date of Closing, and any changes thereto which will or
are likely to adversely affect the Buying Party require the Buying
Party's prior written consent, such consent not to be unreasonably
withheld.
3) The labelling of Lamps supplied by the Selling Party to the Buying Party
under this Article IV shall be the labelling existing at the date of
Closing (except that the use of the trade mark "GTE" shall be phased
out) and any changes thereto require the Buying Party's prior written
consent, such consent not to be unreasonably withheld.
4) Any costs incurred by the Selling Party in making changes to the
packaging and labelling of Lamps requested by the Buying Party shall be
for the Buying Party's account, except any changes required as a
consequence of the IL Purchase Agreements. All other
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<PAGE> 36
changes to labelling and packaging (including all costs connected with
removing and replacing the "GTE" and other trade marks associated with GTE
Corporation and its Subsidiaries) shall be made at the Selling Party's
cost and shall not increase the price of Lamps supplied hereunder.
p) FORCE MAJEURE
The Selling Party shall not be liable for failure to fill the orders of the
Buying Party where such failure or delay is due to force majeure including,
without limitation, fire; act of God; acts, restrictions or failure to act of
any government authority, domestic or foreign; strikes or labour disputes;
equipment failure; shortages of materials in the market which were
unforeseeable and which a prudent manufacturing company could not reasonably
have avoided; war or civil commotion; delays in transportation or any other
cause beyond its reasonable control. Provided, however, that in such event
the Selling Party shall use reasonable efforts to fulfil the Buying Party's
orders insofar as practicable, and shall at least supply to the Buying Party
the quantity of Lamps or Similar Products equal to a percentage to be
determined by the ratio of the Buying Party's firm orders to the Selling
Party's sales to all its customers for said Lamp [and its own use of such
Lamp], for the twelve month period proceeding the force majeure event, for
the duration of the event constituting force majeure.
q) CONFIDENTIALITY
The parties undertake to, and shall procure that their respective
Subsidiaries hold so far as reasonably possible the terms of any supply
arrangement to which this Article is applicable in confidence. Neither EDIL
nor OSRAM nor their respective Subsidiaries shall make any reference to the
origin of Lamps supplied hereunder in their sales promotion.
r) MINOR PRODUCT FINES
The parties shall within 12 months of Closing consider the continued
viability and practicality of each party supplying the other party with small
quantities of Lamps and in the event that the parties agree that the Selling
Party's costs of manufacturing such small quantities outweigh the commercial
benefits to the Buying Party of being supplied the same on the terms and
conditions set out herein then the Selling Party's obligations to supply the
Buying Party with such type of Lamp hereunder may be terminated by agreement.
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ARTICLE V
SUPPLY OF MANUFACTURING APPARATUS
1) Whereas pursuant to the Research and Development and Engineering Support
Agreement OSRAM and EDIL were to have agreed, prior to Closing, full form
supply agreements for the supply by OSRAM to EDIL of Manufacturing Appararus
(as therein defined).
2) The parties have not agreed full form supply agreement for the supply of
Manufacturing Apparatus as at the date hereof and shall do so within 1 month
of Closing on the terms and conditions set out in the Research and
Development and Engineering Support Agreement (including Schedule 2) as well
as in the Master Agreement.
3) In addition, the parties hereby agree that the terms and conditions of
supply (including, but without limitation, prices, quality, delivery terms,
payment terms and capacity) shall be no less favorable than the terms
except the terms of the Supply Agreement between OSRAM and IL relating to
the Double Twin Company Fluorescent line installed at Shipley, United
Kingdom on which such Manufacturing Apparatus or similar Manufacturing
Apparatus was supplied by OSRAM to IL prior to Closing.
------------------------
ARTICLE VI
Section 6.1 Governing Law
This Agreement is governed by, and shall be constituted in accordance with the
laws of the state of New York, USA. Except:
(a) the Supply Agreements under Article III which are governed by the law
as provided in the respective Agreement; and
(b) the Long Term Supply Agreements and Purchase Orders between the parties
which shall be governed by such law as is agreed between the parties from
time to time.
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SECTION 6.2 ARBITRATION
1) Any differences or disputes regarding the supply of Lamp Materials or Lamps
subject to this Agreement are to be settled by an amicable effort on the
part of both parties. An attempt to arrive at a settlement shall be deemed
to have failed as soon as one of the parties so notifies the other party in
writing.
2) Any claim or controversy arising at any time out of or in relation to this
Agreement shall be settled in accordance with the rules of commercial
arbitration of the International Chamber of Commerce by an arbitrator
appointed in accordance with the rules who shall be entitled to award
specific performance, preliminary or final injunctions and/or damages. Any
arbitration shall take place in Paris, France and shall be conducted in the
English language. Judgment upon the award rendered may be entered in any
court having jurisdiction thereof. All proceedings shall be conducted in
confidence; the parties agree to provide such information and make
available such employees as the arbitrator deems necessary for his or her
determination. Each party will be afforded an opportunity to examine the
witnesses and documents referred to or submitted by the other party as a
part of such proceedings and to submit a reasonable list of document
requests, interrogatories and requests for admission to which the other
will respond, it being understood that time is of the essence in the
completion of such proceedings. The arbitrator shall be required to put his
or her award and decision in writing and provide all parties with a copy
thereof.
SECTION 5.3 AMENDMENTS
a) Except as otherwise permitted in this Agreement, no amendment, waiver or
modification of any provision of this Agreement shall be valid unless it is
in writing and signed by or on behalf of each of the parties hereto.
b) Nothing in this Agreement shall be construed to limit the right of the
parties mutually to agree to amend the terms of this agreement or any
agreement referred to herein.
SECTION 5.4 ASSIGNMENT
Except as expressly provided in this Agreement, neither party shall assign or
transfer or purport to assign or transfer any of its or obligations under this
Agreement.
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SECTION 5.5 NOTICES
Except as expressly provided herein, any notice or other communication under or
in accordance with this Agreement shall be in writing and shall be delivered
personally or sent by first class pre-paid recorded delivery (and by air mail
if overseas) or by fax (and confirmed by letter post) or by telex as follows:
if to OSRAM, to:
Address: Hellabrunner Strasse 1
D-8000 Muenchen 90
Germany
Telefax: 0049 89 6213 2019
Marked for the attention of Gerd Pokorny;
if to EDIL, to:
Address: Apollolam 171
1077 AS, Amsterdam
P.O. Box 7301, 1007 JH
Amsterdam
The Netherlands
Telefax: 31 20 6769326
Marked for the attention of C. Barbas:
and a copy to: CITICORP VENTURE CAPITAL UNLIMITED
Address: Citibank House
7th Floor
335 Strand
London WC2R 1LS
England
Telefax: 071 438 1420
Marked for the attention of M. Smith;
-36-
<PAGE> 40
and
Address: [EDIL], Geneva
20 Route de Pre-Bois
P.O. Box 554
1215 Geneva 15
Switzerland
Telefax: 010 4122 7880363
Marked for the attention of R. Swaanen
or to such other person, address or telefax number as any party may specify by
notice in writing to the others. A notice shall be effective when received.
SECTION 5.6 Waiver
No waiver by either party of the exercise of any right or of enforcement of any
obligation of the other party shall operate as a waiver of any other such right
of enforcement of any other such obligation to a subsequent occasion.
SECTION 5.7 Severability
If any provision of this Agreement shall be held invalid, the remainder shall
nevertheless be deemed valid and effective, and it is the intention of both
OSRAM and EDIL that each provision hereof is being stipulated separately in the
event one or more of such provisions should be held invalid.
SECTION 5.8 Entire Agreement
This Agreement embodies the entire agreement of OSRAM and EDIL and supersedes
and cancels all previous negotiations, understandings, commitments or
agreements, written or oral, regarding the subject matter hereof.
SECTION 5.9 Counterparts
This Agreement may be executed in any number of counterparts, each of which
executed and delivered shall be an original, but all the counterparts together
shall continue one and the same instrument.
-37-
<PAGE> 41
SECTION 5.10 Headings
The headings of the articles, sections and subsections in this Agreement are
inserted for convenience of the reader only and do not form a part of this
Agreement.
SECTION 5.11 Confidentiality
The parties undertake to, and shall procure that their respective Subsidiaries
shall take reasonable steps to, hold the terms of this Agreement in
confidence. No public announcement, communication or circular (other than and
to the extent required by law) concerning the transactions referred to in this
Agreement, the terms and conditions of this Agreement or the financial affairs
of any of the parties to this Agreement shall be made or dispatched by any
party without the prior written consent of the other party (such consent not to
be unreasonably withheld or delayed).
SECTION 5.12 U.N. Convention
Except as may by expressly provided to the contrary in any agreement to be
amended or entered into pursuant to this Agreement, the parties agree that the
provisions of the United Nations Convention on Contracts for the International
Sale of Goods shall not apply to this Agreement or to such agreements.
SECTION 5.13 Inconsistent terms
The provisions set forth in any purchase order, invoice or other printed form
used in the ordering or supply of products pursuant to a supply agreement
amended or entered into pursuant to this Agreement shall not take precedence
over the terms of this Agreement and to the extent contradictory of this
Agreement's terms, shall be of no effect.
In Witness whereof, this Agreement has been executed by the parties on the date
first written above.
OSRAM GmbH EDIL International Lighting B.V.
By: /s/ By: /s/
--------------------------- --------------------------------
Name: Name:
Title: General Counsel Title: Authorized Signature
-38-
<PAGE> 42
SCHEDULES
SCHEDULE A - Lamp Materials
Part I - Lamp Materials supplied by NAL to IL
Part II - Lamp Materials supples by IL to NAL
SCHEDULE B - Firm Orders for period from Closing to July 1st 1993
Part I - Lamp Materials
A) NAL to IL
B) IL to NAL
Part II - Lamps
A) NAL to IL
B) IL to NAL
SCHEDULE C
No Longer Applicable
SCHEDULE D - Finished Lamps
SCHEDULE E - Specialty Lamps purchased by IL from NAL
The products which present a Sylvania specialty in Europe and are purchased
from NAL are:
Metalarc M Types (excluding NAL types MP75 AND MP100)
VHO Fluorescent
HO Fluorescent
Slimline Fluorescent
Photocopy Fluorescent
UV suntanning and therapeutic lamps and UV phosphors
PAR 64 Lamps
Sub-miniature Fluorescent Lamps
- 39 -
<PAGE> 43
\ 4.2.2 OSRAM shall retain for a period of two (2) years
after making a royalty report, the records, files,
and books of account prepared in the normal course of
business, which contain data reasonably required for
the computation and verification of the amounts to be
paid and the information to be given in such report.
OSRAM shall permit the inspection, with reasonable
advance notice and at reasonable times during normal
business hours, of such records, files, and books of
account, by a certified public accountant to when
OSRAM has no reasonable objection. Said accountant
shall be permitted to inspect such records, files,
and books and OSRAM shall give the accountant such
other information as may be necessary and proper to
enable the amounts of payments payable hereunder to
be accurately ascertained. Such inspection shall be
at SLI's expense unless it is determined by said
accountant that the royalties paid to SLI are
deficient in excess of five percent (5%), in which
case the costs of such inspection shall be paid by
OSRAM. Neither SLI nor said accountant shall
disclose to anyone, directly or indirectly, any of
the information which they obtain as a result of any
such inspection and such accountant shall report to
SLI only the amount of royalty due and payable.
5. Notwithstanding the provisions of section 4.3 c) part 3 of the
Supply Agreement, OSRAM hereby undertakes that the price charged to SLI, or its
Subsidiaries, by OSRAM, or its Subsidiaries, for subminiature fluorescent Lamps
to be supplied to SLI, or its Subsidiaries, pursuant to the Supply Agreement
shall in respect of orders received by OSRAM after January 29, 1993 always be
15% less than the Net Price (less all discounts, allowances, rebates and
credits) charged by OSRAM, or its Subsidiaries, to its most favoured group of
wholesalers, distributors, original equipment manufacturers or any third party
for the same type of subminiature fluorescent Lamps. The parties agree that
with effect from 29 January 1996 the price charged by OSRAM to SLI will be
reviewed with the purpose to agree an increase of such price by taking into
account the increased demand from the after market.
6. Except as provided above all other terms and conditions set forth
under the Supply Agreement shall remain unmodified and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment Agreement
as of the date first above written.
<PAGE> 44
Sylvania Lighting OSRAM GmbH
International S.V.
/s/ /s/
- ----------------------------------- -----------------------------------
December 23, 1994 December 23, 1994
<PAGE> 1
EXHIBIT 10.35
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.
<PAGE> 8
8
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
<PAGE> 9
9
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.
<PAGE> 10
10
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.
<PAGE> 11
11
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.
<PAGE> 12
12
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
<PAGE> 15
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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
<PAGE> 17
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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
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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.
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(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.
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(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
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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
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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 10.36
TRANSLATION
SUPPLY CONTRACT
between
OSRAM Gesellschaft mit beschrankter Hattung, Berlin/Munich -
hereinafter called "OSRAM" -
and
SABA Schwarzwalder Apparate-Bau-Aristalt August Schwer Sohne
GmbH, Product section Sylvania, Enangon - hereinafter called
"SYLVANIA"-
1. ESTIMATE OF BULB REQUIREMENTS
SYLVANIA agrees to order its bulb requirements for fluorescent and
circline lamps from OSRAM.
The order quantities are estimated as follows:
<TABLE>
<CAPTION>
Calendar Year Quantities in Mio. Units
------------- ------------------------
<S> <C>
1979 31,6
1980 33
1981 34,7
1982 35,5
1983 38,3
1984 40,2
1985 41,9
1986 44
</TABLE>
The above-mentioned quantities are estimates only. The order volume
with respect to bulb quantities and types remains subject to the
provisions of paragraph 3 hereof.
OSRAM agrees to provide capacity in accordance with the
above-mentioned quantities in order to meet the SYLVANIA requirements.
2. PRICE STRUCTURE
Each year the bulb sales prices shall be determined in advance for the
period of October 1 of one year until September 30 of the following
year, based on the attached standard cost breakdown (Appendix 1). The
annual variance of TMCs shall be determined as of September 30 for
each year, and credited and debited to SYLVANIA. Each year SYLVANIA
shall obtain from OSRAM six months after the beginning of the OSRAM
financial year a forecast concerning the anticipated development of
cost variances. Thereafter a forecast shall be given monthly.
For the period of January 1, 1979 until the production start-up of the
vello draw the above-mentioned standard cost breakdown shall not be
used for determination of prices. Up to this date, the current bulb
sales price shall be adjusted on January 1 of each year in the same
proportion as the manufacturing costs have changed. For this price
adjustment, variances of manufacturing costs resulting from process
changes shall not be taken into consideration. Whereas volume
variances shall be considered.
<PAGE> 2
2
Supplementary remark in handwriting:
Expected production start-up with vello draw process is planned for
end of 1980, beginning 1981.
After start-up of the vello process, SYLVANIA is entitled to request
an audit of standard costs (in accordance with appendix 1) and the
variances thereof by a neutral auditor to be appointed by both parties
of this contract, at the close of the OSRAM financial year on
September 30 of each year. The audit costs shall be shared equally by
both parties.
3. ORDERING SUPPLY PROCEDURES
Not later than December 1, March 1, June 1, and September 1 of each
year, after signing of the contract, SYLVANIA shall submit to OSRAM
information regarding its requirements in the periods January to March,
April to June, July to September and October to December, so that for
each of the above-mentioned dates most recent information is submitted,
covering the requirements of the 12 calendar months beginning one
calendar month after submission of the information. Each of the said
periods is henceforth referred to as "quarter" and the expressions
"first quarter", "second quarter", "third quarter" and "fourth quarter"
refer to the four quarters directly subsequent to the submission of the
information.
Information submitted regarding the requirements for each third and
fourth quarter shall be an estimate only. Information submitted as to
requirements for each second quarter shall be subject to a volume
variance of individual types, at the option of SYLVANIA, of no more
than plus or minus 20% or no more than 10% of the total quantity
compared to the previously submitted estimate for each third quarter.
The information as to the requirements for each first and second
quarter shall contain a breakdown of types and months. The firm order
for each first quarter shall be subject to a volume variance, at the
option of SYLVANIA, of no more than plus or minus 10% from the
information submitted as to requirements for each second quarter. It is
to be understood that this firm order may within the frame or the
aforementioned volume variances include bulb types which were not
included in the forecast. OSRAM warrants delivery after 4 weeks for
bulb types which can be produced with no change in manpower
requirements. Bulbs with a length of more than 1495 mm require more
manpower, for these types OSRAM ensure the production start latest
after 4 weeks.
If the firm order increases by more than 10% compared to the forecast
or SYLVANIA increases the quantity of the already placed firm order
later and the increase cannot be covered out of the 10 days stock,
OSRAM has the right to refuse the delivery of the difference. In this
case SYLVANIA is free to purchase the difference elsewhere.
Within the limits of the given firm order, SYLVANIA shall inform
OSRAM of the weekly call-offs with a notice of at least 14 days
whereby it is understood that SYLVANIA shall accept the bulbs in due
time.
Short term changes (up to two truck loads) are possible until
Wednesday of the previous week.
After receipt of a firm order OSRAM shall send a written order
acknowledgement, which shall contain prices as well as delivery times
to be applied in accordance with this contract. If it becomes obvious
that delivery delays shall occur, immediate notification of the period
of delay shall be made. Except for the case of Acts of God OSRAM shall
pay a penalty for deliveries, which cannot be carried out within the
specified time. This penalty is twice the value, without value added
tax, of each bulb for every day of delivery delay exceeding 5 working
days.
All deliveries shall be carried through eif SYLVANIA, factory
Frauenaurach. For all shipments a delivery note indicating contents
and SYLVANIA, order number shall be written out by OSRAM.
<PAGE> 3
3
OSRAM carries the risk for all shipments and return shipments. The
risk will only then be borne by SYLVANIA for all shipments when the
products have reached the SYLVANIA warehouse Erlangen-Frauenaurach.
The risk for return shipments to OSRAM will be carried by OSRAM when
leaving the SYLVANIA warehouse in Erlangen-Frauenaurach.
Firm orders are only valid if given in writing or confirmed in
writing. Verbal agreements or arrangements with respect to firm orders
are neither binding for SYLVANIA nor for OSRAM unless they have been
confirmed in writing. Regarding the firm orders correspondence shall
always carry the numbers of same.
4. DELIVERY LIMITATIONS
Supplementary remark in handwriting:
The annual audit referred to in paragraph 2, section 3, shall contain
the audit of obedience to the above-mentioned.
If for any reason, including Acts of God or other unforeseen
circumstances, OSRAM is unavoidably prevented from manufacturing the
bulbs and the ten working days stock is exhausted (see para. 5), OSRAM
will ensure that delivery shall be effected to SYLVANIA of quantities
proportional to those which in fact OSRAM makes to its other customers
taking into consideration OSRAM's obligation towards these. In this
case SYLVANIA has the right to purchase the balance of its
requirements elsewhere.
All OSRAM production facilities processing bulbs are also to be
understood as "other customers" according to first section of this
paragraph. In compliance with section 1 of this paragraph SYLVANIA may
not under any circumstances be put at a disadvantage against OSRAM.
If SYLVANIA as a result of provable Acts of God, strike and furlough
cannot fulfil its purchase commitments, already scheduled deliveries
may be cancelled for periods of such events. In such case SYLVANIA
shall try beforehand to announce and adjust its purchase volume to the
corresponding reduced requirement.
If SYLVANIA upon delivery of the bulbs determines either delivery
shortage as to the advised number of units or failure to comply with
the quality requirements in accordance with this contract, SYLVANIA
shall be given written notification to OSRAM. Upon receipt of such
notification, OSRAM shall have the right to send an inspector to
SYLVANIA's plant at Frauenaurach with a maximum period of two working
days. Whether or not OSRAM exercises this right SYLVANIA shall have
the right to place the bulbs in question at OSRAM's disposal, whereby
SYLVANIA shall be released from its purchase and payment commitment
unless OSRAM provides compensation according to the arrangement in the
following section.
For delivery shortages and defective bulbs caused by OSRAM
manufacturing OSRAM has to deliver replacement within 5 working days
after written notification. For defective bulb deliveries not caused
by OSRAM (for example damage in transit) the period for replacement
delivery shall be agreed upon case by case whereby ORSAM shall be
endeavoured to deliver as fast as possible.
<PAGE> 4
-4-
5. SAFETY STOCK
Osram shall maintain for SYLVANIA a stock of the main types 20, 40
and 65 Watt bulbs for straight lamps as well as of the types 22, 32
and 40 Watt bulbs for circline lamps which covers a requirement of ten
working days with respect to the orders for the corresponding first
quarter.
This stock will be maintained according to the principle "first in
first out". The warehousing shall occur with the same attention as
the warehousing for OSRAM's own bulb requirements. Whenever the
said stock is diminished as a consequence of replacements being
delivered to SYLVANIA, OSRAM shall notify SYLVANIA in writing, if at
any time the stock is fully or partially depleted, traceable to
replacements as a consequence of OSRAM failure, it shall be fully
replenished within a maximum period of ten working days.
If at any time the stock shall be partially or fully exhausted at
the request of SYLVANIA OSRAM shall replenish the stock as fast as
possible without any additional costs for OSRAM, SYLVANIA shall be
informed in writing when replacement is completed.
6. DAMAGES IN TRANSIT
The provisions with respect to bulb replacement deliveries shall
apply regardless of any insurance claims, which may be made as a
consequence of damage to bulbs prior to delivery to SYLVANIA's
factory at Frauenaurach.
Upon receipt of bulbs which have been damaged during transportation
to Frauenaurach, SYLVANIA shall initiate all measures necessary for
the assertion of claims against carrier or any insurers.
7. PACKING, DELIVERY
Bulbs shall be loaded, without any exception, on pallets and delivered
to SYLVANIA's factory by trucks which can be unloaded on both sides.
The pallet design shall be fixed by mutual agreement, Manufacturing
and maintenance expenses shall be borne by SYLVANIA. The expenses of
returning empty pallets and packing material shall be borne by OSRAM.
SYLVANIA shall accept deliveries from Monday through Friday each week
from 7 a.m. until 6 p.m. as well as from 7 p.m. until 10 p.m. if
deliveries on Saturday or legal holidays become necessary. OSRAM
shall notify SYLVANIA thereof not later than 12 o'clock noon on the
preceding working day. Such deliveries shall be between 7 a.m. and
12 a.m.
8. PALLETS
SYLVANIA shall supply OSRAM in time and with sufficient quantities
of pallets, covers and edge protections. For each million bulbs
purchased per year 138 faultless pallets including faultless
accessories shall be supplied by SYLVANIA. Therefore for 1979 with
a requirement estimated at 31.5 million bulbs 4,350 pallets have
to be supplied. On increasing purchases SYLVANIA shall increase the
number of pallets with cover and/or edge protections in due time.
SYLVANIA shall continuously make available to OSRAM at least half
of the total quantity of pallets.
OSRAM guarantees packing to be in accordance with the standard
specifications agreed upon by both parties with the understanding
that SYLVANIA makes available in due time sufficient pallets with
corresponding accessories. It has been decided that the packing
agreed upon can only be changed by mutual agreement.
The return of packing material to OSRAM shall be in shipments of
at least 250 pallets including accessories and caps of corrugated
paper. OSRAM shall bear the transportation costs.
<PAGE> 5
- 5 -
9. TERMS OF PAYMENT
Invoices for deliveries effected from the 1st to 14th of each month are
payable up to the 25th of the same month; invoices for deliveries from the
15th to the end of each month are payable up to the 10th of the following
month. Accounts are payable net without any deductions. SYLVANIA reserves
the right to remit by draft.
Invoices shall be submitted in duplicate. They are to contain purchase
order details for each item. Copies of invoices shall be clearly marked as
such.
10. WARRANTY
OSRAM warrants any material and any service to be rendered based on any
firm order to be in accordance with the provisions of this contract,
especially with reference to the quality requirements according to Appendix
2 and other assured characteristics according to Appendix 2. Deviations
shall not be accepted unless prior written approval has been obtained.
Notwithstanding the provisions of paragraph 4, sections 2 and 3 hereof
warranty claims with respect to type, quality and quantity of bulbs
delivered may be asserted within a month after receipt. In case bulbs
delivered and services rendered are not in accordance with the
specifications agreed upon by both parties, SYLVANIA reserves the right, in
addition to the provisions of this contract and to warranties implied in
fact or law, either to obtain bulb replacement from OSRAM at no extra cost
or to negotiate an adjustment of price.
In addition, warranty claims based on material defects or unfitness of
material (except for weathering defects), which become evident only during
or after processing of bulbs, may be asserted immediately after detection,
however, not later than six months after receipt of bulbs.
All expenses arising in connection with warranty claims shall be borne by
OSRAM in the event that the warranty claims are justified. In the event
that the warranty claims are not justified, those expenses shall be borne
by SYLVANIA.
11. PATENT CLAIMS
OSRAM warrants that the bulbs delivered under this contract do not infringe
any valid patent owned or controlled by any third party and agrees to
protect SYLVANIA against any and all liability, loss and expense by reason
of any claim, action or litigation arising out of any infringement of such
rights.
SYLVANIA shall give OSRAM prompt notice in writing of all necessary details
if such claim, action or litigation occurs, and further agrees to give
OSRAM such opportunity to participate in the defence thereof as is afforded
by applicable laws, rules and regulations.
OSRAM does not warrant that SYLVANIA by further use or further processing
of bulbs delivered will not infringe on protective rights at either German
or foreign patents. Moreover, delivery does not entitle SYLVANIA to
participate in any protective rights which are at OSRAM's disposal with the
exception of those merely referring to the nature of the delivered
products. If bulbs should be delivered to SYLVANIA bearing trade marks,
labels or other inscriptions as specified by SYLVANIA such application is
made at the sole and exclusive risk of SYLVANIA as regards the validity of
any trade mark rights. SYLVANIA explicitly undertakes to indemnify and
protect OSRAM from and against all claims and damages which may arise by
reason of OSRAM following SYLVANIA's instructions with respect to the
application of the trade marks, labels and inscriptions.
<PAGE> 6
- 6 -
12. LEGAL SETTLING PLACE, ARBITRATION
All controversies arising from this contract, also concerning its legal
validity shall be settled by an arbitration committee consisting of three
members. Each party to the contract shall nominate one arbitrator; if
these two arbitrators cannot agree upon the chairman of the arbitration
committee, he shall be nominated by the president of the Munich court of
appeal (Oberlandesgericht); the chairman must be qualified to be appointed
judge. The procedure shall be in accordance with the Civil Code of German
Law (ZivilprozeBordnung). The place of arbitration shall be Munich,
Germany.
Place of delivery and payment is Erlangen, Germany.
13. MISCELLANEOUS
SYLVANIA shall not be bound by any printed text on OSRAM's acknowledgement
forms or invoices if they deviate from the provisions and conditions of
this contract.
The standard conditions of purchase/sale of SYLVANIA and of OSRAM,
respectively, are not applicable to this contract.
OSRAM agrees to introduce in due time new technological developments which
are available and which offer economical advantages with respect to the
process of glass manufacturing. SYLVANIA shall inform OSRAM as soon as
SYLVANIA shall get knowledge of or shall have available such new
technological developments and SYLVANIA requests their introduction.
Provided that SYLVANIA puts own know-how at OSRAM's disposal, a special
licence agreement regarding this know-how shall be reached which shall
also contain an appropriate licence fee to be paid by OSRAM in favour of
SYLVANIA.
Appendix 1, 2 and 3 shall be essential parts to this contract.
14. DURATION AND TERMINATION OF CONTRACT
This contract shall become effective on January 1, 1979 and shall replace
the bulb delivery contract of June 16/25, 1969. The contract shall expire
on December 31, 1986.
The contract shall automatically be extended for another year, unless
written notice is given 24 months prior to the expiration date.
15. FURTHER PROVISIONS
If any provisions of this contract become invalid, the remainder of said
contract shall remain fully effective. The parties of the contract commit
themselves to replace the invalid provision by another provision
corresponding to the aim and object of the valid agreement.
Verbal secondary arrangements shall not be made.
In order to become effective changes or additions to this contract need to
be done in writing.
Munich, 30,10,1978 Erlangen, 14,11,1978
OSRAM SABA Schwarzwalder Apparate-Bau-Aristalt
Gesellschaft mit beschrankfer August Schwer Sohne GmbH
Haftung Produktbereich SYLVANIA
<PAGE> 7
TRANSLATION
Addition to
SUPPLY CONTRACT FLUORESCENT BULBS - OSRAM/SYLVANIA
DATED 30.10./14.11.1978
The present version of paragraph 14, section 2 shall be cancelled and obtains
the following new version:
"The contract shall automatically be extended for another year each, unless
notice is given latest 24 months each prior to the expiration date."
All other provisions to the contract remain unchanged.
Munich, 19 February 1985
OSRAM
Gesellschaft mit beschrankter Haftung
Erlangen, 18 February 1985
GTE SYLVANIA Licht GmbH
<PAGE> 8
Appendix 1 to
Supply Contract
OSRAM - SYLVANIA
CALCULATION OF STANDARD COSTS
Direct material includes all materials directly used for the product
manufactured. Materials efficiencies are expressed in "Standardzahlen" (see
Appendix 3).
Included are accessory materials (steel straps, packaging accessories, general
operating supply, materials, etc.) on an allocation basis.
Direct labor includes all labor directly associated with the product
manufactured. Labor efficiencies are expressed as "Standardzahlen".
Fringe Benefits are included in direct labor costs. They are allocated on a
percentage basis.
Machine cost is directly allocated and consists of depreciation and interest
based on replacement value of the equipment concerned.
- - Maintenance expenses;
- - Occupancy expenses based on the space occupied. These contain depreciation
and interest on the replacement value of buildings, interest on land property
as well as building maintenance and building safety.
- - Energy costs.
Production overhead cost consists of
Production overhead cost/personnel
a. Labor and fringes for production planning, paid breaks and premiums for
4-shift work, nights, Sundays and holidays.
b. Salaries and fringes for supervisory personnel (indirect labor).
<PAGE> 9
Page 2
of Appendix 1
PRODUCTION OVERHEAD COST/OTHER
includes all other expenses of the production cost center not covered by
machine allocations as for instance occupancy expenses for areas not occupied
by production equipment and downtime expenses for glass furnaces.
Production overhead cost is allocated on a percentage basis.
Abteilungskosten is the sum of all aforementioned cost categories.
Plant period cost includes plant management, administration, plant facilities,
production planning, quality control and warehousing.
Total manufacturing cost (Erstellkoston) is the sum of Abteilungskosten and
plant period cost.
Landed cost (Kolbenabgabepreis) is the sum of total manufacturing cost + $.5 &
corporate overhead cost for corporate management, quality assurance, general
administration, personnel administration, engineering and research, royalty
payments and expenses for bulb transport and return or pallets.
<PAGE> 10
APPENDIX 2 TO
SUPPLY CONTRACT
OSRAM - SYLVANIA
Quality requirements for performed bulbs consisting of glass 905 for the
manufacturing of fluorescent lamps.
Following quality requirements have been agreed upon by both parties to this
contract:
Referring to bulbs for fluorescent lamps No. 07 24 900
Referring to bulbs for circline lamps No. 07 24 903
<PAGE> 1
EXHIBIT 10.37
PURCHASE AGREEMENT
"PHILIPS"
TIENEN, MARCH 8, 1996
<PAGE> 2
PURCHASE AGREEMENT
By and between
Phillips Lighting B.V., a company with limited liability incorporated under
the laws of the Netherlands having its office in Bindhoven, acting on its own
behalf and on behalf of its associated companies represented by Mr. P.J. HUT
(hereinafter referred to as "Phillips")
and
Sylvania N.V., a company with limited liability incorporated under the laws
of Belgium having its office in Tienen, Belgium represented by Mr. M. SWAANEN
(hereinafter referred to as "Sylvania")
Hereinafter referred to jointly as the "Parties".
- --------------------------------------------------------------------------------
It is agreed upon as follows:
ARTICLE 1
DEFINITIONS AND SCOPE
1.01 "Agreement" shall mean this present document and all annexes, exhibits
and other documents referred to herein or attached hereto and signed or
initialled by the parties hereto, all of which annexes, exhibits and
other documents form an integral part hereof.
1.02 "Lamps" shall mean Tungsten Halogen Reflector lamps 230 and 240V
aluminised shaped PAR 38, PAR 30 S.
1.03 "Capsules" shall mean Tungsten Halogen burner 50 W 230 V and or 240 V
for mounting in Halogen Reflector lamps (aluminised) shaped PAR 20 and
Tungsten Halogen burner 75 W 230 V and/or 240 V for mounting in Halogen
Reflector lamps (aluminised) shaped PAR 30 L.
1.04 "Specifications" shall mean all requirements and other specifications of
the Lamps and Capsules as agreed upon by the parties and
<PAGE> 3
"Quality Agreement" shall mean the agreement on quality specifications
for Lamps and for Capsules
49 F 0405-028/A for Lamps PAR 38
49 F 0405-031 for Lamps PAR 30 S
49 F 0405-041/C for Capsules
which is further detailed and attached as Annex 1.
1.05 "Effective Date" shall mean the date on which this Agreement is duly
signed by both parties hereto.
1.06 "Contract Year" shall mean a period of twelve (12) months, starting the
Effective Date and every successive period of twelve (12) months during
the term of this Agreement.
ARTICLE 2
PURCHASE AND SALE OF LAMPS AND CAPSULES
The purpose of this Agreement is to define the terms and conditions under
which Phillips shall purchase from Sylvania a minimum quantity of Lamps and
Capsules per Contract Year, during a period of 2 (two) years, and Sylvania
shall supply said quantities of Lamps and Capsules complying with the
Specifications.
ARTICLE 3
ORDERING PROCEDURE
3.01 On the terms and conditions as set forth herein, Sylvania shall sell and
deliver to Phillips and Phillips shall purchase and accept from
Sylvania, a minimum quantity of
five hundred thousand (500,000)
both
Halogen PAR 38
Aluminised lamps
75 & 100 W
230 & 240 V version with Philips Wiso design
and
Halogen PAR 30 S
Aluminised lamps
75 & 100 W
230 & 240 V version with Philips Wiso design
one million and six hundred thousand (1,600,000)
Capsules
50 W / 75 W
230 & 240 V
in each Contract Year.
<PAGE> 4
3.02 It is the intention of the Parties that deliveries shall be
spread evenly over the year, with a minimum order quantity of
twenty thousand (20,000) Lamps and fifty thousand (50,000) Capsules.
3.03 Monthly orders for supply of Lamps and Capsules specified by type, and
quality shall be placed by Philips with Sylvania at least forty (40)
working days in advance of the desired delivery date. Sylvania shall
acknowledge these orders by letter or fax at least three (3) working days
after receipt of such an order confirming the delivery dates as requested
by Philips, or if the order cannot be executed in accordance with the
requested delivery dates. Sylvania shall indicate the alternative
delivery dates, which should be within a maximum of twenty (20) working
days additional to the original delivery dates requested by Philips.
In the event that Sylvania cannot, for whatever reason, deliver within
the maximum of sixty (60) working days from receipt of an order from
Philips, Philips shall be informed within ten (10) working days after the
receipt of the order from Philips of the delivery date, Philips on
receipt of this information shall confirm acceptance of this delivery
date or cancel the order, where upon the minimum quantity as referred to
in Section 3.1 will be reduced accordingly.
3.04 Each month Philips shall provide Sylvania a 3 months binding forecast
from which Philips may not deviate with more than 10% and a further nine
(9) months non-binding rolling forecast of the total quantity of Lamps
and Capsules on an aggregated total level which Philips plans to order
for delivery.
ARTICLE 4
QUALITY PERFORMANCE AND WARRANTY
4.01 Unless otherwise agreed by the parties hereto, the Lamps and Capsules
sold by Sylvania to Philips shall be of a quality and performance in
accordance with the "Specifications" set forth in Annex I and the Quality
Agreement.
4.02 The Lamps and Capsules shall be packed and labelled as per the
"Specification" defined in Annex 2 to this Agreement. The Lamps and
Capsules shall be supplied to Philips under Philips owned trademarks to
be indicated by Philips and bear the markings as indicated by Philips.
Artwork and packaging initiation cost for these brands will be paid by
Philips as incurred.
<PAGE> 5
4.03 The warranty described in Sections 4.01 and 4.02 of this Agreement is
the sole warranty which Sylvania gives with regard to Lamps and
Capsules.
Sylvania can not be held liable for lamps produced by Philips using
Sylvania capsules.
Philips shall be at liberty to examine or have examined the Capsules
and Lamps suppled by Sylvania and may within 40 days as from the
delivery, reject such Capsules and Lamps which do not comply with the
quality and performance mentioned above. Sylvania shall, at its
option, either replace the Capsules and Lamps within 20 days from the
date of Philips written notice of rejection or issue a credit note for
the respective invoice amount.
ARTICLE 5
LIABILITY
Sylvania shall not be liable for any damages or losses except those for
which Sylvania has expressly assumed liability in this Agreement.
Sylvania's liability shall in no event be considered to extend to indirect
or consequential damages of any nature whatsoever, including loss of
profits and / or revenues and Philips shall indemnify and hold Sylvania
harmless for all costs, damages and interests which might arise directly or
indirectly form any claim of third parties expressly including but not
limited to a claim based on product liability.
ARTICLE 6
DELIVERY AND SCOPE
Sylvania shall arrange for supply of the Lamps and Capsules from its
factory in lienen Belgium and Philips shall take delivery of all Lamps and
Capsules ordered by Philips under the Agreement at the agreed times
Delivery ex Works, lienen as this Term is defined in the Incoterms
(version 1990), it being understood that Sylvania will be responsible for
the loading of the Lamps and Capsules.
ARTICLE 7
FORCE MAJEURE
7.01 If Sylvania is unable, due to force majeure (including without
limitation the direct results of: acts of God; fire; natural
phenomena; governmental regulations; acts; restrictions or omissions
to act of any governmental authority, domestic of foreign; strikes,
labour disputes; shortage of materials in the market; civil commotion;
delays in transport and any other cause beyond its reasonable
control), to fill all or any part of orders on the scheduled delivery
dates thereof, any
<PAGE> 6
such cause shall be sufficient excuse for any failure or delay in delivery
and Philips' orders may be scaled down by Sylvania to a share of available
production.
7.02 Any suspension or reduction of orders or deliveries of Lamps and
Capsules, due to force majeure shall not invalidate this Agreement and
upon removal or termination of the cause of such force majeure orders and
deliveries of Lamps and Capsules shall be resumed in accordance with
terms and conditions hereof.
ARTICLE 8
PRICES
Sylvania shall supply the products under the following conditions:
<TABLE>
<CAPTION>
Lamps Type (Wiso) Price ex Factory Min. Qty per annum
----- ---------------------------- ------------------
<S> <C> <C>
PAR 38 BEF 180 500,000 pcs
PAR 30 S BEF 168
</TABLE>
If the minimum quantity of 500,000 pcs for both products together will be
exceeded in the course of the first 12 months of the contract the price of
all lamps will be reduced as from that moment on by REF 5 per lamp for all
future purchases.
It is the mutual understanding that the Sylvania purchase prices as they
have been established as stipulated in this paragraph should allow
Philips to achieve a reasonable margin when selling said lamps.
In the event Philips consider this margin to be provably jeopardised due to
external market conditions not initiated by Philips, Sylvania agrees to
adapt 12 months after signing the lamp prices to be charged to Philips,
but Philips recognises that Sylvania must earn a reasonable return on the
sale of lamps covered by this Agreement.
<TABLE>
Capsules Type Price ex Factory Min. Qty per annum
-------- ---- ---------------- ------------------
<S> <C> <C> <C>
50 W/75 W REF 55 1,600,000 pcs
</TABLE>
Prices for Capsules are firm for 2 years.
<PAGE> 7
Minimum quantities:
- ------------------
If the agreed minimum capsule quantity is not purchased Philips agrees to
purchase from Sylvania one (1) finished lamp for each three (3) capsules
purchased below the minimum annual quantity.
If the agreed minimum lamp quantity is not purchased Philips agrees to purchase
from Sylvania three (3) burners for each lamp purchased below the minimum
annual quantity as long as capacity is available.
ARTICLE 9
---------
PAYMENT
-------
Philips shall pay cash invoice from Sylvania for Lamps and Capsules supplied
within thirty (30) days from the last day of the calendar month in which said
Lamps and Capsules are invoiced.
ARTICLE 10
----------
DURATION/TERMINATION
--------------------
This Agreement shall become valid as from the Effective Date and shall remain
in effect for an initial term of two (2) years and may thereafter be
automatically renewed for successive two (2) year periods if not terminated by
either party by a notice of termination sent to the other party by registered
mail at least three (3) months before the end of the initial period or 3 months
before the end of any successive two (2) years period.
This Agreement may be terminated earlier:
(a) in the event a party hereto would breach any of the material provisions of
this Agreement the other party is entitled to give written notice to the
party in breach specifying such breach and if the breach is remediable
giving the party in breach an opportunity to remedy the breach to
reasonable satisfaction of the other party within a reasonable period of
time which need not be in excess of thirty (30) calendar days. Failing
such remedy, the party issuing the notice of breach is entitled to take
any action open to it under this Agreement or in law including suspension
of payments, work or deliveries as the case may be, immediate termination
by notice in writing and/or to claim damages; or
(b) by either party by written notice to the other party in the event the
latter party would become insolvent, bankrupt or makes an assignment for
the benefit of its creditors;
(c) by either party by written notice to other party in the event of a change
of ownership or control of the other party whereby the business and/or
shares of that party would pass to other(s) than those now.
<PAGE> 8
having ownership or exercising control. It is understood that this is not
application the event a change of ownership of shares of a party is
effecutated through a public listing at a stock exchange.
Article 11
Deliveries after notice of termination
As from the moment Philips gives notices of termination of this Agreement in
accordance with article 10, Sylvania shall maintain its deliveries to Philips
for the coming three (3) months period of the level supplied during the three
(3) months period prior to the receipt of Philips' notice of termination.
Mutatis muntandis as from the moment Sylvania gives notice of termination of
this agreement in accordance with article 10.
Philips shall maintain its off-take from Sylvania in the coming three (3)
months period at the level of the three (3) months period prior to the moment
of Sylvania's notice of termination.
Article 12
Confidentiality
During the term of this Agreement and any renewal hereof and for a period of
two (2) years after is expiration or termination, each party agrees not to use
or disclose any proprietary information (whether technical, commercial or
otherwise) made available to it by the other party or which it may have
acquired in the performance of this Agreement, unless and to the extent such
information is to the public domain through no fault of the receiving party, is
known and on record at the receiving party prior to receipt or is lawfully
obtained from a third party who was free to disclose such information.
Article 13
Assignment
This Agreement is not assignable in whole or in part by either party without
the prior written consent of the other party, provided, however, that a party
may assign its right under this Agreement to any successor of substantially all
of the business assets related to this Agreement or to an affiliate. Such
assignment shall become effective only when the signee acknowledges in writing
that it agrees to all terms and conditions of this Agreement.
Article 14
Governing Language and Choice of Law
The governing language of this Agreement shall be in English and the applicable
law shall be that of Belgium.
<PAGE> 9
Article 15
Disputes
All disputes shall be within the jurisdiction of the courts at Leuven,
Belgium.
Made on March 1, 1996 in two (2) copies
PHILIPS LIGHTINGS, B.V. SYLVANIA N.V.
By: /s/ By: /s/
--------------------------- ---------------------------------
TITLE: Senior President TITLE:
DATE: April 4, 1996 DATE: March 11, 1996
<PAGE> 10
RIDER TO THE PURCHASE AGREEMENT BETWEEN PHILIPS LIGHTING BV AND SYLVANIA NV
- ------------------------------------------------------------------------------
By and between:
Philips Lighting BV, a company with limited liability incorporated under the
laws of The Netherlands, having its office in Eindhoven, acting on its own
behalf and on behalf of its associated companies.
represented by Mr. P.J. HUT
(hereinafter referred to as "Philips")
and:
Sylvania NV, a company with limited liability incorporated under the laws of
Belgium having its office in Tienen, Belgium
represented by Mr. J. Germis
(hereinafter referred to as "Sylvania")
Hereinafter jointly referred to as the "Parties."
It is witnesseth:
Whereas Philips and Sylvania have entered into a purchase agreement dated March
1, 1996.
Whereas such purchase agreement provides for the purchase by Philips of minimum
quantities of Halogen PAR 38/Halogen PAR 30 S and capsules over each Contract
Year;
Whereas the value of the quantities accounted for the 1st Contract Year - which
started on March 1, 1996 (the "Effective Date") - only to 91.5 million BF
whereas the contract requires minimum purchases by Philips in the amount of
173.8 million BF per Contract Year,
Whereas Philips has requested Sylvania to agree to an amendment to the purchase
agreement to provide for:
<PAGE> 11
(1) an initial fixed contract period of 3 (instead of 2) years with minimum
purchase obligation of BF 91.5 million for the 1st, BF 121 million for the
2nd and BF 135.1 million of the third contract year;
(2) a price reduction for PAR 30S lamps.
In consideration of Sylvania's acceptance of such amendments Sylvania has
requested Philips to replace to the extent possible orders for capsules
by orders for lamps and more in particular PAR 20 and PAR 25 lamps.
It is agreed as follows:
Article 1
1.1. Article 3.01 of the Purchase Agreement of March 1, 1996 is replaced as
follows:
"3.01. On the terms and conditions as set forth herein, Sylvania shall
sell and deliver to Philips and Philips shall purchase and accept from
Sylvania the quantities of the following products to meet the agreed upon
minimum purchase values over the initial 3 year term of this Agreement:
1. Minimum purchase values (exel, VAT/transportation, etc)
1.1. First Contract Year (1/3/96 - 28/2/97): 91.5 MBF
1.2. Second Contract Year (1/3/97 - 28/2/98): 121 MBF
1.3. Third Contract Year (1/3/98 - 28/2/99): 155.1 MBF
----------
347.6 MBF
2. Products
2.1. Halogen PAR 38 Aluminised lamps 75 & 100 W - 230 & 240 V version
with Philips Wiso design
2.2. Halogen PAR 30S - Aluminised lamps 75 & 100 W - 230 & 240 V version
with Philips Wiso design
2.3. Capsules 50W/75W - 230 & 240 V
2.4. Halogen PAR 25; provided it is technically possible to produce such
lamps on existing SLI equipment subject to achievement of Philips
specifications to be proven by test.
2.5. Halogen PAR 20; provided it is technically possible to produce
such lamps on existing SLI equipment subject to achievement of
Philips specifications to be proven by test.
<PAGE> 12
3. General forecast Second contract year (1/3/1997 - 2/2/1998)
<TABLE>
<CAPTION>
Quantity Selling Price
<S> <C> <C>
Capsules 600,000 55 BF
PAR 20 20,000 130 BF if available 1/1/1997
PAR 25 50,000 145 BF if available 10/1/1997
PAR 308 288,000 165 BF
PAR 38 185,000 180 BF
</TABLE>
Philips undertakes to increase to the extent possible in both the 2nd and
3rd contract years the purchases of lamps and decrease the purchases of
capsules.
The price reduction on the PAR 30S lamps from 168BF to 155 BF per lamp will
be applicable as from March 1, 1997 and will be covered by a credit note
that will be issued to Philips at the end of the 2nd contract year. For the
determination of compliance with the minimum purchase requirement (values)
over the 2nd and 3rd contract years the purchases of the PAR 30S Lamps will
be counted at their reduced selling price of 155 BF.
The general forecast for the split-up of the orders per product type for the
3rd contract year will be communicated by Philips early 1998 subject to the
undertaking of Philips to further reduce the quantities of capsules by an
increase of the orders for PAR 20 and PAR 25 lamps.
4. Calculation of the relevant contract year purchase values/commitment to
cover possible shortfalls
4.1 The purchase values to which Philips has committed will not be
impacted by the delivery by Philips of components free of charge to be
assembled in the products and more in particular the coming cups and
lenses for PAR 20 lamps i.e. the reduced selling prices which will
result from the supply free of charge by Philips of such components
will not release Philips from its obligation to meet the minimum
purchase values (i.e. selling prices effectively invoiced by Sylvania
over the relevant contract years).
4.2 If the agreed upon minimum values would not have been reached at the
end of the second or third contract year, Philips will immediately
upon the expiration of such second Contract Year respectively third
Contract Year place an order to cover the shortfall. Such order will
be supplied by Sylvania within three (3) months following receipt."
1.2. Sylvania recognizes that the revised purchase value for the first
Contract year, i.e. 91.5M BF has been met.
<PAGE> 13
1.3. The ordering and forecast procedures provided for in Article 3.02 to 3.04
of the Purchase Agreement will remain unchanged subject only to the
understanding that they will be based on the revised committed purchase
values for the second and third contract years.
Article 2
Provided the conditions for the production of Halogen PAR 20 and PAR 25 lamps
will be met the specifications set forth in annex 1 and the Quality Agreement
shall be completed in mutual agreement to include the specifications for such
lamps.
Article 3
Article 8 of the Purchase Agreement is replaced as follows:
"Sylvania shall supply the products under the following conditions:
<TABLE>
<CAPTION>
Lamps Type (Wi??) Price exfactory per lamp
- ----- ----------- ------------------------
<S> <C> <C>
PAR 38 BF 180
PAR 30S BF A55
PAR 20 BF 130
PAR 25 BF 145
</TABLE>
Subject to supply by Philips of proper glassware (corning cups and lenses) free
of charge for assembly in the PAR 20 lamps the selling price per PAR 20 lamp
will be reduced with a maximum amount of BF 28 (not including efficiency losses
to be proven by test).
<TABLE>
<CAPTION>
Capsules Type Price exfactory per lamp
- -------- ---- ------------------------
<S> <C> <C>
50W/75W BF 55
</TABLE>
The prices will remain firm until the expiration of the initial 3 year term of
the Purchase Agreement.
In case the Purchase Agreement will be renewed for (a) further consecutive 2
year period(s) the prices will be adapted to allow Sylvania to earn a
comparable return on the sale of the products covered by this Agreement (i.e.,
at least equal to the return envisaged at the time of the conclusion of the
Purchase Agreement)".
In case of renewal of the Purchase Agreement the minimum purchase value for the
third Contract Year will also be applicable for the subsequent contract years.
<PAGE> 14
Article 4
The 1st paragraph of Article 10 is replaced as follows:
"This Agreement shall become effective as from the Effective Date (March 1,
1996) and shall remain in effect for an initial term of three (3) years and
will thereafter be automatically renewed for successive two (2) year periods if
not terminated by either party by a notice of termination sent to the other
party by registered mail at least three (3) months before the end of the initial
period or 3 months before the end of any successive two (2) years period".
Article 5
5.1 All terms and conditions of the Purchase Agreement of March 1, 1996 which
are not amended by the present rider remain in full force and effect.
5.2 The effective date of the amendments shall be the date on which the
present rider will have been signed by both parties unless otherwise
indicated in the present rider.
Made in two copies. Each party acknowledges receipt of an originally signed
copy.
PHILIPS LIGHTING BV SYLVANIA NV
By: P.I. Hut By:
Title: Senior Vice President Title:
Date: Date:
<PAGE> 1
EXHIBIT 10.38
SETTLEMENT AGREEMENT
In the light of a potential sale (the "CML sale") of the entire issued share
capital of Sylvania Lighting International B.V. to Chicago Miniature Lamp Inc.
("CML"), or a wholly owned subsidiary of CML, the parties, being
Sylvania Lighting International B.V. ("SLI")
and
Osram GmbH ("Osram")
have agreed that:
1. If the CML sale does not compete until December 31, 1997, this entire
settlement agreement will be null and void. (For the avoidance of doubt,
if the CML sale does not complete until December 31, 1997, the waiver in
paragraph 2 will cease to have effect in relation to any actions taken
after December 31, 1997 to enable the signing and completion of the CML
sale, but the waiver will be effective in relation to any action taken on
or before December 31, 1997 to enable the signing and completion of the
CML sale; paragraph 7 will become effective on the signing of the letter -
however if the CML sale does not complete until December 31, 1997, Osram
will not have any obligation under paragraph 7 in respect of the period
after December 31, 1997).
2. Osram hereby waives its right of first refusal as defined in clause 10.3 of
the Master Agreement dated 29 January, 1993 between (1) Siemens AG (2)
Osram GmbH (3) Citicorp Capital Investors Europe Limited (4) SLI (as
amended) in relation to the CML sale and only for the purpose to enable
the signing and completion of the CML sale.
3. In the event that the CML sale completes, it is agreed that CML will be
deemed to be 'Lamp Competitor' for the purposes of the various agreements
between the Siemens Group and the Osram Group on the one hand and the
Sylvania Group on the other hand, notably the Research and Development and
Engineering Support Agreement of 29 January, 1993 (as amended) and the
Apparatus Supply Agreement dated 23 December 1994 and the License Agreement
between Osram (1) and SLI (2) dated 29 January 1993 (as amended). Subject
to and with effect from completion of the CML sale, all such agreements
will take effect in accordance with their terms as if on such completion,
the entire share capital of SLI had been acquired by a Lamp Competitor.
The parties agree that upon completion of the CML sale, without any further
notice requirement the Apparatus Supply Agreement, the Research and
Development and Engineering Support Agreement and the Licence Agreement
shall automatically terminate; however all existing licences to use
previously licensed Intellectual Property will continue to be in force
according to the provisions of the respective agreements and the provisions
of clause 12.1 of the Research and Development and Engineering Support
Agreement (Consequences of Termination) will take effect.
4.1 At any time until:
<PAGE> 2
(i) December 30, 1999 in respect of the Supply Agreement for
Finished Lamps dated January 29, 1997; and
(ii) January 28, 1998 in respect of the supply for Lamp Materials
acc. to Article II of the Framework Agreement for Supply
Contracts dated January 9, 1993.
OSRAM (or respectively OSRAM Sylvania Products Inc) shall have the
option by notice in writing to SLI to elect to extend the Supply
Agreements under (i) and (ii) above until December 31, 2003 and
receive the status of preferred supplier in each case as described
below.
4.2 In the event that OSRAM (or OSRAM Sylvania Products Inc) exercises this
option, the following provisions will take effect:
(a) in par 9 a of the Supply Agreement for Finished Lamps the phrase
"through December 31, 1999" shall be deleted and the phrase "through
December 31, 2003" shall be inserted after the phrase "February 1,
1997"
(b) in the Frame Work Agreement for the Supply Contracts (i) in Section 2.1
the phrase "for a period of 5 years" shall be deleted and the phrase
"for a period until December 21, 2003" shall be inserted before the
phrase "following Closing for all other Lamp Materials" and (ii) in
Section 2.3 (b) the phrase "for a period of five years" shall be
deleted and the phrase "for a period until December 31, 2003" shall be
inserted before the phrase "from Closing".
4.3 All existing finished goods and material supply contracts other than
the ones mentioned under 4.2 will remain in place on its existing
terms.
4.4 In the event that Osram exercises its options under paragraph 4.1, it
will become under the Supply Agreements a preferential supplier under
the following provisions; (all existing SLI contracts with other
suppliers will be allowed to continue to expiry):
(a) In all cases, when a member of the SLI Group intends to place with
third parties a material order for Products, which SLI is not obliged
to place according to the provisions of the Supply Agreement with the
OSRAM Group, SLI shall give what it believes to be the relevant member
of the OSRAM Group written notice of all reasonable details (including
without limitation, Product type and specifications, price, quality,
delivery terms and quality) of the terms upon which such third party
has offered the delivery of such Products to SLI Group.
(b) If the relevant member of the OSRAM Group agrees in writing within 14
working days after receipt of SLI's information under the above to
supply such Products on terms which are at least equal to the terms
offered by third parties (including, without limitation, price,
quantity, availability, delivery terms, specifications and quality),
SLI shall procure that the relevant order is placed with Osram and
Osram will accept the relevant order.
(c) If Osram does not so agree within the time period described in
paragraph (b) or if Osram states that it does not wish to supply a
material order, then the SLI Group will be free to place the relevant
order with a person other than Osram.
For the purposes of this paragraph 4.4 "Products" means all products
covered by the Definitions of "Products" and "Lamp materials" in the
respective Supply Agreements.
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<PAGE> 3
(d) For the purposes of this paragraph 4.4, a material order is an order
whose value will exceed for each Product together with previous orders an
aggregate amount of US$25,000 per calendar year.
(e) If not otherwise agreed in case of an extension of the Supply Agreements,
the provisions of this paragraph 4.4 will cease to have effect on 31
December 2003.
4.5 In this paragraph 4:-
(a) the "Framework Agreement for Supply Contracts" means Article II (Supply
of Lamp Materials) of the Framework Agreement for Supply Contracts dated
29 January 1993 between Osram (1) SLI (2) as amended.
(b) the "Supply Agreement for Finished Lamps" means the Supply Agreement for
Finished Lamps between OSRAM Sylvania Products Inc. (1) SLI (2) made as of
29 January 1997.
(c) The "Supply Agreements" shall mean collectively the Supply Agreement for
Finished Lamps and the Framework Agreement for Supply Contracts.
4.6 The parties will negotiate in good faith to seek to agree terms on which
the agreements referred to in paragraph 4.2 are extended for a further
period of five years.
4.7 Other than as described above, it is intended that the existing
arrangements between the Osram/Siemens Group and the SLI Group remain in
effect on its agreed terms except that:
(i) paragraph 9 (c) of the Supply Agreement for Finished Lamps does not
apply in the case of the CML Sale;
(ii) the Supply Agreement for New Lamp Products dated 29 January 1993
shall be deemed to be terminated.
Both parties undertake not to use the change of ownership or change in
status of the above agreements as a pretext to change (or fail to
continue with) any of today's successful supply arrangements between the
groups worldwide.
5. The parties will negotiate in good faith to seek to agree a patent
licence to be granted to the SLI Group by the Osram Group in respect of
Patents developed by the Osram Group from the date of completion of the
CML Sale for a five year period (to be extended for a further period of
five years with the agreement of the parties). For the avoidance of
doubt, any such licence would exclude use in North America and in the
automobile market and would bear a royalty to be agreed. The parties
will negotiate in good faith to seek to agree terms for the supply of New
Lamp Products by the OSRAM Group to the SLI Group, based on the existing
Supply Agreements with reasonable modifications as required by the
specific situation of New Lamp Products. (For these purposes "New Lamp
Products" mean Lamp Products (as defined in the Supply Agreement for New
Lamp Products dated 29 January 1993 between OSRAM (1) and SLI (2) which
have not been manufactured and sold on a commercial basis by or on behalf
of the OSRAM Group prior to Closing (as defined in that Supply
Agreement), but which are manufactured and sold on a commercial arm's
length basis by, or on behalf of, the OSRAM Group thereafter.
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<PAGE> 4
6. For the avoidance of doubt, any firm orders under the Apparatus Supply
Agreement which have been accepted will remain in place and will not be
affected by this Agreement. Nothing in paragraph 4.2 or 4.4 of this
Agreement will affect any orders placed with third parties at the time
Osram gives notice under paragraph 4.1
7. Osram will reasonably support SLI in preserving and defending any
anti-trust or other regulatory filings throughout the world in relation to
the CML sale only provided that OSRAM shall not be obliged to make any
statements or give any support which in its sole discretion it considers to
be factually incorrect or to be against its own interests.
8. The parties undertake to, and shall procure that their respective
subsidiaries shall hold so far as reasonably possible the existence and
terms of this Agreement and of any supply arrangement arising out of this
Agreement in confidence. No public announcement, communication or circular
(other than and to the extent required by law) concerning the transactions
referred to in this Agreement, the terms and conditions of this Agreement
or the financial affairs of any of the parties to this Agreement shall be
made or dispatched by any party without the prior written consents of the
other party (such consent not to be unreasonably withheld or delayed). SLI
shall be entitled to deliver a copy of this letter to CML and its advisers.
9. This Agreement is governed by English law.
/s/ /s/
---------------------------- ------------------------------------
Osram GmbH Sylvania Lighting International B.V.
Munich August 14, 1997
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<PAGE> 1
EXHIBIT 10.39
OSI/SLI
FRAMEWORK AGREEMENT
FOR SUPPLY OF FINISHED LAMPS
AGREEMENT, (hereinafter called "Agreement") made as of January 29, 1997
between OSRAM SYLVANIA PRODUCTS INC a Delaware corporation, acting through its
General Lighting Business Group with a principal place of business at 100
Endicott Street, Danvers, MA 01923 (hereinafter called "OSRAM SYLVANIA") and
SYLVANIA LIGHTING INTERNATIONAL B.V. (formerly EDIL International Lighting
B.V.), a private limited company incorporated under the laws of the Netherlands
with a registered office located at Oudeweg 155, 2031 CC Haadem, The Netherlands
("SLI").
W I T N E S S E T H.
WHEREAS, Osram GmbH and EDIL International Lighting, B.V. signed a Framework
Agreement for Supply Contract dated January 29, 1993 for the supply of many
products including lamps and various other agreements connected with the
separation of GTE Corporation's North American Lighting business acquired by
Osram GmbH) from the international lighting businesses of GTE Corporation and
GTE International Incorporated (acquired by SLI).
WHEREAS, Sylvania Lighting International B.V. has succeeded to all of the
rights, benefits and obligations of EDIL International Lighting B.V. under the
Framework Agreement for Supply Contract dated January 29, 1993;
WHEREAS, OSRAM SYLVANIA PRODUCTS INC. and Sylvania Lighting International B.V.
believe it desirable to enter into a new framework agreement setting forth the
standard terms and conditions that will apply to Schedule D lamp sales and
purchases thereby making unnecessary to negotiate such terms and conditions in
connection with each individual transaction;
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS
The term "Products" shall mean Lamps as defined and set forth in Article
IV and Schedule D of the Framework Agreement by and between Osram GmbH and
EDIL International Lighting B.V., and dated January 29, 1993. Additional
products may be added to this Agreement or any of the Products may be
deleted herefrom, upon 6 months prior written notice given by OSRAM
SYLVANIA to SLI that such product or Products are, respectively, to be
added or deleted form this Agreement together with OSRAM SYLVANIA's written
designation of the effective date of such addition or deletion.
2. PRICE SCHEDULES; TERMS AND CONDITIONS
(a) OSRAM SYLVANIA will sell the Products to be sold and distributed by
SLI on accepted orders at prices to be negotiated annually for the
next calendar year. So long as the most recently completed calendar
year's purchases by SLI equal at least 80% of the prior calendar
year's purchases, then each year's price increase will not exceed the
published percentage increase for all general lighting products
(including lamps and ballasts) sold in the United States to
industrial/commercial distributors of the General Lighting business
division of OSRAM SYLVANIA. For the purpose of calculating the "80%".
SLI purchases
<PAGE> 2
shall be deemed to include unfilled, non-cancelable firm purchase
orders for product to be delivered during the then current calendar
year and firm purchase orders for products no longer commercially
available from OSI. Regardless of the date of receipt and acceptance of
orders OSRAM SYLVANIA reserves the right to invoice all or part of
accepted orders at prices in effect on the date of shipment for
backorders greater than 90 days.
The price of any particular Product type or family of product types may
be increased from time to time subject to the mutual written agreement
of the parties; provided, however, (a) the price adjustments result
from unfavorable changes in market conditions or labor, material energy
or other costs of manufacture, or other unfavorable factors beyond the
direct control of OSRAM SYLVANIA and (b) OSRAM SYLVANIA has given SLI
three (3) months' prior notice of the proposed price adjustment.
Conversely, favorable changes in market conditions of labor, material,
energy or other costs of manufacture will result in OSRAM SYLVANIA
providing to SLI price relief on the affected Product type or family of
products. In the event the parties cannot mutually agree on price
adjustments, the parties hereby agree to apply 50% of the price
adjustment for a ninety (90) day period while negotiations continue. If
at the end of such 90 day period, the parties fail to reach mutual
agreement, then OSRAM SYLVANIA will not have any obligation to supply
or SLI obligation to buy such Product type or family of product type
and no liability will result therefrom.
(b) SLI agrees to pay OSRAM SYLVANIA all sums incurred on SLI's open
account with OSRAM SYLVANIA in accordance with the following payment
terms: net 60 days from date of invoice no cash discount for early
payment. The date of invoice shall be the date of shipment or any
date thereafter. The method of payment shall be as OSRAM SYLVANIA
shall reasonably specify from time to time.
(c) OSRAM SYLVANIA reserves the absolute right to review and establish new
credit terms with respect to SLI's open account at any time and from
time to time.
(d) The pricing discussed in this Paragraph (2) is meant to apply only with
respect to the purchase by SLI of Products intended for resale outside
North America. In the event SLI (or any successor) were to purchase
Products under private label for resale in North America, then SLI
would need to negotiate and reach mutual agreement with OSI on the
pricing (and such other terms and conditions) that would apply with
respect to such products destined for resale in North America.
3. PURCHASE ORDERS
OSRAM SYLVANIA will not be required to make any shipments except against
orders sent by SLI to OSRAM SYLVANIA and accepted by OSRAM SYLVANIA. Any
provision of any order placed by SLI which is inconsistent with or in
addition to any provision hereof (other than provisions specifying lamp types
and quantities, delivery dates, invoicing and shipping instructions and
additional specifications) shall be null and void and not binding on OSRAM
SYLVANIA. All orders (excluding sample orders) will be subject to a minimum
order value of $1250 (U.S.) Orders below this amount will be subject to a
$55 (U.S.) handling charge.
4. DELIVERY
(a) Unless otherwise mutually agreed to OSRAM SYLVANIA shall deliver the
Products sold to SLI Ex-works (Incoterms 1990) shipping point from
the OSRAM SYLVANIA Distribution Center nearest the SLI customer
destination. Notwithstanding the foregoing, SLI private-label Product
will be warehoused at and shipped from OSRAM SYLVANIA's Bethleham,
Pennsylvania Distribution Center or such other locations as determined
by OSRAM SYLVANIA. Title and risk of loss with respect to the Project
will pass to SLI upon delivery at the f.o.b. point and all
transportation, insurance and other charges beyond such point of
shipment shall be for SLI's account. (Freight charges will be prorated
and added to the invoice.) OSRAM SYLVANIA shall ship Products in
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<PAGE> 3
accordance with its standard mode of transportation at freight rates
then available to OSRAM SYLVANIA. If SLI requests a faster mode of
transportation, SLI shall be liable for the added transportation
cost. OSRAM SYLVANIA will containerize freight when requested by
SLI. Loading of containers will be to the maximum extent possible
under the circumstances.
(b) All delivery dates shall be deemed approximate. While OSRAM SYLVANIA
will endeavor to meet delivery schedules OSRAM SYLVANIA shall not be
liable for delays in delivery or failure to manufacture or deliver due
to (1) causes beyond its reasonable control, (2) acts of God, acts of
SLI, acts of civil or military authority, or other governmental
allocations or controls, fires, strikes or other labor difficulties,
flood, epidemics, war, riot or other civil disturbance, delays in
usual source of supply, delays in transportation or car shortage, (3)
inability on account of causes beyond its reasonable control to obtain
or delay in obtaining necessary labor, materials, components or
manufacturing facilities, or (4) any other commercial
impracticability. In event of any such delay, the date of delivery
shall be extended for a period equal to the time lost by reason of the
delay.
(c) When necessary and subject to mutual agreement, OSI will provide
palletized product at OSI's cost.
5. PRODUCT AVAILABILITY
(a) In the event of a shortage of Products for any reason, OSRAM SYLVANIA
shall have the right to allocate its available supply of Products
among its customers (including divisions, subsidiaries and affiliates
of OSRAM SYLVANIA that use Products) in any manner that OSRAM
SYLVANIA considers to be equitable or in its best interests.
Expressly subject to the preceding sentence limitation, OSI will
endeavor to supply SLI in accordance with historical buying patterns
of SLI. However, this is merely a non-binding target.
(b) OSRAM SYLVANIA agrees to notify SLI in writing 60 days prior to
obsoleting any specific lamp item and to identify substantially
equivalent replacement(s), if any,
(c) If possible, OSRAM SYLVANIA will provide SLI with a 6 months notice
advising of any known existing or anticipated long term capacity or
production problems (and plans to correct same) affecting a Product
or family of products, e.g., capacity problem experienced with PAR 38
lamps prior to EPACT implementation.
(d) In the event that OSRAM SYLVANIA experiences a short term capacity or
production problem, e.g., availability of F20D, F40D, circtines,
affecting any Product or family of products, it shall notify SLI of
the nature of the problem(s) (and plans to correct same) within 14
days after receiving SLI's firm orders for the affected Product(s).
6. MARKING, PACKAGING AND PACKAGE
(a) Products shall be marked and their packages shall contain graphics and
be labeled in the manner specified by SLI provided, however, that
OSRAM SYLVANIA shall not be obligated to mark or label in a manner
that it, in its sole discretion, believes would violate obligated to
mark or label in manner that it, in its sold discretion, believes
would violate the law or applicable regulations or its own or another
party's rights. SLI will either provide OSRAM SYLVANIA with art work
and films for graphics and labeling or identify its packaging
suppliers and authorize OSRAM SYLVANIA to secure such packaging at
SLI's cost, in which event the price of Products will be equitably
adjusted to reflect the fact that OSRAM SYLVANIA is no longer bearing
the cost of unit packages and/or
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<PAGE> 4
shipping cartons and their graphics and labeling. SLI will reimburse
OSRAM SYLVANIA for all costs associated with any change in graphics
and labeling after the original graphics and labeling have been
supplied, including all costs of obsolete packaging material that
result from the change. Periodically, if it so elects and within its
sole discretion, OSRAM SYLVANIA may substitute its standard SYLVANIA
branded packaging of OSRAM SYLVANIA and/or "white box" or generic
packaging, which includes no corporate reference. SLI's consent would
be required if more than 20% of ordered Product types would be
supplied in non-private labeled packaging. Under no circumstance will
OSRAM branded products be available for purchase by SLI.
(b) The parties will mutually agree on a list of those lamp types which
will be supplied under SLI's private labels and trademarks. Private
labeled Sylvania brand product will be produced for SLI, subject to
minimum purchase requirements and such other requirements as set
forth in OSRAM SYLVANIA Policy #OQ2-133-02 (a copy of which is
attached hereto and incorporated herein). SLI will provide OSRAM
SYLVANIA with its annual forecast (updated quarterly) of private
labeled product requirements. Private labeled product which fails to
meet forecasted demand levels will be subject to deletion or will be
supplied on a "made to order" basis, subject to minimum production
runs and shipment of all such production when the order is completed.
7. COMPLIANCE WITH LAWS
OSRAM SYLVANIA shall not be required to deliver to SLI any Products which,
in OSRAM SYLVANIA's reasonable judgment, do not conform to applicable
standards, rules, regulations (including, but not limited to EPACT) or
guidelines, if any, for Products established by any governmental
authority. In the event OSRAM SYLVANIA determines in its reasonable
judgment, that it can or will export these products to SLI, OSRAM
SYLVANIA may condition its approval on such reasonable, additional terms
and conditions of sale as they would apply to private-labeled products (see
Paragraph 6 above).
8. TRADEMARKS & TRADENAMES
(a) It is understood that the trademarks and tradenames of each of the
parties hereto shall remain the sole and exclusive property of such
party and subject to such terms, conditions, rights and obligations
as set forth in the Amended and Restated Intellectual Property
Allocation and License Agreement by and between EDIL International
Lighting B.V., Osram Acquisition Corporation and Osram GmbH and dated
August 6, 1992 ("Allocation and License Agreement"), as amended by
the Variation Agreement by and between Osram GmbH and Sylvania
Lighting International B.V. and dated December 23, 1994 ("Variation
Agreement"). Neither party will use any of the trademarks or
tradenames of the other party on or in connection with any product
except as permitted by this Agreement or the Allocation and License
and Variation Agreements.
(b) Any breach of Article 18(b) of the Allocation and License Agreement
shall be deemed a breach of a material term of this Agreement and
give rise to early termination, as set forth in Paragraph 9(b) herein.
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<PAGE> 5
9. TERM AND TERMINATION
(a) The Initial term of this Agreement shall be for the period February
1, 1997 through December 31, 1999 and from year to year thereafter
unless otherwise terminated as provided herein. Notwithstanding the
foregoing, either party may terminate this Agreement, with or without
cause, during any renewal period hereof, by giving not less than nine
(9) months prior written notice of termination to the other party,
and upon the giving of such notice, this Agreement shall terminate
without further notice the date specified in such notice of
termination.
(b) Notwithstanding anything to the contrary contained in this Agreement
or this Paragraph 9, in the event of a breach by either party of any
material term, condition or provision of this Agreement, the other
party (in addition to such other rights as it may have) shall have
the right to terminate this Agreement forthwith by giving written
notice of termination to the defaulting party, provided at least 30
(thirty) days' prior written notice of breach and intention to
terminate has been given and the breach is not cured during such
period.
(c) Notwithstanding anything to the contrary in Paragraph 9, or this
Agreement, if SLI ceases to function as a going business or if SLI
becomes involved in financial difficulties or becomes insolvent, or
in the event that: (a) any person, persons or company participating in
the general lighting market acquires twenty-five percent (25%) or
more common equity, ownership or control of SLI, its successors or
any of its assigns (other than pursuant to a public listing), or (b)
SLI, its successor or any of its assigns are or become a publicly
listed company and any person, persons or company participating in the
general lighting market acquires forty-nine percent (49%) or more of
the common equity of such company, or (c) any person, persons or
company participating in the general lighting market has the right to
appoint any director, officer, employee or one or more persons on the
board of management of SLI, its successors or any of its assigns, then
OSRAM SYLVANIA may, at its option, immediately terminate this
Agreement by giving written notice to SLI at termination. It is
expressly agreed that OSRAM SYLVANIA shall have the sole right to
determine whether any of the conditions set forth above shall have
occurred, and its determination, if not unreasonable, shall be binding
upon SLI. With respect to this Paragraph 9(c), any reference to "SLI"
shall be deemed to include any subsidiary owned or controlled by SLI.
(d) All claims shall survive the termination of this Agreement but
neither party shall be liable to the other for damages, indemnities,
losses or compensation of any kind by reason of, or attributable to,
the termination, for any reason, of this Agreement.
(e) In the event of termination of this Agreement by OSRAM SYLVANIA for
cause or by SLI for reasons other than OSRAM SYLVANIA's breach, SLI
will purchase all lamps under firm purchase orders of SLI in finished
packaged inventory at the time of termination plus reimburse OSRAM
SYLVANIA for the costs of all packaging materials, other stock
inventories and dedicated lamp inventories OSRAM SYLVANIA may have
purchased, committed to purchase or manufactured under this
Agreement, not to exceed ninety (90) days of annual purchases. If
such remaining inventory is not purchased by SLI within thirty (30)
days after termination of this Agreement, OSRAM SYLVANIA, without
waiving any other rights it may have, may sell this stock to
purchaser(s) of its choice at prevailing price; provided however, that
no packaging, artwork or labels of SLI shall be used in sales or
affixed to such stock.
10. WARRANTY AND INDEMNIFICATION
(a) Unless otherwise agreed to by the parties, OSRAM SYLVANIA will
manufacture Products to be delivered hereunder in accordance with
applicable specifications published by
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<PAGE> 6
OSRAM SYLVANIA in its Large Lamp catalogue at the time of purchase by
SLI. This warranty shall apply only to defects appearing within one
(1) year from the date of delivery to SLI. Damages resulting from
external causes such as abuse, misuse, or acts of God are not covered
by this Warranty. The conditions of any tests concerning Products
which SLI claims fail to conform to this warranty shall be mutually
agreed upon in writing and OSRAM SYLVANIA shall be notified of, and
may be represented at, all tests that may be made. If any Product
does not meet the above warranty, and if SLI notifies OSRAM SYLVANIA
in writing within thirty (30) days after discovery of the defect,
OSRAM SYLVANIA shall thereupon correct such defect by either (at
OSRAM SYLVANIA's sole option) replacing the defective Product, or
part thereof, or refunding purchase price thereof. IN NO EVENT SHALL
OSRAM SYLVANIA BE LIABLE FOR CONSEQUENTIAL, INDIRECT, SPECIAL, OR
INCIDENTAL DAMAGES, INCLUDING, BUT NOT LIMITED TO LOSS OF PROFITS OR
REVENUE, COST OF CAPITAL, OR CLAIMS OF CUSTOMERS OF SLI FOR SUCH
DAMAGE. THIS WARRANTY REPRESENTS SLI'S EXCLUSIVE REMEDY UNDER THIS
AGREEMENT. THERE ARE NO OTHER WARRANTIES OF ANY KIND, WHETHER
EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND
OF FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO PRODUCTS SOLD
UNDER THIS AGREEMENT.
(b) Where Products have limited life or may deteriorate through age or
other factors such as improper storage, or where industry accepted
visual imperfections exist as in glass or fused quartz products, such
limited life, or imperfection is not a defect or a failure to conform
to specifications as contemplated herein. SLI acknowledges that on
high volume production items such as Products, a small percentage of
defects (including failure to conform to specification(s) or breakage
is considered normal. SLI understands and acknowledges that
allowances for such defects and breakage is factored into the prices
for Products. Should any particular manufacturing lot of Products
develop an unusual number of defects, the parties shall negotiate
regarding an acceptable resolution of the problem, but, in no event
shall OSRAM SYLVANIA make available to SLI anything less in terms of
remedies that it makes generally available to its customers for the
same type of Product. If SLI desires specific acceptable quality
levels or a different remedy for exceeding such levels. SLI shall so
specify on the face of its Purchase Order.
(c) SLI agrees to indemnify and hold OSRAM SYLVANIA harmless from and
against any damage, expense, or loss that OSRAM SYLVANIA may suffer,
sustain or be subject to by reason of infringement of patent or
trademark arising from compliance with SLI designs or specification,
modifications or instructions. Except as otherwise provided in the
preceding sentence. OSRAM SYLVANIA shall defend any suit or
proceeding brought against SLI so far as based on a claim that any
Product furnished under this Agreement constitutes an infringement of
any patent of the United States, if notified promptly in writing and
given authority, information and assistance (at OSRAM SYLVANIA's
expense) for the defense of same, and OSRAM SYLVANIA shall pay all
damages and costs awarded therein against SLI. The foregoing states
the entire liability of OSRAM SYLVANIA for patent infringement by the
said Product.
11. GENERAL PROVISIONS
(a) Anything hereinabove, or in any documentation relating to particular
sales-transactions pursuant hereto, to the contrary notwithstanding,
title to Products sold to SLI hereunder shall pass upon delivery to
SLI.
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<PAGE> 7
(b) This Agreement does not, and shall not be deemed to, make either
party the agent or legal representative of the other party for any
purpose whatsoever and neither party shall have the right or
authority to assume or create any obligation or responsibility
whatsoever express or implied, in behalf of or in the name of the
other party, or to bind the other party in any respect whatsoever,
neither party shall make any guarantee, warranty or representation of
Products on behalf of the other party.
(c) This Agreement contains the entire and only understanding and
agreement between the parties with regard to the subject matter
hereof, there being merged herein all prior and contemporaneous oral
or written representations, understandings, agreements, promises, and
conditions relating to the subject matter hereof and any
representation, understanding, agreement, or condition not
incorporated herein or made a part hereof shall not be binding upon
either party.
(d) The terms of this Agreement may not be altered, waived, modified or
discharged except by an express declaration in writing signed on
behalf of OSRAM SYLVANIA by a duly authorized officer and referring
specifically to this Agreement, and no separate verbal or written
agreement, which may be made between SLI and OSRAM SYLVANIA's
employees shall in any way modify or affect this Agreement.
(e) The failure of either party at any time to require performance of the
other party of any provisions hereof, shall in no way affect the full
right to require such performance at any time thereafter nor shall
the waiver by either party of a breach of any provision hereof be
taken or held to be a waiver of the provision itself.
(f) In the event that this Agreement, or any of its provisions, is
declared invalid by a court, agency, commission or other entity
having jurisdiction thereof, neither party shall have any cause of
action or claim against the other party by reason of such declaration
of invalidity. The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or
enforceability of the remaining provisions.
(g) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
Neither party shall in whole or in part, directly or indirectly sell,
transfer, assign, pledge or otherwise encumber its rights or
obligations under this Agreement without the other party's prior
express written consent. Such consent shall not be unreasonably
denied or delayed.
(h) OSRAM SYLVANIA's liability arising from any claim, including for any
loss or damage resulting from or connected with agreements or from
the breach of performance thereof or from the design, manufacture,
sale, delivery, installation, repair or use of any Product sold or
delivered hereunder shall in no event exceed the price allocable to
the Product(s) which give(s) rise to the claim and shall terminate
three (3) years after delivery of such Product(s) to SLI.
(i) This Agreement and all transactions between OSRAM SYLVANIA and SLI
related thereto has been made and will be governed by and construed
according to the laws of the Commonwealth of Massachusetts, USA,
excluding its conflict of law rules and excluding the 1980 U.N.
Convention on Contracts for the international Sales of Goods.
(j) Except as provided in Paragraph 2(b) herein, any claim or controversy
arising at any time out of or in relation to this Agreement shall be
settled in accordance with the rules of commercial arbitration of the
International Chamber of Commerce by an arbitrator appointed in
accordance with the rules who shall be entitled to award specific
performance preliminary or final and/or damages. Any arbitration
shall take
- 7 -
<PAGE> 8
place in Paris, France, and shall be conducted in the English
language. The arbitration shall be governed in accordance with the
(1) language of the Agreement and (2) substantive law of the
Commonwealth of Massachusetts, as noted above, except to the extent
Massachusetts law conflicts with the language of this Agreement. In
which event this Agreement will prevail. Judgment upon the award
rendered may be entered in any court having jurisdiction thereof. All
proceedings shall be conducted in confidence: the parties agree to
provide such information and make available such employees, as the
arbitrator deems necessary for his or her determination. Each party
will be afforded an opportunity to examine the witnesses and documents
referred to or submitted by the other party as a part of such
proceedings and to submit a reasonable list of document requests,
interrogatories and requests for admission to which the other will
respond, if being understood that time is of the essence in the
completion of such proceedings. The arbitrator shall be required to
put his or her award and decision in writing and provide all parties
with a copy thereof.
IN WITNESS WHEREOF, this Agreement has been executed by both parties hereto as
of the day and year first above written.
OSRAM SYLVANIA PRODUCTS INC. SYLVANIA LIGHTING INTERNATIONAL B.V.
By: /s/ By: /s/ Carlos J. Piltsi
------------------------------- ----------------------------------
- 8 -
<PAGE> 1
EXHIBIT 10.40
THE UNDERSIGNED
1. Europese maatschappij voor fabricage en verkoop van
gideilampensonderdelen, Lommel, Belgium, hereinafter referred to as "Emgo"
of the one side
and
2. G.T.E. Sylvania, Geneve, Switzerland, acting in its own name and on its
own behalf as well as in the name and on behalf of its subsidiaries and
sistercompanies including Claude S.A. established in Europe, hereinafter
referred to as "Sylvania"
of the other side
HEREWITH DECLARE TO HAVE AGREED AS FOLLOWS:
<PAGE> 2
-2-
ARTICLE 1
DEFINITIONS
a) Subsidiary
Any company or other legal entity, present or future, in which Sylvania
respectively any shareholder of Emgo owns or controls, directly or
indirectly, at any time, more than fifty (50) per cent of the issued share
capital or more than fifty (50) per cent of the voting power therein and
with respect to which Sylvania respectively such shareholder of Emgo has
the power to direct its business activities. However, any such company
shall be deemed to be a subsidiary only for as long as such ownership,
power or control exists.
b) Sistercompany of Sylvania S.A. Geneva
Any company or other legal entity which is under the control of the same
entity as that which controls GTE Sylvania S.A. Geneva, which means that
such entity owns or controls, directly or indirectly, at any time more
than fifty (50) percent of the issued share capital or more than fifty (50)
percent of the voting power therein and with respect to which such entity
has the power to direct its business activities. However any such company
shall be deemed to be a sistercompany of GTE Sylvania as long as such
ownership, power or control exists.
c) Bulbs
Bulbs for all kinds of lamps and figuring in Emgo's manufacturing and
sales program as per annex I as amended from time to time.
d) Shareholder prices
The prices as invoiced by Emgo to its shareholderlampmanufacturers and/or
their subsidiaries for supplies of bulbs and fixed according to the
general rules and procedures as per annex II, and increased by the
annually established averaged uplift for packing and freight to
destinations of the EEC territory as per the date of the present agreement.
ARTICLE 2
PURCHASE/SUPPLY OF BULBS
Sylvania will purchase from Emgo and Emgo will supply to Sylvania in conformity
with the terms and conditions as set out in the present agreement, Sylvania's
requirements of bulbs for its lampmanufacturing facilities in Europe.
<PAGE> 3
-3-
The "minimum annual quantity" so to be supplied and purchased will be 120
million bulbs.
If, due to the level of Sylvania's sales, the requirements of bulbs for
Sylvania's lamp manufacturing facilities in Europe would not allow the
purchase from Emgo of this "minimum annual quantity" Sylvania will
purchase from Emgo such quantity of bulbs as to cover its requirements.
If Sylvania's sales of lamps would not allow the purchase of an annual
quantity of at least 100 million bulbs, the surcharge as stipulated in
article 8 will be revised in common agreement between the parties.
ARTICLE 3
ORDERING PROCEDURE
Orders for the supply of bulbs specified by type and quantity shall be
placed by Sylvania in conformity with the procedure, norms and
specifications set out in the Emgo catalogue, chapter 6 "Terms of
Delivery," (annex III).
ARTICLE 4
PACKING
The bulbs will be delivered by Emgo to Sylvania in packing according to
the procedures, norms and specifications set out in the Emgo catalogue,
points 4 "freight and insurance" and 10 "Packing of Bulbs" (paragraph 10.1
to and including 10.8). See annex III of the present agreement.
ARTICLE 5
QUALITY AND PERFORMANCE
The bulbs supplied by Emgo to Sylvania shall be of a quality and
performance equal to the standard quality and performance of bulbs
supplied by Emgo to its shareholder lampmanufacturers and their
subsidiaries in conformity with the norms and specifications set out in
the Emgo catalogue under chapter 8 "Quality" (annex III). Shipments
showing evident manufacturing defects will be replaced free of charge, by
Emgo after they have been returned by mutual agreement. Emgo will not
accept any other responsibility as described above.
<PAGE> 4
-4-
ARTICLE 6
DELIVERY
Emgo shall effect and Sylvania shall take delivery of all bulbs ordered by
Sylvania under this agreement at the agreed times, freight paid to
destination within EEC territory, insurance and handling costs from the
moment of delivery being for the account of Sylvania.
ARTICLE 7
FORCE MAJEURE
a) If Emgo is unable, due to force majeure (including without limitation the
direct or indirect results of: acts of God; fire; natural phenomena;
governmental regulations; acts, restrictions or omissions to act of any
governmental authority, domestic or foreign; strikes; labor disputes;
breakdown of or accidents to machinery; shortage of materials in the
market; civil commotion; delays in transportation and any other cause
beyond their reasonable control), to fulfil all their orders on the
scheduled delivery dates thereof (including orders placed by Emgo's
shareholder) any such cause shall be sufficient excuse for any failure or
delay in delivery. The rules set out in the Emgo catalogue under chapter
7 "Other terms" will be applicable (annex III).
b) If Sylvania is unable, due to force majeure as defined in a) above to take
delivery of any or all bulbs ordered on the scheduled delivery dates
thereof, any such cause shall be sufficient excuse for any failure or
delay to take delivery.
ARTICLE 8
PRICE/AUDIT
Emgo will supply the bulbs to Sylvania and Sylvania will purchase the
bulbs from Emgo at a price that is equivalent to the shareholder price
increased with a surcharge of 3 1/2%.
This price is based upon the purchase by Sylvania of the "minimum annual
quantity" of bulbs as mentioned in article 2 hereabove.
Sylvania is authorized after request and at its own expense to appoint an
external auditor acceptable to Emgo in order to control the correct
application by Emgo of the above described surcharge.
<PAGE> 5
-5-
ARTICLE 9
PAYMENT
Sylvania shall pay each invoice from Emgo for supply of bulbs within 30
days after date of invoice to the Bankers specified in the Emgo catalogue
under point 5 "Terms of Payment" (annex III).
ARTICLE 10
TERMINATION OF PREVIOUS ARRANGEMENTS
All arrangements between Sylvania and Emgo - and in particular the
agreements between the G.T.E.I. subsidiary Claude S.A. and Emgo dated
14.10.1966 and 24.4.1968 - shall be terminated on the day of entering into
force of the present agreement.
In consequence Emgo will repay to Claude S.A. within 30 days from the day
of entering into force of the present agreement an amount of B.frs. 15
million, - being the amount of the loan by Claude S.A. to Emgo - according
to the agreement of 24.4.1968.
Nothing in the foregoing shall prejudice the right of Claude S.A. to
interest in accordance with previous arrangements and agreements, on the
said loan prorated in respect of the total number of days in 1982 and, if
applicable in 1983, preceding repayment of the loan.
ARTICLE 11
ENTRANCE INTO FORCE, DURATION
The present agreement enters into force on the day of its signature by the
second party to sign this agreement, and is concluded for a fixed of 5
years. After expiration of this period it will be tacitly renewed each
<PAGE> 6
-6-
time for a new period of two years unless the present agreement is terminated
by either party by registered letter per the end of the original or any extended
period taking into account a 12 months' prior notice. However, in deviation of
the aforegoing paragraph, whenever during the continuance of this agreement,
Emgo will have to substantially invest to increase the capacity of its
bulbmaking machinery, Emgo will inform Sylvania accordingly by registered letter
and Sylvania will thereby be requested by Emgo to extend the present agreement
from that moment onwards with a further fixed period of 5 years. If Sylvania
would not be prepared to accept such extension of the agreement, Emgo may
forthwith terminate the present agreement with 18 months' prior notice in the
event that at the relevant time this agreement has a minimum of 18 months to
run. In the event that at the relevant time this agreement has less than 18
months to run, Sylvania shall have the right to require that this agreement runs
until the expiry of the fixed period specified in the first two sentences of
this article.
ARTICLE 12
Arbitration
All disputes arising between the parties in connection with this agreement shall
be settled in accordance with Swiss law by an arbitration court of three
members. The seat of the arbitration shall be Geneva. Each party shall appoint
one arbitrator and said arbitrators shall appoint the third one who shall act as
President. If any of the parties fails to appoint his arbitrator within 15 days
of the beginning of the proceedings, or if both arbitrators fail to appoint the
third one within 15 days of the last appointment, the necessary appointments
shall be effected by the Court of First Instance of the Canton of Geneva. The
Geneva rules of Civil procedure shall apply to the arbitration proceedings. The
award shall be final and binding upon the parties.
GENEVA LOMMEL
G.T.E. Sylvania E.M.G.O.
/s/ /s/
Date: 6-12-82 Date: 6-12-82
Lommel, 6th December 1982.
<PAGE> 7
BALEMDUK
B-3900 LOMMELL - BELGIE
N.V. EMGO TELECOM:
TELE:
TELEGRAMADRES: EMGO LOMMELL
- -------------------------------------------------------------------------------
EXPORT SELLING PRICES Page 5.1.
- -------------------------------------------------------------------------------
VALID FROM: 06.12.1982
- -------------------------------------------------------------------------------
The following prices are valid for your factory:
NAME : Gte Sylvania - Claude
PLACE : Tiehen, Lyon, Reims
COUNTRY : Belgium, France
Basis of delivery : Free destination.
(All prices in bfrs per 1,000 bulbs).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Type Clear Frosted Satinated HS F FT T ( )
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A 80 2,359 4,631 4,800 -- -- -- --
A 80 1,741 2,758 2,852 -- -- -- --
A 70 1,341 2,346 -- -- -- -- --
A 69 811 1,206 1,519 2,346 -- -- --
A 60 708 960 1,325 -- -- -- --
A 40 551 -- -- -- -- -- --
B 35 585 945 -- -- -- -- --
B 35 644 1,003 -- -- -- -- --
B 30 615 1,790 -- -- -- -- --
BF 90 2,733 -- -- -- -- -- --
BF 75 2,345 -- -- -- -- -- --
BF 70 1,930 -- -- -- -- -- --
BF 55 1,649 -- -- -- -- -- --
BF 50 770 -- -- -- -- -- --
BW 50 2,279 3,967 -- -- -- -- --
BW 35 906 1,490 -- -- -- -- --
E 80 1,303 2,271 2,271 2,335 -- -- --
E 75 1,597 2,246 -- -- -- -- --
E 60 708 1,090 1,276 -- -- -- --
E 50 630 1,002 1,182 -- -- -- --
E 45 654 1,022 -- -- -- -- --
C 95 3,777 -- -- -- -- -- --
</TABLE>
EXPLANATION: F : Flushed. (1)
FT: Flushed, treated.
T : Treated.
HS: High Satinated.
<PAGE> 8
N.V. EMGO
- --------------------------------------------------------------------------------
EXPORT SELLING PRICES. Page 5.2.
- --------------------------------------------------------------------------------
Valid from: 06.12.1982
The following prices are valid for your factory:
NAME : Cte Sylvania - Claude
PLACE : Tienen, Lyon, Reime
COUNTRY : Belgium, France
Basis of delivery: Free destination.
(All prices: in bfrs per 1,000 bulbs).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Type Clear Frosted Satinated HS F FT T ( )
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
G 40 635 1,264 -- -- -- -- -- --
G 45 794 -- -- -- -- -- -- --
P 45 607 906 -- -- 716 -- -- --
P 25 581 -- -- -- -- -- -- --
P 25 581 -- -- -- -- -- -- --
P 25 586 -- -- -- -- -- -- --
PC 45 1,014 -- -- -- -- -- -- --
PC 35 551 -- -- -- -- -- -- --
R 95 1,984 -- 4,266 4,472 -- -- -- --
R 85 2,841 -- -- 5,258 -- -- -- --
R 53 846 -- 2,879 2,879 -- -- -- --
R 50 846 -- 2,879 2,879 -- -- -- --
S 34 966 -- -- -- -- -- -- --
S 20 583 1,746 -- -- -- -- -- --
S 28 620 -- -- -- -- -- -- --
S 25 581 1,741 -- -- -- -- -- --
S 22 575 -- -- -- -- -- -- --
T 29 655 1,692 -- -- -- -- -- --
T 25 620 1,664 -- -- -- -- -- --
T 22 620 1,649 -- -- -- -- -- --
T 17 560 -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
EXPLANATION F : Flushed. (1):
FT: Flushed, Treated.
T : Treated.
HS: High Satinated.
- -------------------------------------------------------------------------------
<PAGE> 1
Exhibit 10.41
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT is entered into
as of May 18, 1998 (the "Agreement"), by and between Frank M. Ward ("Ward") and
SLI, INC., an Oklahoma corporation (the "Company").
WITNESSETH:
WHEREAS, the parties hereto are parties to that certain Employment
Agreement, dated December 4, 1995, whereby the Company agreed to employ Ward in
the capacity of President and Chief Executive Officer and Ward agreed to be so
employed (the "Employment Agreement");
WHEREAS, Ward and the Company desire to amend and restate the Employment
Agreement; and
WHEREAS, the terms, conditions and undertakings of this Agreement have
been submitted to, and duly approved and authorized by, the Company's Board of
Directors.
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Executive Employment. The Company agrees to employ Ward, and Ward
agrees to be so employed, in the capacity of President and Chief Executive
Officer. Employment shall be for a term of two (2) fiscal years, effective as of
January 5, 1998 and terminating January 2, 2000 (the "Executive Employment").
2. Duties. During the period of Executive Employment, Ward shall devote
full time to such employment. Ward shall perform duties customarily incident to
the office of President and Chief Executive Officer and all other duties the
Board of Directors may from time to time assign to him. Ward shall be entitled
to annual vacations in a manner commensurate with his status as a principal
executive, which shall not be less than the annual vacation period to which he
is presently entitled.
3. Compensation. For each of the two fiscal years commencing January 5,
1998, the Company shall pay to Ward as compensation for his
<PAGE> 2
-2-
services the sum of $500,000 per fiscal year. This amount shall be paid in
equal monthly installments. Ward shall also be eligible in each of the 1998 and
1999 fiscal years for an incentive bonus of $500,000 per fiscal year, upon
achievement by the Company of net income not less than thirty million dollars
($30,000,000) for fiscal 1998, and net income not less than forty-one million
dollars ($41,000,000) for fiscal year 1989, in each case, on a basis consistent
with the determination by the Company's independent auditors of the Company's
net income as reported in the Company's final audited consolidated statement of
income for fiscal 1997.
4. Expenses.
a. Reimbursement. The Company shall reimburse Ward for all
reasonable and necessary expenses incurred in carrying out his duties under
this Agreement. Ward shall present to the Company from time to time an
itemized account of such expenses in any form required by the Company.
b. Automobile. The Company recognizes Ward's need for an automobile
for business purposes and, therefore, the Company shall provide Ward with
an automobile, including all related maintenance, repairs, insurance, and
other costs. The automobile and related costs shall be comparable to those
which the Company presently provides Ward.
5. Disability. If Ward becomes disabled during the period of his
Executive Employment, his compensation shall continue at the same rate that it
was on the date of such disability. If such disability continues for a
continuous period of one (1) year, the Company, at its option, may thereafter,
upon written notice to Ward or his personal representative, terminate his
Executive Employment. For the purpose of this Agreement, disability shall mean
mental or physical illness or condition rendering Ward incapable of performing
his normal duties with the Company.
6. Death. If the Executive Employment should terminate due to the death
of Ward, then the Company shall pay to the estate of Ward, in addition to any
accrued compensation and benefits otherwise payable to Ward, any and all
amounts of regular salary compensation Ward would have received for the
remainder of the calendar month in which Ward dies, as if the Executive
Employment had continued until the end of such month.
7. Employee Benefits. This Agreement shall not be in lieu of any rights,
benefits and privileges to which Ward my be entitled as an
<PAGE> 3
- 3 -
employee of the Company under any retirement, pension, profit-sharing,
insurance, hospital or other plans which may now be in effect or which may
hereafter be adopted. Ward shall have the same rights and privileges to
participate in such plans and benefits as any other employee during his
Executive Employment.
8. Notices. All notices required to be given hereunder shall be given
in writing and delivered, personally or by certified mail, return receipt
requested, postage pre-paid, addressed to the parties as follows:
SLI, Inc.
500 Chapman Street
Canton, Massachusetts 02021
Frank M. Ward
500 Chapman Street
Canton, Massachusetts 02021
9. Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the Commonwealth of
Massachusetts. In the event of a breach of this Agreement, venue for any legal
proceedings shall be proper in the state or federal court in Boston,
Massachusetts.
10. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes all agreements previously made
between the parties relating to the subject matter of this Agreement.
11. Modification. This Agreement may be modified only by a written
instrument executed by the parties hereto.
12. Severability. If any provision of this Agreement is determined to be
invalid and/or unenforceable by a final decision of a court of competent
jurisdiction, the offending provision shall be severed and the remainder of the
Agreement shall survive and remain in full force and effect.
13. Non-Waiver. No delay or failure by either party to exercise any
right under this Agreement shall constitute a waiver of that or any other right.
14. Binding Effect. This Agreement shall inure to the benefit of, and be
binding upon, the Company, its affiliates, subsidiaries,
<PAGE> 4
- 4 -
successors and assigns. In addition, this Agreement shall inure to the benefit
of, and be binding upon Ward, his heirs, personal representatives, successors
and assigns; provided however, the performance owed by Ward under this
Agreement is personal to him and may not be assigned.
15. Headings. Headings used in this Agreement are for convenience only
and shall not be used to interpret or construe its provisions.
[The rest of this page is left intentionally blank]
<PAGE> 5
-5-
[Signature Page to Ward Employment Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the day and year first above written.
COMPANY:
SLI, INC.
By:
------------------------------
Frank M. Ward, President
WARD:
----------------------------------
FRANK M. WARD
<PAGE> 1
EXHIBIT 10.42
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is hereby made and entered
into as of the 1st day of May 1998, by and between SLI, Inc., and Oklahoma
corporation (the "Employer"), and Richard F. Parenti, a resident of the State of
Illinois (the "Employee").
WITNESSETH:
1. EMPLOYMENT. The Employer hereby employs the Employee and the Employee
hereby accepts such employment, upon the terms and subject to the conditions
set forth in this Agreement.
2. TERM. The term of the employment under this Agreement shall be for a four
year period beginning as of May 1, 1998 and terminating on April 30, 2002,
unless such employment is otherwise terminated as provided in paragraphs 8 and
9 of this Agreement.
3. COMPENSATION; REIMBURSEMENT, ETC.
(a) The basic compensation to the Employee shall be payable bi-weekly
based upon a calendar-year annual base salary of $125,000 (the "Annual Base
Salary"). Such salary shall be subject to an annual performance review but any
adjustment shall not result in an annual salary less than the Annual Base
Salary. Employee shall also be reimbursed for all reasonable expenses incurred
on behalf of Employer.
(b) The Employee shall be entitled to such other benefits as the Board
of Directors and/or the Compensation and Stock Option Committee may from time
to time provide to him.
(c) Employer has previously granted to Employee an option to purchase
75,000 shares of the Company's Common Stock. In the event Employer terminates
the employment of employee for any reason other than those specified in 9(a) or
if employee terminates his employment pursuant to 9(c) all outstanding options
will immediately vest.
4. DUTIES. The Employee is engaged as the Vice President of Finance of the
Employer, and he shall have such duties consistent with such office as may from
time to time be reasonably assigned to him by the Board of Directors of the
Employer and provided for in the bylaws of the Employer. Employee's office
shall be located at the Employer's facilities in Hoffman Estates, Illinois.
5. EXTENT OF SERVICES. During the term of his employment under this
Agreement, the Employee shall devote such time and efforts to the business of
the Employer as may be reasonably necessary in the normal course of business.
Employee agrees, if needed, to spend an average of at least four days per month
at the Company's headquarters in Canton, Massachusetts.
6. VACATION AND DAYS OFF. The Employee shall be entitled to such vacation
time during each fiscal year of the Employer as he may qualify for, in
accordance with any vacation policy from time to time established by the
Employer's Board of Directors. Notwithstanding the foregoing, the Employee
shall be entitled to an annual vacation period of not less than three (3)
weeks, during which time his compensation shall be paid in full.
<PAGE> 2
7. DISABILITY, ILLNESS AND INCAPACITY.
(a) During the term of this Agreement, for any period of disability,
illness or incapacity which renders the Employee at least temporarily unable to
perform the services required under this Agreement, the Employee shall receive
his full compensation as set forth in paragraph 3 of this Agreement, provided
however, if the Employees disability, illness or incapacity extends beyond a
period of ninety (90) consecutive days, the Employee shall not be entitled,
after the expiration of such ninety (90) day period, to any further
compensation under paragraph 3(a) until he returns to full-time service
hereunder, but he shall be entitled only to such disability payments as may be
provided by any disability insurance policy or policies, purchased by the
Employer.
(b) Successive periods of disability, illness or incapacity will be
considered separate periods unless the later period of disability, illness or
incapacity is due to the same or related cause.
(c) If and when the period of disability, illness or incapacity of the
Employee totals 90 days, his employment with the Employer shall terminate.
Notwithstanding the foregoing, if the Employee and the Employer agree, the
Employee may thereafter be employed by the Employer upon such terms as may be
mutually agreeable.
(d) Any dispute regarding the existence, extent or continuance of the
disability, illness or incapacity shall be resolved by the determination of a
majority of three competent doctors who are not employees of the Employer, one
of which shall be selected by the Employer, one of which shall be selected by
the Employee and a third selected by the other two doctors. The doctors' fees
and other charges associated with such determination shall be paid by the
Employer.
8. DEATH.
(a) All rights of the Employee hereunder shall terminate upon his death,
except that the Employer shall pay to the estate of the Employee such
compensation and other amounts as would otherwise have been payable to the
Employee through the end of the month in which his death occurs. The Employer
shall have no additional financial obligation under this Agreement to the
Employee or his estate.
9. OTHER TERMINATIONS.
(a) The Employer may terminate the employment of the Employee hereunder
without notice for any of the following reasons:
(i) Employee's failure to promptly and adequately perform the
duties assigned to him by the Employer pursuant to paragraph 4 above,
including but not limited to failure to follow the reasonable direction of
the Board of Directors of the Employer, or of any supervisors or superiors
of Employee;
(ii) Employee's material breach of any provision of this Agreement;
or
(iii) other good cause (as defined below).
(b) The term "good cause" as used in this Agreement shall include, but
shall not necessarily be limited to, habitual absenteeism, a pattern of conduct
which tends to hold the Employer up to ridicule in the community, conviction of
any crime of moral turpitude abuse of and substantial dependence on, as
reasonably determined by the Board of Directors of the Employer, on any
addictive substance, including but not limited
2
<PAGE> 3
to alcohol, amphetamines, barbiturates, methadone, cannabis, cocaine, PCP, THC,
LSD or illegal or narcotic drugs. If any determination of abuse and substantial
dependence by the Board of Directors is disputed by the Employee, the parties
hereto agree to abide by the decision of a panel of three physicians who are
not employees of the Employer, one of which shall be selected by the Employer,
one of which shall be selected by the Employee and a third selected by the
other two (2) doctors. The Employee agrees to make himself available for and
submit to examinations by such physicians as may be directed by the Employer.
Failure to submit to any such examination shall constitute a breach of a
material part of this Agreement. The doctors' fees ad other charges associated
with such determination shall be shared equally by the Employer and the
Employee.
(c) Employee may terminate this Agreement for "Good Reason" which shall
result from (i) the Employee is requested to relocate to a facility more than
35 miles from Chicago, Illinois or (ii) the Employer's material breach of any
of its obligations under this Agreement.
(d) If the Employee's employment with the Employer is terminated
pursuant to paragraph 9(a), the Employer shall pay to the Employee any
compensation earned but not paid to the Employee prior to such termination.
Such payment shall be in full and complete discharge of any and all liabilities
or obligations of the Employer to the Employee hereunder, and the Employee
shall be entitled to no further benefits under this Agreement, except as
otherwise specifically provided in paragraph 3 of this Agreement. If the
Employee's employment with Employer is terminated by Employer for a reason
other than as set forth under paragraph 9(a) or by Employee pursuant to
paragraph 9(c), Employer will compensate Employee as severance pay the monies
due Employee for the remainder of the term of this Agreement. The severance
will be payable in full at the Employee's current base salary at time of
termination.
10. CONFIDENTIALITY. The Employee agrees to keep in strict secrecy and
confidence any and all information the Employee assimilates or to which she has
access during his employment by the Employer and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Employer. The Employee agrees that both during and after the term of his
employment by the Employer, he will not, without prior written consent of the
Employer, disclose any such confidential information to any third person,
partnership, joint venture, company, corporation or other organization.
11. WAIVER OR BREACH. The waiver by the Employer of a breach of any of the
provisions of this Agreement by the Employee shall not be construed as a waiver
of any subsequent breach by the Employee.
12. BINDING EFFECT, ASSIGNMENT. The rights and obligations of the Employer
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Employer. This Agreement is a personal
employment contract and the rights, obligations and interests of the Employee
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
13. ENTIRE AGREEMENT. This Agreement and the option agreement containing the
terms and provisions of the Employee's Option contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
14. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
15. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Massachusetts.
3
<PAGE> 4
16. NOTICES. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by certified or registered mail,
first class, return receipt requested, to the parties at the following address:
To the Employer: SLI, Inc.
500 Chapman Street
Canton, MA 02021
To the Employee: Richard Parenti
3100 W. Higgins Rd., #190
Hoffman Estates, Illinois 60195
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
___ day of ____________, 1998.
EMPLOYER:
SLI, INC.
ATTEST:
By:
- ------------------------------ ------------------------------
Frank M. Ward, President
EMPLOYEE:
Witness as to Employee:
- ------------------------------ ---------------------------------
Richard F. Parenti
4
<PAGE> 1
EXHIBIT 10.48
S.L.I., INC.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of this
11 day of September, 1998, by and between S.L.I, Inc. a Massachusetts
corporation with its principal place of business at 500 Chapman Street, Canton,
Massachusetts (hereinafter referred to as the "Company"), and FRED HOWARD, of
41 Forest Lane, Boxford, Massachusetts, (hereinafter referred to as the
"Employee").
WHEREAS, the Company is engaged in the business of manufacturing and selling
miniature and regular lighting fixtures worldwide;
WHEREAS, the Company wishes to employ the Employee as its Executive Vice
President for a term of two (2) years commencing on October 1, 1998 and
terminating on October 1, 2000, and the Employee desires to act as the
Executive Vice President for the Company fix a term of two (2) years commencing
on October 1, 1998 and terminating on October 1, 2000, and upon the further
terms and conditions set forth in this Agreement.
NOW, THEREFORE, In consideration of the foregoing premises and the covenants
set for below, the Company and the Employee agree as follows:
1. PURPOSES
The purpose of this Agreement is to set forth the intentions of the parties
during the two (2) year employment term running from October 1, 1998 to
October 1, 2000.
2. TERM
The term of this Agreement shall be for two (2) years beginning on
October 1, 1998 and ending on October 1, 2000.
3. SALARY
The Company covenants and agrees to pay to the Employee, as salary, the
lump-sum of one hundred seventy five thousand and XX/100 ($175,000.00) dollars
per year payable to the Employee as follows:
o the sum of one hundred seventy-five thousand and XX/100
($175,000.00) dollars payable in four payments of $43,750.00,
starting on October 1, 1998 and continuing in each subsequent
three month period totaling $175,000 for the twelve months.
<PAGE> 2
o the sum of one hundred seventy-five thousand and XX/100
($175,000.00) dollars payable in four payments of $43,750.00,
starting on October 1, 1999 and continuing in each subsequent
three month period totaling $175,000 for the twelve months.
In the event of the Employee's death or termination from employment with the
Company, this Agreement shall terminate without recourse to either the Company
(or its successors) or the Employee or the Employee's heirs and assigns.
4. BONUS
The employee's work performance shall be measured by objectives to be
determined by both the Company and the Employee. The Company covenants and
agrees to pay the Employee the sum of fifty thousand and XX/100 ($50,000.00)
dollars each year as a bonus upon the Employee meeting the agreed upon
objectives.
5. STOCK OPTIONS
The Company agrees to grant the Employee eighty thousand (80,000) stock options
at the closing price as determined by the New York Stock Exchange as of
September 11, 1998. Said stock options shall be exercisable as follows:
o Forty thousand (40,000) to be available to the Employee on
October 1, 1999, and
o Forty thousand (40,000) to be available to the Employee on
October 1, 2000.
In the event of the Employee's death or termination from employment with the
Company, the stock options of that year shall be prorated in favor of the
Employee or the Employee's heirs and assignee.
In the event of either a change in ownership of the Company or the death of its
President, FRANK WARD, all eighty thousand (80,000) stock options may be
exercised immediately or within two (2) years by the Employee at the Employee's
discretion.
At present, the employee has twenty thousand (20,000) stock options. As an
incentive to the Employee, ten thousand (10,000) stock options of these twenty
thousand (20,000) stock options shall vest to the Employee on October 1, 1998
(the commencement of this Agreement) at the September 11, 1998 price.
2
<PAGE> 3
6. BUSINESS EXPENSES
The Company agrees to reimburse the Employee for all normal and customary
expenses incurred by him in the course of doing business for the Company.
7. AUTOMOBILE
The company, at its own expense, agrees to provide the Employee with a Company
car during the term of the Agreement.
8. CORPORATE EXISTENCE
The Company warrants to the Employee that it is a corporation duly organized
and existing under the laws of the Commonwealth of Massachusetts.
9. LEGALITY
This Agreement constitutes a legal, valid and binding obligation by and between
the Company and the Employee and it is enforceable in accordance with its
terms.
10. GOVERNING LAW
This Agreement has been created and is executed in the Commonwealth of
Massachusetts. All questions concerning the meaning, interpretation, and
intention of the terms and provisions of this Agreement, and concerning its
validity, construction, and effect, shall be governed by , interpreted, judged
and resolved in accordance with the laws of the Commonwealth of Massachusetts.
11. COUNTERPARTS
This Agreement may be executed in any number of counterparts, which together
shall constitute one document.
12. SEVERABILITY
If any provision or provisions of this Agreement shall be held for any reason
invalid or unenforceable, the remaining provisions shall nonetheless be valid
and enforceable provisions.
13. READINGS
All Article headings set forth in this Agreement are intended for convenience
only and shall not control or affect the meaning, construction or intent of
this Agreement or, any provision thereof.
3
<PAGE> 4
14. ENTIRE AGREEMENT
THIS INSTRUMENT CONTAINS THE ENTIRE AND EXCLUSIVE AGREEMENT BETWEEN THE PARTIES
AND SUPERCEDES AND TERMINATES ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS OR
UNDERSTANDINGS, WHETHER ORAL OR WRITTEN. THIS AGREEMENT MAY NOT BE AMENDED OR
MODIFIED, EXCEPT BY A WRITING EXECUTED BY THE COMPANY AND THE EMPLOYEE.
IN WITNESS WHEREOF, we hereunto set our hands and seals this 11 day of
September 1998.
S.L.I., INC. EMPLOYEE
BY: /s/ Frank Ward BY: /s/ Fred Howard
---------------------------------- ----------------------------------
FRANK WARD, President FRED HOWARD
4
<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 incorporation by reference in the Registration Statement
(Form S-8 No. 33-99070) pertaining to the Chicago Miniature Lamp, Inc. 1995
Incentive and Non-Statutory Stock Option Plan of our report dated January 29,
1999, 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. included in the Annual Report (Form
10-K) for the year ended January 3, 1999.
Ernst & Young LLP
Chicago, Illinois
March 25, 1999
65
<PAGE> 1
EXHIBIT 23.1(B)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-99070) pertaining to the Chicago Miniature Lamp, Inc. 1995
Incentive and Non-Statutory Stock Option Plan of our report dated January 29,
1999 with respect to the financial statements of Chicago Miniature Lamp
(Canada), (Canada) Inc. included in the Annual Report (Form 10-K) of SLI, Inc.
for the year ended January 3, 1999.
Hards Pearson
Chartered Accountants
Barrie, Ontario, Canada
March 25, 1999
44
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-START> JAN-05-1998
<PERIOD-END> JAN-03-1999
<EXCHANGE-RATE> 1.0
<CASH> 27,390
<SECURITIES> 0
<RECEIVABLES> 169,951
<ALLOWANCES> (9,369)
<INVENTORY> 149,453
<CURRENT-ASSETS> 353,160
<PP&E> 371,315
<DEPRECIATION> (30,105)
<TOTAL-ASSETS> 775,463
<CURRENT-LIABILITIES> 255,370
<BONDS> 238,530
0
0
<COMMON> 293
<OTHER-SE> 217,517
<TOTAL-LIABILITY-AND-EQUITY> 775,463
<SALES> 773,068
<TOTAL-REVENUES> 773,068
<CGS> 533,484
<TOTAL-COSTS> 713,741
<OTHER-EXPENSES> 1,247
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,892
<INCOME-PRETAX> 41,188
<INCOME-TAX> 8,156
<INCOME-CONTINUING> 33,032
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,032
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 1.10
</TABLE>
