-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RLw/6LOtvcPyYL/IhDxW4Jo7tUjwTQuDwMjieHfDQ7OF/+oe1m2SVFKkNyyxIGf+ MHvjK439D+m/xOoz1bZKnQ== 0000950152-99-001921.txt : 19990316 0000950152-99-001921.hdr.sgml : 19990316 ACCESSION NUMBER: 0000950152-99-001921 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19990315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED LIGHTING TECHNOLOGIES INC CENTRAL INDEX KEY: 0001002125 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 341803229 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-27202 FILM NUMBER: 99565276 BUSINESS ADDRESS: STREET 1: 32000 AURORA RD CITY: SOLON STATE: OH ZIP: 44139 BUSINESS PHONE: 4405190500 MAIL ADDRESS: STREET 1: 32000 AURORA RD CITY: SOLON STATE: OH ZIP: 44139 10-Q/A 1 ADVANCED LIGHTING TECHNOLOGIES, INC 10-Q/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q/A (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the transition period from _____________________ to _____________________ Commission File Number: 0-27202 ADVANCED LIGHTING TECHNOLOGIES, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) OHIO 34-1803229 - ------------------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 32000 AURORA ROAD, SOLON, OHIO 44139 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) 440 / 519-0500 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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 _____ There were 20,121,153 shares of the Registrant's Common Stock, $.001 par value per share, outstanding as of May 6, 1998. 2 EXPLANATORY NOTE This Form 10-Q/A reflects an increase of $16.9 million in the valuation of three million shares of restricted common stock issued in connection with the acquisition of Ruud Lighting, Inc. This Form 10-Q/A also reflects changes in the presentation of discontinued operations and special charges. In addition, certain exhibits have been added, completed and/or renumbered. This Form 10-Q/A replaces in its entirety the Form 10-Q for the quarterly period ended March 31, 1998 previously filed. INDEX ADVANCED LIGHTING TECHNOLOGIES, INC.
PAGE NO. PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets -- March 31, 1998 and June 30, 1997....................................................... 2 Condensed Consolidated Statements of Operations -- Three months and nine months ended March 31, 1998 and 1997.............................. 3 Condensed Statement of Consolidated Shareholders' Equity -- Nine months ended March 31, 1998....................................... 4 Condensed Consolidated Statements of Cash Flows -- Nine months ended March 31, 1998 and 1997.................................. 5 Notes to Condensed Consolidated Financial Statements...................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................. 13 PART II OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds.................................... 22 Item 6. Exhibits and Reports on Form 8-K............................................. 23 SIGNATURES..................................................................................... 25 EXHIBIT INDEX.................................................................................. 26
3 ADVANCED LIGHTING TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) MARCH 31, JUNE 30, 1998 1997 --------- -------- (In thousands) ASSETS Current assets: Cash and cash equivalents $ 30,621 $ 4,198 Short-term investments 4,075 4,075 Trade receivables, less allowances of $397 and $315 38,433 28,916 Receivables from related parties 1,087 346 Inventories: Finished goods 28,599 21,143 Raw materials and work-in-process 12,862 7,982 --------- -------- 41,461 29,125 Prepaid expenses 3,018 l,363 Deferred taxes 5,995 2,566 --------- -------- Total current assets 124,690 70,589 Property, plant and equipment: Land and buildings 27,816 6,143 Machinery and equipment 49,731 32,712 Furniture and fixtures 15,119 7,704 --------- -------- 92,666 46,559 Less accumulated depreciation 10,869 8,558 --------- -------- 81,797 38,001 Deferred taxes 2,050 535 Receivables from related parties 2,532 1,209 Net assets associated with discontinued operations -- Note K 2,358 -- Investments in affiliates 21,902 7,565 Intangible assets 34,485 4,737 Other assets 7,445 4,217 Excess of cost over net assets of businesses acquired, net 48,262 7,985 --------- -------- $ 325,521 $134,838 ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt and current portion of long-term debt $ 2,247 $ 3,731 Accounts payable 15,761 15,773 Payables to related parties 731 699 Employee-related liabilities 3,670 2,674 Accrued income and other taxes 3,377 1,689 Other accrued expenses 11,258 3,643 --------- -------- Total current liabilities 37,044 28,209 Long-term debt 117,520 35,908 Other liabilities 866 463 Deferred taxes 4,491 4,226 Shareholders' equity Common stock 20 13 Paid-in-capital 188,782 59,087 Retained earnings (deficit) (23,202) 6,932 --------- -------- 165,600 66,032 --------- -------- $ 325,521 $134,838 ========= ========
See notes to condensed consolidated financial statements. 2 4 ADVANCED LIGHTING TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share dollar amounts)
THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, -------------------- --------------------- 1998 1997 1998 1997 -------- -------- --------- -------- Net sales $ 49,075 $ 22,034 $ 110,891 $ 60,291 Costs and expenses: Cost of sales -- Note I 30,448 11,801 66,241 32,299 Marketing and selling 7,523 3,784 16,854 10,299 Research and development 2,848 1,291 6,069 3,851 General and administrative 3,087 1,855 7,307 5,378 Fiber optic joint venture formation costs -- -- 212 -- Purchased in-process research & development--Note I 18,220 -- 18,220 -- Special charges -- Note I 15,700 15,700 -- Settlement of claim -- -- -- 771 Amortization of intangible assets 611 101 1,036 195 -------- -------- ------- -------- Income (loss) from operations (29,362) 3,202 (20,748) 7,498 Other income (expense): Interest expense (1,325) (392) (1,649) (749) Interest income 274 283 1,079 610 Loss from equity investment (2) -- (2) -- -------- -------- ------- -------- Income (loss) from continuing operations before income taxes and extraordinary charge (30,415) 3,093 (21,320) 7,359 Income taxes (2,356) 1,123 918 2,616 -------- -------- ------- -------- Income (loss) from continuing operations before extraordinary charge (28,059) 1,970 (22,238) 4,743 Discontinued operations Loss from operations of discontinued business (net of income tax benefits of $416, $49, $719 and $135, respectively) (739) (88) (1,278) (241) Loss from disposal of discontinued business, including provision of $9,100 for operating losses during the phase-out period (net of income tax benefits of $3,086) (6,014) -- (6,014) -- -------- -------- ------- -------- Income (loss) before extraordinary charge (34,812) 1,882 (29,530) 4,502 Extraordinary charge from early extinguishment of debt, net of income tax benefits - Note E (604) -- (604) -- -------- -------- ------- -------- Net income (loss) $(35,416) $ 1,882 $ (30,134) $ 4,502 ======== ======== ======== ======== Earnings per share - Basic: Income (loss) from continuing operations $ (1.41) $ .15 $ (1.27) $ .36 Loss from discontinued operations (.34) (.01) (.42) (.02) Extraordinary charge (.03) -- (.03) -- -------- -------- ------- -------- Earnings per share - Basic $ (1.78) $ .14 $ (1.72) $ .34 ======== ======== ======== ======== Earnings per share - Diluted Income (loss) from continuing operations $ (1.41) $ .14 $ (1.27) $ .35 Loss from discontinued operations (.34) -- (.42) (.02) Extraordinary charge (.03) -- (.03) -- -------- -------- ------- -------- Earnings per share - Diluted $ (1.78) $ .14 $ (1.72) $ .33 ======== ======== ======== ======== Weighted average shares outstanding Basic 19,917 13,438 17,540 13,205 ======== ======== ======== ======== Diluted 19,917 13,802 17,540 13,503 ======== ======== ======== ========
See notes to consolidated financial statements. 3 5 ADVANCED LIGHTING TECHNOLOGIES, INC. CONDENSED STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY (UNAUDITED) NINE MONTHS ENDED MARCH 31, 1998
------------------------------------------------------------------ COMMON STOCK ---------------------- PAID-IN RETAINED SHARES PAR VALUE CAPITAL EARNINGS TOTAL ------ ----- --------- --------- ----------- (In thousands) Balance at July 1, 1997 13,435 $ 13 $ 59,087 $ 6,932 $ 66,032 Net loss - - - (30,134) (30,134) Net proceeds from public offering of common shares 3,000 3 69,317 - 69,320 Issuance of shares in connection with purchases of businesses 3,600 4 59,547 - 59,551 Stock options exercised 70 - 831 - 831 ------ ----- --------- --------- ---------- BALANCE AT MARCH 31, 1998 20,105 $ 20 $ 188,782 $ (23,202) $ 165,600 ====== ===== ========= ========= ==========
4 6 ADVANCED LIGHTING TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE-MONTHS ENDED MARCH 31, ------------------ 1998 1997 ---- ---- (In thousands) OPERATING ACTIVITIES Net income (loss) $ (30,134) $ 4,5O2 Adjustments to reconcile net income (loss) to net cash used in operating activities: Purchased in-process research and development 18,220 -- Depreciation and amortization 3,441 1,829 Provision for discontinued operations 9,100 -- Special charges 18,500 -- Deferred income taxes (5,750) 1,782 Extraordinary loss 604 -- Changes in operating assets and liabilities: Trade receivables (8,063) (9,400) Inventories (5,673) (5,612) Prepaids and other assets (15,008) (2,430) Accounts payable and accrued expenses (3,384) 2,869 Other liabilities 84 (74) --------- ------- Net cash used in operating activities (18,063) (6,534) INVESTING ACTIVITIES Capital expenditures (7,058) (11,589) Purchase of short-term investments -- (10,229) Purchases of businesses (50,441) (6,595) Investments in affiliates (4,343) (1,023) Use of net proceeds from public offering: Capital expenditures (14,507) -- Investment in joint venture with Rohm & Haas Company (2,000) -- Acquisition of minority interest in Fiberstars, Inc. (4,780) -- --------- ------- Net cash used in investing activities (83,129) (29,436) FINANCING ACTIVITIES Proceeds from revolving credit facility 313,196 65,189 Payments of revolving credit facility (305,237) (47,344) Proceeds from long-term debt 104,353 14,822 Payments of long-term debt and capital leases (21,848) (5,896) Issuance of common stock 831 434 Net proceeds from public offering 69,320 30,091 Use of net proceeds from public offering (excluding $11,199 used for working capital purposes for the nine months ended March 31, 1998): Payment of long-term debt (7,400) -- Payment of revolving credit facility (25,600) (16,800) --------- ------- Net cash provided by financing activities 127,615 40,496 --------- ------- Increase in cash and cash equivalents 26,423 4,526 Cash and cash equivalents, beginning of period 4,198 l,682 --------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 30,621 $ 6,208 ========= ======== SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 1,673 $ 684 Income taxes paid 2,280 81 Capitalized interest 680 206 Noncash transactions: Equipment acquired through capital leases 376 1,004 Property acquired by assuming mortgage 4,807 -- Stock issued for purchases of businesses 59,551 1,537 Detail of acquisitions: Assets acquired $ 137,900 $ 14,212 Liabilities assumed (26,149) (5,688) Stock issued (59,551) (1,537) --------- ------- Cash paid 52,200 6,987 Less cash acquired (1,759) (392) --------- ------- Net cash paid for acquisition $ 50,441 $ 6,595 ========= =======
See notes to condensed consolidated financial statements. 5 7 ADVANCED LIGHTING TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1998 (Dollar amounts in thousands) A. ORGANIZATION Advanced Lighting Technologies, Inc. (the "Company" or "ADLT") is an innovation-driven designer, manufacturer and marketer of metal halide lighting products, including materials, system components, systems, and production equipment. B. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements include all material adjustments necessary for a fair presentation, including adjustments of a normal and recurring nature as well as the special charges described in Note I. For further information, refer to the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended June 30, 1997. Operating results for the three months or nine months ended March 31, 1998 are not necessarily indicative of the results that may be expected for the full-year ending June 30, 1998. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the consolidated financial statements and notes. Actual results could differ from those estimates. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 provides authoritative guidance on accounting for and financial reporting of start-up costs and organization costs. The Company is required to adopt the SOP on July 1, 1999 (though earlier application is encouraged) and, upon adoption, expense all previously capitalized start-up costs and organization costs as a cumulative effect of a change in accounting principle. Management is reviewing its capitalization policies and determining the impact that the adoption of this SOP is expected to have on its consolidated results of operations and financial position. 6 8 ADVANCED LIGHTING TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1998 (Dollar amounts in thousands) C. ISSUANCE OF COMMON STOCK In July 1997, the Company issued three million shares of its Common Stock in a public offering, resulting in net proceeds of $69,320. Approximately $33,000 of the net proceeds from this offering were used to repay substantially all amounts outstanding under its Revolving Credit and Security Agreement and its Term Note (the "Loan Agreement"). Of the remaining net proceeds, $14,507 was used for capital expenditures, primarily production equipment and leasehold improvements, $4,780 was used to purchase 29% of Fiberstars, Inc., a company specializing in the marketing and distribution of fiber optic lighting products, $2,000 was contributed to Unison Fiber Optics Lighting Systems LLC, the Company's joint venture with Rohm and Haas Company, and $11,199 was used for working capital purposes for the nine months ended March 31, 1998. D. ACQUISITIONS During the nine months ended March 31, 1998, the Company completed the following business combinations, both of which were accounted for by the purchase method and, accordingly, results of operations for the acquired businesses have been included in the condensed consolidated statement of operations from their respective dates of acquisition. Assets acquired and liabilities assumed have been recorded at fair value based on appraisals and the best estimates available. On January 2, 1998, the Company acquired all of the capital stock outstanding (the "Stock") of Ruud Lighting, Inc. ("Ruud"), located in Racine, Wisconsin. Ruud manufactures and directly markets high-intensity discharge ("HID") lighting systems, with a strong focus on metal halide installations, for commercial, industrial, outdoor, and related lighting applications. The purchase price consisted of $35,500 in cash and three million shares of the Company's Common Stock (valued at $49,950). The excess of the purchase price over the net tangible assets acquired was allocated as $29,928 to various intangible assets such as trade name and customer service infrastructure and $45,959 to the excess of cost over net assets acquired ("goodwill"), which are being amortized over 40 years. The following unaudited pro forma results of operations give effect to the acquisition of Ruud Lighting as if it had occurred on July 1, 1996. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which would have resulted had the acquisition occurred on July 1, 1996, or which may result in the future.
Nine months ended ----------------- March 31, 1998 March 31, 1997 -------------- -------------- Net sales $147,052 $111,681 Income (loss) before extraordinary charge (28,868) 5,921 Net income (loss) (29,472) 5,921 Earnings (loss) per share - diluted: Before extraordinary charge $(1.48) $.36 Net income $(1.51) $.36
7 9 ADVANCED LIGHTING TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1998 (Dollar amounts in thousands) D. ACQUISITIONS (CONTINUED) On January 28, 1998, the Company completed the acquisition of Deposition Sciences, Inc.("DSI"), of Santa Rosa, California. DSI is the leader in the development of sophisticated thin film deposition systems (equipment) and coatings for lighting applications, with particular emphasis on coatings for metal halide lighting systems. The purchase price consisted of $14,500 in cash and 599,717 shares of the Company's Common Stock (valued at $9,600). The excess of the purchase price over the net tangible assets acquired was allocated as $18,220 to in-process research and development ("R&D") and $3,840 to intangible assets. Intangibles consist of trade names, assembled workforce and goodwill, and are amortized over 10 years. Purchased in-process R&D includes the value of products in the development stage and not considered to have reached technological feasibility and, in accordance with generally accepted accounting principles, was capitalized but immediately written-off subsequent to the acquisition of DSI. E. REVOLVING BANK CREDIT FACILITY On January 2, 1998, the Company replaced its existing Loan Agreement and other borrowings in North America with an $85,000 revolving credit facility provided by several North American financial institutions ("Bank Credit Facility"). Proceeds from this facility were partially used to finance the $35,500 cash portion of the Ruud purchase price and the $14,500 cash portion of the DSI purchase price. Proceeds were also used to repay $19,200 of existing and outstanding North American bank borrowings of ADLT, Ruud and DSI. The facility has a three-year term expiring in December 2000, extendable annually for a three-year term. Interest rates on loans outstanding are based, at the Company's option, on LIBOR (plus .625% to 1.75%) or the agent bank's prime rate. The Company is also obligated to pay commitment fees of between .20% and .375% on the unused portion of the facility. The facility contains certain affirmative and negative covenants customary for this type of agreement, prohibits cash dividends, and includes financial covenants with respect to interest coverage, cash flow and tangible net worth. The principal security for the facility is substantially all of the personal property of the Company and each of its North American subsidiaries and a pledge of stock of each of the Company's principal subsidiaries. The early extinguishment of debt under the Loan Agreement resulted in a noncash write-off of deferred financing costs and an extraordinary charge amounting to $604, net of applicable income tax benefits of $311, in the three months ended March 31, 1998. 8 10 ADVANCED LIGHTING TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1998 (Dollar amounts in thousands) F. SENIOR NOTES OFFERING On March 13, 1998, the Company sold $100,000 of Senior Notes due March 15, 2008, resulting in net proceeds of approximately $96,150. The Notes have an annual coupon of 8% and are redeemable at the Company's option, in whole or in part, on or after March 15, 2003 at certain preset redemption prices. In addition, at any time prior to March 15, 2001, the Company may redeem up to 35% of the aggregate principal amount of the Notes at 108% of par with the proceeds of one or more public equity offerings. Interest on the Senior Notes is payable semiannually on March 15 and September 15 of each year beginning on September 15, 1998. There are no sinking fund requirements. The Indenture contains covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries (as defined therein) to incur indebtedness, pay dividends, prepay subordinated indebtedness, repurchase capital stock, make investments, create liens, engage in transactions with stockholders and affiliates, sell assets and, with respect to the Company only, engage in mergers and consolidations. Approximately $76,300 of the net proceeds from the Senior Notes were used to repay amounts outstanding under the Bank Credit Facility, thereby lengthening the term of the Company's debt, most of which had been incurred to finance the acquisitions of Ruud Lighting and DSI. G. PURCHASE OF CORPORATE HEADQUARTERS During March 1998, the Company purchased land and building in Solon, Ohio for $7,758, which includes the assumption of an existing mortgage of approximately $4,800. The mortgage has a 9.39% interest rate, a prepayment penalty that approximates $1,000, requires monthly amortizing payments and a final term payment of $4,100 due in June 2006. Prior to the purchase, a portion of the property was leased and used by the Company for system components manufacturing and office space. Subsequent to the purchase, the Company relocated its world headquarters to the facility. The Company has invested and intends to invest additional amounts for expanded manufacturing, sales and training facilities. H. ADDITIONAL INVESTMENT IN FIBERSTARS, INC. During July 1997, the Company purchased an equity interest in Fiberstars, Inc., a marketer and distributor of fiber optic lighting products. At December 31, 1997, the Company owned approximately 669,000 common shares, or 19.6% of Fiberstars' shares outstanding. On February 11, 1998, the Company increased its equity ownership to approximately 1,023,000 common shares, or 29% of Fiberstars' shares outstanding. Accordingly, the Company has changed its method of carrying the investment to equity from cost in the quarter ended March 31, 1998. The Company can not purchase additional shares of Fiberstars without the consent of the board of directors of Fiberstars. 9 11 ADVANCED LIGHTING TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1998 (Dollar amounts in thousands) I. SPECIAL CHARGES During the three months ended March 31, 1998, the Company recorded special charges related to the purchase price allocation for Deposition Sciences Inc. ("DSI") and an assessment of the Company's global power supply operations. The Company completed the acquisition of DSI in January 1998. The special charges include $18,220 for purchased in-process research and development, determined by an independent valuation, relating to the DSI acquisition. The special charges also include $18,500 principally relating to the Company's decision to refocus and restructure its recently acquired global power supply operations to focus exclusively on opportunities in metal halide. With the January 1998 acquisition of Ruud Lighting, Inc., the Company accelerated this rationalization of its existing power supply manufacturing operations and distribution activities in order to capitalize on new opportunities not previously available. This assessment resulted in (a) the discontinuance of certain power supply products at the Company's power supply facilities and (b) the write-down of certain intangible and fixed assets. In addition, the charges cover the consolidation and rationalization cost of distribution activities and facilities, the write-down of assets in connection with the implementation of new information systems and a reassessment of investments resulting from a change in expansion strategy arising from the Ruud Lighting acquisition. The special charges were determined in accordance with formal plans developed by the Company's management using the best information available to it at the time and, subsequently, approved by the Company's Board of Directors. The amounts the Company may ultimately incur may change as the plans are executed. The amounts are classified in the March 31, 1998 statement of operations as: cost of sales--$2,800; purchased in-process research and development--$18,220; and, special charges--$15,700. Details of the special charges are summarized in the following table:
Charged to Charges Balance as of Description Cash/Noncash Operations Utilized March 31, 1998 - ----------- ------------ ---------- -------- -------------- Asset write-downs: Inventories Noncash $ 2,800 $ 2,800 -- Intangibles Noncash 8,942 8,942 -- Fixed assets Noncash 2,650 2,650 -- Other assets Noncash 2,393 2,393 -- Contractual commitments and other accruals Cash 1,600 473 $1,127 Other Cash 115 115 -- ------- ------- ------ $18,500 $17,373 $1,127 ======= ======= ======
10 12 ADVANCED LIGHTING TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1998 (Dollar amounts in thousands) I. SPECIAL CHARGES (CONTINUED) Intangible assets primarily represent the excess of the purchase price of acquisition over the fair market value of the net assets acquired ("goodwill") and other costs allocated to tradenames, know-how, and other specifically identifiable intangibles arising from business acquisitions. Asset writedowns for the impairment of long-lived intangibles and fixed assets were determined in accordance with Financial Accounting Standards No. 121. Actions required by the plans are expected to be completed by June 30, 1999. The March 31, 1998 balance of the accrual for special charges of $1,127 is classified within the condensed consolidated balance sheet as other accrued expenses. After an income tax benefit of $4,664, these special charges reduced net income by $32,056, or $1.61 diluted earnings per share for the three months ended March 31, 1998. J. INCOME TAXES The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to loss before income taxes as a result of the difference between the financial reporting and tax bases of (a) the net assets of Deposition Sciences, Inc. reflected in the March 31, 1998 statement of operations as purchased in-process research and development and (b) a portion of the special charges related asset write-downs. 11 13 ADVANCED LIGHTING TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1998 (Dollar amounts in thousands) K. DISCONTINUED OPERATIONS, SPIN-OFF OF MICROSUN BUSINESS In March 1998, the Company approved a plan to distribute to its shareholders all of the ownership of Microsun Technologies, Inc., the subsidiary primarily responsible for development, design, assembly and marketing of metal halide portable fixtures for residential and hospitality uses, in a spin-off transaction which is expected to be tax-free. The Company believes the creation of two separate companies will enable the Company and Microsun to devote the resources necessary to develop their core strategies in pursuit of their growth objectives. Summary operating information for Microsun for the three month and nine month periods ended March 31, 1998 and 1997, is presented below for informational purposes only and does not necessarily reflect what the results of operations would have been had Microsun operated as a stand-alone entity.
Three Months Nine Months Ended March 31, Ended March 31, --------------- --------------- 1998 1997 1998 1997 ---- ---- ---- ---- Sales $ 1,610 $ 300 $ 2,764 $ 485 Costs and expenses 2,765 437 4,761 861 ------- ----- -------- ------- Loss before income taxes (1,155) (137) (1,997) (376) Income tax benefit ( 416) ( 49) ( 719) (135) ------- ----- -------- ------- Net loss $( 739) $( 88) $(1,278) $( 241) ======= ===== ======== =======
Operating losses through the intended date of the spin-off follow:
Before Income Income Taxes Taxes Net ----- ----- --- Operating losses for the nine months ended March 31, 1998 $ 1,997 $ 719 $1,278 Estimated operating losses from April 1, 1998 to December 31, 1998 9,100 3,086 6,014 ------- ------ ------ Operating losses through spin-off $11,097 $3,805 $7,292 ======= ====== ======
The estimated date of disposition extends to December 31, 1998 pending the determination of the spin-off as tax-free. As a result of the Board of Directors' approval to spin-off the Microsun business, the consolidated financial statements of ADLT have been adjusted and restated to reflect the results of operations of Microsun as a discontinued operation in accordance with generally accepted accounting principles. 12 14 ADVANCED LIGHTING TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1998 (Dollar amounts in thousands) NOTE L -- VALUATION ADJUSTMENT OF RESTRICTED COMMON STOCK ISSUED During 1999, the Company received a comment letter from the Securities and Exchange Commission ("SEC") related to the Company's Form 10-K for the year ended June 30, 1998. In response to the SEC's view related to the valuation of the three million shares of restricted common stock issued in connection with the acquisition of Ruud Lighting, Inc. (as described in Note D), the value of the shares was restated and increased to $49,950, which resulted in an increase in the excess of cost over net assets of businesses acquired of $16,928. The effect of the restatement on the March 31, 1998 financial statements follows:
AS RESTATED AS PREVIOUSLY REPORTED ----------- ---------------------- Balance Sheet Excess of cost over net assets of businesses acquired, net $ 48,262 $ 31,440 Paid-in-capital 188,782 171,854 Retained earnings (deficit) (23,202) (23,096) Statement of Operations Nine months ended March 31, 1998 Amortization of intangible assets $ 1,036 $ 930 Loss before extraordinary charge 29,530 29,424 Net loss 30,134 30,028 Per share loss--basic and diluted Before extraordinary charge 1.69 1.68 Net Loss 1.72 1.71 Statement of Operations Three months ended March 31, 1998 Amortization of intangible assets $ 611 $ 505 Loss before extraordinary charge 34,812 34,706 Net loss 35,416 35,310 Per share loss--basic and diluted Before extraordinary charge 1.75 1.74 Net Loss 1.78 1.77
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (Dollar amounts in thousands) This report on Form 10-Q may contain forward-looking statements. For this purpose, any statement contained herein that is not a statement of historical fact may be deemed to be a forward-looking statement. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," and similar expressions are intended to identify forward-looking statements. There are a number of factors that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements. Such factors are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997 filed with the Securities and Exchange Commission. The following is management's discussion and analysis of certain significant factors which have affected the results of operations and should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and notes thereto. 13 15 RESULTS OF OPERATIONS - SELECTED ITEMS AS A PERCENTAGE OF NET SALES The following table sets forth, as a percentage of net sales, certain items in the Company's Condensed Consolidated Statements of Operations for the indicated periods:
THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- MARCH 31, MARCH 31, -------------- --------------- 1998 1997 1998 1997 ---- ---- ---- ---- Net sales ............................................ 100.0 100.0 100.0 100.0 Costs and expenses: Cost of sales ....................................... 62.0 53.5 59.7 53.6 Marketing and selling ............................... 15.3 17.2 15.2 17.1 Research and development ............................ 5.8 5.9 5.5 6.4 General and administrative .......................... 6.3 8.4 6.6 8.9 Fiber optic joint venture formation costs ........... -- -- 0.2 -- Purchased in-process R & D .......................... 37.1 -- 16.4 -- Special charges ..................................... 32.0 -- 14.2 -- Settlement of claim ................................. -- -- -- 1.3 Amortization of intangible assets ................... 1.3 0.5 0.9 0.3 ------------------------------------------ Income (loss) from operations ......................... (59.8) 14.5 (18.7) 12.4 Other income (expense): Interest expense ................................... (2.7) (1.8) (1.5) (1.2) Interest income .................................... 0.5 1.3 1.0 1.0 Loss from equity investment ........................ (0.0) -- (0.0) -- ------------------------------------------ Income (loss) from continuing operations before income taxes and extraordinary charge ....... (62.0) 14.0 (19.2) 12.2 Income taxes .......................................... (4.8) 5.1 0.8 4.3 ------------------------------------------ Income (loss) from continuing operations before extraordinary charge ........................ (57.2) 8.9 (20.0) 7.9 Loss from discontinued residential portable fixture operations, net of income taxes ............ (13.7) (0.4) (6.6) (0.4) ------------------------------------------ Income (loss) before extraordinary charge ............. (70.9) 8.5 (26.6) 7.5 Extraordinary charge, net of applicable income tax benefits ................................ (1.3) -- (0.6) -- ------------------------------------------ Net income ............................................ (72.2) 8.5 (27.2) 7.5 ------------------------------------------
Factors which have affected the results of operations for the third quarter of fiscal 1998 as compared to the third quarter of fiscal 1997 and the comparison of the first nine months of fiscal years 1998 and 1997 are discussed below. 14 16 QUARTER ENDED MARCH 31, 1998 COMPARED WITH QUARTER ENDED MARCH 31, 1997 Net sales. Net sales increased 122.7% to $49,075 for the third quarter of fiscal 1998 from $22,034 for the third quarter of fiscal 1997. The increase in system components, materials, and systems ($24,473) was primarily attributable to increased unit volume, including a $14,913 increase from the Company's Ruud Lighting subsidiary, which was acquired on January 2, 1998. The increase in equipment sales ($2,568) was primarily attributable to the acquisition of Deposition Sciences, Inc., which was acquired on January 28, 1998. Cost of Sales. Cost of sales increased 158.0% to $30,448 in the third quarter of fiscal 1998 from $11,801 in the third quarter of fiscal 1997. As a percentage of net sales, cost of sales increased to 62.0% in the third quarter of fiscal 1998 from 53.5% in the third quarter of fiscal 1997. Cost of sales included $2,800 write-down of inventory related to the rationalization of the Company's global power supply operations and the elimination of certain nonfocus product lines. After excluding this write-down, cost of sales increased 134.3% for the quarter to $27,648, or 56.3% of net sales. The increase was primarily attributable to increased unit volume, but also reflects a change in the product mix, whereby lower-margin power supplies products represented a larger component of total sales in fiscal 1998. Marketing and Selling Expenses. Marketing and selling expenses increased 98.8% to $7,523 in the third quarter of fiscal 1998 from $3,784 in the third quarter of fiscal 1997. Marketing and selling expenses, as a percentage of net sales, decreased to 15.3% in the third quarter of fiscal 1998 from 17.2% in the third quarter of fiscal 1997. This decrease reflects the leveraging of certain fixed marketing and selling expenses as sales levels increase and relatively lower marketing expenses associated with the sale of power supplies. Research and Development Expenses. Research and development expenses increased 120.6% to $2,848 in the third quarter of fiscal 1998 from $1,291 in the third quarter of fiscal 1997. This increase arose from increased spending for the: (i) expansion of the line of new lamps intended to replace many first generation metal halide lamps in industrial and commercial applications; (ii) development and testing of electronic power supply systems; and (iii) development of new materials for the world's major lighting manufacturers. As a percentage of net sales, research and development expenses decreased slightly to 5.8% in the third quarter of fiscal 1998 from 5.9% in the third quarter of fiscal 1997. General and Administrative Expenses. General and administrative expenses increased 66.4% to $3,087 in the third quarter of fiscal 1998 from $1,855 in the third quarter of fiscal 1997. As a percentage of net sales, general and administrative expenses decreased to 6.3% in the third quarter of fiscal 1998 from 8.4% in the third quarter of fiscal 1997. The decrease as a percentage of net sales primarily reflects a spending growth rate considerably lower than sales increases through the leveraging of fixed costs as sales levels increase. Purchased In-Process Research & Development. In connection with its acquisition of Deposition Sciences, Inc. in January 1998, the Company acquired in-process research and development valued at $18,220. In accordance with generally accepted accounting principles, the entire amount has been recorded as an expense in the third quarter of fiscal 1998. Special Charges. During the third quarter of fiscal 1998, the Company recorded special charges related to the rationalization of the Company's global power supply businesses. Additionally, the special charges, which total $18,500 (including the $2,800 write-down of inventory discussed above), cover the elimination of certain nonfocus product lines, the consolidation and 15 17 rationalization cost of distribution activities and facilities, the write-down of assets in connection with the implementation of new information systems and a reassessment of the Company's prospective investments. Income (Loss) from Operations. As a result of the aforementioned factors, during the third quarter of fiscal 1998, the Company incurred a loss from operations of $29,362, as compared to income from operations of $3,202 during the third quarter of fiscal 1997. Excluding the total special charges and the purchased in-process R&D, income from operations increased 129.8% to $7,358, or 15.0% of net sales, from $3,202, or 14.5% of net sales in the third quarter of fiscal 1997. Interest Expense. Interest expense increased to $1,325 during the third quarter of fiscal 1998 as compared to $392 for the third quarter of fiscal 1997. This increase resulted primarily from the higher average debt outstanding during the third quarter of fiscal 1998 as compared to the third quarter of fiscal 1997. Interest Income. Interest income of $274 during the third quarter of fiscal 1998 was comparable to the $283 earned in the third quarter of fiscal 1997. Loss from Equity Investment. During the third quarter of fiscal 1998, the Company increased its equity ownership in Fiberstars, Inc. to approximately 29% of total shares outstanding. Accordingly, the Company changed its method of carrying the investment to equity from cost in the quarter ended March 31, 1998, and recognized a loss of $2 from this investment. Income (Loss) from Continuing Operations before Income Taxes and Extraordinary Charge. As a result of the aforementioned factors, during the third quarter of fiscal 1998, the Company incurred a loss from continuing operations before income taxes and extraordinary charge of $30,415, as compared to income from continuing operations before income taxes and extraordinary charge of $3,093 during the third quarter of fiscal 1997. Excluding the total special charges and the purchased in-process R&D, income from continuing operations before income taxes and extraordinary charge increased 103.8% to $6,305, or 12.8% of net sales, from $3,093, or 14.0% of net sales in the third quarter of fiscal 1997. Income Taxes. The Company recorded an income tax benefit of $2,356 in the third quarter of fiscal 1998, as compared to income tax expense of $1,123 in the third quarter of fiscal 1997. The income tax benefit consists of a tax benefit of $4,664 related to the tax-deductible portion of the special charges, and income tax expense of $2,308 related to income from continuing operations (excluding the special charges and the purchased in-process R&D). The income tax expense of $2,308 results in an effective tax rate of 36% on income from continuing operations, which is comparable to the tax rate of 36% incurred in fiscal 1997. Loss from Discontinued Operations. In March 1998, the Company approved a plan to distribute to its shareholders all of the ownership of Microsun Technologies, Inc., the subsidiary primarily responsible for development, design, assembly and marketing of metal halide portable fixtures for residential and hospitality uses, in a spin-off transaction which is expected to be tax-free. The Company believes the creation of two separate companies will enable the Company and Microsun to devote the resources necessary to develop their core strategies in pursuit of their growth objectives. The loss from discontinued operations of $6,753 represents the total of Microsun's loss from operations in the third quarter of fiscal 1998 and operating losses through the intended date of the spin-off. Extraordinary Charge. The Company recorded a $604 extraordinary charge (net of applicable income taxes of $311) during the third quarter of fiscal 1998, representing costs associated with the early extinguishment of debt. 16 18 NINE MONTHS ENDED MARCH 31, 1998 COMPARED WITH NINE MONTHS ENDED MARCH 31, 1997 Net sales. Net sales increased 83.9% to $110,891 for the first nine months of fiscal 1998 from $60,291 for the first nine months of fiscal 1997. The increase in system components, materials, and systems ($46,381) was primarily attributable to increased unit volume, including a $22,011 increase from the Company's power supply subsidiaries acquired in the second half of fiscal 1997 and a $14,913 increase from the Company's Ruud Lighting subsidiary, which was acquired on January 2, 1998. The increase in equipment sales ($4,218) resulted from an increase in equipment contracts-in-progress, as compared with the number of contracts-in-progress during the first nine months of fiscal 1997, due in part to the acquisition of Deposition Sciences, Inc. in January 1998. Cost of Sales. Cost of sales increased 105.1% to $66,241 in the first nine months of fiscal 1998 from $32,299 in the first nine months of fiscal 1997. As a percentage of net sales, cost of sales increased to 59.7% in the first nine months of fiscal 1998 from 53.6% in the first nine months of fiscal 1997. Cost of sales included a $2,800 write-down of inventory related to the rationalization of the Company's global power supply operations and the elimination of certain nonfocus product lines. After excluding this write-down, cost of sales increased 96.4% to $63,441, or 57.2% of net sales. The increase was primarily attributable to increased unit volume, but also reflects a change in the product mix, whereby lower-margin power supply products represented a larger component of total sales in fiscal 1998. Marketing and Selling Expenses. Marketing and selling expenses increased 63.7% to $16,854 in the first nine months of fiscal 1998 from $10,299 in the first nine months of fiscal 1997. Marketing and selling expenses, as a percentage of net sales, decreased to 15.2% in the first nine months of fiscal 1998 from 17.1% in the first nine months of fiscal 1997. This decrease as a percentage of net sales reflects the leveraging of certain fixed marketing and selling expenses as sales levels increase and relatively lower marketing expenses associated with the sale of power supplies. Research and Development Expenses. Research and development expenses increased 57.6% to $6,069 in the first nine months of fiscal 1998 from $3,851 in the first nine months of fiscal 1997. This increase arose from increased spending for the: (i) expansion of the line of new lamps intended to replace many first generation metal halide lamps in industrial and commercial applications; (ii) development and testing of electronic power supply systems; and, (iii) development of new materials for the world's major lighting manufacturers. As a percentage of net sales, research and development expenses decreased to 5.5% in the first nine months of fiscal 1998 from 6.4% in the first nine months of fiscal 1997. General and Administrative Expenses. General and administrative expenses increased 35.9% to $7,307 in the first nine months of fiscal 1998 from $5,378 in the first nine months of fiscal 1997. As a percentage of net sales, general and administrative expenses decreased to 6.6% in the first nine months of fiscal 1998 from 8.9% in the first nine months of fiscal 1997. The decrease as a percentage of net sales primarily reflects a spending growth rate considerably lower than sales increases through the leveraging of fixed costs as sales levels increase. Fiber Optic Joint Venture Formation Costs. On May 6, 1997, the Company entered into a joint development agreement with Rohm and Haas Company ("Rohm and Haas") for the development of advanced fiber optic cable systems using metal halide lamps. On December 31, 1997, the Company and Rohm and Haas completed a series of agreements that resulted in the formation of Unison Fiber Optics Lighting Systems LLC ("Unison"), a joint venture that focuses on the manufacture and sale of fiber optic lighting systems to the worldwide lighting market. In 17 19 connection with this joint venture, the Company incurred $212 of formation and development costs which were charged to operations during the first quarter of fiscal 1998. Purchased In-Process Research & Development. In connection with its acquisition of Deposition Sciences, Inc. in January 1998, the Company acquired in-process research and development valued at $18,220. In accordance with generally accepted accounting principles, the entire amount has been recorded as an expense in the third quarter of fiscal 1998. Special Charges. During the third quarter of fiscal 1998, the Company recorded special charges related to the rationalization of the Company's global power supply businesses. Additionally, the special charges, which total $18,500 (including the $2,800 write-down of inventory discussed above), cover the elimination of certain nonfocus product lines, the consolidation and rationalization cost of distribution activities and facilities, the write-down of assets in connection with the implementation of new information systems and a reassessment of the Company's prospective investments. Settlement of Claim. During the second quarter of fiscal 1997, the Company paid $475 in an out-of-court settlement of a claim brought by certain former common shareholders of a predecessor of the Company. The charge of $771 ($.06 per share) represents the $475 settlement plus legal and other directly-related costs, net of anticipated insurance recoveries. Income (Loss) from Operations. As a result of the aforementioned factors, during the first nine months of fiscal 1998, the Company incurred a loss from operations of $20,748, as compared to income from operations of $7,498 during the first nine months of fiscal 1997. Excluding the fiber optic joint venture formation costs, total special charges, purchased in-process R & D, and the settlement of claim, income from operations increased 95.7% to $16,184, or 14.6% of net sales, from $8,269, or 13.7% of net sales in the first nine months of fiscal 1997. Interest Expense. Interest expense increased to $1,649 during the first nine months of fiscal 1998 as compared to $749 for the first nine months of fiscal 1997. This increase resulted primarily from the higher average debt outstanding during the first nine months of fiscal 1998 as compared to the first nine months of fiscal 1997. Interest Income. Interest income increased to $1,079 during the first nine months of fiscal 1998 as compared to $610 in the first nine months of fiscal 1997. This increase is attributable to higher average cash equivalents and short-term investments during the first nine months of fiscal 1998 as compared to the first nine months of fiscal 1997. Income (Loss) from Continuing Operations before Income Taxes and Extraordinary Charge. As a result of the aforementioned factors, during the first nine months of fiscal 1998, the Company incurred a loss from continuing operations before income taxes and extraordinary charge of $21,320, as compared to income from continuing operations before income taxes and extraordinary charge of $7,359 during the first nine months of fiscal 1997. Excluding the fiber optic joint venture formation costs, total special charges, purchased in-process R&D, and the settlement of claim, income from continuing operations before income taxes and extraordinary charge increased 92.0% to $15,612, or 14.1% of net sales, from $8,130, or 13.5% of net sales in the first nine months of fiscal 1997. Income Taxes. The Company recorded income tax expense of $918 for the first nine months of fiscal 1998, as compared to $2,616 in the first nine months of fiscal 1997. The income tax expense for the first nine months of fiscal 1998 was reduced by a tax benefit of $4,664 related to 18 20 the tax-deductible portion of the special charges. Without this reduction, the income tax expense would have been $5,582, resulting in an effective tax rate of 36% on income from continuing operations, which is comparable to the tax rate of 36% incurred in fiscal 1997. Loss from Discontinued Operations. In March 1998, the Company approved a plan to distribute to its shareholders all of the ownership of Microsun Technologies, Inc., the subsidiary primarily responsible for development, design, assembly and marketing of metal halide portable fixtures for residential and hospitality uses, in a spin-off transaction which is expected to be tax-free. The Company believes the creation of two separate companies will enable the Company and Microsun to devote the resources necessary to develop their core strategies in pursuit of their growth objectives. The loss from discontinued operations of $7,292 represents the total of Microsun's loss from operations in the first nine months of fiscal 1998 and operating losses through the intended date of the spin-off. Extraordinary Charge. The Company recorded a $604 extraordinary charge (net of applicable income taxes of $311) during the third quarter of fiscal 1998, representing costs associated with the early extinguishment of debt. LIQUIDITY AND CAPITAL RESOURCES The Company's principal capital requirements are for developing manufacturing equipment, market development activities, research and development efforts, investments in business acquisitions, joint ventures and working capital. These requirements have been, and the Company expects they will continue to be, financed through a combination of cash flow from operations, borrowings under various credit facilities and the sale of common stock (including the remaining proceeds from the July 1996 and July 1997 issuances of common stock currently invested in cash equivalents). During July 1997, the Company received $74,250 of proceeds from the sale of three million shares of its common stock in connection with a public offering. Underwriting fees amounted to $3,720 and additional costs associated with the public offering, primarily for legal, accounting, consulting and printing fees, amounted to $1,210. The net proceeds were $69,320, of which $33,000 was used to reduce debt outstanding under the Company's domestic Revolving Credit and Security Agreement and its Term Note (the "Loan Agreement"). Of the remaining net proceeds, $14,507 was used for capital expenditures, primarily production equipment and leasehold improvements, $4,780 was used to purchase a 29% interest in Fiberstars, Inc., a company specializing in the marketing and distribution of fiber optic lighting products, $2,000 was contributed to Unison Fiber Optics Lighting Systems LLC, the Company's joint venture with Rohm and Haas Company, and $11,199 was used for working capital purposes for the nine months ended March 31, 1998. The Company's working capital (current assets less current liabilities) at March 31, 1998 was $87,646, resulting in a working capital ratio of current assets to current liabilities of 3.4 to 1.0, as compared to $42,380 or 2.5 to 1.0 at June 30, 1997. As of March 31, 1998, the Company had approximately $34,696 in cash and cash equivalents and short-term investments. On January 2, 1998, the Company replaced its existing Loan Agreement and other borrowings in North America with an $85,000 revolving credit facility provided by several North American financial institutions ("Bank Credit Facility"). Proceeds from this facility were also used to finance the $35,500 cash portion of the Ruud Lighting purchase price and the $14,500 cash portion of the DSI purchase price (see Note D to the condensed consolidated financial statements for a description of these acquisitions). Proceeds were also used 19 21 to repay $19,200 of existing and outstanding North American bank borrowings of ADLT, Ruud Lighting and DSI. The early extinguishment of debt under the Loan Agreement resulted in a noncash write-off of deferred financing costs and an extraordinary charge of $604 (net of applicable income tax benefits of $311) in the quarter ended March 31, 1998. On March 13, 1998, the Company sold $100,000 of 8% Senior Notes due March 15, 2008, resulting in net proceeds of $96,150. Approximately $76,300 of the net proceeds of the Senior Notes were used to repay amounts outstanding under the Bank Credit Facility, thereby lengthening the term of the Company's debt, most of which has been incurred to finance the acquisitions of Ruud Lighting and DSI. Net cash used in operating activities during the nine months ended March 31, 1998 amounted to $20,569, primarily as a result of higher accounts receivable arising from increased sales, an increase in inventory levels to support higher sales service levels, an increase in prepaids and other assets, and a reduction in accounts payable. For the nine months ended March 31, 1998, the Company invested approximately $26,372 in capital expenditures as compared with $11,589 for the first nine months of fiscal 1997. Over the next twelve months the Company intends to spend approximately $20,000 on capital expenditures, primarily production equipment, and $14,400 on the expansion and upgrading of distribution, training center, lighting demonstration and office facilities at the Company's world headquarters. The Company believes that the successful completion of the July 1997 stock offering and the March 1998 senior note offering has strengthened its financial position and enhanced its ability to obtain additional financing. In addition, the Company believes that the acquisition of Ruud will favorably impact its cash flow from operations, as Ruud has historically achieved significant positive cash flows from its operations. The Company believes that the combination of its anticipated cash flows from Ruud's operations, available cash, current borrowing facilities and strengthened financial position will be sufficient for the Company to fund its operations for at least the next 12 months. In addition, it is the Company's intention to avail itself of appropriate financing alternatives to ensure that growth opportunities, including those arising from acquisitions and additional investments in existing relationships, are realized. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 1997, the Financial Accounting Standards Board issued FAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". The statement requires a "management" approach to reporting financial and descriptive information about a Company's operating segments. The Company must adopt this statement in the first quarter of fiscal 1999. Management is currently studying the potential effect of adopting this statement. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 provides authoritative guidance on accounting for and financial reporting of start-up costs and organization costs. The Company is required to adopt the SOP on July 1, 1999 (though earlier application is encouraged) and, upon adoption, expense all previously capitalized start-up costs and organization costs as a cumulative effect of a change in accounting principle. Management is reviewing its capitalization policies and determining the impact that the adoption of this SOP is expected to have on its consolidated results of operations and financial position. 20 22 YEAR 2000 COMPLIANCE The Company utilizes and is dependent upon data processing systems and software to conduct its business. The data processing systems and software include those developed and maintained by the Company and purchased software which is run on in-house computer networks. The Company has initiated a review and assessment of all hardware and software to confirm that it will function properly in the year 2000. To date, those vendors which have been contacted have indicated that their hardware or software is or will be Year 2000 compliant in time frames that meet the Company's requirements. The Company presently believes that costs associated with the compliance efforts will not have a significant impact on the Company's ongoing results of operations. 21 23 PART II. OTHER INFORMATION Except as noted below, the items in Part II are inapplicable or, if applicable, would be answered in the negative. These items have been omitted and no other reference is made thereto. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (a) On January 2, 1998, the Company acquired all of the capital stock outstanding of Ruud Lighting, Inc. ("Ruud"), located in Racine, Wisconsin. Under the terms of the agreement, Ruud's shareholders received, in the aggregate, $35.5 million in cash and 3 million shares of Company Common Stock, par value $.001 per share ("Common Stock"). The transaction was exempt from registration under the Act pursuant to Section 4(2) and Regulation D. The Common Stock was issued to the five existing shareholders of Ruud, who certified themselves to be "accredited investors," as defined in Rule 501 under the Securities Act of 1933, as amended (the "Act"). Each shareholder agreed to contractual restrictions on the transfer of the Common Stock for a period of two years, the shareholders made customary representations and warranties and the share certificates bear restrictive legends. (b) On January 28, 1998 the Company acquired Deposition Sciences, Inc. ("DSI"), located in Santa Rosa, California. The acquisition was accomplished by a merger of DSI into a wholly-owned subsidiary of the Company. DSI shareholders received, in the aggregate, $14.5 million in cash and 599,717 shares of Common Stock. The transaction was exempt from registration under the Act pursuant to Section 4(2) and Regulation D. The Common Stock was issued to 33 of the 34 existing shareholders of DSI, at least nine of whom certified themselves to be "accredited investors," as defined in Rule 501 under the Act. Each DSI shareholder made customary representations and warranties, including acknowledgment of the requirements of Rule 144 and their ability to evaluate the investment and bear the economic risk, and the share certificates bear restrictive legends. 22 24 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
SEQUENTIAL PAGE NUMBER/ EXHIBIT INCORPORATED NUMBER TITLE BY REFERENCE - ------ ----- ------------ 2.1 Stock Purchase Agreement among Advanced Lighting Technologies, Inc., Ruud Lighting, Inc. and Alan J. Ruud, Theodore O. Sokoly, Donald Wandler, Christopher A. Ruud and Cynthia A. Johnson, dated December 19, 1997. ___ 3.1 Amended and Restated Articles of Incorporation. * 3.2 Code of Regulations. ** 10.1 [Renumbered as 2.1 above] 10.2 Credit Agreement between Advanced Lighting Technologies, Inc., The Lending Institutions Named Therein and National City Bank, as Administrative Agent, dated as of January 2, 1998. ___ 10.3 Amendment No. 1 dated as of February 26, 1998 to Credit Agreement between Advanced Lighting Technologies, Inc., The Lending Institutions Named Therein and National City Bank, as Administrative Agent, dated as of January 2, 1998. ___ 10.4 Indenture between Advanced Lighting Technologies, Inc., and The Bank of New York, as Trustee dated March 18, 1998. ___ 10.5 Employment Agreement dated as of February 12, 1998 between Advanced Lighting Technologies, Inc. and Nicholas R. Sucic. ___ 11 Statement Re: Computation of Earnings Per Share ___ 27 Financial Data Schedule ___ * Incorporated by reference to Exhibit of same number in Company's Quarterly Report on Form 10-Q for the Quarterly Period ended December 31, 1996. ** Incorporated by reference to Company's Registration Statement on Form S-1, Registration No. 33-97902, effective December 11, 1995.
23 25 (b) Reports on Form 8-K. During the third quarter of fiscal 1998, the Company filed the following Reports on Form 8-K: 1. Report on Form 8-K dated January 2, 1998, filed January 14, 1998, reporting under Item 2 the acquisition of Ruud Lighting, Inc., and under Item 5 the replacement to the Company's credit agreement. The report includes a Pro Forma Condensed Balance Sheet (unaudited) of Advanced Lighting Technologies, Inc., as at September 30, 1997, Pro Forma Consolidated Combined Statements of Income (unaudited) of Advanced Lighting Technologies, Inc., for the year ended June 30, 1997 and the three months ended September 30, 1997, Balance Sheets of Ruud Lighting, Inc., as at November 30, 1997 and 1996 and Statements of Income of Ruud Lighting, Inc., for the years ended November 30, 1997, 1996 and 1995. 2. Report on Form 8-K dated February 27, 1998, filed March 4, 1998, reporting under Item 5 the offering of Senior Notes and the Company's press release regarding special charges. The Report includes Selected Financial Data of Advanced Lighting Technologies, Inc., for the years ended June 30, 1997, 1996, 1995, 1994 and 1993 and Earnings per Share Calculations of Advanced Lighting Technologies, Inc., for the years ended June 30, 1997, 1996 and 1995. 24 26 SIGNATURES Pursuant to the requirements 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. ADVANCED LIGHTING TECHNOLOGIES, INC. Date: March 15, 1999 By: /s/ Wayne R. Hellman ---------------------------------- Wayne R. Hellman Chief Executive Officer Date: March 15, 1999 By: /s/ Nicholas R. Sucic ---------------------------------- Nicholas R. Sucic Chief Financial Officer 25 27 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - ------ ----------------------- PAGE NO. 2.1 Stock Purchase Agreement among Advanced Lighting Technologies, Inc., Ruud Lighting, Inc. and Alan J. Ruud, Theodore O. Sokoly, Donald Wandler, Christopher A. Ruud and Cynthia A. Johnson, dated December 19, 1997. ___ 3.1 Amended and Restated Articles of Incorporation. * 3.2 Code of Regulations. ** 10.1 [Renumbered as 2.1 above] 10.2 Credit Agreement between Advanced Lighting Technologies, Inc., The Lending Institutions Named Therein and National City Bank, as Administrative Agent, dated as of January 2, 1998. ___ 10.3 Amendment No. 1 dated as of February 26, 1998 to Credit Agreement between Advanced Lighting Technologies, Inc., The Lending Institutions Named Therein and National City Bank, as Administrative Agent, dated as of January 2, 1998. ___ 10.4 Indenture between Advanced Lighting Technologies, Inc., and The Bank of New York, as Trustee dated March 18, 1998. ___ 10.5 Employment Agreement dated as of February 12, 1998 between Advanced Lighting Technologies, Inc. and Nicholas R. Sucic. ___ 11 Statement Re: Computation of Earnings Per Share ___ 27 Financial Data Schedule ___
* Incorporated by reference to Exhibit of same number in Company's Quarterly Report on Form 10-Q for the Quarterly Period ended December 31, 1996. ** Incorporated by reference to Company's Registration Statement on Form S-1, Registration No. 33-97902, effective December 11, 1995. 26 EX-2.1 2 EXHIBIT 2.1 1 Exhibit 2.1 EXECUTION COPY STOCK PURCHASE AGREEMENT AMONG ADVANCED LIGHTING TECHNOLOGIES, INC., RUUD LIGHTING, INC. AND ALAN J. RUUD, THEODORE O. SOKOLY, DONALD WANDLER, CHRISTOPHER A. RUUD and CYNTHIA A. JOHNSON December 19, 1997 2 TABLE OF CONTENTS
PAGE ARTICLE 1 THE TRANSACTION................................................................1 Section 1.1 Purchase of Shares.............................................1 Section 1.2 Purchase Price.................................................1 Section 1.3 Anti-Dilution..................................................1 Section 1.4 Payment of Purchase Price......................................2 Section 1.5 Closing........................................................2 Section 1.6 Deliveries and Proceedings at Closing..........................2 Section 1.7 Purchase Price Adjustment......................................5 ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND RLI......................................................6 Section 2.1 Title to RLI Shares............................................6 Section 2.2 Organization and Qualification.................................6 Section 2.3 Shares; Capitalization.........................................6 Section 2.4 No Subsidiaries................................................7 Section 2.5 Authorization and Enforceability...............................7 Section 2.6 No Violation of Laws or Agreements.............................7 Section 2.7 Financial Statements...........................................8 Section 2.8 Undisclosed Liabilities........................................8 Section 2.9 No Changes.....................................................9 Section 2.10 Tax Matters....................................................9 Section 2.11 Receivables; Inventory........................................10 Section 2.12 Business; Assets..............................................10 Section 2.13 Litigation....................................................10 Section 2.14 Contracts; Compliance.........................................11 Section 2.15 Permits.......................................................11 Section 2.16 Compliance With Laws..........................................11 Section 2.17 Real Property.................................................12 Section 2.18 Transactions With Related Parties.............................12 Section 2.19 Insurance.....................................................12 Section 2.20 Employee Relations............................................13 Section 2.21 Patents and Intellectual Property Rights......................13 Section 2.22 Benefit Plans.................................................14 Section 2.23 Finder's Fees.................................................15 Section 2.24 Confidentiality Agreements....................................15
i 3 Section 2.25 Compliance with Environmental Laws............................16 Section 2.26 Environmental Liabilities.....................................16 Section 2.27 Disclosure....................................................16 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS................................16 Section 3.1 Title to RLI Shares...........................................16 Section 3.2 Authorization and Enforceability..............................16 Section 3.3 No Violation of Laws or Agreements............................17 Section 3.4 Purchase Entirely for Own Account.............................17 Section 3.5 Restricted Securities.........................................17 Section 3.6 Disclosure of Information.....................................18 Section 3.7 Investment Experience.........................................18 Section 3.8 Accredited Investor...........................................18 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF ADLT........................................18 Section 4.1 Title to ADLT Shares..........................................18 Section 4.2 Securities....................................................18 Section 4.3 Organization..................................................18 Section 4.4 Shares; Capitalization........................................19 Section 4.5 Subsidiaries..................................................19 Section 4.6 Authorization and Enforceability..............................19 Section 4.7 No Violation of Laws or Agreements............................19 Section 4.8 SEC Reports...................................................20 Section 4.9 Finder's Fees.................................................20 Section 4.10 Disclosure....................................................21 Section 4.11 No Material Adverse Change....................................21 Section 4.12 Litigation....................................................21 Section 4.13 Compliance with Environmental Laws............................21 Section 4.14 Environmental Liabilities.....................................21 Section 4.15 Registration Rights...........................................21 Section 4.16 Financial Statements..........................................21 Section 4.17 Properties....................................................22 Section 4.18 Employee Matters..............................................22 Section 4.19 Intellectual Property.........................................22 Section 4.20 Insurance.....................................................22 Section 4.21 Limitations on Subsidiary Dividends...........................23 Section 4.22 Permits.......................................................23 Section 4.23 Tax Matters...................................................23 Section 4.24 No Default....................................................23 Section 4.25 Private Placements; Securities................................23 Section 4.26 Compliance With Laws..........................................24
ii 4 Section 4.27 Interested Party Transactions.................................24 Section 4.28 Undisclosed Liabilities.......................................24 ARTICLE 5 COVENANTS OF THE SHAREHOLDERS................................................25 Section 5.1 Conduct of Business Pending Closing...........................25 Section 5.2 Access, Information and Documents.............................26 Section 5.3 Preserve Accuracy of Representations and Warranties...........26 Section 5.4 Filings and Authorizations....................................27 Section 5.5 Notice of Changes.............................................27 Section 5.6 Section 338(h)(10) Election; Certain Tax Returns..............27 Section 5.7 Tax Returns and Payment of Taxes for Periods Through the Closing Date......................................27 Section 5.8 Resale of ADLT Shares.........................................27 Section 5.9 No Negotiations...............................................27 Section 0.1 1997 Audited Financial Statements.............................28 ARTICLE 6 COVENANTS OF ADLT.............................................................28 Section 6.1 Conduct of Business Pending Closing...........................28 Section 6.2 Preserve Accuracy of Representations and Warranties...........29 Section 6.3 Filings and Authorizations....................................29 Section 6.4 Notice of Changes.............................................29 Section 6.5 Stock Option Plan.............................................29 Section 6.6 Employee Benefits.............................................30 Section 6.7 ADLT Board of Directors.......................................30 Section 6.8 Stock Legends.................................................30 Section 6.9 Purchase Price Allocation; Appraisals.........................30 Section 6.10 Permitted Dividends...........................................30 Section 6.11 Access, Information and Documents.............................30 Section 6.12 Post-Closing Indemnification of Certain Persons...............30 ARTICLE 7 CONDITIONS TO CLOSING.........................................................31 Section 7.1 Mutual Conditions Precedent...................................31 Section 7.2 Conditions Precedent to Obligations of ADLT...................32 Section 7.3 Conditions Precedent to the Obligations of the Shareholders...32 ARTICLE 8 TERMINATION...................................................................33 Section 8.1 Termination...................................................33 iii
5 ARTICLE 9 SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION..................................34 Section 9.1 Survival of Representations...................................34 Section 9.2 Indemnification by the Shareholders...........................34 Section 9.3 Indemnification by ADLT.......................................35 Section 9.4 Minimum and Maximum Indemnification Claim.....................35 Section 9.5 Option to Deliver ADLT Shares as Payment......................36 Section 9.6 Notice of Claims..............................................36 Section 9.7 Third Party Claims............................................36 Section 9.8 Limitation on Damages; Insurance; Etc.........................36 Section 9.9 Good Faith Effort to Settle Disputes..........................37 Section 9.10 Exclusivity...................................................37 ARTICLE 10 MISCELLANEOUS................................................................37 Section 10.1 Construction..................................................37 Section 10.2 Notices.......................................................38 Section 10.3 Successors and Assigns........................................39 Section 10.4 Governing Law.................................................39 Section 10.5 No Assignment.................................................39 Section 10.6 Approvals and Actions by the Shareholders.....................39 Section 10.7 Amendment and Waiver; Cumulative Effect.......................39 Section 10.8 Entire Agreement..............................................40 Section 10.9 Severability..................................................40 Section 10.10 No Third Party Beneficiaries..................................40 Section 10.11 Counterparts..................................................40
iv 6 EXHIBITS Exhibit A Form of General Release Exhibit B Forms of Employment Agreements Exhibit C Form of Opinion of Counsel to the Shareholders Exhibit D Form of Opinion of Counsel to ADLT Exhibit E Form of Loan Agreement Exhibit F Form of Registration Rights Agreement Exhibit G Form of ADLT Stock Option Plan V 7 SCHEDULES Schedule 1.4 Shareholders Schedule 1.6B Restrictive Legends Schedule 1.7 Preparation of Closing Statement of Net Worth Schedule 2.2 Foreign Qualifications Schedule 2.3 Securities Rights Schedule 2.4 Subsidiaries Schedule 2.6 RLI Required Consents Schedule 2.7 Permitted Accounting Changes Schedule 2.8 Other Liabilities Schedule 2.9A Material Transactions Schedule 2.9B Surplus Real Property Schedule 2.10 Tax Matters Schedule 2.11 Receivables Schedule 2.12 Business; Permitted Encumbrances Schedule 2.13 Litigation Schedule 2.14 Contracts Schedule 2.17 Real Property Schedule 2.18 Transactions with Related Parties Schedule 2.19 Insurance; Warranty Claims Schedule 2.20 Employee Relations Schedule 2.21 Intellectual Property Schedule 2.22 Benefit Plans Schedule 2.23 Confidentiality Agreements Schedule 2.25 Environmental Matters Schedule 4.5 ADLT Non-Subsidiary Equity Investments Schedule 4.7 ADLT Required Consents Schedule 9.1 Special Indemnity Survival Periods vi [Pursuant to Item 601(b)(2), certain Exhibits and Schedules have been omitted. The Registrant agrees to provide a copy of any such Exhibit or Schedule supplementally to the Securities and Exchange Commission upon request.] 8 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") entered into as of the 19th day of December, 1997 by and among Advanced Lighting Technologies, Inc., an Ohio corporation ("ADLT"), Ruud Lighting, Inc., a Wisconsin corporation ("RLI"), and Alan J. Ruud ("Ruud"), Theodore O. Sokoly ("Sokoly"), Donald Wandler ("Wandler"), Christopher A. Ruud and Cynthia A. Johnson (Ruud, Sokoly, Wandler, Christopher A. Ruud and Cynthia A. Johnson are sometimes referred to herein individually as a "Shareholder" and collectively as the "Shareholders"); WITNESSETH: WHEREAS, the Shareholders own 10,500 shares (the "RLI Shares") of common stock of RLI, par value $1.00 per share ("RLI Common Stock"), which shares represent 100% of the issued and outstanding shares of capital stock of RLI; and WHEREAS, ADLT desires to acquire from the Shareholders, and the Shareholders desire to sell to ADLT, the RLI Shares in consideration for cash in the amount of $35,500,000 and three million shares (the "ADLT Shares") of common stock of ADLT, par value $.001 per share ("ADLT Common Stock"), all under and subject to the terms and conditions set forth herein, NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: ARTICLE 1 THE TRANSACTION Section 1.1 PURCHASE OF SHARES. Subject to the terms and conditions of this Agreement, the Shareholders shall sell, assign, transfer and deliver to ADLT at the Closing (as defined in Section 1.5 below), and ADLT shall purchase from the Shareholders at the Closing, the RLI Shares in exchange for the Purchase Price (as defined in Section 1.2 below). Section 1.2 PURCHASE PRICE. As used herein, "Purchase Price" means (i) $35,500,000 in cash plus (ii) 3 million shares of ADLT Common Stock (the "ADLT Shares"). Section 1.3 ANTI-DILUTION. If between the date hereof and Closing the issued and outstanding shares of ADLT Common Stock shall have been changed into a different number of shares as a result of a stock split, reverse stock split, stock dividend, recapitalization, reclassification or other similar transaction with a record or effective date within such period, the term "ADLT Shares" shall mean the number of shares of ADLT Common Stock which a record holder of three million shares of ADLT Common Stock prior to such transaction would own or be entitled to receive after the consummation of such transaction. 9 Section 1.4 PAYMENT OF PURCHASE PRICE. ADLT shall deliver to each of the Shareholders on the Closing Date (i) a certificate representing the number of ADLT Shares prepared by ADLT's transfer agent and (ii) the amount in cash by wire transfer, or, if permitted by Section 1.6(c)ii, certified or bank checks payable to the order of each Shareholder, each as set forth opposite such Shareholder's name on Schedule 1.4. Upon such deliveries, the Purchase Price shall be paid in full, subject to the adjustment provided for in Section 1.7 below. When reference in this Agreement is made to the RLI Shares, the ADLT Shares or the Purchase Price with respect to any individual Shareholder, such reference shall be to the number of RLI Shares or ADLT Shares or the portion of the cash Purchase Price set forth opposite such Shareholder's name in Schedule 1.4, as adjusted pursuant to Section 1.3. Section 1.5 CLOSING. The closing hereunder (the "Closing") shall take place at the offices of Cowden, Humphrey & Sarlson Co., L.P.A., 1414 Terminal Tower, 50 Public Square, Cleveland, Ohio 44113, or such other place as shall be agreed by RLI and ADLT, on January 2, 1998, effective at 12:01 a.m. on January 2, 1998, except that if all of the conditions to closing under Article 7 shall not have been satisfied on or before January 2, 1998, then closing shall take place within six business days after all of the conditions to Closing under Article 7 shall have been satisfied or waived in writing, at 10:00 a.m. local time or at such other time, date or place as the parties hereto agree (the date of the Closing is sometimes referred to herein as the "Closing Date"). Section 1.6 DELIVERIES AND PROCEEDINGS AT CLOSING. (a) DELIVERIES BY THE SHAREHOLDERS. Each Shareholder shall deliver or cause to be delivered to ADLT at the Closing and shall cause RLI to deliver the documents required by (b) below: i. Certificates representing such Shareholder's RLI Shares, duly endorsed or with stock powers duly executed in blank with all transfer taxes, if any, paid in full; ii. General Releases in substantially the form set forth in Exhibit A, duly executed by each of the Shareholders; iii. Individual Employment Agreements in substantially the forms set forth in Exhibit B, duly executed by Ruud, Sokoly, Wandler, Susan Ruud, Christopher A. Ruud and Jason Johnson; and iv. Such other documents and agreements as ADLT may reasonably request. (b) DELIVERIES BY RLI. RLI shall deliver or cause to be delivered to ADLT at the Closing: 2 10 i. Certificate of status of RLI, issued by the Wisconsin Department of Financial Institutions within 20 days prior to Closing, in substance reasonably satisfactory to ADLT; ii. An incumbency and specimen signature certificate signed by the officers of RLI and certified by the Secretary of RLI; iii. A true and correct copy of the Articles of Incorporation (and all amendments thereto) of RLI in effect as of the Closing Date certified by the Wisconsin Department of Financial Institutions and the By-Laws of RLI (together with all amendments thereto) certified by the Secretary of RLI; iv. Resolutions of the Board of Directors of RLI authorizing the execution and delivery of this Agreement and each Other Agreement to which it is a party and the performance by RLI of the transactions contemplated hereby and thereby, certified by the Secretary of RLI; v. A certificate dated the Closing Date certifying to the fulfillment of the conditions set forth in Section 7.2 hereof; vi. An opinion of Reinhart Boerner Van Deuren Norris & Rieselbach, S.C. in substantially the form attached hereto as Exhibit C; vii. The minute books, stock ledgers and corporate seal of RLI and each Subsidiary and all share certificates of each Subsidiary representing shares of capital stock of such Subsidiary owned by RLI; and viii. Such other agreements and documents as ADLT may reasonably request. (c) DELIVERIES BY ADLT. ADLT shall deliver or cause to be delivered to the Shareholders at the Closing: i. To each Shareholder, a certificate representing the ADLT Shares registered in the name of such Shareholder in the name and at the address set forth on Schedule 1.4 for purposes of ADLT's stock transfer records and using the Social Security Number set forth on Schedule 1.4, such share certificates shall bear restrictive legends in substantially the form set forth on Schedule 1.6B; ii. To each Shareholder, a confirmation of a wire transfer made in accordance with written instructions provided by such Shareholder, provided however, that if such instructions are not provided three business days prior to the 3 11 Closing, ADLT may deliver a certified or bank check, payable to the order of such Shareholder, in either case, in the amount set forth on Schedule 1.4; iii. Duly executed copies of such other documents and agreements provided for herein; iv. A Good Standing certificate of ADLT issued within 20 days prior to Closing certified by the Secretary of State of the State of Ohio, in form reasonably satisfactory to RLI; v. An incumbency and specimen signature certificate signed by the officers of ADLT and certified by the Secretary of ADLT; vi. A true and correct copy of the Restated Articles of Incorporation (and all amendments thereto) of ADLT in effect as of the Closing Date certified by the Secretary of State of the State of Ohio and the Code of Regulations of ADLT (together with all amendments thereto) certified by the Secretary of ADLT; vii. Resolutions of the Board of Directors of ADLT authorizing the execution and delivery of this Agreement and each Other Agreement to which it is a party and the performance of the transactions contemplated hereby and thereby, certified by the Secretary of ADLT; viii. A certificate dated the Closing Date of an officer of ADLT certifying to the fulfillment of the conditions set forth in Section 7.3; ix. The opinion of Cowden, Humphrey & Sarlson Co., L.P.A. in substantially the form attached as Exhibit D; x. A Loan Agreement, in substantially the form attached as Exhibit E, relating to loans to be made available to the Shareholders in an amount up to a portion of their tax liability resulting from the transaction, duly executed by ADLT; xi. A Registration Rights Agreement, in substantially the form attached as Exhibit F, relating to piggy back registration rights of Shareholders (and their permitted transferees) after the Restricted Period, as defined in Section 5.8, duly executed by ADLT; xii. Employment Agreements, in substantially the forms set forth as Exhibit A, relating to the employment of Ruud, Sokoly, Wandler, Susan Ruud, Christopher A. Ruud and Jason Johnson, duly executed by ADLT; 4 12 xiii. Stock option grant resolution, with respect to the grant of options to purchase 800,000 shares of ADLT Common Stock pursuant to the Stock Option Plan (as defined in Section 6.5), in form reasonably satisfactory to RLI; xiv. A copy of the Stock Option Plan certified by the Secretary of ADLT; and xv. Such other documents and agreements as RLI shall reasonably request. Section 1.7 PURCHASE PRICE ADJUSTMENT. (a) As promptly as practicable after the Closing Date, but in any case, prior to February 15, 1998, RLI, with the assistance of Ernst & Young LLP, shall, at the sole expense of RLI, prepare and deliver to ADLT a statement of Closing net worth of RLI as of the Closing Date (the "Closing Statement of Net Worth") prepared in accordance with the procedures set forth on Schedule 1.7. Except as provided in Schedule 2.7, the Closing Statement of Net Worth shall be prepared in accordance with United States generally accepted accounting principles ("GAAP") consistently applied with past practice and shall present fairly the net worth of RLI as of the Closing Date. Based on the Closing Statement of Net Worth, (i) if the net worth of RLI exceeds the Target Net Worth, ADLT shall pay each Shareholder, his or her Pro Rata Share of the difference and (ii) if the net worth of RLI is less than the Target Net Worth, each Shareholder shall each pay ADLT his or her Pro Rata Share of the difference. In either case, such payment shall include interest on such difference from the Closing Date to the date of payment at the rate of interest publicly announced by The Bank of New York in New York from time to time as its "Prime Rate." As used herein, the "Target Net Worth" shall equal $15,563,592 LESS $1,500,000 PLUS the "December net income" or LESS the "December net loss." For purposes hereof, the "December net income" shall mean the net income of RLI, if any, in accordance with GAAP consistently applied, for the period from December 1, 1997 to the Closing Date. For purposes hereof, the "December net loss" shall mean the net loss of RLI, if any, in accordance with GAAP consistently applied, for the period from December 1, 1997 to the Closing Date. As used herein, Pro Rata Share means, with respect to any Shareholder, the number of RLI Shares held by such Shareholder, as set forth on Schedule 1.4, divided by 10,500. Such difference and the interest payable thereon is referred to hereinafter as the "Adjustment to Purchase Price." (b) If ADLT disputes the accuracy of the Closing Statement of Net Worth in any respect, it shall so notify the Shareholders within ten days of receipt of the Closing Statement of Net Worth of its disagreement, indicating the items which are being disputed (the "Disputed Items") and the reasons for such dispute. If ADLT fails to notify the Shareholders as provided in the preceding sentence, payment of the Adjustment to Purchase Price shall be due and payable not later than fifteen days after receipt by ADLT of the Closing Statement of Net Worth. ADLT and the Shareholders 5 13 shall make a good faith effort to resolve any Disputed Items, but if they are unable to do so, the remaining Disputed Items shall be presented to Arthur Andersen LLP or another firm of independent public accountants mutually acceptable to ADLT and the Shareholders (the "Accountants"), to make a final written determination with respect to the correctness of each remaining Disputed Item. The Accountants shall make such determination within thirty days after the dispute is submitted to them, and their determination shall be final and binding upon the parties. The party that is required to pay the Adjustment to Purchase Price shall pay the other party such amount not later than five days after receipt of the Accountants' determination. One-half the fees and expenses of the Accountants in rendering the above opinion shall be payable by ADLT and one-half shall be payable by the Shareholders. ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND RLI The Shareholders and RLI, jointly and severally, represent and warrant to ADLT as set forth in this Article 2. Section 2.1 TITLE TO RLI SHARES. Each Shareholder is the record holder of the number of shares set forth opposite such Shareholder's name on Schedule 1.4. Section 2.2 ORGANIZATION AND QUALIFICATION. RLI has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Wisconsin, has requisite corporate power and authority to own or lease its property as now owned or leased and to conduct the Business (as defined in Section 2.12) as it is now conducted. As used herein, the term "Person" means any person, corporation, association, partnership, limited liability company, trust, business trust, joint venture, unincorporated organization or any other legal entity and the term "Other Agreement" with respect to any party shall mean the other agreements and documents contemplated hereby to be executed and delivered by such party or any Affiliate thereof on or before the Closing. Except as set forth in Schedule 2.2, RLI is duly qualified to transact business and is in good standing as a foreign corporation in those jurisdictions set forth on Schedule 2.2, which are the only jurisdictions wherein the conduct of its business or leasing of property requires such qualification, except to the extent that failure to be so qualified or be in good standing would not have a material adverse effect on RLI. As used herein, "Affiliate" means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person. Section 2.3 SHARES; CAPITALIZATION. The authorized capital stock of RLI consists solely of 56,000 shares of Common Stock, $1.00 par value per share, of which 10,500 shares are issued and outstanding. Except as set forth on Schedule 2.3, there are no Securities Rights with respect to any RLI Shares nor are there any securities convertible into or exchangeable for any RLI Common Stock or any other Security Rights with respect to any unissued RLI Common Stock. "Securities Right" means any option, warrant, other right, proxy, put, call, demand, plan, 6 14 commitment, agreement, understanding or arrangement of any kind relating to any RLI Shares. "Security Right" means any right relating to issuance, sale, assignment, transfer, purchase, redemption, conversion, exchange, registration or voting rights with respect to any capital stock of the issuer, whether issued or unissued, or any other security convertible into or exchangeable for capital stock of the issuer conferred by statute, by the issuer's governing documents or by agreement, including any subscription right, option, preemptive purchase right or registration right. All of the RLI Shares are (a) validly issued, fully paid and nonassessable, except as set forth in Wisconsin statutes section 180.0622(b)(b), as interpreted, (b) were not issued in violation of the terms of any agreement or other understanding of RLI, and (c) were issued in compliance with all applicable federal and state securities or "blue-sky" laws and regulations. Section 2.4 NO SUBSIDIARIES. Except for Ruud Australia, LLC, RLI has no direct or indirect subsidiaries. Except as set forth on Schedule 2.4, RLI does not own, directly or indirectly, any partnership, equity, profit, participation or similar ownership interest in any corporations, partnerships, joint ventures, trusts, unincorporated organizations, associations or similar entities. The term "subsidiary" (or its plural) as used in this Agreement with respect to RLI, ADLT or any other Person shall mean any corporation, partnership, joint venture or other legal entity of which RLI, ADLT or such other Person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, greater than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. Section 2.5 AUTHORIZATION AND ENFORCEABILITY. The execution, delivery and performance by RLI of this Agreement has been duly authorized by all necessary corporate action on its part. This Agreement has been duly executed and delivered by RLI and constitutes, and each Other Agreement which is to be executed and delivered by RLI, when executed and delivered by RLI, shall constitute, the legal, valid and binding obligation of RLI, enforceable against RLI in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws relating to or affecting the rights and remedies of creditors generally and by general principles of equity including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance, injunctive relief or other equitable remedies, regardless of whether enforceability is considered in a proceeding in equity or at law. Section 2.6 NO VIOLATION OF LAWS OR AGREEMENTS. Except as set forth on Schedule 2.6, none of the execution and delivery of this Agreement or any Other Agreement, the consummation of the transactions contemplated hereby or thereby or the compliance with or fulfillment of the terms, conditions and provisions hereof or thereof by the Shareholders or RLI will: (i) contravene any provision of the charter or bylaws of RLI, (ii) conflict with, result in a breach of or constitute a default or an event of default (or an event which would, with the passage of time or the giving of notice or both, constitute a default) under any term, condition or provision of, or result in the termination or loss of any right (or give others the right to cause such a termination or loss) under, any material license or franchise, or any other Contract, to which RLI is a party or by which 7 15 RLI's assets may be bound or affected, (iii) violate any Law (as defined in Section 2.16) or violate any judgment or order of any court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority or instrumentality, whether federal, state, local or foreign ("Governmental Body") to which RLI is subject, (iv) result in the creation or imposition of any Encumbrance upon any RLI Common Stock or the assets of RLI or give to others any interests or rights therein, or (v) result in the maturation or acceleration of any indebtedness of RLI for borrowed money in excess of $200,000 (or give others the right to cause such a maturation or acceleration). Except as may be required by the U.S. Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended (the "HSR Act"), and except as set forth on Schedule 2.6 (collectively, the "Consents"), no material consent, approval, declaration or authorization of, or registration or filing with, any Person (including any Governmental Body) is required in connection with the execution and delivery by RLI of this Agreement or the Other Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby by RLI. "Encumbrance" or "Encumbrances" means any security interest, pledge, mortgage, lien (including, without limitation, environmental and tax liens), charge, encumbrance, adverse claim, preferential arrangement or restriction of any kind, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership. Section 2.7 FINANCIAL STATEMENTS. The Shareholders have previously delivered to ADLT (a) the audited balance sheets, income statements and retained earnings and statements of cash flows for RLI, together with the accompanying footnotes, for the twelve month periods ("Audited Annual Statement") ended November 30, 1996 and 1995 and (b) unaudited balance sheets, income statements and retained earnings and statements of cash flows for RLI, together with the accompanying footnotes, for the eleven month period ending October 28, 1997 (the balance sheet as of October 28, 1997 is sometimes referred to herein as the "Interim Balance Sheet") (all of the foregoing referred to herein collectively as the "RLI Financial Statements"). The RLI Financial Statements have been prepared in accordance with GAAP on a consistent basis throughout the indicated periods (except for changes required as a result of changes in GAAP and, with respect to the Interim Financial Statements, the absence of notes and for normal year-end adjustments) and fairly present in all material respects the financial condition, assets and liabilities and results of operations and cash flows of RLI in accordance with GAAP at the dates and for the periods indicated. When delivered to ADLT, the Audited Annual Statement for the twelve month period ending November 30, 1997, will have been prepared in accordance with GAAP on a consistent basis throughout the periods of such financial statement and the periods of the RLI Financial Statements (except for changes required as a result of changes in GAAP) and will fairly present in all material respects the financial condition, assets and liabilities and results of operations and cash flows of RLI in accordance with GAAP at November 30, 1997 and for the twelve months then ended. Section 2.8 UNDISCLOSED LIABILITIES. Except as disclosed in the RLI Financial Statements and as otherwise disclosed in Schedule 2.8 hereto, RLI has no Liabilities, other than Liabilities incurred in the ordinary course of business since the date of the Interim Balance Sheet. For purposes hereof, "Liabilities" means material liabilities of any nature whatsoever (whether 8 16 absolute, fixed, contingent or otherwise), whether due or to become due, whether incurred directly or by any predecessor, and whether arising out of any act, omission, transaction, circumstance, sale of goods or services, state of facts or other condition. Section 2.9 NO CHANGES. Except as set forth in Schedule 2.9A, since November 30, 1996, there has not been any declaration or payment of any dividend or other distribution on or with respect to, or redemption or purchase by RLI, of any shares of RLI Common Stock, including any of the RLI Shares, other than Permitted Dividends. Since October 28, 1997, except as set forth in Schedule 2.9A, there has been no (a) material adverse change in the financial condition, assets, Liabilities, net worth, Business or, to the knowledge of the Shareholders or RLI, prospects of RLI; (b) damage or destruction to any material asset of RLI, not covered by insurance; (c) increase in the salary, wage or bonus of any (i) officer of RLI or (ii) other employee of RLI which exceed, in the aggregate, $100,000; (d) asset acquisition or expenditure, including capital expenditure, in excess of $200,000 in the aggregate which is not reflected on the Interim Balance Sheet; (e) amendment to any RLI Plan which would be reasonably expected to increase the annual expense of RLI in respect of such RLI Plan by an amount in excess of $100,000; (f) disposition of any assets (other than inventory, the Excess Real Estate or Permitted Dividends) in the aggregate for more than $100,000; or (g) agreement or commitment to do any of the foregoing. The term "Permitted Dividends" shall mean aggregate dividends and/or distributions made on or after November 30, 1996, consisting of (i) the total of: (A) the amount of net income of RLI for the twelve months ended November 30, 1997, as shown in the 1997 financial statements of RLI prepared in accordance with GAAP (excluding any net income from the sale of the Excess Real Estate), on a basis consistent with the RLI Financial Statements, and (B) $1,500,000, and (ii) a distribution of the real estate described in Schedule 2.9B (the "Excess Real Estate") or the proceeds of the sale of Excess Real Estate. Section 2.10 TAX MATTERS. (a) RLI is now, and for all periods since December 1, 1986, has been, a corporation which has elected to be taxed in accordance with Subchapter S of the United States Internal Revenue Code of 1986, as amended (the "Code"). (b) RLI has filed all foreign, federal, state and local tax returns ("Tax Returns") that are required to be filed or has requested extensions thereof (except in any case in which failure to so file would not have a material adverse effect on RLI) and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such assessment, fine or penalty which is reflected as a Liability on the Closing Statement of Net Worth or which is currently being contested in good faith and the failure to pay would not have a material adverse effect on RLI. (c) RLI has not received from the Internal Revenue Service or from any other tax authority from any state, foreign, county, local or other jurisdiction a notice of underpayment of Taxes, a proposed assessment of Tax, a proposed adjustment to any Tax return filed or other deficiency that is pending or has not been paid or resolved. 9 17 (d) Neither RLI nor any Affiliate of RLI has waived restrictions on assessment or collection of Taxes or executed a waiver or consented to the extension of any statute of limitations for federal income or other Tax Liability that remains outstanding. Except as set forth on Schedule 2.10, neither RLI nor any RLI Affiliate in respect of RLI has made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstances could obligate it to make any payments that will not be deductible under Code Section 280G or 162(m). Section 2.11 RECEIVABLES; INVENTORY. (a) RECEIVABLES. Schedule 2.11 discloses all trade and other accounts receivable of RLI ("Receivables") outstanding as of October 28, 1997 presented on an aged basis and separately identifies the name of each account debtor and the total amount of each related Receivable. All Receivables, whether disclosed on Schedule 2.11 or created after October 28, 1997, arose from bona fide sale transactions of RLI, and except as disclosed on Schedule 2.11, to the knowledge of the Shareholders, no portion of any Receivable is subject to counterclaim, defense or set-off or is otherwise in dispute. (b) INVENTORY. The inventories of RLI are sufficient to permit the conduct of the RLI Business in the ordinary course of business immediately following the Closing in the manner in which the RLI Business is presently conducted. Section 2.12 BUSINESS; ASSETS. RLI is engaged in the business of manufacturing lighting systems and direct marketing lighting systems and lighting system components to commercial, industrial and retail users (collectively, the "Business"). RLI's equipment and RLI's buildings, fixtures, improvements, machinery, equipment, tools, furniture, improvements and tangible personal property, including those reflected on the Interim Balance Sheet, are in good operating condition and repair (reasonable wear and tear excepted). RLI has good and marketable title to all of its personal property and none of such personal property is subject to any Encumbrance except Permitted Encumbrances. As used herein, the term "Permitted Encumbrances" means liens for governmental charges that are not yet due and payable, Encumbrances identified in Schedule 2.12 and Encumbrances which do not materially and adversely affect the value of such property (and are not reflected on the Interim Balance Sheet) and do not interfere materially with the use made of such property by RLI. Schedule 2.12 identifies any material asset of RLI that is not located on property owned or leased by RLI, other than vehicles owned or leased by RLI. Section 2.13 LITIGATION. Except as set forth on Schedule 2.13, there are no actions, suits, investigations, claims or proceedings of any nature or kind whatsoever ("Litigation") pending, to which RLI is a party or to which any of its assets are subject, or, to the knowledge of the Shareholders or RLI, threatened against RLI or its assets, which could reasonably be expected to (i) result in a liability, or the impairment of any asset, in excess of $100,000, in any individual instance or in excess of $250,000, in the aggregate, or (ii) materially and adversely affect the Business or the operations of RLI or the transactions contemplated by this Agreement or any Other Agreement. There are no outstanding judgments, decrees or orders of any Governmental Body 10 18 against or affecting RLI, the RLI Shares, the Business or RLI's assets. RLI has not commenced and does not have pending any material action, suit or proceeding against any third party, except as set forth on Schedule 2.15. Except as set forth in Schedule 2.13, RLI has not been a party to any other Litigation during the past three years which has or had a material adverse effect on the Business. Section 2.14 CONTRACTS; COMPLIANCE. (a) Disclosed on Schedule 2.14 is a list of each contract, lease, indenture, mortgage, instrument, commitment or other agreement, to which RLI is a party or by which it or its assets may be affected with respect to which RLI has continuing Liability and that (i) involves the purchase, sale or lease of any asset, materials, supplies, inventory or services in excess of $200,000 per year; (ii) relates to the borrowing or lending of any money or guarantee of any obligation in excess of $200,000; (iii) limits the right of RLI to compete in any line of business; (iv) is an employment or consulting contract involving the payment of compensation and benefits in excess of $100,000 per year; or (v) involves the pending or former purchase or sale of any material business (each, a "Contract" and, collectively, the "Contracts"), but excluding (A) any Contract that is terminable with no continuing Liability by RLI on no greater than 60 days notice and (B) purchase orders entered into by RLI in the ordinary course of business. Schedule 2.14 discloses any outstanding stand-by letters of credit issued for the account of RLI in excess of $100,000, in any instance or in excess of $250,000 in the aggregate (the "Letters of Credit"). (b) Each Contract is a legal, valid and binding obligation of RLI and is in full force and effect. Except as disclosed on Schedule 2.14, RLI and, to the knowledge of RLI or the Shareholders, each other party to each Contract has performed all obligations required to be performed by it thereunder and is not in breach or default, and is not alleged to be in breach or default, in any respect thereunder, and, to the knowledge of RLI or the Shareholders, no event has occurred and no condition or state of facts exists (or would exist upon the giving of notice or the lapse of time or both) that would become or cause a breach, default or event of default thereunder, would give to any Person the right to cause such a termination or would cause an acceleration of any obligation thereunder. Without limiting the foregoing, except as disclosed on Schedule 2.14, RLI is in compliance with its loan covenants set forth in its construction note and its finishing equipment note, with Bank One. Section 2.15 PERMITS. RLI holds and is in compliance in all material respects with all permits, certificates, licenses, franchises, privileges, approvals, registrations and authorizations required under all Laws, in connection with the operation of RLI's assets and the Business (collectively, the "Permits") and each of such Permits is in full force and effect, except for any failure to comply which would not have a material adverse effect on RLI. No notice of (a) cancellation of or default, dispute or complaint concerning any Permit or (b) any event, condition or state of facts described in the preceding sentence, has been received by RLI, in either case, which would reasonably be expected to have a material adverse effect on RLI. Section 2.16 COMPLIANCE WITH LAWS. RLI has received no notice that it is and, to the knowledge of RLI and the Shareholders, RLI is not, in violation in any material respect of any 11 19 applicable foreign, federal, state and local statutes, laws, ordinances, rules or regulations (collectively, "Laws"), and, to the knowledge of RLI or the Shareholders, no event has occurred or condition or state of facts exists that could give rise to any such violation. Section 2.17 REAL PROPERTY. Schedule 2.17 sets forth a correct list of all real properties currently owned ("Owned Real Property") or leased by RLI or in which RLI has an interest (including options) ("Leased Real Property," collectively, the "Real Property"). RLI has good and marketable title in fee simple to all Owned Real Property. Except as described in Schedule 2.17, there are no leases, subleases, tenancies or other rights of occupancy affecting all or any part of the Owned Real Property, and RLI has not granted any options to purchase or otherwise acquire, and there are no outstanding offers to purchase, all or any part of the Owned Real Property. RLI has previously delivered to ADLT correct and complete copies of all leases with respect to Leased Real Property. RLI has not received any written or oral notice of assessments for public improvements or condemnation against any Real Property. Section 2.18 TRANSACTIONS WITH RELATED PARTIES. Except as disclosed on Schedule 2.18, no Related Party (as hereafter defined) has directly or indirectly: (a) Any interest in any property or assets used or owned by RLI (other than ownership of the RLI Shares); (b) Any agreement or plan providing for payment or vesting (or acceleration of either) of property, severance benefits or other benefits that are contingent on the transactions contemplated by this Agreement or conditioned upon a change of control after the termination of employment of such employee regardless of the reason for such termination of employment or the value of any of the benefits which will be calculated on the basis of any of the transactions contemplated by this Agreement; (c) Become a party to any Contract or has any agreement or understanding of any nature with any party to any Contract with regard to such Contract; or (d) An economic interest in any of RLI's suppliers, vendors or customers other than the ownership of no more than 5% of the outstanding voting stock of a publicly traded corporation. As used herein, the term "Related Party" means (i) the Shareholders, (ii) any Affiliate of the Shareholders, (iii) any officer or director of RLI and (iv) any spouse or other member of the immediately family of any natural person identified in preceding clauses. Without limiting the foregoing, (A) Schedule 2.18 identifies any assets, arrangements or services to which RLI is a party or with respect to which RLI benefits that will have to be replaced or would be materially adversely affected after Closing because RLI will after Closing no longer be owned directly by the Shareholders and (B) Schedule 2.18 identifies any and all assets (including insurance claims files, legal files, accounting information, tax returns, etc.) of RLI in the possession of any of the Shareholders. 12 20 Section 2.19 INSURANCE. Schedule 2.19 sets forth a complete list of all policies of insurance (collectively, the "Insurance Policies") of which RLI is the owner, insured or beneficiary or programs of self insurance and identifies whether such policies are claims made or occurrence policies. Except as set forth on Schedule 2.19, all premiums under the Insurance Policies have been paid in accordance with the terms of the policies and there are no deposits or other amounts for the benefit of RLI held by any third party relating to any insurance or self insurance program of RLI. There have been no defaults with respect to any provision contained in any such Insurance Policies, nor has there been any failure to give any notice or present any unresolved claim under any such policies in a timely fashion or in the manner or detail required by the Insurance Policies. Since November 30, 1996, no notice of cancellation or non-renewal with respect to, or disallowance of any unresolved claim under, or material increase of the premium for any such insurance policy has been received by RLI except in the ordinary course of business. Schedule 2.19 describes any program of self-insurance maintained by RLI or by any Affiliate of RLI for or on behalf of RLI. All of RLI's environmental pollution insurance coverage policies are identified on Schedule 2.19. Section 2.20 EMPLOYEE RELATIONS. No employee of RLI is represented by any union or other labor organization. Except as set forth in Schedule 2.20, no representation election, arbitration proceeding, grievance, labor strike, dispute, slowdown or stoppage is pending or, to the knowledge of RLI or the Shareholders, threatened against, involving, affecting or potentially affecting RLI which would reasonably be expected to have material adverse effect on RLI. No complaint against RLI is pending or, to the knowledge of RLI or the Shareholders, threatened before the National Labor Relations Board, the Equal Employment Opportunity Commission or any similar state or local agency, by or on behalf of any employee of RLI, which, if decided adversely to RLI, would have a material adverse effect on RLI. Neither the execution and delivery of this Agreement, the performance of the provisions hereof nor the consummation of the transactions contemplated hereby will trigger any severance pay obligation under any contract to which RLI or any Affiliate of RLI is a party or under any Law. Section 2.21 PATENTS AND INTELLECTUAL PROPERTY RIGHTS. (a) Schedule 2.21 contains a complete list of all trademark rights, trademark applications, trademark registrations, service marks, trade names and brand names, copyright registrations and copyright applications, letters patent, patent applications, logos and licenses (except for licenses not material to the Business) used in the Business including the expiration dates, if any, of each such intellectual property right. (b) RLI owns or possesses, or can acquire on reasonable terms, the right to use, in the manner and geographic area currently used, (i) the intellectual property rights identified pursuant to subparagraph (a) above and (ii) any other processes, know-how and related know-how, formulae, trade secrets, inventions, discoveries, improvements, blueprints, specifications, drawings, designs, shop and royalty rights and other similar types of proprietary intellectual property, and all research and development related to the Business (collectively, "Intellectual Property Rights") currently used in the Business and RLI has not received any notice of, nor does it have any 13 21 reasonable belief that its use constitutes, a material infringement of or conflict with asserted rights of any third party with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a material adverse change in the condition, financial or otherwise, or Business of RLI. Section 2.22 BENEFIT PLANS. (a) BENEFIT PLANS; RLI PLANS. Schedule 2.22 discloses all written "employee benefit plans" within the meaning of Section 3(3) of the U.S. Employee Retirement Income Security Act of 1974, as amended, and the applicable rulings and regulations thereunder ("ERISA"), and any other written profit sharing, pension, savings, deferred compensation, fringe benefit, insurance, medical, medical reimbursement, life, disability, accident, post-retirement health or welfare benefit, stock option, stock purchase, sick pay, vacation, employment, severance, termination or other plan, agreement, contract, policy, trust fund or arrangement (each, a "Benefit Plan"), whether or not funded, (i) currently maintained or sponsored by RLI, (ii) with respect to which RLI (or the Shareholders with respect to RLI) has or may have Liability or is obligated to contribute, (A) that otherwise covers any of the current or former employees of RLI or its Affiliates or (B) as to which any such current or former employees or their beneficiaries participated or were entitled to participate or accrue or have accrued any rights thereunder (each, a "RLI Plan"). Neither RLI nor any of its Affiliates now maintains or contributes to, or has ever maintained, contributed to or been obligated to contribute to, any employee pension benefit plan as defined in Section 3(2) of ERISA, whether a defined benefit plan or a defined contribution plan, or a plan defined in Section 3(27) of ERISA. (b) RLI GROUP MATTERS; FUNDING. Neither RLI nor any corporation that may be aggregated with RLI under Sections 414(b), (c), (m) or (o) of the Code (the "RLI Group") has any obligation to contribute to or any direct or indirect Liability under or with respect to any Benefit Plan of the type described in Sections 4063 and 4064 of ERISA or Section 413(c) of the Code. RLI does not have any Liability, and after the Closing RLI will not have any Liability, with respect to any Benefit Plan of any other member of the RLI Group, whether as a result of delinquent contributions, distress terminations, fraudulent transfers, failure to pay premiums to the Pension Benefit Guaranty Corporation (the "PBGC"), withdrawal Liability or otherwise which Liability is material to RLI. No accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code) exists nor has any funding waiver from the IRS been received or requested with respect to any RLI Plan or any Benefit Plan of any member of the RLI Group and no excise or other Tax is due or owing because of any failure to comply with the minimum funding standards of the Code or ERISA with respect to any of such plans and which would have a material adverse effect on RLI. (c) COMPLIANCE. To the knowledge of RLI or the Shareholders, and except as such non-compliance would not have a material and adverse effect on RLI, each of the RLI Plans and all related trusts, insurance contracts and funds have been created, maintained, funded and administered in all respects in compliance with all applicable Laws and in compliance with the plan document, trust agreement, insurance policy or other writing creating the same or applicable thereto. 14 22 To the knowledge of RLI or the Shareholders, no RLI Plan is or is proposed to be under audit or investigation, and no completed audit of any RLI Plan has resulted in the imposition of any Tax, fine or penalty. (d) QUALIFIED PLANS. Schedule 2.25 discloses each RLI Plan that purports to be a qualified plan under Section 401(a) of the Code and exempt from United States federal income Tax under Section 501(a) of the Code (a "Qualified Plan"). With respect to each Qualified Plan, a determination letter (or opinion or notification letter, if applicable) covering the U.S. Tax Reform Act of 1986 and later Code changes for which the remedial amendment period has not closed has been received from the IRS that such plan is qualified under Section 401(a) of the Code and exempt from federal income Tax under Section 501(a) of the Code. No Qualified Plan has been amended since the date of the most recent such letter. To the knowledge of RLI or the Shareholders, no member of RLI Group, nor any fiduciary of any Qualified Plan, nor any agent of any of the foregoing, has done anything that would adversely affect the qualified status of a Qualified Plan or the qualified status of any related trust. (e) NO DEFINED BENEFIT PLANS. No RLI Plan is a defined benefit plan within the meaning of Section 3(35) of ERISA (a "Defined Benefit Plan"). No Defined Benefit Plan sponsored or maintained by any member of RLI Group has been terminated or partially terminated after September 1, 1974. During the five year period ending on the Closing Date, no member of RLI Group has transferred a Defined Benefit Plan to a corporation that was not, at the time of transfer, related to the transferor in any manner described in Sections 414(b), (c), (m) or (o) of the Code. (f) MULTIEMPLOYER PLANS. No RLI Plan is a multiemployer plan within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA (a "Multiemployer Plan"). No member of RLI Group has withdrawn from any Multiemployer Plan or incurred any withdrawal Liability to or under any Multiemployer Plan. No RLI Plan covers any employees of any member of RLI Group in any foreign country or territory. (g) PROHIBITED TRANSACTIONS; FIDUCIARY DUTIES; POST-RETIREMENT BENEFITS. No prohibited transaction (within the meaning of Section 406 of ERISA and Section 4975 of the Code) with respect to any RLI Plan exists or has occurred that could subject RLI to any Liability or Tax under Part 5 of Title I of ERISA or Section 4975 of the Code. Neither RLI nor, to the knowledge of RLI or the Shareholders, any administrator or fiduciary of any RLI Plan, nor any agent of any of the foregoing, has engaged in any transaction or acted or failed to act in a manner that will subject RLI to any Liability for a breach of fiduciary or other duty under ERISA or any other applicable Law. With the exception of the requirements of Section 4980B of the Code and except as disclosed on Schedule 2.22, no post-retirement benefits are provided under any RLI Plan that is a welfare benefit plan as described in ERISA Section 3(1). Section 2.23 FINDER'S FEES. Neither the Shareholders nor RLI nor any of RLI's officers, directors or employees has employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finder's fees in connection with the transactions contemplated herein. Neither the Shareholders nor RLI nor any of RLI's officers, directors or employees has made any 15 23 agreement or taken any other action which might cause anyone to become entitled to a broker's fee or commission as a result of the transactions contemplated hereunder. Section 2.24 CONFIDENTIALITY AGREEMENTS. Schedule 2.24 sets forth a true, correct and complete list of all confidentiality agreements to which RLI is a party. Section 2.25 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as described on Schedule 2.25, RLI (i) is in compliance with any applicable Law relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants, including common law nuisance, property damage and similar common law theories ("Environmental Law"), (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its Business and (iii) is in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on RLI. Section 2.26 ENVIRONMENTAL LIABILITIES. To the knowledge of RLI or the Shareholders, there are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with any Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on RLI. Section 2.27 DISCLOSURE. None of the representations or warranties of the Shareholders or RLI contained herein and none of the information contained in the Schedules referred to in Article 2 is false or misleading in any material respect or omits to state a fact herein or therein necessary to make the statements herein or therein not misleading in any material respect. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS Each Shareholder, severally and not jointly, represents and warrants to ADLT, with respect to such Shareholder's RLI Shares, as follows: Section 3.1 TITLE TO RLI SHARES. (a) Except as set forth on Schedule 3.1, such Shareholder has legal, valid, beneficial and exclusive title to his or her RLI Shares, free of all Encumbrances, and (b) upon delivery of such RLI Shares at Closing against receipt of the Purchase Price to be delivered to such Shareholder, ADLT shall acquire legal and valid title to such RLI Shares, free of all Encumbrances. Such Shareholder exclusively holds all rights and powers to vote his or her RLI Shares. Section 3.2 AUTHORIZATION AND ENFORCEABILITY. This Agreement has been duly executed and delivered by such Shareholder and constitutes, and each Other Agreement which is to 16 24 be executed and delivered by such Shareholder, when executed and delivered by such Shareholder, shall constitute the legal, valid and binding agreement of such Shareholder, enforceable against such Shareholder in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws relating to or affecting the rights and remedies of creditors generally and by general principles of equity including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance, injunctive relief or other equitable remedies, regardless of whether enforceability is considered in a proceeding in equity or at law. Section 3.3 NO VIOLATION OF LAWS OR AGREEMENTS. None of the execution and delivery of this Agreement or any Other Agreement, the consummation of the transactions contemplated hereby or thereby or the compliance with or fulfillment of the terms, conditions and provisions hereof or thereof by the Shareholders or RLI will: (i) conflict with, result in a breach of or constitute a default or an event of default (or an event which would, with the passage of time or the giving of notice or both, constitute a default) under any term, condition or provision of, or result in the termination or loss of any right (or give others the right to cause such a termination or loss) under any license, franchise, mortgage or other contract, agreement or instrument to which such Shareholder is a party or by which such Shareholder's assets may be bound or affected, or (ii) result in the creation, maturation or acceleration of any Liability or obligation of such Shareholder. Except as may be required by the HSR Act, no consent, approval, declaration or authorization of, or registration or filing with, any Person (including any Governmental Body) is required in connection with the execution and delivery by such Shareholder of this Agreement or the Other Agreements to which he or she is a party and the consummation of the transactions contemplated hereby and thereby by such Shareholder. Section 3.4 PURCHASE ENTIRELY FOR OWN ACCOUNT. Such Shareholder confirms he or she is acquiring the ADLT Shares solely for his or her own account for investment, not as a nominee or agent and not with a view to the resale or distribution of any part thereof and such Shareholder has no present intention of selling, granting any participation in, or otherwise distributing the same. Such Shareholder further represents that he or she does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or any third person, with respect to any of the ADLT Shares. Section 3.5 RESTRICTED SECURITIES. (a) Such Shareholder understands that the issuance and sale of the ADLT shares pursuant to this Agreement have not been registered pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or under any state securities laws, that the ADLT Shares are characterized as "restricted securities" under the federal securities laws inasmuch as they will be initially acquired from ADLT in a transaction not involving a public offering and that under such laws and applicable regulations, such securities may be resold without registration under the Securities Act, only in certain limited circumstances. In this connection, such Shareholder represents that he or she is familiar with SEC Rule 144 as presently in effect, and understands the resale limitations imposed thereby and by the Act. 17 25 (b) Such Shareholder further understands that the transfer of the ADLT Shares is further limited by the terms of this Agreement and that transfers of the ADLT Shares are generally not permitted prior to the second anniversary of the Closing Date without the consent of ADLT, which consent is in the sole and absolute discretion of ADLT. Section 3.6 DISCLOSURE OF INFORMATION. Such Shareholder represents he or she has had an opportunity to ask questions of and receive answers from ADLT regarding ADLT and its business. Such Shareholder believes he or she has received all the information he or she considers necessary or appropriate for deciding whether to acquire the ADLT Shares. Section 3.7 INVESTMENT EXPERIENCE. Such Shareholder acknowledges he or she is able to fend for himself or herself, can bear the economic risk of his or her investment and has such knowledge and experience in financial or business matters that he or she is capable of evaluating the merits of acquiring the ADLT Shares. Section 3.8 ACCREDITED INVESTOR. Such Shareholder represents he or she is an "accredited investor" as that term is defined in Rule 501 of Regulation D of the Act, as presently in effect. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF ADLT ADLT represents and warrants to the Shareholders as follows: Section 4.1 TITLE TO ADLT SHARES. Upon delivery of the ADLT Shares at Closing against receipt of the RLI Shares, each Shareholder shall acquire legal and valid title to his or her ADLT Shares free of any Encumbrances. Section 4.2 SECURITIES. ADLT is an "accredited investor" as such term is defined in Rule 501 of Regulation D of the Securities Act. ADLT understands that the RLI Shares have not been registered under the Securities Act or any state securities law by reason of specific exemptions under the provisions thereof which depend in part upon the other representations and warranties made by ADLT in this Agreement. ADLT understands that the RLI Shares are "restricted securities" under the Securities Act. ADLT confirms that it is acquiring the RLI Shares for its own account for investment, and not as a nominee or agent and not with a view to the resale or distribution of any part thereof and ADLT has no present intention of selling, granting a participation in or otherwise distributing the same, except that ADLT may pledge the RLI Shares to its lender or transfer the RLI Shares to an Affiliate of ADLT. ADLT does not have any undertaking, agreement or arrangement with any Person to sell, transfer or grant a participation to such Person or any third person, with respect to any of the RLI Shares, other than a pledge of the RLI Shares to ADLT's lender. Section 4.3 ORGANIZATION. ADLT has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Ohio, has the corporate power and 18 26 authority to own or lease its property as now owned or leased and to conduct its business as it is now conducted and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on ADLT and its subsidiaries, taken as a whole. Section 4.4 SHARES; CAPITALIZATION. The authorized capital stock of ADLT consists of (i) 80,000,000 shares of ADLT Common Stock, of which there are issued and outstanding 16,446,943 shares plus (A) shares issued upon exercise of options under ADLT's 1995 Incentive Compensation Plan and ADLT's 1997 Employee Stock Purchase Plan since September 22, 1997 and (B) shares issued upon the prior written consent of RLI pursuant to Section 6.1 hereof, and (ii) 1,000,000 shares of Preferred Stock, $.001 par value, none of which is issued and outstanding. On the Closing Date, the ADLT Shares will be duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights created by statute, ADLT's Articles of Incorporation or Regulations or any agreement to which ADLT is a party or is bound. Section 4.5 SUBSIDIARIES. Each subsidiary of ADLT has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own or lease its property and to conduct its business as described in the Prospectus and the Annual Report (as defined in Section 4.8) and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on ADLT and its subsidiaries, taken as a whole; all of the issued shares of capital stock of each subsidiary of ADLT have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly by ADLT or a subsidiary of ADLT, free and clear of all liens, encumbrances, equities or claims. A list of all entities in which the equity interest of ADLT (and all subsidiaries of ADLT, taken as a whole) exceeds 20% is set forth on Schedule 4.5. Section 4.6 AUTHORIZATION AND ENFORCEABILITY. The execution, delivery and performance by ADLT of this Agreement has been duly authorized by all necessary corporate action on its part. The execution, delivery and performance by ADLT of each Other Agreement to which ADLT is a party has been duly authorized by all necessary action on its part. This Agreement has been duly executed and delivered by and constitutes, and each Other Agreement which is to be executed and delivered by ADLT, when executed and delivered by ADLT, shall constitute the legal, valid and binding obligation of ADLT, enforceable against ADLT in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws relating to or affecting the rights and remedies of creditors generally and by general principles of equity including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance, injunctive relief or other equitable remedies, regardless of whether enforceability is considered in a proceeding in equity or at law. 19 27 Section 4.7 NO VIOLATION OF LAWS OR AGREEMENTS. Except as set forth on Schedule 4.7, none of the execution and delivery of this Agreement or any Other Agreements, the consummation of the transactions contemplated hereby or thereby or the compliance with or fulfillment of the terms, conditions and provisions hereof or thereof by ADLT, nor the execution and delivery of any Other Agreement, the consummation of the transactions contemplated thereby or the compliance with or fulfillment of the terms, conditions and provisions thereof by ADLT, will: (i) contravene any provision of the charter or regulations of ADLT or any of its subsidiaries, (ii) conflict with, result in a breach of or constitute a default or an event of default (or an event which would, with the passage of time or the giving of notice or both, constitute a default) under any term, condition or provision of, or results in the termination or loss of any right (or give others the right to cause such a termination or loss) under, any license, franchise, indenture, mortgage or any other contract, agreement or instrument to which ADLT or any of its subsidiaries is a party or by which the assets of ADLT or any of its subsidiaries may be bound or affected, and which is material to ADLT and its subsidiaries, taken as a whole, (iii) violate any Law or judgment or order of any Governmental Body to which ADLT or any of its subsidiaries is subject, (v) result in the creation or imposition of any Encumbrance upon the ADLT Shares or gives to others any interests or rights therein, or (iv) result in the maturation or acceleration of any Liability or obligation of ADLT (or gives others the right to cause such a maturation or acceleration). Except as may be required by the HSR Act and the Exchange Act (as defined below), and the listing of the ADLT Shares on the NASDAQ National Market, no consent, approval, declaration or authorization of, or registration or filing with, any Person (including any Governmental Body) is required in connection with the execution and delivery by ADLT of this Agreement and the Other Agreements and the consummation of the transactions contemplated hereby and thereby by ADLT or the execution and delivery by ADLT of the Other Agreements to which it is a party and the consummation of the transactions contemplated thereby by ADLT; provided, however, that, in making this representation, ADLT is relying on certain representations of RLI and the Shareholders, pursuant to which the issuance of the ADLT Shares is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). Section 4.8 SEC REPORTS. ADLT has delivered to the Shareholders a copy of the following documents filed with the Securities and Exchange Commission ("SEC") by ADLT pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"): ADLT's Annual Report on Form 10-K for the fiscal year ended June 30, 1997 (the "Annual Report"), ADLT's proxy statement dated September 30, 1997 with respect to ADLT's annual shareholders meeting held on November 12, 1997 (the 1997 Proxy Statement") and each other SEC Filing made by ADLT pursuant to the Exchange Act after June 30, 1997 and prior to the date of this Agreement (the "Exchange Act Filings") and the 424(b) prospectus, dated July 1, 1997, related to ADLT's Registration Statement No. 333-28529 (the "Prospectus") (the Exchange Act Filings and the Prospectus are sometimes referred to collectively as the SEC Filings"). The SEC Filings, as of their respective filing dates, (i) complied as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. 20 28 Section 4.9 FINDER'S FEES. Neither ADLT, its Affiliates nor any of their respective officers, directors or employees has employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finder's fees in connection with the transactions contemplated herein. Neither ADLT, its Affiliates nor any of their respective officers directors or employees has made an agreement or taken any other action which might cause anyone to become entitled to a broker's fee or commission as a result of the transactions contemplated hereunder. Section 4.10 DISCLOSURE. None of the representations or warranties of ADLT contained herein is false or misleading in any material respect or omits to state a fact herein necessary to make the statements herein not misleading in any material respect. Section 4.11 NO MATERIAL ADVERSE CHANGE. There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of ADLT and its subsidiaries, taken as a whole, from that set forth in the Annual Report. Section 4.12 LITIGATION. There is no Litigation pending, or to the knowledge of ADLT, or threatened to which ADLT or any of its subsidiaries is a party or to which any of the properties of ADLT or any of its subsidiaries is subject (i) affecting the transactions contemplated by this Agreement or any Other Agreement or (ii) that are required to be described in the Exchange Act Filings and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Exchange Act Filings or to be filed as exhibits to the Exchange Act Filings that are not described or filed as required. Section 4.13 COMPLIANCE WITH ENVIRONMENTAL LAWS. ADLT and its subsidiaries (i) are in compliance with any and all Environmental Laws, (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on ADLT and its subsidiaries, taken as a whole. Section 4.14 ENVIRONMENTAL LIABILITIES. To the knowledge of ADLT, there are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on ADLT and its subsidiaries, taken as a whole. Section 4.15 REGISTRATION RIGHTS. Other than the Registration Rights and Option Agreement dated December 15, 1995 among General Electric Company, ADLT and Wayne R. Hellman, there are no contracts, agreements or understandings between ADLT and any person 21 29 granting such person the right to require ADLT to file a registration statement under the Securities Act with respect to any securities of ADLT. Section 4.16 FINANCIAL STATEMENTS. The consolidated financial statements and schedules of ADLT and its subsidiaries included in the Annual Report (the ADLT Financial Statements") fairly present the financial position of ADLT and the results of operations and cash flows as of the dates and periods therein specified. Such financial statements and schedules have been prepared in accordance with GAAP consistently applied throughout the periods involved (except as otherwise noted therein). The selected financial data set forth under the caption "Selected Financial Data" in the Annual Report fairly present, on the basis stated in the Annual Report, the information included therein. Section 4.17 PROPERTIES. ADLT and each of its subsidiaries have good and marketable title in fee simple to all items of real property and good and marketable title to all personal property owned by each of them, in each case free and clear of any security interests, liens, encumbrances, equities, claims and other defects, except such as do not materially and adversely affect the value of such property and do not interfere with the use made or proposed to be made of such property by ADLT or such subsidiary, and any real property and buildings held under lease by ADLT or any such subsidiary are held under valid, subsisting and enforceable leases, with such exceptions as are not material and do not interfere with the use made or proposed to be made of such property and buildings by ADLT or such subsidiary, in each case except as described in or contemplated by the Annual Report. Section 4.18 EMPLOYEE MATTERS. No representation election, arbitration proceeding, grievance, labor strike, dispute, slowdown or stoppage is pending or, to the knowledge of ADLT, threatened against ADLT or any of its subsidiaries which would reasonably be expected to result in a material adverse change in the condition, financial or otherwise, or business of ADLT and its subsidiaries taken as a whole, except as described in or contemplated by the Annual Report. Section 4.19 INTELLECTUAL PROPERTY. ADLT and its subsidiaries own or possess, or can acquire on reasonable terms, all material Intellectual Property Rights currently used by them in connection with their respective businesses, and neither ADLT nor any such subsidiary has received any notice of, or has any reasonable belief that its use constitutes, a material infringement of or conflict with asserted rights of any third party with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a material adverse change in the condition, financial or otherwise, or business of ADLT and its subsidiaries. Section 4.20 INSURANCE. ADLT and each of its subsidiaries is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; neither ADLT nor any such subsidiary has been refused any insurance coverage sought or applied for; and neither ADLT nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be 22 30 necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or in the management, business prospects, earnings, business or operations of ADLT and its subsidiaries taken as a whole, except as described in or contemplated by the Annual Report. All premiums under all insurance policies of which ADLT or any of its subsidiaries is the owner, insured or beneficiary have been paid in accordance with the terms of such policies and there have been no defaults with respect to any provision contained in any such policies, nor has there been any failure to give any notice or present any unresolved claim under any such policies in a timely fashion or in the manner or detail required by such policies. Section 4.21 LIMITATIONS ON SUBSIDIARY DIVIDENDS. Except as set forth in ADLT's Revolving Credit and Security Agreement by and between ADLT, its subsidiaries and BNY Financial Corporation and except as set forth in the Postponement of Claim and Assignment dated as of February 11, 1997 by and among the Royal Bank of Canada, Canadian Lighting Systems Holding, Inc. and Ballastronix, Inc., no subsidiary of ADLT is currently prohibited pursuant to any agreement, directly or indirectly, from paying any dividends to ADLT, from making any other distribution on such subsidiary's capital stock, from repaying to ADLT any loans or advances to such subsidiary of ADLT or from transferring any of such subsidiary's property or assets to ADLT or any other subsidiary of ADLT, except as described in or contemplated by the Annual Report. Section 4.22 PERMITS. ADLT and its subsidiaries possess and are in compliance in all material respects with all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither ADLT nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to result in a material adverse change in the condition, financial or otherwise, or business of ADLT and its subsidiaries. Section 4.23 TAX MATTERS. ADLT, its subsidiaries and each Predecessor (as such term is defined in the Prospectus), have filed all foreign, federal, state and local tax returns that are required to be filed or have requested extensions thereof (except in any case in which the failure so to file would not have a material adverse effect on ADLT and its subsidiaries taken as a whole) and have paid all taxes required to be paid by them and any other assessment, fine or penalty levied against them, to the extent that any of the foregoing is due and payable, except for any such assessment, fine or penalty that is currently being contested in good faith or as described in or contemplated by the Annual Report. Section 4.24 NO DEFAULT. No default exists, and no event has occurred which, with notice or lapse of time or both, would constitute a default in the due performance and observance of any term, covenant or condition of any indenture, mortgage, deed of trust, lease or other material agreement or instrument to which ADLT or any of its subsidiaries is a party or by which ADLT or any of its subsidiaries or any of their respective properties is bound or may be affected in any material adverse respect with regard to property, business or operations of ADLT and its subsidiaries taken as a whole, including, without limitation, each agreement filed or incorporated by reference 23 31 as an exhibit to the Annual Report (the ADLT Contracts"). Each ADLT Contract is a legal, valid and binding obligation of ADLT and is in full force and effect. Section 4.25 PRIVATE PLACEMENTS; SECURITIES. (a) Other than the 2,900,000 shares of ADLT Common Stock sold by ADLT in the initial public offering on December 11, 1995 (the "IPO"), the 2,452,050 shares of ADLT Common Stock of ADLT sold by ADLT in the July 1996 public offering and the 3,000,000 shares of ADLT Common Stock sold by ADLT in the July 1997 public offering, and offers and sales pursuant to ADLT's 1995 Incentive Award Plan and ADLT's Employee Stock Purchase Plan, all offers and sales of ADLT Common Stock by ADLT prior to the date hereof, including the offer and sale of 7,281,848 shares of Common Stock in connection with the Combination (as such term is defined in the Prospectus), were at all relevant times exempt from the registration requirements of the Securities Act, and were the subject of an available exemption from the registration requirements of all applicable state securities or blue sky laws. (b) Except as disclosed in the SEC Filings, there are no outstanding (i) securities or obligations of ADLT or any of its subsidiaries convertible into or exchangeable for any capital stock of ADLT or any such subsidiary, (ii) warrants, rights or options to subscribe for or purchase from ADLT or any such subsidiary any such capital stock or any such convertible or exchangeable securities or obligations, or (iii) obligations of ADLT or any such subsidiary to issue any shares of capital stock, any such convertible or exchangeable securities or obligations, or any such warrants, rights or options. Section 4.26 COMPLIANCE WITH LAWS. ADLT has received no notice that it is, and, to the knowledge of ADLT, ADLT is not, in violation in any material respect of any applicable Laws, and, to the knowledge of ADLT, no event has occurred or condition or state of facts exists that could give rise to any such violation, except for any violation which would not have a material adverse effect on ADLT and its subsidiaries, taken as a whole. Section 4.27 INTERESTED PARTY TRANSACTIONS. Since the date of the 1997 Proxy Statement, no officer or director of ADLT, or any spouse or member of the immediate family of such officer or director, has acquired any interest in any property of ADLT or any of its subsidiaries (except as a shareholder of ADLT) or has entered into any business relationship with ADLT or any of its subsidiaries (except as an employee, officer, director or shareholder thereof), in any such case, of a nature which would be required to be disclosed in a proxy statement relating to the election of directors filed under the Exchange Act. Section 4.28 UNDISCLOSED LIABILITIES. Except as disclosed in the ADLT financial statements or as otherwise disclosed in the SEC Filings or in Schedule 4.28 hereto, ADLT has no Liabilities other than Liabilities incurred in the ordinary course of business since June 30, 1997. 24 32 ARTICLE 5 COVENANTS OF THE SHAREHOLDERS AND RLI Section 5.1 CONDUCT OF BUSINESS PENDING CLOSING. During the period commencing on the date of this Agreement and ending on the earlier to occur of (i) the Closing or (ii) the termination of this Agreement (the "Interim Period"), and unless ADLT shall otherwise consent or agree in writing and without limiting any other provision herein, RLI shall, and the Shareholders shall cause RLI to, conduct its affairs as follows: (a) ORDINARY COURSE; COMPLIANCE. The Business shall be conducted in the ordinary course and substantially consistent with past practice. RLI shall use reasonable best efforts to maintain its property, equipment and other assets consistent with past practice and shall comply timely in all material respects with the provisions of all its leases, agreements, contracts and commitments in connection with the Business or its assets. (b) PRESERVATION OF BUSINESS. During the Interim Period, RLI shall use reasonable efforts to preserve its business organization intact, keep available the services of its employees and preserve the goodwill of its suppliers, customers and others having business relations with it. (c) PROHIBITED TRANSACTIONS. During the Interim Period, RLI shall not, nor shall the Shareholders cause or permit RLI to: i. Amend its charter documents or bylaws; ii. Enter into any contract or commitment which is made other than in the ordinary course of business, the terms of which are consistent with past practice; iii. Form any subsidiary; iv. Enter into any employment contract that is not terminable at will, without penalty or obligation continuing after the Closing Date; v. Make, change or revoke any Tax election or make any agreement or settlement with any taxing authority that relates to the period after Closing; vi. Create any Encumbrance, other than Permitted Encumbrances, on any assets, tangible or intangible; vii. Declare, set aside or pay any dividend or other distribution (whether in cash, stock, property or any combination thereof), other than Permitted Dividends, in respect of RLI Common Stock or directly or indirectly issue, sell, redeem, purchase or otherwise acquire or dispose of, or create any Securities Rights with respect to, RLI Common Stock or any rights to purchase RLI Common Stock or securities convertible into or exchangeable for RLI Common Stock; 25 33 viii. Increase any of the salaries or other compensation payable or to become payable to, or make any advance or loan to, any employee, or make any increase in, or any addition to, other benefits (including any RLI Benefit Plan) to which any employee may be entitled, or make any payments to or in respect of any RLI Benefit Plan (other than a discretionary payment to the Company's 401(k) salary deferral arrangement not in excess of $257,500) or any change in any RLI Benefit Plan which is not consistent with past practice; ix. Make or authorize any single capital expenditure or series of related capital expenditures in excess of $200,000 or acquire (by merger, consolidation or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof, or make any investment either by purchase of stock or securities, contribute capital, make any loan or advance of funds to any Person or, except in the ordinary course of business, purchase any property or assets; x. Sell, transfer or otherwise dispose of any assets (other than inventory, the Excess Real Estate and Permitted Dividends), except sales of assets in the ordinary course of business not in excess of $100,000; or xi. Make any payment, loan or advance of any amount to or in respect of, or any sale, transfer or lease of any properties or assets (whether real, personal or mixed, tangible or intangible) to, or consummate any transaction or create any agreement or arrangement with, any Related Party, except for (A) compensation to the officers and employees at rates not exceeding the rates of compensation existing on the date hereof (or reflecting increases in compensation consistent with past practice), (B) Permitted Dividends, (C) purchase by Ruud of the $2,000,000 life insurance policy on his life presently owned by RLI, at a purchase price at least equal to the policy's cash surrender value at the time of such purchase, (D) the sale of the Excess Real Estate, and (E) otherwise as contemplated by this Agreement. Section 5.2 ACCESS, INFORMATION AND DOCUMENTS. During the Interim Period, the Shareholders and RLI shall give to ADLT and to its employees and representatives (including independent public accountants, attorneys, environmental consultants and engineers) access during normal business hours to all of the properties (including Real Property for purposes of an environmental assessment), books, Tax returns, contracts, commitments, records, officers, personnel and accountants (including independent public accountants) of RLI and shall furnish to ADLT all such documents and copies of documents and all information with respect to the affairs of RLI as ADLT may reasonably request. Section 5.3 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. The Shareholders shall use their reasonable efforts to ensure that RLI conducts, and RLI shall use its 26 34 reasonable best efforts to conduct, the Business in such a manner that, at the Closing, the representations and warranties of the Shareholders and RLI contained in this Agreement shall be true and correct in all material respects as though such representations and warranties were made on, as of, and with reference to such date. The Shareholders and RLI shall each promptly notify ADLT of any lawsuit, claim, proceeding or investigation that may be threatened, brought, asserted or commenced after the date hereof against RLI. The Shareholders and RLI shall each notify ADLT of any facts or circumstances as to which it obtains knowledge that cause any representation and warranty contained in Article 2 or 3 of this Agreement or relating to any matters required to be set forth in the related Schedules hereto to be untrue. Section 5.4 FILINGS AND AUTHORIZATIONS. As promptly as practicable, each of RLI and the Shareholders shall make, or cause to be made, such filings and submissions under law, rules and regulations applicable to it, including the HSR Act, as may be required for it to consummate the purchase and transfer of the RLI Shares hereunder, and shall use its best efforts to obtain, or cause to be obtained, all authorizations, approvals, consents and waivers from all Governmental Bodies necessary to be obtained by it. Section 5.5 NOTICE OF CHANGES. During the Interim Period, the Shareholders and RLI shall give ADLT prompt written notice of any material change or inaccuracies in any data previously given or made available to ADLT pursuant to this Agreement. Section 5.6 SECTION 338(h)(10) ELECTION; CERTAIN TAX RETURNS. The Shareholders shall join with ADLT in the timely filing of a joint election pursuant to Section 338(h)(10) of the Code (the "Section 338(h)(10) Election") under which, for federal (and state, where permissible) income tax purposes, the sale of the RLI Shares will be treated as if it were a sale of all of the assets of RLI in a single transaction on the Closing Date. The Shareholders shall take all reasonable steps required in order to make the Section 338(h)(10) Election valid. The Shareholders shall use the purchase price allocation and values set forth in the appraisals conducted in accordance with Section 6.9 in the preparation of all Tax returns relating to the income of RLI or the income of the Shareholders resulting from the transactions contemplated hereby. Section 5.7 TAX RETURNS AND PAYMENT OF TAXES FOR PERIODS THROUGH THE CLOSING DATE. The Shareholders shall pay any Tax due with respect to the income of RLI for all periods up to and including the Closing Date and amounts due as a result of the Section 338(h)(10) Election. The Shareholders shall be responsible for and pay all Taxes of RLI and each Subsidiary up to and including the Closing Date, including any Taxes attributable to any audits of RLI's federal income Tax returns currently in process. The Shareholders shall be entitled to all income tax refunds for all taxable periods ending before the Closing Date. Section 5.8 RESALE OF ADLT SHARES. No Shareholder (and no permitted transferee of the ADLT Shares of any Shareholder) shall transfer any ADLT Shares prior to the second anniversary of the Closing Date (the "Restricted Period") without the prior written consent of ADLT, which consent is in the sole and absolute discretion of ADLT; provided, however, that any Shareholder may make a charitable donation of some or all of such Shareholder's shares or a 27 35 transfer, other than a transfer for value, to any member of such Shareholder's immediate family, provided, in either such case, that such transferee is bound by the transfer restrictions set forth in this Section 5.8. If, during the Restricted Period, any Shareholder pledges any of his or her ADLT Shares as security for a loan, such Shareholder agrees not to intentionally take any action, or omit to take any action, which would cause a default on the loan secured by the ADLT Shares during the Restricted Period. After expiration of the Restricted Period, any Shareholder (and any permitted transferee) may transfer his or her ADLT shares only in accordance with applicable securities laws. Section 5.9 NO NEGOTIATIONS. Until the termination of this Agreement, neither RLI nor any Shareholder shall institute, continue or otherwise entertain or maintain negotiations or discussions with any person, other than ADLT, with respect to the sale of all, or substantially all, the capital stock, business or assets of RLI. Section 5.10 1997 AUDITED FINANCIAL STATEMENTS. At least two business days prior to the Closing, Rudd shall provide ADLT with an Audited Annual Statement for the fiscal year ended November 30, 1997. ARTICLE 6 COVENANTS OF ADLT Section 6.1 CONDUCT OF BUSINESS PENDING CLOSING. During the Interim Period, and unless RLI shall agree in writing and without limiting any other provision herein, ADLT shall conduct its affairs and the affairs of its subsidiaries as follows: (a) ORDINARY COURSE; COMPLIANCE. The Business shall be conducted in the ordinary course and substantially consistent with past practice. ADLT and each of its subsidiaries shall use reasonable best efforts to maintain its property, equipment and other assets consistent with past practice and shall comply timely in all material respects with the provisions of all its leases, agreements, contracts and commitments in connection with its business or assets. (b) PROHIBITED TRANSACTIONS. During the Interim Period, ADLT shall not, nor shall ADLT cause or permit any of its Subsidiaries to: i. Amend its charter documents or bylaws; ii. Enter into any contract or commitment which is made other than in the ordinary course of business the terms of which are consistent with past practice; iii. Issue any shares of ADLT capital stock, or grant any options, warrants or other rights to purchase such capital stock or other securities exchangeable for or convertible into such capital stock, other than options issued under ADLT's 1995 Incentive Award Plan, 1997 Employee Stock Purchase Plan and 1997 Billion Dollar Market Capitalization Incentive Award Plan, all as 28 36 defined in the Exchange Act Filings, and shares issued upon exercise of options under such plans; iv. Declare, set aside or pay any dividend or other distribution (whether in cash, stock, property or any combination thereof) in respect of ADLT Common Stock or any securities of any subsidiary of ADLT other than dividends by any direct or indirect subsidiary of ADLT to its parent; v. Sell, transfer or convey, or enter into an agreement to sell, transfer or convey, all or a material portion of its assets, except sales of assets in the ordinary course of business; provided, however, that ADLT or any of its subsidiaries may transfer assets used or useful in the design or manufacture of fiber optic lighting systems to a joint venture with Rohm and Haas Company, or its subsidiary; vi. Make any payment, loan or advance of any amount to or in respect of, or any sale, transfer or lease of any properties or assets (whether real, personal or mixed, tangible or intangible) to, or consummate any transaction or create any agreement or arrangement with, any Person which is an "affiliate" of ADLT as defined in the Exchange Act, except for compensation to the officers and employees at rates not exceeding the rates of compensation existing on the date hereof and otherwise as contemplated by this Agreement; or vii. Amend ADLT's 1995 Incentive Award Plan, 1997 Employee Stock Purchase Plan or 1997 Billion Dollar Market Capitalization Incentive Award Plan. Section 6.2 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. ADLT shall use its reasonable efforts to conduct its business in such a manner that, at the Closing, the representations and warranties of ADLT contained in this Agreement shall be true and correct in all material respects as though such representations and warranties were made on, as of, and with reference to such date. ADLT shall promptly notify the Shareholders of any lawsuit, claim, proceeding or investigation that may be threatened, brought, asserted or commenced after the date hereof against ADLT or any subsidiary of ADLT. ADLT shall notify the Shareholders of any facts or circumstances as to which it obtains knowledge that cause any representation and warranty contained in Article 4 of this Agreement or relating to any matters required to be set forth in the related Schedules hereto to be untrue. Section 6.3 FILINGS AND AUTHORIZATIONS. As promptly as practicable, ADLT shall make, or cause to be made, such filings and submissions under law, rules and regulations applicable to it, including the HSR Act, as may be required for it to consummate the purchase and transfer of the RLI Shares hereunder, and shall use its best efforts to obtain, or cause to be obtained, all authorizations, approvals, consents and waivers from all Governmental Bodies necessary to be obtained by it. 29 37 Section 6.4 NOTICE OF CHANGES. During the Interim Period, ADLT shall deliver to the Shareholders copies of any material public disclosures made by ADLT and shall give RLI prompt written notice of any material change or inaccuracies in any data previously given or made available to RLI or the Shareholders pursuant to this Agreement. Section 6.5 STOCK OPTION PLAN. On or prior to the Closing Date ADLT will adopt a stock option plan, substantially in the form of Exhibit F hereto (the "Stock Option Plan"), with effect on the Closing Date. To the extent required to permit options under such plan to be incentive stock options under the Code, ADLT will include approval of such stock option plan in its proxy statement for its 1998 annual meeting of shareholders. Section 6.6 EMPLOYEE BENEFITS. ADLT will maintain in force each RLI Plan which was in force on September 17, 1997 until the first anniversary of the Closing Date, unless ADLT can provide improved benefit plans reasonably acceptable to RLI management. Section 6.7 ADLT BOARD OF DIRECTORS. As promptly as practicable following the Closing, the Board of Directors of ADLT shall (i) elect Ruud Vice Chairman of ADLT, (ii) appoint Ruud to the vacant seat on the ADLT Board of Directors with the term expiring at ADLT's annual meeting in 2000, and (iii) appoint John R. Buerkle, or another individual nominated by Ruud and reasonably acceptable to the ADLT Board of Directors, to the vacant seat on the ADLT Board of Directors with the term expiring at ADLT's annual meeting in 1999. Section 6.8 STOCK LEGENDS. After expiration of the Restricted Period, ADLT shall instruct its transfer agent to reissue to any Shareholder (or its permitted transferee), upon surrender of the certificates for their ADLT Shares, a certificate or certificates representing such Shareholder's (or transferee's) ADLT Shares without the restrictive legend set forth on such certificate referring to the transfer restrictions set forth in Section 5.8 of this Agreement. Section 6.9 PURCHASE PRICE ALLOCATION; APPRAISALS. ADLT shall obtain, at its sole expense, appraisals, by appraisers reasonably satisfactory to ADLT and RLI, of (a) the value of the ADLT Shares for the purpose of determining the Tax liabilities of the parties and (b) the value of the assets of RLI. ADLT shall promptly prepare a purchase price allocation based on the values set forth in such appraisals and deliver a copy of such allocation to each Shareholder. ADLT shall use such purchase price allocation and values for the purposes of preparation of its Tax returns. Section 6.10 PERMITTED DIVIDENDS. Notwithstanding anything in this Agreement to the contrary, ADLT shall permit RLI to declare and pay, and RLI may declare and pay, Permitted Dividends at any time prior to the Closing. Section 6.11 ACCESS, INFORMATION AND DOCUMENTS. During the Interim Period, ADLT shall give to RLI and to its employees and representatives (including independent public accountants, attorneys, environmental consultants and engineers) access during normal business hours to all of the properties, books, Tax returns, contracts, commitments, records, officers, 30 38 personnel and accountants (including independent public accounts) of ADLT and its subsidiaries and shall furnish to RLI all such documents and copies of documents and all information with respect to the affairs of ADLT and its subsidiaries as RLI shall reasonably request. Section 6.12 POST-CLOSING INDEMNIFICATION OF CERTAIN PERSONS. (a) From and after the Closing, ADLT shall, and shall cause RLI to, indemnify, defend and hold harmless the present and former officers, directors, employees, agents and representatives of RLI (collectively, the "Indemnified Parties") against all losses, expenses, claims, damages or liabilities arising out of actions or omissions occurring at or prior to the Closing (including, without limitation, the transactions contemplated by this Agreement) to the fullest extent permitted or required under the Wisconsin Business Corporation Law (the "Wisconsin Law") or other applicable state law (and shall also advance reasonable expenses as incurred to the fullest extent permitted under the Wisconsin Law or other applicable state law, provided that the persons to whom expenses are advanced provide an undertaking to repay such advances contemplated by the Wisconsin Law). ADLT agrees that all rights to indemnification, including provisions relating to advances of expenses incurred in defense of any claim, action, suit, proceeding or investigation (a "Claim") existing in favor of the Indemnified Parties as provided in RLI's Articles of Incorporation or By-Laws or other agreement or provisions, as in effect as of the date hereof, with respect to matters occurring through the Closing, shall survive the Closing and shall continue in full force and effect. (b) Without limiting the foregoing, in the event any Claim is brought against any Indemnified Party (whether arising before or after the Closing) after the Closing (i) the Indemnified Parties may retain counsel satisfactory to them (subject to approval by ADLT and RLI, which approval will not be unreasonably withheld or delayed), (ii) ADLT and RLI shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received subject to the ability of ADLT and RLI to receive such information relative to the legal services provided as is customarily provided and reasonably requested by ADLT and RLI, and (iii) ADLT and RLI will use all reasonable efforts to assist in the vigorous defense of any such matter, provided that neither ADLT nor RLI shall be liable for any settlement of any Claim effected without its written consent, which consent, however, shall not be unreasonably withheld or delayed. Any Indemnified Party wishing to claim indemnification under this Section 6.12, upon learning of any such Claim, shall notify ADLT (but the failure so to notify ADLT shall not relieve it from any liability which it may have under this Section 6.12 except to the extent such failure materially prejudices ADLT). The Indemnified Parties as a group may retain only one law firm to represent them with respect to each such matter unless there is, as evidenced by the written opinion of counsel reasonably acceptable to ADLT and RLI, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Parties. (c) This section 6.12 is intended to benefit the Indemnified Parties and shall be binding on all successors and assigns of ADLT and RLI. 31 39 ARTICLE 7 CONDITIONS TO CLOSING Section 7.1 MUTUAL CONDITIONS PRECEDENT. The obligations of ADLT and the Shareholders to proceed with the Closing under this Agreement are subject to the fulfillment prior to the Closing of the following conditions: (a) LITIGATION. No order of any Governmental Body shall be in effect which enjoins, restrains or prohibits the transactions contemplated hereby or that would limit or adversely affect ADLT's ownership of the RLI Shares or the Shareholders's ownership of the ADLT Shares, and there shall not have been threatened, nor shall there be pending, any action or proceeding by or before any Governmental Body challenging any of the transactions contemplated by this Agreement or the Other Agreements or seeking monetary relief by reason of the consummation of such transactions. (b) FILINGS. The filing and waiting period requirements of any applicable federal or state law or Governmental Body relating to the consummation of the transactions contemplated by this Agreement and the Other Agreements shall have been complied with. Section 7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF ADLT. The obligation of ADLT to proceed with the Closing under this Agreement is subject to the fulfillment prior to or at Closing of the following conditions (any one or more of which may be waived in whole or in part by ADLT at ADLT's option): (a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties of the Shareholders and RLI contained in Article 2 of this Agreement, and each of the representations and warranties of the Shareholders contained in Article 3 of this Agreement, shall be true and correct in all material respects on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made on, as of and with reference to such date. (b) PERFORMANCE AND COMPLIANCE. The Shareholders and RLI shall each have performed in all material respects all of the covenants and complied in all material respects with all of the provisions required by this Agreement to be performed or complied with by it on or before the Closing. (c) NO MATERIAL ADVERSE CHANGE. Between October 28, 1997 and the Closing Date, there shall have been no material adverse change in the financial condition, assets, Liabilities, net worth, Business or prospects of RLI or any Subsidiary, and no event or condition shall have occurred or exist that might be expected to cause such a change in the future. (d) APPROVAL BY ADLT BOARD OF DIRECTORS. The Board of Directors of ADLT shall have approved this Agreement, the Other Agreements and the consummation of the transactions 32 40 contemplated hereby and thereby. Messrs. Wayne Hellman and Louis Fisi agree to use their best efforts to obtain such approval promptly after the signing of this Agreement. (e) CLOSING DOCUMENTS. Receipt of the deliveries referred to in Section 1.6(a) and (b). (f) CONSENTS. Receipt of evidence reasonably satisfactory to ADLT that the consents set forth in Schedule 2.6 have been obtained. Section 7.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDERS. The obligation of the Shareholders to proceed with the Closing hereunder is subject to the fulfillment prior to or at Closing of the following conditions (any one or more of which may be waived in whole or in part by the Shareholders at the Shareholders's option): (a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties of ADLT contained in Article 4 of this Agreement shall be true and correct in all material respects on, as of, and with reference to the Closing Date, with the same force and effect as though such representations and warranties had been made on, as of and with reference to such date. (b) PERFORMANCE AND COMPLIANCE. ADLT shall have performed in all material respects all of the covenants and complied in all material respects with all of the provisions required by this Agreement to be performed or complied with by it on or before the Closing. ADLT shall have performed in all material respects all of the covenants and complied in all material respects with all of the provisions required by the Other Agreements to which it is a party to be performed or complied with by it on or before Closing. (c) NO MATERIAL ADVERSE CHANGE. Between June 30, 1997 and the Closing Date, there shall have been no material adverse change in the financial condition, assets, liabilities, net worth, business or prospects of ADLT and its subsidiaries taken as a whole, and no event or condition shall have occurred or exist that might be expected to cause such a change in the future. (d) CLOSING DOCUMENTS. The Shareholders shall have received the deliveries referred to in Section 1.6(c). ARTICLE 8 TERMINATION Section 8.1 TERMINATION. This Agreement may be terminated at any time prior to Closing by: (i) mutual consent of ADLT, Shareholders holding a majority of the RLI Shares and RLI; (ii) ADLT, if (A) any of the conditions specified in Sections 7.1 or 7.2 hereof shall not have been fulfilled by January 20, 1998 and shall not have been waived by ADLT, but only if ADLT has not caused the condition giving rise to termination not to be satisfied through its own action or inaction, or (B) if the ADLT Stock Price on the Closing Date is less than $20 per share; or (iii) the Shareholders holding a majority of the RLI Shares if (A) any of the conditions specified in 33 41 Sections 7.1 or 7.3 hereof shall not have been fulfilled by January 20, 1998 and shall not have been waived by the Shareholders, but only if the Shareholders or RLI have not caused the condition giving rise to termination not to be satisfied through their own action or inaction, or (B) if the ADLT Stock Price on the Closing Date is less than $20. Nothing in this Section 8.1 shall be construed as excusing the breach of any obligation under this Agreement or as limiting the remedies which may be available to any non-breaching party in respect of such breach. Notwithstanding the foregoing, in the event that this Agreement is terminated by one party hereto pursuant to clause (ii) or (iii) of the first sentence of this Section solely as a result of a breach by another party hereto of a representation or warranty of such other party as of a date after the date of this Agreement, which breach could not have been reasonably anticipated by such other party and was beyond the reasonable control of such other party, then neither party shall have any liability to the other hereunder. Any dispute arising under this Section 8.1 shall be resolved by arbitration in accordance with the rules of the American Arbitration Association in the City of Cleveland, Ohio using three arbitrators, one being chosen by Shareholders holding a majority of the RLI Shares, one being chosen by ADLT and the third being chosen by the other two arbitrators (collectively, the "Arbitrators"). The term "ADLT Stock Price" shall mean the average of the last sale prices, as reported by the NASDAQ National Market, for the ten trading days immediately preceding the date of calculation. ARTICLE 9 SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION Section 9.1 SURVIVAL OF REPRESENTATIONS. All representations, warranties, covenants and agreements made by any party in this Agreement or pursuant hereto shall survive the Closing, but no claim may be made with respect to any breach of any representation or warranty hereunder after October 31, 1998; provided, however, that claims for breach of the representations and warranties contained in the Sections listed in Schedule 9.1 may be made at any time to the applicable date set forth on Schedule 9.1. The Shareholders and RLI acknowledge with respect to ADLT, and ADLT acknowledges with respect to RLI, that they have performed comprehensive due diligence investigations and that they have no knowledge of any facts and circumstances which would result in the inaccuracy of any representation or warranty of ADLT, or RLI and/or the Shareholders, as applicable. Section 9.2 INDEMNIFICATION BY THE SHAREHOLDERS. Subject to the limitations set forth in this Article 9 and the Closing of the transactions contemplated by this Agreement, the Shareholders, severally but not jointly, shall indemnify, defend, save and hold ADLT and its officers, directors, employees, Affiliates and agents (including, after Closing, RLI) (collectively, "ADLT Indemnitees") harmless from and against all demands, claims, actions or causes of action, assessments, losses, damages, deficiencies, Liabilities, costs and expenses, including reasonable attorneys' fees, interest, penalties, and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing (collectively, "ADLT Damages") asserted against, imposed upon, resulting to or incurred by any of the ADLT Indemnitees, directly or indirectly, in connection with, or arising out of, or resulting from (i) a breach of any of the representations and warranties made by the Shareholders or RLI in Article 2 of this Agreement, except as set forth above in Section 9.1, ("ADLT Warranty Damages"), (ii) a breach of any of the representations and warranties made by any 34 42 Shareholder in Article 3 of this Agreement, except as set forth above in Section 9.1 and except that each Shareholder will be severally responsible only for his or her own such representations and warranties and (iii) a breach of any of the covenants or agreements made by the Shareholders, or a breach of any of the covenants or agreements of RLI to be completed before the Closing, in or pursuant to this Agreement and in any Other Agreement to which the Shareholders or RLI is a party, except that, with respect to Shareholder covenants, each Shareholder will be severally responsible only for his or her own covenants or agreements. The waiver by ADLT of any condition to Closing set forth in Section 7.2 shall be deemed to be a waiver by ADLT of its rights of indemnification hereunder. All claims made by virtue of such representations and warranties shall be made under, and subject to, the limitations set forth in this Article 9. The Liability of each Shareholder with respect to any claim for indemnity shall be equal to the Shareholder's Pro Rata Share, provided, however, that each Shareholder shall be entirely responsible for any violation of his or her own representations contained in Article 3. Section 9.3 INDEMNIFICATION BY ADLT. (a) Subject to the limitations set forth in this Article 9 and the Closing of the transactions contemplated by this Agreement, ADLT shall indemnify, defend, save and hold the Shareholders harmless from and against any and all demands, claims, actions or causes of action, assessments, losses, damages, deficiencies, Liabilities, costs and expenses, including reasonable attorneys' fees, interest, penalties, and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing (collectively, "Shareholder Damages") asserted against, imposed upon, resulting to or incurred by any of the Shareholders, directly or indirectly, in connection with, or arising out of, or resulting from (i) a breach of any of the representations and warranties made by ADLT in Article 4 of this Agreement, except as set forth above in Section 9.1, ("Shareholder Warranty Damages") or (ii) a breach of any of the covenants or agreements made by ADLT in or pursuant to this Agreement and in any Other Agreement to which ADLT is a party. The waiver by the Shareholders of any condition to Closing set forth in Section 7.3 shall be deemed a waiver by the Shareholders of their rights to indemnification hereunder. All claims made by virtue of such representations and warranties shall be made under, and subject to, the limitations set forth in this Article 9. (b) Subject to Section 9.6 below, ADLT shall indemnify, defend, save and hold the Shareholders harmless from and against any and all costs and expenses, including reasonable attorneys' fees, interest, penalties (but not the additional taxes) and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing (collectively, "Tax Damages") incurred by any of the Shareholders directly or indirectly, in connection with or arising out of, or resulting from, any proceeding by the Internal Revenue Service, Wisconsin Department of Revenue or other taxing authority resulting from a claim that the tax liability of the Shareholders is an amount greater than the amount of tax calculated by ADLT in its presentation to the Shareholders. Section 9.4 MINIMUM AND MAXIMUM INDEMNIFICATION CLAIM. The provision for indemnity for Shareholder Warranty Damages, or ADLT Warranty Damages, as the case may be, shall only be effective and no Shareholder shall be required to provide such indemnity to the ADLT Indemnitees, and ADLT shall not be required to provide such indemnity to the Shareholder Indemnitees, hereunder unless the claim(s) of indemnification of the ADLT Indemnitees, or RLI 35 43 Indemnitees, as the case may be, shall exceed in the aggregate $1,000,000 (the "Basket"). In the event the ADLT Indemnitees' claims, or the RLI Indemnitees' claims, as the case may be, shall exceed the Basket, then the ADLT Indemnitees shall have the right to be indemnified for Shareholder Warranty Damages, or ADLT Warranty Damages, as the case may be, but only for amounts in excess of the Basket and, in all cases, subject to the further limitation that the Shareholders shall in no event be liable for ADLT Damages in excess of $5,000,000 (the "Cap"). None of the ADLT Indemnitees, or the RLI Indemnitees, as the case may be, shall have any claim against any Shareholders, or ADLT, as the case may be, for any damages, costs or expenses up to the amount of the Basket and the Shareholders shall have no liabilities to the ADLT Indemnitees for claims in excess of the Cap. Section 9.5 OPTION TO DELIVER ADLT SHARES AS PAYMENT. In the event a Shareholder becomes obligated to make an indemnification payment to any of the ADLT Indemnitees pursuant to this Article 9, such Shareholder may, at his or her option, in lieu of making a payment to the ADLT Indemnitees in cash, elect to deliver to the ADLT Indemnitees a portion of the ADLT shares received hereunder. Such ADLT shares shall be valued, for purposes of this Article 9 at the greater of $25 per share or the ADLT Stock Price as of the date the amount of the indemnification payment is fixed. Section 9.6 NOTICE OF CLAIMS. If any ADLT Indemnitee or Shareholder (an "Indemnified Party") believes that it has suffered or incurred or will suffer or incur any ADLT Damages, Shareholder Damages or Tax Damages ("Damages") for which it is entitled to indemnification under this Article 9, or if any legal, governmental or administrative proceeding which may result in such damages is threatened or asserted (including any written notice from any taxing authority), such Indemnified Party shall so notify the party or parties from whom indemnification is being claimed (the "Indemnifying Party") with reasonable promptness and reasonable particularity in light of the circumstances then existing. If any action at law or suit in equity is instituted by or against a third party with respect to which any Indemnified Party intends to claim any Damages, such Indemnified Party shall promptly notify the Indemnifying Party of such action or suit. The failure of an Indemnified Party to give any notice required by this Section 9.4 shall not affect any of such party's rights under this Article 9 except to the extent such failure is actually prejudicial to the rights or obligations of the Indemnifying Party. Section 9.7 THIRD PARTY CLAIMS. In case any legal, governmental or administrative proceeding which may result in such Damages is instituted, threatened or asserted (including any written notice from any taxing authority) by or against a third party with respect to which an Indemnified Party intends to claim any Damages and the Indemnified Party notifies the Indemnifying Party of such proceeding as provided in Section 9.6, the Indemnifying Party shall be entitled to participate therein and, to the extent that it may wish, jointly with any other Indemnifying Party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party (who shall not, except with the consent of the Indemnified Party, be counsel to the Indemnifying Party), and after notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof, the Indemnifying Party will not be liable to such Indemnified Party under this Article 9 for any legal or other expenses subsequently incurred by such 36 44 Indemnified Party in connection with the defense thereof other than reasonable costs of investigation. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened action in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party unless such settlement includes an unconditional release of such Indemnified Party from all Liability on any claims that are the subject matter of such proceeding. Section 9.8 LIMITATION ON DAMAGES; INSURANCE; ETC. In determining Damages hereunder, (i) each Indemnified Party shall be required to pursue all valid claims against any insurance carrier providing coverage with respect to the matter giving rise to such Damages, (ii) if such Damages arise out of matters concerning any customers of RLI, RLI shall use its best efforts to pursue its rights and remedies against such customers (without litigation or arbitration), and (iii) if such Damages arise out of matters involving Persons other than customers of RLI and RLI has indemnification rights against such Persons, then RLI shall permit the Shareholders, at the Shareholders' expense, to pursue any and all remedies against such Persons and the Shareholders shall be entitled to the proceeds thereof to the extent that the Shareholders have provided indemnity in respect of such Damages; provided, however, that no such requirement shall delay the Shareholders' obligations to indemnify ADLT or RLI hereunder (except that the indemnification obligation hereunder shall be delayed if and to the extent that the applicable insurance company under clause (i) above assumes the defense or acknowledges liability). Section 9.9 GOOD FAITH EFFORT TO SETTLE DISPUTES. The parties agree that, prior to commencing any litigation against the other concerning any matter with respect to which such party intends to claim a right of indemnification in such proceeding, Ruud and the chief executive officer of ADLT shall meet in a timely manner and attempt in good faith to negotiate a settlement of such dispute during which time such individuals shall disclose to the others all relevant information relating to such dispute. Section 9.10 EXCLUSIVITY. It is understood and agreed that, except as expressly provided in this Article 9, after Closing, no Shareholder will have any obligation or liability to the ADLT Indemnitees with respect to any ADLT Warranty Damages, and ADLT will not have any obligation or liability with respect to any Shareholder Warranty Damages, it being understood and agreed that the remedies provided for in this Article 9 shall be the sole and exclusive remedies for any such claim by the ADLT Indemnitees or Shareholder Indemnitees, as the case may be, for any such matters, whether such claims are framed in contract, tort or otherwise. No Shareholder shall have any liability under any circumstances pursuant to this Article 9 in connection with the breach of any representation or warranty regarding title to shares of RLI Common Stock which were owned by another Shareholder. 37 45 ARTICLE 10 MISCELLANEOUS Section 10.1 CONSTRUCTION. As used herein, unless the context otherwise requires: (i) the terms defined herein shall have the meaning set forth herein for all purposes; (ii) references to "Article" or "Section" are to an article or section hereof; (iii) all "Exhibits" and "Schedules" referred to herein are to Exhibits and Schedules attached hereto and are incorporated herein by reference and made a part hereof; (iv) "include," "includes" and "including" are deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of like import; (v) "writing," "written" and comparable terms refer to printing, typing, lithography and other means of reproducing words in a visible form; (vi) "hereof," "herein," "hereunder" and comparable terms refer to the entirety of this Agreement and not to any particular article, section or other subdivision hereof or attachment hereto; (vii) references to any gender include references to all genders, and references to the singular include references to the plural and vice versa; (viii) references to an agreement or other instrument or law, statute or regulation are referred to as amended and supplemented from time to time (and, in the case of a statute or regulation, to any successor provision) and all regulations, rulings and interpretations promulgated pursuant thereto; (ix) the preliminary statements made on page 1 hereof are incorporated herein and made a part hereof; (x) the headings of the various articles, sections and other subdivisions hereof are for convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof; (xi) the deadline for all deliveries and notices hereunder shall be determined by reference to the local time of the place such delivery or notice is properly made; and (l) all currency references herein are to U.S. dollars. Section 10.2 NOTICES. All notices, and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed to have been duly given or made (i) the second day after mailing, if sent by registered or certified mail, return receipt requested, (ii) upon delivery, if sent by hand delivery, (iii) when received, if sent by prepaid overnight carrier, with a record of receipt, or (iv) the first day after dispatch, if sent by cable, telegram, facsimile or telecopy (with a copy simultaneously sent by registered or certified mail, return receipt requested), to the parties at the following addresses (or at such other addresses as shall be specified by the parties by like notice): (a) if to ADLT, to: Advanced Lighting Technologies, Inc. 2307 East Aurora Road Suite 1 Twinsburg, Ohio 44087 38 46 with a copy to: Cowden, Humphrey & Sarlson Co., L.P.A. 1414 Terminal Tower 50 Public Square Cleveland, Ohio 44113 (b) if to the Shareholders, to: Alan J. Ruud Theodore O. Sokoly Donald Wandler Christopher A. Ruud Cynthia A. Johnson At the addresses set forth on Schedule 1.4 with a copy to: Donald J. Christl, Esq. Reinhart, Boerner, Van Deuren, Norris & Rieselbach, S.C. 1000 North Water Street, Suite 2100 P. O. Box 92900 Milwaukee, WI 53202-0900 (c) If to RLI, to: Ruud Lighting, Inc. 9201 Washington Avenue Racine, Wisconsin 54406 Attention: Mr. Alan J. Ruud, CEO with a copy to: Donald J. Christl, Esq. Reinhart, Boerner, Van Deuren, Norris & Rieselbach, S.C. 1000 North Water Street, Suite 2100 P. O. Box 92900 Milwaukee, WI 53202-0900 Section 10.3 SUCCESSORS AND ASSIGNS. This Agreement and all the rights and powers granted hereby shall bind and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Section 10.4 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio without regard to its conflict of law doctrines. 39 47 Section 10.5 NO ASSIGNMENT. This Agreement and the rights, interests and obligations hereunder may not be assigned by any party hereto without the prior written consent of the other parties hereto, except that ADLT may assign its rights hereunder to any direct or indirect wholly owned subsidiary of ADLT, so long as ADLT remains fully liable hereunder. Section 10.6 APPROVALS AND ACTIONS BY THE SHAREHOLDERS. Whenever any approval or action by the Shareholders is required or permitted pursuant to this Agreement, or any Other Agreement, including any consent, waiver or amendment, such approval or action shall be sufficient if it is made by Shareholders holding (or who held prior to the Closing) a majority of the RLI Shares, and such approval or action shall be binding on all Shareholders. Section 10.7 AMENDMENT AND WAIVER; CUMULATIVE EFFECT. The parties may by mutual agreement amend this Agreement in any respect, and any party, as to such party, may (i) extend the time for the performance of any of the obligations of any other party, waive any inaccuracies in representations by any other party, (ii) waive compliance by any other party with any of the agreements contained herein and performance of any obligations by such other party, and (iii) waive the fulfillment of any condition that is precedent to the performance by such party of any of its obligations under this Agreement. To be effective, any such amendment or waiver must be in writing and be signed by the party against whom enforcement of the same is sought. Neither the failure of any party hereto to exercise any right, power or remedy provided under this Agreement where otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party with its obligations hereunder, nor any custom or practice of the parties at variance with the terms hereof, shall constitute a waiver by such party of its right to exercise any such right, power or remedy or to demand such compliance. The rights and remedies of the parties hereto are cumulative and not exclusive of the rights and remedies that they otherwise might have now or hereafter, at law, in equity, by statute or otherwise. Section 10.8 ENTIRE AGREEMENT. This Agreement and the Schedules and Exhibits set forth all of the promises, covenants, agreements, conditions and undertakings between the parties hereto with respect to the subject matter hereof, and supersede all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, other than the Secrecy Agreement between RLI and ADLT. Section 10.9 SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other terms, conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. 40 48 Section 10.10 NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder, except the provisions of Section 6.12 and Section 9.3 relating to RLI Indemnitees and Section 9.2 relating to ADLT Indemnitees, which are intended to benefit such indemnitees. Section 10.11 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall be deemed to be one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ADVANCED LIGHTING TECHNOLOGIES, INC. By: /s/ Wayne R. Hellman ----------------------------------------- Wayne R. Hellman, CEO RUUD LIGHTING, INC. By: /s/ Alan J. Ruud ----------------------------------------- Alan J. Ruud, CEO /s/ Alan J. Ruud -------------------------------------------- Alan J. Ruud, Shareholder /s/ Theodore O. Sokoly -------------------------------------------- Theodore O. Sokoly, Shareholder /s/ Donald Wandler -------------------------------------------- Donald Wandler, Shareholder /s/ Christopher A. Ruud -------------------------------------------- Christopher A. Ruud, Shareholder /s/ Cynthia A. Johnson -------------------------------------------- Cynthia A. Johnson, Shareholder 41 49 SCHEDULE 9.1
Last Date for Claim Section 2.3 Capitalization October 31, 2000 Section 2.8 Undisclosed Liabilities No survival Section 2.10 Taxes October 31, 2000 Section 2.11 Receivables; Inventory No survival Section 2.12 Business; Assets No survival, except title representation which survives to statute of limitations, plus 90 days Section 2.14(a) Contracts No survival Section 2.17 Real Property October 31, 2000 Section 2.19 Insurance No survival Section 2.24 Confidentiality Agreements No survival Section 3.1 Title to RLI Shares Statute of Limitations, plus 90 days Section 3.4 Purchase for Own Account October 31, 2000 Section 3.5 Restricted Securities October 31, 2000 Section 3.6 Disclosure October 31, 2000 Section 3.7 Investment Experience October 31, 2000 Section 3.8 Accredited Investor October 31, 2000 Section 4.1 Title to ADLT Shares Statute of limitations, plus 90 days Section 4.2 Securities October 31, 2000 Section 4.4 Capitalization October 31, 2000 Section 4.17 Properties Title representation survives to October 31, 2000 Section 4.23 Tax Matters October 31, 2000
50 CONFIDENTIAL CH&S DRAFT -DECEMBER 9, 1997 EXHIBIT B TO STOCK PURCHASE AGREEMENT EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT entered into and effective as of January 1, 1998, among RUUD LIGHTING, INC., a Wisconsin corporation (RLI or EMPLOYER"), ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation ("ADLT"), and ALAN J. RUUD ("EMPLOYEE"); WITNESSETH: ----------- WHEREAS, RLI and Employee desire to terminate any and all prior agreements, whether oral or written, between the parties and between Employee and ADLT relating to Employee's employment; and WHEREAS, RLI and Employee desire to enter into an Employment Agreement as set forth herein below to ensure RLI and ADLT of the services of Employee as Vice Chairman of ADLT and Chief Executive Officer of RLI, and to set forth the rights and duties of the parties hereto, NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties agree as follows: 1. TERMINATION OF PRIOR AGREEMENTS. RLI and Employee hereby terminate any and all prior agreements, whether oral or written, between the parties or ADLT relating to Employee's employment. 2. EMPLOYMENT. (a) RLI hereby employs Employee, and Employee hereby accepts employment, upon the terms and conditions hereinafter set forth. (b) During the term of this Employment Agreement, (for purposes hereof, all references to the term of this Employment Agreement shall be deemed to include all renewals or extensions hereof, if any), Employee shall devote his full business time to his employment and shall perform diligently such duties as are, or may be, required by the Board of Directors of RLI and the Board of Directors of ADLT or their designee, which duties shall be within the bounds of reasonableness and acceptable business standards and ethics. (c) During the term of this Employment Agreement, Employee shall not, without the prior written consent of RLI, which shall not be unreasonably withheld, directly or indirectly, render services of a business, professional or commercial nature to any other person or firm, whether for compensation or otherwise, other than in the performance of duties naturally inherent in the businesses of RLI or any subsidiary or affiliate of RLI, including but not limited to ADLT; provided, however, that Employee may continue (i) to serve on the board of directors of companies to the extent such service and service on the ADLT Board of Directors is permitted by law, and (ii) to render services to and participate in 51 philanthropic and charitable causes, in each case, in a manner and to the extent consistent with his past practice. 3. TERM AND POSITION. (a) Subject to the termination provisions contained herein, the term of this Employment Agreement shall commence as of January 1, 1998 and shall continue for a term of three years from such date, subject, however, to the provisions of Section 6. (b) Employee shall serve as Vice Chairman of ADLT and as Chief Executive Officer of RLI, and in such offices or positions with ADLT and RLI as shall be agreed upon by Employee and the Board of Directors of RLI or the Board of Directors of ADLT, as the case may be, without, however, any change in Employee's compensation (but such offices or positions shall be consistent with the office and position stated herein). (c) Employee shall promptly be appointed to a term on the ADLT Board of Directors expiring at the ADLT annual meeting in the year 2000 and be appointed Vice Chairman of ADLT and as a member of the Executive Committee of the ADLT Board of Directors. (d) The principal business office of Employee shall be in Racine, Wisconsin; provided, however, Employee maintains a residence and a business office in ____________Florida, from which the Employee may perform his duties under this Agreement. Employee shall not be required to relocate without Employee's consent. Employee's travel expenses for travel to and from the Wisconsin and Florida offices shall be paid by RLI. 4. COMPENSATION. (a) Subject to the provisions of this Employment Agreement, for all services which Employee may render to RLI or ADLT during the term of this Employment Agreement, Employee shall receive a salary at the rate of ________________________ Dollars ($___________) per annum for the first year of this Agreement, which shall be payable in equal, consecutive biweekly installments. (b) Provided that Employee satisfactorily performs his services under this Employment Agreement, Employee shall be entitled to salary increases from time to time as determined by the Compensation Committee of ADLT. (c) Provided that Employee has satisfactorily performed his services under this Employment Agreement, Employee shall be eligible for bonuses from time to time as determined by the Compensation Committee of ADLT. 5. OTHER BENEFITS. During the term of this Employment Agreement, Employee shall be entitled to such vacation privileges, life insurance, medical and hospitalization benefits, and such other benefits as are typically provided to other executive officers of ADLT and its subsidiaries in comparable positions; provided, however, that such benefits shall be not less valuable to Employee than those benefits provided by Employer in the recent past, provided that, on or after January 1, 1999, any benefit reduction to executive officers of ADLT may be applied to Employee's non-vacation benefits. 2 52 6. TERMINATION AND FURTHER COMPENSATION. (a) The employment of Employee under this Employment Agreement, for the term thereof, may be terminated by the Board of Directors of RLI or ADLT for cause at any time. For purposes hereof, the term "cause" shall mean: (i) Employee's fraud, dishonesty, willful misconduct or gross negligence in the performance of his duties hereunder; or (ii) Employee's material breach of this Agreement, in whole or in part. Any termination by reason of the foregoing shall not be in limitation of any other right or remedy RLI may have under this Employment Agreement or otherwise. (b) In the event of (i) termination of the Employment Agreement for any of the reasons set forth in Subparagraph (a) of this Section 6, or (ii) if Employee shall voluntarily terminate his employment hereunder prior to the end of the term of this Employment Agreement, then in either event Employee shall be entitled to no further salary, bonus or other benefits under this Employment Agreement, except as to that portion of any unpaid salary and other benefits accrued and earned by him hereunder up to and including the effective date of such termination. In the event the Employee voluntarily terminates this Agreement, Employee shall provide 30 days' prior written notice to RLI of such voluntary termination. (c) In the event that RLI terminates Employee's employment without "cause" (as defined herein above) or Employee terminates employment with "good reason" (as defined below) prior to the end of the term of this Employment Agreement, then Employee shall be entitled to all salary and medical benefits for the remainder of the term of this Employment Agreement all upon the terms and as set forth herein. At the conclusion of the term of this Employment Agreement, all salary, medical and other benefits as set forth herein shall cease. Employee shall have no other rights and remedies except as set forth in this Section 6. For purposes hereof, the term "good reason" shall mean (i) without the express written consent of Employee, a material reduction of Employee's duties, authority, compensation, benefits or responsibilities or (ii) a material breach of this Agreement by RLI or ADLT. (d) In the event of Employee's death or permanent disability (as defined herein below) occurring during the term of this Employment Agreement, this Employment Agreement shall be deemed terminated for cause and Employee or his estate, as the case may be, shall be entitled to no further salary or other compensation provided for herein except as to that portion of any unpaid salary accrued or earned by Employee hereunder up to and including the date of death or permanent disability, and any benefits under any insurance policies or other plans. (e) "Permanent disability" means the inability of Employee to perform satisfactorily his usual or customary occupation for a period of 120 days in the aggregate out of 150 consecutive days as a result of a physical or mental illness or other disability which in the written opinion of a physician of recognized ability and reputation, is likely to continue for a significant period of time. 3 53 (f) In the event this Employment Agreement is terminated with cause, before the end of the term, RLI may, in its sole discretion, notify Employee that RLI intends to continue to pay all compensation, benefits and monies due under the terms of the Employment Agreement for the remainder of the term. In such event, and provided RLI continues to make such payments, Employee shall continue to be bound by the terms of the non-competition provisions in Section 7 hereof. 7. COVENANTS REGARDING NON-COMPETITION AND CONFIDENTIAL INFORMATION. (a) Non-Competition. (i) Recognizing that Employee will have been involved as an executive officer of RLI and ADLT and that RLI and its affiliates, including ADLT, are engaged in the supply of products and/or services in every state of the United States and internationally, therefore, upon termination of his employment, for any reason, he agrees that he will not, for a period of three years immediately following such termination, engage, in the United States or in any country where RLI, ADLT or any of their affiliates conducts business, either directly or indirectly on behalf of himself or on behalf of any employee, consultant, principal, substantial shareholder or investor, partner or officer of any corporation, in any business of the type and character or in competition with the business carried on by RLI, ADLT or their affiliates (as conducted on the date Employee ceases to be employed by RLI in any capacity). (ii) Employee will not, for a period of three years immediately following the termination of his employment, either directly or indirectly or on behalf of another as an employee, agent, principal, partnership or other entity, recruit, hire or otherwise entice any employees of RLI, ADLT or their affiliates to leave the Employer. (iii) Employee will not disclose, divulge, discuss, copy or otherwise use or suffer to be used in any manner, in competition with, or contrary to the interests of RLI, ADLT or their affiliates, the customer lists, manufacturing methods, product research or engineering data or other trade secrets of RLI, ADLT or any of their affiliates, it being acknowledged by Employee that all such information regarding the business of RLI, ADLT or their affiliates developed, compiled or obtained by or furnished to Employee while Employee shall have been employed by or associated with RLI, ADLT or their affiliates is confidential information and RLI's, ADLT's or their affiliates' exclusive property. Employee's obligations under this Section 7(a)(iii) will not apply to any information which (A) is known to the public other than as a result of Employee's acts or omissions, (B) is approved for release, in writing, by the Company, (C) is disclosed to Employee by a third party without restriction, or (D) Employee is legally required to disclose. 4 54 (b) Employee expressly agrees and understands that the remedy at law for any breach by him of this Section 7 will be inadequate and that the damages flowing from such breach are not readily susceptible to being measured in monetary terms. Accordingly, it is acknowledged that upon adequate proof of Employee's violation of any legally enforceable provision of this Section 7, RLI shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach. Nothing in this Section 7 shall be deemed to limit RLI's remedies at law or in equity for any breach by Employee of any of the provisions of this Section 7 which may be pursued or availed of by RLI or any of its affiliates including but not limited to ADLT. (c) In the event Employee shall violate any legally enforceable provision of this Section 7 as to which there is a specific time period during which he is prohibited from taking certain actions or from engaging in certain activities as set forth in such provision then, in such event, such violation shall toll the running of such time period from the date of such violation until such violation shall cease. 8. RENEWAL. Not later than six (6) months prior to the termination of this Agreement, Employer shall be entitled to notify Employee whether it desires to renew this Employment Agreement with Employee for an additional period of three (3) years, which notice, if given, shall contain the compensation and other benefits proposed to be paid and provided to Employee by Employer. For a period of thirty (30) days after receipt of such notice, Employee shall have the option to accept such offer of renewal or, in the alternative, shall be entitled to consult with Employer with respect to different compensation and/or benefits to be paid and provided to Employee by Employer during said renewal period of employment. If at the end of said thirty (30) day period Employee and Employer are unable to agree, then this Employment Agreement shall not be renewed at the end of the term thereof, unless otherwise agreed to by the parties. In the event, however, that Employer does not, timely notify Employee of its desire to renew this Employment Agreement, then this Employment Agreement shall not be renewed at the end of the term thereof, unless otherwise agreed upon by the parties. 9. SEVERABLE PROVISIONS. The provisions of this Employment Agreement are severable and if any one or more provisions may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions and any partially unenforceable provision to the extent enforceable in any jurisdiction shall, nevertheless, be binding and enforceable. 10. ARBITRATION. Any controversy or claim arising out of or relating to this Employment Agreement, or the breach thereof, shall be settled by arbitration by a single arbitrator in the City of Racine, State of Wisconsin, in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. The Arbitrator shall be deemed to possess the powers to issue mandatory orders and restraining orders in connection with such arbitration; PROVIDED, HOWEVER, that nothing in this Section 10 shall be construed so as to deny RLI the right and power to seek and obtain injunctive relief in a court of equity for any breach or threatened breach of Employee of any of his covenants contained in Section 7 hereof. 5 55 11. NOTICES. (a) Each notice, request, demand or other communication ("NOTICE") by either party to the other party pursuant to this Agreement shall be in writing and shall be personally delivered or sent by U.S. certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight commercial courier, charges prepaid, or by facsimile transmission (but each such Notice sent by facsimile transmission shall be confirmed by sending a copy thereof to the other party by U.S. mail or commercial courier as provided herein no later than the following business day), addressed to the address of the receiving party or to such other address as such party shall have communicated to the other party in accordance with this Section. Any Notice hereunder shall be deemed to have been given and received on the date when personally delivered, on the date of sending when sent by facsimile, on the third business day following the date of sending when sent by mail or on the first business day following the date of sending when sent by commercial courier. (b) If a Notice is to RLI, then such Notice shall be addressed to Ruud Lighting, Inc., attention of the Board of Directors. (c) If a Notice is to Employee, then such Notice shall be addressed to Employee at his home address last known on the payroll records of RLI. 12. WAIVER. The failure of either party to enforce any provision or provisions of this Employment Agreement shall not in any way be construed as a waiver of any such provision or provisions as to any future violations thereof, nor prevent that party thereafter from enforcing each and every other provision of this Employment Agreement. The rights granted the parties herein are cumulative and the waiver of any single remedy shall not constitute a waiver of such party's right to assert all other legal remedies available to it under the circumstances. 13. MISCELLANEOUS. This Employment Agreement supersedes all prior agreements and understandings between the parties and may not be modified or terminated orally. No modification, termination or attempted waiver shall be valid unless in writing and signed by the party against whom the same it is sought to be enforced. 14. GOVERNING LAW. This Employment Agreement shall be governed by and construed according to the laws of the State of Wisconsin. 6 56 IN WITNESS WHEREOF, the parties have executed this Employment Agreement on the day and year first set forth above. WITNESS: RUUD LIGHTING, INC. By: By: ------------------------------- ------------------------------ Name: Name: ------------------------------- ------------------------------ Its: ------------------------------ WITNESS: ADVANCED LIGHTING TECHNOLOGIES, INC. By: By: ------------------------------- ------------------------------ Name: Name: ------------------------------- ------------------------------ Its: ------------------------------ WITNESS: By: ------------------------------- ------------------------------ Name: ALAN J. RUUD ------------------------------- 7 57 CONFIDENTIAL CH&S DRAFT -DECEMBER 8, 1997 EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT entered into and effective as of January 1, 1998, among RUUD LIGHTING, INC., a Wisconsin corporation ("RLI" or "EMPLOYER") and ________________ ("EMPLOYEE"); WITNESSETH: ----------- WHEREAS, RLI and Employee desire to terminate any and all prior agreements, whether oral or written, between the parties and between Employee and ADLT relating to Employee's employment; and WHEREAS, RLI and Employee desire to enter into an Employment Agreement as set forth herein below to ensure RLI and ADLT of the services of Employee as ______________ of RLI, and to set forth the rights and duties of the parties hereto, NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties agree as follows: 1. TERMINATION OF PRIOR AGREEMENTS. RLI and Employee hereby terminate any and all prior agreements, whether oral or written, between the parties or ADLT relating to Employee's employment. 2. EMPLOYMENT. (a) RLI hereby employs Employee, and Employee hereby accepts employment, upon the terms and conditions hereinafter set forth. (b) During the term of this Employment Agreement, (for purposes hereof, all references to the term of this Employment Agreement shall be deemed to include all renewals or extensions hereof, if any), Employee shall devote his full business time to his employment and shall perform diligently such duties as are, or may be, required by the Board of Directors of RLI and the Board of Directors of ADLT or their designee, which duties shall be within the bounds of reasonableness and acceptable business standards and ethics. (c) During the term of this Employment Agreement, Employee shall not, without the prior written consent of RLI, which shall not be unreasonably withheld, directly or indirectly, render services of a business, professional or commercial nature to any other person or firm, whether for compensation or otherwise, other than in the performance of duties naturally inherent in the businesses of RLI or any subsidiary or affiliate of RLI, including but not limited to ADLT. 3. TERM AND POSITION. (a) Subject to the termination provisions contained herein, the term of this Employment Agreement shall commence as of January 1, 1998 and shall continue for a term of three years from such date, subject, however, to the provisions of Section 6. 1 58 (b) Employee shall serve as___________________ and in such offices or positions with ADLT and RLI as shall be agreed upon by Employee and the Board of Directors of RLI or the Board of Directors of ADLT, as the case may be, without, however, any change in Employee's compensation (but such offices or positions shall be consistent with the office and position stated herein). (c) The principal business office of Employee shall be in Racine, Wisconsin. Employee shall not be required to relocate without Employee's consent. 4. COMPENSATION. (a) Subject to the provisions of this Employment Agreement, for all services which Employee may render to RLI or ADLT during the term of this Employment Agreement, Employee shall receive a salary at the rate of ___________________ Dollars ($___________) per annum for the first year of this Agreement, which shall be payable in equal, consecutive biweekly installments. (b) Provided that Employee satisfactorily performs his services under this Employment Agreement, Employee shall be entitled to salary increases from time to time as determined by the Compensation Committee of ADLT. (c) Provided that Employee has satisfactorily performed his services under this Employment Agreement, Employee shall be eligible for bonuses from time to time as determined by the Compensation Committee of ADLT. 5. OTHER BENEFITS. During the term of this Employment Agreement, Employee shall be entitled to such vacation privileges, life insurance, medical and hospitalization benefits, and such other benefits as are typically provided to other executives of ADLT and its subsidiaries in comparable positions; provided, however, that such benefits shall be not less valuable to Employee than those benefits provided by Employer in the recent past, provided that, on or after January 1, 1999, any benefit reduction to executive officers of ADLT may be applied to Employee's non-vacation benefits. 6. TERMINATION AND FURTHER COMPENSATION. (a) The employment of Employee under this Employment Agreement, for the term thereof, may be terminated by the Board of Directors of RLI or ADLT for cause at any time. For purposes hereof, the term "cause" shall mean: (i) Employee's fraud, dishonesty, willful misconduct or gross negligence in the performance of his duties hereunder; or (ii) Employee's material breach of this Agreement, in whole or in part. Any termination by reason of the foregoing shall not be in limitation of any other right or remedy RLI may have under this Employment Agreement or otherwise. 2 59 (b) In the event of (i) termination of the Employment Agreement for any of the reasons set forth in Subparagraph (a) of this Section 6, or (ii) if Employee shall voluntarily terminate his employment hereunder prior to the end of the term of this Employment Agreement, then in either event Employee shall be entitled to no further salary, bonus or other benefits under this Employment Agreement, except as to that portion of any unpaid salary and other benefits accrued and earned by him hereunder up to and including the effective date of such termination. In the event the Employee voluntarily terminates this Agreement, Employee shall provide 30 days' prior written notice to RLI of such voluntary termination. (c) In the event that RLI terminates Employee's employment without "cause" (as defined herein above) or Employee terminates employment with "good reason" (as defined below) prior to the end of the term of this Employment Agreement, then Employee shall be entitled to all salary and medical benefits for the remainder of the term of this Employment Agreement all upon the terms and as set forth herein. At the conclusion of the term of this Employment Agreement, all salary, medical and other benefits as set forth herein shall cease. Employee shall have no other rights and remedies except as set forth in this Section 6. For purposes hereof, the term "good reason" shall mean (i) without the express written consent of Employee, a material reduction of Employee's duties, authority, compensation, benefits or responsibilities or (ii) a material breach of this Agreement by RLI or ADLT. (d) In the event of Employee's death or permanent disability (as defined herein below) occurring during the term of this Employment Agreement, this Employment Agreement shall be deemed terminated for cause and Employee or his estate, as the case may be, shall be entitled to no further salary or other compensation provided for herein except as to that portion of any unpaid salary accrued or earned by Employee hereunder up to and including the date of death or permanent disability, and any benefits under any insurance policies or other plans. (e) "Permanent disability" means the inability of Employee to perform satisfactorily his usual or customary occupation for a period of 120 days in the aggregate out of 150 consecutive days as a result of a physical or mental illness or other disability which in the written opinion of a physician of recognized ability and reputation, is likely to continue for a significant period of time. (f) In the event this Employment Agreement is terminated with cause, before the end of the term, RLI may, in its sole discretion, notify Employee that RLI intends to continue to pay all compensation, benefits and monies due under the terms of the Employment Agreement for the remainder of the term. In such event, and provided RLI continues to make such payments, Employee shall continue to be bound by the terms of the non-competition provisions in Section 7 hereof. 7. COVENANTS REGARDING NON-COMPETITION AND CONFIDENTIAL INFORMATION. (a) Non-Competition. (i) Recognizing that Employee will have been involved as an executive officer of RLI and ADLT and that RLI and its affiliates, including ADLT, are engaged in 3 60 the supply of products and/or services in every state of the United States and internationally, therefore, upon termination of his employment, for any reason, he agrees that he will not, for a period of three years immediately following such termination, engage, in the United States or in any country where RLI, ADLT or any of their affiliates conducts business, either directly or indirectly on behalf of himself or on behalf of any employee, consultant, principal, substantial shareholder or investor, partner or officer of any corporation, in any business of the type and character or in competition with the business carried on by RLI, ADLT or their affiliates (as conducted on the date Employee ceases to be employed by RLI in any capacity). (ii) Employee will not, for a period of three years immediately following the termination of his employment, either directly or indirectly or on behalf of another as an employee, agent, principal, partnership or other entity, recruit, hire or otherwise entice any employees of RLI, ADLT or their affiliates to leave the Employer. (iii) Employee will not disclose, divulge, discuss, copy or otherwise use or suffer to be used in any manner, in competition with, or contrary to the interests of RLI, ADLT or their affiliates, the customer lists, manufacturing methods, product research or engineering data or other trade secrets of RLI, ADLT or any of their affiliates, it being acknowledged by Employee that all such information regarding the business of RLI, ADLT or their affiliates developed, compiled or obtained by or furnished to Employee while Employee shall have been employed by or associated with RLI, ADLT or their affiliates is confidential information and RLI's, ADLT's or their affiliates' exclusive property. Employee's obligations under this Section 7(a)(iii) will not apply to any information which (A) is known to the public other than as a result of Employee's acts or omissions, (B) is approved for release, in writing, by the Company, (C) is disclosed to Employee by a third party without restriction, or (D) Employee is legally required to disclose. (b) Employee expressly agrees and understands that the remedy at law for any breach by him of this Section 7 will be inadequate and that the damages flowing from such breach are not readily susceptible to being measured in monetary terms. Accordingly, it is acknowledged that upon adequate proof of Employee's violation of any legally enforceable provision of this Section 7, RLI shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach. Nothing in this Section 7 shall be deemed to limit RLI's remedies at law or in equity for any breach by Employee of any of the provisions of this Section 7 which may be pursued or availed of by RLI or any of its affiliates including but not limited to ADLT. (c) In the event Employee shall violate any legally enforceable provision of this Section 7 as to which there is a specific time period during which he is prohibited from taking certain actions or from engaging in certain activities as set forth in such provision then, in such event, such violation shall toll the running of such time period from the date of such violation until such violation shall cease. 4 61 8. RENEWAL. Not later than six (6) months prior to the termination of this Agreement, Employer shall be entitled to notify Employee whether it desires to renew this Employment Agreement with Employee for an additional period of three (3) years, which notice, if given, shall contain the compensation and other benefits proposed to be paid and provided to Employee by Employer. For a period of thirty (30) days after receipt of such notice, Employee shall have the option to accept such offer of renewal or, in the alternative, shall be entitled to consult with Employer with respect to different compensation and/or benefits to be paid and provided to Employee by Employer during said renewal period of employment. If at the end of said thirty (30) day period Employee and Employer are unable to agree, then this Employment Agreement shall not be renewed at the end of the term thereof, unless otherwise agreed to by the parties. In the event, however, that Employer does not, timely notify Employee of its desire to renew this Employment Agreement, then this Employment Agreement shall not be renewed at the end of the term thereof, unless otherwise agreed upon by the parties. 9. SEVERABLE PROVISIONS. The provisions of this Employment Agreement are severable and if any one or more provisions may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions and any partially unenforceable provision to the extent enforceable in any jurisdiction shall, nevertheless, be binding and enforceable. 10. ARBITRATION. Any controversy or claim arising out of or relating to this Employment Agreement, or the breach thereof, shall be settled by arbitration by a single arbitrator in the City of Racine, State of Wisconsin, in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. The Arbitrator shall be deemed to possess the powers to issue mandatory orders and restraining orders in connection with such arbitration; PROVIDED, HOWEVER, that nothing in this Section 10 shall be construed so as to deny RLI the right and power to seek and obtain injunctive relief in a court of equity for any breach or threatened breach of Employee of any of his covenants contained in Section 7 hereof. 11. NOTICES. (a) Each notice, request, demand or other communication ("NOTICE") by either party to the other party pursuant to this Agreement shall be in writing and shall be personally delivered or sent by U.S. certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight commercial courier, charges prepaid, or by facsimile transmission (but each such Notice sent by facsimile transmission shall be confirmed by sending a copy thereof to the other party by U.S. mail or commercial courier as provided herein no later than the following business day), addressed to the address of the receiving party or to such other address as such party shall have communicated to the other party in accordance with this Section. Any Notice hereunder shall be deemed to have been given and received on the date when personally delivered, on the date of sending when sent by facsimile, on the third business day following the date of sending when sent by mail or on the first business day following the date of sending when sent by commercial courier. 5 62 (b) If a Notice is to RLI, then such Notice shall be addressed to Ruud Lighting, Inc., attention of the Board of Directors. (c) If a Notice is to Employee, then such Notice shall be addressed to Employee at his home address last known on the payroll records of RLI. 12. WAIVER. The failure of either party to enforce any provision or provisions of this Employment Agreement shall not in any way be construed as a waiver of any such provision or provisions as to any future violations thereof, nor prevent that party thereafter from enforcing each and every other provision of this Employment Agreement. The rights granted the parties herein are cumulative and the waiver of any single remedy shall not constitute a waiver of such party's right to assert all other legal remedies available to it under the circumstances. 13. MISCELLANEOUS. This Employment Agreement supersedes all prior agreements and understandings between the parties and may not be modified or terminated orally. No modification, termination or attempted waiver shall be valid unless in writing and signed by the party against whom the same it is sought to be enforced. 14. GOVERNING LAW. This Employment Agreement shall be governed by and construed according to the laws of the State of Wisconsin. IN WITNESS WHEREOF, the parties have executed this Employment Agreement on the day and year first set forth above. WITNESS: RUUD LIGHTING, INC. By: By: ------------------------------- -------------------------------- Name: Name: ------------------------------- -------------------------------- Its: -------------------------------- WITNESS: By: ------------------------------- -------------------------------- Name: EMPLOYEE 6 63 CH&S Draft - November 12, 1997 EXHIBIT F TO STOCK PURCHASE AGREEMENT REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT is entered into as of the 1st day of January, 1998, by and among ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation (the "COMPANY"), ALAN J. RUUD, THEODORE O. SOKOLY, DONALD WANDLER, CHRISTOPHER A. RUUD and CYNTHIA A. JOHNSON (individually referred to as "SHAREHOLDER" and collectively, as "SHAREHOLDERS"); WITNESSETH: WHEREAS, the Company, Ruud Lighting, Inc. and the Shareholders have entered into a certain Stock Purchase Agreement ("STOCK PURCHASE AGREEMENT") pursuant to which the Company will issue, at Closing, three million shares of its Common Stock to the Shareholders, as partial consideration for the Shareholders' shares of capital stock of Ruud Lighting, Inc.; and WHEREAS, the Stock Purchase Agreement requires the execution and delivery of this Agreement by the Company and the Shareholders as a condition to Closing, NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: SECTION 1. DELIVERY OF COMMON SHARES. At the Closing, the Company will deliver shares of its Common Stock to the Shareholders in accordance with its obligations under the Stock Purchase Agreement. Such shares, and any other shares required to be delivered pursuant to Section 1.3 of the Stock Purchase Agreement, will be subject to the terms of this Agreement. All shares so issued to the Shareholders pursuant to the Stock Purchase Agreement shall be referred to herein as "STOCK" and references in this Agreement to a percentage of Stock shall be calculated by multiplying the total number of shares of Stock held by all Holders (as defined in Section 4.3 below) times the applicable percentage. SECTION 2. REGISTRATION RIGHTS. 2.1 REGISTRATION RIGHTS. If the Company, at any time on or after two years following the date of Closing under the Stock Purchase Agreement (the "CLOSING DATE") and on or before the seventh anniversary of the Closing Date, proposes to file on its behalf and/or on behalf of any of its security holders a Registration Statement under the Securities Act on any form (other than a Registration Statement on Form S-4 or S-8 or any successor form for securities to be offered on a transaction of the type referred to in Rule 145 under the Securities Act or to employees of the 64 Company pursuant to any employee benefit plan, respectively) for the general registration of securities to be sold for cash with respect to its Common Stock, it will give written notice to all Holders of Stock at least 30 days before the initial filing with the Commission of such Registration Statement, which notice shall set forth the intended method of disposition of the securities proposed to be registered by the Company. The notice shall offer to include in such filing the aggregate number of shares of Stock, as such Holders may request. Each Holder of any such Stock desiring to have Stock registered under this Section 2.1 shall advise the Company in writing within 10 days after the date of receipt of such notice from the Company, setting forth the amount of such Stock for which registration is requested. The Company shall thereupon include in such filing the number of shares of Stock for which registration is so requested, subject to the next sentence, and shall use its best efforts to effect registration under the Securities Act of such shares. If the managing underwriter of a proposed public offering shall advise the Company in writing that, in its opinion, the distribution of the Stock requested to be included in the registration concurrently with the securities being registered by the Company or any other holder of Common Stock of the Company desiring to be included in the registration (a "DEMANDING HOLDER") would materially and adversely affect the distribution of such securities by the Company or such other holder, then the number of shares of Common Stock of the Company determined by such underwriting to be the maximum number of shares of Common Stock capable of being included in such registration shall be allocated as follows: (i) if the offering was initiated by the Company as a primary offering, first to the Company and second to the Holders of the Stock and to any Demanding Holder in proportion to the respective numbers of shares sought to be included by them therein; and (ii) if the offering was initiated by a Demanding Holder as a secondary offering, first to such Demanding Holder and to the Holders of the Stock in proportion to the numbers of shares sought to be included by them in such registration and second to the Company. Except as otherwise provided in Section 2.3, all expenses of such registration shall be borne by the Company. 2.2 REGISTRATION PROCEDURES. It shall be a condition precedent to the obligation of the Company to take any action pursuant to Section 2.1 in respect of the securities which are to be registered at the request of any Holder of Stock that such Holder shall furnish to the Company such information regarding the securities held by such Holder and the intended method of disposition thereof as the Company shall reasonably request and as shall be required in connection with the action taken by the Company. 2.3 EXPENSES. All expenses incurred in complying with Section 2, including, without limitation, all registration and filing fees (including all expenses incident to filing with the NASD), printing expenses, fees and disbursements of counsel for the selling security holders (selected by those holding a majority of the shares being registered), expenses of any special audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws shall be paid by the Company, except that (a) all such expenses in connection with any amendment or supplement to the Registration Statement or prospectus filed more than 180 days after the effective date of such 2 65 Registration Statement because any Holder of Stock has not effected the disposition of the securities requested to be registered shall be paid by such Holder; and (b) the Company shall not be liable for any fees, discounts or commissions to any underwriter in respect of the securities sold by such Holder of Stock. 2.4 INDEMNIFICATION AND CONTRIBUTION. (a) In the event of any registration of any of the Stock under the Securities Act pursuant to this Section 2, the Company shall indemnify and hold harmless the Holder of such Stock, such Holder's directors and officers, and each other Person (including each underwriter) who participated in the offering of such Stock and each other Person, if any, who controls such Holder or such participating Person within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Holder or any such director or officer or participating Person or controlling Person may become subject under the Securities Act or controlling Person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any alleged untrue statement of any material fact contained, on the effective date thereof, in any Registration Statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such Holder or such director, officer or participating Person or controlling Person for any legal or any other expenses reasonably incurred by such Holder or such director, officer or participating Person or controlling Person in connection with investigating or defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the Company shall not be liable in such case to the extent that such loss, claim, damage or liability arises out of or is based upon any alleged untrue statement or alleged omission made in such Registration Statement, preliminary prospectus, prospectus or amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Holder specifically for use therein. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or such director, officer or participating Person or controlling Person, and shall survive the Transfer of such securities by such Holder. (b) Each Holder of any Stock, by acceptance thereof, agrees to indemnify and hold harmless the Company, its directors and officers and each other Person, if any, who controls the Company within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director or officer or any such Person may become subject under the Securities Act against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director or officer of any such Person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon information in writing provided to the Company by such Holder of such Stock specifically for use in the following 3 66 documents and contained, on the effective date thereof, in any Registration Statement under which securities were registered under the Securities Act at the request of such Holder, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto. (c) If the indemnification provided for in this Section 2.4 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by referenced to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.4(c) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 2.5 CERTAIN LIMITATIONS ON REGISTRATION RIGHTS. Notwithstanding the other provisions of Section 2, the Company shall not be obligated to register the Stock of any Holder if, in the opinion of counsel to the Company reasonably satisfactory to the Holder and its counsel (or, if the Holder has engaged an investment banking firm, to such investment banking firm and its counsel), the sale or other disposition of such Holder's Stock, in the manner proposed by such Holder (or by such investment banking firm), may be effected without registering such Stock under the Securities Act. 2.6 HOLDBACK AGREEMENTS. (a) If any registration of Common Stock to which Section 2.1 applies is an underwritten public offering, each Holder of Stock by acquisition of such Stock agrees, if so required by the managing underwriter, not to effect a public sale or distribution of Stock (other than as part of such underwritten public offering) within one business day (or such longer period as may be prohibited by Regulation M under the Securities Act) prior to the pricing of Common Stock offered pursuant to the related registration statement or the earlier of (i) the one hundred twentieth (120th) day after 4 67 the effective date of such registration statement or (ii) the date all securities registered under such registration statement are sold, provided that the Company shall have complied with its obligations under Section 2.6(b) below. (b) the Company agrees not to effect any public sale or distribution within one business day (or such longer period as may be prohibited by Regulation M under the Securities Act) prior to the pricing of Common Stock offered pursuant to any registration statement filed pursuant to Section 2.1 above and in connection with any underwritten public offering and prior to the earlier of (A) the one hundred twentieth (120th) day after any such registration statement has become effective and (B) the date on which all securities registered under such registration statement are sold, except as part of such underwritten public offering pursuant to such registration statement and except for securities registered on Form S-4 or S-8 or any successor forms thereto. SECTION 3. SUPPLYING INFORMATION. The Company shall cooperate with each Holder of Stock in supplying such information as may be reasonably necessary for such Holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Stock. The Company shall use its best efforts at all times to make public information available so as to afford the Holders of the Stock the benefit of Rule 144 of the Securities Act in connection with resales, as such Rule 144 may be amended from time to time or any similar rule or regulation thereafter adopted by the Commission. SECTION 4. MISCELLANEOUS 4.1 HEADINGS. The headings contained in this Agreement are inserted for convenience of reference only and do not constitute a part of this Agreement. 4.2 ENTIRE AGREEMENT. This Agreement and the Stock Purchase Agreement constitute the entire agreement among the parties and supersede all other prior agreements and understandings, both written and oral, among the parties. 4.3 CERTAIN DEFINITIONS. As used in this Agreement, the following terms have the respective meanings set forth below: "CLOSING" shall have the same meaning as ascribed thereto as in the Stock Purchase Agreement. "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. 5 68 "COMMON STOCK" shall mean (except where the context otherwise indicates) the Common Stock, par value $.001, of the Company, and any capital stock into which such Common Stock may thereafter be changed. "HOLDER" shall mean any Person who owns of record 10,000 or more shares of Stock. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "PERSON" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "TRANSFER" shall mean any disposition of any Stock or of any interest in either thereof, which would constitute a sale thereof within the meaning of the Securities Act. 4.4 COUNTERPARTS. This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument. 4.5 SEVERABILITY. To the extent possible, each provision of this Agreement shall be interpreted in a manner as to be valid, legal and enforceable. Any determination that any provision of this Agreement or any application thereof is invalid, illegal or unenforceable in any respect or in any instance shall be effective only to the extent of such invalidity, illegality or unenforceability and shall not affect the validity, legality or enforceability of any other provision of this Agreement. 4.6 AMENDMENT. This Agreement may be amended only by a written instrument duly executed by the parties. 4.7 NOTICES. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed to have been given or made if in writing and delivered personally or sent by facsimile or telecopy or by registered or certified mail (postage prepaid, return receipt requested) or any overnight courier to the parties at the following addresses: 6 69 (i) If to any Holder, at the address set forth on the records of the Company, with a copy to: Donald J. Christl, Esq. Reinhart, Boerner, Van Deuren, Norris & Rieselbach, S.C. 1000 North Water Street P.O. Box 92900 Milwaukee, Wisconsin 53202-0900 (ii) If to the Company: 2307 E. Aurora Road, Suite One Twinsburg, Ohio 44087 With a copy to: Gerald W. Cowden, Esq. Cowden, Humphrey & Sarlson Co., L.P.A. 1414 Terminal Tower Cleveland, Ohio 44113 or to such other addresses as shall be furnished by like notice by such party. Any such notice or communication given by mail shall be deemed to have been given when received. 4.8 THIRD PARTY BENEFICIARIES. Except as provided in Section 4.9 below, each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto; nor shall any statement here be deemed an admission against interest by any party in proceedings with third persons. 4.9 ASSIGNMENT. This Agreement and all of the provisions hereto shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, successors and assigns (to the extent assignment is permitted hereunder). 4.10 GOVERNING LAW JURISDICTION. This Agreement shall be governed by and construed in accordance with the internal substantive laws of the State of Ohio without regard to the conflicts of law principles hereof. 7 70 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day first written above. ADVANCED LIGHTING TECHNOLOGIES, INC. By: ---------------------------------- Name: WAYNE R. HELLMAN ---------------------------------- Its: CHIEF EXECUTIVE OFFICER ---------------------------------- ------------------------------------- ALAN J. RUUD ------------------------------------ THEODORE O. SOKOLY ----------------------------------- DONALD WANDLER ------------------------------------ CHRISTOPHER A. RUUD ----------------------------------- CYNTHIA A. JOHNSON 8 71 CH&S DRAFT - November 12, 1997 JANUARY 2, 1998 EXHIBIT G TO STOCK PURCHASE AGREEMENT ADVANCED LIGHTING TECHNOLOGIES, INC. 1998 INCENTIVE AWARD PLAN SECTION 1. PURPOSE. The purposes of this Advanced Lighting Technologies, Inc. 1998 Incentive Award Plan (the "Plan") are to encourage selected employees, advisors, consultants, and directors of Advanced Lighting Technologies, Inc. (together with any successor thereto, the "Company") and its Affiliates (as defined below) to acquire a proprietary interest in the growth and performance of the Company, to generate an increased incentive to contribute to the Company's future success and prosperity, thus enhancing the value of the Company for the benefit of its shareholders, and to enhance the ability of the Company and its Affiliates to attract and retain exceptionally qualified individuals upon whom, in large measure, the sustained progress, growth and profitability of the Company depend. The Plan will be submitted for approval by the shareholders of the Company at the next annual shareholders' meeting. SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall have the meanings set forth below: (a) "Affiliate" shall mean (i) any entity that, directly or through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, as determined by the Committee. (b) " 'A' Option" shall mean an "A" Option granted under Section 6(a) of the Plan. (c) "Award" shall mean any "A" Option or "B" Option granted under the Plan. (d) "Award Agreement" shall mean any written agreement, contract, or other instrument or document evidencing any Award granted under the Plan. (e) " 'B' Option" shall mean a "B" Option granted under Section 6(a) of the Plan. 72 (f) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (g) "Committee" shall mean a committee of the Board of Directors of the Company designated by such Board to administer the Plan and composed of not less than three (3) directors. (h) "Employee" shall mean any employee of the Company or of any Affiliate. (i) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. (j) "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code, or any successor provision thereto. (k) "Non-Employee Participant" shall mean any advisor, consultant or director of the Company or any Affiliate designated to be granted an Award (other than an Incentive Stock Option) under the Plan and eligible to be a Participant under Section 5 of the Plan. (l) "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option. (m) "Option" shall mean an "A" Option or a "B" Option. (n) "Participant" shall mean any Employee or Non-Employee Participant designated to be granted an Award under the Plan. (o) "Person" shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, or governmental or political subdivision thereof. (p) "Section 16" shall mean Section 16 of the Securities Exchange Act of 1934, as amended. 2 73 (q) "Shares" shall mean the shares of Common Stock of the Company, $.001 par value, and such other securities or property as may become the subject of Awards, or become subject to Awards, pursuant to an adjustment made under Section 4(b) of the Plan. SECTION 3. ADMINISTRATION. The Plan shall be administered solely by the Committee. Subject to the terms of the Plan and applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards, or other property, or canceled, forfeited or suspended, and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time, and shall be final, conclusive, and binding upon all Persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, any shareholders, and any employee of the Company or of any Affiliate. SECTION 4. SHARES AVAILABLE FOR AWARDS. (a) SHARES AVAILABLE. Subject to adjustment as provided in Section 4(b): 3 74 (i) CALCULATION OF NUMBER OF SHARES AVAILABLE. The number of Shares available for granting Awards under the Plan shall be 800,000 Shares, subject to adjustment as provided in Section 4(b). Further if, after the effective date of the Plan, any Shares covered by an Award granted under the Plan, or to which such an Award relates, are forfeited, or if an Award otherwise terminates without the delivery of Shares or of other consideration, then the Shares covered by such Award, or to which such Award relates, or the number of Shares otherwise counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be, or shall become, available for granting Awards under the Plan. (ii) ACCOUNTING FOR AWARDS. For purposes of this Section 4, the number of Shares covered by an Award shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan; provided, however, that Awards that operate in tandem with (whether granted simultaneously with or at a different time from), or that are substituted for, other Awards may be counted or not counted under procedures adopted by the Committee in order to avoid double counting. Any Shares that are delivered by the Company, and any Awards that are granted by, or become obligations of, the Company, through the assumption by the Company or any Affiliate of, or in substitution for, outstanding awards previously granted by an acquired company shall not, except in the case of Awards granted to Participants who are officers or directors of the Company for purposes of Section 16, be counted against the Shares available for granting Awards under the Plan. (iii) SOURCES OF SHARES DELIVERABLE UNDER AWARDS. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of Treasury Shares. (b) ADJUSTMENTS. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property) recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares 4 75 such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or property) which thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or property) subject to outstanding award, or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award; provided, however, in each case, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422 of the Code or any successor provision thereto; and provided further, however, that the number of Shares subject to any Award denominated in Shares shall always be a whole number. SECTION 5. ELIGIBILITY. Any Employee, advisor, consultant or director of the Company or of any Affiliate, shall be eligible to be designated a Participant; provided however, no officer or director of the Company shall be eligible to be designated a Participant unless the shareholders of the Company shall have approved the Plan in accordance with the Company's Regulations. SECTION 6. AWARDS. (a) OPTIONS. The Committee is hereby authorized to grant "A" Options and "B" Options to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine: (i) EXERCISE PRICE FOR "A" OPTIONS. The purchase price per Share purchasable under an "A" Option shall be the Fair Market Value per Share on the date of grant of such "A" Options. (ii) EXERCISE PRICE FOR "B" OPTIONS. The purchase price per Share purchasable under a "B" Option shall be determined by the Committee; provided, however, that such purchase price shall not be less than the Fair Market Value of a Share on the date of grant of such "B" 5 76 Option (or, if the Committee so determines, in the case of any "B" Option retroactively granted in tandem with or in substitution for another Award, on the date of grant of such Award). (iii) OPTION TERM. The term of each Option shall be fixed by the Committee. (iv) TIME AND METHOD OF EXERCISE. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, and the method or methods by which, and the form or forms, including, without limitation, cash, Shares, other Awards, or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price, in which, payment of the exercise price with respect thereto may be made or deemed to have been made; provided, however, that no Option may be exercised prior to six months after its date of grant. (v) INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, or any successor provisions thereto, and any regulations promulgated thereunder. An Incentive Stock Option may be granted only to an Employee and no Incentive Stock Option may be granted to any owner of ten percent or more of the total combined voting power of the Company and its Affiliates. The aggregate Fair Market Value determined as of the date of the Award, of Shares subject to an Incentive Stock Option exercised by an Employee in any calendar year shall not exceed $100,000. (b) GENERAL. (i) CONSIDERATION FOR AWARDS. Awards may be granted for no cash consideration or such cash consideration as may be required by applicable law. Awards also may be granted for cash or such other consideration as the Committee may deem appropriate. (ii) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for any other Award or any award granted under any other plan of the Company or any Affiliate. Awards granted in 6 77 addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards. (iii) LIMITS ON TRANSFER OF AWARDS. No Award and no right under any such Award, shall be assignable, alienable, saleable, or transferable by a Participant otherwise than by will or by the laws of descent and distribution; provided, however, that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant, and to receive any property distributable with respect to any Award upon the death of the Participant. Each Award, and each right under any Award, shall be exercisable, during the Participant's lifetime, only by the Participant or, if permissible under applicable law, by the Participant's guardian or legal representative. No Award, and no right under any such Award, may be pledged, alienated, attached, or otherwise encumbered, and any purported pledge, alienation, attachment, or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. (iv) TERM OF AWARDS. The term of each Award shall be for such period as may be determined by the Committee; provided, however, that in no event shall the term of any Incentive Stock Option exceed a period of ten years from the date of its grant. (v) SECTION 16 SIX MONTH LIMITATIONS. If necessary to comply with Section 16 and its rules only, any equity security issued pursuant to the Plan may not be sold for at least six months after acquisition and any derivative security issued pursuant to the Plan will not be exercisable for six months from its date of grant. Terms used in the preceding sentence shall, for the purposes of such sentence only, have the meanings, if any, assigned or attributed to them under Section 16 and the rules promulgated thereunder. (vi) SHARE CERTIFICATES. All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange or over the counter market 7 78 upon which such Shares or other securities are then listed or traded, and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be put on any certificates to make appropriate reference to such restrictions. SECTION 7. AMENDMENT AND TERMINATION. Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan: (a) AMENDMENTS TO THE PLAN. Subject to the last sentence of this Section 7(a), the Board of Directors of the Company may amend, alter, suspend, discontinue, or terminate the Plan, without the consent of any shareholders, Participant, other holder or beneficiary of an Award, or other person; provided, however, that, notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the shareholders of the Company no such amendment, alteration, suspension, discontinuation, or termination shall be made that would: (i) increase the total number of Shares available for Awards under the Plan, except as provided in Section 4 hereof; or (ii) permit Options to be granted with per Share grant, purchase, or exercise prices of less than the Fair Market Value of a Share on the date of grant thereof, except to the extent permitted under Section 6(a) hereof. No amendment, alteration, suspension, discontinuation or termination shall in any manner adversely affect any outstanding Option without the prior written consent of the Participant holding the Option. (b) AMENDMENTS TO AWARDS. Unless otherwise provided in the Award Agreement, the Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue, or terminate, any Award theretofore granted, prospectively or retroactively, without the consent of any relevant Participant or holder or beneficiary of an Award. (c) ADJUSTMENTS OF AWARDS UPON CERTAIN ACQUISITIONS. In the event the Company or any Affiliate shall assume outstanding employee awards or the right or obligation to make future such awards 8 79 in connection with the acquisition of another business or another corporation or business entity, the Committee may make such adjustments, not inconsistent with the terms of the Plan, in the terms of Awards as it shall deem appropriate in order to achieve reasonable comparability or other equitable relationship between the assumed awards and the Awards granted under the Plan as so adjusted. (d) ADJUSTMENTS OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING EVENTS. The Committee shall be authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4(b) hereof) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or the changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits to be made available under the Plan. (e) CORRECTION OF DEFECTS, OMISSIONS, AND INCONSISTENCIES. The Committee may correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect. SECTION 8. GENERAL PROVISIONS. (a) NO RIGHTS TO AWARDS. No Employee, Non-Employee Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees, Non-Employee Participants, or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to each recipient. (b) DELEGATION. The Committee may delegate to one or more officers or managers of the Company or any Affiliate, or a committee of such officers or managers, the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to, or to cancel, modify, waive rights with respect to, alter, discontinue, suspend, or terminate Awards held by, Salaried Employees who are not officers or directors of the Company, for purposes of Section 16. 9 80 (c) WITHHOLDING. The Company or any Affiliate shall be authorized to withhold from any Award granted or any payment due or transfer made under any Award or under the Plan the amount (in cash, Shares, other securities, other Awards, or other property) of withholding taxes due in respect of an Award, its exercise, or any payment or transfer under such Award or under the Plan and to take such other action as may be necessary in the opinion of the Company or Affiliate to satisfy all obligations for the payment of such taxes. (d) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (e) NO RIGHT TO EMPLOYMENT. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss a Participant from employment, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. (f) GOVERNING LAW. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Ohio and applicable federal law. (g) SEVERABILITY. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provisions shall be stricken as to such jurisdiction, Person, or Award, and the remainder of the Plan and any such Award shall remain in full force and effect. 10 81 (h) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of an unsecured general creditor of the Company or any Affiliate. (i) NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated. (j) HEADINGS. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. SECTION 9. EFFECTIVE DATE OF THE PLAN. The Plan shall be effective as of the later of (a) the effective date of its approval by the Board of Directors of the Company or (b) January 2, 1998. SECTION 10. TERM OF THE PLAN. No Award shall be granted under the Plan after January 2, 2008. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such date, and the authority of the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award, or to waive any conditions or rights under any such Award, and the authority of the Board of Directors of the Company to amend the Plan, shall extend beyond such date. 11 82 [RUUD MANAGEMENT EMPLOYEES] "A" OPTION GRANT, INTENDED TO QUALIFY AS AN INCENTIVE STOCK OPTION Date of Grant: _______________, 199_. THIS "A" OPTION GRANT is delivered by Advanced Lighting Technologies, Inc., an Ohio corporation (the "Company") to ______________________________ (the "Grantee"), who is an employee of the Company or one of its Affiliates (the Grantee's employer is referred to herein as the "Employer"). WHEREAS, the Board of Directors of the Company (the "Board") has adopted the Advanced Lighting Technologies, Inc. 1998 Incentive Award Plan (the "Plan") with an effective date of ____________________; WHEREAS, the Plan provides for the granting of Incentive Stock Options by a committee to be appointed by the Board (the "Committee") to eligible employees, advisors, consultants or directors of the Company or any Affiliate to purchase Common Stock, $.001 par value, of the Company (the "Stock"), in accordance with the terms and provisions thereof; and WHEREAS, the Committee considers the Grantee to be a person who is eligible for a grant of an Incentive Stock Option under the Plan, and has determined that it would be in the best interest of the Company to grant the Incentive Stock Option award herein as an "A" Option pursuant to the Plan. NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Grant of "A" Option. Subject to the terms and conditions hereinafter set forth, the Company, with the approval and at the direction of the Committee, hereby grants to the Grantee, as of the date of grant noted above ("Date of Grant"), an "A" Option to purchase up to ____________________ (____) shares of Stock at a price of $________ per share, which the Committee has determined to be the Fair Market Value of the Stock as of the date hereof. The shares of stock purchasable upon exercise of the Option are hereinafter sometimes referred to as the " 'A' Option Shares." The "A" Option is intended by the parties hereto to be, and shall be treated as, an incentive stock option (as such term is defined under section 422 of the Internal Revenue Code of 1986), unless the Plan has not been approved by Company shareholders in accordance with such Section 422. 2. Installment Exercise. Subject to such further limitations as are provided herein, the Grantee having the right hereunder to purchase from the Company the following number of "A" Option Shares upon exercise of the "A" Option, on and after the following dates, and so long as the Employer shall have attained the "A" Option Vesting Schedule EBIT Goals established by the Committee with respect to the relevant fiscal years noted below: (a) on and after September 30, ____, up to 25% of the total number of "A" Option Shares if the Employer has attained its Goal during the fiscal year ending June 30, ____; (b) on and after September 30, 20__, up to an additional 35% of the total number of "A" Option Shares if the Employer has attained its Goal during the fiscal year ending June 30, 20___; 83 (c) on and after September 30, 20__, up to an additional 40% of the total number of "A" Option Shares if the Employer has attained its Goal during the fiscal year ending June 30, 20___; (d) Should any of the Goals not be attained by the Employer during any fiscal year, then any unearned "A" Options may become exercisable on and after the sixth anniversary of the Date of Grant; (e) Any unearned "A" Options remaining after the sixth anniversary of the Date of Grant shall become immediately exercisable if the Grantee has been continuously employed by the Employer, the Company and/or any affiliate of the Company from the Date of Grant through such date; (f) The Committee reserves the right to revise the Goals at any time. 3. Termination of "A" Option. (a) The "A" Option and all rights hereunder with respect thereto, to the extent such rights shall not have been exercised, shall terminate and become null and void after the expiration of ten years from the Date of Grant (the "Option Term"). (b) Upon a termination of the Grantee's employment for any reason (other than by retirement, disability or death), the "A" Option may be exercised for sixty (60) days thereafter, but only to the extent that the "A" Option was outstanding and exercisable on the date of termination of the Grantee's employment. Upon a termination of the Grantee's employment by reason of retirement, disability or death, the "A" Option may be exercised during the following periods, but only to the extent that the "A" Option was outstanding and exercisable on any such date of retirement, disability or death: (i) the one-year period following the date of such termination of the Grantee's employment in the case of a disability (within the meaning of Section 22(e)(3) of the Code), (ii) the six-month period following the date of issuance of letters testamentary or letters of administration to the executor or administrator of a deceased Grantee, in the case of the Grantee's death during his employment by the Employer, but not later than one year after the Grantee's death, and (iii) the three-month period following the date of such termination in the case of retirement on or after attainment of age 65, or in the case of disability other than as described in (i) above. In no event, however, shall any such period extend beyond the Option Term. (c) A transfer of the Grantee's employment between the Company and any Affiliate, or between any Affiliates of the Company, shall not be deemed to be a termination of the Grantee's employment. (d) Notwithstanding any other provisions set forth herein or in the Plan, if the Grantee shall (i) commit any act of malfeasance or wrongdoing affecting the Company or Affiliate, (ii) breach any covenant not to compete, or employment contract, with the Company or Affiliate, or (iii) engage in conduct that would warrant the Grantee's discharge for cause (excluding general dissatisfaction with the performance of the Grantee's duties, but including any act of disloyalty or any conduct clearly tending to bring discredit upon the Company or any Affiliate), any unexercised portion of the "A" Option shall immediately terminate and be void. 4. Procedure to Exercise "A" Options. (a) The Grantee may exercise the "A" Option with respect to all or any part of the number of "A" Option Shares then exercisable hereunder by giving the Secretary of the Company written notice of intent to exercise. The notice of exercise shall specify the number of "A" Option Shares as to which the "A" Option is to be exercised and the date of exercise thereof, which date shall be at least five days after the giving of such notice unless an earlier time shall have been mutually agreed upon. 84 (b) Full payment (in U.S. dollars) by the Grantee of the option price for the "A" Option Shares purchased shall be made on or before the exercise date specified in the notice of exercise in cash, or, with the prior written consent of the Committee, in whole or in part through the surrender of previously acquired shares of Stock at their fair market value on the exercise date. (c) On the exercise date specified in the Grantee's notice or as soon thereafter as is practicable, the Company shall cause to be delivered to the Grantee, a certificate or certificates for the "A" Option Shares then being purchased (out of theretofore unissued Stock or Treasury Stock, as the Company may elect) upon full payment for such "A" Option Shares. The obligation of the Company to deliver Stock shall, however, be subject to the condition that if at any time the Committee shall determine in its discretion that the listing, registration or qualification of the "A" Option or the "A" Option Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the "A" Option or the issuance or purchase of Stock thereunder, the "A" Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. (d) If the Grantee fails to pay for any of the "A" Option Shares specified in such notice or fails to accept delivery thereof, the Grantee's right to purchase such "A" Option Shares may be terminated by the Company. The date specified in the Grantee's notice as the date of exercise shall be deemed the date of exercise of the "A" Option, provided that payment in full for the "A" Option Shares to be purchased upon such exercise shall have been received by such date. 5. No Rights of Shareholders. Neither the Grantee nor any personal representative shall be, or shall have any of the rights and privileges of, a shareholder of the Company with respect to any shares of Stock purchasable or issuable upon the exercise of the "A" Option, in whole or in part, prior to the date of exercise of the "A" Option. 6. Non-Transferability of Option. During the Grantee's lifetime, the "A" Option hereunder shall be exercisable only by the Grantee or any guardian or legal representative of the Grantee, and the "A" Option shall not be transferable except, in case of the death of the Grantee, by will or the laws of descent and distribution, nor shall the "A" Option be subject to attachment, execution or other similar process. In the event of (a) any attempt by the Grantee to assign, alienate, sell, pledge, hypothecate or otherwise dispose of the "A" Option, except as provided for herein, or (b) the levy of any installment, execution or similar process upon the rights or interest hereby conferred, the Company may terminate the "A" Option by notice to the Grantee and it shall thereupon become null and void. 7. Employment Not Affected. Neither the granting of the "A" Option nor its exercise shall not be construed as granting to the Grantee any right with respect to continuance of employment of the Employer. Except as may otherwise be limited by a written agreement between the Employer and the Grantee, the right of the Employer to terminate at will the Grantee's employment with it at any time (whether specifically reserved by the Company, as the Employer or on behalf of the Employer (whichever the case may be), and acknowledged by the Grantee. 85 8. Amendment of "A" Option. The "A" Option may be amended by the Committee at any time (i) if the Committee determines, in its sole discretion, that amendment is necessary or advisable in the light of any addition to or change in the Internal Revenue Code of 1986 or in the regulations issued thereunder, or any federal or state securities law or other law or regulation, which change occurs after the Date of Grant and by its terms applies to the "A" Option; or (ii) other than in the circumstances described in clause (i), with the consent of the Grantee. 9. Notice. Any notice to the Company provided for in this instrument shall be addressed to it in care of its Secretary at its executive offices at 2307 East Aurora Road, Suite 1, Twinsburg, Ohio 44087, or such other address as the Company shall specify by written notice to the Grantee, and any notice to the Grantee shall be addressed to the Grantee at the current address shown on the payroll records of the Employer. Any notice shall be deemed to be duly given if and when properly addressed and posted by registered or certified mail, postage prepaid. 10. Incorporation of Plan by Reference. The "A" Option is granted pursuant to the terms of the Plan, the terms of which are incorporated herein by reference, and the "A" Option shall in all respects be interpreted in accordance with the Plan. The Committee shall interpret and construe the Plan and this instrument, and its interpretations and determinations shall be conclusive and binding on the parties hereto and any other person claiming an interest hereunder, with respect to any issue arising hereunder or thereunder. 11. Governing Law. The validity, construction, interpretation and effect of this instrument shall exclusively be governed by and determined in accordance with the law of the State of Ohio, except to the extent preempted by federal law, which shall to the extent govern. IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and attest this grant of an "A" Option, and the Grantee has placed his or her signature hereon, effective as of the Date of Grant. ADVANCED LIGHTING TECHNOLOGIES, INC. By: --------------------------------------- ACCEPTED AND AGREED TO: By: --------------------------------------- Grantee 86 [RUUD EMPLOYEES] "B" OPTION GRANT, INTENDED TO QUALIFY AS AN INCENTIVE STOCK OPTION Date of Grant: ____________, 199__. THIS "B" OPTION GRANT is delivered by Advanced Lighting Technologies, Inc., an Ohio corporation (the "Company") to ______________________________ (the "Grantee"), who is an employee of the Company or one of its Affiliates (the Grantee's employer is referred to herein as the "Employer"). WHEREAS, the Board of Directors of the Company (the "Board") has adopted the Advanced Lighting Technologies, Inc. 1998 Incentive Award Plan (the "Plan") with an effective date of ___________________; WHEREAS, the Plan provides for the granting of Incentive Stock Options by a committee to be appointed by the Board (the "Committee") to eligible employees, advisors, consultants or directors of the Company or any Affiliate to purchase Common Stock of the Company (the "Stock"), in accordance with the terms and provisions thereof; and WHEREAS, the Committee considers the Grantee to be a person who is eligible for a grant of an Incentive Stock Option under the Plan, and has determined that it would be in the best interest of the Company to grant the Incentive Stock Option award herein as an "B" Option pursuant to the Plan. NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Grant of "B" Option. Subject to the terms and conditions hereinafter set forth, the Company, with the approval and at the direction of the Committee, hereby grants to the Grantee, as of the date of grant noted above ("Date of Grant"), a "B" Option to purchase up to ____________________ (____) shares of Stock at a price of $__________ per share, which the Committee has determined to be the Fair Market Value of the Stock as of the date hereof. The shares of stock purchasable upon exercise of the Option are hereinafter sometimes referred to as the "'B' Option Shares." The "B" Option is intended by the parties hereto to be, and shall be treated as, an incentive stock option (as such term is defined under section 422 of the Internal Revenue Code of 1986), unless the Plan has not been approved by Company shareholders in accordance with such Section 422. 2. Installment Exercise. Subject to such further limitations as are provided herein, the Grantee having the right hereunder to purchase from the Company the following number of "B" Option Shares upon exercise of the "B" Option, on and after the following dates: (a) on and after the first anniversary of the Date of Grant, 25% of the total number of "B" Option Shares; (b) on and after the second anniversary of the Date of Grant, an additional 35% of the total number of "B" Option Shares; and (c) on and after the third anniversary of the Date of Grant, an additional 40% of the total number of "B" Option Shares. 87 3. Termination of "B" Option. (a) The "B" Option and all rights hereunder with respect thereto, to the extent such rights shall not have been exercised, shall terminate and become null and void after the expiration of ten years from the Date of Grant (the "Option Term"). (b) Upon a termination of the Grantee's employment for any reason (other than by retirement, disability or death), the "B" Option may be exercised for 60 days thereafter, but only to the extent that the "B" Option was outstanding and exercisable on the date of termination of the Grantee's employment. Upon a termination of the Grantee's employment by reason of retirement, disability or death, the "B" Option may be exercised during the following periods, but only to the extent that the "B" Option was outstanding and exercisable on any such date of retirement, disability or death: (i) the one-year period following the date of such termination of the Grantee's employment in the case of a disability (within the meaning of Section 22(e)(3) of the Code), (ii) the six-month period following the date of issuance of letters testamentary or letters of administration to the executor or administrator of a deceased Grantee, in the case of the Grantee's death during his employment by the Employer, but not later than one year after the Grantee's death, and (iii) the three-month period following the date of such termination in the case of retirement on or after attainment of age 65, or in the case of disability other than as described in (i) above. In no event, however, shall any such period extend beyond the Option Term. (c) A transfer of the Grantee's employment between the Company and any Affiliate, or between any Affiliates of the Company, shall not be deemed to be a termination of the Grantee's employment. The term "Employer" shall thereafter mean the Affiliate for which the Grantee is then employed. (d) Notwithstanding any other provisions set forth herein or in the Plan, if the Grantee shall (i) commit any act of malfeasance or wrongdoing affecting the Company or Affiliate, (ii) breach any covenant not to compete, or employment contract, with the Company or Affiliate, or (iii) engage in conduct that would warrant the Grantee's discharge for cause (excluding general dissatisfaction with the performance of the Grantee's duties, but including any act of disloyalty or any conduct clearly tending to bring discredit upon the Company or any Affiliate), any unexercised portion of the "B" Option shall immediately terminate and be void. 4. Procedure to Exercise "B" Options. (a) The Grantee may exercise the "B" Option with respect to all or any part of the number of "B" Option Shares then exercisable hereunder by giving the Secretary of the Company written notice of intent to exercise. The notice of exercise shall specify the number of "B" Option Shares as to which the "B" Option is to be exercised and the date of exercise thereof, which date shall be at least five days after the giving of such notice unless an earlier time shall have been mutually agreed upon. (b) Full payment (in U.S. dollars) by the Grantee of the option price for the "B" Option Shares purchased shall be made on or before the exercise date specified in the notice of exercise in cash, or, with the prior written consent of the Committee, in whole or in part through the surrender of previously acquired shares of Stock at their fair market value on the exercise date. (c) On the exercise date specified in the Grantee's notice or as soon thereafter as is practicable, the Company shall cause to be delivered to the Grantee, a certificate or certificates for the "B" Option Shares then being purchased (out of theretofore unissued Stock or Treasury Stock, as the Company may elect) upon full payment for such "B" Option Shares. The obligation of the Company to deliver Stock shall, however, be subject to the condition that if at any time the Committee shall determine in its discretion that the listing, registration or qualification of the "B" Option or the "B" Option Shares upon any securities 88 exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the "B" Option or the issuance or purchase of Stock thereunder, the "B" Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. (d) If the Grantee fails to pay for any of the "B" Option Shares specified in such notice or fails to accept delivery thereof, the Grantee's right to purchase such "B" Option Shares may be terminated by the Company. The date specified in the Grantee's notice as the date of exercise shall be deemed the date of exercise of the "B" Option, provided that payment in full for the "B" Option Shares to be purchased upon such exercise shall have been received by such date. 5. No Rights of Shareholders. Neither the Grantee nor any personal representative shall be, or shall have any of the rights and privileges of, a shareholder of the Company with respect to any shares of Stock purchasable or issuable upon the exercise of the "B" Option, in whole or in part, prior to the date of exercise of the "B" Option. 6. Non-Transferability of Option. During the Grantee's lifetime, the "B" Option hereunder shall be exercisable only by the Grantee or any guardian or legal representative of the Grantee, and the "B" Option shall not be transferable except, in case of the death of the Grantee, by will or the laws of descent and distribution, nor shall the "B" Option be subject to attachment, execution or other similar process. In the event of (a) any attempt by the Grantee to assign, alienate, sell, pledge, hypothecate or otherwise dispose of the "B" Option, except as provided for herein, or (b) the levy of any installment, execution or similar process upon the rights or interest hereby conferred, the Company may terminate the "B" Option by notice to the Grantee and it shall thereupon become null and void. 7. Employment Not Affected. Neither the granting of the "B" Option nor its exercise shall not be construed as granting to the Grantee any right with respect to continuance of employment of the Employer. Except as may otherwise be limited by a written agreement between the Employer and the Grantee, the right of the Employer to terminate at will the Grantee's employment with it at any time (whether specifically reserved by the Company, as the Employer or on behalf of the Employer (whichever the case may be), and acknowledged by the Grantee. 8. Amendment of "B" Option. The "B" Option may be amended by the Committee at any time (i) if the Committee determines, in its sole discretion, that amendment is necessary or advisable in the light of any addition to or change in the Internal Revenue Code of 1986 or in the regulations issued thereunder, or any federal or state securities law or other law or regulation, which change occurs after the Date of Grant and by its terms applies to the "B" Option; or (ii) other than in the circumstances described in clause (i), with the consent of the Grantee. 9. Notice. Any notice to the Company provided for in this instrument shall be addressed to it in care of its Secretary at its executive offices at 2307 East Aurora Road, Suite 1, Twinsburg, Ohio 44087, or such other address as the Company shall specify by written notice to the Grantee, and any notice to the Grantee shall be addressed to the Grantee at the current address shown on the payroll records of the Employer. Any 89 notice shall be deemed to be duly given if and when properly addressed and posted by registered or certified mail, postage prepaid. 10. Incorporation of Plan by Reference. The "B" Option is granted pursuant to the terms of the Plan, the terms of which are incorporated herein by reference, and the "B" Option shall in all respects be interpreted in accordance with the Plan. The Committee shall interpret and construe the Plan and this instrument, and its interpretations and determinations shall be conclusive and binding on the parties hereto and any other person claiming an interest hereunder, with respect to any issue arising hereunder or thereunder. 11. Governing Law. The validity, construction, interpretation and effect of this instrument shall exclusively be governed by and determined in accordance with the law of the State of Ohio, except to the extent preempted by federal law, which shall to the extent govern. IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and attest this grant of an "B" Option, and the Grantee has placed his or her signature hereon, effective as of the Date of Grant. ADVANCED LIGHTING TECHNOLOGIES, INC. By: ------------------------------- ACCEPTED AND AGREED TO: By: ------------------------------- Grantee EX-10.2 3 EXHIBIT 10.2 1 EXHIBIT 10.2 ================================================================================ ================================================================================ CREDIT AGREEMENT DATED AS OF JANUARY 2, 1998 AMONG ADVANCED LIGHTING TECHNOLOGIES, INC. AS BORROWER THE LENDING INSTITUTIONS NAMED THEREIN AS LENDERS AND NATIONAL CITY BANK AS ADMINISTRATIVE AGENT ================================================================================ ================================================================================ 2 TABLE OF CONTENTS
PAGE ---- SECTION 1. DEFINITIONS AND TERMS...........................................................................1 1.1. CERTAIN DEFINED TERMS...........................................................................1 1.2. COMPUTATION OF TIME PERIODS....................................................................15 1.3. ACCOUNTING TERMS...............................................................................15 1.4. TERMS GENERALLY................................................................................15 1.5. CURRENCY EQUIVALENTS...........................................................................16 SECTION 2. AMOUNT AND TERMS OF LOANS......................................................................16 2.1. COMMITMENTS FOR LOANS..........................................................................16 2.2. MINIMUM BORROWING AMOUNTS, ETC.; PRO RATA BORROWINGS...........................................17 2.3. NOTICE OF BORROWING............................................................................17 2.4. DISBURSEMENT OF FUNDS FROM BORROWINGS..........................................................18 2.5. NOTES..........................................................................................19 2.6. VOLUNTARY CONVERSION OF DOLLAR DENOMINATED LOANS; REDENOMINATION OF LOANS......................19 2.7. INTEREST ON LOANS..............................................................................20 2.8. INTEREST PERIODS...............................................................................21 2.9. INCREASED COSTS, ILLEGALITY, ETC...............................................................22 2.10. COMPENSATION...................................................................................24 2.11. CHANGE OF LENDING OFFICE; REPLACEMENT OF LENDERS...............................................24 SECTION 3. LETTERS OF CREDIT..............................................................................25 3.1. LETTERS OF CREDIT..............................................................................25 3.2. LETTER OF CREDIT REQUESTS: NOTICES OF ISSUANCE.................................................26 3.3. AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS...................................................26 3.4. LETTER OF CREDIT PARTICIPATIONS................................................................26 3.5. INCREASED COSTS................................................................................28 3.6. GUARANTY OF SUBSIDIARY LETTER OF CREDIT OBLIGATIONS............................................29 3.7. SEPARATE DOCUMENTARY LETTERS OF CREDIT.........................................................30 SECTION 4. FEES; COMMITMENTS..............................................................................30 4.1. FEES...........................................................................................30 4.2. VOLUNTARY TERMINATION/REDUCTION OF COMMITMENTS.................................................31 4.3. MANDATORY TERMINATION/ADJUSTMENTS OF COMMITMENTS, ETC..........................................31 4.4. EXTENSION OF MATURITY DATE.....................................................................32 SECTION 5. PAYMENTS.......................................................................................32 5.1. VOLUNTARY PREPAYMENTS..........................................................................32 5.2. MANDATORY PREPAYMENTS..........................................................................33 5.3. METHOD AND PLACE OF PAYMENT....................................................................34 5.4. NET PAYMENTS...................................................................................34 SECTION 6. CONDITIONS PRECEDENT...........................................................................36 6.1. CONDITIONS PRECEDENT AT INITIAL BORROWING DATE.................................................36 6.2. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS......................................................38 SECTION 7. REPRESENTATIONS AND WARRANTIES.................................................................38 7.1. CORPORATE STATUS, ETC..........................................................................39 7.2. SUBSIDIARIES...................................................................................39 7.3. CORPORATE POWER AND AUTHORITY, ETC.............................................................39 7.4. NO VIOLATION...................................................................................39
ii 3 7.5. GOVERNMENTAL APPROVALS.........................................................................39 7.6. LITIGATION.....................................................................................40 7.7. USE OF PROCEEDS; MARGIN REGULATIONS............................................................40 7.8. FINANCIAL STATEMENTS, ETC......................................................................40 7.9. NO MATERIAL ADVERSE CHANGE.....................................................................41 7.10. TAX RETURNS AND PAYMENTS.......................................................................41 7.11. TITLE TO PROPERTIES, ETC.......................................................................41 7.12. LAWFUL OPERATIONS, ETC.........................................................................41 7.13. ENVIRONMENTAL MATTERS..........................................................................41 7.14. COMPLIANCE WITH ERISA..........................................................................42 7.15. INTELLECTUAL PROPERTY, ETC.....................................................................42 7.16. INVESTMENT COMPANY.............................................................................42 7.17. BURDENSOME CONTRACTS; LABOR RELATIONS..........................................................43 7.18. EXISTING INDEBTEDNESS..........................................................................43 7.19. SECURITY INTERESTS.............................................................................43 7.20. TRUE AND COMPLETE DISCLOSURE...................................................................43 SECTION 8. AFFIRMATIVE COVENANTS..........................................................................44 8.1. REPORTING REQUIREMENTS.........................................................................44 8.2. BOOKS, RECORDS AND INSPECTIONS.................................................................47 8.3. INSURANCE......................................................................................47 8.4. PAYMENT OF TAXES AND CLAIMS....................................................................47 8.5. CORPORATE FRANCHISES...........................................................................48 8.6. GOOD REPAIR....................................................................................48 8.7. COMPLIANCE WITH STATUTES, ETC..................................................................48 8.8. COMPLIANCE WITH ENVIRONMENTAL LAWS.............................................................48 8.9. FISCAL YEARS, FISCAL QUARTERS..................................................................49 8.10. CERTAIN SUBSIDIARIES TO JOIN IN SUBSIDIARY GUARANTY............................................49 8.11. ADDITIONAL SECURITY; FURTHER ASSURANCES........................................................49 8.12. CORPORATE SEPARATENESS.........................................................................51 8.13. ERISA..........................................................................................51 8.14. HEDGE AGREEMENTS, ETC..........................................................................51 8.15. LANDLORD/MORTGAGEE WAIVERS; BAILEE LETTERS.....................................................52 8.16. SENIOR DEBT....................................................................................52 SECTION 9. NEGATIVE COVENANTS.............................................................................52 9.1. CHANGES IN BUSINESS............................................................................52 9.2. CONSOLIDATION, MERGER OR SALE OF ASSETS, ETC...................................................52 9.3. LIENS..........................................................................................54 9.4. INDEBTEDNESS...................................................................................56 9.5. ADVANCES, INVESTMENTS, LOANS AND GUARANTY OBLIGATIONS..........................................57 9.6. DIVIDENDS, ETC.................................................................................59 9.7. TOTAL INDEBTEDNESS/EBITDA RATIO................................................................59 9.8. INTEREST COVERAGE RATIO........................................................................59 9.9. CAPITAL EXPENDITURES...........................................................................59 9.10. CERTAIN LEASES.................................................................................59 9.11. MINIMUM CONSOLIDATED TANGIBLE NET WORTH........................................................59 9.12. PREPAYMENTS AND REFINANCINGS OF OTHER DEBT, ETC................................................60 9.13. TRANSACTIONS WITH AFFILIATES...................................................................60 9.14. LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES.............................................60 9.15. LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS.................................................60 SECTION 10. EVENTS OF DEFAULT..............................................................................61 10.1. EVENTS OF DEFAULT..............................................................................61
ii 4 10.2. ACCELERATION, ETC..............................................................................63 10.3. APPLICATION OF LIQUIDATION PROCEEDS............................................................63 SECTION 11. THE ADMINISTRATIVE AGENT.......................................................................64 11.1. APPOINTMENT....................................................................................64 11.2. DELEGATION OF DUTIES...........................................................................64 11.3. EXCULPATORY PROVISIONS.........................................................................64 11.4. RELIANCE BY ADMINISTRATIVE AGENT...............................................................64 11.5. NOTICE OF DEFAULT..............................................................................65 11.6. NON-RELIANCE...................................................................................65 11.7. INDEMNIFICATION................................................................................65 11.8. THE ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY................................................66 11.9. SUCCESSOR ADMINISTRATIVE AGENT.................................................................66 11.10. OTHER AGENTS...................................................................................66 SECTION 12. GUARANTY BY THE BORROWER.......................................................................66 12.1. GUARANTY OF CERTAIN SUBSIDIARY BORROWINGS......................................................66 12.2. ADDITIONAL UNDERTAKING.........................................................................66 12.3. GUARANTY UNCONDITIONAL, ETC....................................................................66 12.4. BORROWER OBLIGATIONS TO REMAIN IN EFFECT; RESTORATION..........................................67 12.5. WAIVER OF ACCEPTANCE, ETC......................................................................67 12.6. SUBROGATION....................................................................................67 12.7. EFFECT OF STAY.................................................................................67 SECTION 13. MISCELLANEOUS..................................................................................68 13.1. PAYMENT OF EXPENSES ETC........................................................................68 13.2. RIGHT OF SETOFF................................................................................68 13.3. NOTICES........................................................................................69 13.4. BENEFIT OF AGREEMENT...........................................................................69 13.5. NO WAIVER: REMEDIES CUMULATIVE.................................................................70 13.6. PAYMENTS PRO RATA..............................................................................70 13.7. CALCULATIONS: COMPUTATIONS.....................................................................71 13.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL.........................71 13.9. COUNTERPARTS...................................................................................72 13.10. EFFECTIVENESS..................................................................................72 13.11. HEADINGS DESCRIPTIVE...........................................................................72 13.12. AMENDMENT OR WAIVER............................................................................72 13.13. SURVIVAL OF INDEMNITIES........................................................................73 13.14. DOMICILE OF LOANS..............................................................................73 13.15. CONFIDENTIALITY................................................................................73 13.16. LENDER REGISTER................................................................................73 13.17. LIMITATIONS ON LIABILITY OF THE LETTER OF CREDIT ISSUERS.......................................74 13.18. GENERAL LIMITATION OF LIABILITY................................................................74 13.19. NO DUTY........................................................................................74 13.20. LENDERS AND ADMINISTRATIVE AGENT NOT FIDUCIARY TO BORROWER, ETC................................75 13.21. JUDGMENT CURRENCY..............................................................................75 13.22. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................................75
iii 5 - ------------ ANNEX I - INFORMATION AS TO LENDERS ANNEX II - INFORMATION AS TO SUBSIDIARIES ANNEX III - DESCRIPTION OF EXISTING INDEBTEDNESS ANNEX IV - DESCRIPTION OF EXISTING LIENS ANNEX V - DESCRIPTION OF EXISTING ADVANCES, LOANS, INVESTMENTS AND GUARANTEES ANNEX VI - DESCRIPTION OF LETTERS OF CREDIT DEEMED ISSUED UNDER THE CREDIT AGREEMENT EXHIBIT A - FORM OF NOTE EXHIBIT B-1 - FORM OF NOTICE OF BORROWING EXHIBIT B-2 - FORM OF NOTICE OF CONVERSION EXHIBIT B-3 - FORM OF LETTER OF CREDIT REQUEST EXHIBIT B-4 - FORM OF REDENOMINATION REQUEST EXHIBIT C - FORM OF SUBSIDIARY GUARANTY EXHIBIT D - FORM OF SECURITY AGREEMENT EXHIBIT E-1 - FORM OF PLEDGE AGREEMENT EXHIBIT E-2 - FORM OF MORTGAGE OF SHARES OF PARRY POWER SYSTEMS LIMITED EXHIBIT F-1 - FORM OF LANDLORD WAIVER EXHIBIT F-2 - FORM OF MORTGAGEE WAIVER EXHIBIT G - FORM OF BAILEE WAIVER EXHIBIT H - FORM OF COMPLIANCE CERTIFICATE EXHIBIT I - FORM OF OPINION OF SPECIAL COUNSEL TO THE BORROWER EXHIBIT J - FORM OF ASSIGNMENT AGREEMENT EXHIBIT K - FORM OF SECTION 5.4(B)(II) CERTIFICATE iv 6 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of January 2, 1998, among the following: (i) ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation (herein, together with its successors and assigns, the "Borrower"); (ii) the lending institutions listed in Annex I hereto (each a "Lender" and collectively, the "Lenders"); and (iii) NATIONAL CITY BANK, a national banking association, as administrative agent (the "Administrative Agent"): PRELIMINARY STATEMENTS: (1) Unless otherwise defined herein, all capitalized terms used herein and defined in section 1 are used herein as so defined. (2) The Borrower has applied to the Lenders for credit facilities in order to refinance certain indebtedness of the Borrower and its Subsidiaries and in order to provide working capital and funds for other lawful purposes. (3) Subject to and upon the terms and conditions set forth herein, the Lenders are willing to make available to the Borrower the credit facilities provided for herein. NOW, THEREFORE, it is agreed: SECTION 1. DEFINITIONS AND TERMS 1.1. Certain Defined Terms. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular: "ACQUISITION" shall mean and include: (i) any acquisition on a going concern basis (whether by purchase, lease or otherwise) of any facility and/or business operated by any person who is not a Wholly-Owned Subsidiary of the Borrower, and (ii) acquisitions of equity or other similar interests in any such person (whether by merger, stock purchase or otherwise) which result in the ownership by the Borrower and its Subsidiaries of a majority of the outstanding equity or other similar interests in any such person. "ADDITIONAL SECURITY DOCUMENT" shall have the meaning provided in section 8.11(a). "ADMINISTRATIVE AGENT" shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Administrative Agent appointed pursuant to section 11.9. "AFFILIATE" shall mean, with respect to any person, any other person directly or indirectly controlling, controlled by, or under direct or indirect common control with such person. A person shall be deemed to control a second person if such first person possesses, directly or indirectly, the power (i) to vote 20% or more of the securities having ordinary voting power for the election of directors or managers of such second person or (ii) to direct or cause 7 the direction of the management and policies of such second person, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, (x) a director, officer or employee of a person shall not, solely by reason of such status, be considered an Affiliate of such person; and (y) neither the Administrative Agent nor any Lender shall in any event be considered an Affiliate of the Borrower or any other Credit Party or any of their respective Subsidiaries. "AGREEMENT" shall mean this Credit Agreement, as the same may be from time to time further modified, amended and/or supplemented. "ALTERNATIVE CURRENCY" shall mean and include (i) German Marks, French Francs, Pounds Sterling, Australian Dollars and Canadian Dollars, if at the time any such currency is readily and freely transferable and convertible into Dollars; and (ii) any other lawful currency other than Dollars which is readily and freely transferable and convertible into Dollars and is acceptable to the Lenders as provided in section 2.3(b) or 2.6(b), as applicable, and any applicable Letter of Credit Issuer. "APPLICABLE EUROCURRENCY MARGIN" shall have the meaning provided in section 2.7(g). "APPLICABLE COMMITMENT FEE RATE" shall have the meaning provided in section 4.1(a). "APPLICABLE LENDING OFFICE" shall mean, with respect to each Lender, (i) such Lender's Domestic Lending Office in the case of Borrowings consisting of Prime Rate Loans and (ii) such Lender's Eurocurrency Lending Office in the case of Borrowings consisting of Eurocurrency Loans. "APPLICABLE PRIME RATE MARGIN" shall have the meaning provided in section 2.7(g). "ASSET SALE" shall mean the sale, transfer or other disposition (including by means of Sale and Lease-Back Transaction and by means of mergers, consolidations, and liquidations of a corporation, partnership or limited liability company of the interests therein of the Borrower or any Subsidiary) by the Borrower or any Subsidiary to any person other than the Borrower or any Subsidiary of any of their respective assets (other than sales of inventory and equipment in the ordinary course of business, and sales, transfers or other dispositions of obsolete or excess furniture, fixtures, equipment or other property, tangible or intangible, also in the ordinary course of business). "ASSIGNMENT AGREEMENT" shall mean an Assignment Agreement substantially in the form of Exhibit J hereto. "AUTHORIZED OFFICER" shall mean any officer or employee of the Borrower designated as such in writing to the Administrative Agent by the Borrower. "BANKRUPTCY CODE" shall have the meaning provided in section 10.1(g). "BORROWER" shall have the meaning provided in the introductory paragraph hereof. "BORROWING" shall mean the incurrence of Loans consisting of one Type of Loan, by the Borrower from all of the Lenders having Commitments in respect thereof on a PRO RATA basis on a given date (or resulting from conversions on a given date), which in the case of Eurocurrency Loans have the same Interest Period and are denominated in the same currency. "BUSINESS DAY" shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in the city in which the applicable Payment Office is located a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurocurrency Loans, any day which is a Business Day described in clause (i) and which is also a day on which dealings are carried on in the London interbank market and banks are open for business in London and in the country of issue of any Alternative Currency in which any applicable Eurocurrency Loans are denominated. 2 8 "CAPITAL LEASE" as applied to any person shall mean any lease of any property (whether real, personal or mixed) by that person as lessee which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that person. "CAPITALIZED LEASE OBLIGATIONS" shall mean all obligations under Capital Leases of the Borrower or any of its Subsidiaries in each case taken at the amount thereof accounted for as liabilities identified as "capital lease obligations" (or any similar words) on a consolidated balance sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP. "CASH EQUIVALENTS" shall mean any of the following: (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (PROVIDED that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than one year from the date of acquisition; (ii) U.S. dollar denominated time deposits, certificates of deposit and bankers' acceptances of (x) any Lender or (y) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank, an "APPROVED BANK"), in each case with maturities of not more than 90 days from the date of acquisition; (iii) commercial paper issued by any Lender or Approved Bank or by the parent company of any Lender or Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be, and in each case maturing within 90 days after the date of acquisition; (iv) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (iii) above; (v) investments in money market funds access to which is provided as part of "sweep" accounts maintained with a Lender or an Approved Bank; and (vi) only in the case of any Foreign Subsidiary or a foreign branch or permanent establishment of the Borrower, short term deposits, certificates of deposit, repurchase agreements and similar financial instruments, in any currency, incident to normal operations in any foreign jurisdiction outside the United States, with or issued by any local or international financial institution with undivided capital and surplus of at least $250,000,000 (or the equivalent in any applicable currency), not exceeding $1,100,000 (or the equivalent in any other currency) in the case of any single financial institution. "CASH PROCEEDS" shall mean, with respect to any Asset Sale, the aggregate cash payments (including any cash received by way of deferred payment pursuant to a note receivable issued in connection with such Asset Sale, other than the portion of such deferred payment constituting interest, but only as and when so received) received by the Borrower and/or any Subsidiary from such Asset Sale. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as the same may be amended from time to time, 42 U.S.C. Sec. 9601 ET SEQ. "CHANGE OF CONTROL" shall mean and include any of the following: (i) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the Borrower's Board of Directors (together with any new directors whose election by the Borrower's Board of Directors or whose nomination for election by the Borrower's shareholders was 3 9 approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; (ii) any person or group (as such term is defined in section 13(d)(3) of the 1934 Act), other than the Borrower, any trustee or other fiduciary holding securities under an employee benefit plan of the Borrower, and Wayne R. Hellman (and (x) trusts for the benefit of such person, his family and descendants, and (y) any voting trust over which Mr. Hellman exercises control), shall acquire, directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3 and 13d-5 of the 1934 Act) of more than 25%, on a fully diluted basis, of the economic or voting interest in the Borrower's capital stock; (iii) Wayne R. Hellman (and trusts for the benefit of such person, his family and descendants) shall, for any reason, cease to have, directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3 and 13d-5 of the 1934 Act) of at least 12%, on a fully diluted basis, of the economic or voting interest in the Borrower's capital stock; (iv) the full time active employment of Wayne R. Hellman as chief executive officer of the Borrower shall be voluntarily terminated by the Borrower or Mr. Hellman (other than by reason of death or disability), unless a successor acceptable to the Required Lenders shall have been appointed or elected and actually taken office within three months following any such termination, in which case the name of such successor shall be substituted for the name of the person he or she replaces for purposes of this clause (iv); (v) the shareholders of the Borrower approve (A) a merger or consolidation of the Borrower with any other person, other than a merger or consolidation which would result in the voting securities of the Borrower outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted or exchanged for voting securities of the surviving or resulting entity) more than 75% of the combined voting power of the voting securities of the Borrower or such surviving or resulting entity outstanding after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Borrower (or similar transaction), other than any such transaction in which no person or group (as hereinabove defined) not excepted from the provisions of clause (ii) above acquires more than 25% of the combined voting power, on a fully diluted basis, of the Borrower's then outstanding voting securities; and/or (vi) the shareholders of the Borrower approve a plan of complete liquidation of the Borrower or an agreement or agreements for the sale or disposition by the Borrower of all or substantially all of the Borrower's assets. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. Section references to the Code are to the Code, as in effect at the Effective Date and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. "COLLATERAL" shall mean any collateral covered by any Security Document. "COLLATERAL AGENT" shall mean the Administrative Agent acting as Collateral Agent for the Lenders pursuant to the Security Documents. "COMMITMENT" shall mean, with respect to each Lender, the amount set forth opposite such Lender's name in Annex I as its "Commitment" as the same may be reduced from time to time pursuant to section 4.2, 4.3 and/or 10 or adjusted from time to time as a result of assignments to or from such Lender pursuant to section 13.4. "COMMITMENT FEE" shall have the meaning provided in section 4.1(a). 4 10 "CONSOLIDATED CAPITAL EXPENDITURES" shall mean, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including in all events amounts expended or capitalized under Capital Leases but excluding any amount representing capitalized interest) by the Borrower and its Subsidiaries during that period that, in conformity with GAAP, are or are required to be included in the property, plant or equipment reflected in the consolidated balance sheet of the Borrower and its Subsidiaries. "CONSOLIDATED NET INCOME" shall mean for any period, the net income (or loss), without deduction for minority interests, of the Borrower and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP, PROVIDED that there shall be excluded therefrom (i) the income, (or loss) of any entity accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any of its Subsidiaries or on which its assets are acquired by the Borrower or any of its Subsidiaries, and (ii) the income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary. "CONSOLIDATED TANGIBLE NET WORTH" shall mean at any time for the determination thereof (i) all amounts which, in conformity with GAAP, would be included under the caption "total stockholders' equity" (or any like caption) on a consolidated balance sheet of the Borrower as at such date, REDUCED BY (ii) the sum (without duplication), on a consolidated basis, of the following, to the extent reflected as consolidated assets: (A) any write-up in the book value of any assets subsequent to September 30, 1997, (B) goodwill, (C) organizational expenses, research and development expenses, patents, trademarks, copyrights licenses and other intangible assets, (D) unamortized debt discount and expense, (E) securities which are not readily marketable, (F) cash or Cash Equivalents held in a sinking or other analogous fund established for the purpose of redemption, retirement or prepayment of capital stock or Indebtedness, and (G) any items not included in the foregoing clauses (A) through (F) which are treated as intangibles in accordance with GAAP. "CREDIT DOCUMENTS" shall mean this Agreement, the Notes, the Subsidiary Guaranty, the Security Documents and any Letter of Credit Document. "CREDIT EVENT" shall mean the making of any Loans and/or the issuance of any Letter of Credit. "CREDIT PARTY" shall mean the Borrower and each Subsidiary which is a party to any Credit Document. "DEFAULT" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "DEFAULTING LENDER" shall mean any Lender with, respect to which a Lender Default is in effect. "DESIGNATED HEDGE AGREEMENT" shall mean any Hedge Agreement to which the Borrower or any of its Subsidiaries is a party which, pursuant to a written instrument signed by the Administrative Agent, has been designated as a Designated Hedge Agreement so that the Borrower's or Subsidiaries's counterparty's credit exposure thereunder will be entitled to share in the benefits of the Subsidiary Guaranty and the Security Documents to the extent such Subsidiary Guaranty and Security Documents provide guarantees or security for creditors of the Borrower or any Subsidiary under Designated Hedge Agreements. The Administrative Agent may, without the approval or consent of the Lenders, designate a Hedge Agreement as a Designated Hedge Agreement if the counterparty is a Lender or an Affiliate of a Lender and the maximum credit exposure of such counterparty under such Hedge Agreement to the Borrower and its Subsidiaries is reasonably determined by the Administrative Agent, in accordance with its own customary valuation practices, not to exceed $3,000,000; however, if the counterparty is not a Lender or an Affiliate of a Lender, or such credit exposure is so determined by the Administrative Agent to be greater than $3,000,000, the Administrative Agent shall only designate the Hedge Agreement involving such counterparty as a Designated Hedge Agreement if the Administrative Agent is instructed to do so by the Required Lenders. As a matter of present intention, the Administrative Agent intends to offer to Lenders the opportunity to participate in any Designated Hedge Agreement arranged by it. The Administrative Agent may impose as a condition to any designation 5 11 of a Designated Hedge Agreement a requirement that the counterparty enter into an intercreditor or similar agreement with the Administrative Agent under which recoveries from the Borrower and its Subsidiaries with respect to such Designated Hedge Agreement will be shared in a manner consistent with the provisions of section 10.3 hereof. "DOLLARS", "U.S. DOLLARS" and the sign "$" each means lawful money of the United States. "DOMESTIC LENDING OFFICE" shall mean, with respect to any Lender, the office of such Lender specified as its Domestic Lending Office in Annex I or in the Assignment Agreement pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EBIT" shall mean, for any period, the sum of the amounts for such period of (i) Consolidated Net Income, (ii) provisions for taxes based on income, and (iii) Total Interest Expense, all as determined for the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP. "EBITDA" shall mean, for any period, (A) the sum of the amounts for such period of (i) EBIT, (ii) depreciation and amortization, and (iii) extraordinary, infrequent or unusual, and other non-recurring non-cash losses and non-cash charges, LESS (B) gains on sales of assets (excluding sales in the ordinary course of business) and extraordinary gains, all as determined for the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP. "EFFECTIVE DATE" shall have the meaning provided in section 13.10. "ELIGIBLE TRANSFEREE" shall mean and include a commercial bank, financial institution or other "accredited investor" (as defined in SEC Regulation D), in each case which (i) so long as no Default under section 10.1(a) or Event of Default shall have occurred and be continuing, and so long as the financial covenants contained in sections 9.7 through 9.13 of this Agreement have not been modified (or compliance therewith waived) following a deterioration in the financial condition or results of operations of the Borrower and its Subsidiaries, is not disapproved in writing by the Borrower in a notice given to a requesting Lender and the Administrative Agent, specifying the reasons for such disapproval, within five Business Days following the giving of notice to the Borrower of the identity of any proposed transferee (any such disapproval by the Borrower must be reasonable), and (ii) is not a direct competitor of the Borrower or engaged in the same or similar business as the Borrower, or any of its respective Subsidiaries or is not an Affiliate of any such competitors of the Borrower or any of its respective Subsidiaries. "ENVIRONMENTAL CLAIMS" shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations or proceedings arising under any Environmental Law or any permit issued under any such law (hereafter "CLAIMS"), including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the storage, treatment or Release (as defined in CERCLA) of any Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "ENVIRONMENTAL LAW" shall mean any applicable Federal, state, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy and rule of common law now or hereafter in effect and in each case as amended, and any binding and enforceable judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment issued to or rendered against the Borrower or any of its Subsidiaries relating to the environment, employee health and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. Sec. 2601 ET SEQ.; the Clean Air Act, 42 U.S.C. Sec. 7401 ET SEQ.; the Safe Drinking Water Act, 6 12 42 U.S.C. Sec. 3803 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Sec. 2701 ET SEQ.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. Sec. 11001 ET SEQ., the Hazardous Material Transportation Act, 49 U.S.C. Sec. 1801 ET SEQ. and the Occupational Safety and Health Act, 29 U.S.C. Sec. 651 ET SEQ. (to the extent it regulates occupational exposure to Hazardous Materials); and any state and local or foreign counterparts or equivalents, in each case as amended from time to time. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the Effective Date and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA AFFILIATE" shall mean each person (as defined in section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the Borrower would be deemed to be a "single employer" (i) within the meaning of section 414(b),(c), (m) or (o) of the Code or (ii) as a result of the Borrower or a Subsidiary of the Borrower being or having been a general partner of such person. "EUROCURRENCY LENDING OFFICE" shall mean, with respect to any Lender, the office of such Lender specified as its Eurocurrency Lending Office in Annex I or in the Assignment Agreement pursuant to which it became a Lender, or such other office or offices (for Eurocurrency Loans denominated in Dollars or particular Alternative Currencies) of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EUROCURRENCY LOANS" shall mean each Loan, denominated in U.S. Dollars or in an Alternative Currency, bearing interest at the rates provided in section 2.7(b). "EUROCURRENCY RATE" shall mean with respect to each Interest Period for a Eurocurrency Loan, (A) either (i) the rate per annum for deposits in Dollars or in the relevant Alternative Currency for a maturity most nearly comparable to such Interest Period which appears on page 3740 or 3750, as applicable, of the Dow Jones Telerate Screen as of 11:00 A.M. (local time at the Notice Office) on the date which is two Business Days prior to the commencement of such Interest Period, or (ii) if such a rate does not appear on such a page, an interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in Dollars or in the relevant Alternative Currency are offered to each of the Reference Banks by prime banks in the London interbank Eurocurrency market for deposits of amounts in same day funds comparable to the outstanding principal amount of the Eurocurrency Loan for which an interest rate is then being determined with maturities comparable to the Interest Period to be applicable to such Eurocurrency Loan, determined as of 11:00 A.M. (London time) on the date which is two Business Days prior to the commencement of such Interest Period, in each case divided (and rounded upward to the nearest whole multiple of 1/16th of 1%) by (B) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "EVENT OF DEFAULT" shall have the meaning provided in section 10.1. "EXISTING INDEBTEDNESS" shall have the meaning provided in section 7.18. "EXISTING INDEBTEDNESS AGREEMENTS" shall have the meaning provided in section 7.18. "EXISTING LETTER OF CREDIT" shall have the meaning provided in section 3.1(d). "FACING FEE" shall have the meaning provided in section 4.1(c). "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of 7 13 the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent. "FEES" shall mean all amounts payable pursuant to, or referred to in, section 4.1. "FOREIGN SUBSIDIARY" shall mean any Subsidiary (i) substantially all of whose assets and properties are located, or substantially all of whose business is carried on, outside the United States, or (ii) substantially all of whose assets consist of Subsidiaries that are Foreign Subsidiaries as defined in clause (i) of this definition. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time; it being understood and agreed that determinations in accordance with GAAP for purposes of section 9, including defined terms as used therein, are subject (to the extent provided therein) to section 13.7(a). "GUARANTEED OBLIGATIONS" shall have the meaning provided in section 12.1. "GUARANTY OBLIGATIONS" shall mean as to any person (without duplication) any obligation of such person guaranteeing any Indebtedness ("PRIMARY INDEBTEDNESS") of any other person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, any obligation of such person, whether or not contingent, (a) to purchase any such primary Indebtedness or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary Indebtedness or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary Indebtedness of the ability of the primary obligor to make payment of such primary Indebtedness, or (d) otherwise to assure or hold harmless the owner of such primary Indebtedness against loss in respect thereof, PROVIDED, HOWEVER, that the term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary Indebtedness in respect of which such Guaranty Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith. "HEDGE AGREEMENT" shall mean (i) any interest rate swap agreement, any interest rate cap agreement, any interest rate collar agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates, and (ii) any currency swap agreement, forward currency purchase agreement or similar agreement or arrangement designed to protect against fluctuations in currency exchange rates. "HAZARDOUS MATERIALS" shall mean (i) any petrochemical or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (ii) any chemicals, materials or substances defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "restricted hazardous materials", "extremely hazardous wastes", "restrictive hazardous wastes", "toxic substances", "toxic pollutants", "contaminants" or "pollutants", or words of similar meaning and regulatory effect under any applicable Environmental Law. "INDEBTEDNESS" of any person shall mean without duplication: (i) all indebtedness of such person for borrowed money, (ii) all bonds, notes, debentures and similar debt securities of such person, (iii) the deferred purchase price of capital assets or services which in accordance with GAAP would be shown on the liability side of the balance sheet of such person, 8 14 (iv) the face amount of all letters of credit issued for the account of such person and, without duplication, all drafts drawn thereunder, (v) all Indebtedness of a second person secured by any Lien on any property owned by such first person, whether or not such indebtedness has been assumed, (vi) all Capitalized Lease Obligations of such person, (vii) all obligations of such person to pay a specified purchase price for goods or services whether or not delivered or accepted, I.E., take-or-pay and similar obligations, (viii) all net obligations of such person under Hedge Agreements, (ix) the full outstanding balance of trade receivables sold with full or limited recourse, other than solely for purposes of collection of delinquent accounts, and (x) all Guaranty Obligations of such person, PROVIDED that neither trade payables and accrued expenses, in each case arising in the ordinary course of business, nor obligations in respect of insurance policies or performance or surety bonds which themselves are not guarantees of Indebtedness, shall constitute Indebtedness. "INITIAL BORROWING DATE" shall mean the date, on or after the Effective Date, upon which the conditions specified in section 6.1 are satisfied. "INTEREST COVERAGE RATIO" shall mean, for any Testing Period, the ratio of (i) the sum of EBIT and amortization, to (ii) Total Interest Expense, in each case on a consolidated basis for the Borrower and its Subsidiaries for such Testing Period. "INTEREST PERIOD" with respect to any Eurocurrency Loan shall mean the interest period applicable thereto, as determined pursuant to section 2.8. "LEASEHOLDS" of any person means all the right, title and interest of such person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "LENDER" shall have the meaning provided in the first paragraph of this Agreement. "LENDER DEFAULT" shall mean (i) the refusal (which has not been retracted) of a Lender in violation of the requirements of this Agreement to make available its portion of any incurrence of Loans or to fund its portion of any unreimbursed payment under section 3.4(c) or (ii) a Lender having notified the Administrative Agent and/or the Borrower that it does not intend to comply with the obligations under section 2.1 and/or section 3.4(c), in the case of either (i) or (ii) as a result of the appointment of a receiver or conservator with respect to such Lender at the direction or request of any regulatory agency or authority. "LENDER REGISTER" shall have the meaning provided in section 13.16. "LETTER OF CREDIT" shall have the meaning provided in section 3.1(a). "LETTER OF CREDIT DOCUMENTS" shall have the meaning specified in section 3.2(a). "LETTER OF CREDIT FEE" shall have the meaning provided in section 4.1(b). "LETTER OF CREDIT ISSUER" shall mean (i) in respect of each Existing Letter of Credit, the Lender that has issued same as of the Effective Date; (ii) in any other case, any of the original Lenders named in this Agreement; 9 15 and/or (iii) any other Lender that is requested, and agrees, to so act by the Borrower, and is approved by the Administrative Agent and the Required Lenders; PROVIDED, that unless otherwise agreed by the Borrower, NCB and NBD Bank, NBD Bank will act as the Letter of Credit Issuer for Letters of Credit issued after the Effective Date for any of the purposes contemplated by clause (ii) of section 3.1(a). "LETTER OF CREDIT OUTSTANDINGS" shall mean, at anytime, the sum, without duplication, of (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings. "LETTER OF CREDIT REQUEST" shall have the meaning provided in section 3.2(a). "LIEN" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof). "LOAN" shall have the meaning provided in section 2.1. "MARGIN STOCK" shall have the meaning provided in Regulation U. "MATERIAL ADVERSE EFFECT" (i) when used with reference to either (x) the Borrower, or (y) any of its Subsidiaries, shall mean a material adverse effect on the business, operations, property, assets, liabilities or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole; or (ii) when used with reference to any other person, shall mean a material adverse effect on the business, operations, property, assets, liabilities or condition (financial or otherwise) of such person and its Subsidiaries, taken as a whole. "MATERIAL SUBSIDIARY" shall mean, at any time, with reference to any person, any Subsidiary of such person (i) that has assets at such time comprising 5% or more of the consolidated assets of such person and its Subsidiaries, or (ii) whose operations in the current fiscal year are expected to, or whose operations in the most recent fiscal year did (or would have if such person had been a Subsidiary for such entire fiscal year), represent 5% or more of the consolidated earnings before interest, taxes, depreciation and amortization of such person and its Subsidiaries for such fiscal year. "MATURITY DATE" shall mean December 31, 2000, unless earlier terminated, or extended in accordance with section 4.4. "MINIMUM BORROWING AMOUNT" shall mean (i) for Loans which are Prime Rate Loans, $1,000,000, with minimum increments thereafter of $250,000 and (ii) for Loans which are Eurocurrency Loans, $1,000,000 (or the substantial equivalent thereof in any Alternative Currency), with minimum increments thereafter of $500,000 (or the substantial equivalent thereof in any Alternative Currency). "MOODY'S" shall mean Moody's Investors Service, Inc. and its successors. "MULTIEMPLOYER PLAN" shall mean a multiemployer plan, as defined in section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions or has within any of the preceding three plan years made or accrued an obligation to make contributions. "MULTIPLE EMPLOYER PLAN" shall mean an employee benefit plan, other than a Multiemployer Plan, to which the Borrower or any ERISA Affiliate, and one or more employers other than the Borrower or an ERISA Affiliate, is making or accruing an obligation to make contributions or, in the event that any such plan has been terminated, to which the Borrower or an ERISA Affiliate made or accrued an obligation to make contributions during any of the five plan years preceding the date of termination of such plan. "NCB" shall mean National City Bank, a national banking association, together with its successors and assigns. 10 16 "NET CASH PROCEEDS" shall mean, with respect to any Asset Sale, the Cash Proceeds resulting therefrom net of (i) reasonable and customary expenses of sale incurred in connection with such Asset Sale, and other reasonable and customary fees and expenses incurred, and all state, and local taxes paid or reasonably estimated to be payable by such person, as a consequence of such Asset Sale and the payment of principal, premium and interest of Indebtedness secured by the asset which is the subject of the Asset Sale and required to be, and which is, repaid under the terms thereof as a result of such Asset Sale, (ii) amounts of any distributions payable to holders of minority interests in the relevant person or in the relevant property or assets and (iii) incremental income taxes paid or payable as a result thereof. "1934 ACT" shall mean the Securities Exchange Act of 1934, as amended. "NON-DEFAULTING LENDER" shall mean each Lender other than a Defaulting Lender. "NOTE" shall have the meaning provided in section 2.5(a). "NOTICE OF BORROWING" shall have the meaning provided in section 2.3(a). "NOTICE OF CONVERSION" shall have the meaning provided in section 2.6(a). "NOTICE OF REDENOMINATION" shall have the meaning provided in section 2.6(b). "NOTICE OFFICE" shall mean the office of the Administrative Agent at 1900 East Ninth Street, Cleveland, Ohio 44114, Attention: Anthony J. DiMare, Senior Vice President (telephone: (216) 575-3344; facsimile: (216) 575-9396), or such other office, located in a city in the United States Eastern Time Zone, as the Administrative Agent may designate to the Borrower from time to time. "OBLIGATIONS" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing by the Borrower to the Administrative Agent or any Lender pursuant to the terms of this Agreement or any other Credit Document. "PARTICIPANT" shall have the meaning provided in section 3.4(a). "PAYMENT OFFICE" shall mean the office of the Administrative Agent at 1900 East Ninth Street, Cleveland, Ohio 44114, Attention: Connie Djukic (telephone: (216) 575-2578; facsimile: (216) 575-9396), or such other office, located in a city in the United States Eastern Time Zone, as the Administrative Agent may designate to the Borrower from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "PERCENTAGE" shall mean at any time for any Lender, the percentage obtained by dividing such Lender's Commitment by the Total Commitment, PROVIDED, that if the Total Commitment has been terminated, the Percentage for each Lender shall be determined by dividing such Lender's Commitment immediately prior to such termination by the Total Commitment immediately prior to such termination. "PERMITTED ACQUISITION" shall mean and include any Acquisition as to which all of the following conditions are satisfied: (i) such transaction is not actively opposed by the Board of Directors (or similar governing body) of the selling person or the person whose equity interests are to be acquired, UNLESS all of the Lenders consent to such transaction; (ii) the aggregate consideration for such transaction (including the principal amount of any assumed Indebtedness and (without duplication) any Indebtedness of any acquired person or persons), does 11 17 not exceed $10,000,000, UNLESS the Required Lenders consent to such transaction; PROVIDED that this limitation shall not apply to the acquisition of the company identified to the Lenders prior to the Effective Date if the aggregate consideration does not exceed $15,000,000 plus 600,000 shares of the Borrower's common stock; and (iii) such Acquisition would not involve the Borrower and its Subsidiaries in a business which is not similar or related to the businesses engaged in by the Borrower and its Subsidiaries on the Effective Date. Notwithstanding the foregoing, the term Permitted Acquisition does not include (x) the acquisition of Ruud Lighting, Inc.; (y) any Consolidated Capital Expenditures; or (z) any loans, advances or investments (including investments in joint ventures) otherwise permitted pursuant to section 9.5. "PERMITTED LIENS" shall mean Liens described in section 9.3. "PERSON" shall mean any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "PLAN" shall mean any multiemployer or single-employer plan as defined in section 4001 of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute by) the Borrower or a Subsidiary of the Borrower or an ERISA Affiliate, and each such plan for the five year period immediately following the latest date on which the Borrower, or a Subsidiary of the Borrower or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan. "PLEDGE AGREEMENT" shall have the meaning provided in section 6.1(c). "PRIME RATE" shall mean, for any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the greater of (i) the rate of interest established by the Administrative Agent at its principal office, from time to time, as its prime rate, whether or not publicly announced, which interest rate may or may not be the lowest rate charged by it for commercial loans or other extensions of credit; and (ii) the Federal Funds Effective Rate in effect from time to time PLUS 1/2 of 1% per annum. "PRIME RATE LOAN" shall mean each Loan, denominated in U. S. Dollars, bearing interest at the rates provided in section 2.7(a). "PROHIBITED TRANSACTION" shall mean a transaction with respect to a Plan that is prohibited under section 4975 of the Code or section 406 of ERISA and not exempt under section 4975 of the Code or section 408 of ERISA. "RCRA" shall mean the Resource Conservation and Recovery Act, as the same may be amended from time to time, 42 U.S.C. Sec. 6901 et seq. "REAL PROPERTY" of any person shall mean all of the right, title and interest of such person in and to land, improvements and fixtures, including Leaseholds. "REDENOMINATE", "REDENOMINATION" and "REDENOMINATED" each refers to redenomination of each Eurocurrency Loan comprising the same Borrowing from Dollars into an Alternative Currency or from an Alternative Currency into Dollars or another Alternative Currency pursuant to section 2.6. "REFERENCE BANKS" shall mean (i) NCB, NBD Bank, and PNC Bank, National Association, and (ii) any other Lender or Lenders selected as a Reference Bank by the Administrative Agent and the Required Lenders, PROVIDED, that if any of such Reference Banks is no longer a Lender, such other Lender or Lenders as may be selected by the Administrative Agent acting on instructions from the Required Lenders. 12 18 "REGULATION D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "REGULATION U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements. "REPORTABLE EVENT" shall mean an event described in section 4043(c) of ERISA with respect to a Plan other than those events as to which the 30-day notice period is waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC Regulation section 2615. "REQUIRED LENDERS" shall mean Non-Defaulting Lenders whose outstanding Loans and Unutilized Commitments constitute at least 66+2/3% of the sum of the total outstanding Loans and Unutilized Commitments of Non-Defaulting Lenders (PROVIDED that, for purposes hereof, neither the Borrower, nor any of its Affiliates, shall be included in (i) the Lenders holding such amount of the Loans or having such amount of the Unutilized Commitments, or (ii) determining the aggregate unpaid principal amount of the Loans or Unutilized Commitments). "RUUD ACQUISITION DOCUMENTS" shall have the meaning provided in section 6.1(l). "SALE AND LEASE-BACK TRANSACTION" shall mean any arrangement with any person providing for the leasing by the Borrower or any Subsidiary of the Borrower of any property (except for temporary leases for a term, including any renewal thereof, of not more than one year and except for leases between the Borrower and a Subsidiary or between Subsidiaries), which property has been or is to be sold or transferred by the Borrower or such Subsidiary to such person. "S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., and its successors. "SEC" shall mean the United States Securities and Exchange Commission. "SEC REGULATION D" shall mean Regulation D as promulgated under the Securities Act of 1933, as amended, as the same may be in effect from time to time. "SECTION 5.4(B)(II) CERTIFICATE" shall have the meaning provided in section 5.4(b)(ii). "SECURITY AGREEMENT" shall have the meaning provided in section 6.1(c). "SECURITY DOCUMENTS" shall mean the Security Agreement, the Pledge Agreement and each other document pursuant to which any Lien or security interest is granted by any Credit Party to the Collateral Agent as security for any of the Obligations. "SEPARATE DOCUMENTARY LETTER OF CREDIT OBLIGATIONS" shall mean all obligations of the Borrower or any of its Subsidiaries under documentary letters of credit issued by NCB as contemplated by section 3.7. "STATED AMOUNT" of each Letter of Credit shall mean the maximum available to be drawn thereunder (regardless of whether any conditions or other requirements for drawing could then be met). "SUBSIDIARY" of any person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity in which such person directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time. Unless otherwise expressly provided, all references herein to "Subsidiary" shall mean a Subsidiary of the Borrower. "SUBSIDIARY GUARANTY" shall have the meaning provided in section 6.1(c). 13 19 "SUBORDINATED INDEBTEDNESS" shall mean any Indebtedness which has been subordinated to the Obligations in such manner and to such extent as the Required Lenders may require. "TESTING PERIOD" shall mean for any determination a single period consisting of the four consecutive fiscal quarters of the Borrower most recently ended (whether or not such quarters are all within the same fiscal year). "TOTAL COMMITMENT" shall mean the sum of the Commitments of the Lenders. "TOTAL INDEBTEDNESS" shall mean the sum (without duplication) of the following, for the Borrower and/or any of its Subsidiaries, all as determined on a consolidated basis of: (i) all indebtedness for borrowed money, (ii) all bonds, notes, debentures and similar debt securities, (iii) the deferred purchase price of capital assets or services which in accordance with GAAP would be shown on the liability side of a consolidated balance sheet of the Borrower and its Subsidiaries, (iv) the face amount of all letters of credit issued for the account of the Borrower or any Subsidiary, and, without duplication, all drafts drawn thereunder, EXCEPT that, to the extent any such letters of credit support Indebtedness of a Subsidiary referred to in section 9.4(b) hereof, such amount shall only be counted (without duplication) to the extent of the principal amount of such Indebtedness of such Subsidiary which is outstanding; (v) all Indebtedness of a second person secured by any Lien on any property owned by such first person, whether or not such Indebtedness has been assumed, (vi) all Capitalized Lease Obligations, (vii) all obligations of the Borrower or any Subsidiary to pay a specified purchase price for goods or services whether or not delivered or accepted, I.E., take-or-pay and similar obligations, (viii) the full outstanding balance of trade receivables sold with full or limited recourse, other than solely for purposes of collection of delinquent accounts, PROVIDED that if the structure of any receivables sales program provides for "over-collateralization", the outstanding balance of the trade receivables attributable to the "over-collateralization" may be excluded, and (ix) all Guaranty Obligations of such person, PROVIDED that neither trade payables and accrued expenses, in each case arising in the ordinary course of business, nor obligations in respect of insurance policies or performance or surety bonds which themselves are not guarantees of Indebtedness, shall be included. "TOTAL INTEREST EXPENSE" shall mean, for any period, (i) total interest expense (including that which is attributable to Capital Leases, in accordance with GAAP) of the Borrower and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and net costs under Hedge Agreements, but excluding, however, any amortization of deferred financing costs, all as determined in accordance with GAAP, MINUS (ii) gross interest income of the Borrower and its Subsidiaries on a consolidated basis, all as determined in accordance with GAAP. "TOTAL LIABILITIES" shall mean the sum (without duplication) of (i) Total Indebtedness, and (ii) all other liabilities which in accordance with GAAP which would be shown on a consolidated balance sheet as liabilities, all as determined on a consolidated basis for the Borrower and its Subsidiaries. 14 20 "TYPE" shall mean any type of Loan determined with respect to the interest option applicable thereto, i.e., a Prime Rate Loan or a Eurocurrency Loan. "UCC" shall mean the Uniform Commercial Code. "UNFUNDED CURRENT LIABILITY" of any Plan shall mean the amount, if any, by which the actuarial present value of the accumulated plan benefits under the Plan as of the close of its most recent plan year exceeds the fair market value of the assets allocable thereto, each determined in accordance with Statement of Financial Accounting Standards No. 87, based upon the actuarial assumptions used by the Plan's actuary in the most recent annual valuation of the Plan. "UNITED STATES" and "U.S." each means United States of America. "UNPAID DRAWING" shall have the meaning provided in section 3.3(a). "UNUTILIZED COMMITMENT" for any Lender at any time shall mean the excess of (i) such Lender's Commitment at such time over (ii) the sum of the principal amount of Loans made by such Lender and outstanding at such time and (y) such Lender's Percentage of Letter of Credit Outstandings at such time. "UNUTILIZED TOTAL COMMITMENT" shall mean, at any time, the excess of (i) the Total Commitment at such time over (ii) the sum of (x) the aggregate principal amount of all Loans then outstanding plus (y) the aggregate Letter of Credit Outstandings at such time. "VALUE" shall mean, with respect to a Sale and Lease-Back Transaction, as of any particular time, the amount equal to the greater of (i) the net proceeds of the sale or transfer of the property leased pursuant to such Sale and Lease-Back Transaction or (ii) the fair value in the opinion of the Borrower, acting in good faith, of such property at the time of entering into such Sale and Lease-Back Transaction. "WHOLLY-OWNED SUBSIDIARY" shall mean each Subsidiary of the Borrower at least 95% of whose capital stock, equity interests and partnership interests, other than director's qualifying shares or similar interests, are owned directly or indirectly by the Borrower. "WRITTEN", "WRITTEN" or "IN WRITING" shall mean any form of written communication or a communication by means of telex, facsimile transmission, telegraph or cable. 1.2. COMPUTATION OF TIME PERIODS. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding". 1.3. ACCOUNTING TERMS. Except as otherwise specifically provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision of section 8 or 9 hereof to eliminate the effect of any change occurring after the Effective Date in GAAP or in the application thereof to such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any such provision hereof for such purposes), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP 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 with the requirements of this Agreement. 1.4. 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, 15 21 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 sections, Annexes and Exhibits shall be construed to refer to sections of, and Annexes and Exhibits 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 real property, tangible and intangible assets and properties, including cash, securities, accounts and contract rights, and interests in any of the foregoing. 1.5. CURRENCY EQUIVALENTS. For purposes of this Agreement, except as otherwise specified herein, (i) the equivalent in Dollars of any Alternative Currency shall be determined by using the quoted spot rate at which the Administrative Agent offers to exchange Dollars for such Alternative Currency at its Payment Office at 9:00 A.M. (local time at the Payment Office) two Business Days prior to the date on which such equivalent is to be determined, (ii) the equivalent in any Alternative Currency of any other Alternative Currency shall be determined by using the quoted spot rate at which the Administrative Agent's Payment Office offers to exchange such Alternative Currency for the equivalent in Dollars of such other Alternative Currency at such Payment Office at 9:00 A.M. (local time at the Payment Office) two Business Days prior to the date on which such equivalent is to be determined, and (iii) the equivalent in any Alternative Currency of Dollars shall be determined by using the quoted spot rate at which the Administrative Agent's Payment Office offers to exchange such Alternative Currency for Dollars at the Payment Office at 9:00 A.M. (local time at the Payment Office) two Business Days prior to the date on which such equivalent is to be determined; provided, that (A) the equivalent in Dollars of each Eurocurrency Loan made in an Alternative Currency shall be recalculated hereunder on each date that it shall be necessary (or the Administrative Agent shall elect) to determine the unused portion of each Lender's Commitment, or any or all Loan or Loans outstanding on such date; (B) the equivalent in Dollars of any Unpaid Drawing in respect of any Letter of Credit denominated in an Alternative Currency shall be determined at the time the drawing under such Letter of Credit was paid or disbursed by the applicable Letter of Credit Issuer; (C) for purposes of sections 2.1(a), 3.1(b) and 5.2(a), the equivalent in Dollars of the Stated Amount of any Letter of Credit denominated in an Alternative Currency shall be calculated (x) on the date of the issuance of the respective Letter of Credit, (y) on the first Business Day of each calendar month thereafter and (z) in any other case where the same is required or permitted to be calculated, on such other day as the Administrative Agent may, in its sole discretion, consider appropriate; and (D) for purposes of sections 4.1(b) and (c), the equivalent in Dollars of the Stated Amount of any Letter of Credit denominated in an Alternative Currency shall be calculated on the first day of each calendar month in the quarterly period in which the respective payment is due pursuant to said sections. SECTION 2. AMOUNT AND TERMS OF LOANS. 2.1. COMMITMENTS FOR LOANS. Subject to and upon the terms and conditions set forth in this Agreement, each Lender severally agrees to make a loan or loans (each a "LOAN" and, collectively, the "LOANS") to the Borrower, which Loans shall be drawn, in accordance with the following provisions: (a) Loans may be made pursuant to a Borrowing by the Borrower at any time and from time to time on and after the Initial Borrowing Date and prior to the Maturity Date; (b) Loans may, except as otherwise provided, at the option of the Borrower, be incurred and maintained as, or converted or Redenominated into, Loans which are Prime Rate Loans or Eurocurrency Loans, denominated in Dollars or an Alternative Currency, PROVIDED that all Loans made as part of the same Borrowing by the Borrower shall, unless otherwise specifically provided herein, consist of Loans of the same Type and currency; and provided, further, that the aggregate outstanding principal amount of Loans to the Borrower denominated in any Alternative Currency shall not exceed $8,000,000 at any time outstanding; (c) Loans may be repaid or prepaid and reborrowed in accordance with the provisions hereof; and (d) Loans shall not exceed for any Lender at any time outstanding that aggregate principal amount which, when added to the product at such time of (i) such Lender's Percentage, times (ii) the aggregate Letter of Credit Outstandings, equals the Commitment of such Lender at such time. 16 22 2.2. MINIMUM BORROWING AMOUNTS, ETC.; Pro Rata Borrowings. (a) The aggregate principal amount of each Borrowing by the Borrower shall not be less than the Minimum Borrowing Amount. More than one Borrowing may be incurred by the Borrower on any day, provided that (i) if there are two or more Borrowings on a single day by the Borrower which consist of Eurocurrency Loans denominated in the same currency, each such Borrowing shall have a different initial Interest Period, and (ii) at no time shall there be more than 14 Borrowings of Eurocurrency Loans outstanding hereunder. (b) All Borrowings shall be made by the Lenders pro rata on the basis of their respective Commitments. It is understood that no Lender shall be responsible for any default by any other Lender in its obligation to make Loans hereunder and that each Lender shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Lender to fulfill its Commitment hereunder. 2.3. NOTICE OF BORROWING. (a) Whenever the Borrower desires to incur Loans, the Borrower shall give the Administrative Agent at its Notice Office, (A) BORROWINGS OF EUROCURRENCY LOANS DENOMINATED IN DOLLARS: prior to 11:00 A.M. (local time at its Notice Office), at least three Business Days' prior written or telephonic notice (in the case of telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent) of each Borrowing of Eurocurrency Loans denominated in Dollars to be made hereunder, (B) BORROWINGS OF EUROCURRENCY LOANS DENOMINATED IN AN ALTERNATIVE CURRENCY: prior to 11:00 A.M. (local time at its Notice Office), at least five Business Days' prior written or telephonic notice (in the case of telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent) of each Borrowing of Loans consisting of Eurocurrency Loans denominated in an Alternative Currency to be made hereunder, or (C) BORROWINGS OF PRIME RATE LOANS: prior to 11:00 A.M. (local time at its Notice Office) on the proposed date thereof written or telephonic notice (in the case of telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent) of each Borrowing of Prime Rate Loans to be made hereunder. Each such notice (each such notice, a "NOTICE OF BORROWING") shall (if requested by the Administrative Agent to be confirmed in writing), be substantially in the form of Exhibit B-1, and in any event shall be irrevocable and shall specify: (i) the aggregate principal amount of the Loans to be made pursuant to such Borrowing; (ii) the date of the Borrowing (which shall be a Business Day); (iii) whether the Borrowing shall consist of Prime Rate Loans or Eurocurrency Loans; (iv) if the requested Borrowing consists of Eurocurrency Loans, the Interest Period to be initially applicable thereto; and (v) in the case of a requested Borrowing consisting of Loans which are Eurocurrency Loans, the currency, if other than Dollars, in which such Loans are requested. The Administrative Agent shall promptly give each Lender written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing, of such Lender's proportionate share thereof and of the other matters covered by the Notice of Borrowing relating thereto. (b) In the case of a proposed Borrowing comprised of Loans which are Eurocurrency Loans denominated in an Alternative Currency, the obligation of each affected Lender to make its Eurocurrency Loan in the requested Alternative Currency as part of such Borrowing is subject to: (A) if such requested Alternative Currency is an Alternative Currency described in clause (i) of the definition of the term Alternative Currency, the confirmation by the Administrative Agent to the Borrower not later than the fourth Business Day before the requested date of such Borrowing that such Alternative Currency is readily and freely transferable and convertible into Dollars, or (B) if such requested Alternative Currency is not an Alternative Currency described in clause (i) of the definition of the term Alternative Currency, the confirmation by such Lender to the Administrative Agent not later than the fourth Business Day before the requested date of such Borrowing that such 17 23 Alternative Currency is acceptable to such Lender, which confirmation shall be notified immediately by the Administrative Agent to the Borrower. If the Administrative Agent shall not have provided the confirmation referred to in clause (A) above, or any affected Lender shall not have so provided to the Administrative Agent the confirmation referred to in clause (B) above, the Administrative Agent shall promptly notify the Borrower and each affected Lender that a Lender has not provided any such confirmation referred to in such clause (B), whereupon the Borrower may, by notice to the Administrative Agent not later than the third Business Day before the requested date of such Borrowing, withdraw the Notice of Borrowing relating to such requested Borrowing. If the Borrower does so withdraw such Notice of Borrowing, the Borrowing requested in such Notice of Borrowing shall not occur and the Administrative Agent shall promptly so notify each affected Lender. If the Borrower does not so withdraw such Notice of Borrowing, the Administrative Agent shall promptly so notify each affected Lender and such Notice of Borrowing shall be deemed to be a Notice of Borrowing which requests a Borrowing of Loans comprised of Eurocurrency Loans in an aggregate amount in Dollars equivalent, on the date the Administrative Agent so notifies each affected Lender, to the amount of the originally requested Borrowing in an Alternative Currency; and in such notice by the Administrative Agent to each affected Lender the Administrative Agent shall state such aggregate equivalent amount of such Borrowing in Dollars and such Lender's ratable portion of such Borrowing. (c) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice permitted to be given hereunder, the Administrative Agent may act prior to receipt of written confirmation without liability upon the basis of such telephonic notice believed by the Administrative Agent in good faith to be from an Authorized Officer of the Borrower entitled to give telephonic notices under this Agreement on behalf of the Borrower. In each such case, the Administrative Agent's record of the terms of such telephonic notice shall be conclusive absent manifest error. 2.4. DISBURSEMENT OF FUNDS FROM BORROWINGS. (a) No later than 2:00 P.M. (local time at the Payment Office of the Administrative Agent) on the date specified in each Notice of Borrowing relating to Eurocurrency Loans, and no later than 2:00 P.M. (local time at the Payment Office of the Administrative Agent) on the date specified in each Notice of Borrowing relating to Prime Rate Loans, each Lender will make available its pro rata share of each Borrowing requested to be made on such date in the manner provided below. All amounts relating to any Borrowing by the Borrower shall be made available to the Administrative Agent in U.S. dollars or the applicable Alternative Currency and immediately available funds at the Administrative Agent's Payment Office and the Administrative Agent promptly will make available to the Borrower by depositing to its account at such Payment Office, or at such other account in another financial institution designated by the Borrower to the Administrative Agent, the aggregate of the amounts so made available in the currency and type of funds received. Unless the Administrative Agent shall have been notified by any Lender prior to the date of a Borrowing that such Lender does not intend to make available to the Administrative Agent its portion of the Borrowing or Borrowings to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date of Borrowing, and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender and the Administrative Agent has made available same to the Borrower, the Administrative Agent shall be entitled to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent at a rate per annum equal to (x) if paid by such Lender, at the overnight Federal Funds Effective Rate, in the case of any Loan denominated in Dollars, or at the weighted average overnite or weekend borrowing rate for immediately available and freely transferrable funds in the applicable Alternative Currency which is offered to the Administrative Agent in the international markets, in the case of any Loan denominated in an Alternative Currency, or (y) if paid by the Borrower, the then applicable rate of interest, calculated in accordance 18 24 with section 2.7, for the respective Loan (but without any requirement to pay any amounts in respect thereof pursuant to section 2.10). (b) Nothing herein and no subsequent termination of the Commitments pursuant to section 4.2 or 4.3 shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder and in existence from time to time or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder. 2.5. Notes. (a) The Borrower's obligation to pay the principal of, and interest on, the Loans made to it by each Lender shall be evidenced by a promissory note of the Borrower substantially in the form of Exhibit A (each a "Note" and, collectively, the "Notes"). (b) The Note issued by the Borrower to a Lender shall: (i) be executed by the Borrower; (ii) be payable to the order of such Lender and be dated on or prior to the date the first Loan outstanding thereunder is made; (iii) be payable in the principal amount of Loans evidenced thereby; (iv) mature on the Maturity Date; (v) bear interest as provided in section 2.7 in respect of the Prime Rate Loans or Eurocurrency Loans, as the case may be, evidenced thereby; (vi) be subject to mandatory prepayment as provided in section 5.2; and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (c) Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will, prior to any transfer of any of the Notes issued to it by the Borrower, endorse on the reverse side thereof or the grid attached thereto the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation or any error in any such notation shall not affect the Borrower's obligations in respect of such Loans. 2.6. VOLUNTARY CONVERSION OF DOLLAR DENOMINATED LOANS; REDENOMINATION OF LOANS. (a) The Borrower shall have the option to convert on any Business Day all or a portion at least equal to the applicable Minimum Borrowing Amount of the outstanding principal amount of its Loans denominated in Dollars of one Type owing by it into a Borrowing or Borrowings of another Type of Loans denominated in Dollars which can be made by the Borrower, provided that: (i) no partial conversion of a Borrowing of Eurocurrency Loans shall reduce the outstanding principal amount of the Eurocurrency Loans made pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable thereto; (ii) any conversion of Eurocurrency Loans into Prime Rate Loans shall be made on, and only on, the last day of an Interest Period for such Eurocurrency Loans; (iii) Prime Rate Loans may only be converted into Eurocurrency Loans if no Default under section 10.1(a) or Event of Default is in existence on the date of the conversion unless the Required Lenders otherwise agree; and (iv) Borrowings of Eurocurrency Loans resulting from this section 2.6 shall conform to the requirements of section 2.2. Each such conversion shall be effected by the Borrower giving the Administrative Agent at its Notice Office, prior to 11:00 A.M. (local time at such Notice Office), at least three Business Days' (or prior to 11:00 A.M. (local time at such Notice Office) same Business Day's, in the case of a conversion into Prime Rate Loans) prior written notice (or telephonic notice promptly confirmed in writing if so requested by the Administrative Agent) (each a "NOTICE OF CONVERSION"), substantially in the form of Exhibit B-2, specifying the Loans to be so converted, the Type of Loans to be converted into and, if to be converted into a Borrowing of Eurocurrency Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Lender prompt notice of any such proposed conversion affecting any of its Loans. For the avoidance of doubt, the prepayment or repayment of any Loans out of the proceeds of other Loans by the Borrower is not considered a conversion of Loans into other Loans. (b) The Borrower may, upon notice given to the Administrative Agent at least five Business Days prior to the date of the proposed Redenomination, request that all Loans comprising the same Borrowing by the Borrower be Redenominated from Dollars into an Alternative Currency or from an Alternative Currency into Dollars or another Alternative Currency; PROVIDED, HOWEVER, that any Redenomination of Eurocurrency Loans shall be made on, and only on, the last day of an Interest Period for such Loans; and PROVIDED, FURTHER, that no Redenomination shall be made which would cause any Prime Rate Loans to be denominated in any currency other than Dollars.. Each such notice of request of a Redenomination (a "NOTICE OF REDENOMINATION") shall be by telecopier, telex or cable (confirmed immediately in writing if so requested by the Administrative Agent), in substantially the form of Exhibit 19 25 B-4 hereto, specifying (i) the Loans comprising the Borrowing to be Redenominated, (iii) the date of the proposed Redenomination (which shall be a Business Day), (iv) the currency into which such Loans are to be Redenominated, and (v) if such Loans as so Redenominated are to be Eurocurrency Loans, the duration of the Interest Period for such Loans upon being so Redenominated. The Administrative Agent shall promptly notify each affected Lender of any such requested Redenomination. In the case of a Notice of Redenomination which requests a Redenomination of Loans into an Alternative Currency, such Redenomination is subject to the confirmation by each Lender to the Administrative Agent, not later than the third Business Day before the requested date of such Redenomination that such Lender agrees to such Redenomination, which confirmation shall be notified immediately by the Administrative Agent to the Borrower. If any affected Lender shall not have so provided to the Administrative Agent such confirmation, the requested Redenomination will not occur and the Administrative Agent shall promptly notify the Borrower and each affected Lender that a Lender has not provided such confirmation and that the requested Redenomination will not occur. If each affected Lender shall have so provided to the Administrative Agent such confirmation or if such Notice of Redenomination requests a Redenomination of Loans into Dollars, each Loan so requested to be Redenominated will be Redenominated, on the date specified therefor in such Notice of Redenomination, into an equivalent amount thereof in the currency requested in such Notice of Redenomination, such equivalent amount to be determined on such date by the Administrative Agent in accordance with section 1.4, and in the case of any such Loan being so Redenominated which will be a Eurocurrency Loan, such Eurocurrency Loan will have an initial Interest Period as requested in such Notice of Redenomination. 2.7. INTEREST ON LOANS. (a) The unpaid principal amount of each Loan which is a Prime Rate Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a fluctuating rate per annum which shall at all times be equal to the Prime Rate in effect from time to time plus the Applicable Prime Rate Margin (as defined below) in effect at the time. (b) The unpaid principal amount of each Loan which is a Eurocurrency Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Eurocurrency Margin (as defined below) for such Loan plus the relevant Eurocurrency Rate. (c) Notwithstanding the above provisions, if a Default under section 10.1(a) or Event of Default is in existence, all outstanding amounts of principal and, to the extent permitted by law, all overdue interest, in respect of each Loan shall bear interest, payable on demand, at a fluctuating rate per annum equal at all times to 2% per annum above the Prime Rate in effect from time to time. If any amount (other than the principal of and interest on the Loans) payable by the Borrower under the Credit Documents is not paid when due, such amount shall bear interest, payable on demand, at a fluctuating rate per annum equal at all times to 2% per annum above the Prime Rate in effect from time to time. (d) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any prepayment or repayment thereof and shall be payable (i) in respect of each Prime Rate Loan, quarterly in arrears on the last Business Day of March, June, September and December, (ii) in respect of each Eurocurrency Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on the dates which are successively three months after the commencement of such Interest Period, and (iii) in respect of each Loan, on any prepayment or conversion (on the amount prepaid or converted), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) All computations of interest hereunder shall be made in accordance with section 13.7(b). (f) Each Reference Bank agrees to furnish the Administrative Agent timely information for the purpose of determining the Eurocurrency Rate for any Borrowing consisting of Eurocurrency Loans. If any one or more of the Reference Banks shall not timely furnish such information, the Administrative Agent shall determine the Eurocurrency Rate on the basis of timely information furnished by the remaining Reference Banks. The Administrative Agent upon determining the interest rate for any Borrowing shall promptly notify the Borrower and the Lenders thereof. 20 26 (g) As used herein, the term "APPLICABLE EUROCURRENCY MARGIN", as applied to any Loan which is a Eurocurrency Loan, means 75 basis points per annum, and the term "APPLICABLE PRIME RATE MARGIN", as applied to any Loan which is a Prime Rate Loan, means zero basis points per annum; provided, that subsequent to the fiscal quarter of the Borrower ended nearest to March 31, 1998, the Applicable Eurocurrency Margin and the Applicable Prime Rate Margin will be determined by the Administrative Agent in accordance with the Pricing Grid Table which appears below, based on the Borrower's ratio of Total Indebtedness to EBITDA referred to in section 9.7 and identified in such Table. Changes in the Applicable Eurocurrency Margin and Applicable Prime Rate Margin based upon changes in such ratio shall become effective on the first day of the month following the receipt by the Administrative Agent pursuant to section 8.1(a) or (b) of the financial statements of the Borrower, accompanied by the certificate referred to in section 8.1(c), demonstrating the computation of such ratio, based upon the ratio in effect at the end of the applicable period covered (in whole or in part) by such financial statements; PROVIDED that if any financial statements referred to in section 8.1(a) or (b), or the related certificate referred to in section 8.1(c), are not timely delivered, the Administrative Agent may determine the Applicable Eurocurrency Margin and the Applicable Prime Rate Margin based upon a good faith estimate by the Borrower of such ratio as in effect at the end of the applicable period to be covered (in whole or in part) by such financial statements, PROVIDED, FURTHER, that if upon delivery of such delinquent financial statements and related certificate, such financial statements indicate that such good faith estimate was incorrect and, as a result thereof, the Applicable Eurocurrency Margin or Applicable Prime Rate Margin for any Loans was too low at such determination, the Applicable Eurocurrency Margin or Applicable Prime Rate Margin, as the case may be, for such Loans shall be increased, as appropriate, with retroactive effect to the date of the change made on the basis of such determination, and the Borrower will immediately pay to the Administrative Agent, for the account of the Lenders all additional interest due by reason of such increased Applicable Eurocurrency Margin or Applicable Prime Rate Margin, as the case may be. Any changes in the Applicable Eurocurrency Margin or Applicable Prime Rate Margin shall be determined by the Administrative Agent in accordance with the foregoing provisions and the Administrative Agent will promptly provide notice of such determinations to the Borrower and the Lenders. Any such determination by the Administrative Agent pursuant to this section 2.7(g) shall be conclusive and binding absent manifest error. PRICING GRID TABLE (Expressed in Basis Points)
- ---------------------------------------------------------------------------------------------------------------- APPLICABLE APPLICABLE APPLICABLE TOTAL INDEBTEDNESS/EBITDA RATIO EUROCURRENCY PRIME RATE COMMITMENT MARGIN MARGIN FEE RATE - ---------------------------------------------------------------------------------------------------------------- less than 1.50 to 1.00 62.50 -0- 20.00 - ---------------------------------------------------------------------------------------------------------------- greater than = 1.50 to 1.00 and less than 2.00 to 1.00 75.00 -0- 22.50 - ---------------------------------------------------------------------------------------------------------------- greater than = 2.00 to 1.00 and less than 2.50 to 1.00 100.00 -0- 25.00 - ---------------------------------------------------------------------------------------------------------------- greater than = 2.50 to 1.00 and less than 3.00 to 1.00 125.00 -0- 27.50 - ---------------------------------------------------------------------------------------------------------------- greater than = 3.00 to 1.00 and less than 3.50 to 1.00 150.00 -0- 30.00 - ---------------------------------------------------------------------------------------------------------------- greater than = 3.50 to 1.00 175.00 25.00 37.50 - ----------------------------------------------------------------------------------------------------------------
2.8. INTEREST PERIODS. (a) At the time the Borrower gives a Notice of Borrowing or Notice of Conversion in respect of the making of, or conversion into, a Borrowing of Eurocurrency Loans (in the case of the initial Interest Period applicable thereto) or prior to 11:00 A.M. (local time at the applicable Notice Office) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurocurrency Loans, 21 27 it shall have the right to elect by giving the Administrative Agent written or telephonic notice (in the case of telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent) of the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of the Borrower, be a one, two, three or six month period. Notwithstanding anything to the contrary contained above: (i) the initial Interest Period for any Borrowing of Eurocurrency Loans shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of Prime Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (ii) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, PROVIDED that if any Interest Period would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) no Interest Period for any Loan may be selected which would end after the Maturity Date; and (v) no Interest Period may be elected at any time when a Default under section 10.1(a) or an Event of Default is then in existence unless the Required Lenders otherwise agree. (b) If upon the expiration of any Interest Period the Borrower has failed to (or may not) elect a new Interest Period to be applicable to the respective Borrowing of Eurocurrency Loans as provided above, (i) in the case of any such Eurocurrency Loans which are denominated in Dollars, the Borrower shall be deemed to have elected to convert such Borrowing to Prime Rate Loans effective as of the expiration date of such current Interest Period, and (ii) in the case of any such Eurocurrency Loans which are denominated in an Alternative Currency, the Borrower shall be deemed to have elected effective as of the expiration date of such current Interest Period to Redenominate such Loans from the applicable Alternative Currency into an equivalent amount thereof in Dollars, such equivalent amount to be determined on such date by the Administrative Agent in accordance with section 1.4, and to treat such Loans as so Redenominated as Prime Rate Loans. 2.9. INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in the case of clause (i) below, the Administrative Agent or (y) in the case of clauses (ii) and (iii) below, any Lender, shall have determined on a reasonable basis (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any date for determining the Eurocurrency Rate for Eurocurrency Loans denominated in Dollars or in an Alternative Currency for any Interest Period that, by reason of any changes arising after the Effective Date affecting the interbank Eurocurrency market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurocurrency Rate; or (ii) at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder in an amount which such Lender deems material with respect to any Eurocurrency Loans (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of taxes or similar charges) because of any change since the Effective Date in any applicable law, governmental rule, regulation, guideline, order or request (whether or not having the force of law), or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline, order or request (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves includable in the Eurocurrency Rate pursuant to the definition thereof); or 22 28 (iii) at any time, that the making or continuance of any Eurocurrency Loan denominated in Dollars or in an Alternative Currency has become unlawful by compliance by such Lender in good faith with any change since the Effective Date in any law, governmental rule, regulation, guideline or order, or the interpretation or application thereof, or would conflict with any thereof not having the force of law but with which such Lender customarily complies; THEN, and in any such event, such Lender (or the Administrative Agent in the case of clause (i) above) shall (x) on or promptly following such date or time and (y) within 10 Business Days of the date on which such event no longer exists give notice (by telephone confirmed in writing) to the Borrower and to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other applicable Lenders). Thereafter (x) in the case of clause (i) above, Eurocurrency Loans shall no longer be available in the applicable currency until such time as the Administrative Agent notifies the Borrower and the applicable Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing, Notice of Conversion or Notice of Redenomination given by or on behalf of the Borrower with respect to Eurocurrency Loans denominated in such currency which have not yet been incurred, converted or Redenominated shall be deemed rescinded by the Borrower or, in the case of a Notice of Borrowing, shall, at the option of the Borrower, be deemed converted into a Notice of Borrowing for Prime Rate Loans to be made on the date of Borrowing contained in such Notice of Borrowing, (y) in the case of clause (ii) above, the Borrower shall pay to such Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender shall determine) as shall be required to compensate such Lender, for such increased costs or reductions in amounts receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing the basis for the calculation thereof, which basis must be reasonable, submitted to the Borrower by such Lender shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in section 2.9(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Eurocurrency Loan denominated in Dollars or an Alternative Currency is affected by the circumstances described in section 2.9(a)(ii) or (iii), the Borrower may (and in the case of a Eurocurrency Loan affected pursuant to section 2.9(a)(iii) the Borrower shall) either (i) if the affected Eurocurrency Loan is then being made pursuant to a Borrowing, by giving the Administrative Agent telephonic notice (confirmed promptly in writing if requested) thereof on the same date that the Borrower was notified by a Lender pursuant to section 2.9(a)(ii) or (iii), cancel said Borrowing, convert the related Notice of Borrowing into one requesting a Borrowing of Prime Rate Loans or require the affected Lender to make its requested Loan as a Prime Rate Loan, or (ii) if the affected Eurocurrency Loan is then outstanding, upon at least one Business Day's notice to the Administrative Agent, require the affected Lender to convert each such Eurocurrency Loan denominated in Dollars into a Prime Rate Loan, or require the affected Lender to Redenominate each such Eurocurrency Loan denominated in an Alternative Currency into a Prime Rate Loan, provided that if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this section 2.9(b). (c) If any Lender shall have determined that after the Effective Date, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged by law with the interpretation or administration thereof, or compliance by such Lender or its parent corporation with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank, or comparable agency, in each case made subsequent to the Effective Date, has or would have the effect of reducing by an amount reasonably deemed by such Lender to be material the rate of return on such Lender's or its parent corporation's capital or assets as a consequence of such Lender's commitments or obligations hereunder to a level below that which such Lender or its parent corporation could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender's or its parent corporation's policies with respect to capital adequacy), then from time to time, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or its parent corporation for such reduction. Each Lender, upon determining in good faith that any additional amounts will be payable pursuant to this section 2.9(c), will give prompt written notice thereof to the Borrower, which notice shall set forth, in reasonable detail, the basis of the calculation of such additional amounts, 23 29 which basis must be reasonable, although the failure to give any such notice shall not release or diminish the Borrower's obligations to pay additional amounts pursuant to this section 2.9(c) upon the subsequent receipt of such notice. (d) Notwithstanding anything in this Agreement to the contrary, (i) no Lender shall be entitled to compensation or payment or reimbursement of other amounts under section 2.9, 3.5 or 5.4 for any amounts incurred or accruing more than 180 days prior to the giving of notice to the Borrower of additional costs or other amounts of the nature described in such sections, and (ii) no Lender shall demand compensation for any reduction referred to in section 2.9(c) or payment or reimbursement of other amounts under section 3.5 or 5.4 if it shall not at the time be the general policy or practice of such Lender to demand such compensation, payment or reimbursement in similar circumstances under comparable provisions of other credit agreements. 2.10. COMPENSATION. The Borrower shall compensate each applicable Lender, upon its written request (which request shall set forth the detailed basis for requesting and the method of calculating such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Eurocurrency Loans) which such Lender may sustain: (i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of Eurocurrency Loans by the Borrower does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by or on behalf of the Borrower or deemed withdrawn pursuant to section 2.9(a)); (ii) if any repayment, prepayment or conversion of any of its Eurocurrency Loans occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any of its Eurocurrency Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Eurocurrency Loans when required by the terms of this Agreement or (y) an election made pursuant to section 2.9(b). 2.11. CHANGE OF LENDING OFFICE; REPLACEMENT OF LENDERS. (a) Each Lender agrees that, upon the occurrence of any event giving rise to the operation of section 2.9(a)(ii) or (iii), 2.9(c), 3.5 or 5.4 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another Applicable Lending Office for any Loans or Commitment affected by such event, provided that such designation is made on such terms that such Lender and its Applicable Lending Office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such section. (b) If any Lender requests any compensation, reimbursement or other payment under section 2.9(a)(ii) or (iii), 2.9(c) or 3.5 with respect to such Lender, or if the Borrower is required to pay any additional amount to any Lender or governmental authority pursuant to section 5.4, or if any Lender is a Defaulting Lender, then the Borrower may, at its 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 the restrictions contained in section 13.4(b)), 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 Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, 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 Borrower (in the case of all other amounts), and (iii) in the case of any such assignment resulting from a claim for compensation, reimbursement or other payments required to be made under section 2.9(a)(ii) or (iii), 2.9(c) or 3.5 with respect to such Lender, or resulting from any required payments to any Lender or governmental authority pursuant to section 5.4, such assignment will result in a reduction in such compensation, reimbursement 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 Borrower to require such assignment and delegation cease to apply. (c) Nothing in this section 2.11 shall affect or postpone any of the obligations of the Borrower or the right of any Lender provided in section 2.9, 3.5 or 5.4. 24 30 SECTION 3. LETTERS OF CREDIT. 3.1. LETTERS OF CREDIT. (a) Subject to and upon the terms and conditions herein set forth, the Borrower may request a Letter of Credit Issuer at any time and from time to time on or after the Initial Borrowing Date and prior to the date that is 15 Business Days prior to the Maturity Date to issue, for the account of the Borrower or any of its Subsidiaries and in support of (i) worker compensation, liability insurance, releases of contract retention obligations, contract performance guarantee requirements and other bonding obligations of the Borrower or any such Subsidiary incurred in the ordinary course of its business, and such other standby obligations of the Borrower and its Subsidiaries that are acceptable to the Letter of Credit Issuer, and/or (ii) Indebtedness of any Foreign Subsidiary of the Borrower incurred as contemplated by section 9.4(b) to any other persons or persons that are acceptable to the Letter of Credit Issuer, and subject to and upon the terms and conditions herein set forth, such Letter of Credit Issuer agrees to issue from time to time, irrevocable standby letters of credit denominated in Dollars or an Alternative Currency in such form as may be approved by such Letter of Credit Issuer and the Administrative Agent (each such letter of credit (and each Existing Letter of Credit described in section 3.1(d)), a "LETTER OF CREDIT" and collectively, the "LETTERS OF CREDIT"). (b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings at such time, would exceed either (x) $15,000,000 or (y) when added to the aggregate principal amount of all Loans then outstanding, an amount equal to the Total Commitment at such time; (ii) no Letter of Credit shall be issued for any of the purposes specified in clause (i) or (ii) of section 3.1(a) if after giving effect thereto the Letter of Credit Outstandings at such time in respect of all Letters of Credit issued for the purposes specified in clauses (i) of section 3.1(a) would exceed $5,000,000; (iii) no Letter of Credit shall be issued in support of Indebtedness of any Foreign Subsidiary of the Borrower if after giving effect thereto the Letter of Credit Outstandings at such time in respect of all Letters of Credit issued to support any Indebtedness of the Foreign Subsidiaries of the Borrower would exceed $10,500,000; and (iv) each Letter of Credit shall have an expiry date (including any renewal periods) occurring not later than the earlier of (A) one year from the date of issuance thereof, unless a longer period is approved by the relevant Letter of Credit Issuer and Lenders (other than any Defaulting Lender) holding a majority of the Total Commitment, and (B) 15 Business Days prior to the Maturity Date, in each case on terms acceptable to the Administrative Agent and the relevant Letter of Credit Issuer. (c) Notwithstanding the foregoing, in the event a Lender Default exists, no Letter of Credit Issuer shall be required to issue any Letter of Credit unless either (i) such Letter of Credit Issuer has entered into arrangements satisfactory to it and the Borrower to eliminate such Letter of Credit Issuer's risk with respect to the participation in Letters of Credit of the Defaulting Lender or Lenders, including by cash collateralizing such Defaulting Lender's or Lenders' Percentage of the Letter of Credit Outstandings; or (ii) the issuance of such Letter of Credit, taking into account the potential failure of the Defaulting Lender or Lenders to risk participate therein, will not cause the Letter of Credit Issuer to incur aggregate credit exposure hereunder with respect to Loans and Letter of Credit Outstandings in excess of its Commitment, and the Borrower has undertaken, for the benefit of such Letter of Credit Issuer and the Lenders (other than any Defaulting Lender), pursuant to an instrument satisfactory in form and substance to such Letter of Credit Issuer, not to thereafter incur Loans or Letter of Credit Outstandings hereunder which would cause the Letter of Credit Issuer to incur aggregate credit exposure hereunder with respect to Loans and Letter of Credit Outstandings in excess of its Commitment. (d) Annex VI hereto contains a description of all letters of credit outstanding on, and to continue in effect after, the Initial Borrowing Date. Each such letter of credit issued by a bank that is or becomes a Lender under this Agreement on the Effective Date (each, an "EXISTING LETTER OF CREDIT") shall constitute a "Letter of Credit" for all purposes of this Agreement, issued, for purposes of section 3.4(a), on the Initial Borrowing Date, and the Borrower, the Administrative Agent and the applicable Lenders hereby agree that, from and after such date, the terms of this Agreement shall apply to such Letters of Credit, superseding any other agreement theretofore applicable to them to the extent inconsistent with the terms hereof. 25 31 3.2. LETTER OF CREDIT REQUESTS: NOTICES OF ISSUANCE. (a) Whenever it desires that a Letter of Credit be issued, the Borrower shall give the Administrative Agent and the Letter of Credit Issuer written or telephonic notice (in the case of telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent) which, if in the form of written notice shall be substantially in the form of Exhibit B-3, or transmit by electronic communication (if arrangements for doing so have been approved by the Letter of Credit Issuer), prior to 11:00 A.M. (local time at its Notice Office) at least three Business Days (or such shorter period as may be acceptable to the relevant Letter of Credit Issuer) prior to the proposed date of issuance (which shall be a Business Day) (each a "Letter of Credit Request"), which Letter of Credit Request shall include such supporting documents that such Letter of Credit Issuer customarily requires in connection therewith (including, in the case of a Letter of Credit for an account party other than the Borrower, an application for, and if applicable a reimbursement agreement with respect to, such Letter of Credit). Any such documents executed in connection with the issuance of a Letter of Credit, including the Letter of Credit itself, are herein referred to as "LETTER OF CREDIT DOCUMENTS". In the event of any inconsistency between any of the terms or provisions of any Letter of Credit Document and the terms and provisions of this Agreement respecting Letters of Credit, the terms and provisions of this Agreement shall control. The Administrative Agent shall promptly notify each Lender of each Letter of Credit Request. (b) Each Letter of Credit Issuer shall, on the date of each issuance of a Letter of Credit by it, give the Administrative Agent and the Borrower written notice of the issuance of such Letter of Credit, accompanied by a copy to the Administrative Agent of the Letter of Credit or Letters of Credit issued by it. Each Letter of Credit Issuer shall provide to the Administrative Agent a quarterly (or monthly if requested by any applicable Lender) summary describing each Letter of Credit issued by such Letter of Credit Issuer and then outstanding and an identification for the relevant period of the daily aggregate Letter of Credit Outstandings represented by Letters of Credit issued by such Letter of Credit Issuer. 3.3. AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower hereby agrees to reimburse (or cause any Subsidiary for whose account a Letter of Credit was issued to reimburse) each Letter of Credit Issuer, by making payment directly to such Letter of Credit Issuer in immediately available funds at the payment office of such Letter of Credit Issuer, for any payment or disbursement made by such Letter of Credit Issuer under any Letter of Credit (each such amount so paid or disbursed until reimbursed, an "UNPAID DRAWING") immediately after, and in any event on the date on which, such Letter of Credit Issuer notifies the Borrower (or any such Subsidiary for whose account such Letter of Credit was issued) of such payment or disbursement (which notice to the Borrower (or such Subsidiary) shall be delivered reasonably promptly after any such payment or disbursement), such payment to be made in Dollars (and in the amount which is the Dollar equivalent of any such payment or disbursement made or denominated in an Alternative Currency), with interest on the amount so paid or disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (local time at the payment office of the Letter of Credit Issuer) on the date of such payment or disbursement, from and including the date paid or disbursed to but not including the date such Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall be the rate then applicable to Loans which are Prime Rate Loans (plus an additional 2% per annum if not reimbursed by the third Business Day after the date of such payment or disbursement), any such interest also to be payable on demand. (b) The Borrower's obligation under this section 3.3 to reimburse, or cause a Subsidiary to reimburse, each Letter of Credit Issuer with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against such Letter of Credit Issuer, the Administrative Agent, any other Letter of Credit Issuer or any Lender, including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such drawing, provided, however that the Borrower shall not be obligated to reimburse, or cause a Subsidiary to reimburse, a Letter of Credit Issuer for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer. 3.4. LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the issuance by a Letter of Credit Issuer of any Letter of Credit (and on the Initial Borrowing Date with respect to any Existing Letter of Credit), such Letter of Credit Issuer shall be deemed to have sold and transferred to each Lender, and each such Lender (each a 26 32 "PARTICIPANT") shall be deemed irrevocably and unconditionally to have purchased and received from such Letter of Credit Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Lender's Percentage, in such Letter of Credit, each substitute letter of credit, each drawing made thereunder, the obligations of the Borrower under this Agreement with respect thereto (although Letter of Credit Fees shall be payable directly to the Administrative Agent for the account of the Lenders as provided in section 4.1(b) and the Participants shall have no right to receive any portion of any fees of the nature contemplated by section 4.1(c)), the obligations of any Subsidiary of the Borrower under any Letter of Credit Documents pertaining thereto, and any security for, or guaranty pertaining to, any of the foregoing. Upon any change in the Commitments of the Lenders pursuant to section 13.4(b), it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this section 3.4 to reflect the new Percentages of the assigning and assignee Lender. (b) In determining whether to pay under any Letter of Credit, a Letter of Credit Issuer shall not have any obligation relative to the Participants other than to determine that any documents required to be delivered under such Letter of Credit have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by a Letter of Credit Issuer under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Letter of Credit Issuer any resulting liability. (c) In the event that a Letter of Credit Issuer makes any payment under any Letter of Credit and the Borrower shall not have reimbursed (or caused any applicable Subsidiary to reimburse) such amount in full to such Letter of Credit Issuer pursuant to section 3.3(a), such Letter of Credit Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to the Administrative Agent for the account of such Letter of Credit Issuer, the amount of such Participant's Percentage of such payment in U.S. Dollars (the Administrative Agent having determined in the case of any payment by a Letter of Credit Issuer made in an Alternative Currency the equivalent thereof in Dollars) and in same day funds, PROVIDED, HOWEVER, that no Participant shall be obligated to pay to the Administrative Agent its Percentage of such unreimbursed amount for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer. If the Administrative Agent so notifies any Participant required to fund a payment under a Letter of Credit prior to 11:00 A.M. (local time at its Notice Office) on any Business Day, such Participant shall make available to the Administrative Agent for the account of the relevant Letter of Credit Issuer such Participant's Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its Percentage of the amount of such payment available to the Administrative Agent for the account of the relevant Letter of Credit Issuer, such Participant agrees to pay to the Administrative Agent for the account of such Letter of Credit Issuer, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent for the account of such Letter of Credit Issuer at the Federal Funds Effective Rate. The failure of any Participant to make available to the Administrative Agent for the account of the relevant Letter of Credit Issuer its Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to the Administrative Agent for the account of such Letter of Credit Issuer its Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Administrative Agent for the account of such Letter of Credit Issuer such other Participant's Percentage of any such payment. (d) Whenever a Letter of Credit Issuer receives a payment of a reimbursement obligation as to which the Administrative Agent has received for the account of such Letter of Credit Issuer any payments from the Participants pursuant to section 3.4(c) above, such Letter of Credit Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each Participant which has paid its Percentage thereof, in U.S. dollars and in same day funds, an amount equal to such Participant's Percentage of the principal amount thereof and interest thereon accruing after the purchase of the respective participations, as and to the extent so received. (e) The obligations of the Participants to make payments to the Administrative Agent for the account of each Letter of Credit Issuer with respect to Letters of Credit shall be irrevocable and not subject to counterclaim, 27 33 set-off or other defense or any other qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, set-off defense or other right which the Borrower (or any Subsidiary) may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any person for whom any such transferee may be acting), the Administrative Agent, any Letter of Credit Issuer, any Lender, or other person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower (or any Subsidiary) and the beneficiary named in any such Letter of Credit), other than any claim which the Borrower (or any Subsidiary which is the account party with respect to a Letter of Credit) may have against any applicable Letter of Credit Issuer for gross negligence or wilful misconduct of such Letter of Credit Issuer in making payment under any applicable Letter of Credit; (iii) any draft, certificate or other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents: or (v) the occurrence of any Default or Event of Default. (f) To the extent the Letter of Credit Issuer is not indemnified by the Borrower, the Participants will reimburse and indemnify the Letter of Credit Issuer, in proportion to their respective Percentages, for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Letter of Credit Issuer in performing its respective duties in any way related to or arising out of its issuance of Letters of Credit, PROVIDED that no Participants shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements resulting from the Letter of Credit Issuer's gross negligence or willful misconduct. 3.5. INCREASED COSTS. If after the Effective Date, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Letter of Credit Issuer or any Lender with any request or directive (whether or not having the force of law) by any such authority, central bank or comparable agency (in each case made subsequent to the Effective Date) shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by such Letter of Credit Issuer or such Lender's participation therein, or (ii) shall impose on such Letter of Credit Issuer or any Lender any other conditions affecting this Agreement, any Letter of Credit or such Lender's participation therein; and the result of any of the foregoing is to increase the cost to such Letter of Credit Issuer or such Lender of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by such Letter of Credit Issuer or such Lender hereunder (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of taxes or similar charges), then, upon demand to the Borrower by such Letter of Credit Issuer or such Lender (a copy of which notice shall be sent by such Letter of Credit Issuer or such Lender to the Administrative Agent), the Borrower shall pay to such Letter of Credit Issuer or such Lender such additional amount or amounts as will compensate any such Letter of Credit Issuer or such Lender for such increased cost or reduction. A certificate submitted to the Borrower by any Letter of Credit Issuer or any Lender, as the case may be (a copy of which certificate shall be sent by such Letter of Credit Issuer or such Lender to the Administrative Agent), setting forth, in reasonable detail, the basis for the determination of such additional amount or amounts necessary to compensate any Letter of Credit Issuer 28 34 or such Lender as aforesaid shall be conclusive and binding on the Borrower absent manifest error, although the failure to deliver any such certificate shall not release or diminish any of the Borrower's obligations to pay additional amounts pursuant to this section 3.5. Reference is hereby made to the provisions of section 2.9(d) for certain limitations upon the rights of a Letter of Credit Issuer or Lender under this section. 3.6. GUARANTY OF SUBSIDIARY LETTER OF CREDIT OBLIGATIONS. (a) The Borrower hereby unconditionally guarantees, for the benefit of the Administrative Agent and the Lenders, the full and punctual payment of the Obligations of each Subsidiary under each Letter of Credit Document to which such Subsidiary is now or hereafter becomes a party. Upon failure by any such Subsidiary to pay punctually any such amount, the Borrower shall forthwith on demand by the Administrative Agent pay the amount not so paid at the place and in the currency and otherwise in the manner specified in this Agreement or any applicable Letter of Credit Document. (b) As a separate, additional and continuing obligation, the Borrower unconditionally and irrevocably undertakes and agrees, for the benefit of the Administrative Agent and the Lenders, that, should any amounts not be recoverable from the Borrower under section 3.6(a) for any reason whatsoever (including, without limitation, by reason of any provision of any Credit Document or any other agreement or instrument executed in connection therewith being or becoming void, unenforceable, or otherwise invalid under any applicable law) then, notwithstanding any notice or knowledge thereof by any Lender, the Administrative Agent, any of their respective Affiliates, or any other person, at any time, the Borrower as sole, original and independent obligor, upon demand by the Administrative Agent, will make payment to the Administrative Agent, for the account of the Lenders and the Administrative Agent, of all such obligations not so recoverable by way of full indemnity, in such currency and otherwise in such manner as is provided in the Credit Documents. (c) The obligations of the Borrower under this section shall be unconditional and absolute and, without limiting the generality of the foregoing shall not be released, discharged or otherwise affected by the occurrence, one or more times, of any of the following: (i) any extension, renewal, settlement, compromise, waiver or release in respect to any obligation of any Subsidiary under any Letter of Credit Document, by operation of law or otherwise; (ii) any modification or amendment of or supplement to this Agreement, any Note or any other Credit Document; (iii) any release, non-perfection or invalidity of any direct or indirect security for any obligation of the Borrower under this Agreement, any Note or any other Credit Document or of any Subsidiary under any Letter of Credit Document; (iv) any change in the corporate existence, structure or ownership of any Subsidiary or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Subsidiary or its assets or any resulting release or discharge of any obligation of any Subsidiary contained in any Letter of Credit Document; (v) the existence of any claim, set-off or other rights which the Borrower may have at any time against any Subsidiary, the Administrative Agent, any Lender or any other person, whether in connection herewith or any unrelated transactions; (vi) any invalidity or unenforceability relating to or against any Subsidiary for any reason of any Letter of Credit Document, or any provision of applicable law or regulation purporting to prohibit the payment by any Subsidiary of any Obligations in respect of any Letter of Credit; or (vii) any other act or omission to act or delay of any kind by any Subsidiary, the Administrative Agent, any Lender or any other person or any other circumstance whatsoever which might, but for the provisions of this section, constitute a legal or equitable discharge of the Borrower's obligations under this section. 29 35 (d) The Borrower's obligations under this section shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts payable by the Borrower under the Credit Documents and by any Subsidiary under the Letter of Credit Documents shall have been paid in full. If at any time any payment of any of the Obligations of any Subsidiary in respect of any Letter of Credit Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of such Subsidiary, the Borrower's obligations under this section with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. (e) The Borrower irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any person against any Subsidiary or any other person, or against any collateral or guaranty of any other person. (f) Until the indefeasible payment in full of all of the Obligations and the termination of the Commitments of the Lenders hereunder, the Borrower shall have no rights, by operation of law or otherwise, upon making any payment under this section to be subrogated to the rights of the payee against any Subsidiary with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by any Subsidiary in respect thereof. (g) In the event that acceleration of the time for payment of any amount payable by any Subsidiary under any Letter of Credit Document is stayed upon insolvency, bankruptcy or reorganization of such Subsidiary, all such amounts otherwise subject to acceleration under the terms of any applicable Letter of Credit Document shall nonetheless be payable by the Borrower under this section forthwith on demand by the Administrative Agent. 3.7. SEPARATE DOCUMENTARY LETTERS OF CREDIT. If after the Effective Date, NCB in its sole discretion issues any documentary letter of credit for the account of the Borrower or any of its Subsidiaries, it may do so, provided that the aggregate Separate Documentary Letter of Credit Outstandings do not exceed $1,000,000 at any time. Such documentary letters of credit will not constitute Letters of Credit hereunder, but the documentation incident thereto shall be deemed to constitute Letter of Credit Documents for purposes of section 10 hereof and the reimbursement obligations of the Borrower (or any Subsidiary) in respect of such letters of credit shall be deemed covered by the guaranty provided in section 3.6 and shall be entitled to the benefits of the Subsidiary Guaranty and the Security Documents, subject to the provisions of section 10.3 in the event of the recovery of any proceeds or payments under any of the Credit Documents. SECTION 4. FEES; COMMITMENTS. 4.1. FEES. (a) The Borrower agrees to pay to the Administrative Agent a Commitment Fee ("COMMITMENT FEE"), for the account of each Non-Defaulting Lender, for the period from and including the Effective Date to, but not including, the Maturity Date or, if earlier, the date upon which the Total Commitment has been terminated, computed for each day at a rate per annum equal to the Applicable Commitment Fee Rate for such day on such Lenders' aggregate Unutilized Commitments for such day. Such Commitment Fee shall be due and payable in arrears on the last Business Day of each June, September, December and March and on the Maturity Date or, if earlier, the date upon which the Total Commitment has been terminated. As used herein, the term "APPLICABLE COMMITMENT FEE RATE" means 22.50 basis points per annum; PROVIDED, that subsequent to the fiscal quarter of the Borrower ended nearest to March 31, 1998, the Applicable Commitment Fee Rate will be determined by the Administrative Agent in accordance with the Pricing Grid Table which appears in section 2.8(g), based on the ratio referred to in such Table. Changes in the Applicable Commitment Fee Rate based upon changes in such ratio shall become effective on the first day of the month following the receipt by the Administrative Agent pursuant to section 8.1(a) or (b) of the financial statements of the Borrower, accompanied by the certificate referred to in section 8.1(c), demonstrating the computation of such ratio, based upon the ratio in effect at the end of the applicable period covered (in whole or in part) by such financial statements; provided that if any financial statements referred to in section 8.1(a) or (b), or the related certificate referred to in section 8.1(c), are not timely delivered, the Administrative Agent may determine the Applicable Commitment Fee Rate based upon a good faith estimate by the Borrower of such ratio as in effect at the end of the applicable period to be covered (in whole or in part) by such financial statements, PROVIDED, FURTHER, that if upon delivery of such delinquent financial statements and related certificate, such financial statements indicate that such good faith estimate was incorrect and, as a result thereof, the Applicable Commitment 30 36 Fee Rate was too low at such determination, the Applicable Commitment Fee Rate shall be increased, as appropriate, with retroactive effect to the date of the change made on the basis of such determination, and the Borrower will immediately pay to the Administrative Agent for the account of the affected Lenders all additional Commitment Fee due by reason of such increased Applicable Commitment Fee Rate. Any changes in the Applicable Commitment Fee Rate shall be determined by the Administrative Agent and the Administrative Agent will promptly provide notice of such determinations to the Borrower and the Lenders. Any such determination by the Administrative Agent pursuant to this section 4.1(a) shall be conclusive and binding absent manifest error. (b) The Borrower agrees to pay to the Administrative Agent, for the account of each Non-Defaulting Lender, pro rata on the basis of its Percentage, on or prior to the date of issuance of any Letter of Credit (an increase in the amount of a Letter of Credit, or an extension of the expiration date thereof, shall be considered an issuance to the extent of the increase or extension), a fee in respect of such Letter of Credit (the "LETTER OF CREDIT FEE"), computed at the rate per annum equal to the Applicable Eurocurrency Margin then in effect, on the daily Stated Amount of such Letter of Credit, for the period from and including the date of issuance to but excluding the date of expiration date thereof (assuming exercise of any renewal rights applicable thereto). (c) The Borrower agrees to pay directly to each Letter of Credit Issuer a fee in respect of each Letter of Credit issued by it (a "FACING FEE"). A Facing Fee shall be due and payable on or prior to the date of issuance of any Letter of Credit (an increase in the amount of a Letter of Credit, or an extension of the expiration date thereof, shall be considered an issuance to the extent of the increase or extension), computed at the rate of 1/8 of 1% per annum, on the daily Stated Amount of such Letter of Credit, for the period from and including the date of issuance to but excluding the date of expiration date thereof (assuming exercise of any renewal rights applicable thereto). (d) The Borrower agrees to pay directly to each Letter of Credit Issuer upon each issuance of, drawing under, and/or amendment, extension, renewal or transfer of, a Letter of Credit issued by it such amount as shall at the time of such issuance, drawing, amendment, extension, renewal or transfer be the administrative or processing charge which such Letter of Credit Issuer is customarily charging for issuances of, drawings under or amendments, extensions, renewals or transfers of, letters of credit issued by it. (e) The Borrower shall pay to the Administrative Agent on the Effective Date and thereafter for its own account and/or for distribution to the Lenders such fees as heretofore agreed by the Borrower and the Administrative Agent. (f) All computations of Fees shall be made in accordance with section 13.7(b). 4.2. VOLUNTARY TERMINATION/REDUCTION OF COMMITMENTS. Upon at least three Business Days' prior written notice (or telephonic notice confirmed in writing) to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, without premium or penalty, to (a) terminate the Total Commitment, provided that: (i) any and all outstanding Loans are contemporaneously prepaid in accordance with section 5.1; and (ii) if there are any Letter of Credit Outstandings, the Borrower contemporaneously completes the cash collateralization actions contemplated by section 5.2(a); and/or (b) partially and permanently reduce the Unutilized Total Commitment, provided that (i) any such reduction shall apply to proportionately and permanently reduce the Commitment of each of the Lenders; (ii) any such reduction of the Unutilized Total Commitment pursuant to this section 4.2 shall be in the amount of at least $1,000,000 (or, if greater, in integral multiples of $1,000,000). 4.3. MANDATORY TERMINATION/ADJUSTMENTS OF COMMITMENTS, ETC. (a) The Total Commitment (and the Commitment of each Lender) shall terminate on January 31, 1998, unless the Initial Borrowing Date has occurred on or prior to such date. 31 37 (b) The Total Commitment (and the Commitment of each Lender) shall terminate on the earlier of (x) the Maturity Date and (y) the date on which a Change of Control occurs. (c) The Total Commitment shall be permanently reduced, without premium or penalty, at the time that any mandatory prepayment of Loans would be made pursuant to section 5.2(b) if Loans were then outstanding in the full amount of the Total Commitment, in an amount at least equal to the required prepayment of principal of Loans which would be required to be made in such circumstance. Any such reduction shall apply to proportionately and permanently reduce the Commitment of each of the Lenders, and any partial reduction of the Total Commitment pursuant to this section 4.3(c) shall be in the amount of at least $1,000,000 (or, if greater, in integral multiples of $1,000,000). The Borrower will provide at least three Business Days' prior written notice (or telephonic notice confirmed in writing) to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), of any reduction of the Total Commitment pursuant to this section 4.3(c), specifying the date and amount of the reduction. 4.4. EXTENSION OF MATURITY DATE. At any time after February 1, 1999 and during the 30 day period following delivery by the Borrower pursuant to section 8.1(a) of its consolidated financial statements for its fiscal year then most recently ended, and annually thereafter during the 30 day period following delivery by the Borrower of its consolidated financial statements pursuant to section 8.1(a), the Borrower may request the Administrative Agent to determine if all of the Lenders are then willing to extend the Maturity Date for a single additional year. If the Borrower so requests, the Administrative Agent will so advise the Lenders. If all of the Lenders in their sole discretion are all willing to so extend the Maturity Date, after taking into account such considerations as any Lender may deem relevant, the Borrower, the Administrative Agent and all of the Lenders (including each Letter of Credit Issuer) shall execute and deliver a definitive written instrument so extending the Maturity Date. No such extension of the Maturity Date shall be valid or effective for any purpose unless such definitive written instrument is so signed and delivered within 60 days following the giving by the Administrative Agent of notice to the Lenders that the Borrower has requested such an extension. SECTION 5. PAYMENTS. 5.1. VOLUNTARY PREPAYMENTS. The Borrower shall have the right to prepay any of its Loans, in whole or in part, without premium or penalty, from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent at the Notice Office written or telephonic notice (in the case of telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent) of its intent to prepay the Loans, the amount of such prepayment and (in the case of Eurocurrency Loans) the specific Borrowing(s) pursuant to which made, which notice shall be received by the Administrative Agent by (x) 11:00 A.M. (local time at the Notice Office) three Business Days prior to the date of such prepayment, in the case of any prepayment of Eurocurrency Loans, or (y) 12:00 noon (local time at the Notice Office) on the date of such prepayment, in the case of any prepayment of Prime Rate Loans, and which notice shall promptly be transmitted by the Administrative Agent to each of the Lenders; (ii) each partial prepayment of any Borrowing by the Borrower shall be in an aggregate principal amount which is $1,000,000 or an integral multiple of $250,000 in excess thereof, in the case of Loans which are Prime Rate Loans, and $1,000,000 or an integral multiple of $1,000,000 in excess thereof, in the case of Loans which are Eurocurrency Loans; 32 38 (iii) no partial prepayment of Eurocurrency Loans of the Borrower made pursuant to a Borrowing shall reduce the aggregate principal amount of the Eurocurrency Loans outstanding pursuant to such Borrowing to an amount less the Minimum Borrowing Amount applicable thereto; (iv) each prepayment in respect of any Loans of the Borrower made pursuant to a Borrowing shall be applied pro rata among such Loans; and (v) each prepayment of Eurocurrency Loans pursuant to this section 5.1 on any date other than the last day of the Interest Period applicable thereto shall be accompanied by any amounts payable in respect thereof under section 2.10. 5.2. MANDATORY PREPAYMENTS. The Loans shall be subject to mandatory prepayment in accordance with the following provisions: (a) IF OUTSTANDING LOANS AND LETTER OF CREDIT OUTSTANDINGS EXCEED TOTAL COMMITMENT. If on any date (after giving effect to any other payments on such date) the sum of (i) the aggregate outstanding principal amount of Loans plus (ii) the aggregate amount of Letter of Credit Outstandings, exceeds the Total Commitment as then in effect, the Borrower shall prepay on such date that principal amount of Loans and, after Loans have been paid in full, Unpaid Drawings, in an aggregate amount, conforming to the requirements of section 5.1 as to the amount of any partial prepayments provided for therein, at least equal to such excess. If, after giving effect to the prepayment of Loans and Unpaid Drawings, the aggregate amount of Letter of Credit Outstandings exceeds the Total Commitment as then in effect, the Borrower shall pay to the Administrative Agent an amount in cash and/or Cash Equivalents equal to such excess and the Administrative Agent shall hold such payment as security for the obligations of the Borrower hereunder pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Administrative Agent and the Borrower (which shall permit certain investments in Cash Equivalents satisfactory to the Administrative Agent and the Borrower until the proceeds are applied to the secured obligations). (b) CERTAIN ASSET SALES. If during any fiscal year of the Borrower, the Borrower and its Subsidiaries have received cumulative Cash Proceeds during such fiscal year from one or more Asset Sales of at least $1,000,000, not later than the third Business Day following the date of receipt of any Cash Proceeds in excess of such amount, an amount, conforming to the requirements of section 5.1 as to the amount of any partial prepayments provided for therein, at least equal to 100% of the Net Cash Proceeds then received in excess of such amount from any Asset Sale shall be applied as a mandatory prepayment of the then outstanding Loans; provided, that (i) if no Default under section 10.1(a) or Event of Default shall have occurred and be continuing, (ii) the Borrower and its Subsidiaries have scheduled Consolidated Capital Expenditures during the following six months, and the Borrower notifies the Administrative Agent of the amount and nature thereof and of its intention to reinvest all or a portion of such Net Cash Proceeds in such Consolidated Capital Expenditures during such six month period, then no such prepayment shall be required to the extent the Borrower so indicates that such reinvestment will take place. If at the end of any such six month period any portion of such Net Cash Proceeds has not been so reinvested, the Borrower will immediately make a prepayment of principal of the then outstanding Loans in an amount, conforming to the requirements as to the amount of partial prepayments contained in section 5.1, at least equal to such remaining amount. (c) CHANGE OF CONTROL. On the date on which a Change of Control occurs, notwithstanding anything to the contrary contained in this Agreement, no further Borrowings shall be made and the then outstanding principal amount of all Loans, if any, shall become due and payable and shall be prepaid in full, and the Borrower shall contemporaneously either (i) cause all outstanding Letters of Credit to be surrendered for cancellation (any such Letters of Credit to be replaced by letters of credit issued by other financial institutions), or (ii) the Borrower shall pay to the Administrative Agent an amount in cash and/or Cash Equivalents equal to 100% of the Letter of Credit Outstandings and the Administrative Agent shall hold such payment as security for the obligations of the Borrower hereunder pursuant to a cash collateral agreement 33 39 to be entered into in form and substance reasonably satisfactory to the Administrative Agent and the Borrower (which shall permit certain investments in Cash Equivalents satisfactory to the Administrative Agent and the Borrower until the proceeds are applied to the secured obligations). (d) PARTICULAR LOANS TO BE PREPAID. With respect to each prepayment of Loans required by this section 5.2, the Borrower shall designate the Types of Loans which are to be prepaid and the specific Borrowing(s) pursuant to which such prepayment is to be made, PROVIDED that (i) the Borrower shall first so designate all Loans that are Prime Rate Loans and Eurocurrency Loans with Interest Periods ending on the date of prepayment prior to designating any other Eurocurrency Loans for prepayment, (ii) if the outstanding principal amount of Eurocurrency Loans made pursuant to a Borrowing is reduced below the applicable Minimum Borrowing Amount as a result of any such prepayment, then all the Loans outstanding pursuant to such Borrowing shall be converted into Prime Rate Loans, and (iii) each prepayment of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans. In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under section 2.10. Any prepayment of Eurocurrency Loans pursuant to this section 5.2 shall in all events be accompanied by such compensation as is required by section 2.10. 5.3. METHOD AND PLACE OF PAYMENT. Except as otherwise specifically provided herein, all payments by the Borrower under this Agreement shall be made to the Administrative Agent for the ratable (based on its pro rata share) account of the Lenders entitled thereto, not later than 11:00 A.M. (local time at the Payment Office) on the date when due and shall be made in immediately available funds and in lawful money of the United States of America (in the case of Loans denominated in Dollars), or in the applicable Alternative Currency (in the case of Loans denominated in an Alternative Currency), at the Payment Office, it being understood that written notice by the Borrower to the Administrative Agent to make a payment from the funds in the Borrower's account at the Payment Office shall constitute the making of such payment to the extent of such funds held in such account which are so applied. Any payments under this Agreement which are made later than 11:00 A.M. (local time at the Payment Office) shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. 5.4. NET PAYMENTS. (a) All payments made by the Borrower hereunder, under any Note or any other Credit Document, will be made without setoff, counterclaim or other defense. Except as provided for in section 5.4(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax, imposed on or measured by the net income or net profits of a Lender pursuant to the laws of the jurisdiction under which such Lender is organized or the jurisdiction in which the principal office or Applicable Lending Office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to such non excluded taxes, levies imposts, duties, fees, assessments or other charges (all such nonexcluded taxes levies, imposts, duties, fees assessments or other charges being referred to collectively as "TAXES"). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes and such additional amounts as may be necessary so that every payment by it of all amounts due hereunder, under any Note or under any other Credit Document, after withholding or deduction for or on account of any Taxes will not be less than the amount provided for herein or in such Note or in such other Credit Document. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each Lender, upon the written request of such Lender for taxes imposed on or measured by the net income or profits of such Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which the principal office or Applicable Lending Office of such Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which the principal office or Applicable Lending Office of such Lender is located and for any withholding of income or similar taxes imposed by the United States of America as such Lender shall determine are payable by, or withheld from, such Lender in respect of such amounts so paid to or on behalf of such Lender pursuant to the preceding sentence, which request shall be 34 40 accompanied by a statement from such Lender setting forth, in reasonable detail, the computations used in determining such amounts. The Borrower will furnish to the Administrative Agent within 45 days after the date the payment of any Taxes, or any withholding or deduction on account thereof, is due pursuant to applicable law certified copies of tax receipts, or other evidence satisfactory to the Lender, evidencing such payment by the Borrower. The Borrower will indemnify and hold harmless the Administrative Agent and each Lender, and reimburse the Administrative Agent or such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid or withheld by such Lender. (b) Each Lender that is not a United States person (as such term is defined in section 7701(a)(30) of the Code) for Federal income tax purposes agrees to provide to the Borrower and the Administrative Agent on or prior to the Effective Date, or in the cases of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to section 13.4 (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer and such Lender is in compliance with the provisions of this section 5.4(b)), on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement, any Note or any other Credit Document, or (ii) if the Lender is not a "bank" within the meaning of section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit K (any such certificate, a "SECTION 5.4(B)(II) CERTIFICATE") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement, any Note or any other Credit Document. In addition, each Lender agrees that from time to time after the Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section 5.4(b)(ii) Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement, any Note or any other Credit Document, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such Form or Certificate, in which case such Lender shall not be required to deliver any such Form or Certificate pursuant to this section 5.4(b). Notwithstanding anything to the contrary contained in section 5.4(a), but subject to section 13.4(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or other similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in section 7701(a)(30) of the Code) for United States federal income tax purposes and which has not provided to the Borrower such forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to section 5.4(a) hereof to gross-up payments to be made to a Lender in respect of income or similar taxes imposed by the United States or any additional amounts with respect thereto (I) if such Lender has not provided to the Borrower the Internal Revenue Service forms required to be provided to the Borrower pursuant to this section 5.4(b) or (II) in the case of a payment other than interest, to a Lender described in clause (ii) above, to the extent that such forms do not establish a complete exemption from withholding of such taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this section 5.4 and except as specifically provided for in section 13.4(b), the Borrower agrees to pay additional amounts and indemnify each Lender in the manner set forth in section 5.4(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any Taxes deducted or withheld by it as described in the previous sentence as a result of any changes after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of income or similar Taxes. (c) If any Lender, in its sole opinion, determines that it has finally and irrevocably received or been granted a refund in respect of any Taxes paid as to which indemnification has been paid by the Borrower pursuant to this section, it shall promptly remit such refund (including any interest received in respect thereof), net of all out-of-pocket costs and expenses; PROVIDED, that the Borrower agrees to promptly return any such refund (plus interest) to such Lender in the event such Lender is required to repay such refund to the relevant taxing authority. Any such 35 41 Lender shall provide the Borrower with a copy of any notice of assessment from the relevant taxing authority (redacting any unrelated confidential information contained therein) requiring repayment of such refund. Nothing contained herein shall impose an obligation on any Lender to apply for any such refund. (d) Reference is hereby made to the provisions of section 2.9(d) for certain limitations upon the rights of a Lender under this section. SECTION 6. CONDITIONS PRECEDENT. 6.1. CONDITIONS PRECEDENT AT INITIAL BORROWING DATE. The obligation of the Lenders to make Loans, and of any Letter of Credit Issuer to issue Letters of Credit, is subject to the satisfaction of each of the following conditions on the Initial Borrowing Date: (a) EFFECTIVENESS; NOTES. On or prior to the Initial Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall have been delivered to the Administrative Agent for the account of each Lender each appropriate Note executed by the Borrower, in each case, in the amount, maturity and as otherwise provided herein. (b) FEES, ETC. The Borrower shall have paid or caused to be paid all fees required to be paid by it on or prior to such date pursuant to section 4 hereof and all reasonable fees and expenses of the Administrative Agent and of special counsel to the Administrative Agent which have been invoiced on or prior to such date in connection with the preparation, execution and delivery of this Agreement and the other Credit Documents and the consummation of the transactions contemplated hereby and thereby. (c) OTHER CREDIT DOCUMENTS. The Credit Parties named therein shall have duly executed and delivered and there shall be in full force and effect, and original counterparts shall have been delivered to the Administrative Agent, in sufficient quantities for the Administrative Agent and the Lenders, of, (i) the Subsidiary Guaranty (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof, the "SUBSIDIARY GUARANTY"), substantially in the form attached hereto as Exhibit C; (ii) the Security Agreement (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof, the "SECURITY AGREEMENT"), substantially in the form attached hereto as Exhibit D; (iii) the Pledge Agreement (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof, the "PLEDGE AGREEMENT"), substantially in the form attached hereto as Exhibit E-1; and (iv) the pledge agreement, substantially in the form attached hereto as Exhibits E-2, relating to the pledge of a portion of the shares of a United Kingdom company which is a Subsidiary of the Borrower. (d) CORPORATE RESOLUTIONS AND APPROVALS. The Administrative Agent shall have received, in sufficient quantity for the Administrative Agent and the Lenders, certified copies of the resolutions of the Board of Directors of the Borrower and each other Credit Party, approving the Credit Documents to which the Borrower or any such other Credit Party, as the case may be, is or may become a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the execution, delivery and performance by the Borrower or any such other Credit Party of the Credit Documents to which it is or may become a party. (e) INCUMBENCY CERTIFICATES. The Administrative Agent shall have received, in sufficient quantity for the Administrative Agent and the Lenders, a certificate of the Secretary or an Assistant Secretary of the Borrower and of each other Credit Party, certifying the names and true signatures of the officers of the Borrower or such other Credit Party, as the case may be, authorized to sign the Credit Documents to which the Borrower or such other Credit Party is a party and any other documents to which the Borrower or any such other Credit Party is a party which may be executed and delivered in connection herewith. 36 42 (f) RECORDATION OF SECURITY DOCUMENTS, DELIVERY OF COLLATERAL, TAXES, ETC. The Security Documents (or proper notices or financing statements in respect thereof) shall have been duly recorded, published and filed in such manner and in such places as is required by law to establish, perfect, preserve and protect the rights and security interests of the parties thereto and their respective successors and assigns, all collateral items required to be physically delivered to the Collateral Agent under the Security Documents shall have been so delivered, accompanied by any appropriate instruments of transfer, and all taxes, fees and other charges then due and payable in connection with the execution, delivery, recording, publishing and filing of such instruments and the issue and delivery of the Notes shall have been paid in full. (g) SEARCH REPORTS. The Administrative Agent shall have received completed requests for information on Form UCC-11, or search reports from one or more commercial search firms acceptable to the Administrative Agent, listing all of the effective financing statements filed against any Credit Party which is a party to the Security Agreement in any jurisdiction in which such Credit Party maintains an office or in which any Collateral of such Credit Party is located, together with copies of such financing statements. (h) COMPLIANCE CERTIFICATE. The Administrative Agent shall have received, in sufficient quantity for the Administrative Agent and the Lenders, a certificate, dated the Initial Borrowing Date, of a responsible financial or accounting officer of the Borrower, in form and substance satisfactory to each Lender, (i) certifying compliance with the financial covenants contained in sections 9.7 and 9.8 of this Agreement, and (ii) covenanting to provide to the Lenders by January 15, 1998 computations as to compliance with such financial covenants on a pro forma basis after giving effect to the acquisition of Ruud Lighting, Inc. (i) EVIDENCE OF INSURANCE. The Collateral Agent shall have received certificates of insurance and other evidence, satisfactory to it, of compliance with the insurance requirements of this Agreement and the Security Agreement. (j) OPINIONS OF COUNSEL. On the Initial Borrowing Date, the Administrative Agent shall have received (i) an opinion, addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date, from Cowden, Humphrey & Sarlson, special counsel to the Borrower, substantially in the form of Exhibit I hereto and covering such other matters incident to the transactions contemplated hereby as the Administrative Agent may reasonably request, such opinion to be in form and substance satisfactory to the Administrative Agent; and (ii) if requested by the Administrative Agent, an opinion, addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date, from United Kingdom counsel to the Borrower, with respect to the pledge document executed and delivered in substantially the form attached as Exhibit E-2 hereto, such opinion to be in form and substance satisfactory to the Administrative Agent. (k) EXISTING CREDIT AGREEMENT. Contemporaneously with the initial Borrowing hereunder, the Borrower and the other borrowers named therein shall have terminated the commitments of the lenders under the existing financing arrangements with Bank of New York (or its Affiliates), shall have prepaid all borrowings thereunder, shall have made effective provision satisfactory to the Administrative Agent for the termination, or assignment to the Collateral Agent, of the liens and security thereunder, and if required in connection with such termination, made effective provision for any letters of credit issued thereunder to be supported or replaced by Letters of Credit issued hereunder. (l) TRANSACTION. Contemporaneously with the initial Borrowing hereunder, the Borrower shall have completed the acquisition of Ruud Lighting, Inc. in accordance with the acquisition documents (the "RUUD ACQUISITION DOCUMENTS"), true, correct and complete copies of which shall have been furnished to the Lenders prior to the Effective Date. The purchase price (which may be subject to customary audit and other similar adjustments) for such acquisition shall not exceed $35,500,000 in cash and 3,000,000 shares of the Borrower's common stock, and each Lender shall be reasonably satisfied with all of the material terms of such acquisition. Without limitation of the foregoing, (i) such acquisition shall have been completed in compliance with all applicable laws; (ii) there shall have been no amendment to or other modification of the 37 43 terms or conditions of the Ruud Acquisition Documents, or any waiver of performance of any of the terms thereof, which in the opinion of the Required Lenders is materially adverse; and (iii) the Borrower shall have made arrangements for all Indebtedness for borrowed money, if any, of the seller which is assumed, or to which the assets acquired are subject, in such transaction, to be repaid or prepaid, and all Liens on acquired assets securing such Indebtedness terminated, on or immediately following completion of such transactions. In addition, the Lenders shall be satisfied, in their sole discretion, with their "due diligence" review of the business, properties, liabilities and commitments of Ruud Lighting to which the Borrower will be subject following completion of such acquisition. (m) APPROVALS, ETC. On the Initial Borrowing Date, (i) all material governmental and third party approvals in connection with the transactions contemplated by the Ruud Acquisition Documents and the Credit Documents and otherwise referred to herein shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority (including any court having jurisdiction) which restrains or prevents such transactions or imposes, in the judgment of the Required Lenders or the Administrative Agent, materially adverse conditions upon the consummation of such transactions; and (ii) there shall be no legal restriction upon any Lender which prohibits, or imposes any material burdens upon any Lender in connection with, the extensions of credit contemplated by the Credit Documents. (n) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings and all documents incidental to the transactions contemplated hereby shall be satisfactory in substance and form to the Administrative Agent and the Lenders and the Administrative Agent and its special counsel and the Lenders shall have received all such counterpart originals or certified or other copies of such documents as the Administrative Agent or its special counsel or any Lender may reasonably request. 6.2. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligations of the Lenders to make each Loan and/or of a Letter of Credit Issuer to issue each Letter of Credit is subject, at the time thereof, to the satisfaction of the following conditions: (a) NOTICE OF BORROWING, ETC. The Administrative Agent shall have received a Notice of Borrowing meeting the requirements of section 2.3 with respect to the incurrence of Loans or a Letter of Credit Request meeting the requirement of section 3.2 with respect to the issuance of a Letter of Credit. (b) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time thereof and also after giving effect thereto, (i) there shall exist no Default or Event of Default and (ii) all representations and warranties of the Credit Parties contained herein or in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Loan or issuance of such Letter of Credit, except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct on and as of such earlier date. The acceptance of the benefits of each Loan or issuance of a Letter of Credit shall constitute a representation and warranty by the Borrower to each of the Lenders that all of the applicable conditions specified in section 6.1 and/or 6.2, as the case may be, exist as of that time. All of the certificates, legal opinions and other documents and papers referred to in section 6.1 or this section 6.2, unless otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Lenders and, except for the Notes, in sufficient counterparts for each of the Lenders, and the Administrative Agent will promptly distribute to the Lenders their respective Notes and the copies of such other certificates, legal opinions and documents. SECTION 7. REPRESENTATIONS AND WARRANTIES. In order to induce the Lenders to enter into this Agreement and to make the Loans, and/or to issue and/or to participate in the Letters of Credit provided for herein, the Borrower makes the following representations and 38 44 warranties to, and agreements with, the Lenders, all of which shall survive the execution and delivery of this Agreement and each Credit Event: 7.1. CORPORATE STATUS, ETC. Each of the Borrower and its Material Subsidiaries (i) is a duly organized or formed and validly existing corporation, partnership or limited liability company, as the case may be, in good standing under the laws of the jurisdiction of its formation and has the corporate, partnership or limited liability company power and authority, as applicable, to own its property and assets and to transact the business in which it is engaged and presently proposes to engage, and (ii) except for the Subsidiary which has been identified to the Lenders and as to which its qualification as a foreign corporation and good standing in a particular jurisdiction is excepted from the operation and effect of this clause (ii) during a period of 60 days following the Effective Date, has duly qualified and is authorized to do business in all jurisdictions where it is required to be so qualified except where the failure to be so qualified would not have a Material Adverse Effect. 7.2. SUBSIDIARIES. Annex II hereto lists, as of the date hereof, each Material Subsidiary of the Borrower and certain other Subsidiaries of the Borrower (and the direct and indirect ownership interest of the Borrower therein). As of the Initial Borrowing Date and after giving effect to the Ruud Acquisition, the only Material Subsidiaries of the Borrower are the following: DOMESTIC SUBSIDIARIES FOREIGN SUBSIDIARIES - --------------------- -------------------- APL Engineered Materials, Inc. Ballastronix Incorporated Venture Lighting International, Inc. Parry Power Systems Limited Lighting Resources International, Inc. Ruud Lighting, Inc. 7.3. CORPORATE POWER AND AUTHORITY, ETC. Each Credit Party has the corporate power and authority to execute, deliver and carry out the terms and provisions of the Credit Documents to which it is party and has taken all necessary corporate or other organizational action to authorize the execution, delivery and performance of the Credit Documents to which it is party. Each Credit Party has duly executed and delivered each Credit Document to which it is party and each Credit Document to which it is party constitutes the legal, valid and binding agreement or obligation of such Credit Party enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 7.4. NO VIOLATION. Neither the execution, delivery and performance by any Credit Party of the Credit Documents to which it is party nor compliance with the terms and provisions thereof (i) will contravene any provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality applicable to such Credit Party or its properties and assets, (ii) will conflict with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (other than the Liens created pursuant to the Security Documents) upon any of the property or assets of such Credit Party pursuant to the terms of any promissory note, bond, debenture, indenture, mortgage, deed of trust, credit or loan agreement, or any other material agreement or other instrument, to which such Credit Party is a party or by which it or any of its property or assets are bound or to which it may be subject, or (iii) will violate any provision of the certificate or articles of incorporation, code of regulations or by-laws, or other charter documents of such Credit Party. 7.5. GOVERNMENTAL APPROVALS. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any foreign or domestic governmental or public body or authority, or any subdivision thereof, is required to authorize or is required as a condition to (i) the execution, delivery and performance by any Credit Party of any Credit Document to which it is a party, or (ii) the legality, validity, binding effect or enforceability of any Credit Document to which any Credit Party is a party, other than filings and recordings necessary to establish or perfect any Liens or security interests purported to be granted by any of the Security Documents. 39 45 7.6. LITIGATION. There are no actions, suits or proceedings pending or, to, the knowledge of the Borrower, threatened with respect to the Borrower or any of its Material Subsidiaries (i) that have, or could reasonably be expected to have, a Material Adverse Effect, or (ii) which question the validity or enforceability of any of the Credit Documents, or of any action to be taken by any Credit Party pursuant to any of the Credit Documents to which it is a party. 7.7. USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds of all Loans shall be utilized (i) to retire the Indebtedness referred to in section 6.1(k) and (l), (ii) to pay the cash purchase payable in connection with the Acquisition referred to in section 6.1(l), and (iii) for other lawful purposes not inconsistent with the requirements of this Agreement. (b) No part of the proceeds of any Credit Event will be used directly or indirectly to purchase or carry Margin Stock, or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. Neither any Credit Event, nor the use of the proceeds thereof, will violate or be inconsistent with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. At no time would more than 25% of the value of the assets of the Borrower or of the Borrower and its consolidated Subsidiaries that are subject to any "arrangement" (as such term is used in section 221.2(g) of such Regulation U) hereunder be represented by Margin Stock. 7.8. FINANCIAL STATEMENTS, ETC. (a) The Borrower has furnished to the Lenders and the Administrative Agent complete and correct copies of (i) the audited consolidated balance sheets of the Borrower and its consolidated subsidiaries as of June 30, 1997 and as of June 30, 1996, and the related audited consolidated statements of income, shareholders' equity, and cash flows for the fiscal years then ended, accompanied by the unqualified report thereon of the Borrower's independent accountants; and (ii) the unaudited condensed consolidated balance sheets of the Borrower and its consolidated subsidiaries as of September 30, 1997, and the related unaudited condensed consolidated statements of income and of cash flows of the Borrower and its consolidated subsidiaries for the fiscal quarter then ended, as contained in the Form 10-Q Quarterly Report of the Borrower filed with the SEC. All such financial statements have been prepared in accordance with GAAP, consistently applied (except as stated therein), and fairly present the financial position of the Borrower and its consolidated subsidiaries as of the respective dates indicated and the consolidated results of their operations and cash flows for the respective periods indicated, subject in the case of any such financial statements which are unaudited, to normal audit adjustments, none of which will involve a Material Adverse Effect. (b) The Borrower has received consideration which is the reasonable equivalent value of the obligations and liabilities that the Borrower has incurred to the Administrative Agent and the Lenders. The Borrower now has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage and is now solvent and able to pay its debts as they mature and the Borrower, as of the Initial Borrowing Date, owns property having a value, both at fair valuation and at present fair salable value, greater than the amount required to pay the Borrower's debts; and the Borrower is not entering into the Credit Documents with the intent to hinder, delay or defraud its creditors. Without limitation of the foregoing, on and as of the Initial Borrowing Date, and after giving effect to the acquisition contemplated by the Ruud Acquisition Documents referred to in section 6.1(l) and to all Indebtedness incurred and to be incurred by the Borrower and its Subsidiaries in connection therewith, (i) the sum of the assets, at a fair valuation, of the Borrower will exceed its debts, (ii) the Borrower will not have incurred or intended to, or believe that it will, incur debts beyond its ability to pay such debts as such debts mature and (iii) the Borrower will have sufficient capital with which to conduct its business. For purposes of this section 7.8(b), "debt" means any liability on a claim, and "claim" means (x) right to payment whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (y) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. (c) The Borrower has delivered to the Lenders prior to the execution and delivery of this Agreement (i) a copy of the Borrower's Report on Form 10-K as filed (without Exhibits) with the SEC for its fiscal year ended 40 46 June 30, 1997, which contains a general description of the business and affairs of the Borrower and its Subsidiaries as of the end of such fiscal year, and (ii) financial projections prepared by management of the Borrower for the Borrower and its Subsidiaries for the fiscal years 1998-2000 which take into account the acquisition contemplated by the Ruud Acquisition Documents (the "Financial Projections"). The Financial Projections were prepared on behalf of the Borrower in good faith after taking into account the existing and historical levels of business activity of the Borrower and its Subsidiaries, historical financial information with respect to the properties and business acquired pursuant to the Ruud Acquisition Documents, as supplied by the seller, known trends, including general economic trends, and all other information, assumptions and estimates considered by management of the Borrower and its Subsidiaries to be pertinent thereto, taking into account the fact that such management is not intimately familiar with the properties and business acquired pursuant to the Ruud Acquisition Documents. The Financial Projections were considered by management of the Borrower, as of such date of preparation, to be realistically achievable; provided, that no representation or warranty is made as to the impact of future general economic conditions or as to whether the Borrower's projected consolidated results as set forth in the Financial Projections will actually be realized. No facts are known to the Borrower at the date hereof which, if reflected in the Financial Projections, would result in a material adverse change in the assets, liabilities, results of operations or cash flows reflected therein. 7.9. NO MATERIAL ADVERSE CHANGE. Since June 30, 1997, there has been no change in the condition, business or affairs of the Borrower and its Subsidiaries taken as a whole, or their properties and assets considered as an entirety, except for changes none of which, individually or in the aggregate, has had or could reasonably be expected to have, a Material Adverse Effect. 7.10. TAX RETURNS AND PAYMENTS. The Borrower and each of its Material Subsidiaries has filed all federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all material taxes and assessments payable by it which have become due, other than those not yet delinquent and except for those contested in good faith. The Borrower and each of its Material Subsidiaries has established on its books such charges, accruals and reserves in respect of taxes, assessments, fees and other governmental charges for all fiscal periods as are required by GAAP. The Borrower knows of no proposed assessment for additional federal, foreign or state taxes for any period, or of any basis therefor, which, individually or in the aggregate, taking into account such charges, accruals and reserves in respect thereof as the Borrower and its Subsidiaries have made, could reasonably be expected to have a Material Adverse Effect. 7.11. TITLE TO PROPERTIES, ETC. At the date of the most recent consolidated balance sheet referred to in section 7.8, the Borrower and each of its Subsidiaries had good and marketable title, in the case of real property, and good title (or valid leasehold interests, in the case of any leased property), in the case of all other property, to all of its properties and assets reflected in such consolidated balance sheet. The interests of the Borrower and each of its Subsidiaries in the properties reflected in the most recent consolidated balance sheet referred to in section 7.8, taken as a whole, were sufficient, in the judgment of the Borrower, as of the date of such consolidated balance sheet, for purposes of the ownership and operation of the businesses conducted by the Borrower and such Subsidiaries. 7.12. LAWFUL OPERATIONS, ETC. Except for known situations or incidents which are reserved for on the consolidated financial statements of the Borrower and its Subsidiaries pursuant to this Agreement or which, if not so reserved, could not reasonably be expected to have a Material Adverse Effect, the Borrower and each of its Material Subsidiaries is in full compliance with all material requirements imposed by law, whether federal or state, including (without limitation) Environmental Laws and zoning ordinances. 7.13. ENVIRONMENTAL MATTERS. (a) The Borrower and each of its Material Subsidiaries is in compliance with all Environmental Laws governing its business except to the extent that any such failure to comply (together with any resulting penalties, fines or forfeitures) would not reasonably be expected to have a Material Adverse Effect. All licenses, permits, registrations or approvals required for the business of the Borrower and each of its Material Subsidiaries, as conducted as of the Initial Borrowing Date, under any Environmental Law have been secured and the Borrower and each of its Material Subsidiaries is in substantial compliance therewith, except for such licenses, permits, registrations or approvals the failure to secure or to comply therewith is not reasonably likely to have a Material Adverse Effect. Neither the Borrower nor any of its Material Subsidiaries has received written notice, or 41 47 otherwise knows, that it is in any respect in noncompliance with, breach of or default under any applicable writ, order, judgment, injunction, or decree to which the Borrower or such Material Subsidiary is a party or which would affect the ability of the Borrower or such Material Subsidiary to operate any real property and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute noncompliance, breach of or default thereunder, except in each such case, such noncompliance, breaches or defaults as would not reasonably be expected to, in the aggregate, have a Material Adverse Effect. There are as of the Initial Borrowing Date no Environmental Claims pending or, to the best knowledge of the Borrower, threatened wherein an unfavorable decision, ruling or finding would reasonably be expected to have a Material Adverse Effect. There are no facts, circumstances, conditions or occurrences on any Real Property now or at any time owned, leased or operated by the Borrower or any of its Material Subsidiaries, which are known by the Borrower or as to which the Borrower or any such Material Subsidiary has received written notice, that could reasonably be expected (i) to form the basis of an Environmental Claim against the Borrower or any of its Material Subsidiaries or any Real Property of the Borrower or any of its Material Subsidiaries, or (ii) to cause such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property under any Environmental Law, except in each such case, such Environmental Claims or restrictions that individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect. (b) Hazardous Materials have not at any time been (i) generated, used, treated or stored on, or transported to or from, any Real Property of the Borrower or any of its Material Subsidiaries or (ii) released on any such Real Property, in each case where such occurrence or event is not in compliance with Environmental Laws and is reasonably likely to have a Material Adverse Effect. 7.14. COMPLIANCE WITH ERISA. Compliance by the Borrower with the provisions hereof and Credit Events contemplated hereby will not involve any prohibited transaction within the meaning of ERISA or section 4975 of the Code. The Borrower and each of its Subsidiaries, (i) has fulfilled all obligations under minimum funding standards of ERISA and the Code with respect to each Plan that is not a Multiemployer Plan or a Multiple Employer Plan, (ii) has satisfied all respective contribution obligations in respect of each Multiemployer Plan and each Multiple Employer Plan, (iii) is in compliance in all material respects with all other applicable provisions of ERISA and the Code with respect to each Plan, each Multiemployer Plan and each Multiple Employer Plan, and (iv) has not incurred any liability under the Title IV of ERISA to the PBGC with respect to any Plan, any Multiemployer Plan, any Multiple Employer Plan, or any trust established thereunder. No Plan or trust created thereunder has been terminated, and there have been no Reportable Events, with respect to any Plan or trust created thereunder or with respect to any Multiemployer Plan or Multiple Employer Plan, which termination or Reportable Event will or could result in the termination of such Plan, Multiemployer Plan or Multi Employer Plan and give rise to a material liability of the Borrower or any ERISA Affiliate in respect thereof. Neither the Borrower nor any ERISA Affiliate is at the date hereof, or has been at any time within the two years preceding the date hereof, an employer required to contribute to any Multiemployer Plan or Multiple Employer Plan, or a "contributing sponsor" (as such term is defined in section 4001 of ERISA) in any Multiemployer Plan or Multiple Employer Plan. Neither the Borrower nor any ERISA Affiliate has any contingent liability with respect to any post-retirement "welfare benefit plan" (as such term is defined in ERISA) except as has been disclosed to the Lenders in writing. 7.15. INTELLECTUAL PROPERTY, ETC. The Borrower and each of its Material Subsidiaries has obtained or has the right to use all material patents, trademarks, servicemarks, trade names, copyrights, licenses and other rights with respect to the foregoing necessary for the present and planned future conduct of its business, without any known conflict with the rights of others, except for such patents, trademarks, servicemarks, trade names, copyrights, licenses and rights, the loss of which, and such conflicts, which in any such case individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect. 7.16. INVESTMENT COMPANY ACT, ETC. Neither the Borrower nor any of its Material Subsidiaries is subject to regulation with respect to the creation or incurrence of Indebtedness under the Investment Company Act of 1940, as amended, the Interstate Commerce Act, as amended, the Federal Power Act, as amended, the Public Utility Holding Company Act of 1935, as amended, or any applicable state public utility law. 42 48 7.17. BURDENSOME CONTRACTS; LABOR RELATIONS. The Borrower and its Material Subsidiaries (i) are not subject to any burdensome contract, agreement, corporate restriction, judgment, decree or order, (ii) are not parties to any labor dispute, (iii) are not subject to any material strikes, slow downs, workouts or other concerted interruptions of operations by employees of the Borrower or any Material Subsidiary, whether or not relating to any labor contracts, (iv) are not subject to any significant pending or, to the knowledge of the Borrower, threatened, unfair labor practice complaint, before the National Labor Relations Board, and (v) are not subject to any significant pending or, to the knowledge of the Borrower, threatened, grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement, (vi) are not subject to any significant pending or, to the knowledge of the Borrower, threatened, significant strike, labor dispute, slowdown or stoppage, and (vii) to the knowledge of the Borrower, no union representation question exists with respect to the employees of the Borrower or any of its Material Subsidiaries, except (with respect to any matter specified in any of the above clauses), for such matters as, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 7.18. EXISTING INDEBTEDNESS. Annex III sets forth a true and complete list, as of the date or dates set forth therein, of all Indebtedness of the Borrower and each of its Subsidiaries, on a consolidated basis, which (i) has an outstanding principal amount of at least $250,000 or (ii) is secured by any Lien on any property of the Borrower or any Subsidiary, and which will be outstanding on the Initial Borrowing Date after giving effect to the initial Borrowing hereunder, other than the Indebtedness created under the Credit Documents (all such Indebtedness, whether or not in a principal amount meeting such threshold and required to be so listed in Annex III, the "EXISTING INDEBTEDNESS"). The Borrower has provided to the Administrative Agent prior to the date of execution hereof true and complete copies of all agreements and instruments governing the Indebtedness listed on Annex III (the "EXISTING INDEBTEDNESS AGREEMENTS"). 7.19. SECURITY INTERESTS. Once executed and delivered, and until terminated in accordance with the terms thereof, each of the Security Documents creates, as security for the obligations purported to be secured thereby, a valid and enforceable perfected security interest in and Lien on all of the Collateral subject thereto from time to time, in favor of the Collateral Agent for the benefit of the Secured Creditors referred to in the Security Documents, superior to and prior to the rights of all third persons and subject to no other Liens (except that the Collateral under the Security Agreement may be subject to Permitted Liens). No filings or recordings are required in order to perfect the security interests created under any Security Document except for filings or recordings required in connection with any such Security Document which shall have been made, or for which satisfactory arrangements have been made, upon or prior to the execution and delivery thereof. All recording, stamp, intangible or other similar taxes required to be paid by any person under applicable legal requirements or other laws applicable to the property encumbered by the Security Documents in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement thereof have been paid. 7.20. TRUE AND COMPLETE DISCLOSURE. All factual information (taken as a whole) heretofore or contemporaneously furnished by or on behalf of the Borrower or any of its Subsidiaries in writing to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated herein, other than the Financial Projections (as to which representations are made only as provided in section 7.8), is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of such person in writing to any Lender will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided, except that any such future information consisting of financial projections prepared by management of the Borrower is only represented herein as being based on good faith estimates and assumptions believed by such persons to be reasonable at the time made, it being recognized by the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ materially from the projected results. As of the Effective Date, there is no fact known to the Borrower or any of its Subsidiaries which has, or could reasonably be expected to have, a Material Adverse Effect which has not theretofore been disclosed to the Lenders. 43 49 SECTION 8. AFFIRMATIVE COVENANTS. The Borrower hereby covenants and agrees that so long as this Agreement is in effect and until such time as the Total Commitment has been terminated, no Notes are outstanding and the Loans, together with interest, Fees and all other Obligations hereunder, have been paid in full: 8.1. REPORTING REQUIREMENTS. The Borrower will furnish to each Lender and the Administrative Agent: (a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event within 90 days after the close of each fiscal year of the Borrower, the consolidated and consolidating balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated and consolidating statements of income, of stockholder's equity and of cash flows for such fiscal year, in each case setting forth comparative figures for the preceding fiscal year, all in reasonable detail and accompanied by (i) the opinion with respect to such consolidated financial statements of independent public accountants of recognized national standing selected by the Borrower, which opinion shall be unqualified and shall (A) state that such accountants audited such consolidated financial statements in accordance with generally accepted auditing standards, that such accountants believe that such audit provides a reasonable basis for their opinion, and that in their opinion such consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Borrower and its consolidated subsidiaries as at the end of such fiscal year and the consolidated results of their operations and cash flows for such fiscal year in conformity with generally accepted accounting principles, or (B) contain such statements as are customarily included in unqualified reports of independent accountants in conformity with the recommendations and requirements of the American Institute of Certified Public Accountants (or any successor organization); and (ii) a certificate of or letter from such independent accountants containing certified computations with respect to compliance with the provisions of sections 9.7, 9.8, 9.9, 9.10 and 9.11 of this Agreement and stating whether or not their examination of such financial statements has disclosed the existence, during the fiscal year covered by such financial statements, of any condition or event which constitutes a Default or Event of Default, and if their examination has disclosed any such condition or event, specifying the nature and period of existence thereof (which certificate or letter may contain such statements as are customarily included in similar certifications of independent accountants in conformity with the recommendations and requirements of the American Institute of Certified Public Accountants (or any successor organization)). (b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any event within 45 days after the close of each of the first three quarterly accounting periods in each fiscal year of the Borrower, the unaudited condensed consolidated and consolidating balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such quarterly period and the related unaudited condensed consolidated and consolidating statements of income and of cash flows for such quarterly period, and setting forth, in the case of such unaudited consolidated statements of income and of cash flows, comparative figures for the related periods in the prior fiscal year, and which consolidated financial statements shall be certified on behalf of the Borrower by the Chief Financial Officer or other Authorized Officer of the Borrower, subject to changes resulting from normal year-end audit adjustments. (c) OFFICER'S COMPLIANCE CERTIFICATES. At the time of the delivery of the financial statements provided for in sections 8.1(a) and (b), a certificate on behalf of the Borrower of the Chief Financial Officer or other Authorized Officer of the Borrower to the effect that, to the best knowledge of the Borrower, no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof, which certificate shall be substantially in the form attached hereto as Exhibit H and shall 44 50 set forth the calculations required to establish compliance with the provisions of sections 9.7, 9.8, 9.9, 9.10 and 9.11 of this Agreement and the other provisions of this Agreement referred to in the form of such certificate. (d) MONTHLY FINANCIAL STATEMENTS. As soon as available and in any event within 45 days after the close of each month during each fiscal year of the Borrower, the unaudited consolidated and consolidating balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such month and the related unaudited consolidated and consolidating statements of income and of cash flows for such month, and setting forth comparative figures for prior periods, in the form customarily prepared by the Borrower for internal review by senior management. (e) BUDGET. Not later than 90 days after the commencement of any fiscal year of the Borrower and its Subsidiaries, a consolidated budget in reasonable detail for each of the four fiscal quarters of such fiscal year, and (if and to the extent prepared by management of the Borrower) for any subsequent fiscal years, as customarily prepared by management for its internal use, setting forth, with appropriate discussion, the forecasted balance sheet, income statement, operating cash flows and capital expenditures of the Borrower and its Subsidiaries for the period covered thereby, and the principal assumptions upon which forecasts and budget are based. (f) SEC REPORTS AND REGISTRATION STATEMENTS. Promptly upon transmission thereof or other filing with the SEC, copies of all registration statements (other than the exhibits thereto and any registration statement on Form S-8 or its equivalent) and annual, quarterly or current reports that the Borrower or any of its Subsidiaries files with the SEC. (g) AUDITORS' INTERNAL CONTROL COMMENT LETTERS, ETC. Promptly upon receipt thereof, a copy of each letter or memorandum commenting on internal accounting controls, which is submitted to the Borrower by its independent accountants in connection with any annual or interim audit made by them of the books of the Borrower or any of its Subsidiaries. (h) NOTICE OF DEFAULT, LITIGATION OR CERTAIN MATTERS INVOLVING MAJOR CUSTOMERS OR SUPPLIERS. Promptly, and in any event within three Business Days, in the case of clause (i) below, or five Business Days, in the case of clause (ii) or (iii) below, after the Borrower or any of its Material Subsidiaries obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or Event of Default, which notice shall specify the nature thereof, the period of existence thereof and what action the Borrower proposes to take with respect thereto, (ii) any litigation or governmental or regulatory proceeding pending against the Borrower or any of its Material Subsidiaries which is likely to have a Material Adverse Effect or a material adverse effect on the ability of the Borrower to perform its obligations hereunder or under any other Credit Document, and (iii) any significant adverse change (in the Borrower's reasonable judgment) in the Borrower's or any Subsidiary's relationship with, or any significant event or circumstance which is in the Borrower's reasonable judgment likely to adversely affect the Borrower's or any Subsidiary's relationship with, (A) any customer (or related group of customers) representing more than 10% of the Borrower's consolidated revenues during its most recent fiscal year, or (B) any supplier which is significant to the Borrower and its Subsidiaries considered as an entirety. (i) ERISA. Promptly, and in any event within 10 days after the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate knows of the occurrence of any of the following, the Borrower will deliver to each of the Lenders a certificate on behalf of the Borrower of an Authorized Officer of the Borrower setting forth the full details as to such occurrence and the action, if any, that the Borrower, such 45 51 Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: (i) that a Reportable Event has occurred with respect to any Plan; (ii) the institution of any steps by the Borrower, any ERISA Affiliate, the PBGC or any other person to terminate any Plan; (iii) the institution of any steps by the Borrower or any ERISA Affiliate to withdraw from any Plan; (iv) the institution of any steps by the Borrower or any Subsidiary to withdraw from any Multiemployer Plan or Multiple Employer Plan, if such withdrawal could result in withdrawal liability (as described in Part 1 of Subtitle E of Title IV of ERISA) in excess of $1,000,000; (v) a non-exempt "prohibited transaction" within the meaning of section 406 of ERISA in connection with any Plan; (vi) that a Plan has an Unfunded Current Liability exceeding $1,000,000; (vii) any material increase in the contingent liability of the Borrower or any Subsidiary with respect to any post-retirement welfare liability; or (viii) the taking of any action by, or the threatening of the taking of any action by, the Internal Revenue Service, the Department of Labor or the PBGC with respect to any of the foregoing. (j) ENVIRONMENTAL MATTERS. Promptly upon, and in any event within 10 Business Days after, an officer of the Borrower obtains actual knowledge thereof, notice of any of the following environmental matters which involves any reasonable likelihood (in the Borrower's reasonable judgment) of resulting in a Material Adverse Effect: (i) any pending or threatened (in writing) Environmental Claim against the Borrower or any of its Material Subsidiaries or any Real Property owned or operated by the Borrower or any of its Material Subsidiaries; (ii) any condition or occurrence on or arising from any Real Property owned or operated by the Borrower or any of its Material Subsidiaries that results in noncompliance by the Borrower or any of its Material Subsidiaries with any applicable Environmental Law; (iii) any condition or occurrence on any Real Property owned, leased or operated by the Borrower or any of its Material Subsidiaries that could reasonably be expected to cause such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability by the Borrower or any of its Material Subsidiaries of such Real Property under any Environmental Law; and (iv) the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property owned, leased or operated by the Borrower or any of its Material Subsidiaries as required by any Environmental Law or any governmental or other administrative agency. All such notices shall describe in reasonable detail the nature of the Environmental Claim and the Borrower's or such Material Subsidiary's response thereto. 46 52 (k) OTHER INFORMATION. With reasonable promptness, such other information or documents (financial or otherwise) relating to the Borrower or any of its Subsidiaries as any Lender may reasonably request from time to time. 8.2. BOOKS, RECORDS AND INSPECTIONS. The Borrower will, and will cause each of its Subsidiaries to, (i) keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower or such Subsidiaries, as the case may be, in accordance with GAAP, in the case of the Borrower, or which are reconcilable to a GAAP presentation, in the case of any Subsidiary; and (ii) permit, upon at least five Business Days' notice to the Chief Financial Officer or any other Authorized Officer of the Borrower, officers and designated representatives of the Administrative Agent or any of the Lenders to visit and inspect any of the properties or assets of the Borrower and any of its Material Subsidiaries in whomsoever's possession (but only to the extent the Borrower or such Material Subsidiary has the right to do so to the extent in the possession of another person), and to examine the books of account of the Borrower and any of its Material Subsidiaries and discuss the affairs, finances and accounts of the Borrower and of any of its Subsidiaries with, and be advised as to the same by, the Borrower's officers and independent accountants and independent actuaries, if any, all at such reasonable times and intervals and to such reasonable extent as the Administrative Agent or any of the Lenders may request. 8.3. INSURANCE. (a) The Borrower will, and will cause each of its Subsidiaries to, (i) maintain insurance coverage by such insurers and in such forms and amounts and against such risks as are generally consistent with the insurance coverage maintained by the Borrower and its Subsidiaries at the date hereof, and (ii) forthwith upon any Lender's written request, furnish to such Lender such information about such insurance as such Lender may from time to time reasonably request, which information shall be prepared in form and detail satisfactory to such Lender and certified by an Authorized Officer of the Borrower. (b) The Borrower will, and will cause each of its Subsidiaries which is a Credit Party to, at all times keep their respective property which is subject to the Lien of any Security Document insured in favor of the Collateral Agent, and all policies or certificates (or certified copies thereof) with respect to such insurance (and any other insurance maintained by the Borrower or any such Subsidiary) (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee (with respect to Collateral) or, to the extent permitted by applicable law, as an additional insured), (ii) shall state that such insurance policies shall not be cancelled without 30 days' prior written notice thereof (or 10 days' prior written notice in the case of cancellation for the non-payment of premiums) by the respective insurer to the Collateral Agent, (iii) shall provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Collateral Agent and the Lenders, and (iv) shall in the case of any such certificates or endorsements in favor of the Collateral Agent, be delivered to or deposited with the Collateral Agent. In no event shall the Borrower be required to deposit the actual insurance policies with the Collateral Agent. The Administrative Agent shall deliver copies of any certificates of insurance to a Lender upon such Lender's request. (c) If the Borrower or any of its Subsidiaries shall fail to maintain all insurance in accordance with this section 8.3, or if the Borrower or any of its Subsidiaries which is a Credit Party shall fail to so endorse and deliver or deposit all endorsements or certificates with respect thereto, the Administrative Agent and/or the Collateral Agent shall have the right (but shall be under no obligation), upon prior notice to the Borrower, to procure such insurance and the Borrower agrees to reimburse the Administrative Agent or the Collateral Agent, as the case may be for all costs and expenses of procuring such insurance. 8.4. PAYMENT OF TAXES AND CLAIMS. The Borrower will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a Lien or charge upon any properties of the Borrower or any of its Subsidiaries; PROVIDED that neither the Borrower nor any of its Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP; and PROVIDED, FURTHER, that the Borrower will not be considered to be in default of any of the provisions of this sentence if the Borrower or any 47 53 Subsidiary fails to pay any such amount which, individually or in the aggregate, is immaterial to the Borrower and its Subsidiaries considered as an entirety. 8.5. CORPORATE FRANCHISES. The Borrower will do, and will cause each of its Subsidiaries to do, or cause to be done, all things necessary to preserve and keep in full force and effect its corporate or other organizational existence, rights, authority and franchises, provided that nothing in this section 8.5 shall be deemed to prohibit (i) any transaction permitted by section 9.2; (ii) the termination of existence of any Subsidiary if (A) the Borrower determines that such termination is in its best interest and (B) such termination is not adverse in any material respect to the Lenders; or (iii) the loss of any rights, authorities or franchises if the loss thereof, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 8.6. GOOD REPAIR. The Borrower will, and will cause each of its Material Subsidiaries to, ensure that its material properties and equipment used or useful in its business in whomsoever's possession they may be, are kept in good repair, working order and condition, normal wear and tear excepted, and that from time to time there are made in such properties and equipment all needful and proper repairs, renewals, replacements, extensions, additions, betterments and improvements, thereto, to the extent and in the manner customary for companies in similar businesses. 8.7. COMPLIANCE WITH STATUTES, ETC. The Borrower will, and will cause each of its Subsidiaries to, comply, in all material respects, with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, other than those (i) being contested in good faith by appropriate proceedings, as to which adequate reserves are established to the extent required under GAAP, and (ii) the noncompliance with which would not have, and which would not be reasonably expected to have, a Material Adverse Effect or a material adverse effect on the ability of the Borrower to perform its obligations under any Credit Document. 8.8. COMPLIANCE WITH ENVIRONMENTAL LAWS. Without limitation of the covenants contained in section 8.7: (a) The Borrower will, and will cause each of its Subsidiaries to, (i) comply in all material respects, with all Environmental Laws applicable to the ownership, lease or use of all Real Property now or hereafter owned, leased or operated by the Borrower or any of its Subsidiaries, and promptly pay or cause to be paid all costs and expenses incurred in connection with such compliance, except for such noncompliance as would not have, and which would not be reasonably expected to have, a Material Adverse Effect or a material adverse effect on the ability of the Borrower to perform its obligations under any Credit Document; and (ii) keep or cause to be kept all such Real Property free and clear of any Liens imposed pursuant to such Environmental Laws which are not permitted under section 9.3. (b) Neither the Borrower nor any of its Subsidiaries will generate, use, treat, store, release or dispose of, or permit the generation, use, treatment, storage, release or disposal of, Hazardous Materials on any Real Property now or hereafter owned, leased or operated by the Borrower or any of its Subsidiaries or transport or permit the transportation of Hazardous Materials to or from any such Real Property other than in compliance with applicable Environmental Laws and in the ordinary course of business, except for such noncompliance as would not have, and which would not be reasonably expected to have, a Material Adverse Effect or a material adverse effect on the ability of the Borrower to perform its obligations under any Credit Document. (c) If required to do so under any applicable order of any governmental agency, the Borrower will undertake, and cause each of its Subsidiaries to undertake, any clean up, removal, remedial or other action necessary to remove and clean up any Hazardous Materials from any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries in accordance with, in all material respects, the requirements of all applicable Environmental Laws and in accordance with, in all material respects, such orders of all governmental authorities, except (i) to the extent that the Borrower or such Subsidiary is contesting such order in good faith and by appropriate proceedings and for which adequate reserves have 48 54 been established to the extent required by GAAP, or (ii) for such noncompliance as would not have, and which would not be reasonably expected to have, a Material Adverse Effect or a material adverse effect on the ability of the Borrower to perform its obligations under any Credit Document. 8.9. FISCAL YEARS, FISCAL QUARTERS. The Borrower will, for consolidated financial reporting purposes, continue to use June 30 as the end of its fiscal year and September 30, December 31, and March 31 as the end of its first three fiscal quarters. If the Borrower shall change any of its Subsidiaries' fiscal years or fiscal quarters (other than the fiscal year or fiscal quarters of a person which becomes a Subsidiary, made at the time such person becomes a Subsidiary, to conform to the Borrower's fiscal year and fiscal quarters or to conform to the fiscal year or fiscal quarters which the Borrower generally utilizes for its Subsidiaries), the Borrower will promptly, and in any event within 30 days following any such change, deliver a notice to the Administrative Agent and the Lenders describing such change and any material accounting entries made in connection therewith and stating whether such change will have any impact upon any financial computations to be made hereunder, and if any such impact is foreseen, describing in reasonable detail the nature and extent of such impact. If the Required Lenders determine that any such change will have any impact upon any financial computations to be made hereunder which is adverse to the Lenders, the Borrower will, if so requested by the Administrative Agent, enter into an amendment to this Agreement, in form and substance satisfactory to the Administrative Agent and the Required Lenders, modifying any of the financial covenants or related provisions hereof in such manner as the Required Lenders determine is necessary to eliminate such adverse effect. 8.10. CERTAIN SUBSIDIARIES TO JOIN IN SUBSIDIARY GUARANTY. (a) In the event that at any time after the Initial Borrowing Date (x) the Borrower has any Material Subsidiary which is not a party to the Subsidiary Guaranty, or (y) an Event of Default shall have occurred and be continuing and the Borrower has any Subsidiary which is not a party to the Subsidiary Guaranty, the Borrower will notify the Administrative Agent in writing of such event, identifying the Subsidiary in question and referring specifically to the rights of the Administrative Agent and the Lenders under this section. The Borrower will, within 30 days following request therefor from the Administrative Agent (who may give such request on its own initiative or upon request by the Required Lenders), cause such Subsidiary to deliver to the Administrative Agent, in sufficient quantities for the Lenders, (i) a joinder supplement, satisfactory in form and substance to the Administrative Agent and the Required Lenders, duly executed by such Subsidiary, pursuant to which such Subsidiary joins in the Subsidiary Guaranty as a guarantor thereunder, and (ii) if such Subsidiary is a corporation, resolutions of the Board of Directors of such Subsidiary, certified by the Secretary or an Assistant Secretary of such Subsidiary as duly adopted and in full force and effect, authorizing the execution and delivery of such joinder supplement, or if such Subsidiary is not a corporation, such other evidence of the authority of such Subsidiary to execute such joinder supplement as the Administrative Agent may reasonably request. (b) Notwithstanding the foregoing or the provisions of section 8.11 hereof, the Borrower shall not, unless an Event of Default shall have occurred and be continuing, be required to cause a Foreign Subsidiary to join in the Subsidiary Guaranty or to become a party to an Additional Security Document if (i) to do so would subject the Borrower to liability for additional United States income taxes by virtue of section 956 of the Code in an amount the Borrower considers material, and (ii) the Borrower provides the Administrative Agent with documentation, including computations prepared by the Borrower's internal tax officer, its independent accountants or tax counsel, acceptable to the Required Lenders, in support thereof. 8.11. ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) In the event that at any time after the Initial Borrowing Date (x) the Borrower or any Subsidiary acquires, or a person which has become a Subsidiary owns or holds, an interest in any Real Property or any other property or interest, located in the United States, 49 55 which is not at the time included in the Collateral and is not subject to a Permitted Lien securing Indebtedness, the Borrower will notify the Administrative Agent in writing of such event, identifying the property in question and referring specifically to the rights of the Administrative Agent and the Lenders under this section, (y) the Borrower or any Subsidiary at any time owns or holds an interest in any Real Property or any other property or interest, located in the United States, (1) which is not at the time included in the Collateral and is not subject to a Permitted Lien securing Indebtedness, and (2) as to which the Administrative Agent on its own initiative or upon instructions from the Required Lenders has notified the Borrower that it requires that the same be included in the Collateral, (z) an Event of Default shall have occurred and be continuing and the Borrower or any Subsidiary at any time owns or holds an interest in any Real Property or any other property or interest, located within or outside of the United States, which is not at the time included in the Collateral and is not subject to a Permitted Lien securing Indebtedness, the Borrower will, or will cause such Subsidiary to, within 20 days following request by the Collateral Agent (who may make such request on its own initiative or upon instructions from the Required Lenders), grant the Collateral Agent for the benefit of the Secured Creditors (as defined in the Security Documents) security interests and mortgages (each an "ADDITIONAL SECURITY DOCUMENT") in such interests or properties of the Borrower or any Subsidiary, subject to obtaining any required consents from third parties (including third party lessors and co-venturers) necessary to be obtained for the granting of a Lien on the interests or assets involved (with the Borrower hereby agreeing to use its reasonable best efforts to obtain such consents), and subject to the provisions of section 8.11(b). Each Additional Security Document (i) shall be granted pursuant to documentation satisfactory in form and substance to the Administrative Agent and the Collateral Agent, which documentation shall in the case of Real Property or interests therein be accompanied by such Phase I environmental assessments, surveys and surveyor's certifications, a mortgage policy of title insurance, consents of landlords and other supporting documentation requested by and satisfactory in form and substance to the Administrative Agent and the Collateral; and (ii) shall constitute a valid and enforceable perfected Lien upon the interests or properties so included in the Collateral, superior to and prior to the rights of all third persons and subject to no other Liens except those permitted by section 9.3 or otherwise agreed by the Administrative Agent at the time of perfection thereof and (in the case of Real Property or interests therein) such other encumbrances as may be set forth in the mortgage policy, if any, relating to such Additional Security Document which shall be delivered to the Collateral Agent together with such Additional Security Document and which shall be satisfactory in form and substance to the Collateral Agent. The Borrower, at its sole cost and expense, will cause each Additional Security Document or instruments related thereto to be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens created thereby required to be granted pursuant to the Additional Security Document, and will pay or cause to be paid in full all taxes, fees and other charges payable in connection therewith. For the avoidance of doubt, it is noted that as of the Initial Borrowing date the Lenders have determined not to request the Borrower to provide a mortgage or deed of trust covering any of the Real Property owned by the entities to be acquired pursuant to the Ruud Acquisition Documents. (b) The Borrower will, and will cause each of its Subsidiaries to, at the expense of the Borrower, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such conveyances, financing statements, transfer endorsements, powers of attorney, certificates, and other assurances or instruments and take such further steps relating to the Collateral covered by any of the Security Documents as the Collateral Agent may reasonably require. If at any time the Collateral Agent determines, based on applicable law, that all applicable taxes (including, without limitation, mortgage recording taxes or similar charges) were not paid in connection with the recordation of any mortgage or deed of trust, the Borrower shall promptly pay the same upon demand. Furthermore, the Borrower shall cause to be delivered to the Collateral Agent such opinions of local counsel, appraisals, title insurance, surveys, environmental assessments, consents of landlords, lien waivers from landlords or mortgagees and other related documents as may be reasonably requested by the Administrative Agent or the Collateral Agent in connection therewith, all of which documents shall be in form and substance satisfactory to the Administrative Agent and the Collateral Agent, except that no title insurance or surveys shall be required for any leasehold properties (unless the lessee has a nominal or bargain purchase option). 50 56 (c) The Borrower will if requested by any Lender at any time, in order to meet any legal requirement applicable to such Lender, provide to Administrative Agent, the Collateral Agent and the Lenders, at the sole cost and expense of the Borrower, appraisals and other supporting documentation relating to the any mortgage or deed of trust delivered as an Additional Security Document hereunder, as specified by any Lender, meeting the appraisal and other documentation requirements of the Real Estate Reform Amendments of the Financial Institution Reform, Recovery and Enforcement Act of 1989, as amended, or any other legal requirements applicable to any Lender, which in the case of any such appraisal shall be prepared by one or more valuation firms of national standing, acceptable to the Required Lenders, utilizing appraisal standards satisfying such Amendments, Act or other legal requirements. (d) The Borrower will provide the Administrative Agent with sufficient copies of each Additional Security Document and any additional supporting documents delivered in connection therewith for distribution of copies thereof to the Lenders, and the Administrative Agent will promptly so distribute such copies. 8.12. CORPORATE SEPARATENESS. The Borrower will take, and will cause each of its Subsidiaries to take, all such action as is necessary to keep the operations of the Borrower and its Subsidiaries separate and apart from those of each Subsidiary which has outstanding Indebtedness, including, without limitation, ensuring that all customary formalities regarding corporate existence, including holding regular board of directors' meetings and maintenance of corporate records, are followed. All financial statements of the Borrower and its Subsidiaries provided to creditors will clearly evidence the corporate separateness of the Borrower and its other Subsidiaries from each Subsidiary which has Indebtedness outstanding. Finally, neither the Borrower nor any of its other Subsidiaries will take any action, or conduct its affairs in a manner which is likely to result in the corporate existence of a Subsidiary which has Indebtedness outstanding, on the one hand, and the Borrower and its other Subsidiaries, on the other hand, being ignored, or in the assets and liabilities of the Borrower or any of its other Subsidiaries being substantively consolidated with those of a Subsidiary which has Indebtedness outstanding in a bankruptcy, reorganization or other insolvency proceeding. No action or indemnity, or provision of support in the form of a letter of credit, expressly permitted by this Agreement will breach this covenant. 8.13. ERISA. As soon as possible and, in any event, within 10 days after the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following, the Borrower will deliver to each of the Lenders a certificate of the chief financial officer of the Borrower setting forth the full details as to such occurrence and the action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred; that an accumulated funding deficiency, within the meaning of section 412 of the Code or section 302 of ERISA, has been incurred or an application may be or has been made for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under section 412 of the Code or section 303 or 304 of ERISA with respect to a Plan; that any contribution required to be made with respect to a Plan has not been timely made; that a Plan has been or may be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability; that proceedings may be or have been instituted to terminate or appoint a trustee to administer a Plan which is subject to Title IV of ERISA; that a proceeding has been instituted pursuant to section 515 of ERISA to collect a delinquent contribution to a Plan; that the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or may incur any liability (including any indirect, contingent, or secondary' liability) to or on account of the termination of or withdrawal from a Plan under section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under section 401(a)(29), 4971, 4975 or 4980 of the Code or section 409 or 502(i) or 502(l) of ERISA or with respect to a group health plan (as defined in section 607(1) of ERISA or section 4980B(g)(2) of the Code) under section 4980B of the Code; or that the Borrower or any Subsidiary of the Borrower may incur any material liability pursuant to any employee welfare benefit plan (as defined in section 3(1) of ERISA) that provides benefits to retired employees or other former employees (other than as required by section 601 of ERISA) or any Plan. 8.14. HEDGE AGREEMENTS, ETC. The Borrower will, and will cause each of its Subsidiaries to, enter into Hedge Agreements in order to provide protection to the Borrower or any such Subsidiary from fluctuations and other 51 57 changes in interest rates and currency exchange rates, as and to the extent considered reasonably necessary by the Borrower, but without exposing the Borrower or its Subsidiaries to predominantly speculative risks unrelated to the amount of Indebtedness, assets or liabilities intended to be subject to coverage on a notional basis under all such Hedge Agreements. Without limitation of the foregoing, the Borrower will obtain within 60 days following the Initial Borrowing Date, and thereafter maintain in effect, a Hedge Agreement, in form and substance satisfactory to the Administrative Agent, with a notional amount of at least $35,000,000, protecting the Borrower for a period of at least three years against such changes in interest rates as can be obtained at reasonable cost in light of prevailing market conditions. In the case of any Hedge Agreement to be entered into in order to comply with the requirements of the preceding sentence, the Borrower will provide the proposed form thereof (including any proposed pricing or other material terms) to the Administrative Agent contemporaneously with or prior to the entry into such Hedge Agreement. 8.15. LANDLORD/MORTGAGEE WAIVERS; BAILEE LETTERS. The Borrower will promptly (and in any event within 60 days following request by the Administrative Agent) obtain, and will maintain in effect, (a) waivers from landlords and mortgagees having any interest in any Real Property on which any tangible items of Collateral having a value of at least $100,000 are located, substantially in the form attached hereto as Exhibits F-1 and F-2, and (b) bailee letters, substantially in the form attached hereto as Exhibit G, from persons unrelated to any of the Credit Parties who are parties to the Security Agreement to whom any tangible items of Collateral having a value of at least $100,000 have been delivered for storage, use in the manufacture of products for the Borrower and its Subsidiaries, consignment or similar purposes. 8.16. SENIOR DEBT. The Borrower will at all times ensure that (a) the claims of the Lenders in respect of the Obligations of the Borrower will not be subordinate to, and will in all respects at least rank pari passu with, the claims of every other senior secured or unsecured creditor of the Borrower, and (b) any Indebtedness subordinated in any manner to the claims of any senior secured or unsecured creditor of the Borrower will be subordinated in like manner to such claims of the Lenders. SECTION 9. NEGATIVE COVENANTS. The Borrower hereby covenants and agrees that on the Effective Date and thereafter for so long as this Agreement is in effect and until such time as the Total Commitment has been terminated, no Notes remain outstanding and the Loans, together with interest, Fees and all other Obligations incurred hereunder are paid in full: 9.1. CHANGES IN BUSINESS. Neither the Borrower nor any of its Subsidiaries will engage in any business if, as a result, the general nature of the business, taken on a consolidated basis, which would then be engaged in by the Borrower and its Subsidiaries, would be substantially changed from the general nature of the business engaged in by the Borrower and its Subsidiaries on the date hereof, it being understood that any acquisition by the Borrower of the company identified to the Lenders prior to the Effective Date would not be considered a violation of this covenant. 9.2. CONSOLIDATION, MERGER OR SALE OF ASSETS, ETC. The Borrower will not, and will not permit any Subsidiary to, wind up, liquidate or dissolve its affairs, or enter into any transaction of merger or consolidation or sell or otherwise dispose of any of its property or assets (but excluding any sale or disposition of obsolete or excess furniture, fixtures or equipment or excess vacant land in the ordinary course of business), or purchase, lease or otherwise acquire (in one transaction or a series of related transactions) all or any part of the property or assets of any person (excluding any purchases, leases or other acquisitions of property or assets in, and for use in, the ordinary course of business) or agree to do any of the foregoing at any future time, except that the following shall be permitted: (a) CAPITAL EXPENDITURES: Consolidated Capital Expenditures permitted by section 9.11; (b) PERMITTED INVESTMENTS: the investments permitted pursuant to section 9.5; 52 58 (c) CERTAIN INTERCOMPANY MERGERS, ETC.: if no Default or Event of Default shall have occurred and be continuing or would result therefrom, (i) the merger, consolidation or amalgamation of any Wholly- Owned Subsidiary with or into the Borrower or another Wholly-Owned Subsidiary, so long as in any merger, consolidation or amalgamation involving the Borrower it is the surviving or continuing or resulting corporation, or the liquidation or dissolution of any Subsidiary, or (ii) the transfer or other disposition of any property by the Borrower to any Wholly-Owned Subsidiary which is a Subsidiary Guarantor or by any Wholly-Owned Subsidiary to the Borrower or any other Wholly-Owned Subsidiary of the Borrower which is a Subsidiary Guarantor; (d) RUUD LIGHTING TRANSACTION: the acquisition of Ruud Lighting, Inc. and its Subsidiaries may be completed as contemplated by section 6.1; (e) PERMITTED ACQUISITIONS: if no Default or Event of Default shall have occurred and be continuing or would result therefrom, the Borrower or any Subsidiary may make Permitted Acquisitions, provided that at least five Business Days prior to the date of any such Permitted Acquisition which involves consideration (including the amount of any assumed Indebtedness and (without duplication) any outstanding Indebtedness of any person which becomes a Subsidiary as a result of such Permitted Acquisition) of $3,000,000 or more, the Borrower shall have delivered to the Administrative Agent an officer's certificate executed on behalf of the Borrower by an Authorized Officer of the Borrower, which certificate shall (A) contain the date such Permitted Acquisition is scheduled to be consummated, (B) contain the estimated purchase price of such Permitted Acquisition, (C) contain a description of the property and/or assets acquired in connection with such Permitted Acquisition, (D) demonstrate that at the time of making any such Permitted Acquisition the covenants contained in sections 9.7 and 9.8 shall be complied with on a pro forma basis as if the properties and/or assets so acquired had been owned by the Borrower, and the Indebtedness assumed and/or incurred to acquire and/or finance same has been outstanding, for the 12 month period immediately preceding such acquisition (without giving effect to any credit for unobtained or unrealized gains or any adjustments to overhead in connection with any such Permitted Acquisition), and (E) if requested by the Administrative Agent, attach thereto a true and correct copy of the then proposed purchase agreement, merger agreement or similar agreement, partnership agreement and/or other contract entered into in connection with such Permitted Acquisition; (f) PERMITTED DISPOSITIONS: if no Default or Event of Default shall have occurred and be continuing or would result therefrom, the Borrower or any of its Subsidiaries may (i) sell any property, land or building (including any related receivables or other intangible assets) to any person which is not a Subsidiary of the Borrower, or (ii) sell the entire capital stock (or other equity interests) and Indebtedness of any Subsidiary owned by the Borrower or any other Subsidiary to any person which is not a Subsidiary of the Borrower, or (iii) permit any Subsidiary to be merged or consolidated with a person which is not an Affiliate of the Borrower, or (iv) consummate any other Asset Sale with a person who is not a Subsidiary of the Borrower; provided that (A) the consideration for such transaction represents fair value (as determined by management of the Borrower), and at least 90% of such consideration consists of cash, (B) in the case of any such transaction involving consideration in excess of $3,000,000, at least five Business Days prior to the date of completion of such transaction the Borrower shall have delivered to the Administrative Agent an officer's certificate executed on behalf of the Borrower by an Authorized Officer of the Borrower, which certificate shall contain a description of the proposed transaction, the date such transaction is scheduled to be consummated, the estimated purchase price or other consideration for such transaction, financial information pertaining to compliance with the preceding clause (A), and which shall (if requested by the Administrative Agent) include a certified copy of the draft or definitive documentation pertaining thereto, and (C) contemporaneously therewith, the Borrower prepays Loans as and to the extent contemplated by section 5.2(b); (g) CONTRIBUTIONS TO JOINT VENTURES, ETC.: if no Default or Event of Default shall have occurred and be continuing or would result therefrom, the Borrower or any of its Subsidiaries may contribute assets to joint ventures and other persons in accordance with section 9.5(o); and 53 59 (h) LEASES: the Borrower or any of its Subsidiaries may enter into leases of property or assets not constituting Permitted Acquisitions in the ordinary course of business not otherwise in violation of this Agreement. To the extent the Required Lenders (or all of the Lenders as shall be required by section 13.12) waive the provisions of this section 9.2 with respect to the sale, transfer or other disposition of any Collateral, or any Collateral is sold, transferred or disposed of as permitted by this section 9.2, (i) such Collateral shall be sold, transferred or disposed of free and clear of the Liens created by the respective Security Documents; (ii) if such Collateral includes all of the capital stock of a Subsidiary which is a Party to the Subsidiary Guaranty or other Security Document, such capital stock shall be released from the Pledge Agreement and such Subsidiary shall be released from the Subsidiary Guaranty; and (iii) the Administrative Agent and the Collateral Agent shall be authorized to take actions deemed appropriate by them in order to effectuate the foregoing. 9.3. LIENS. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible) of the Borrower or any such Subsidiary whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable or notes with or without recourse to the Borrower or any of its Subsidiaries, other than for purposes of collection in the ordinary course of business) or assign any right to receive income, or file or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute, except that the foregoing restrictions shall not apply to: (a) Liens for taxes not yet delinquent or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Borrower) have been established; (b) Liens in respect of property or assets imposed by law which were incurred in the ordinary course of business, such as carriers', warehousemen's, materialmen's and mechanics' Liens and other similar Liens arising in the ordinary course of business, which do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrower or any Subsidiary; (c) Liens created by this Agreement or the other Credit Documents; (d) Liens (i) in existence on the Initial Borrowing Date which are listed, and the Indebtedness secured thereby and the property subject thereto on the Initial Borrowing Date described, in Annex IV, (ii) consisting of cash collateral for letters of credit issued by other financial institutions which are outstanding on the Initial Borrowing Date in an aggregate undrawn amount not in excess of $1,000,000, PROVIDED such letters of credit are replaced or supported within 60 days following the Initial Borrowing Date with Letters of Credit issued hereunder and such cash collateral is released in connection with such replacement or support, or (iii) arising out of the refinancing, extension, renewal or refunding of any Indebtedness referred to in the preceding clause (i) which is secured by any such Liens, provided that the principal amount of such Indebtedness is not increased and such Indebtedness is not secured by any additional assets, and PROVIDED, FURTHER, that the Indebtedness referred to in section 6.1(k) may only be refinanced by Loans made, Letters of Credit issued and collateral granted pursuant to the Credit Documents; (e) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under section 10.1(f); (f) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; and mechanic's Liens, carrier's Liens, and other Liens to secure the performance of tenders, statutory obligations, contract bids, government contracts, performance and return-of-money bonds and other similar obligations, incurred in the ordinary course of business (exclusive of obligations in respect of 54 60 the payment for borrowed money), whether pursuant to statutory requirements, common law or consensual arrangements; (g) Leases or subleases granted to others not interfering in any material respect with the business of the Borrower or any of its Subsidiaries and any interest or title of a lessor under any lease not in violation of this Agreement; (h) easements, rights-of-way, zoning or deed restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Borrower or any of its Subsidiaries considered as an entirety; (i) Liens arising from financing statements regarding property subject to leases not in violation of the requirements of this Agreement, provided that such Liens are only in respect of the property subject to, and secure only, the respective lease (and any other lease with the same or an affiliated lessor); (j) Liens on specifically identifiable receivables, chattel paper, inventory and related property and rights of Lighting Resources, securing Indebtedness permitted by section 9.4(d) incurred in connection with the financing thereof; (k) Liens which (i) are placed upon equipment or machinery used in the ordinary course of business of the Borrower or any Subsidiary at the time of (or within 180 days after) the acquisition thereof by the Borrower or any such Subsidiary to secure Indebtedness incurred to pay or finance all or a portion of the purchase price thereof, PROVIDED that the Lien encumbering the equipment or machinery so acquired does not encumber any other asset of the Borrower or any such Subsidiary; or (ii) are existing on property or other assets at the time acquired by the Borrower or any Subsidiary or on assets of a person at the time such person first becomes a Subsidiary of the Borrower; provided that (A) any such Liens were not created at the time of or in contemplation of the acquisition of such assets or person by the Borrower or any of its Subsidiaries; (B) in the case of any such acquisition of a person, any such Lien attaches only to the property and assets of such person; and (C) in the case of any such acquisition of property or assets by the Borrower or any Subsidiary, any such Lien attaches only to the property and assets so acquired and not to any other property or assets of the Borrower or any Subsidiary; PROVIDED that (1) the Indebtedness secured by any such Lien does not exceed 100% of the fair market value of the property and assets to which such Lien attaches, determined at the time of the acquisition of such property or asset or the time at which such person becomes a Subsidiary of the Borrower (except in the circumstances described in clause (ii) above to the extent such Liens constituted customary purchase money Liens at the time of incurrence and were entered into in the ordinary course of business), and (2) the Indebtedness secured thereby is permitted by section 9.4(e); (l) Liens placed on (A) the Real Property and improvements thereto acquired by the Borrower for a corporate headquarters, training center and showroom, to secure Indebtedness incurred to pay or finance up to 100% of the purchase price thereof, and/or (B) other unencumbered Real Property and the improvements thereto, to finance up to 100% of the fair value thereof; PROVIDED in either such case that the Lien encumbering such Real Property and improvements does not encumber any other asset of the Borrower or any Subsidiary, and the Indebtedness secured thereby is permitted by section 9.4(f); and (m) Liens on any property of any Subsidiary organized under the laws of Canada, or any Province thereof, substantially all of whose property (exclusive of any consigned inventory) is located in Canada, securing Indebtedness permitted by section 9.4(b). 55 61 If any specifically identifiable Collateral is subjected to a Lien contemplated by clause (j), (k) or (l) of this section 9.3, the Administrative Agent and the Collateral Agent shall be authorized to release such specifically identifiable Collateral from the Lien of any Security Document and to take any related actions deemed appropriate by them in connection therewith. 9.4. INDEBTEDNESS. The Borrower will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness of the Borrower or any of its Subsidiaries, EXCEPT: (a) Indebtedness incurred under this Agreement and the other Credit Documents; (b) Indebtedness of Subsidiaries of the Borrower organized under the laws of Canada, or any Province thereof, substantially all of whose property (exclusive of any consigned inventory) is located in Canada, not in excess of $10,000,000 (or the equivalent amount thereof in any other applicable currency) at any time outstanding, and any guaranty by the Borrower or any Subsidiary of any such Indebtedness, provided that if any such Indebtedness is supported by a Letter of Credit, such Indebtedness so supported is secured by substantially all of the otherwise unencumbered property of the Subsidiary which has incurred such Indebtedness; (c) Indebtedness of the Borrower or any Subsidiary in respect of Capital Leases; provided that (i) the aggregate Capitalized Lease Obligations of the Borrower and its Subsidiaries, plus the aggregate outstanding principal amount of Indebtedness permitted under clause (e) below, shall not exceed $15,000,000 in the aggregate at any time outstanding, and (ii) at the time of any incurrence thereof after the date hereof, and after giving effect thereto, no Event of Default shall have occurred and be continuing or would result therefrom; (d) Indebtedness of Lighting Resources International, Inc., one of the Borrower's Subsidiaries, subject to Liens permitted by section 9.3(j), and any guaranty by the Borrower of any such Indebtedness; provided that (i) the aggregate principal amount of such Indebtedness shall not exceed $10,000,000 in the aggregate at any time outstanding, (ii) such Indebtedness is supported by a guaranty or other form of credit support supplied by Eximbank (or any comparable U.S. government authority) and the credit initially evidenced by such Indebtedness shall have been offered to one or more of the Lenders (or their respective Affiliates) on the same terms as offered to any other financial institution, and (iii) at the time of any incurrence thereof after the date hereof, and after giving effect thereto, no Event of Default shall have occurred and be continuing or would result therefrom; (e) Indebtedness of the Borrower or any Subsidiary subject to Liens permitted by section 9.3(k), including and any guaranty by the Borrower of any such Indebtedness; PROVIDED that (i) the aggregate principal amount of such Indebtedness shall not exceed $10,000,000 in the aggregate at any time outstanding, (ii) if at the time any such Indebtedness is incurred the aggregate outstanding principal amount of Indebtedness secured by Liens permitted by section 9.3(k), after giving effect to such incurrence, would exceed $5,000,000, the Borrower shall have demonstrated to the reasonable satisfaction of the Administrative Agent that the incurrence of such additional Indebtedness would be likely to result in a weighted average borrowing cost less than the weighted average borrowing cost which would have resulted if Loans had been incurred hereunder in lieu of such additional Indebtedness, and (iii) at the time of any incurrence thereof after the date hereof, and after giving effect thereto, no Event of Default shall have occurred and be continuing or would result therefrom; (f) secured Indebtedness of the Borrower in the aggregate principal amount of up to $45,000,000, having a weighted average life to maturity (computed in accordance with standard financial practices) at the time of incurrance thereof in excess of five years, incurred to finance Real Property and improvements referred to in section 9.3(l)(A) or (B), and secured by Liens permitted under such section 9.3(l); PROVIDED that (A) at the time of incurrence thereof, and after giving effect thereto, no Event of Default shall have occurred and be continuing or would result therefrom, and the Borrower is and will be in compliance with the covenant contained in section 9.7; and (B) the aggregate outstanding principal 56 62 amount of Indebtedness incurred to finance the corporate headquarters, training center and showroom which is referred to in section 9.3(l)(A) does not exceed $30,000,000; (g) Indebtedness of Foreign Subsidiaries of the Borrower, and Indebtedness of branches of the Borrower that are incorporated under the laws of a country other than the United States, not otherwise permitted by the foregoing clauses, provided that (i) the aggregate principal amount of such Indebtedness outstanding at any time is not in excess of $8,000,000 (or the equivalent in any applicable currency or currencies), and (ii) at the time of incurrence thereof, and after giving effect thereto, no Event of Default shall have occurred and be continuing or would result therefrom; (h) Existing Indebtedness, to the extent not otherwise permitted pursuant to the foregoing clauses; and any refinancing, extension, renewal or refunding of any such Existing Indebtedness not involving an increase in the principal amount thereof or a reduction of more than 10% in the remaining weighted average life to maturity thereof (computed in accordance with standard financial practice); (i) Indebtedness of the Borrower or any Subsidiary under Hedge Agreements; (j) Indebtedness of the Borrower to any of its Subsidiaries, and Indebtedness of any of the Borrower's Subsidiaries to the Borrower or to another Subsidiary of the Borrower, in each case to the extent permitted under section 9.5; and (k) Guaranty Obligations permitted under section 9.5. 9.5. ADVANCES, INVESTMENTS, LOANS AND GUARANTY OBLIGATIONS. The Borrower will not, and will not permit any of its Subsidiaries to, (1) lend money or credit or make advances to any person, (2) purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, or other investment in, any person, (3) create, acquire or hold any Subsidiary, (4) be or become a party to any joint venture or partnership, or (5) be or become obligated under any Guaranty Obligations (other than those created in favor of the Lenders pursuant to the Credit Documents), EXCEPT: (a) the Borrower or any of its Subsidiaries may invest in cash and Cash Equivalents; (b) any endorsement of a check or other medium of payment for deposit or collection, or any similar transaction in the normal course of business; (c) the Borrower and its Subsidiaries may acquire and hold receivables owing to them in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; (d) investments acquired by the Borrower or any of its Subsidiaries (i) in exchange for any other investment held by the Borrower or any such Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other investment, or (ii) as a result of a foreclosure by the Borrower or any of its Subsidiaries with respect to any secured investment or other transfer of title with respect to any secured investment in default; (e) loans and advances to employees for business-related travel expenses, moving expenses, costs of replacement homes and other similar expenses, in each case incurred in the ordinary course of business, shall be permitted; (f) investments in the capital of any Wholly-Owned Subsidiary which is (i) a Subsidiary Guarantor, and (ii) not a Foreign Subsidiary; (g) to the extent not permitted by the foregoing clauses, existing investments in any Subsidiaries (and any increases thereof attributable to increases in retained earnings); 57 63 (h) to the extent not permitted by the foregoing clauses, the existing loans, advances, investments and guarantees described on Annex V hereto; (i) any unsecured guaranty by the Borrower of any Indebtedness of a Subsidiary permitted by section 9.4, and any guaranty by any Subsidiary described in section 9.4; (j) investments of the Borrower and its Subsidiaries in Hedge Agreements; (k) loans and advances by any Subsidiary of the Borrower to the Borrower, provided that the Indebtedness represented thereby constitutes Subordinated Indebtedness; (l) loans and advances by the Borrower or by any Subsidiary of the Borrower to, or other investments in, any Subsidiary of the Borrower which is (i) a Subsidiary Guarantor, (ii) a Wholly-Owned Subsidiary, and (iii) not a Foreign Subsidiary; (m) loans and advances by any Subsidiary of the Borrower which is not a Subsidiary Guarantor to, or other investments by any such Subsidiary in, any other Subsidiary of the Borrower which is a Wholly- Owned Subsidiary; (n) Acquisitions permitted by section 9.2; and loans, advances and investments of any person which are outstanding at the time such person becomes a Subsidiary of the Borrower in an Acquisition permitted by section 9.2, but not any increase in the amount thereof; (o) loans, advances and investments by the Borrower or any Subsidiary in or to any Foreign Subsidiary made after September 30, 1997, PROVIDED that (i) at the time of making any such loan, advance or investment no Event of Default shall have occurred or would result therefrom, and (ii) taking into account any repayment of any such loans or advances or return of such investments, the aggregate amount so expended does not exceed $10,000,000; (p) Guaranty Obligations, not otherwise permitted by the foregoing clauses, of (i) the Borrower or any Subsidiary in respect of leases of the Borrower or any Subsidiary the entry into which is not prohibited by this Agreement, (ii) the Borrower or any Subsidiary in respect of any other person (other than in respect of (x) Indebtedness for borrowed money or represented by bonds, notes, debentures or similar securities, or (y) Indebtedness constituting Capital Leases) arising as a matter of applicable law because the Borrower or such Subsidiary is or is deemed to be a general partner of such other person, or (iii) the Borrower or any Subsidiary in respect of any other person (other than in respect of (x) Indebtedness for borrowed money or represented by bonds, notes, debentures or similar securities, or (y) Indebtedness constituting Capital Leases) arising in the ordinary course of business; (q) any other loans, advances, investments (whether in the form of cash or contribution of property, and if in the form of a contribution of property, such property shall be valued for purposes of this clause (q) at the fair value thereof as reasonably determined by the Borrower) and Guaranty Obligations, including, without limitation, in or to or for the benefit of, Subsidiaries, joint ventures, or other persons, not otherwise permitted by the foregoing clauses, made after September 30, 1997 (such loans, advances and investments, collectively, "BASKET INVESTMENTS", and such Guaranty Obligations, collectively "BASKET GUARANTEES") described below: (i) Basket Investments of up to an aggregate of $15,000,000, taking into account the repayment of any loans or advances comprising such Basket Investments, shall be permitted to be made in joint venture or similar arrangements with Rohm & Haas or any of its Affiliates, provided that no Event of Default shall have occurred and be continuing, or would result therefrom; (ii) additional Basket Investments of up to an aggregate of $25,000,000, taking into account the repayment of any loans or advances comprising such Basket Investments, shall be 58 64 permitted to be made, PROVIDED that (A) no Event of Default shall have occurred and be continuing, or would result therefrom, and (B) the aggregate Basket Investments made pursuant to this provision in any single person or related group of persons does not exceed $10,000,000, taking into account the repayment of any loans or advances comprising such Basket Investments; and (iii) if no Event of Default shall have occurred and be continuing, or would result therefrom, Basket Guarantees covering up to $5,000,000 aggregate principal amount of Indebtedness outstanding at any time, shall be permitted to be incurred. 9.6. DIVIDENDS, ETC. The Borrower will not declare or pay any dividends (other than dividends payable solely in common stock of the Borrower) on, or make any other distribution or payment on account of (other than in shares of the common stock of the Borrower), and the Borrower will not, and will not permit any of its Subsidiaries to, purchase, redeem, retire or otherwise acquire, any shares of any class of the capital stock of the Borrower, whether now or hereafter outstanding. 9.7. TOTAL INDEBTEDNESS/EBITDA RATIO. The Borrower will not at any time permit the ratio of (i) the amount of Total Indebtedness at such time to (ii) EBITDA for any Testing Period, to exceed (A) 4.00 to 1.00 for any Testing Period ending on or prior to December 31, 1998, (B) 3.75 to 1.00 for any subsequent Testing Period ending on or prior to December 31, 1999, or (C) 3.50 to 1.00 for any subsequent Testing Period. 9.8. INTEREST COVERAGE RATIO. The Borrower will not permit its Interest Coverage Ratio for any Testing Period to be less than 4.00 to 1.00. 9.9. CAPITAL EXPENDITURES. The Borrower will not, and will not permit any of its Subsidiaries to, make or incur Consolidated Capital Expenditures during any fiscal period of the Borrower described below which exceed the aggregate amount set forth for such fiscal period:
Fiscal Period Amount ------------- ------ Fiscal Quarter ended 3/31/98 $6,500,000 Fiscal Quarter ended 6/30/98 $6,500,000 Fiscal Year ended 6/30/99 $26,000,000 Fiscal Year ended 6/30/2000 $20,000,000 Any Fiscal Year thereafter $15,000,000
; PROVIDED that Consolidated Capital Expenditures of up to $30,000,000 related to the acquisition, renovation and expansion of the Borrower's Solon, Ohio headquarters shall be excluded from computations of this covenant. 9.10. CERTAIN LEASES. The Borrower will not permit the aggregate payments (excluding any property taxes, insurance or maintenance obligations paid by the Borrower and its Subsidiaries as additional rent or lease payments) by the Borrower and its Subsidiaries on a consolidated basis under agreements to rent or lease any real or personal property for a period exceeding 12 months (including any renewal or similar option periods), other than: (i) any leases constituting Capital Leases; and (ii) any operating lease of any Real Property which could have been subjected to a Lien permitted under section 9.3(l), or any equipment located thereon; to exceed $2,500,000 in any fiscal year of the Borrower. 9.11. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. The Borrower will not permit its Consolidated Tangible Net Worth at any time to be less than $100,800,000, except that (i) effective as of the end of the Borrower's fiscal quarter ended March 31, 1998, and as of the end of each fiscal quarter thereafter, the foregoing amount (as 59 65 it may from time to time be increased as herein provided), shall be increased by 75% of the consolidated net income of the Borrower and its Subsidiaries for the fiscal quarter ended on such date, if any, without deduction for minority interests, as determined in conformity with GAAP (there being no reduction in the case of any such consolidated net income which reflects a deficit), (ii) the foregoing amount (as it may from time to time be increased as herein provided), shall be increased by an amount equal to 100% of the cash proceeds (net of underwriting discounts and commissions and other customary fees and costs associated therewith) from any sale or issuance of equity by the Borrower after the Initial Borrowing Date (other than any sale or issuance to management or employees pursuant to employee benefit plans of general application), and (iii) the foregoing amount (as it may from time to time be increased as herein provided), shall be increased by an amount equal to 90% of any increase in Consolidated Tangible Net Worth attributable to the issuance of common stock or other equity interests in connection with the completion of any acquisition after September 30, 1997. 9.12. PREPAYMENTS AND REFINANCINGS OF OTHER DEBT, ETC. The Borrower will not, and will not permit any of its Subsidiaries to, make (or give any notice in respect thereof) any voluntary or optional payment or prepayment or redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) or exchange of, or refinance or refund, any Indebtedness of the Borrower or its Subsidiaries (other than the Obligations); provided that the Borrower or any Subsidiary may refinance or refund any such Indebtedness if the aggregate principal amount thereof is not increased and the weighted average life to maturity thereof (computed in accordance with standard financial practice) is not reduced by more than 10%. 9.13. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction or series of transactions with any Affiliate (other than, in the case of the Borrower, any Subsidiary, and in the case of a Subsidiary, the Borrower or another Subsidiary) other than in the ordinary course of business of and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than would obtain in a comparable arm's-length transaction with a person other than an Affiliate, except (i) loans, advances and investments permitted by section 9.5, (ii) sales of goods to an Affiliate for use or distribution outside the United States which in the good faith judgment of the Borrower complies with any applicable legal requirements of the Code, or (iii) agreements and transactions with and payments to officers, directors and shareholders which are either (A) entered into in the ordinary course of business and not prohibited by any of the provisions of this Agreement, or (B) entered into outside the ordinary course of business, approved by the directors or shareholders of the Borrower, and not prohibited by any of the provisions of this Agreement. 9.14. LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any contractual encumbrance or restriction in or on the ability of any such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrower or any Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any of the Borrower's other Subsidiaries, or transfer any of its property or assets to the Borrower or any of the Borrower's other Subsidiaries, EXCEPT for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of a Subsidiary of the Borrower, (iv) customary provisions restricting assignment of any licensing agreement entered into by any Subsidiary of the Borrower in the ordinary course of business, (v) customary provisions restricting the transfer of assets subject to Liens permitted under section 9.3(k), (vi) encumbrances and restrictions contained in the Existing Indebtedness Agreements as in effect on the Effective Date and customary restrictions governing any of the Indebtedness of a Subsidiary permitted pursuant to 9.4, (vii) any document relating to Indebtedness secured by a Lien permitted by section 9.3, insofar as the provisions thereof limit grants of junior liens on the assets securing such Indebtedness, and (viii) any operating lease or Capital Lease, insofar as the provisions thereof limit grants of a security interest in, or other assignments of, the related leasehold interest to any other person. 9.15. LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. The Borrower will not, nor will it permit any Subsidiary to, enter into any Sale and Lease-Back Transaction involving any individual property (or related group 60 66 of properties as part of the same Sale and Lease-Back Transaction) having a Value over $250,000 unless either (a) the Borrower or such Subsidiary would be entitled to incur Indebtedness secured by a Lien on such property pursuant to section 9.4(e) or (f), or (b) the Borrower complies with the provisions of section 5.2(b). SECTION 10. EVENTS OF DEFAULT. 10.1. EVENTS OF DEFAULT. Upon the occurrence of any of the following specified events (each an "EVENT OF DEFAULT"): (a) PAYMENTS: the Borrower shall (i) default in the payment when due of any principal of the Loans or any reimbursement obligation in respect of any Unpaid Drawing or (ii) default in the payment when due of any interest on the Loans or any Fees or any other amounts owing hereunder or under any other Credit Document; or (b) REPRESENTATIONS, ETC.: any representation, warranty or statement made by the Borrower or any other Credit Party herein or in any other Credit Document or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or (c) COVENANTS: the Borrower shall (i) default in the due performance or observance by it of any term, covenant or agreement contained in sections 9.2 through 9.13 (inclusive) of this Agreement, or (ii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in clause (a) or (b) above or the preceding clause (i) of this clause (c)) contained in this Agreement or any other Credit Document and such default shall continue unremedied for a period of at least 30 days after notice by the Administrative Agent or the Required Lenders; or (d) CROSS DEFAULT UNDER OTHER AGREEMENTS: the Borrower or any of its Subsidiaries shall (i) default in any payment with respect to any Indebtedness (other than the Obligations) having an unpaid principal amount of $250,000 or greater, and such default shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness, or (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto (and all grace periods applicable to such observance, performance or condition shall have expired), or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause any such Indebtedness to become due prior to its stated maturity; or any such Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be due and payable, or shall be required to be prepaid (other than by a regularly scheduled required prepayment or redemption, prior to the stated maturity thereof); or (e) OTHER CREDIT DOCUMENTS: the Subsidiary Guaranty or any Security Document (once executed and delivered) shall cease for any reason (other than termination in accordance with its terms) to be in full force and effect; or any Credit Party shall default in any payment obligation thereunder; or any Credit Party shall default in any material respect in the due performance and observance of any other obligation thereunder and such default shall continue unremedied for a period of at least 30 days after notice by the Administrative Agent or the Required Lenders; or any Credit Party shall (or seek to) disaffirm or otherwise limit its obligations thereunder otherwise than in strict compliance with the terms thereof; or (f) JUDGMENTS: one or more judgments or decrees shall be entered against the Borrower and/or any of its Subsidiaries involving a liability (whether or not covered by insurance) of $500,000 or more in the aggregate for all such judgments and decrees for the Borrower and its Subsidiaries) and any such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 30 days (or such longer period, not in excess of 60 days, during which enforcement thereof, and the filing of any judgment lien, is effectively stayed or prohibited) from the entry thereof; or 61 67 (g) BANKRUPTCY, ETC.: any of the following shall occur: (i) the Borrower or any of its Material Subsidiaries or any other Credit Party (the Borrower or any of such other persons, each a "PRINCIPAL PARTY") shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto (the "BANKRUPTCY CODE"); or (ii) an involuntary case is commenced against any Principal Party and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or (iii) a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of any Principal Party; or (iv) any Principal Party commences (including by way of applying for or consenting to the appointment of, or the taking of possession by, a rehabilitator, receiver, custodian, trustee, conservator or liquidator (collectively, a "CONSERVATOR") of itself or all or any substantial portion of its property) any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency, liquidation, rehabilitation, conservatorship or similar law of any jurisdiction whether now or hereafter in effect relating to such Principal Party; or (v) any such proceeding is commenced against any Principal Party to the extent such proceeding is consented by such person or remains undismissed for a period of 60 days; or (vi) any Principal Party is adjudicated insolvent or bankrupt; or (vii) any order of relief or other order approving any such case or proceeding is entered; or (viii) any Principal Party suffers any appointment of any conservator or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60 days; or (ix) any Principal Party makes a general assignment for the benefit of creditors; or (x) any corporate (or similar organizational) action is taken by any Principal Party for the purpose of effecting any of the foregoing; or (h) ERISA: (i) any of the events described in clauses (i) through (viii) of section 8.1(i) shall have occurred; or (ii) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (iii) any such event or events or any such lien, security interest or liability, individually, and/or in the aggregate, in the opinion of the Required Lenders, has had, or could reasonably be expected to have, a Material Adverse Effect; or (i) MATERIAL ADVERSE EFFECT: (i) the forced liquidation value of the Collateral, considered as an entirety, shall in the reasonable written opinion of the Required Lenders delivered to the Borrower, decline substantially over a period of not less than three months, or (ii) any other objective event or circumstance shall occur or exist after the date hereof which, in the reasonable opinion of the Required Lenders, (A) casts reasonable and substantial doubt upon the Borrower's ability to repay or refinance the Obligations, or (B) has resulted in a Material Adverse Effect upon the Borrower and its Subsidiaries, considered as an entirety, as compared to the business, operations, property, assets, liabilities or condition (financial or otherwise) of the Borrower and its Subsidiaries, considered as an entirety, as reflected in the most recent consolidated financial statements referred to in section 7.8. 62 68 10.2. ACCELERATION, ETC. Upon the occurrence of any Event of Default, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent shall, upon the written request of the Required Lenders, by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of the Administrative Agent or any Lender to enforce its claims against the Borrower, except as otherwise specifically provided for in this Agreement (provided that, if an Event of Default specified in section 10.1(g) shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment terminated, whereupon the Commitment of each Lender shall forthwith terminate immediately without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans, all Unpaid Drawings and all obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; (iii) terminate any Letter of Credit which may be terminated in accordance with its terms; and (iv) direct the Borrower to pay (and the Borrower hereby agrees that on receipt of such notice or upon the occurrence of an Event of Default with respect to the Borrower under section 10.1(g), it will pay) to the Administrative Agent an amount of cash equal to the aggregate Stated Amount of all Letters of Credit then outstanding (such amount to be held as security after the Borrower's reimbursement obligations in respect thereof). 10.3. APPLICATION OF LIQUIDATION PROCEEDS. All monies received by the Administrative Agent or any Lender from the exercise of remedies hereunder or under the other Credit Documents or under any other documents relating to this Agreement shall, unless otherwise required by the terms of the other Credit Documents or by applicable law, be applied as follows: (i) FIRST, to the payment of all expenses (to the extent not paid by the Borrower) incurred by the Administrative Agent and the Lenders in connection with the exercise of such remedies, including, without limitation, all reasonable costs and expenses of collection, attorneys' fees, court costs and any foreclosure expenses; (ii) SECOND, to the payment PRO RATA of interest then accrued on the outstanding Loans; (iii) THIRD, to the payment PRO RATA of any fees then accrued and payable to the Administrative Agent, any Letter of Credit Issuer or any Lender under this Agreement in respect of the Loans or the Letter of Credit Outstandings; (iv) FOURTH, to the payment PRO RATA of (A) the principal balance then owing on the outstanding Loans, (B) the amounts then due under Designated Hedge Agreements to creditors of the Borrower or any Subsidiary, subject to confirmation by the Administrative Agent of any calculations of termination or other payment amounts being made in accordance with normal industry practice, and (C) the Stated Amount of the Letter of Credit Outstandings (to be held and applied by the Administrative Agent as security for the reimbursement obligations in respect thereof); (v) FIFTH, to the payment to the Lenders of any amounts then accrued and unpaid under sections 2.9, 2.10 and 3.5 hereof, and if such proceeds are insufficient to pay such amounts in full, to the payment of such amounts PRO RATA; (vi) SIXTH, to the payment PRO RATA of all other amounts owed by the Borrower to the Administrative Agent, to any Letter of Credit Issuer or any Lender under this Agreement or any other Credit Document, and to any counterparties under Designated Hedge Agreements of the Borrower and its Subsidiaries, and if such proceeds are insufficient to pay such amounts in full, to the payment of such amounts PRO RATA; (vii) SEVENTH, to the extent proceeds remain, to NCB in respect of the reimbursement and other obligations in respect of Separate Document Letter of Credit Outstandings; and 63 69 (viii) FINALLY, any remaining surplus after all of the Obligations have been paid in full, to the Borrower or to whomsoever shall be lawfully entitled thereto. SECTION 11. THE ADMINISTRATIVE AGENT. 11.1. APPOINTMENT. Each Lender hereby irrevocably designates and appoints NCB as Administrative Agent (such term to include, for the purposes of this section 11, NCB acting as Collateral Agent) to act as specified herein and in the other Credit Documents, and each such Lender hereby irrevocably authorizes NCB as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. The Administrative Agent agrees to act as such upon the express conditions contained in this section 11. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the other Credit Documents, nor any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent. The provisions of this section 11 are solely for the benefit of the Administrative Agent, and the Lenders, and the Borrower and its Subsidiaries shall not have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, the Administrative Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Borrower or any of its Subsidiaries. 11.2. DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement or any other Credit Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care except to the extent otherwise required by section 11.3. 11.3. EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such person under or in connection with this Agreement (except for its or such person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or of its Subsidiaries or any of their respective officers contained in this Agreement, any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Credit Document or for any failure of the Borrower or any Subsidiary of the Borrower or any of their respective officers to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. The Administrative Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Administrative Agent to the Lenders or by or on behalf of the Borrower or any of its Subsidiaries to the Administrative Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. 11.4. RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, facsimile transmission, telex or teletype message, statement, order or other document or conversation believed by it, in good faith, to be genuine and correct and to have been signed, sent or made by the 64 70 proper person or persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower or any of its Subsidiaries), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Lenders (or all of the Lenders, as to any matter which, pursuant to section 13.12, can only be effectuated with the consent of all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders. 11.5. NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders, provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 11.6. NON-RELIANCE. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates have made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent, or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and its Subsidiaries and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent, or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and its Subsidiaries. The Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial and other conditions, prospects or creditworthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 11.7. INDEMNIFICATION. The Lenders agree to indemnify the Administrative Agent in its capacity as such ratably according to their respective Loans and Unutilized Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Administrative Agent in its capacity as such in any way relating to or arising out of this Agreement or any other Credit Document, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted to be taken by the Administrative Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by the Borrower, PROVIDED that no Lender shall be liable to the Administrative Agent for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting solely from the Administrative Agent's gross negligence or willful misconduct. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity 65 71 and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this section 11.7 shall survive the payment of all Obligations. 11.8. THE ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower, its Subsidiaries and their Affiliates as though not acting as Administrative Agent hereunder. With respect to the Loans made by it and all Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. 11.9. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as the Administrative Agent upon 20 days' notice to the Lenders and the Borrower. The Required Lenders shall appoint from among the Lenders a successor Administrative Agent for the Lenders subject to prior approval by the Borrower (such approval not to be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall include such successor agent effective upon its appointment, and the resigning Administrative Agent's rights, powers and duties as the Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. After the retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of this section 11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. 11.10. OTHER AGENTS. Any Lender identified herein as a Co-Agent, Syndication Agent, Managing Agent, Manager or any other corresponding title, other than "Administrative Agent" or "Collateral Agent", shall have no right, power, obligation, liability, responsibility or duty under this Agreement or any other Credit Document except those applicable to all Lenders as such. Each Lender acknowledges that it has not relied, and will not rely, on any Lender so identified in deciding to enter into this Agreement or in taking or not taking any action hereunder. SECTION 12. GUARANTY BY THE BORROWER. 12.1. GUARANTY OF CERTAIN SUBSIDIARY BORROWINGS. The Borrower hereby unconditionally guarantees, for the benefit of any Lender or any of its Affiliates which has extended credit to any Subsidiary of the Borrower which is supported by a Letter of Credit issued hereunder, the full and punctual payment of all amounts owed by any such Subsidiary in respect of any such extension or extensions of credit (collectively, the "GUARANTEED OBLIGATIONS"). Upon failure by any Subsidiary to pay punctually any such amount, the Borrower shall forthwith on demand by the Administrative Agent (acting on instructions from any affected Lender, on its own behalf or on behalf of any of its Affiliates) pay the amount not so paid at the place and in the currency and otherwise in the manner specified in any other applicable agreement or instrument. 12.2. ADDITIONAL UNDERTAKING. As a separate, additional and continuing obligation, the Borrower unconditionally and irrevocably undertakes and agrees, for the benefit of the Lenders and their Affiliates referred to in section 12.1, that, should any amounts not be recoverable from the Borrower under section 12.1 for any reason whatsoever (including, without limitation, by reason of any provision of any Credit Document or any other agreement or instrument executed in connection therewith being or becoming void, unenforceable, or otherwise invalid under any applicable law) then, notwithstanding any notice or knowledge thereof by any Lender, the Administrative Agent, any of their respective Affiliates, or any other person, at any time, the Borrower as sole, original and independent obligor, upon demand by the Administrative Agent (acting on instructions from any affected Lender, on its own behalf or on behalf of any of its Affiliates), will make payment to the Administrative Agent, for the account of the affected Lenders (or any such Affiliate), of all such obligations not so recoverable by way of full indemnity, in such currency and otherwise in such manner as is provided in any applicable agreement or instrument. 12.3. GUARANTY UNCONDITIONAL, ETC. The obligations of the Borrower under this section shall be unconditional and absolute and, without limiting the generality of the foregoing shall not be released, discharged or otherwise affected by the occurrence, one or more times, of any of the following: 66 72 (i) any extension, renewal, settlement, compromise, waiver or release in respect to any Guaranteed Obligation of any Subsidiary under any agreement or instrument, by operation of law or otherwise; (ii) any modification or amendment of or supplement to this Agreement, any Note, any other Credit Document, or any agreement or instrument evidencing or relating to any Guaranteed Obligation; (iii) any release, non-perfection or invalidity of any direct or indirect security for any Guaranteed Obligation of any Subsidiary under any agreement or instrument evidencing or relating to any Guaranteed Obligation; (iv) any change in the corporate existence, structure or ownership of any Subsidiary or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Subsidiary or its assets or any resulting release or discharge of any obligation of any Subsidiary contained in any agreement or instrument evidencing or relating to any Guaranteed Obligation; (v) the existence of any claim, set-off or other rights which the Borrower may have at any time against any Subsidiary, the Administrative Agent, any Lender, any Affiliate of any Lender or any other person, whether in connection herewith or any unrelated transactions; (vi) any invalidity or unenforceability relating to or against any Subsidiary for any reason of any agreement or instrument evidencing or relating to any Guaranteed Obligation, or any provision of applicable law or regulation purporting to prohibit the payment by any Subsidiary of any Guaranteed Obligations; or (vii) any other act or omission to act or delay of any kind by any Subsidiary, the Administrative Agent, any Lender, any of their Affiliates, or any other person, or any other circumstance whatsoever, which might, but for the provisions of this section, constitute a legal or equitable discharge of the Borrower's obligations under this section. 12.4. BORROWER OBLIGATIONS TO REMAIN IN EFFECT; RESTORATION. The Borrower's obligations under this section shall remain in full force and effect until the Commitments shall have terminated, and the principal of and interest on the Notes and other Guaranteed Obligations, and all other amounts payable by the Borrower or any Subsidiary under the Credit Documents or any other agreement or instrument evidencing or relating to any of the Guaranteed Obligations, shall have been paid in full. If at any time any payment of any of the Guaranteed Obligations of any Subsidiary in respect of any Guaranteed Obligations is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of such Subsidiary, the Borrower's obligations under this section with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. 12.5. WAIVER OF ACCEPTANCE, ETC. The Borrower irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any person against any Subsidiary or any other person, or against any collateral or guaranty of any other person. 12.6. SUBROGATION. Until the indefeasible payment in full of all of the Obligations and any other Guaranteed Obligations and the termination of the Commitments of the Lenders hereunder and the termination of any commitments of any Lender or its Affiliate to any Subsidiary for any extension of credit to be supported by a Letter of Credit issued hereunder, the Borrower shall have no rights, by operation of law or otherwise, upon making any payment under this section to be subrogated to the rights of the payee against any Subsidiary with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by any Subsidiary in respect thereof. 12.7. EFFECT OF STAY. In the event that acceleration of the time for payment of any amount payable by any Subsidiary under any Guaranteed Obligation is stayed upon insolvency, bankruptcy or reorganization of such 67 73 Subsidiary, all such amounts otherwise subject to acceleration under the terms of any applicable agreement or instrument evidencing or relating to any Guaranteed Obligation shall nonetheless be payable by the Borrower under this section forthwith on demand by the Administrative Agent. SECTION 13. MISCELLANEOUS. 13.1. PAYMENT OF EXPENSES ETC. The Borrower agrees to: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the negotiation, preparation, execution and delivery of the Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto (including, without limitation, the reasonable fees and disbursements of Jones, Day, Reavis & Pogue, special counsel to the Administrative Agent), and of the Administrative Agent and each of the Lenders in connection with the enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and disbursements of counsel for the Administrative Agent and for each of the Lenders and any allocated costs of internal counsel for any of the Lenders); (ii) in the event of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of the Borrower or any of its Subsidiaries, pay all costs of collection and defense, including reasonable attorneys' fees in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, which shall be due and payable together with all required service or use taxes; (iii) pay and hold each of the Lenders harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iv) indemnify each Lender, its officers, directors, employees, representatives and agents (collectively, the "INDEMNITEES") from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses reasonably incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of (a) any investigation, litigation or other proceeding (whether or not any Lender is a party thereto) related to the entering into and/or performance of any Credit Document or the use of the proceeds of any Loans hereunder or the consummation of any transactions contemplated in any Credit Document, other than any such investigation, litigation or proceeding arising out of transactions solely between any of the Lenders or the Administrative Agent, transactions solely involving the assignment by a Lender of all or a portion of its Loans and Commitment, or the granting of participations therein, as provided in this Agreement, or arising solely out of any examination of a Lender by any regulatory authority having jurisdiction over it, or (b) the actual or alleged presence of Hazardous Materials in the air, surface water or groundwater or on the surface or subsurface of any Real Property owned, leased or at any time operated by the Borrower or any of its Subsidiaries, the release, generation, storage, transportation, handling or disposal of Hazardous Materials at any location, whether or not owned or operated by the Borrower or any of its Subsidiaries, if the Borrower or any such Subsidiary could have or is alleged to have any responsibility in respect thereof, the non-compliance of any Real Property with foreign, federal, state and local laws, regulations and ordinances (including applicable permits thereunder) applicable to any Real Property, or any Environmental Claim asserted against the Borrower or any of its Subsidiaries, in respect of any Real Property owned, leased or at any time operated by the Borrower or any of its Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of the negligence or willful misconduct of the person to be indemnified or of any other Indemnitee who is such person or an Affiliate of such person). To the extent that the undertaking to indemnify, pay or hold harmless any person set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law. 13.2. RIGHT OF SETOFF. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Lender (including, without limitation, by branches and agencies of such Lender wherever located) to or for 68 74 the credit or the account of the Borrower against and on account of the Obligations and liabilities of the Borrower (or any of them) to such Lender under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations purchased by such Lender pursuant to section 13.4(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 13.3. NOTICES. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed, transmitted, cabled or delivered, (a) if to the Borrower, to the Borrower at 2307 East Aurora Road, Suite One, Twinsburg, Ohio 44087, attention: Nicholas R. Sucic, Chief Financial Officer & Treasurer (facsimile: (216) 405-1335); (b) if to any Lender at its address specified for such Lender on Annex I hereto; (c) if to the Administrative Agent, at its Notice Address; or (d) at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, and shall be effective when received. 13.4. BENEFIT OF AGREEMENT. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns, provided that the Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of all the Lenders, and, PROVIDED, FURTHER, that any assignment by a Lender of its rights and obligations hereunder shall be effected in accordance with section 13.4(b). Each Lender may at any time grant participations in any of its rights hereunder or under any of the Notes to another financial institution or any other "accredited investor" (as defined in SEC Regulation D), PROVIDED that in the case of any such participation, (i) the participant shall not have any rights under this Agreement or any of the other Credit Documents, including rights of consent, approval or waiver (the participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto), (ii) such Lender's obligations under this Agreement (including, without limitation, its Commitment hereunder) shall remain unchanged, (iii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iv) such Lender shall remain the holder of any Note for all purposes of this Agreement and (v) the Borrower, the Administrative Agent, and the other Lenders shall continue to deal solely and directly with the selling Lender in connection with such Lender's rights and obligations under this Agreement, and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, except that the participant shall be entitled to the benefits of sections 2.9, 2.10 and 5.4 of this Agreement to the extent that such Lender would be entitled to such benefits if the participation had not been entered into or sold, and, PROVIDED FURTHER, that no Lender shall transfer, grant or sell any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (x) extend the final scheduled maturity of the Loans in which such participant is participating (it being understood that any waiver of the making of any mandatory prepayment of the Loans shall not constitute an extension of the final maturity date thereof), or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of the applicability of any post-default increase in interest rates), or reduce the principal amount thereof, or increase such participant's participating interest in any Commitment over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of any mandatory prepayment or a mandatory reduction in the Total Commitment, shall not constitute a change in the terms of any Commitment) or (y) release all or any substantial portion of the Collateral, or release any Credit Party from any obligations under any Security Document or the Subsidiary Guaranty, except in accordance with the explicit terms hereof or thereof, or (z) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement. (b) Notwithstanding the foregoing, (x) any Lender may assign all or a portion of its Loans and/or Commitment and its rights and obligations hereunder to another Lender that is not a Defaulting Lender, or to an Affiliate of any Lender (including itself) which is not a Defaulting Lender which is a commercial bank, financial institution or other "accredited investor" (as defined in SEC Regulation D), and (y) any Lender may assign all, or if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Lender or assigning Lenders, of its Loans and/or Commitments and its rights and obligations hereunder, to one or more Eligible Transferees, each 69 75 of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment Agreement, PROVIDED that, (i) in the case of any assignment of a portion of the Loans and/or Commitment of a Lender, such Lender shall retain a minimum fixed portion thereof equal to at least $5,000,000 ($10,000,000, if such Lender is also the Administrative Agent), (ii) at the time of any such assignment Annex I shall be deemed modified to reflect the Commitments of such new Lender and of the existing Lenders, (iii) upon surrender of the old Notes, new Notes will be issued, at the Borrower's expense, to such new Lender and to the assigning Lender, such new Notes to be in conformity with the requirements of section 2.5 (with appropriate modifications) to the extent needed to reflect the revised Commitments, (iv) in the case of clause (y) only, the consent of the Administrative Agent and each Letter of Credit Issuer shall be required in connection with any such assignment (which consent shall not be unreasonably withheld or delayed), and (v) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Lender, the payment of a non-refundable assignment fee of $3,000 and, PROVIDED FURTHER, that such transfer or assignment will not be effective until recorded by the Administrative Agent on the Lender Register maintained by it as provided herein. To the extent of any assignment pursuant to this section 13.4(b), the assigning Lender shall be relieved of its obligations hereunder with respect to its assigned Commitments. At the time of each assignment pursuant to this section 13.4(b) to a person which is not already a Lender hereunder and which is not a United States person (as such term is defined in section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable a Section 5.4(b)(ii) Certificate) described in section 5.4(b). To the extent that an assignment of all or any portion of a Lender's Commitment and related outstanding Obligations pursuant to this section 13.4(b) would, at the time of such assignment, result in increased costs under section 2.9 from those being charged by the respective assigning Lender prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to any other increased costs of the type described above resulting from changes after the date of the respective assignment). Nothing in this section 13.4(b) shall prevent or prohibit any Lender from pledging its Notes or Loans to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank. (c) Notwithstanding any other provisions of this section 13.4, no transfer or assignment of the interests or obligations of any Lender hereunder or any grant of participation therein shall be permitted if such transfer, assignment or grant would require the Borrower to file a registration statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any State. (d) Each Lender initially party to this Agreement hereby represents, and each person that became a Lender pursuant to an assignment permitted by this section 13.4 will, upon its becoming party to this Agreement, represent that it is a commercial lender, other financial institution or other "accredited" investor (as defined in SEC Regulation D) which makes or acquires loans in the ordinary course of its business and that it will make or acquire Loans for its own account in the ordinary course of such business, provided that subject to the preceding sections 13.4(a) and (b), the disposition of any promissory notes or other evidences of or interests in Indebtedness held by such Lender shall at all times be within its exclusive control. 13.5. NO WAIVER: REMEDIES CUMULATIVE. No failure or delay on the part of the Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower and the Administrative Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or the Lenders to any other or further action in any circumstances without notice or demand. 13.6. PAYMENTS PRO RATA. (a) The Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations, it shall distribute such payment to the Lenders (other than any Lender that has expressly waived in writing its right to receive its PRO RATA share thereof) PRO RATA based upon their respective shares, if any, of the Obligations with respect to which such payment was 70 76 received. As to any such payment received by the Administrative Agent prior to 1:00 P.M. (local time at its Payment Office) in funds which are immediately available on such day, the Administrative Agent will use all reasonable efforts to distribute such payment in immediately available funds on the same day to the Lenders as aforesaid. (b) Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans or Fees, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations to such Lenders in such amount as shall result in a proportional participation by all of the Lenders in such amount, provided that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. (c) Notwithstanding anything to the contrary contained herein, the provisions of the preceding sections 13.6(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Lenders which are not Defaulting Lenders, as opposed to Defaulting Lenders. 13.7. CALCULATIONS: COMPUTATIONS. (a) The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Lenders); provided, that if at any time the computations determining compliance with section 9 utilize accounting principles different from those utilized in the financial statements furnished to the Lenders, such computations shall set forth in reasonable detail a description of the differences and the effect upon such computations. (b) All computations of interest on Eurocurrency Loans and Prime Rate Loans hereunder and all computations of Commitment Fees, Letter of Credit Fees and other Fees hereunder shall be made on the actual number of days elapsed over a year of 360 days. 13.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF OHIO, TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF OHIO GOVERNS THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS. Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the Courts of the State of Ohio, or of the United States for the Northern District of Ohio, and, by execution and delivery of this Agreement, the Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Borrower hereby further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Borrower at its address for notices pursuant to section 13.3, such service to become effective 30 days after such mailing or at such earlier time as may be provided under applicable law. Nothing herein shall affect the right of the Administrative Agent or any Lender to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction. (b) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in section 13.8(a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 71 77 (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 13.9. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same agreement. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. 13.10. EFFECTIVENESS. This Agreement shall become effective on the date (the "EFFECTIVE DATE") on which the Borrower and each of the Lenders shall have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Administrative Agent at the Notice Office of the Administrative Agent or, in the case of the Lenders, shall have given to the Administrative Agent telephonic (confirmed in writing), written telex or facsimile transmission notice (actually received) at such office that the same has been signed and mailed to it. 13.11. HEADINGS DESCRIPTIVE. The headings of the several sections and other portions of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 13.12. AMENDMENT OR WAIVER. Neither this Agreement nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the Borrower and the Required Lenders, provided that no such change, waiver, discharge or termination shall, without the consent of each Lender (other than a Defaulting Lender) affected thereby, (i) extend any interim or final maturity date provided for herein (including any extension of any interim maturity date to be effected in accordance with section 4.4 hereof) applicable to a Loan or a Commitment (it being understood that any waiver of the making of, or application of, any mandatory prepayment of the Loans shall not constitute an extension of such final maturity thereof); (ii) reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) or Fees thereon, or reduce the principal amount thereof, or increase the Commitment of any Lender over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of any mandatory prepayment or a mandatory reduction in the Total Commitment shall not constitute a change in the terms of any Commitment of any Lender); (iii) release the Borrower from any obligations as a guarantor of any of its Subsidiaries' obligations under any Credit Document or other agreement or instrument referred to herein; (iv) release any Credit Party from the Subsidiary Guaranty, except in connection with a transaction permitted by section 9.2(f); (v) release all or any substantial portion of the Collateral (in each case except as expressly provided in the Credit Documents); (vi) change the definition of the term "Change of Control" or any of the provisions of section 5.2(c) which are applicable upon a Change of Control; (vii) change the definition of the term "Permitted Acquisition" or any of the provisions of section 9.2(e) which are applicable to Permitted Acquisitions which would have the effect of depriving such Lender of its rights with respect to "hostile acquisitions" as contemplated by such definition; 72 78 (viii) amend, modify or waive any provision of this section 13.12, or section 11.7, 13.1, 13.4, 13.6 or 13.7(b), or any other provision of any of the Credit Documents pursuant to which the consent or approval of all Lenders is by the terms of such provision explicitly required; (ix) reduce the percentage specified in, or otherwise modify, the definition of Required Lenders; or (x) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement. No provision of section 3 or 11 may be amended without the consent of (x) any Letter of Credit Issuer adversely affected thereby or (y) the Administrative Agent, respectively. 13.13. SURVIVAL OF INDEMNITIES. All indemnities set forth herein including, without limitation, in section 2.9, 2.10, 3.5, 11.7 and 13.1, shall survive the execution and delivery of this Agreement and the making, prepayment and repayment of Loans for the longest period permitted under any applicable statute of limitations. 13.14. DOMICILE OF LOANS. Each Lender may transfer and carry its Loans at, to or for the account of any branch office, subsidiary or affiliate of such Lender, PROVIDED that the Borrower shall not be responsible for costs arising under section 2.9 resulting from any such transfer (other than a transfer pursuant to section 2.11) to the extent not otherwise applicable to such Lender prior to such transfer. 13.15. CONFIDENTIALITY. Subject to section 13.4, the Lenders shall hold all non-public information obtained pursuant to the requirements of this Agreement which has been identified as such by the Borrower or any Subsidiary in accordance with its customary procedure for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure: (i) to other Lenders and the Administrative Agent; (ii) reasonably required by any BONA FIDE transferee or participant in connection with the contemplated transfer of any Loans or Commitment or participation therein (PROVIDED that each such prospective transferee and/or participant shall execute an agreement for the benefit of the Borrower with such prospective transferor Lender containing provisions substantially identical to those contained in this section 13.15); (iii) to its auditors or attorneys on a confidential basis consistent with the requirements of this section 13.15; (iv) as required or requested by any governmental agency or representative thereof in connection with an examination of the financial condition of such Lender or any of its Affiliates by such governmental agency; and/or (v) as required pursuant to legal process (or, if approved by the Borrower, as requested in lieu of legal process), provided that, unless specifically prohibited by applicable law or court order, each Lender shall notify the Borrower of any such request or demand for disclosure of any such non-public information prior to disclosure of such information; PROVIDED that in no event shall any Lender be obligated or required to return any materials furnished by or on behalf of the Borrower or any of its Subsidiaries. The Borrower hereby agrees that the failure of a Lender to comply with the provisions of this section 13.15 shall not relieve the Borrower of any of the obligations to such Lender under this Agreement and the other Credit Documents. 13.16. LENDER REGISTER. The Borrower hereby designates the Administrative Agent to serve as its agent, solely for purposes of this section 13.16, to retain a copy of each Assignment Agreement delivered to and accepted 73 79 by it and to maintain a register (the "LENDER REGISTER") on or in which it will record the names and addresses of the Lenders, and the Commitments from time to time of each of such Lenders to the Borrower, the Loans made to the Borrower by each of such Lenders and each repayment or prepayment in respect of the principal amount of such Loans of each such Lender. Failure to make any such recordation, or (absent manifest error) any error in such recordation, shall not affect the Borrower's obligations in respect of such Loans. With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Lender Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Lender Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment Agreement pursuant to section 13.4(b). The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by such Administrative Agent in performing its duties under this section 13.16. The Lender Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. 13.17. LIMITATIONS ON LIABILITY OF THE LETTER OF CREDIT ISSUERS. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letters of Credit. Neither any Letter of Credit Issuer nor any of its officers or directors shall be liable or responsible for: (a) the use which may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by a Letter of Credit Issuer against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to such Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower (or a Subsidiary which is the account party in respect of the Letter of Credit in question) shall have a claim against a Letter of Credit Issuer, and a Letter of Credit Issuer shall be liable to the Borrower (or such Subsidiary), to the extent of any direct, but not consequential, damages suffered by the Borrower (or such Subsidiary) which the Borrower (or such Subsidiary) proves were caused by (i) such Letter of Credit Issuer's willful misconduct or gross negligence in determining whether documents presented under a Letter of Credit comply with the terms of such Letter of Credit or (ii) such Letter of Credit Issuer's willful failure to make lawful payment under any Letter of Credit after the presentation to it of documentation strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, a Letter of Credit Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation. 13.18. GENERAL LIMITATION OF LIABILITY. No claim may be made by the Borrower, any Lender, the Administrative Agent, any Letter of Credit Issuer or any other person against the Administrative Agent, any Letter of Credit Issuer, or any other Lender or the Affiliates, directors, officers, employees, attorneys or agents of any of them for any damages other than actual compensatory damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement or any of the other Credit Documents, or any act, omission or event occurring in connection therewith; and the Borrower, each Lender, each Administrative Agent and each Letter of Credit Issuer hereby, to the fullest extent permitted under applicable law, waives, releases and agrees not to sue or counterclaim upon any such claim for any special, consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor. 13.19. NO DUTY. All attorneys, accountants, appraisers, consultants and other professional persons (including the firms or other entities on behalf of which any such person may act) retained by the Administrative Agent or any Lender with respect to the transactions contemplated by the Credit Documents shall have the right to act exclusively in the interest of the applicable Administrative Agent or such Lender, as the case may be, and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to the Borrower, to any of its Subsidiaries, or to any other person, with respect to any matters within the scope of such representation or related to their activities in connection with such representation. 74 80 13.20. LENDERS AND ADMINISTRATIVE AGENT NOT FIDUCIARY TO BORROWER, ETC. The relationship among the Borrower and its Subsidiaries, on the one hand, and the Administrative Agent, each Letter of Credit Issuer and the Lenders, on the other hand, is solely that of debtor and creditor, and the Administrative Agent, each Letter of Credit Issuer and the Lenders have no fiduciary or other special relationship with the Borrower and its Subsidiaries, and no term or provision of any Credit Document, no course of dealing, no written or oral communication, or other action, shall be construed so as to deem such relationship to be other than that of debtor and creditor. 13.21. JUDGMENT CURRENCY. (a) The Credit Parties' obligations hereunder and under the other Credit Documents to make payments in U.S. dollars shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than U.S. dollars, except to the extent that such tender or recovery results in the effective receipt by the Administrative Agent or the applicable Lender of the full amount of U.S. dollars expressed to be payable to the Administrative Agent or such Lender under this Agreement or the other Credit Documents. If, for the purpose of obtaining or enforcing judgment against any Credit Party in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than U.S. dollars (such other currency being hereinafter referred to as the "JUDGMENT CURRENCY") an amount due in U.S. dollars, the conversion shall be made at the equivalent thereof in Dollars determined as of the Business Day immediately preceding the day on which the judgment is given (such Business Day being hereinafter referred to as the "JUDGMENT CURRENCY CONVERSION DATE"). (b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Borrower covenants and agrees to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of U.S. dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date. (c) For purposes of determining the equivalent in Dollars for this section, such amount shall include any premium and costs payable in connection with the conversion into or from the Judgment Currency. 13.22. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties herein shall survive the making of Loans and the issuance of Letters of Credit hereunder, the execution and delivery of this Agreement, the Notes and the other documents the forms of which are attached as Exhibits hereto, the issue and delivery of the Notes, any disposition thereof by any holder thereof, and any investigation made by the Administrative Agent or any Lender or any other holder of any of the Notes or on its behalf. All statements contained in any certificate or other document delivered to the Administrative Agent or any Lender or any holder of any Notes by or on behalf of the Borrower or of its Subsidiaries pursuant hereto or otherwise specifically for use in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower hereunder, made as of the respective dates specified therein or, if no date is specified, as of the respective dates furnished to the Administrative Agent or any Lender. [The balance of this page is intentionally blank.] 75 81 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. ADVANCED LIGHTING TECHNOLOGIES, INC. BY: /S/______________________________________ CHIEF FINANCIAL OFFICER & TREASURER NATIONAL CITY BANK, INDIVIDUALLY AND AS ADMINISTRATIVE AGENT BY: /S/______________________________________ SENIOR VICE PRESIDENT NBD BANK BY: /S/______________________________________ FIRST VICE PRESIDENT PNC BANK, NATIONAL ASSOCIATION BY: /S/______________________________________ VICE PRESIDENT NATIONAL BANK OF CANADA, A CANADIAN CHARTERED BANK, CLEVELAND REPRESENTATIVE OFFICE BY: /S/______________________________________ VICE PRESIDENT 76 82 ANNEX I INFORMATION AS TO LENDERS
==================================================================================================================================== NAME OF LENDER COMMITMENT DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE - ------------------------------------------------------------------------------------------------------------------------------------ National City Bank $25,000,000 National City Bank National City Bank National City Center National City Center 1900 East Ninth Street 1900 East Ninth Street Cleveland, Ohio 44114 Cleveland, Ohio 44114 CONTACTS/NOTIFICATION METHODS: National City Bank National City Center 1900 East Ninth Street Cleveland, Ohio 44114 Attn.: Metro/Ohio Division Facsimile: (216) 575-9396 PRIMARY CONTACT: Anthony J. DiMare Senior Vice President Direct Dial: (216) 575-3344 BACK-UP CONTACT: Boyd K. Pethel Vice President Direct Dial: (216) 575-2830 CONTACT FOR BORROWINGS, PAYMENTS, ETC.: Connie Djukic Metro/Ohio Division Direct Dial: (216) 575-2578 Facsimile: (216) 575-9396 LETTER OF CREDIT NOTIFICATION: National City Bank National City Center 1900 East Ninth Street Cleveland, Ohio 44114 Attn.: Metro/Ohio Division Facsimile: (216) 575-9396 PAYMENT INSTRUCTIONS: ABA # 041 000 124 Attention: Commercial Loan Operations Reference: Advanced Lighting Technologies, Inc. ====================================================================================================================================
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==================================================================================================================================== NAME OF LENDER COMMITMENT DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE - ------------------------------------------------------------------------------------------------------------------------------------ NBD Bank $22,500,000 NBD Bank NBD Bank 611 Woodward Avenue 611 Woodward Avenue Detroit, Michigan 48226 Detroit, Michigan 48226 CONTACTS/NOTIFICATION METHODS: NBD Bank 611 Woodward Avenue Detroit, Michigan 48226 Attn.: Corporate and Institutional Banking Facsimile: (313) 225-1212 PRIMARY CONTACT: Winifred S. Pinet First Vice President Direct Dial: (313) 225-1313 BACK-UP CONTACT: Paul Flynn Vice President Direct Dial: (313) 225-1671 CONTACT FOR BORROWINGS, PAYMENTS, ETC.: Carletta Colquitt Direct Dial: (313) 225-3698 Facsimile: (313) 225-1212 LETTER OF CREDIT NOTIFICATION: Madeline Savary Direct Dial: (313) 225-1349 PAYMENT INSTRUCTIONS: ABA # 072 000 326 Account # Comm'l Loans 212115 Attention: Commercial Loan Operations Reference: Advanced Lighting Technologies, Inc. ====================================================================================================================================
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==================================================================================================================================== NAME OF LENDER COMMITMENT DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE - ------------------------------------------------------------------------------------------------------------------------------------ PNC Bank, National $22,500,000 PNC Bank, National Association PNC Bank, National Association Association One PNC Plaza One PNC Plaza 249 Fifth Avenue 249 Fifth Avenue Pittsburgh, Pennsylvania 15222-2707 Pittsburgh, Pennsylvania 15222-2707 CONTACTS/NOTIFICATION METHODS: PNC Bank, National Association Cleveland Office Suite 1250 One Cleveland Center 1375 East Ninth Street Cleveland, Ohio 44114-1724 Facsimile: (216) 348-8594 PRIMARY CONTACT: David J. Williams Vice President Direct Dial: (216) 348-8562 BACK-UP CONTACT: Joseph G. Moran Vice President Direct Dial: (216) 348-8560 CONTACT FOR BORROWINGS, PAYMENTS, ETC.: Peggy Collier PNC Bank, National Association 249 Fifth Avenue Pittsburgh, Pennsylvania 15222 Direct Dial: (412) 762-7946 Facsimile: (412) 762-4586 LETTER OF CREDIT NOTIFICATION: Stephanie Angelini PNC Bank, National Association 249 Fifth Avenue Pittsburgh, Pennsylvania 15222 Direct Dial: (412) 768-4262 Facsimile: (412) 762-2571 PAYMENT INSTRUCTIONS: Routing Transit/ABA # 0430 00096 Attention: Commercial Loan Operations Reference: Advanced Lighting Technologies, Inc. ====================================================================================================================================
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==================================================================================================================================== NAME OF LENDER COMMITMENT DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE - ------------------------------------------------------------------------------------------------------------------------------------ National Bank of $15,000,000 National Bank of Canada, National Bank of Canada, Canada, a Canadian a Canadian Chartered Bank a Canadian Chartered Bank Chartered Bank 125 West 55th Street 125 West 55th Street New York, New York 10019 New York, New York 10019 CONTACTS/NOTIFICATION METHODS: National Bank of Canada, a Canadian Chartered Bank, Cleveland Representative Office Suite 2430 One Cleveland Center 1375 East Ninth Street Cleveland, Ohio 44114 Facsimile: (216) 574-9236 PRIMARY CONTACT: Jack Jankovic Vice President Direct Dial: (216) 696-2923 BACK-UP CONTACT: John Gierowski Vice President Direct Dial: (216) 696-2923 CONTACT FOR BORROWINGS, PAYMENTS, ETC.: Catherine Petipas Direct Dial: (216) 696-2923 Facsimile: (216) 574-9236 LETTER OF CREDIT NOTIFICATION: Catherine Petipas Direct Dial: (216) 696-2923 Facsimile: (216) 574-9236 PAYMENT INSTRUCTIONS: ABA # 026 005 487 Name of Account: G/L Suspense Account Account # 156100097602 Attention: Cleveland Office Reference: Advanced Lighting Technologies, Inc. ====================================================================================================================================
86 INFORMATION AS TO SUBSIDIARIES (as of January 2, 1998) (After Giving Effect to the Acquisition of Ruud Lighting, Inc.)
==================================================================================================================== PERCENTAGE OF OUTSTANDING STOCK NAME OF TYPE OF JURISDICTION OR OTHER EQUITY SUBSIDIARY ORGANIZATION WHERE INTERESTS OWNED ORGANIZED (INDICATING WHETHER OWNED BY THE BORROWER OR A SPECIFIED SUBSIDIARY) - -------------------------------------------------------------------------------------------------------------------- APL Engineered Materials, Inc. corporation Ohio 100% by VLI 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 PLACE OF OPERATION: 2401 North Willow Road Urbana, Illinois 61801-7332 - -------------------------------------------------------------------------------------------------------------------- Venture Lighting International, Inc. ("VLI") corporation Ohio 100% by the Borrower 32000 Aurora Road Solon, Ohio 44139 - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. corporation Wisconsin 100% by the Borrower 9201 Washington Avenue Racine, Wisconsin 54406 - -------------------------------------------------------------------------------------------------------------------- Specialty Discharge Lighting, Inc. corporation Ohio 100% by VLI 101 Shawnee Drive Bellevue, Ohio 44811 - -------------------------------------------------------------------------------------------------------------------- Lighting Resources International, Inc. corporation Ohio 100% by VLI 3000 Seneca Industrial Parkway Bellevue, Ohio 44811 - -------------------------------------------------------------------------------------------------------------------- Metal Halide Technologies, Inc. corporation Ohio 100% by the Borrower 32000 Aurora Road Solon, Ohio 44139 - -------------------------------------------------------------------------------------------------------------------- The Light Source, Inc. corporation Ohio 100% by the Borrower 32000 Aurora Road Solon, Ohio 44139 - -------------------------------------------------------------------------------------------------------------------- Energy-Wise Lighting, Inc. corporation Ohio 100% by the Borrower 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - --------------------------------------------------------------------------------------------------------------------
87
==================================================================================================================== PERCENTAGE OF OUTSTANDING STOCK NAME OF TYPE OF JURISDICTION OR OTHER EQUITY SUBSIDIARY ORGANIZATION WHERE INTERESTS OWNED ORGANIZED (INDICATING WHETHER OWNED BY THE BORROWER OR A SPECIFIED SUBSIDIARY) - -------------------------------------------------------------------------------------------------------------------- Bio Light, Inc. corporation Ohio 100% by the Borrower 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - -------------------------------------------------------------------------------------------------------------------- HID Direct, Inc. corporation Ohio 100% by the Borrower 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - -------------------------------------------------------------------------------------------------------------------- Bright Ideas Advertising and Design, Inc. corporation Ohio 100% by the Borrower 8500 Station Street, Suite 275 Mentor, Ohio 44060 - -------------------------------------------------------------------------------------------------------------------- Energy Efficient Products, Inc. corporation Ohio 100% by the Borrower 3000 Seneca Industrial Parkway Bellevue, Ohio 44811 - -------------------------------------------------------------------------------------------------------------------- ADLT Services, Inc. corporation Ohio 100% by the Borrower f/k/a High Intensity Technologies, Inc. 3000 Seneca Industrial Parkway Bellevue, Ohio 44811 - -------------------------------------------------------------------------------------------------------------------- Metal Halide Controls, Inc. corporation Ohio 100% by the Borrower a/k/a Current Industries, Inc. 1893 E. Aurora Road Twinsburg, Ohio 44087 (authorized to do business in Illinois; SOS file no. 5951-602-7) on July 29, 1997 - -------------------------------------------------------------------------------------------------------------------- HID Recycling, Inc. corporation Ohio 100% by the Borrower 32000 Aurora Road Solon, Ohio 44139 - -------------------------------------------------------------------------------------------------------------------- MICROSUN Technologies, Inc. corporation Ohio 100% by the Borrower 1667 East 40th Street Cleveland, Ohio 44103 - -------------------------------------------------------------------------------------------------------------------- Advanced Acquisitions, Inc. corporation Ohio 100% by the Borrower 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Systems, Inc. corporation Arizona 100% by the Borrower 7830 East Evans Road Scottsdale, Arizona 85360 - --------------------------------------------------------------------------------------------------------------------
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==================================================================================================================== PERCENTAGE OF OUTSTANDING STOCK NAME OF TYPE OF JURISDICTION OR OTHER EQUITY SUBSIDIARY ORGANIZATION WHERE INTERESTS OWNED ORGANIZED (INDICATING WHETHER OWNED BY THE BORROWER OR A SPECIFIED SUBSIDIARY) - -------------------------------------------------------------------------------------------------------------------- Ballastronix (Delaware), Inc. corporation Delaware 100% by the Borrower c/o CT Corp. (Agent) 1209 Orange Street Wilmington, Delaware 19801 - -------------------------------------------------------------------------------------------------------------------- Ballastronix Incorporated corporation Nova Scotia 100% by Canadian Lighting 10 Chandler Road System Holding P.O. Box 250 Incorporated Amherst, Nova Scotia B4H 3Z2 CANADA - -------------------------------------------------------------------------------------------------------------------- Canada Lighting Systems Holding Incorporated corporation Nova Scotia 100% by VLI 200 Bay Street South Tower, Royal Bank Plaza Toronto, Ontario M5J 2I4 CANADA - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies Australia, Inc. corporation Ohio 100% by the Borrower 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - -------------------------------------------------------------------------------------------------------------------- Venture Lighting International, Ltd. corporation United Kingdom 100% by the Borrower P.O. Box 164 Rickmansworth Herts WD3 4QG England - -------------------------------------------------------------------------------------------------------------------- Parry Power Systems Limited company United Kingdom 100% by the Borrower Victoria Mills Draycott (registered no. Derby DE72 3PW 33417889) England - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies Canada, Inc. corporation Canada 100% by the Borrower d/b/a Spectro Electric 875 Progress Avenue Scarborough, Ontario M1H 3A7 CANADA - --------------------------------------------------------------------------------------------------------------------
3 89 ANNEX III DESCRIPTION OF EXISTING INDEBTEDNESS [DESCRIPTION FOLLOWS THIS PAGE.] 90
CONFIDENTIAL Advanced Lighting Technologies, Inc. ANNEX III, PAGE 1 OF 3 Debt Schedule LOAN AGREEMENT January 2, 1998 Principle Interest Maturity Description Obligor Lender Outstanding Rate Date - ----------- ------------ ------------------------- ------------ -------------- --------- Short-Term Debt - --------------- Multioption Credit Facility ADLT Australia National Australia Bank, Ltd. $ 578,510 various 3/24/99 Trade Facility VLI, Ltd. Barclays Bank PLC 300,000 9.25% 6/30/98 Trade Facility ADLT Australia National Australia Bank, Ltd. 594,453 depends on currency 120 days --------- TOTAL SHORT-TERM $1,472,963 Long-Term Debt - -------------- Mortgage APL Bank Illinois 719,413 7.5% 10/1/08 Mortgage ADLT, Corporation Homeside Lending, Inc. 183,718 7.5% 8/1/10 Mortgage ADLT, Corporation Security Federal 157,248 8.5 5/1/22 Mortgage Microsun Shore Bank 450,000 Months 1-12 @ 8.25% 12/20/99 Months 13-36 Variable & = to Shore Bank's prime lending rate Installation loan ADLT Australia National Australia Bank, Ltd. 25,305 9.76% 2/29/01 Environmental Protection ADLT Australia EPA 35,527 0.00% 6/30/02 Authority-term Mortgage Ballastronix Province of Nova Scotia 321,954 9.50% 3/1/01 Unsecured term loan Ballastronix Government of Canada (A.C.O.A) 77,825 0.00% 3/31/02 Unsecured term loan Ballastronix Government of Canada (A.C.O.A) 29,359 0.00% 3/31/03 Unsecured note Ballastronix Acrovox 98,118 6.50% 4/30/98 Term loan LRI Ohio Edison 42,601 11.00% 6/29/00 --------- TOTAL LONG-TERM $2,141,068 Promissory note ADLT, Corporation Unison Fiber Optics Systems 3,000,000 0.00% 1/1/00 Capital leases $1,429,174 (schedule attached) TOTAL INDEBTEDNESS $8,043,205 ==========
91 CONFIDENTIAL ADVANCED LIGHTING TECHNOLOGIES, INC. ANNEX III PAGE 2 OF 3 CAPITAL LEASES LOAN AGREEMENT JANUARY 2, 1998
Principal Maturity Description Obligor Outstanding Date - ----------- ------- ------------ --------- Computer Hardware Capital Lease ADLT, Corporation 28,264 2/1/99 Computer Hardware Capital Lease ADLT, Corporation 7,836 4/14/99 Bulb Former ADLT, Corporation 159,200 5/10/01 Computer Hardware Capital Lease - HW & SW ADLT, Corporation 8,572 4/14/99 Computer Hardware Capital Lease ADLT, Corporation 14,162 8/3/99 Badalex, Stern Machine/Chi Fong Flare Machine ADLT, Corporation 50,658 8/3/01 Furnace Equipment ADLT, Corporation 65,815 10/1/01 FAF Partitions/Cubicles ADLT, Corporation 380,090 10/1/01 Computer Hardware Capital Lease ADLT, Corporation 18,313 10/1/99 Computer Hardware Capital Lease ADLT, Corporation 151,523 2/1/02 Computer Hardware Capital Lease ADLT, Corporation 24,407 2/1/02 Computer Hardware Capital Lease ADLT, Corporation 19,080 3/12/00 Manufacturing Equipment ADLT, Corporation 248,959 1/16/02 Computer Hardware Capital Lease Venture Lighting 2,657 1/15/98 Computer Hardware Capital Lease Venture Lighting 4,234 1/15/98 Computer Hardware Capital Lease Venture Lighting 7,180 1/15/98 Computer Hardware Capital Lease Venture Lighting 3,323 Ritch Copier Venture Lighting 22,801 1/15/98 Office Furniture LRI 148,371 4/1/02 Yale Fork Lift Truck LRI 20,007 10/20/00 AT&T-computer hardware LRI 948 4/1/98 AT&T-computer hardware LRI 311 2/1/98 AT&T-computer hardware LRI 1,664 1/22/99 AT&T-computer hardware LRI 4,419 6/15/99 AT&T-computer hardware LRI 8,870 4/23/99 Development Lathe LRI 21,147 3/2/00 AT&T-computer hardware SDL 6,363 6/13/90 ---------- $1,429,174 ==========
92 Annex III, Page 3 of 3 Loan Agreement Obligation to Lend Pursuant to the terms of the Ruud Lighting transaction, each Ruud shareholder, upon notice delivered in 1999, can require Advanced Lighting to lend an amount related to income taxes above an agreed level. The shareholders have informed Advanced Lighting that they do not anticipate that any such requests will be made. The permitted loans will not exceed $5 million in the aggregate. Letters of Credit
ADLT Expiration Entity Type Issuer Amount Date - ------------------------------------------------------------------------------- Microsun Technologies Stand-by BNY FC $234,000 1/31/97 Lighting Resources Intl. Import BNY FC 20,350 12/22/97 Lighting Resources Intl. Import BNY FC 23,765 12/31/97 Lighting Resources Intl. Import BNY FC 11,990 3/2/98 ADLT Canada Import BNY FC 125,239 12/25/97 ADLT Canada Import BNY FC 181,949 1/10/98 Ballastronix Import Royal Bank of Canada 119,850 1/23/98 --------- $717,143 =========
93 ANNEX IV DESCRIPTION OF EXISTING LIENS [DESCRIPTION FOLLOWS THIS PAGE.] 94 ANNEX IV TO CREDIT AGREEMENT List of Permitted Liens The mortgages listed on Annex III (Description of Existing Indebtedness) are incorporated by reference. 95 PERMITTED ENCUMBRANCES OF ADVANCED LIGHTING TECHNOLOGIES, CANADA INC. ONTARIO PERSONAL PROPERTY SECURITY REGISTRATIONS
FILE NO. SECURED PARTY COLLATERAL GENERAL COLLATERAL CLASSIFICATION DESCRIPTION - ------------------------------------------------------------------------------------------------------------- 835388631 G.N. Johnston Equipment Co. Equipment, Other, MV (1) Rebuilt Battery, Ltd. 1400 Courtney Park Drive, Included S/N 12411279 Mississauga, Ontario L5T 1H1 (2) Rebuilt Charger S/N CSM12-1-720B Ref#1838 MV: 77 Raymond Lift Truck 20R30TT VIN: S/N 20-1168-S - -------------------------------------------------------------------------------------------------------------- 832255362 Ford Credit Canada Limited Equipment, Other, MV MV: 97 Ford Explorer 3700 Steeles Avenue West Included VIN: IFMDV34E9VUCO2084 Suite 301 Woodbridge, Ontario L4L 8K8 - -------------------------------------------------------------------------------------------------------------- 828959283 Commcorp. Financial Services Equipment, Other Photocopy & Facsimile Inc. Equipment 5050 South Service Road C/N 877036 Burlington, Ontario L7R 4C8 L/N N726340 - -------------------------------------------------------------------------------------------------------------- 824205393 GMAC Leaseco Limited Equipment, Other, MV MV: 96 Oldsmobile 3250 Bloor Street West Included Aurora Suite 800 VIN: 1G3GR62C9T4123971 Toronto, Ontario M8X 2Y5 - --------------------------------------------------------------------------------------------------------------- 821556306 Venture Lighting International, Inventory, Equipment Inc. Accounts, Other MV Included - --------------------------------------------------------------------------------------------------------------- 009362961 Venture Lighting International, Inventory, Equipment, Assigned from The Inc. Accounts, Other, MV Bank of Nova Scotia Included - --------------------------------------------------------------------------------------------------------------- 922125429 Venture Lighting International, Book Debts, Other and the proceeds thereof Assigned from The Inc. Bank of Nova Scotia (Original Reg. No. 8902101221432773) - --------------------------------------------------------------------------------------------------------------- 947611476 Venture Lighting International, Inventory, Accounts, Assigned from The Inc. Other Bank of Nova Scotia (Original Reg. No. 8902101221432772) - --------------------------------------------------------------------------------------------------------------- 957863682 Venture Lighting International, Inventory, Equipment, Demand Debenture Assigned from The Inc. Book Debts, Other, Bank of Nova Scotia MV Included (Original Reg. No. 8411091312435184) - ---------------------------------------------------------------------------------------------------------------
96 -2-
FILE NO. SECURED PARTY COLLATERAL GENERAL COLLATERAL CLASSIFICATION DESCRIPTION - -------------------------------------------------------------------------------------------------------------- 900741249 Venture Lighting International, Assigned from The Inc. Bank of Nova Scotia (Original CSRANO.074124) - --------------------------------------------------------------------------------------------------------------
97 ADLT WHOLLY-OWNED SUBSIDIARIES UCC FINANCING FIXTURES FILINGS - PERMITTED LIENS =============================================================================== 12/30/97
ADVANCED LIGHTING TECHNOLOGIES, INC. 2307 East Aurora Rd, Suite One Twinsburg, OH 44087 Summit County, OH GS/CA: Yes / Yes Jurisdiction Searched Date Filed File Number Item Type Secured Party Security - --------------------- ---------- ---------- --------- ------------- --------- OH Secretary of State 5/3/96 AM70326 UCC-1 Security Federal S & L EDP Equipment Schedule: 3-GA P 5133 Ass Professional PC; 3-20" Vivitron Color Monitor; 3-Office 95 on CD; 1-GA P5-133 Professional PC; 1-17" Vivitron Color Monitor; 1-Office 95 on CD; 5-GA P5 133 Professional PC; 5-20 Vivitron Color Monitor; 5 MSF etc OH Secretary of State 7/9/96 AM86848 UCC-1 Dove Management EDP Equipment Schedule: 3-GA P 5133 Services, Inc. Professional PC; 3-20" Vivitron Color Monitor; 3-Office 95 on CD; 1-GA P5-133 Professional PC; 1-17" Vivitron Color Monitor; 1-Office 95 on CD; 5-GA P5 133 Professional PC; 5-20 Vivitron Color Monitor; 5 MSF etc OH Secretary of State 7/9/96 AM86907 UCC-1 Dove Management 1-HP Envisex Base Unit 10MB RAM; Services, Inc. 1-Mulltimedia 19" Color X Station; 1-ADD 8MB DRAM; 1-HP UX Keyboard; 1-Digitizing Tablet; 1-Add HP 16 MB RAM; 1- ME 10 Unix; 1-GDBPENT 133P1B P5-133 Pro PC; 1-Office 95 Pro CD; 1-Monitor WW SON 2OVIV 19.1" View etc OH Secretary of State 7/9/96 AM86908 UCC-1 Security Federal S & L 1-HP Envisex Base Unit 10MB RAM; Ass 1-Mulltimedia 19" Color X Station; 1-ADD 8MB DRAM; 1-HP UX Keyboard; 1-Digitizing Tablet; 1-Add HP 16 MB RAM; 1-ME 10 Unix; 1-GDBPENT 133P1B P5-133 Pro PC; 1-Office 95 Pro CD; 1-Monitor WW SON 2OVIV 19.1" View etc OH Secretary of State 7/12/96 AM87777 UCC-1 Dove Management Model #R105, 1-3x5 Bulb Former (5x7) Services, Inc. potential; 1-Lathe Bed; 1-Control Unit OH Secretary of State 7/15/96 AM88264 UCC-1 Security Federal S & L Model #R105, 1-3x5 Bulb Former (5x7) Ass potential; 1-Lathe Bed; 1-Control Unit OH Secretary of State 7/26/96 AM91047 UCC-1 Security Federal S & L 4-Model P5-166 Intel P5-166MHz, Tower Ass Case, KBD, Mouse, 32MB EDO DRAM, 1.44M 3.5" DSHD Floppy...; 4-Soundblaster 16 Bit Sound Card Speakers; 4-Ethernet Card 10/100; 4-Matrox Millenium Video Card 4MB WRAM, 17" Vivitron Monitor, Win '95 Installed etc
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12/30/97 OH Secretary of State 7/26/96 AM91046 UCC-1 Dove Management 4-Model P5-166 Intel P5-166MHz, Tower Services, Inc. Case, KBD, Mouse, 32MB EDO DRAM, 1.44M 3.5" DSHD Floppy...; 4-Soundblaster 16 Bit Sound Card Speakers; 4-Ethernet Card 10/100; 4-Matrox Millenium Video Card 4MB WRAM, 17" Vivitron Monitor, Win '95 Installed etc OH Secretary of State 10/4/96 AN08067 UCC-1 Security Federal S & L 8-PS-166 Intel P5-166MHZ, Tower Case, Ass KBD, Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DSHD Floppy, 2.0GB EIDE WD Hard Drive, CDROM-8X; 8 Ethenet Card 10/100; 8-Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95-Installed, MS Office Prof etc OH Secretary of State 10/4/96 AN08069 UCC-1 Dove Management 8-PS-166 Intel P5-166MHZ, Tower Case, Services, Inc. KBD, Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DSHD Floppy, 2.0GB EIDE WD Hard Drive, CDROM-8X; 8 Ethenet Card 10/100; 8-Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95-Installed, MS Office Prof etc OH Secretary of State 10/7/96 AN08870 UCC-1 Dove Management 1-Rebuilt CHI-Fong Flare Machine Model Services, Inc. #CRFA-12-H; 1-Rebuilt Badalex Stem Machine OH Secretary of State 10/7/96 AN08872 UCC-1 Security Federal S & L 1-Rebuilt CHI-Fong Flare Machine Model Ass #CRFA-12-H; 1-Rebuilt Badalex Stem Machine OH Secretary of State 12/4/96 AN23135 UCC-1 Security Federal S & L 1-CM Furnance 10-0022 34D, 346-36-1Z- Ass 240V-3PH 480V-3PE OH Secretary of State 12/4/96 AN23138 UCC-1 Dove Management 1-CM Furnance 10-0022 34D, Services, Inc. 346-36-1Z-240V-3PH 480V-3PE OH Secretary of State 12/11/96 AN25035 UCC-1 Security Federal S & L 4-Allsteel Interchange Item APCF4130N Ass Panel Complete, Non-Powered, Dimensions 41"x30", Group 2 Avalon AV9V5 Northern Lights, Paint P92 Pumice, Tag Warren/W459C; 12-Allsteel Interchange Item APCF4148P Panel Complete, Powered, Dimensions 41"x48", etc OH Secretary of State 12/11/96 AN25032 UCC-1 Dove Management 4-Allsteel Interchange Item APCF4130N Services, Inc. Panel Complete, Non-Powered, Dimensions 41"x30", Group 2 Avalon AV9V5 Northern Lights, Paint P92 Pumice, Tag Warren/W459C; 12-Allsteel Interchange Item APCF4148P Panel Complete, Powered, Dimensions 41"x48", etc OH Secretary of State 12/27/96 AN28794 UCC-1 Security Federal S & L 11 P5-166 Pentium PCs, GDBPENT166PIB Ass Seiral Nos - #6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11-MONO17010AAWW CrystalScan 700 Monitor (15.9 viewable); 11-SWRKIT125ABUS Office '95 Pro CD; 1-FFAH01; Freight & Handling
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12/30/97 OH Secretary of State 12/27/96 AN28793 UCC-1 Dove Management 11 P5-166 Pentium PCs, GDBPENT166PIB Services, Inc. Seiral Nos - #6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11-MONO17010AAWW CrystalScan 700 Monitor (15.9 viewable); 11-SWRKIT125ABUS Office '95 Pro CD: 1-FFAH01; Freight & Handling OH Secretary of State 4/15/97 AN55732 UCC-1 Security Federal S & L 1-Allsteel Dedicated Truck for W459C, Ass From Allsteel to Venture, Tag Warren/W459R; 1-Sandglo Item 1/4" Plate Glass w/Polished Edges (2 Pieces) Approx Dim 168"x48", Tag Warren/WA624; 15- Allsteel Interchange Item AEP Panel Port, Color Black, Tag etc OH Secretary of State 4/15/97 AN55733 UCC-1 Dove Management 1-Allsteel Dedicated Truck for W459C, Services, Inc. From Allsteel to Venture, Tag Warren/W459R; 1-Sandglo Item 1/4" Plate Glass w/Polished Edges (2 Pieces) Approx Dim 168"x48", Tag Warren/WA624; 15- Allsteel Interchange Item AEP Panel Port, Color Black, Tag etc OH Secretary of State 4/15/97 AN55775 UCC-1 Dove Management 10-P5-166 Pentium PC, S/N GDBPENT 166PIB; Services, Inc. 10-P5-166 Midtower/GDB Ser#-6875988, 5989, 5990, 5991, 5992, 5993, 5994, 5995, 5996, 5997; 10-SWRKIT125AAUS/Microsoft '95; 10-MONO21005AAWW Vivitron 1100 Viewable area OH Secretary of State 4/15/97 AN55777 UCC-1 Security Federal S & L 10-P5-166 Professional Pentium PC, Ass Serial No. GDBPENT166PIB 6875988, 5989, 5990, 5991, 5992, 5993, 5994, 5995, 5996, 5997; 10-SWRKIT125AAUS Microsoft Office '95 Professional on CD; 10 MONO21005AAWW Vivitron 1100 with 19.7 Viewable area OH Secretary of State 5/8/97 AN63212 UCC-1 The Croghan Colonial 1-Used 13"x25" Clausing Colchester Bank Geared Head Tool Room Engine Lathe, Model 8014, Serial No.5/0013/11963DD Complete with Accessories; 1-2 Axis AUC-RITE Tuenmate Digital Readout Assembly Complete OH Secretary of State 5/20/97 AN66607 UCC-1 Dove Management 10-P5-166 Professional PC Ser# Services, Inc. GDBPENT166PIH 7007797, 7798, 7799, 7800, 7801, 7802, 7803, 7804, 7805, 7806; 10- MONO1700AAWW Vivitron 700 Monitor (15.9 viewable); 10-SWRKIT125AAUS Microsoft Office 95 Professional on CD; 1-FFAH01 OH Secretary of State 5/20/97 AN66609 UCC-1 Security Federal S & L 10-P5-166 Professional PC Ser# Ass GDBPENT166PIH 7007797, 7798, 7799, 7800, 7801, 7802, 7803, 7804, 7805, 7806; 10-MONO17008AAWW Vivitron 700 Monitor (15.9 viewable); 10-SWRKIT125AAUS Microsoft Office 95 Professional on CD; 1-FFAH01 OH Secretary of State 5/27/97 AN68135 UCC-1 Security Federal S & L 1-Electro Static Coater MDL SCO-4000, Ass Ser 10687-C, Spec-XM 0007
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12/30/97 OH Secretary of State 5/27/97 AN68134 UCC-1 Dove Management 1-Electro Static Coater MDL SCO-4000, Services, Inc. Ser 10687-C, Spec-XM 0007 OH Secretary of State 6/27/97 AN76986 UCC-1 Security Federal S & L 3-Allsteel Item APCF-6524N Non-Powered Ass Panel, Dimensions 65"x24", Fabric Grade 1 Roberts Ridge VV9RG, Paint Green Non- Metallic, Tag Warren/W602A/Area A/MKTING-Sales; 12-Allsteel Item APCF-6536P Powered Panel, Dimensions 65"x36", Fabric Grade 1 etc OH Secretary of State 6/27/97 AN76987 UCC-1 Dove Management 3-Allsteel Item APCF-6524N Non-Powered Services, Inc. Panel, Dimensions 65"x24", Fabric Grade 1 Roberts Ridge VV9RG. Paint Green Non- Metallic, Tag Warren/W602A/Area A/MKTING-Sales; 12-Allsteel Item APCF-6536P Powered Panel, Dimensions 65"x36", Fabric Grade 1 etc OH Secretary of State 7/21/97 AN82970 UCC-1 Dove Management 1-Electro Static Coater, MDL SCO-400 C Services, Inc. Ser 10687-E, Spec-KM 0007 OH Secretary of State 7/21/97 AN82972 UCC-1 Dove Management Henredon Item C9386B Sofa-516B80252, Services, Inc. Dimen 76"L x39"D x 35"H, Tag Warren/WA824; Key City Item 313 Lose Pillow Back Chair-189-75535, Dimen 36"Wx41"D x 38"H, Tag Warren/WA824; Stanley Item 589-15-01 SQ Cocktail Table 356-87857, Dimen 40"W x 40"D x OH Secretary of State 7/21/97 AN82968 UCC-1 Security Federal S & L 1-Electro Static Coater, MDL SCO-400 Ass C Ser 10687-E, Spec-KM 0007 OH Secretary of State 7/21/97 AN82965 UCC-1 Dove Management 15-SOFTW SYMIX V .40 User License; Services, Inc. 1-SOFTW Migrate 8-Progress Users from SCO to HP Enterprise Server & 8 Clients; 16-SOFTW Progress Users & Database Servers; 1-SOFTW Progress 4GL Development System; 1-HARDW HP 9000...Server, 128mb of Memory 2 etc OH Secretary of State 7/21/97 AN82964 UCC-1 Security Federal S & L 15-SOFTW SYMIX V .40 User License; Ass 1-SOFTW Migrate 8-Progress Users from SCO to HP Enterprise Server & 8 Clients; 16-SOFTW Progress Users & Database Servers; 1-SOFTW Progress 4GL Development System; 1-HARDW HP 9000...Server, 128mb of Memory 2 etc OH Secretary of State 7/21/97 AN82971 UCC-1 Security Federal S & L Henredon Item C9386B Sofa-516B80252, Ass Dimen 76"L x39"D x 35"H, Tag Warren/WA824; Key City Item 313 Lose Pillow Back Chair-189-75535, Dimen 36"W x 41"D x 38"H, Tag Warren/WA824; Stanley Item 589-15-01 SQ Cocktail Table 356- 87857, Dimen 40"W x 40"D x OH Secretary of State 8/7/97 AN87472 UCC-1 Dove Management 12-GA-G5-200 Professional PC Ser# Services, Inc. 7257128, 7129, 7130, 7131, 7132, 7133, 7134, 7135, 7136, 7137, 7138, 7139; 12-17" Vivitron Monitor; 12-MS Office Professional '95 on CD
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12/30/97 OH Summit County 5/13/96 504472 UCC-1(FX) Security Federal S & L EDP Equipment Schedule: 3-GA P 5133 Ass Professional PC; 3-20" Vivitron Color Monitor; 3-Office 95 on CD; 1-GA P5-133 Professional PC; 1-17" Vivitron Color Monitor; 1 Office 95 on CD; 5-GA P5 133 Professional PC; 5-20" Vivitron Color Monitor; 5 MSF etc OH Summit County 7/9/96 506341 UCC-1(FX) Security Federal S & L 1-HP Envisex Base Unit, 10MB Ram; Ass 1-Multimedia 19" Color X Station; 1-ADD 8MB DRAM; 1-HP-UX Keyboard; 1-Digitizing Tablet; 1-ADD HP 16 MB Ram; 1-ME 10 Unix; 1-GDBPent 133P1B P5-133 Pro PC; 1-Office 95 Pro CD; 1-Monitor WW SON 20 VIV, 19.1" View etc OH Summit County 7/11/96 506390 UCC-1(FX) Security Federal S & L Model #R05, 1-3x5 Bulb Former 5x7 Ass potential; 1 Lathe Bed; 1-Control Unit OH Summit County 7/12/96 506483 UCC-1(FX) Dove Management Model #R105, 1-3x5 Bulb Former 5x7 Services, Inc. potential; 1 Lathe Bed; 1-Control Unit OH Summit County 7/12/96 506484 UCC-1(FX) Dove Management EDP Equipment Schedule: 3-GA P 5133 Services, Inc. Professional PC; 3-20" Vivitron Color Monitor; 3-Office 95 on CD; 1-GA P5-133 Professional PC; 1-17" Vivitron Color Monitor; 1-Office 95 on CD; 5-GA P5 133 Professional PC; 5-20" Vivitron Color Monitor; 5-MSF etc OH Summit County 7/24/96 506906 UCC-1(FX) Dove Management 4-Model P5-166 Intel P5-166MHz, Services, Inc. Tower Case, KBD, Mouse, 32MB EDO DRAM, 1.44M 3.5" DSHD Floppy, 2.56GB EIDE Hard Drive, CDROM-8X; 4-Soundblaster 16Bit Sound Card-Speakers; 4-Ethernet Card 10/100; 4-Matrox Millenium Video Card-4MB WRAM, 17" Vivitro etc OH Summit County 7/24/96 506905 UCC-1(FX) Security Federal S & L 4-Model P5-166 Intel P5-166MHz, Tower Ass Case, KBD, Mouse, 32MB EDO DRAM, 1.44M 3.5" DSHD Floppy, 2.56GB EIDE Hard Drive, CDROM-8X; 4-Soundblaster l6Bit Sound Card-Speakers; 4-Ethernet Card 10/100; 4-Matrox Milllenium Video Card-4MB WRAM, 17" Vivitro etc OH Summit County 10/1/96 509001 UCC-1(FX) Security Federal S & L 1-Rebuilt CHI-Fong Flare Machine Model # Ass CRFA-12-H, 1-Rebuilt Badalex Stem Machine* OH Summit County 10/1/96 509002 UCC-1(FX) Dove Management 1-Rebuilt CHI-Fong Flare Machine Model # Services, Inc. CRFA-12-H, 1-Rebuilt Badalex Stem Machine OH Summit County 10/2/96 509031 UCC-1(FX) Security Federal S & L 8-PS-166 Intel P5-166 MHZ, Tower Case, Ass KBD, Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DSHD Floppy, 2.0GB EIDE WD Hard Drive, CDROM-8X; 8-Ethenet Card 10/100; 8 Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95 Installed, MS Office Prof etc
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12/30/97 OH Summit County 10/2/96 509032 UCC-1(FX) Dove Management 8-PS-166 Intel P5-166 MHZ, Tower Case, Services, Inc. KBD, Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DSHD Floppy, 2.0GB EIDE WD Hard Drive, CDROM-8X; 8-Ethenet Card 10/100; 8 Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95 Installed, MS Office Prof etc OH Summit County 12/5/96 510990 UCC-1(FX) Security Federal S & L 1-CM Furnance 10-0022-34D, Ass 346-36-1Z-240V-3PH 480V-3PE OH Summit County 12/5/96 510991 UCC-1(FX) Dove Management 1 CM Furnance 10-0022-34D, Services, Inc. 346-36-1Z-240V-3PH 480V-3PH OH Summit County 12/6/96 511013 UCC-1(FX) Security Federal S & L Attachment missing Ass OH Summit County 12/6/96 511014 UCC-1(FX) Dove Management Attachment missing Services, Inc. OH Summit County 12/27/96 511756 UCC-1(FX) Security Federal S & L 11-P5-166 Pentium PC GDBPent166PIB Ass Serial Nos 6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11-MONO17010AAWW CrystalScan 700 Monitor (15.9 viewable); 11-SWRKIT125ABUS Office '95 Pro CD; 1-FFAHO1; Freight & Handling OH Summit County 12/27/96 511757 UCC-1(FX) Dove Management 11-P5-166 Pentium PC GDBPent166PIB Services, Inc. Serial Nos 6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11-MONO17010AAWW CrystalScan 700 Monitor (15.9 viewable); 11-SWRKIT125ABUS Office '95 Pro CD; 1-FFAHO1; Freight & Handling OH Summit County 4/18/97 21001204 UCC-1(FX) Dove Management P5-166 Professional Pentium PC, Services, Inc. SN GDBPENT166PIB; 10-P5-166 Midtower/GDB Ser # 6875988, 5989, 5990, 5991, 5992, 5993, 5994, 5995, 5996, 5997; 10 SWRKIT125AAUS/Microsoft 95; 10-MONO21005AAWW Vivitron 1100 Viewable Area OH Summit County 4/18/97 21001202 UCC-1(FX) Dove Management 1-Allsteel Dedicated Truck for W459C From Services, Inc. Allsteel to Venture, Tag Warren/W459R; 1-Sandglo Item 1/4" Plate Glass w/Polished Edges (2 pieces), Approx Dim 168"x48", Tag Warren/WA624; 15- Allsteel Interchange Item AEP Panel Port, Color Black, Tag etc OH Summit County 4/18/97 21001203 UCC-1(FX) Security Federal S & L 1-Allsteel Dedicated Truck for W459C From Ass Allsteel to Venture, Tag Warren/W459R; 1-Sandglo Item 1/4" Plate Glass w/Polished Edges (2 pieces), Approx Dim 168"x48", Tag Warren/WA624; 15-Allsteel Interchange Item AEP Panel Port, Color Black, Tag etc
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12/30/97 OH Summit County 5/20/97 21002537 UCC-1(FX) Dove Management 10-166 PIH, P5-166 Professional PC Ser# Services, Inc. GDBPENT166PIH 700797, 7798, 7799, 7800, 7801, 7802, 7803, 7804, 7805, 7806; 10-MONO17008AAWW Vivitron 700 Monitor (15.9 viewable); 10 SWRKIT125AAUS, Microsoft Office 95 Professional on CD; 1-FFAH01 OH Summit County 5/20/97 21002538 UCC-1(FX) Security Federal S & L 10-166 PIH, P5-166 Professional PC Ser# Ass GDBPENT166PIH 7007797, 7798, 7799, 7800, 7801, 7802, 7803, 7804, 7805, 7806; 10-MONO17008AAWW Vivitron 700 Monitor (15.9 viewable); 10 SWRKIT125AAUS, Microsoft Office 95 Professional on CD; 1-FFAH01 OH Summit County 5/21/97 21002574 UCC-1(FX) Security Federal S & L 1-Electro Static Coater, MDL SCO-4000, Ass Ser 10687-C, Spec-XM 0007 OH Summit County 5/21/97 21002575 UCC-1 (FX) Dove Management 1-Electro Static Coater, MDL Services, Inc. SCO-4000, Ser 10687-C, Spec-XM 0007 OH Summit County 6/19/97 21003748 UCC-1 (FX) Dove Management 3-Allsteel Item APCF-6524N Non-Powered Services, Inc. Panel, Dimensions 65"x24", Fabric Grade 1 Roberts Ridge VV9RG, Paint Green Non- Metallic, Tag Warren/W602A/Area A/ MKTING-Sales; 12-Allsteel Item APCF-6536 Powered Panel, Dimensions 65"x36", Fabric Grade etc OH Summit County 6/19/97 21003749 UCC-1(FX) Security Federal S & L 3-Allsteel Item APCF-6524N Non-Powered Ass Panel, Dimensions 65"x24", Fabric Grade 1 Roberts Ridge VV9RG, Paint Green Non- Metallic, Tag Warren/W602A/Area A/ MKTING-Sales; 12-Allsteel Item APCF-6536 Powered Panel, Dimensions 65"x36", Fabric Grade etc OH Summit County 7/18/97 21005101 UCC-1(FX) Security Federal S & L 15-SOFTW SYMIX V.40 User License; 1 SOFTW Ass Migrate 8-Progress Users from SCO to HP Enterprise Server & 8 Clients; 16 SOFTW Progress User & Database Servers; 1 SOFTW Progress 4GL Development System; 1 HARDW Hewlett-Packard 9000 D210 Server, 128mb etc OH Summit County 7/18/97 21005100 UCC-1(FX) Dove Management 15-SOFTW SYMIX V.40 User License; 1 SOFTW Services, Inc. Migrate 8-Progress Users from SCO to HP Enterprise Server & 8 Clients; 16 SOFTW Progress User & Database Servers; 1 SOFTW Progress 4GL Development System; 1 HARDW Hewlett-Packard 9000 D210 Server, 128mb etc OH Summit County 7/23/97 21005340 UCC-1(FX) Security Federal S & L 1-Electro Static Coater, MDL SCO-400 C, Ass Ser 10687-E, Spec-KM 0007 OH Summit County 7/23/97 21005341 UCC-1(FX) Dove Management 1-Electro Static Coater, MDL SCO-400 C, Services, Inc. Ser 10687-E, Spec-KM 0007*
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12/30/97 OH Summit County 7/31/97 21005652 UCC-1(FX) Security Federal S & L Henredon Item C9386B Sofa-516B-80252, Ass Dimen 76"L x 39"D x 35"H, Tag Warren/WA824; Key City Item 313 Lose Pillow Back Chair 189-75535, Dimen 36"W x 41"D x 38"H, Tag Warren/WA824; Stanley Item 589-15-01 SQ Cocktail Table 356- 87857, Dimen 40"W x 40" etc OH Summit County 7/31/97 21005653 UCC-1(FX) Dove Management Henredon Item C9386B Sofa-516B-80252, Services, Inc. Dimen 76"L x 39"D x 35"H, Tag Warren/WA824; Key City Item 313 Lose Pillow Back Chair 189-75535, Dimen 36"W x 41"D x 38"H, Tag Warren/WA824; Stanley Item 589-15-01 SQ Cocktail Table 356- 87857, Dimen 40"W x 40" etc OH Summit County 8/13/97 21006106 UCC-1(FX) Dove Management 12-GA G5-200 Professional PC Services, Inc. Ser# 7257128, 7129, 7130, 7131, 7132, 7133, 7134, 7135, 7136, 7137, 7138, 7139; 12-17" Vivitron Monitor; 12-MS Office Professional 95 on CD APL ENGINEERED MATERIALS, INC. 2307 East Aurora Rd, Suite One Twinsburg, OH 44087 Summit County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- IL Secretary of State 8/14/91 2883308 UCC-1 The Champaign National Rents re real estate Bank IL Secretary of State 11/17/95 3471524 UCC-1 Aldrich Chemical Ownership interest of Debtor in Company, Inc. Aldrich- APL, LLC IL Secretary of State 7/9/96 3562595 CONT BankIllinois, Successor Rents re real estate The Champaign National Bank OH Secretary of State 1/24/96 AM45283 UCC-1 Levetz Investments, Inc. 1-Beechcraft King Air 300, aircraft, all parts & accessories thereto, all instruments, accounts & chattel paper arising therefrom (including leases & conditional sales contracts), & the proceeds of all of the foregoing, including proceeds in the etc
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12/30/97 ENERGY-WISE LIGHTING, INC. 2307 East Aurora Rd, Suite One Twinsburg, OH 44087 Summit County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Secretary of State 11/18/94 AL43453 UCC-1 General Electric Inventory consisting of lamps & light Company GE Lighting bulbs (including w/o limitation, incandescent, fluorescent, high intensity discharge, quartz, photo, miniature, holiday & accessories & parts relating thereto), lighting fixtures including parts & components etc OH Secretary of State 5/24/96 05249617301 AMEND General Electric Inventory consisting of lamps & light Company GE Lighting bulbs (including w/o limitation, incandescent, fluorescent, high intensity discharge, quartz, photo miniature, holiday & accessories & parts relating thereto), lighting fixtures including parts & components etc OH Summit County 11/15/94 487528 UCC-1(FX) General Electric Inventory consisting of lamps & light Company GE Lighting bulbs (including w/o limitation, incandescent, fluorescent, high intensity discharge, quartz, photo, miniature, holiday & accessories & parts relating thereto), lighting fixtures including parts & components etc OH Summit County 6/5/96 487528 AMEND(FX) General Electric Inventory consisting of lamps & light Company GE Lighting bulbs (including w/o limitation, incandescent, fluorescent, high intensity discharge, quartz, photo, miniature, holiday & accessories & parts relating thereto), lighting fixtures including parts & components etc LIGHTING RESOURCES INTERNATIONAL, INC. 3000 Seneca Industrial Pkwy Bellevue, OH 44811 Huron County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Huron County 5/15/97 77266 UCC-1(FX) AT & T Capital Leasing Sharp SD2060, Sharp SF2214, Sharp FO6500, Services, Inc. Sharp FO5400, Equipment Lease No 620826, This transaction is a true lease & is not intended by the parties as a secured transaction. Filing is only intended to make the true lease a matter of public rec etc OH Secretary of State 4/26/96 AM68503 UCC-1 AT & T Credit Definity & Intuity under lease No.5618813 Corporation [illegible] & all attachments, accessories, additions, substitutions, products, replacements & rentals & a right to use license for any software related to any of the foregoing, & proceeds therefrom etc
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12/30/97 OH Secretary of State 1/8/97 AN31531 UCC-1 Brennan Leasing Yale Industrial Fork Lift Truck Model Company GLC050DENUAE083, Ser No. N546824 OH Secretary of State 5/5/97 AN61511 UCC-1 AT & T Capital Leasing Sharp SD2060, Sharp SF2214, Sharp FO6500, Services, Inc. Sharp FO5400 - Equipment Lease No 00620826. This transaction is a true lease & is not intended by the parties as a secured transaction. Filing is only intended to make the true lease a matter of public etc MICROSUN Technologies, Inc. 2307 East Aurora Rd, Suite One Twinsburg, OH 44087 Summit County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Cuyahoga County 11/17/97 1402406 UCC-1(FX) Sanwa Business Credit 1-New Mitsubishi Forklift Model: FG15B-LP Corporation S/N: AF31-51256 including, but not limited to, all replacements, parts, repairs, attachments & accessories incorporated herein or affixed thereto now owned or hereafter acquired OH Secretary of State 11/19/97 AP0004062 UCC-1 Sanwa Business Credit [Attachment missing- not available] Corporation RUUD LIGHTING, INC. 9201 Washington Ave Racine, WI 54406 Racine County, WI GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- WI Secretary of State 5/11/95 7501507516 UCC-1 General Electric Inventory consisting of lamps & light Company, GE Lighting bulbs now or hereafter sold or consigned to the debtor by General Electric Company & A/R, contracts rights, chattel paper, & any other right to the payment of money & security therefore, now or hereafter etc
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12/30/97 SPECIALTY DISCHARGE LIGHTING, INC. 101 Shawnee Dr Bellevue, OH 44811 Huron County, OH GS/CA: Yes / No JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Huron County 6/17/96 75404 UCC-1(FX) AT & T Capital Leasing P5-133 Pro Gateway 2000, P5-150 Services, Inc. Gateway 2000. Equipment Lease No.00561731. This transaction is a true lease & is not intended by the parties as a secured transaction. Filing is only intended to make the true lease a matter of public record. Etc OH Secretary of State 8/30/93 AK43106 UCC-1 AT & T Capital HP-54600A Digital Oscilloscope Corporation S/N 3227A07440; HP 54650A HP-IB Interface S/N 3230A03925; TEK P6015A High Voltage Probe S/N B010117 OH Secretary of State 6/17/96 AM81510 UCC-1 AT & T Capital Leasing P5-133 Pro Gateway 2000, P5-150 Services, Inc. Gateway 2000. Equipment Lease No. 00561731. This transaction is a true lease & is not intended by the parties as a secured transaction. Filing is only intended to make the true lease a matter of public record. etc THE LIGHT SOURCE, INC. 32000 Aurora Rd Solon, OH 44139 Cuyahoga County, OH GS/CA: Yes / No JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Secretary of State 7/13/95 AM00017 UCC-1 Osram Sylvania, Inc. All Osram Sylvania [illegible]... manufactured and/or branded... merchandise inventory including... bulbs, flourscent lamps, headlamps.. carbide, glass, etc regardless of type...or hereafter acquired & any A/R created or proceeds received as a etc VENTURE LIGHTING INTERNATIONAL, INC. 32000 Aurora Rd Solon, OH 44139 Cuyahoga County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Cuyahoga County 5/17/91 1197400 CONT(FX) Philips Lighting Co. Computer print-out no detail
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12/30/97 OH Cuyahoga County 5/17/91 1023621 UCC-1(FX) Philips Lighting Co. Computer print-out no detail OH Cuyahoga County 9/8/93 1259219 UCC-1(FX) Yale Financial Serv. Inc. Computer print-out no detail OH Cuyahoga County 10/28/93 1263708 UCC-1(FX) Xerox Corp. Computer print-out no detail OH Cuyahoga County 11/29/93 1266087 UCC-1(FX) General Electric Co. Computer print-out no detail OH Cuyahoga County 6/30/94 1284365 CONT(FX) Siemens Credit Corp. Computer print-out no detail OH Cuyahoga County 6/30/94 1149137 UCC-1(FX) Siemens Credit Corp. Computer print-out no detail OH Cuyahoga County 2/24/95 1305407 UCC-1(FX) IBM Credit Corp. Computer print-out no detail OH Cuyahoga County 2/24/95 1305420 UCC-1(FX) IBM Credit Corp. Computer print-out no detail OH Cuyahoga County 4/14/95 1309620 UCC-1(FX) General Electric Capital Computer print-out no detail Computer OH Cuyahoga County 7/13/95 1317922 UCC-1(FX) Osram Sylvania, Inc. Computer print-out no detail OH Cuyahoga County 9/13/95 1323196 UCC-1(FX) American Financial Computer print-out no detail Resources, Inc. OH Cuyahoga County 7/23/96 1349905 UCC-1(FX) Security Federal S & L 1-HP Envisex Base Unit, 10MB RAM; 1- Ass Multimedia 19" Color X Station; 1-ADD 8MB DRAM; 1-HP-UX Keyboard; 1-Digitizing Tablet; 1-ADD HP 16 MB RAM; 1-ME 10 Unix; 1 GDBPent 133P1B P5-133 Pro PC; 1-Office 95 Pro CD; 1-Monitor WW SON 20 VIV, 19.1" View; etc OH Cuyahoga County 7/23/96 1349902 UCC-1(FX) Security Federal S & L 4-Model P5-166 Intel P5-166MHZ, Tower Ass Case, KBD, Mouse, 32MB EDO DRAM, 1.44M, 3.5" DSHD Floppy, 2.5GB EIDE Hard Drive, CDROM-8X; 4-Soundblaster 16 Bit Sound Card-Speakers;4-Ethernet Card 10/100; 4-Matrox Millenium Video Card4-MB WRAM, 17" Vivitr etc OH Cuyahoga County 7/23/96 1349903 UCC-1(FX) Security Federal S & L Model #R105, 1-3x5 Bulb Former 5x7 Ass potential; 1-Lathe Bed; 1-Control Unit OH Cuyahoga County 7/23/96 1349904 UCC-1(FX) Security Federal S & L EDP Equipment Schedule: 3-GA P 5133 Ass Professional PC; 3-20" Vivitron Color Monitor; 3-Office 95 on CD; 1-GA P5-133 Professional PC; 1-17" Vivitron Color Monitor; 1-Office 95 on CD; 5-GA P5-133 Professional PC; 5-20" Vivitron Color Monitor; 5-MSF etc. OH Cuyahoga County 10/2/96 1355623 UCC-1(FX) Security Federal S & L 8-PS-166 Intel P5-166MHZ; Tower Case, Ass KBD; Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DS HD Floppy, 2.0GB Eide WD Hard Drive, CDROM-8X; 8-Ethenet Card 10/100; 8-Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95-Installed, MS Office Prof etc
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OH Cuyahoga County 10/7/96 1355917 UCC-1(FX) Security Federal S & L Rebuilt CHI-Fong Flare Machine Model Ass #CRFA-12-H; Rebuilt Badalex Stem Machine OH Cuyahoga County 11/27/96 1360246 UCC-1(FX) American Financial 1-Ricoh 8680 Copier System, This is a Resources lease transaction & is being filed for notification purposes only OH Cuyahoga County 12/3/96 1360566 UCC-1(FX) Security Federal S & L 1-CM Furnance 10-0022-34D, Ass 346-36-1Z-240V-3PH 480V-3PE OH Cuyahoga County 12/5/96 1360945 UCC-1(FX) Security Federal S & L Computer print-out no detail Ass OH Cuyahoga County 1/2/97 1363450 UCC-1(FX) Security Federal S & L 11-P5-166 Pentium PC, GDBPENT166IB Serial Ass Nos-6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11- MONO17010AAWW CrystalScan700 Monitor (15.9 viewable); 11-SWRKIT125ABUS Office 95 Pro CD; 1 FFAH01, Freight & handling OH Cuyahoga County 11/21/97 1402905 UCC-1(FX) American Financial 1 Ricoh 8680 Copier, This is a lease Resources transaction& is being filed for notification purposes only. LS#4557252 OH Secretary of State 9/7/93 AK44159 UCC-1 Yale Financial Services, (1) Used Yale Forklift ERC030A w/battery Inc. charger, & all accessions, additions, replacements, & substitutions thereto & therefor, & all proceeds including insurance proceeds, thereof OH Secretary of State 11/29/93 AK61791 UCC-1 General Electric Inventory consisting of lamps & light Company GE Lighting bulbs (including w/o limitation incandescent, fluorescent, high intensity discharge, quartz, photo, miniature, holiday & accessories & parts relating thereto), lighting fixtures including parts & components etc OH Secretary of State 2/22/95 AL64948 UCC-1 IBM Credit Corp. All computer, information processing, & other peripheral equipment & goods referenced on IBM Supplement # 205504 dated 2/16/95 Qty Description 017-Gateway 486DX-66 (2/17/95) 9405345 UCC Log No. CPQZ4205504 OH Secretary of State 2/22/95 AL65116 UCC-1 IBM Credit Corp. All computer, information processing, & other peripheral equipment & goods referenced on IBM Supplement #205360 dated 2/16/95 Qty Description 001-Apple Powerbook 520 160MB 008-Apple Quadra 630 33MHZ (2/17/95) 9405345 UCC Log No. CPQZ4205360 OH Secretary of State 4/14/95 AL77868 UCC-1 General Electric Capital Equipment Schedule 1 to Master Equipment Computer Leasing Lease Agreement dated as of 1/20/95: Corporation 1-Hewlett Packard 9000/A4090A Base CPU, 1-Apple Powerbook Duo
13 110
12/30/97 JUDSDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - -------------------- ---------- ---------- --------- ------------- --------- OH Secretary of State 7/13/95 AM00016 UCC-1 Osram Sylvania, Inc. All OSRAM Sylvania Inc. and/or affiliates manufactured and/or branded (Sylvania Osram/Sylvania Lighting Services [illegible]...inventory including... bulbs, flourescent lamps... wire... received as a result of the sale of such merchandise inventory OH Secretary of State 9/11/95 AM13649 UCC-1 American Financial 1-Ricoh 6655 Copier. This is a Lease Resources Transaction & is being filed for notification purposes only OH Secretary of State 1/24/96 AM45284 UCC-1 Levetz Investments, Inc. 1-Beechcraft King Air 300, aircraft, all parts & accessories thereto, all instruments, accounts & chattel paper arising therefrom (including leases & conditional sales contracts) & the proceeds of all the foregoing, including proceeds in the etc OH Secretary of State 7/15/96 AM88264 UCC-1 Security Federal S & L Model #R105, 1-3x5 Bulb Former 5x7 Ass Potential; 1-Lathe Bed; 1-Control Unit OH Secretary of State 7/26/96 AM91048 UCC-1 Security Federal S & L 4-Model P5-166 Intel...; 4-Soundblaster Ass 16 Bit...; 4-Ethenet Card 10/100; 4-Matrox Millenium Video Card 4MB WRAM...; 4-21" Vivitron Upgrade; 4-NT Workstation Upgrade 3.51; 4-Shipping Configuration OH Secretary of State 10/4/96 AN08068 UCC-1 Security Federal S & L 8-PS-166 Intel P5-166MHZ, Tower Case, KBD, Ass Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DSHD Floppy, 2.0GB...WD Hard Drive, CDROM 8X; 8 Ethenet Card 10/100; 8-Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95 Installed, MS Office Prof etc. OH Secretary of State 10/7/96 AN08873 UCC-1 Security Federal S & L Rebuilt CHI-FONG Flare Machine Model Ass # CRFA-12-H; Rebuilt Badalex Stem Machine OH Secretary of State 12/4/96 AN23136 UCC-1 Security Federal S & L 1-CM Furnance 10-0022-34D, Ass 346-36-1Z-240V-3PH 480V-3PE OH Secretary of State 12/10/96 AN24590 UCC-1 American Financial 1-Ricoh 8680 Copier System - This is a Resources lease transaction & is being filed for notification purposes only OH Secretary of State 12/11/96 AN25034 UCC-1 Security Federal S & L 4-Allsteel Interchange Item APCF4130N Ass Panel Complete Non-Powered, dimensions 41"x30", Group 2 Avalon AV9V5 Northern Lights, Paint P92 PUMICE, Tag Warren/W459C; 12-ALLSteel Interchange Item APCF4148P Panel Complete, Powered, Dimensions 41"x48", etc OH Secretary of State 12/27/96 AN28792 UCC-1 Security Federal S & L 11-PS-166 Pentium PC, Serial Nos. Ass GDBPENT166PIB 6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11-MONO17010AAWW CrystalScan700 Monitor (15.9) viewable); 11-SWRKIT125ABUS Office '95 Pro CD; 1-FFAH01; Freight & Handling
14 111
12/30/97 WEB DESIGN ASSOCIATES, INC. 275 Martinel Dr., Suite 2A Kent, OH 44240 Portage County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ---------- --------- ------------- --------- OH Portage County 2/11/93 113476 UCC-1(FX) Dana Commercial Credit SGI Iris Indigo 4000, Pro Engineer Corporation Designer Package OH Secretary of State 2/13/93 AH98379 UCC-1 Dana Commercial Credit SGI Iris Indigo 4000, Pro Engineer Corporation Designer Package
15 112 SCHEDULE "B" SEARCH RESULTS I. BALLASTRONIX INCORPORATED 1 . REAL PROPERTY We have searched the records and indices of the Registry of Deeds in and for the County Cumberland and Halifax and subject to the accuracy thereof, we have found the following registered against the title of Ballastronix: (a) a Debenture to the Nova Scotia Business Development Corporation ("NSBDC") in the amount of $1,450,000 dated April 29, 1993, registered under the Registry Act at the Cumberland County Registry of Deeds on May 5, 1993, in book 595 at page 1051. A PARTIAL RELEASE WAS GRANTED FEBRUARY 4, 1997 AND REGISTERED ST THE OFFICE OF THE REGISTRY OF JOINT STOCK COMPANIES ON APRIL 23, 1997 WITH REGARD TO TRADEMARKS, TRADENAMES, PATENTS, ETC. IN RELATION TO AN ASSET PURCHASE AGREEMENT DATED JANUARY 31, 1997 AND INCLUDED: (i) Canadian Patent No. 1,210,099 - Method of making bobbin constructions for auto transformer ballast; (ii) U.S. Patent No. 4,419,81 - Method of making bobbin constructions for auto transformer ballast; (iii) Ballast License Agreement between General Signal Limited and Ballastronix Inc. dated April 30, 1993 ("Ballast License Agreement") for fluorescent ballast and mercury vapour transformers, high intensity discharge ballast and all engineering know-how related to the manufacture, use and installation of such products; (iv) Canadian Trademark Registration No. TNA 449,454 for the trademark "Ballastronix"; and (v) United States Trademark Application No.74/584879 to register the trademark "Ballastronix" . (b) a Supplemental Debenture dated July 18, 1995, in favour of NSBDC with respect to the above-mentioned Debenture registered under the Registry Act in the Cumberland County Registry of Deeds, Nova Scotia, on July 21, 1995, in book 631, at page 937. 113 -2- (c) a Debenture in favour of the Royal Bank in the amount of $4,000,000 dated July 18, 1995, registered at the Registry of Deeds in Cumberland County on July 21, 1995, in book 631 at page 942 ("RBC"). A PARTIAL RELEASE DATED MAY 6, 1997 AND REGISTERED AT THE OFFICE OF THE REGISTRAR OF JOINT STOCKS ON MAY 12, 1997 WITH REGARD TO TRADEMARKS, TRADENAMES, PATENTS, ETC. IN RELATION TO AN ASSET PURCHASE AGREEMENT DATED JANUARY 31, 1997 AND INCLUDED: (i) Canadian Patent No. 1,210,099 - Method of making bobbin constructions for auto transformer ballast; (ii) U.S. Patent No. 4,419,814 - Method of making bobbin constructions for auto transformer ballast; (iii) Ballast License Agreement between General Signal Limited and Ballastronix Inc. dated April 30, 1993 ("Ballast License Agreement") for fluorescent ballast and mercury vapour transformers, high intensity discharge ballast and all engineering know-how related to the manufacture, use and installation of such products; (iv) Canadian Trademark Registration No. TNA 449,454 for the trademark "Ballastronix"; and (v) United States Trademark Application No.74/584879 to register the trademark "Ballastronix". (d) a Priority Agreement was recorded in the Cumberland County Registry of Deeds on the 17th day of August, 1995 in book 633 at pages 79-90. A Grantee search under the name "Ballastronix" reveals that the lands described in a deed to Ballastronix from the Nova Scotia Business Development Corporation dated the 30th day of April, 1993, are the only lands registered in the name of Ballastronix in Cumberland County. 2. CHATTEL SEARCH (BILLS OF SALE, CHATTEL MORTGAGES, CONDITIONAL SALES, ASSIGNMENTS OF BOOK DEBTS) We have searched the records of the Registrar of Deeds in and for the Counties of Cumberland and Halifax with respect to the Bills of Sale Act, the Conditional Sales Act, and the Assignment of Book Debts Act with respect to Ballastronix. Subject to the accuracy of these records, the following encumbrances appear: (a) Conditional Sales Agreement between General Signal Ltd. to Ballastronix Incorporated dated the 30th day of April, 1993, and registered on the 18th day of May, 1993, As No.1993-1583. DISCHARGED. 114 -3- (b) Transfer Agreement, undated, between Sola Canada Inc., a unit of General Signal Ltd., as transferor, Ballastronix, as transferee, and AT&T Canada Inc., registered on the 10th day of November, 1994, as No.1994-4372. A complete copy of this is enclosed, as it appears that there are several problems with it, including the fact that it is not executed by AT&T Capital Canada Inc. This agreement purports to transfer to Ballastronix all of the interest of Sola Canada in the equipment which is the subject of Agreement 90038759 which is supposed to be attached to the Transfer Agreement, but is not. (c) Lease Agreement dated the 4th day of January, 1995, between Ballastronix Incorporated as Lessor and The Lease Line, a division of Credit Line Corporation, which lease was registered on the 6th day of January, 1995, as No.95-106, relating to certain computer equipment as described. (d) Order of the Supreme Court of Nova Scotia, in File S.H. 122771, dated the 30th day of November, 1995, and registered the 4th day of December, 1995, as No.1995-4970. AT&T Capital Canada Inc. is granted leave to register late the Lease Agreement between OE Leasing, a division of OE Inc., and Sola Canada, a unit of General Signal Ltd., dated the 4th day of November, 1994, and assigned to AT&T Capital Canada Inc. by undated agreement. This is the Lease referred to in the Transfer Agreement referred to in (2) above. (e) Lease Agreement between Ballastronix, as lessee, and HOP Leasing, a division of Halifax Office Products Limited, undated and registered on the 13th day of November, 1996, as No. 1996-4286, with respect to certain Canon photocopying equipment specific on the front page of the Lease. (f) Leasing Agreement dated November 10, 1994, which lease was registered on November 17, 1994, as No. 44620, between Dana Commercial Credit Canada Inc. and Ballastronix for the lease of a "three Prolinea computer system". (g) Chattel Mortgage dated May 2, 1995, which was registered on May 30, 1995, as No. 18229, between the Toronto Dominion Bank and Ballastronix in respect of certain equipment. (h) Leasing Agreement daied September 30, 1995 which was registered on January 6, 1995, as No. 95-106, between User Friendly Systems Incorporated and Ballastronix for the lease of computer equipment. 115 -4- (i) Leasing Agreement dated January 17, 1996, which lease was registered on February 5, 1996, as No.3943, between Royal Bank of Canada and Ballastronix for the lease of computer equipment. (j) Leasing Agreement dated July 19, 1996, which lease was registered on August 2, 1996, as No. 31068, between Royal Bank of Canada and Ballastronix for the lease of computer equipment. (k) Leasing Agreement dated September 16, 1996, which lease was registered on September 16,1996, as No. 37170, between Royal Bank of Canada and Ballastronix for the lease of computer equipment. (l) Leasing Agreement dated November 20, 1996, which lease was registered on November 28, 1996, as No. 46784, between Royal Bank of Canada and Ballastronix for the lease of computer equipment (m) Lease Agreement dated April 15, 1997, which lease was registered on April 24, 1997, as No. 15834, between Royal bank of Canada and Ballastronix for the lease of computer equipment and cellular phone. We have searched the Assignment of Book Debts Registry as kept by the Cumberland County Registrar of Deeds and the Halifax County Registrar of Deeds and, subject to the accuracy thereof, there are four Assignments of Book Debts registered against Ballastronix - in order of registration tbey are: (a) General Assignment of Debts in favour of Toronto-Dominion Bank, dated April 29, 1993 and recorded in the Cumberland County Registry of Deeds on May 5, 1993, as Document No. 93-31. Discharged. (b) General Assignment of Debts in favour of Royal Bank Export Finance Company Limited, registered in Cumberland County, dated the 8th day of March, 1995, and registered on the 13th day of April, 1995, as No. 95-23. (c) General Assignrnent of Debts in favour of the Royal Bank of Canada, registered in Cumberland County, dated the 18th day of July, 1995, and registered on the 21st day of July, 1995 as No. 95A5, and in the County of Halifax on July 19, 1995, as No.872. (d) General Assignment of Debts in favour of the Royal Bank of Canada dated the 18th day of July, 1995, and registered on the 17th day of August, 1995, as No.9548. This is a reregistrattion of the GABD in (c) above. (e) General Assignment of Debts in favour of the Royal Bank of Canada, registered in Cumberland County, dated the 24th day of August, 1995, and registered on the 18th day of September, 1995, as No. 95-53. 116 -5- 3. CORPORATION SECURITY REGISTRATION ACT We have done a corporate search at the Registry of Joint Stock Companies in respect to the Corporations Security Registration Act, and subject to the accuracy thereof, we have found the following registered pursuant against Ballastronix: (a) A Debenture to the Toronto-Dominion Bank in the amount of $4,000,000 filed at the Registry of Joint Stock Companies on May 3, 1993 as new debenture no.26866. This debenture is being shown as discharged on July 31, 1995; (b) a Debenture to the NSBDC In the amount of $1,450,000 dated April 29, 1993 and filed at the Registry of Joint Stock Companies on May 3, 1993 as new debenture no.26867; (c) a Supplement Debenture filed on July 19, 1995, in favour of NSBDC with respect to the above-mentioned debenture filed at the Registry of Joint Stock Companies: (d) a Debenture to the Royal Bank of Canada in the amount of $4,000,000 dated July 18, 1995 and registered at the Registry of Joint Stock Companies on July 19, 1995 as new debenture no. 28499. (e) a Priority Agreement filed on August 9, 1995, with respect to the above-mentioned Royal Bank of Canada Debenture arid NSBDC Debenture. 4. PERSONAL PROPERTY SECURITY ACT SEARCH (a) Ontario Financing Statement with the Royal Bank registered as 950727202415295230 for all goods, wares and merchandise in Ballastronix's manufacturing, assembling and distribution business for electrical equipment and all goods, wares and merchandise purchased for resale. (b) Nova Scotia Financing Statement with General Electric Capital Leasing Incorporated registered at the Registry of Joint Stock Companies December 16, 1997 as No.134494 for two motor vehicles leased by Ballastronix (1996 Grand Caravan and 1995 Audi 100). 117 -6- 5. JUDGMENT SEARCH For greater certainty, we certify that, according to and subject to the accuracy of the records and indices of the Registrar of Deeds in and for the County of Cumberland and Halifax, there are no judgments recorded against Ballastronix. 6. LITIGATION SEARCH We have searched the records of the Prothonotary in the County of Cumberland and have located no actions or claims against Ballastronix. We have also searched the records of the Prothonotary in the County of Halifax and have located no actions or claims against Ballastronix. 7. SECTION 427 BANK ACT SEARCH A Notice of Intention To Give Section 427 security to the Royal Bank of Canada was filed at the office of the Bank of Canada in Halifax, Nova Scotia, on July 19, 1995, as No.3994. II. CANADIAN LIGHTING SYSTEMS HOLDING LIMITED 1. CHATTEL SEARCH (BILLS OF SALE, CHATTEL MORTGAGES, CONDITIONAL SALES, ASSIGNMENTS OF BOOK DEBTS) We have searched tile records of the Registrar of Deeds in and for the Counties of Cumberland and Halifax with respect to the Bills of Sale Act, the Conditional Sales Act, and the Assignment of Book Debts Act with respect to Canadian Lighting. Nil 2. CORPORATION SECURITY REGISTRATION ACT We have done a corporate search at the Registry of Joint Stock Companies in respect to the Corporations Security Registration Act: Nil 3. PERSONAL PROPERTY SECURITY ACT SEARCH We have done a corporate search under the Personal Property Security Act: and have found the following registered against Canadian Lighting: Nil 118 -7- 4. JUDGMENT SEARCH For greater certainty, we certify that, according to and subject to the accuracy of the records and indices of the Registrar of Deeds in and for the County of Cumberland and Halifax, there are no judgments recorded against Canadian Lighting. 5. LITIGATION SEARCH We have searched the records of the Prothonotary in the County of Cumberland and have located no actions or claims against Canadian Lighting. We have also searched the records of the Prothonotary in the County of Halifax and have located no actions or claims against Canadian Lighting. 6. SECTION 427 BANK ACT SEARCH We have searched the records at the Bank of Canada in Halifax, Nova Scotia: Nil 119 ANNEX V DESCRIPTION OF EXISTING ADVANCES, LOANS, INVESTMENTS AND GUARANTEES [DESCRIPTION FOLLOWS THIS PAGE.] 120 CONFIDENTIAL ADVANCED LIGHTING TECHNOLOGIES, INC. ANNEX V PAGE 1 OF 2 LOAN AGREEMENT Advances, Loans, Guarantees, 12/31/97
Company Advanced to Amount Description - ------------------------------- ------------------ ------- ------------------------------- Lighting Resources International Lighting Resources India 254,077 Working capital advances APL Engineered Materials GLE 48,323 Advanced payment for equipment Ballastronix Vendor 87,518 Advanced payment for materials Ballastronix Vendor 37,785 Advanced payment for materials Metal Halide Technologies Intl. Vendor 94,000 Advanced payment for equipment
121 CONFIDENTIAL ADVANCED LIGHTING TECHNOLOGIES, INC. ANNEX V PG 2 OF 2 LOAN AGREEMENT Investments, 12/31/97 BOOK INVESTMENT VALUE - ---------------------------------------- ------------------ Ford Motor Credit Bond $ 4,075,320 Venture Lighting Japan 3,840,077 Fiberstars, Inc. 3,080,773 Unison Fiber Optics Lighting System Joint Venture 2,204,614 Lighting Resources Holdings (BVI) 1,003,734 Vietnam Advanced Lighting 323,959 Al Amid IV 300,000 Metal Halide Technologies International (BVI) 218,381 Gesellschaft Fur Lichttschaft (GLE) 205,962 Ruud International 175,782 Asian Lighting Resources 131,893 Lighting Professionals Inc. 115,725 Others (under $100,000) 580,012 ----------- 16,256,232 =========== Obligation to Lend Pursuant to the terms of the Ruud Lighting transaction, each Ruud shareholder, upon notice delivered in 1999, can require Advanced Lighting to lend an amount related to income taxes above an agreed level. The shareholders have informed Advanced Lighting that they do not anticipate that any such requests will be made. The permitted loans will not exceed $5 million in the aggregate. 122 ANNEX VI DESCRIPTION OF LETTERS OF CREDIT DEEMED ISSUED UNDER THE CREDIT AGREEMENT -None- 123 EXHIBIT A PROMISSORY NOTE Cleveland, Ohio , 1998 FOR VALUE RECEIVED, the undersigned ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation (herein, together with its successors and assigns, the "BORROWER"), hereby promises to pay to the order of ______________ (the "LENDER"), in lawful money of the United States of America, in the case of Loans denominated in Dollars, or in the Alternative Currency, in the case of Loans denominated in such Alternative Currency (such terms and certain other terms used herein without definition shall have the meanings ascribed thereto in the Agreement referred to below), in immediately available funds, at the Payment Office, on the Maturity Date, the aggregate principal amount of all Loans made by the Lender to the Borrower pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount of each Loan made by the Lender to the Borrower at said office from the date hereof until paid at the rates and at the times provided in section 2.7 of the Agreement and in Dollars (in the case of Loans denominated in Dollars) or an Alternative Currency (in the case of Loans denominated in such Alternative Currency). This Note is one of the Notes referred to in the Credit Agreement, dated as of January 2, 1998, among the Borrower, the financial institutions from time to time party thereto (including the Lender), and National City Bank, as Administrative Agent (as from time to time in effect, the "AGREEMENT"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to mandatory prepayment prior to the Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. No failure to exercise, or delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of any such rights. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF OHIO. ADVANCED LIGHTING TECHNOLOGIES, INC. By: ____________________________________ Title: 124 LOANS AND PAYMENTS OF PRINCIPAL
========================================================================================================================== AMOUNT AMOUNT OF OF DATE LOAN TYPE PRINCIPAL UNPAID OF AND OF INTEREST PAID OR PRINCIPAL MADE NOTATION CURRENCY LOAN PERIOD PREPAID BALANCE BY - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------
125 EXHIBIT B-1 NOTICE OF BORROWING [Date] National City Bank, as Administrative Agent for the Lenders party to the Credit Agreement referred to below 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Commercial Loan Operations -------------------------- Re: Notice of Borrowing under Credit Agreement, dated as of January 2, 1998, with Advanced Lighting Technologies, Inc. ------------------------------------ Ladies and Gentlemen: The undersigned, Advanced Lighting Technologies, Inc. (the "BORROWER"), refers to the Credit Agreement, dated as of January 2, 1998 (as amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the financial institutions from time to time party thereto (the "LENDERS"), and National City Bank, as Administrative Agent for such Lenders, and hereby gives you notice, irrevocably, pursuant to section 2.3(a) of the Credit Agreement, that the undersigned hereby requests one or more Borrowings under the Credit Agreement, and in that connection sets forth in the schedule attached hereto the information relating to each such Borrowing (collectively the "PROPOSED BORROWING") as required by section 2.3(a) of the Credit Agreement. The undersigned hereby specifies that the Proposed Borrowing will consist of Loans as indicated in the schedule attached hereto. The undersigned hereby certifies that to the best knowledge of the Borrower the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties of the Credit Parties contained in the Credit Agreement and the other Credit Documents are and will be true and correct in all material respects, before and after giving effect to the Proposed Borrowing and to the application of the proceeds thereof, as though made on such date, except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct on and as of such earlier date; and (B) no Default or Event of Default has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds thereof. Very truly yours, ADVANCED LIGHTING TECHNOLOGIES, INC. By: ____________________________________ Title: 126 BORROWING SCHEDULE PROPOSED BORROWING #1: NAME OF BORROWER: ______________________
============================================================================================= BUSINESS DAY INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE PROPOSED BORROWING TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans or Three Months ______________________ Six Months [Circle and or [Alternative Currency] complete one [Circle one of above] of Above] - ---------------------------------------------------------------------------------------------
PROPOSED BORROWING #2: NAME OF BORROWER: ______________________
============================================================================================= BUSINESS DAY INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE PROPOSED BORROWING TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans or Three Months ______________________ Six Months [Circle and or [Alternative Currency] complete one [Circle one of above] of Above] - ---------------------------------------------------------------------------------------------
127 PROPOSED BORROWING #3: NAME OF BORROWER: ______________________
============================================================================================= BUSINESS DAY INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE PROPOSED BORROWING TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans or Three Months ______________________ Six Months [Circle and or [Alternative Currency] complete one [Circle one of above] of Above] - ---------------------------------------------------------------------------------------------
PROPOSED BORROWING #4: NAME OF BORROWER: ______________________
============================================================================================= BUSINESS DAY INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE PROPOSED BORROWING TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans or Three Months ______________________ Six Months [Circle and or [Alternative Currency] complete one [Circle one of above] of Above] - ---------------------------------------------------------------------------------------------
128 EXHIBIT B-2 NOTICE OF CONVERSION [Date] National City Bank, as Administrative Agent for the Lenders party to the Credit Agreement referred to below 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Commercial Loan Operations -------------------------- Re: Notice of Conversion under Credit Agreement, dated as of January 2, 1998, with Advanced Lighting Technologies, Inc. ------------------------------------ Ladies and Gentlemen: The undersigned, Advanced Lighting Technologies, Inc. (the "BORROWER"), refers to the Credit Agreement, dated as of January 2, 1998 (as amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the financial institutions from time to time party thereto (the "LENDERS"), and National City Bank, as Administrative Agent for such Lenders, and hereby gives you notice, irrevocably, pursuant to section 2.6 of the Credit Agreement, that the undersigned hereby requests one or more conversions of Loans denominated in Dollars of one Type into Loans of another Type, pursuant to section 2.6 of the Credit Agreement, and in that connection sets forth in the schedule attached hereto the information relating to each such conversion. Very truly yours, ADVANCED LIGHTING TECHNOLOGIES, INC. By: ____________________________________ Title: 129 CONVERSION SCHEDULE PROPOSED CONVERSION #1 [OF THE LOANS DESCRIBED IN THE FIRST TABLE BELOW INTO LOANS DESCRIBED IN THE SECOND TABLE BELOW]
============================================================================================= DATE INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE LOANS TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans Three Months [Circle One of Six Months Above] [Circle one of above] - ---------------------------------------------------------------------------------------------
============================================================================================= DATE INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE LOANS TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans Three Months [Circle One of Six Months Above] [Circle one of above] - ---------------------------------------------------------------------------------------------
130 PROPOSED CONVERSION #2 [OF THE LOANS DESCRIBED IN THE FIRST TABLE BELOW INTO LOANS DESCRIBED IN THE SECOND TABLE BELOW]
============================================================================================= DATE INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE LOANS TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans Three Months [Circle One of Six Months Above] [Circle one of above] - ---------------------------------------------------------------------------------------------
============================================================================================= DATE INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE LOANS TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans Three Months [Circle One of Six Months Above] [Circle one of above] - ---------------------------------------------------------------------------------------------
131 EXHIBIT B-3 LETTER OF CREDIT REQUEST No. ______________(1) Dated __________(2) National City Bank, as Administrative Agent for the Lenders party to the Credit Agreement referred to below 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Commercial Loan Operations and International Division -------------------------- [Insert Name of applicable Letter of Credit Issuer, if other than National City Bank] Ladies and Gentlemen: The undersigned, Advanced Lighting Technologies, Inc. (the "BORROWER"), refers to the Credit Agreement, dated as of January 2, 1998 (as amended, modified or supplemented from time to time, the "CREDIT AGREEMENT", the capitalized terms defined therein being used herein as therein defined), among the Borrower, the financial institutions from time to time party thereto (the "LENDERS"), and National City Bank, as Administrative Agent for such Lenders. The Borrower hereby requests that ____________________, as a Letter of Credit Issuer, issue a Letter of Credit on ____________________, 199_ (the "DATE OF ISSUANCE") in the aggregate amount of [U.S.$______] [amount in specified Alternative Currency], for the account of ____________________. The beneficiary of the requested Letter of Credit will be ____________________,(3) and such Letter of Credit will be in support of ____________________(4) and will have a stated termination date of ____________________.(5) The Borrower hereby certifies that after giving effect to the requested issuance of the Letter of Credit: (i) $_________ principal amount of Loans will be outstanding; and (ii) the Letter of Credit Outstandings will be $_________. - -------- (1) Letter of Request Number. (2) Date of Letter of Request (at least five Business Days prior to the Date of Issuance or such lesser number as may be agreed by the relevant Letter of Credit Issuer). (3) Insert name and address of beneficiary. (4) Insert description of the supported obligations, name of agreement and/or the commercial transaction to which this Letter of Credit Request relates. (5) Insert last date upon which drafts may be presented (which may not be beyond the 15th Business Day next preceding the Maturity Date). 132 The undersigned hereby certifies that to the best knowledge of the Borrower the following statements are true on the date hereof, and will be true on the Date of Issuance: (A) the representations and warranties of the Credit Parties contained in the Credit Agreement and the other Credit Documents are and will be true and correct in all material respects, before and after giving effect to the issuance of the Letter of Credit requested hereby, as though made on the Date of Issuance, except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct on and as of such earlier date; and (B) no Default or Event of Default has occurred and is continuing, or would result after giving effect to the issuance of the Letter of Credit requested hereby. Copies of all documentation with respect to the supported transaction are attached hereto. Very truly yours, ADVANCED LIGHTING TECHNOLOGIES, INC. By: ____________________________________ Title: 2 133 EXHIBIT B-4 NOTICE OF REDENOMINATION [Date] National City Bank, as Administrative Agent for the Lenders party to the Credit Agreement referred to below 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Commercial Loan Operations -------------------------- Re: Notice of Redenomination of Loans under Credit Agreement, dated as of January 2, 1997, with Advanced Lighting Technologies, Inc. ------------------------------------ Ladies and Gentlemen: The undersigned, Advanced Lighting Technologies, Inc. (the "BORROWER"), refers to the Credit Agreement, dated as of January 2, 1998 (as amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the financial institutions from time to time party thereto (the "LENDERS"), and National City Bank, as Administrative Agent for such Lenders, and hereby gives you notice pursuant to section 2.6(b) of the Credit Agreement, that the undersigned hereby requests one or more Redenominations of Loans into Loans of another currency, and in that connection sets forth in the schedule attached hereto the information relating to each such Redenomination. Very truly yours, ADVANCED LIGHTING TECHNOLOGIES, INC. By: ____________________________________ Title: 134 REDENOMINATION SCHEDULE PROPOSED REDENOMINATION #1 [OF THE LOANS DESCRIBED IN THE FIRST TABLE BELOW INTO LOANS DESCRIBED IN THE SECOND TABLE BELOW]
============================================================================================= DATE INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE LOANS TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans Alternative Currency Three Months and Amount:__________ [Circle One of Six Months Above] [Complete one of above] [Circle one of above] - ---------------------------------------------------------------------------------------------
============================================================================================= DATE INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE LOANS TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans Alternative Currency Three Months and Amount:__________ [Circle One of Six Months Above] [Complete one of above] [Circle one of above] - ---------------------------------------------------------------------------------------------
135 PROPOSED REDENOMINATION #2 [OF THE LOANS DESCRIBED IN THE FIRST TABLE BELOW INTO LOANS DESCRIBED IN THE SECOND TABLE BELOW]
============================================================================================= DATE INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE LOANS TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans Alternative Currency Three Months and Amount:__________ [Circle One of Six Months Above] [Complete one of above] [Circle one of above] - ---------------------------------------------------------------------------------------------
============================================================================================= DATE INTEREST PERIOD OF AGGREGATE AMOUNT IF LOANS ARE LOANS TYPE OF LOANS OF LOANS EUROCURRENCY LOANS - --------------------------------------------------------------------------------------------- Prime Rate One Month _________________, Loans 19____ $____________________ Two Months Eurocurrency Loans Alternative Currency Three Months and Amount:__________ [Circle One of Six Months Above] [Complete one of above] [Circle one of above] - ---------------------------------------------------------------------------------------------
2 136 EXHIBIT C ---------------------------- FORM OF SUBSIDIARY GUARANTY ---------------------------- 137 ================================================================================ THE SUBSIDIARIES OF ADVANCED LIGHTING TECHNOLOGIES, INC. NAMED HEREIN WITH NATIONAL CITY BANK, AS ADMINISTRATIVE AGENT ----------------------------- SUBSIDIARY GUARANTY DATED AS OF JANUARY 2, 1998 ----------------------------- ================================================================================ 138 SUBSIDIARY GUARANTY SUBSIDIARY GUARANTY, dated as of January 2, 1998 (as amended, modified or supplemented from time to time, "THIS GUARANTY"), made by each of the undersigned (each, together with its successors and assigns, a "GUARANTOR" and collectively, the "GUARANTORS"), with NATIONAL CITY BANK, a national banking association, as Administrative Agent (herein, together with its successors and assigns in such capacity, the "ADMINISTRATIVE Agent") for itself and the other Lenders (defined below), for the benefit of (i) the Administrative Agent, (ii) the Lenders from time to time party to the Credit Agreement referred to below, and (iii) the Hedge Creditors referred to below: PRELIMINARY STATEMENTS: (1) Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. (2) This Guaranty is made pursuant to the Credit Agreement, dated as of the date hereof (herein, as amended or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Advanced Lighting Technologies, Inc., an Ohio corporation (herein, together with its successors and assigns, the "BORROWER"), the financial institutions named as lenders therein, and the Administrative Agent, as agent for the Lenders (as defined in the Credit Agreement), providing, among other things, for loans or advances or other extensions of credit to or for the benefit of the Borrower of up to $85,000,000, with such loans or advances being evidenced by promissory notes (the "NOTES", such term to include all notes and other securities issued in exchange therefor or in replacement thereof). (3) The Borrower or any of its Subsidiaries may from time to time be party to one or more Designated Hedge Agreements (as defined in the Credit Agreement). Any institution that participates, and in each case their subsequent assigns, as a counterparty to any Designated Hedge Agreement (collectively, the "HEDGE CREDITORS," and the Hedge Creditors together with the Lenders, collectively the "CREDITORS"), shall benefit hereunder as herein provided. This Guaranty is made for the PRO RATA benefit of the Administrative Agent and the Creditors to guarantee the payment of the principal of and interest on the Notes and the payment and performance by the Borrower of its obligations under the Credit Agreement, the other Credit Documents to which the Borrower is a party, and the payment and performance by the Borrower or any of its Subsidiaries of its obligations under Designated Hedge Agreements. This Guaranty is one of the Credit Documents referred to in the Credit Agreement. (4) Each Guarantor is a direct or indirect Subsidiary of the Borrower. (5) It is a condition to the making of Loans and the issuance of and participation in, Letters of Credit under the Credit Agreement that each Guarantor shall have executed and delivered this Guaranty. (6) Each Guarantor will obtain benefits from the incurrence of Loans by, and the issuance of Letters of Credit for the account of, the Borrower under the Credit Agreement and, accordingly, desires to execute this Guaranty in order to satisfy the condition described in the preceding paragraph and to induce the Lenders to make Loans to, and to issue and participate in Letters of Credit for the account of, the Borrower or any of its Subsidiaries. NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Guarantor, the receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby makes the following representations and warranties to the Administrative Agent and the Creditors and hereby covenants and agrees with the Administrative Agent and each Creditor as follows: 139 1. Each Guarantor, jointly and severally, irrevocably and unconditionally guarantees: (i) to the Administrative Agent and the Lenders the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of (x) the principal of and interest on the Notes issued by, and the Loans made to, the Borrower under the Credit Agreement, (y) all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit issued under the Credit Agreement and (z) all other obligations (including obligations which, but for any automatic stay under section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Borrower to the Lenders under the Credit Agreement (including, without limitation, indemnities, Fees and interest thereon), now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement or any other Credit Document and the due performance and compliance with the terms of the Credit Documents by the Borrower (all such principal, interest, liabilities and obligations being herein collectively called the "CREDIT DOCUMENT OBLIGATIONS"); and (ii) to each Hedge Creditor the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for any automatic stay under section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Borrower or any of its Subsidiaries under any Designated Hedge Agreement, whether now in existence or hereafter arising, and the due performance and compliance by the Borrower and any such Subsidiary with all terms, conditions and agreements contained therein (all such obligations and liabilities, the "HEDGE OBLIGATIONS", and the Hedge Obligations together with the Credit Document Obligations, collectively the "GUARANTEED OBLIGATIONS"). Each Guarantor understands, agrees and confirms that the Creditors may enforce this Guaranty up to the full amount of the Guaranteed Obligations against any Guarantor without proceeding against any other Guarantor, any Borrower or other person, against any security for the Guaranteed Obligations, or under any other guaranty covering all or a portion of the Guaranteed Obligations. All payments by each Guarantor under this Guaranty shall be made in the same currency and type of funds as the Guaranteed Obligations to which such payments relate, and otherwise on the same basis as payments by the Borrower under sections 5.3 and 5.4 of the Credit Agreement. 2. (a) Additionally, each Guarantor, jointly and severally, unconditionally and irrevocably, guarantees the payment of any and all Guaranteed Obligations to the Creditors, whether or not due or payable by the obligor thereon, upon the occurrence in respect of the Borrower of any of the events specified in section 10.1(g) of the Credit Agreement, and unconditionally and irrevocably, jointly and severally, promises to pay such Guaranteed Obligations to the Administrative Agent, for the benefit of the Administrative Agent and the Creditors, on demand, in the same currency and type of funds as the Guaranteed Obligations to which such payments relate, and otherwise on the same basis as payments by the Borrower under sections 5.3 and 5.4 of the Credit Agreement. (b) As a separate, additional and continuing obligation, each Guarantor unconditionally and irrevocably undertakes and agrees, for the benefit of the Administrative Agent and the Creditors, that, should any amounts not be recoverable from the applicable obligor under section 1 for any reason whatsoever (including, without limitation, by reason of any provision of any Credit Document or Designated Hedge Agreement or any other agreement or instrument executed in connection therewith being or becoming void, unenforceable, or otherwise invalid under any applicable law) then, notwithstanding any notice or knowledge thereof by the Administrative Agent, any Creditor, any of their respective Affiliates, or any other person, at any time, each Guarantor as sole, original and independent obligor, upon demand by the Administrative Agent, will make payment to the Administrative Agent, for the account of the Creditors and the Administrative Agent, of all such obligations not so recoverable by way of full indemnity, 2 140 in such currency and otherwise in such manner as is provided in the Credit Documents or the documents governing the Hedge Obligations, as the case may be. 3. The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the indebtedness of the Borrower whether executed by such Guarantor, any other Guarantor, any other guarantor or by any other person, and the liability of each Guarantor hereunder shall not be affected or impaired by (i) any direction as to application of payment by the Borrower or by any other person, (ii) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other person as to the indebtedness of the Borrower, (iii) any payment on or in reduction of any such other guaranty or undertaking, (iv) any dissolution, termination or increase, decrease or change in personnel by the Borrower or (v) any payment made to any Creditor on the indebtedness which any Creditor repays to the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. 4. The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor, any other guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against any Guarantor whether or not action is brought against any other Guarantor, any other guarantor or the Borrower and whether or not any other Guarantor, any other guarantor of the Borrower, or the Borrower, be joined in any such action or actions. 5. Each Guarantor hereby waives notice of acceptance of this Guaranty and notice of any liability to which it may apply, and waives promptness, diligence, presentment, demand of payment, protest, notice of dishonor or nonpayment of any such liabilities, suit or taking of other action by the Administrative Agent or any other Creditor against, and any other notice to, any party liable thereon (including such Guarantor or any other guarantor of the Borrower). 6. Any Creditor may at any time and from time to time without the consent of or notice to, any Guarantor, without incurring responsibility to such Guarantor, without impairing or releasing the obligations of such Guarantor hereunder upon or without any terms or conditions and in whole or in part (but, in each case, in accordance with the Credit Agreement or the Designated Hedge Agreement, as the case may be): (i) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew or alter, any of the Guaranteed Obligations, any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; (ii) sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (iii) exercise or refrain from exercising any rights against the Borrower or others or otherwise act or refrain from acting; (iv) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to creditors of the Borrower; (v) apply any sums by whomsoever paid or whomsoever realized to any liability or liabilities of the Borrower to the Creditors regardless of what liabilities of the Borrower remain unpaid; (vi) consent to or waive any breach of, or any act, omission or default under, any of the Credit Documents, any Designated Hedge Agreement or any of the instruments or agreements referred to therein, 3 141 or otherwise amend, modify or supplement any of the Credit Documents, any Designated Hedge Agreement or any of such other instruments or agreements; and/or (vii) act or fail to act in any manner referred to in this Guaranty which may deprive such Guarantor of its right to subrogation against the Borrower to recover full reimbursement or indemnity for any payments made pursuant to this Guaranty. 7. No invalidity, irregularity or unenforceability of all or any part of the Guaranteed Obligations or of any security therefor shall affect, impair or be a defense to this Guaranty, and this Guaranty shall be primary, absolute and unconditional notwithstanding the occurrence of any event or the existence of any other circumstances which might constitute a legal or equitable discharge of a surety or guarantor except payment in full of the Guaranteed Obligations. 8. This Guaranty is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. No failure or delay on the part of the Administrative Agent or any Creditor in exercising any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly specified are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Creditor would otherwise have. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or any Creditor to any other or further action in any circumstances without notice or demand. It is not necessary for the Administrative Agent or any Creditor to inquire into the capacity or powers of the Borrower or any of its Subsidiaries or the officers, directors, partners or agents acting or purporting to act on its behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 9. Any Indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated to the Indebtedness of the Borrower to the Administrative Agent and the Creditors; and such indebtedness of the Borrower to any Guarantor, if the Administrative Agent, after an Event of Default has occurred so requests, shall be collected, enforced and received by such Guarantor as trustee for the Administrative Agent and the Creditors and be paid over to the Administrative Agent, for the benefit of the Administrative Agent and the Creditors, on account of the Indebtedness of the Borrower to the Administrative Agent and the Creditors, but without affecting or impairing in any manner the liability of such Guarantor under the other provisions of this Guaranty. Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any Indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. 10. (a) Each Guarantor waives any right (except as shall be required by applicable statute and cannot be waived) to require the Administrative Agent or any of the Creditors to: (i) proceed against the Borrower, any other Guarantor, any other guarantor of the Borrower or any other person; (ii) proceed against or exhaust any security held from the Borrower, any other Guarantor, any other guarantor of the Borrower or any other person; or (iii) pursue any other remedy in the Administrative Agent's or the Creditors' power whatsoever. Each Guarantor waives, to the extent permitted by applicable law, any defense based on or arising out of any defense of the Borrower, any other Guarantor, any other guarantor of the Borrower or any other person other than payment in respect of the Guaranteed Obligations or that the Guaranteed Obligations are not yet due and payable, including, without limitation, any defense based on or arising out of the disability of the Borrower, any other Guarantor, any other guarantor of the Borrower or any other person, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in respect of the Guaranteed Obligations. The Administrative Agent and the Creditors may, at their election, foreclose on any security held by the Administrative Agent, the Collateral Agent or the other Creditors by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Administrative Agent or the Creditors may have against 4 142 the Borrower or any other person, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been paid. (b) Each Guarantor waives, to the extent permitted by applicable law, all presentments, demands for performance, protests and notices, including, without limitation, notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional indebtedness. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that the Administrative Agent and the Creditors shall have no duty to advise any Guarantor of information known to them regarding such circumstances or risks. (c) Until such time as the Guaranteed Obligations have been paid in full in cash or Cash Equivalents, each Guarantor hereby waives all rights of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under section 509 of the Bankruptcy Code, or otherwise) to the claims of the Administrative Agent and the Creditors against the Borrower, any other Guarantor or any other guarantor of the Guaranteed Obligations and all contractual, statutory or common law rights of reimbursement, contribution or indemnity from the Borrower or any other Guarantor which it may at any time otherwise have as a result of this Guaranty. 11. If and to the extent that any Guarantor makes any payment to the Administrative Agent (for its own account or for the account of any or all of the Creditors) or any Creditor or to any other person pursuant to or in respect of this Guaranty, any claim which such Guarantor may have against the Borrower by reason thereof shall be subject and subordinate to the prior payment in full of the Guaranteed Obligations to the Administrative Agent and each Creditor. 12. Each Guarantor covenants and agrees that on and after the date hereof and until the termination of the Total Commitment and when no Letter of Credit or Note remains outstanding and all Guaranteed Obligations have been paid in full, such Guarantor shall take, or will refrain from taking, as the case may be, all actions that are necessary to be taken or not taken so that no violation of any provision, covenant or agreement contained in section 8 or 9 of the Credit Agreement, and so that no Default or Event of Default, is caused by the actions of such Guarantor or any of its Subsidiaries. 13. Each Guarantor represents and warrants that: (a) it is a duly organized or formed and validly existing corporation, partnership or limited liability company, as the case may be, in good standing under the laws of the jurisdiction of its formation and has the corporate, partnership or limited liability company power and authority, as applicable, to own its property and assets and to transact the business in which it is engaged and presently proposes to engage; (b) it has the corporate or other organizational power and authority to execute, deliver and carry out the terms and provisions of the Credit Documents to which it is party and has taken all necessary corporate or other organizational action to authorize the execution, delivery and performance of the Credit Documents to which it is party; (c) it has duly executed and delivered each Credit Document to which it is party and each Credit Document to which it is party constitutes the legal, valid and binding agreement or obligation of such Guarantor enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); (d) neither the execution, delivery and performance by such Guarantor of the Credit Documents to which it is party nor compliance with the terms and provisions thereof (i) will contravene 5 143 any provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality applicable to such Guarantor or its properties and assets, (ii) will conflict with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (other than the Liens created pursuant to the Security Documents) upon any of the property or assets of such Guarantor pursuant to the terms of any promissory note, bond, debenture, indenture, mortgage, deed of trust, credit or loan agreement, or any other material agreement or other instrument, to which such Guarantor is a party or by which it or any of its property or assets are bound or to which it may be subject, or (iii) will violate any provision of the certificate or articles of incorporation, code of regulations or by-laws, or other charter documents of such Guarantor; (e) no order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any foreign or domestic governmental or public body or authority, or any subdivision thereof, is required to authorize or is required as a condition to (i) the execution, delivery and performance by such Guarantor of any Credit Document to which it is a party, or (ii) the legality, validity, binding effect or enforceability of any Credit Document to which such Guarantor is a party, other than filings and recordings necessary to establish or perfect any Liens or security interests purported to be granted by any of the Security Documents; (f) there are no actions, suits or proceedings pending or, to, the knowledge of such Guarantor, threatened with respect to such Guarantor which question the validity or enforceability of any of the Credit Documents to which such Guarantor is a party, or of any action to be taken by such Guarantor pursuant to any of the Credit Documents to which it is a party; and (g) as of the date such Guarantor has become a party to this Guaranty, (i) such Guarantor has received consideration which is the reasonable equivalent value of the obligations and liabilities that such Guarantor has incurred to the Administrative Agent and the Creditors under this Guaranty and the other Credit Documents to which such Guarantor is a party; (ii) such Guarantor has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage and is solvent and able to pay its debts as they mature; (iii) such Guarantor owns property having a value, both at fair valuation and at present fair salable value, greater than the amount required to pay its debts; and (iv) such Guarantor is not entering into the Credit Documents to which it is a party with the intent to hinder, delay or defraud its creditors. 14. The Guarantors hereby jointly and severally agree to pay, to the extent not paid pursuant to section 13.1 of the Credit Agreement, all reasonable out-of-pocket costs and expenses of the Administrative Agent and each Creditor in connection with the enforcement of this Guaranty and any amendment, waiver or consent relating hereto (including, without limitation, the reasonable fees and disbursements of counsel employed by the Administrative Agent or any of the Creditors). 15. This Guaranty shall be binding upon each Guarantor and its successors and assigns, and shall inure to the benefit of the Administrative Agent and the Creditors and their successors and assigns to the extent permitted under the Credit Agreement (or any Designated Hedge Agreement, in the case of an Hedge Creditor). 16. Neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated except with the written consent of the Required Lenders (or to the extent required by section 13.12 of the Credit Agreement, with the written consent of each Lender) and each Guarantor affected thereby (it being understood that the addition or release of any Guarantor hereunder shall not constitute a change, waiver, discharge or termination affecting any Guarantor other than the Guarantor so added or released). 17. Each Guarantor acknowledges that an executed (or conformed) copy of each of the Credit Documents has been made available to its principal executive officers and such officers are familiar with the contents thereof. 6 144 18. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default (such term to mean any "Event of Default" as defined in the Credit Agreement or any payment default under any Designated Hedge Agreement after any applicable grace period), each Creditor is hereby authorized at any time or from time to time, without notice to such Guarantor or to any other person, any such notice being expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Creditor to or for the credit or the account of such Guarantor, against and on account of the obligations and liabilities of such Guarantor to such Creditor under this Guaranty, irrespective of whether or not the Administrative Agent or such Creditor shall have made any demand hereunder and although said obligations, liabilities, deposits or claims, or any of them, shall be contingent or unmatured. Each Creditor agrees to promptly notify the relevant Guarantor after any such set off and application, PROVIDED, HOWEVER that the failure to give such notice shall not affect the validity of such set off and application. 19. All notices requests, demands or other communications pursuant hereto shall be made in writing (including telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed, transmitted, cabled or delivered, if to any Guarantor, at the address specified for it in Annex II to the Credit Agreement, with a courtesy copy to the Borrower at its address specified in or pursuant to the Credit Agreement; if to the Administrative Agent or any Lender, as provided in the Credit Agreement; if to any Hedge Creditor, as provided in the Designated Hedge Agreement to which it is a party; or in any case at such other address as any of the persons listed above may hereafter notify the others in writing. All such notices and communication shall be mailed, telegraphed, telexed, facsimile transmitted, or cabled or sent by overnight courier, and shall be effective when received. 20. If claim is ever made upon the Administrative Agent or any Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including the Borrower), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such Guarantor, notwithstanding any revocation hereof or other instrument evidencing any liability of the Borrower, and such Guarantor shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. 21. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE ADMINISTRATIVE AGENT, THE CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF OHIO. Any legal action or proceeding with respect to this Guaranty may be brought in the Courts of the State of Ohio, or of the United States of America for the Northern District of Ohio, and, by execution and delivery of this Guaranty, each Guarantor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered mail, return receipt requested, to each Guarantor at its address specified in or pursuant to this Guaranty, such service to become effective 30 days after such mailing, or such earlier time as may be provided by applicable law. Nothing herein shall affect the right of the Administrative Agent or any of the Creditors to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against each Guarantor in any other jurisdiction. (b) Each Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guaranty or any other Credit Document brought in the courts referred to in section 21(a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that such action or proceeding brought in any such court has been brought in an inconvenient forum. 7 145 (c) EACH GUARANTOR, THE ADMINISTRATIVE AGENT AND EACH CREDITOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 22. In the event that all of the capital stock of one or more Guarantors is sold or otherwise disposed of or liquidated in compliance with the requirements of section 9.2 of the Credit Agreement (or such sale or other disposition has been approved in writing by the Required Lenders (or all Lenders if required by section 13.12 of the Credit Agreement)) and the proceeds of such sale, disposition or liquidation are applied, to the extent applicable, in accordance with the provisions of the Credit Agreement, such Guarantor shall be released from this Guaranty and this Guaranty shall, as to each such Guarantor or Guarantors, terminate, and have no further force or effect (it being understood and agreed that the sale of one or more persons that own, directly or indirectly, all of the capital stock or other equity interests of any Guarantor shall be deemed to be a sale of such Guarantor for the purposes of this section 22). 23. Each Guarantor, in addition to the subrogation rights it shall have against the Borrower under applicable law as a result of any payment it makes hereunder, shall also have a right of contribution against all other Guarantors in respect of any such payment PRO RATA among same based on their respective net fair value as enterprises, PROVIDED any such right of contribution shall be subject and subordinate to the prior payment in full of the Guaranteed Obligations (and such Guarantor's obligations in respect thereof). It is the desire and intent of each Guarantor and the Creditors that this Guaranty shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. If and to the extent that the obligations of any Guarantor under this Guaranty would, in the absence of this sentence, be adjudicated to be invalid or unenforceable because of any applicable state or federal law relating to fraudulent conveyances or transfers, then the amount of such Guarantor's liability hereunder in respect of the Guaranteed Obligations shall be deemed to be reduced AB INITIO to that maximum amount which would be permitted without causing such Guarantor's obligations hereunder to be so invalidated. 24. The Creditors agree that this Guaranty may be enforced only by the action of the Administrative Agent, acting upon the instructions of the Required Lenders, and that no Creditor shall have any right individually to seek to enforce or to enforce this Guaranty or to realize upon the security to be granted by the Security Documents, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Collateral Agent for the benefit of the Creditors upon the terms of this Guaranty and the Security Documents. The Creditors further agree that this Guaranty may not be enforced against any director, officer or employee of any Guarantor. 25. (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in any currency (the "ORIGINAL CURRENCY") into another currency (the "OTHER CURRENCY") each Guarantor, the Administrative Agent and the Creditors, by their acceptance of the benefits hereof, agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the Original Currency with the Other Currency at the Payment Office on the second Business Day preceding that on which final judgment is given. (b) The obligation of a Guarantor in respect of any sum due in the Original Currency from it to any Creditor or the Administrative Agent hereunder shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by such Creditor or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such Other Currency such Creditor or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase U.S. Dollars with such Other Currency; if the amount of the Original Currency so purchased is less than the sum originally due to such Creditor or the Administrative Agent (as the case may be) in the Original Currency, such Guarantor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Creditor or the Administrative Agent (as the case may be) against such loss, and if the amount of the Original Currency so purchased exceeds the sum originally due to any Creditor or the Administrative Agent (as the case may be) in the Original Currency, such Creditor or the Administrative Agent (as the case may be) agrees to remit to such Guarantor such excess. 8 146 26. For the avoidance of doubt, it is noted that Ruud Lighting, Inc. is executing this Guaranty as a Guarantor hereunder only after it has been acquired by the Borrower pursuant to the Ruud Acquisition Documents referred to in the Credit Agreement. 27. This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. * * * 9 147 IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. APL ENGINEERED MATERIALS, INC. VENTURE LIGHTING INTERNATIONAL, INC. SPECIALTY DISCHARGE LIGHTING, INC. METAL HALIDE TECHNOLOGIES, INC. THE LIGHT SOURCE, INC. ENERGY-WISE LIGHTING, INC. HID DIRECT, INC. BRIGHT IDEAS ADVERTISING AND DESIGN, INC. METAL HALIDE CONTROLS, INC. A/K/A CURRENT INDUSTRIES, INC. HID RECYCLING, INC. MICROSUN TECHNOLOGIES, INC. ENERGY EFFICIENT PRODUCTS, INC. BIO LIGHT, INC. ADLT SERVICES, INC. ADVANCED ACQUISITIONS, INC. BY: ___________________________________ NICHOLAS R. SUCIC, VICE PRESIDENT, ON BEHALF OF EACH OF THE ABOVE CORPORATIONS LIGHTING RESOURCES INTERNATIONAL, INC. BALLASTRONIX (DELAWARE), INC. ADVANCED LIGHTING SYSTEMS, INC. BY: ___________________________________ LOUIS S. FISI, SECRETARY, ON BEHALF OF EACH OF THE ABOVE CORPORATIONS RUUD LIGHTING, INC. BY: ___________________________________ ALAN J. RUUD, PRESIDENT 10 148 EXHIBIT D ---------------------------- FORM OF SECURITY AGREEMENT ---------------------------- 149 ================================================================================ ADVANCED LIGHTING TECHNOLOGIES, INC. AS ASSIGNOR THE OTHER ASSIGNORS NAMED HEREIN AS ASSIGNORS WITH NATIONAL CITY BANK, AS COLLATERAL AGENT -------------------------- SECURITY AGREEMENT DATED AS OF JANUARY 2, 1998 -------------------------- ================================================================================ 150 SECURITY AGREEMENT SECURITY AGREEMENT, dated as of January 2, 1998 (as amended, modified, or supplemented from time to time, "THIS AGREEMENT"), among each of the undersigned (each, together with its successors and assigns, an "ASSIGNOR" and collectively, the "ASSIGNORS"), and NATIONAL CITY BANK, a national banking association, as collateral agent (herein, together with its successors and assigns in such capacity, the "COLLATERAL AGENT"), for the benefit of the Secured Creditors (as defined below): PRELIMINARY STATEMENTS: (1) Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. (2) This Agreement is made pursuant to the Credit Agreement, dated as of the date hereof (herein, as amended or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Advanced Lighting Technologies, Inc., an Ohio corporation (herein, together with its successors and assigns, the "BORROWER"), the financial institutions named as lenders therein, and National City Bank, as the Administrative Agent for the Lenders (as defined in the Credit Agreement), providing, among other things, for loans or advances or other extensions of credit to or for the benefit of the Borrower of up to $85,000,000, with such loans or advances being evidenced by promissory notes (the "NOTES", such term to include all notes and other securities issued in exchange therefor or in replacement thereof). (3) The Borrower or any of its Subsidiaries may from time to time be party to one or more Designated Hedge Agreements (as defined in the Credit Agreement). Any institution that participates, and in each case their subsequent assigns, as a counterparty to any Designated Hedge Agreement(collectively, the "HEDGE CREDITORS," and the Hedge Creditors together with the Lenders, collectively the "SECURED CREDITORS"), shall benefit hereunder as herein provided. (4) Pursuant to the Subsidiary Guaranty, each Subsidiary Guarantor has jointly and severally guaranteed to the Secured Creditors the payment when due of the Guaranteed Obligations (as defined in the Subsidiary Guaranty). (5) It is a condition precedent to the making of Loans and the issuance of, and participation in, Letters of Credit under the Credit Agreement that each Assignor shall have executed and delivered to the Collateral Agent this Agreement. (6) Each Assignor desires to execute this Agreement to satisfy the condition described in the preceding paragraph. NOW, THEREFORE, in consideration of the benefit accruing to each Assignor, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby makes the following representations and warranties and hereby covenants and agrees as follows: 1. SECURITY INTERESTS. 1.1. GRANT OF SECURITY INTERESTS. (a) As security for the prompt and complete payment and performance when due of all of the Obligations, each Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent, for the benefit of the Secured Creditors, a continuing security interest of first priority in, all of the right, title and interest of such Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired (collectively, the "COLLATERAL"): 151 (i) each and every Receivable, (ii) all Contracts, together with all Contract Rights arising thereunder, (iii) all Inventory, (iv) all Equipment, (v) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of such Assignor symbolized by the Marks, (vi) all Patents and Copyrights, (vii) all computer programs of such Assignor and all intellectual property rights therein and all other Proprietary Information of such Assignor, including, but not limited to, Trade Secrets, (viii) all Permits, (ix) the Cash Collateral Account and all monies, securities and instruments deposited or required to be deposited in such Cash Collateral Account, (x) all other Goods, General Intangibles, Chattel Paper, Documents and Instruments (other than the Securities and Equity Interests, as defined in, and which are pledged, or not required to be pledged, pursuant to the Pledge Agreement), and (xi) all Proceeds and products of any and all of the foregoing. (b) The security interest of the Collateral Agent under this Agreement extends to all Collateral of the kind which is the subject of this Agreement which any Assignor may acquire at any time during the continuation of this Agreement. 1.2. POWER OF ATTORNEY. Each Assignor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of such Assignor or otherwise) to act, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due or to become due to the Assignor under or arising out of the Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Collateral Agent may deem to be necessary or advisable in the premises, which appointment as attorney is coupled with an interest. 2. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 2.1. NECESSARY FILINGS. Assuming the filing in the appropriate filing offices of those UCC-1 financing statements delivered to the Collateral Agent pursuant to section 6.1(f) of the Credit Agreement and the filings of the patent, trademark and copyright security agreements with the United States Patent and Trademark Office and the United States Copyright Office, all filings, registrations and recordings necessary or appropriate to create, preserve, protect and perfect the security interest granted by such Assignor to the Collateral Agent hereby in respect of the Collateral have been accomplished and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Collateral constitutes a perfected security interest therein superior and prior to the rights of all other persons therein (except that the Collateral may be subject to the security interests evidenced by the financing statements disclosed on Annex A hereto (the "PERMITTED FILINGS")) and subject to no other Liens (except Permitted 2 152 Liens) and is entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests, subject to compliance with the Assignment of Claims Act of 1940, as amended. 2.2. NO LIENS. Each Assignor is, and as to Collateral acquired by it from time to time after the date hereof such Assignor will be, the owner of all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any person (other than evidenced by the Permitted Filings and Liens permitted under the Credit Agreement), and such Assignor shall defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein adverse to the Collateral Agent. 2.3. OTHER FINANCING STATEMENTS. There is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Collateral except as disclosed in Annex A hereto and so long as the Total Commitment has not been terminated or any Letter of Credit remains outstanding or any of the Obligations remain unpaid or any Designated Hedge Agreement remains in effect, no Assignor will execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted by such Assignor herein or as otherwise permitted by the Credit Agreement. 2.4. CHIEF EXECUTIVE OFFICE, ETC; RECORDS. The chief executive office (and the registered office of each Assignor which is a corporation) of each Assignor is located at the address indicated on Annex B hereto. The U.S. Federal Tax I.D. Number of each Assignor is set forth on Annex B hereto. No Assignor will move its chief executive office (or registered office in the case of an Assignor which is a corporation) except to such new location as such Assignor may establish in accordance with the last sentence of this section 2.4. The originals of all documents evidencing all Receivables and Contract Rights of such Assignor and the only original books of account and records of such Assignor relating thereto are, and will continue to be, kept at such chief executive office, or at such new locations as such Assignor may establish in accordance with the last sentence of this section 2.4. All Receivables and Contract Rights of such Assignor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described above, or such new locations as such Assignor may establish in accordance with the last sentence of this section 2.4. No Assignor shall establish new locations for such offices until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice (or such lesser notice as shall be acceptable to the Collateral Agent in the case of a new record location to be established in connection with newly acquired Contracts) of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, and (ii) with respect to such new location, it shall have taken all action, satisfactory to the Collateral Agent, to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. 2.5. LOCATION OF INVENTORY AND EQUIPMENT. All Inventory and Equipment held on the date hereof by each Assignor is located at one of the locations shown on Annex C attached hereto. Each Assignor agrees that all Inventory and Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to or from) any one of the locations shown on Annex C hereto, or such new location as such Assignor may establish in accordance with the last sentence of this section 2.5. An Assignor may establish a new location for Inventory and Equipment only if (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, and (ii) with respect to such new location, it shall have taken all action reasonably satisfactory to the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times in fully perfected and in full force and effect. 2.6. TRADE NAMES; CHANGE OF NAME. No Assignor has or operates in any jurisdiction under, or in the preceding five years has had or has operated in any jurisdiction under, any trade names, fictitious names or other names (including, without limitation, any names of divisions or operations) except its legal name and such other trade, fictitious or other names as are listed on Annex D hereto. Each Assignor has only operated under each name set forth in Annex D in the jurisdiction or jurisdictions set forth opposite each such name on Annex D. No Assignor 3 153 shall change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name except those names listed on Annex D hereto in the jurisdictions listed with respect to such names and new names (including, without limitation, any names of divisions or operations) and/or jurisdictions established in accordance with the last sentence of this section 2.6. No Assignor shall assume or operate in any jurisdiction under any new trade, fictitious or other name or operate under any existing name in any additional jurisdiction until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing in such new name and/or jurisdiction and, in the case of a new name, the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may reasonably request, and (ii) with respect to such new name and/or new jurisdiction, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. 2.7. RECOURSE. This Agreement is made with full recourse to the relevant Assignor and pursuant to and upon all the warranties, representations, covenants, and agreements on the part of such Assignor contained herein, in the Designated Hedge Agreements and otherwise in writing in connection herewith or therewith. 3. SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS. 3.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. As of the time when each of its accounts receivable arises, each Assignor shall be deemed to have represented and warranted that, except in such respects as do not impair in any material respect the value or collectibility of its accounts receivable taken as a whole, and except in such other respects as may from time be disclosed by such Assignor to the Administrative Agent in writing: such receivable, and all records, papers and documents relating thereto (if any) are, to the best knowledge of the Assignor after due inquiry, genuine and in all respects what they purport to be, and that all papers and documents (if any) relating thereto, to the best knowledge of the Assignor after due inquiry, (i) will represent the genuine, legal, valid and binding obligation of the account debtor, subject to adjustments customary in the business of such Assignor, and evidencing indebtedness unpaid and owed by the respective account debtor arising out of the performance of labor or services or the sale or lease and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for general accounting purposes), (iii) will evidence true and valid obligations, enforceable in accordance with their respective terms, subject to adjustments customary in the business of such Assignor, and (iv) will be in compliance and will conform with all applicable federal, state and local laws and applicable laws of any relevant foreign jurisdiction. 3.2. MAINTENANCE OF RECORDS. Each Assignor will keep and maintain at its own cost and expense satisfactory and complete records of its Receivables and Contracts, including, but not limited to, the originals of all documentation (including each Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and such Assignor will make the same available to the Collateral Agent for inspection, at such Assignor's own cost and expense, at any and all reasonable times upon reasonable demand and upon reasonable advance notice. Each Assignor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, copies of all documents evidencing the Receivables and all Contracts, such copies, if requested by the Collateral Agent while an Event of Default is in existence, to be certified as true and complete by an appropriate officer of such Assignor) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by such Assignor) at any time upon its reasonable demand. If the Collateral Agent so directs, each Assignor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, the Receivables and Contracts, as well as books, records and documents of such Assignor evidencing or pertaining to the Receivables with an appropriate reference to the fact that the Receivables and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. 4 154 3.3. MODIFICATION OF TERMS; ETC. No Assignor shall rescind or cancel any indebtedness evidenced by any Receivable or under any Contract, or modify any term thereof or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent, except (i) as permitted by section 3.4 hereof and (ii) so long as no Event of Default is then in existence in respect of which the Collateral Agent has given notice that this exception is no longer applicable, the Assignor may rescind, cancel, modify, make adjustments with respect to, extend or renew any Contracts or indebtedness evidenced by any Receivable, or compromise or settle any such dispute, claim, suit, or legal proceeding, or sell any Receivable or Contract or interest therein, in the ordinary course of business. Each Assignor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and Contracts and will do nothing to materially impair the rights of the Collateral Agent in the Receivables or Contracts. 3.4. COLLECTION. Each Assignor shall endeavor to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, so long as no Event of Default is then in existence in respect of which the Collateral Agent has given notice that this exception is no longer applicable, such Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which such Assignor finds appropriate in accordance with sound business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services. The reasonable out-of-pocket costs and expenses (including, without limitation, attorneys' fees) of collection, whether incurred by such Assignor or the Collateral Agent, shall be borne by such Assignor. 3.5. DIRECTION TO ACCOUNT DEBTORS, ETC. Upon the occurrence and during the continuance of an Event of Default, and if the Collateral Agent so directs the relevant Assignor, to the extent permitted by applicable law, such Assignor agrees (x) to cause all payments on account of the Receivables to be made directly to the Cash Collateral Account, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables to make payments with respect thereto as provided in preceding clause (x), and (z) that the Collateral Agent may enforce collection of any such Receivables and may adjust, settle or compromise the amount of payment thereof. The Collateral Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account in the manner provided in section 7.4 of this Agreement. The reasonable out-of-pocket costs and expenses (including attorneys' fees) of collection, whether incurred by such Assignor or the Collateral Agent, shall be borne by such Assignor. 3.6. INSTRUMENTS. If any Assignor owns or acquires any Instrument, such Assignor will within 10 days notify the Collateral Agent thereof, and upon request by the Collateral Agent promptly deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. 3.7. FURTHER ACTIONS. Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require to give effect to the purposes of this Agreement. 4. SPECIAL PROVISIONS CONCERNING TRADEMARKS. 4.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Each Assignor represents and warrants that it is the true and lawful owner or licensee of the Marks listed in Annex E attached hereto and that said listed Marks constitute all the marks registered in the United States Patent and Trademark Office that such Assignor now owns 5 155 or uses in connection with its business. Each Assignor represents and warrants that it owns or is licensed to use all Marks that it uses, and that it owns all of the registrations listed on Annex E. Each Assignor further warrants that it is aware of no third party claim that any aspect of such Assignor's present or contemplated business operations infringes or will infringe any trademark or service mark in a manner which could have a material effect on the financial condition, business or property of such Assignor. 4.2. LICENSES AND ASSIGNMENTS. Each Assignor hereby agrees not to divest itself of any right under a Mark other than in the ordinary course of business absent prior written approval of the Collateral Agent (which approval shall be given pursuant to instructions from the Required Lenders, which instructions shall not be unreasonably withheld). 4.3. INFRINGEMENTS. Each Assignor agrees, promptly upon learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who may be infringing or otherwise violating any of such Assignor's rights in and to any Mark that has a material effect on the financial condition, business or property of such Assignor taken as a whole (each such Mark, a "SIGNIFICANT MARK"), or with respect to any party claiming that such Assignor's use of any Significant Mark violates any property right of that party, to the extent that such infringement or violation could have a material effect on the financial condition, business or property of such Assignor. Each Assignor further agrees, unless otherwise directed by the Collateral Agent, diligently to prosecute any person infringing any Significant Mark in a manner consistent with its past practice and in the ordinary course of business. 4.4. PRESERVATION OF MARKS. Each Assignor agrees to use or license the use of its Significant Marks in interstate commerce during the time in which this Agreement is in effect, sufficiently to preserve such Marks as trademarks or service marks registered under the laws of the United States. 4.5. MAINTENANCE OF REGISTRATION. Each Assignor shall, at its own expense, diligently process all documents required by the Trademark Act of 1946, 15 U.S.C. Sections 1051 ET SEQ. to maintain trademark registration which would reasonably be expected to have a Material Adverse Effect, including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and shall pay all fees and disbursements in connection therewith, and shall not abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent, which consent shall not be unreasonably withheld. 4.6. FUTURE REGISTERED MARKS. If any mark registration issues hereafter to an Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, within 30 days of receipt of such certificate such Assignor shall deliver a copy of such certificate, and a grant of security in such mark to the Collateral Agent, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially the same as the form hereof. 4.7. REMEDIES. If an Event of Default shall occur and be continuing, the Collateral Agent may, by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of such Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditors, in which case such Assignor agrees to execute an assignment in form and substance reasonably satisfactory to the Collateral Agent, of all its rights, title and interest in and to the Marks to the Collateral Agent for the benefit of the Secured Creditors; (ii) take and use or sell the Marks and the goodwill of such Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of the Assignor in connection with which the Marks have been used; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by the Collateral Agent, change such Assignor's corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that the Collateral Agent may request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office to the Collateral Agent. 6 156 5. SPECIAL PROVISIONS CONCERNING PATENTS AND COPYRIGHTS. 5.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Each Assignor represents and warrants that it is the true and lawful owner or licensee of all rights in the Patents listed in Annex F attached hereto and in the Copyright registrations listed in Annex G attached hereto, that said Patents constitute all the United States patents and applications for United States patents that such Assignor now owns and that said Copyrights constitute all the registered United States copyrights that such Assignor now owns. Each Assignor represents and warrants that it owns or is licensed to practice under all Patents and Copyright registrations that it now owns, uses or practices under. Each Assignor further warrants that it is aware of no third party claim that any aspect of such Assignor's present or contemplated business operations infringes or will infringe any patent or any copyright in a manner which could have a material effect on the financial condition, business or property of such Assignor. 5.2. LICENSES AND ASSIGNMENTS. Each Assignor hereby agrees not to divest itself of any right under a Patent or Copyright other than in the ordinary course of business absent prior written approval of the Collateral Agent (which approval shall be given pursuant to instructions from the Required Lenders, which instructions shall not be unreasonably withheld). 5.3. INFRINGEMENTS. Each Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to such Assignor with respect to any infringement or other violation of such Assignor's rights in any Patent that has a material effect on the financial condition, business or property of such Assignor taken as a whole (each such Patent, a "SIGNIFICANT PATENT") or Copyright, or with respect to any claim that practice of any Significant Patent or Copyright violates any property right of that party, to the extent that such infringement or violation could have a material effect on the financial condition, business or property of such Assignor. Each Assignor further agrees, absent direction of the Collateral Agent to the contrary, diligently to prosecute any person infringing any Significant Patent or Copyright about which it has knowledge in a manner consistent with its past practice and in the ordinary course of business. 5.4. MAINTENANCE OF PATENTS. At its own expense, each Assignor shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. Section 41 to maintain in force rights under each Patent. 5.5. PROSECUTION OF PATENT APPLICATIONS. At its own expense, each Assignor shall diligently prosecute all applications for United States patents listed on Annex F hereto, and shall not abandon any such application, except in favor of a continuation application based on such application, prior to exhaustion of all administrative and judicial remedies, absent written consent of the Collateral Agent, which such consent shall not be unreasonably withheld. 5.6. OTHER PATENTS AND COPYRIGHTS. Within 30 days of acquisition of a United States Patent or Copyright, or of filing of an application for a United States Patent or Copyright, the relevant Assignor shall deliver to the Collateral Agent a copy of said Patent or Copyright, as the case may be, with a grant of security as to such Patent or Copyright, as the case may be, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially the same as the form hereof. 5.7. REMEDIES. If an Event of Default shall occur and be continuing, the Collateral Agent may by written notice to the relevant Assignor take any or all of the following actions: (i) declare the entire right, title and interest of such Assignor in each of the Patents and Copyrights vested, in which event such right, title and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, in which case such Assignor agrees to execute an assignment in form and substance reasonably satisfactory to the Collateral Agent of all its right, title, and interest to such Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors; (ii) take and practice or sell the Patents and Copyrights; (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from practicing the Patents and Copyrights directly or indirectly, and such Assignor shall execute such other and further documents as the Collateral Agent may request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors. 7 157 6. PROVISIONS CONCERNING ALL COLLATERAL. 6.1. PROTECTION OF COLLATERAL AGENT'S SECURITY. Each Assignor will do nothing to impair the rights of the Collateral Agent in the Collateral. Each Assignor will at all times keep its Inventory and Equipment insured in favor of the Collateral Agent, at its own expense, to the extent required by the Credit Agreement against fire, theft and all other risks to which such Collateral may be subject; all policies or certificates with respect to such insurance shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as an additional insured and loss payee) and copies thereof shall be delivered upon request to the Collateral Agent. If an Assignor shall fail to insure such Inventory and/or Equipment to the extent required by the Credit Agreement, or if such Assignor shall fail to so endorse all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and such Assignor agrees to reimburse the Collateral Agent for all costs and expenses of procuring such insurance. The Collateral Agent may apply any proceeds of such insurance in accordance with section 7.4, it being understood and agreed that the Assignor shall be permitted to first use any such proceeds to repair and/or replace the relevant Collateral. Each Assignor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of such Assignor to pay its Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to such Assignor. 6.2. WAREHOUSE RECEIPTS NON-NEGOTIABLE. Each Assignor agrees that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, such warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as such term is used in section 7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law). 6.3. FURTHER ACTIONS. Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent reasonably deems appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. 6.4. FINANCING STATEMENTS. Each Assignor agrees to sign and deliver to the Collateral Agent such financing statements, in form acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant law. Each Assignor will pay any applicable filing fees and related expenses. Each Assignor authorizes the Collateral Agent to file any such financing statements without the signature of such Assignor. 7. REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT. 7.1. REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT. Each Assignor agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, subject to any mandatory requirements of applicable law then in effect, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the Uniform Commercial Code in all relevant jurisdictions and may: (i) personally, or by agents or attorneys, immediately retake possession of the Collateral or any part thereof, from such Assignor or any other person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon such Assignor's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Assignor; 8 158 (ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables) constituting the Collateral to make any payment required by the terms of such instrument or agreement directly to the Collateral Agent; (iii) sell, assign or otherwise liquidate, or direct such Assignor to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; (iv) withdraw any or all monies, securities and/or instruments in the Cash Collateral Account for application to the Obligations in accordance with section 7.4 hereof; and (v) take possession of the Collateral or any part thereof, by directing such Assignor in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event such Assignor shall at its own expense; (A) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent, (B) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in section 7.2, and (C) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; it being understood that such Assignor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by the Assignor of said obligation. 7.2. REMEDIES; DISPOSITION OF THE COLLATERAL. Upon the occurrence and continuance of an Event of Default, any Collateral repossessed by the Collateral Agent under or pursuant to section 7.1 and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale of the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days' written notice to such Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the relevant Assignor or any nominee of the relevant Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' written notice to the relevant Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in the city where such Collateral is located. To the extent permitted by any such requirement of law, the Collateral Agent on behalf of the Secured Creditors (or certain of them) may bid for and become the purchaser (by bidding in Obligations or otherwise) of the Collateral or any item thereof, offered for sale in accordance with this section without accountability to the relevant Assignor (except to the extent of surplus money received as provided in section 7.4). If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the Assignor as hereinabove specified, the Collateral 9 159 Agent need give the relevant Assignor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. 7.3. WAIVER OF CLAIMS. Except as otherwise provided in this Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE ASSIGNOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and each Assignor hereby further waives, to the extent permitted by law: (i) all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or wilful misconduct; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights here-under; and (iii) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the relevant Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against the relevant Assignor and against any and all persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the relevant Assignor. 7.4. APPLICATION OF PROCEEDS. (a) The proceeds of any Collateral obtained pursuant to section 7.1 or disposed of pursuant to section 7.2 shall be applied as follows: (i) first, to the payment of all Obligations to the Collateral Agent of the type described in clauses (iii) and (iv) of the definition of "Obligations" contained in section 9 hereof; (ii) second, to the extent proceeds remain after the application pursuant to preceding clause (i), an amount equal to the outstanding Obligations to the Secured Creditors shall be paid to the Secured Creditors as provided in section 7.4(c) with each Secured Creditor receiving an amount equal to its outstanding Obligations or, if the proceeds are insufficient to pay in full all such Obligations, its Pro Rata Share of the amount remaining to be distributed; and (iii) third, to the extent remaining after the application pursuant to the preceding clauses (i) and (ii) or following the termination of this Agreement pursuant to section 10.9 hereof, to the relevant Assignor or to whomever may be lawfully entitled to receive such payment. (b) For purposes of this Agreement, "PRO RATA SHARE" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, the amount (expressed as a percentage) equal to a fraction the numerator of which is the then outstanding amount of the relevant Obligations owed such Secured Creditor and the denominator of which is the then outstanding amount of all Obligations. (c) All payments required to be made to the (i) Lenders hereunder shall be made to the Administrative Agent for the account of the respective Lenders and (ii) Hedge Creditors hereunder shall be made to the paying agent 10 160 under the applicable Designated Hedge Agreement or, in the case of Designated Hedge Agreements without a paying agent, directly to the applicable Hedge Creditor. (d) For purposes of applying payments received in accordance with this section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Administrative Agent for a determination (which the Administrative Agent agrees to provide upon request to the Collateral Agent) of the outstanding Credit Document Obligations and (ii) upon any Hedge Creditor for determination (which each Hedge Creditor agrees to provide upon request to the Collateral Agent) of the outstanding Hedge Obligations owed to such Hedge Creditor. Unless it has actual knowledge (including by way of written notice from a Secured Creditor) to the contrary, the Administrative Agent under the Credit Agreement, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that (x) no Credit Document Obligations other than principal, interest and regularly accruing fees are owing to any Lender and (y) no Designated Hedge Agreements or any Hedge Obligations with respect thereto are in existence. (e) It is understood that the Assignors shall remain jointly and severally liable to the extent of any deficiency between (x) the amount of the proceeds of the Collateral and the amount of the sum referred to in clause (a)(i) and (ii) of this section 7.4 and (y) the aggregate outstanding amount of the Obligations. 7.5. REMEDIES CUMULATIVE. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement, any Designated Hedge Agreement or the other Credit Documents or now or hereafter existing at law or in equity, or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of one shall not be deemed a waiver of the right to exercise of any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including attorneys' fees, and the amounts thereof shall be included in such judgment. 7.6. DISCONTINUANCE OF PROCEEDINGS. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the relevant Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. 7.7. COLLATERAL AGENT TO ACT ON BEHALF OF SECURED CREDITORS. The Secured Creditors agree by their acceptance of the benefits hereof that this Agreement may be enforced on their behalf only by the action of the Collateral Agent, acting upon the instructions of the Required Lenders (or, after all Credit Document Obligations have been paid in full, instructions of the holders of at least the majority of the outstanding Hedge Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Collateral Agent, for the benefit of the Secured Creditors, upon the terms of this Agreement. 8. INDEMNITY. 8.1. INDEMNITY. (a) The Assignors jointly and severally agree to indemnify, reimburse and hold the Collateral Agent, each Secured Creditor and its respective successors, assigns, employees, agents and servants (hereinafter in this section 8.1 referred to individually as "INDEMNITEE", and collectively as "INDEMNITEES") harmless from any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, suits, judgments and any and all reasonable out-of-pocket costs and expenses (including reasonable attorneys' fees and expenses) (for the 11 161 purposes of this section 8.1 the foregoing are collectively called "EXPENSES") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any Designated Hedge Agreement, any other Credit Document or the documents executed in connection herewith and therewith or in any other way connected with the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), the violation of the laws of any country, state or other governmental body or unit, any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any person (including any Indemnitee), or property damage), or contract claim; PROVIDED that no Indemnitee shall be indemnified pursuant to this section 8.1(a) for losses, damages or liabilities to the extent caused by the gross negligence or wilful misconduct of such person to be indemnified or of any other Indemnitee who is such person or an affiliate of such person. If any claim is asserted against any Indemnitee, such Indemnitee shall promptly notify the Assignor and each Indemnitee may, and if requested by the Assignor shall, in good faith, contest the validity, applicability and amount of such claim with counsel selected by such Indemnitee, and shall permit the Assignor to participate in such contest. In addition, in connection with any claim covered by this section 8.1 against more than one Indemnitee, all such Indemnitees shall be represented by the same legal counsel selected by such Indemnitees; PROVIDED, HOWEVER, that if such legal counsel determines in good faith that representing all such Indemnitees would or could result in a conflict of interest under the laws or ethical principles applicable to such legal counsel or that a defense or counterclaim is available to an Indemnitee that is not available to all such Indemnitees, then to the extent reasonably necessary to avoid such a conflict of interest or to permit unqualified assertion of such defense or counterclaim, each Indemnitee shall be entitled to separate representation by a legal counsel selected by that Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, loss, damage, penalty, claim, demand, action, judgment or suit, such Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the relevant Assignor of any such assertion of which such Indemnitee has knowledge. (b) Without limiting the application of section 8.1(a), the Assignors jointly and severally agree to pay, or reimburse the Collateral Agent for (if the Collateral Agent shall have incurred fees, costs or expenses because an Assignor shall have failed to comply with its obligations under this Agreement or any Credit Document), any and all out-of-pocket fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. (c) Without limiting the application of section 8.1(a) or (b), the Assignors jointly and severally agree to pay, indemnify and hold each Indemnitee harmless from and against any loss, costs, damages and expenses which such Indemnitee may suffer, expend or incur in consequence of or growing out of any material misrepresentation by an Assignor in this Agreement, or in any statement or writing contemplated by or made or delivered pursuant to or in connection with this Agreement. (d) If and to the extent that the obligations of any Assignor under this section 8.1 are unenforceable for any reason, each Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnity obligations of the Assignors contained in this section 8 shall continue in full force and effect notwithstanding the full payment of all the Notes issued under the Credit Agreement and all of the other Obligations and notwithstanding the discharge thereof. 12 162 9. DEFINITIONS. The following terms shall have the meanings herein specified unless the context otherwise requires. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "AGREEMENT" shall mean this Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "ASSIGNOR" shall have the meaning specified in the first paragraph of this Agreement. "BUSINESS DAY" means any day excluding Saturday, Sunday and any day which shall be at the Payment Office of the Administrative Agent a legal holiday or a day on which banking institutions are authorized by law to close. "CASH COLLATERAL ACCOUNT" shall mean a cash collateral account maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Creditors (such cash collateral account shall be interest bearing if it is the general policy of the Collateral Agent in syndicated credit agreements in which it acts as collateral agent to establish such cash collateral accounts as interest bearing accounts; otherwise such cash collateral account shall be non-interest bearing). "CHATTEL PAPER" shall have the meaning assigned that term under the Uniform Commercial Code as in effect on the date hereof in the State of Ohio. "COLLATERAL" shall have the meaning provided in section 1.1(a). "COLLATERAL AGENT" shall have the meaning specified in the first paragraph of this Agreement. "CONTRACT RIGHTS" shall mean all rights of an Assignor (including, without limitation, all rights to payment) under each Contract. "CONTRACTS" shall mean all contracts between an Assignor and one or more additional parties (but shall include Cash Equivalents). "COPYRIGHTS" shall mean any U.S. copyright to which an Assignor now or hereafter has title, as well as any application for a U.S. copyright hereafter made by such Assignor. "CREDIT AGREEMENT" shall have the meaning provided in the Preliminary Statements of this Agreement. "DOCUMENTS" shall have the meaning assigned that term under the Uniform Commercial Code as in effect on the date hereof in the State of Ohio. "EQUIPMENT" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of Ohio, now or hereafter owned by an Assignor and, in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, fixtures and vehicles now or hereafter owned by an Assignor and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "EVENT OF DEFAULT" shall mean any Event of Default under, and as defined in, the Credit Agreement, or any payment default, after any applicable grace period, under any Designated Hedge Agreement. "GENERAL INTANGIBLES" shall have the meaning assigned that term under the Uniform Commercial Code as in effect on the date hereof in the State of Ohio. 13 163 "GOODS" shall have the meaning assigned that term under the Uniform Commercial Code as in effect on the date hereof in the State of Ohio. "HEDGE CREDITORS" shall have the meaning provided in the Preliminary Statements of this Agreement. "INDEMNITEE" shall have the meaning provided in section 8.1. "INSTRUMENT" shall have the meaning assigned that term under the Uniform Commercial Code as in effect on the date hereof in the State of Ohio (but shall not include Cash Equivalents). "INVENTORY" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same; in all stages of production -- from raw materials through work-in-process to finished goods -- and all products and proceeds of whatever sort and wherever located and any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from an Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of Ohio, now or hereafter owned by the Assignor. "LENDER" shall have the meaning provided in the Preliminary Statements of this Agreement. "MARKS" shall mean any trademarks and service marks now held or hereafter acquired by an Assignor, which are registered in the United States Patent and Trademark Office, as well as any unregistered marks used by an Assignor in the United States and trade dress including logos and/or designs in connection with which any of these registered or unregistered marks are used. "OBLIGATIONS" shall mean (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under section 362(a) of the Bankruptcy Code, would become due) of each Assignor to the Lenders, whether now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement and the other Credit Documents to which such Assignor is a party (including without limitation (x) in the case of the Borrower, all such obligations and indebtedness of the Borrower under the Credit Agreement and (y) in the case of each other Assignor, all such obligations and indebtedness under the Subsidiary Guaranty to which such Assignor is a party which relate to any of the foregoing), and the due performance and compliance by each Assignor with all of the terms, conditions and agreements contained in the Credit Agreement and such other Credit Documents (all such obligations and liabilities under this clause (i), being herein collectively called the "CREDIT DOCUMENT OBLIGATIONS"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Assignor or any other Subsidiary of the Borrower now existing or hereafter incurred under, arising out of or in connection with any Designated Hedge Agreement with any of the Secured Creditors including, in the case of Assignors other than the Borrower, all obligations of such Assignor under the Subsidiary Guaranty in respect of any Designated Hedge Agreement, and the due performance and compliance by such Assignor with all of the terms, conditions and agreements contained therein (all such obligations and liabilities under this clause (ii) being herein collectively called the "HEDGE OBLIGATIONS"); (iii) any and all sums advanced by the Collateral Agent in order to preserve the Collateral or preserve its security interest in the Collateral; and (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of any Assignor referred to in clauses (i) and (ii) above, after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs. "PATENTS" shall mean any U.S. patent to which an Assignor now or hereafter has title, as well as any application for a U.S. patent now or hereafter made by an Assignor. 14 164 "PERMITS" shall mean, to the extent permitted to be assigned by the terms thereof of by applicable law, all licenses, permits, rights, orders, variances, franchises or authorizations of or from any governmental authority or agency. "PROCEEDS" shall have the meaning assigned that term under the Uniform Commercial Code as in effect in the State of Ohio on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or an Assignor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to an Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "PROPRIETARY INFORMATION" means all information and know-how worldwide, including, without limitation, technical data; manufacturing data; research and development data; data relating to compositions, processes and formulations, manufacturing and production know-how and experience; management know-how; training programs; manufacturing, engineering and other drawings; specifications; performance criteria; operating instructions; maintenance manuals; technology; technical information; software; engineering and computer data and databases; design and engineering specifications; catalogs; promotional literature; financial, business and marketing plans; inventions and invention disclosures. "RECEIVABLES" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of Ohio, now or hereafter owned by an Assignor and, in any event, shall include, but shall not be limited to, all of an Assignor's rights to payment for goods sold or leased or services performed by an Assignor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (a) all security pledged, assigned, hypothecated or granted to or held by an Assignor to secure the foregoing, (b) all of an Assignor's right, title and interest in and to any goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (d) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (e) all books, records, ledger cards, and invoices relating thereto, (f) all evidences of the filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (g) all credit information, reports and memoranda relating thereto, and (h) all other writings related in any way to the foregoing. "SECURED CREDITORS" shall have the meaning provided in the Preliminary Statements of this Agreement. "SIGNIFICANT MARK" shall have the meaning provided in section 4.3 of this Agreement. "SIGNIFICANT PATENT" shall have the meaning provided in section 5.3 of this Agreement. "TRADE SECRETS" means any secretly held existing engineering and other data, information, production procedures and other know-how relating to the design, manufacture, assembly, installation, use, operation, marketing, sale and servicing of any products or business of an Assignor worldwide whether written or not written. 10. MISCELLANEOUS. 10.1. NOTICES. All notices and other communications hereunder shall be in writing and shall be delivered or mailed by first class mail, postage prepaid, addressed: (i) if to any Assignor, at its address specified in or pursuant to the Credit Agreement or the Subsidiary Guaranty, as the case may be; 15 165 (ii) if to the Collateral Agent, at: National City Bank, as Collateral Agent 1900 East Ninth Street Cleveland, Ohio 44114 Attn.: Anthony J. DiMare Senior Vice President Tel. No.: (216) 575-3344 Fax No.: (216) 575-9396; with copies to: Jones, Day, Reavis & Pogue North Point 901 Lakeside Avenue Cleveland, Ohio 44114 Attn.: John W. Sager, Esq. Tel. No.: (216) 586-7228 Fax No.: (216) 579-0212 (iii) if to any Lender (other than the Collateral Agent), at such address as such Lender shall have specified in the Credit Agreement; (iv) if to any Hedge Creditor, at such address as such Hedge Creditor shall have specified in writing to each Assignor and the Collateral Agent; or at such other address as shall have been furnished in writing by any person described above to the party required to give notice hereunder. 10.2. WAIVER; AMENDMENT. (a) None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Assignor and the Collateral Agent (with the consent of the Required Lenders or, to the extent required by section 13.12 of the Credit Agreement, all of the Lenders), PROVIDED, HOWEVER, that no such change, waiver, modification or variance shall be made to section 7.4 hereof or this section 10.2 without the consent of each Secured Creditor adversely affected thereby, PROVIDED FURTHER that any change, waiver, modification or variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such Class of Secured Creditors. For the purpose of this Agreement, the term "CLASS" shall mean each class of Secured Creditors, I.E., whether (x) the Lenders as holders of the Credit Document Obligations or (y) the Hedge Creditors as holders of the Hedge Obligations. For the purpose of this Agreement, the term "REQUISITE CREDITORS" of any Class shall mean each of (x) with respect to the Credit Document Obligations, the Required Lenders and (y) with respect to the Hedge Obligations, the holders of 51% of all obligations outstanding from time to time under the Designated Hedge Agreements. (b) No delay on the part of the Collateral Agent in exercising any of its rights, remedies, powers and privileges hereunder or partial or single exercise thereof, shall constitute a waiver thereof. No notice to or demand on any Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. 10.3. OBLIGATIONS ABSOLUTE. The obligations of each Assignor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: 16 166 (i) any renewal, extension, amendment or modification of, or addition or supplement to or deletion from other Credit Documents or any Designated Hedge Agreement, or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument or this Agreement except as expressly provided in such renewal, extension, amendment, modification, addition, supplement, assignment or transfer; (iii) any furnishing of any additional security to the Collateral Agent or its assignee or any acceptance thereof or any release of any security by the Collateral Agent or its assignee; (iv) any limitation on any person's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to an Assignor or any Subsidiary of an Assignor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not an Assignor shall have notice or knowledge of any of the foregoing. 10.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon each Assignor and its successors and assigns and shall inure to the benefit of the Collateral Agent and its successors and assigns, PROVIDED that no Assignor may transfer or assign any or all of its rights or obligations hereunder without the written consent of the Collateral Agent. All agreements, statements, representations and warranties made by each Assignor herein or in any certificate or other instrument delivered by such Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement and the other Credit Documents regardless of any investigation made by the Secured Creditors on their behalf. 10.5. HEADINGS DESCRIPTIVE. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 10.6. SEVERABILITY. Any provision of this Agreement which 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. 10.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF OHIO. 10.8. ASSIGNORS' DUTIES. It is expressly agreed, anything herein contained to the contrary notwithstanding, that each Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of an Assignor under or with respect to any Collateral. 10.9. TERMINATION: RELEASE. (a) After the termination of the Total Commitment and all Designated Hedge Agreements, when no Note nor Letter of Credit is outstanding and when all Loans and other Obligations have been paid in full, this Agreement shall terminate, and the Collateral Agent, at the request and expense of the Assignors, will execute and deliver to the relevant Assignor a proper instrument or instruments (including Uniform Commercial Code termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the relevant Assignor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. 17 167 (b) So long as no payment default on any of the Obligations is in existence or would exist after the application of proceeds as provided below, the Collateral Agent shall, at the request of the relevant Assignor, release any or all of the Collateral, PROVIDED that (x) such release is permitted by the terms of the Credit Agreement (it being agreed for such purposes that a release will be deemed "PERMITTED BY THE TERMS OF THE CREDIT AGREEMENT" if the proposed transaction constitutes an exception contained in section 9.2 of the Credit Agreement) or otherwise has been approved in writing by the Required Lenders and (y) the proceeds of such Collateral are to be applied as required pursuant to the Credit Agreement or any consent or waiver entered into with respect thereto. (c) At any time that an Assignor desires that the Collateral Agent take any action to give effect to any release of Collateral pursuant to the foregoing section 10.9(a) or (b), it shall deliver to the Collateral Agent a certificate signed by a principal executive officer stating that the release of the respective Collateral is permitted pursuant to section 10.9(a) or (b). In the event that any part of the Collateral is released as provided in section 10.9(b), the Collateral Agent, at the request and expense of an Assignor, will duly release such Collateral and assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold and as may be in the possession of the Collateral Agent and has not theretofore been released pursuant to this Agreement. The Collateral Agent shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it as permitted by this section 10.9. Upon any release of Collateral pursuant to section 10.9(a) or (b), none of the Secured Creditors shall have any continuing right or interest in such Collateral, or the proceeds thereof. 10.10. COLLATERAL AGENT. By accepting the benefits of this Agreement, each Secured Creditor acknowledges and agrees that the rights and obligations of the Collateral Agent shall be as set forth in section 11 of the Credit Agreement. Notwithstanding anything to the contrary contained in section 10.2 of this Agreement or section 13.12 of the Credit Agreement, this section 10.10, and the duties and obligations of the Collateral Agent set forth in this section 10.10, may not be amended or modified without the consent of the Collateral Agent. 11. EXECUTION BY RUUD LIGHTING, INC. For the avoidance of doubt, it is noted that Ruud Lighting, Inc. is executing this Agreement as an Assignor hereunder only after it has been acquired by the Borrower pursuant to the Ruud Acquisition Documents referred to in the Credit Agreement. 12. WAIVER OF JURY TRIAL. EACH ASSIGNOR AND THE COLLATERAL AGENT EACH HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. * * * 18 168 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. ADVANCED LIGHTING TECHNOLOGIES, INC. APL ENGINEERED MATERIALS, INC. VENTURE LIGHTING INTERNATIONAL, INC. SPECIALTY DISCHARGE LIGHTING, INC. METAL HALIDE TECHNOLOGIES, INC. THE LIGHT SOURCE, INC. ENERGY-WISE LIGHTING, INC. HID DIRECT, INC. BRIGHT IDEAS ADVERTISING AND DESIGN, INC. METAL HALIDE CONTROLS, INC. A/K/A CURRENT INDUSTRIES, INC. HID RECYCLING, INC. MICROSUN TECHNOLOGIES, INC. ENERGY EFFICIENT PRODUCTS, INC. BIO LIGHT, INC. ADLT SERVICES, INC. ADVANCED ACQUISITIONS, INC. BY: ___________________________________ NICHOLAS R. SUCIC, VICE PRESIDENT, ON BEHALF OF EACH OF THE ABOVE CORPORATIONS LIGHTING RESOURCES INTERNATIONAL, INC. BALLASTRONIX (DELAWARE), INC. ADVANCED LIGHTING SYSTEMS, INC. BY: ___________________________________ LOUIS S. FISI, SECRETARY, ON BEHALF OF EACH OF THE ABOVE CORPORATIONS RUUD LIGHTING, INC. BY: ___________________________________ ALAN J. RUUD, PRESIDENT NATIONAL CITY BANK, AS COLLATERAL AGENT, BY: ________________________________________ SENIOR VICE PRESIDENT 19 169 ANNEX A to SECURITY AGREEMENT SCHEDULE OF EXISTING FINANCING STATEMENTS [See attached information.] 170 ADLT WHOLLY-OWNED SUBSIDIARIES UCC FINANCING FIXTURES FILINGS - PERMITTED LIENS =============================================================================== 12/30/97
ADVANCED LIGHTING TECHNOLOGIES, INC. 2307 East Aurora Rd, Suite One Twinsburg, OH 44087 Summit County, OH GS/CA: Yes / Yes Jurisdiction Searched Date Filed File Number Item Type Secured Party Security - --------------------- ---------- ---------- --------- ------------- --------- OH Secretary of State 5/3/96 AM70326 UCC-1 Security Federal S & L EDP Equipment Schedule: 3-GA P 5133 Ass Professional PC; 3-20" Vivitron Color Monitor; 3-Office 95 on CD; 1-GA P5-133 Professional PC; 1-17" Vivitron Color Monitor; 1-Office 95 on CD; 5-GA P5 133 Professional PC; 5-20 Vivitron Color Monitor; 5 MSF etc OH Secretary of State 7/9/96 AM86848 UCC-1 Dove Management EDP Equipment Schedule: 3-GA P 5133 Services, Inc. Professional PC; 3-20" Vivitron Color Monitor; 3-Office 95 on CD; 1-GA P5-133 Professional PC; 1-17" Vivitron Color Monitor; 1-Office 95 on CD; 5-GA P5 133 Professional PC; 5-20 Vivitron Color Monitor; 5 MSF etc OH Secretary of State 7/9/96 AM86907 UCC-1 Dove Management 1-HP Envisex Base Unit 10MB RAM; Services, Inc. 1-Mulltimedia 19" Color X Station; 1-ADD 8MB DRAM; 1-HP UX Keyboard; 1-Digitizing Tablet; 1-Add HP 16 MB RAM; 1- ME 10 Unix; 1-GDBPENT 133P1B P5-133 Pro PC; 1-Office 95 Pro CD; 1-Monitor WW SON 2OVIV 19.1" View etc OH Secretary of State 7/9/96 AM86908 UCC-1 Security Federal S & L 1-HP Envisex Base Unit 10MB RAM; Ass 1-Mulltimedia 19" Color X Station; 1-ADD 8MB DRAM; 1-HP UX Keyboard; 1-Digitizing Tablet; 1-Add HP 16 MB RAM; 1-ME 10 Unix; 1-GDBPENT 133P1B P5-133 Pro PC; 1-Office 95 Pro CD; 1-Monitor WW SON 2OVIV 19.1" View etc OH Secretary of State 7/12/96 AM87777 UCC-1 Dove Management Model #R105, 1-3x5 Bulb Former (5x7) Services, Inc. potential; 1-Lathe Bed; 1-Control Unit OH Secretary of State 7/15/96 AM88264 UCC-1 Security Federal S & L Model #R105, 1-3x5 Bulb Former (5x7) Ass potential; 1-Lathe Bed; 1-Control Unit OH Secretary of State 7/26/96 AM91047 UCC-1 Security Federal S & L 4-Model P5-166 Intel P5-166MHz, Tower Ass Case, KBD, Mouse, 32MB EDO DRAM, 1.44M 3.5" DSHD Floppy...; 4-Soundblaster 16 Bit Sound Card Speakers; 4-Ethernet Card 10/100; 4-Matrox Millenium Video Card 4MB WRAM, 17" Vivitron Monitor, Win '95 Installed etc
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12/30/97 OH Secretary of State 7/26/96 AM91046 UCC-1 Dove Management 4-Model P5-166 Intel P5-166MHz, Tower Services, Inc. Case, KBD, Mouse, 32MB EDO DRAM, 1.44M 3.5" DSHD Floppy...; 4-Soundblaster 16 Bit Sound Card Speakers; 4-Ethernet Card 10/100; 4-Matrox Millenium Video Card 4MB WRAM, 17" Vivitron Monitor, Win '95 Installed etc OH Secretary of State 10/4/96 AN08067 UCC-1 Security Federal S & L 8-PS-166 Intel P5-166MHZ, Tower Case, Ass KBD, Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DSHD Floppy, 2.0GB EIDE WD Hard Drive, CDROM-8X; 8 Ethenet Card 10/100; 8-Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95-Installed, MS Office Prof etc OH Secretary of State 10/4/96 AN08069 UCC-1 Dove Management 8-PS-166 Intel P5-166MHZ, Tower Case, Services, Inc. KBD, Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DSHD Floppy, 2.0GB EIDE WD Hard Drive, CDROM-8X; 8 Ethenet Card 10/100; 8-Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95-Installed, MS Office Prof etc OH Secretary of State 10/7/96 AN08870 UCC-1 Dove Management 1-Rebuilt CHI-Fong Flare Machine Model Services, Inc. #CRFA-12-H; 1-Rebuilt Badalex Stem Machine OH Secretary of State 10/7/96 AN08872 UCC-1 Security Federal S & L 1-Rebuilt CHI-Fong Flare Machine Model Ass #CRFA-12-H; 1-Rebuilt Badalex Stem Machine OH Secretary of State 12/4/96 AN23135 UCC-1 Security Federal S & L 1-CM Furnance 10-0022 34D, 346-36-1Z- Ass 240V-3PH 480V-3PE OH Secretary of State 12/4/96 AN23138 UCC-1 Dove Management 1-CM Furnance 10-0022 34D, Services, Inc. 346-36-1Z-240V-3PH 480V-3PE OH Secretary of State 12/11/96 AN25035 UCC-1 Security Federal S & L 4-Allsteel Interchange Item APCF4130N Ass Panel Complete, Non-Powered, Dimensions 41"x30", Group 2 Avalon AV9V5 Northern Lights, Paint P92 Pumice, Tag Warren/W459C; 12-Allsteel Interchange Item APCF4148P Panel Complete, Powered, Dimensions 41"x48", etc OH Secretary of State 12/11/96 AN25032 UCC-1 Dove Management 4-Allsteel Interchange Item APCF4130N Services, Inc. Panel Complete, Non-Powered, Dimensions 41"x30", Group 2 Avalon AV9V5 Northern Lights, Paint P92 Pumice, Tag Warren/W459C; 12-Allsteel Interchange Item APCF4148P Panel Complete, Powered, Dimensions 41"x48", etc OH Secretary of State 12/27/96 AN28794 UCC-1 Security Federal S & L 11 P5-166 Pentium PCs, GDBPENT166PIB Ass Seiral Nos - #6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11-MONO17010AAWW CrystalScan 700 Monitor (15.9 viewable); 11-SWRKIT125ABUS Office '95 Pro CD; 1-FFAH01; Freight & Handling
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12/30/97 OH Secretary of State 12/27/96 AN28793 UCC-1 Dove Management 11 P5-166 Pentium PCs, GDBPENT166PIB Services, Inc. Seiral Nos - #6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11-MONO17010AAWW CrystalScan 700 Monitor (15.9 viewable); 11-SWRKIT125ABUS Office '95 Pro CD: 1-FFAH01; Freight & Handling OH Secretary of State 4/15/97 AN55732 UCC-1 Security Federal S & L 1-Allsteel Dedicated Truck for W459C, Ass From Allsteel to Venture, Tag Warren/W459R; 1-Sandglo Item 1/4" Plate Glass w/Polished Edges (2 Pieces) Approx Dim 168"x48", Tag Warren/WA624; 15- Allsteel Interchange Item AEP Panel Port, Color Black, Tag etc OH Secretary of State 4/15/97 AN55733 UCC-1 Dove Management 1-Allsteel Dedicated Truck for W459C, Services, Inc. From Allsteel to Venture, Tag Warren/W459R; 1-Sandglo Item 1/4" Plate Glass w/Polished Edges (2 Pieces) Approx Dim 168"x48", Tag Warren/WA624; 15- Allsteel Interchange Item AEP Panel Port, Color Black, Tag etc OH Secretary of State 4/15/97 AN55775 UCC-1 Dove Management 10-P5-166 Pentium PC, S/N GDBPENT 166PIB; Services, Inc. 10-P5-166 Midtower/GDB Ser#-6875988, 5989, 5990, 5991, 5992, 5993, 5994, 5995, 5996, 5997; 10-SWRKIT125AAUS/Microsoft '95; 10-MONO21005AAWW Vivitron 1100 Viewable area OH Secretary of State 4/15/97 AN55777 UCC-1 Security Federal S & L 10-P5-166 Professional Pentium PC, Ass Serial No. GDBPENT166PIB 6875988, 5989, 5990, 5991, 5992, 5993, 5994, 5995, 5996, 5997; 10-SWRKIT125AAUS Microsoft Office '95 Professional on CD; 10 MONO21005AAWW Vivitron 1100 with 19.7 Viewable area OH Secretary of State 5/8/97 AN63212 UCC-1 The Croghan Colonial 1-Used 13"x25" Clausing Colchester Bank Geared Head Tool Room Engine Lathe, Model 8014, Serial No.5/0013/11963DD Complete with Accessories; 1-2 Axis AUC-RITE Tuenmate Digital Readout Assembly Complete OH Secretary of State 5/20/97 AN66607 UCC-1 Dove Management 10-P5-166 Professional PC Ser# Services, Inc. GDBPENT166PIH 7007797, 7798, 7799, 7800, 7801, 7802, 7803, 7804, 7805, 7806; 10- MONO1700AAWW Vivitron 700 Monitor (15.9 viewable); 10-SWRKIT125AAUS Microsoft Office 95 Professional on CD; 1-FFAH01 OH Secretary of State 5/20/97 AN66609 UCC-1 Security Federal S & L 10-P5-166 Professional PC Ser# Ass GDBPENT166PIH 7007797, 7798, 7799, 7800, 7801, 7802, 7803, 7804, 7805, 7806; 10-MONO17008AAWW Vivitron 700 Monitor (15.9 viewable); 10-SWRKIT125AAUS Microsoft Office 95 Professional on CD; 1-FFAH01 OH Secretary of State 5/27/97 AN68135 UCC-1 Security Federal S & L 1-Electro Static Coater MDL SCO-4000, Ass Ser 10687-C, Spec-XM 0007
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12/30/97 OH Secretary of State 5/27/97 AN68134 UCC-1 Dove Management 1-Electro Static Coater MDL SCO-4000, Services, Inc. Ser 10687-C, Spec-XM 0007 OH Secretary of State 6/27/97 AN76986 UCC-1 Security Federal S & L 3-Allsteel Item APCF-6524N Non-Powered Ass Panel, Dimensions 65"x24", Fabric Grade 1 Roberts Ridge VV9RG, Paint Green Non- Metallic, Tag Warren/W602A/Area A/MKTING-Sales; 12-Allsteel Item APCF-6536P Powered Panel, Dimensions 65"x36", Fabric Grade 1 etc OH Secretary of State 6/27/97 AN76987 UCC-1 Dove Management 3-Allsteel Item APCF-6524N Non-Powered Services, Inc. Panel, Dimensions 65"x24", Fabric Grade 1 Roberts Ridge VV9RG. Paint Green Non- Metallic, Tag Warren/W602A/Area A/MKTING-Sales; 12-Allsteel Item APCF-6536P Powered Panel, Dimensions 65"x36", Fabric Grade 1 etc OH Secretary of State 7/21/97 AN82970 UCC-1 Dove Management 1-Electro Static Coater, MDL SCO-400 C Services, Inc. Ser 10687-E, Spec-KM 0007 OH Secretary of State 7/21/97 AN82972 UCC-1 Dove Management Henredon Item C9386B Sofa-516B80252, Services, Inc. Dimen 76"L x39"D x 35"H, Tag Warren/WA824; Key City Item 313 Lose Pillow Back Chair-189-75535, Dimen 36"Wx41"D x 38"H, Tag Warren/WA824; Stanley Item 589-15-01 SQ Cocktail Table 356-87857, Dimen 40"W x 40"D x OH Secretary of State 7/21/97 AN82968 UCC-1 Security Federal S & L 1-Electro Static Coater, MDL SCO-400 Ass C Ser 10687-E, Spec-KM 0007 OH Secretary of State 7/21/97 AN82965 UCC-1 Dove Management 15-SOFTW SYMIX V .40 User License; Services, Inc. 1-SOFTW Migrate 8-Progress Users from SCO to HP Enterprise Server & 8 Clients; 16-SOFTW Progress Users & Database Servers; 1-SOFTW Progress 4GL Development System; 1-HARDW HP 9000...Server, 128mb of Memory 2 etc OH Secretary of State 7/21/97 AN82964 UCC-1 Security Federal S & L 15-SOFTW SYMIX V .40 User License; Ass 1-SOFTW Migrate 8-Progress Users from SCO to HP Enterprise Server & 8 Clients; 16-SOFTW Progress Users & Database Servers; 1-SOFTW Progress 4GL Development System; 1-HARDW HP 9000...Server, 128mb of Memory 2 etc OH Secretary of State 7/21/97 AN82971 UCC-1 Security Federal S & L Henredon Item C9386B Sofa-516B80252, Ass Dimen 76"L x39"D x 35"H, Tag Warren/WA824; Key City Item 313 Lose Pillow Back Chair-189-75535, Dimen 36"W x 41"D x 38"H, Tag Warren/WA824; Stanley Item 589-15-01 SQ Cocktail Table 356- 87857, Dimen 40"W x 40"D x OH Secretary of State 8/7/97 AN87472 UCC-1 Dove Management 12-GA-G5-200 Professional PC Ser# Services, Inc. 7257128, 7129, 7130, 7131, 7132, 7133, 7134, 7135, 7136, 7137, 7138, 7139; 12-17" Vivitron Monitor; 12-MS Office Professional '95 on CD
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12/30/97 OH Summit County 5/13/96 504472 UCC-1(FX) Security Federal S & L EDP Equipment Schedule: 3-GA P 5133 Ass Professional PC; 3-20" Vivitron Color Monitor; 3-Office 95 on CD; 1-GA P5-133 Professional PC; 1-17" Vivitron Color Monitor; 1 Office 95 on CD; 5-GA P5 133 Professional PC; 5-20" Vivitron Color Monitor; 5 MSF etc OH Summit County 7/9/96 506341 UCC-1(FX) Security Federal S & L 1-HP Envisex Base Unit, 10MB Ram; Ass 1-Multimedia 19" Color X Station; 1-ADD 8MB DRAM; 1-HP-UX Keyboard; 1-Digitizing Tablet; 1-ADD HP 16 MB Ram; 1-ME 10 Unix; 1-GDBPent 133P1B P5-133 Pro PC; 1-Office 95 Pro CD; 1-Monitor WW SON 20 VIV, 19.1" View etc OH Summit County 7/11/96 506390 UCC-1(FX) Security Federal S & L Model #R05, 1-3x5 Bulb Former 5x7 Ass potential; 1 Lathe Bed; 1-Control Unit OH Summit County 7/12/96 506483 UCC-1(FX) Dove Management Model #R105, 1-3x5 Bulb Former 5x7 Services, Inc. potential; 1 Lathe Bed; 1-Control Unit OH Summit County 7/12/96 506484 UCC-1(FX) Dove Management EDP Equipment Schedule: 3-GA P 5133 Services, Inc. Professional PC; 3-20" Vivitron Color Monitor; 3-Office 95 on CD; 1-GA P5-133 Professional PC; 1-17" Vivitron Color Monitor; 1-Office 95 on CD; 5-GA P5 133 Professional PC; 5-20" Vivitron Color Monitor; 5-MSF etc OH Summit County 7/24/96 506906 UCC-1(FX) Dove Management 4-Model P5-166 Intel P5-166MHz, Services, Inc. Tower Case, KBD, Mouse, 32MB EDO DRAM, 1.44M 3.5" DSHD Floppy, 2.56GB EIDE Hard Drive, CDROM-8X; 4-Soundblaster 16Bit Sound Card-Speakers; 4-Ethernet Card 10/100; 4-Matrox Millenium Video Card-4MB WRAM, 17" Vivitro etc OH Summit County 7/24/96 506905 UCC-1(FX) Security Federal S & L 4-Model P5-166 Intel P5-166MHz, Tower Ass Case, KBD, Mouse, 32MB EDO DRAM, 1.44M 3.5" DSHD Floppy, 2.56GB EIDE Hard Drive, CDROM-8X; 4-Soundblaster l6Bit Sound Card-Speakers; 4-Ethernet Card 10/100; 4-Matrox Milllenium Video Card-4MB WRAM, 17" Vivitro etc OH Summit County 10/1/96 509001 UCC-1(FX) Security Federal S & L 1-Rebuilt CHI-Fong Flare Machine Model # Ass CRFA-12-H, 1-Rebuilt Badalex Stem Machine* OH Summit County 10/1/96 509002 UCC-1(FX) Dove Management 1-Rebuilt CHI-Fong Flare Machine Model # Services, Inc. CRFA-12-H, 1-Rebuilt Badalex Stem Machine OH Summit County 10/2/96 509031 UCC-1(FX) Security Federal S & L 8-PS-166 Intel P5-166 MHZ, Tower Case, Ass KBD, Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DSHD Floppy, 2.0GB EIDE WD Hard Drive, CDROM-8X; 8-Ethenet Card 10/100; 8 Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95 Installed, MS Office Prof etc
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12/30/97 OH Summit County 10/2/96 509032 UCC-1(FX) Dove Management 8-PS-166 Intel P5-166 MHZ, Tower Case, Services, Inc. KBD, Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DSHD Floppy, 2.0GB EIDE WD Hard Drive, CDROM-8X; 8-Ethenet Card 10/100; 8 Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95 Installed, MS Office Prof etc OH Summit County 12/5/96 510990 UCC-1(FX) Security Federal S & L 1-CM Furnance 10-0022-34D, Ass 346-36-1Z-240V-3PH 480V-3PE OH Summit County 12/5/96 510991 UCC-1(FX) Dove Management 1 CM Furnance 10-0022-34D, Services, Inc. 346-36-1Z-240V-3PH 480V-3PH OH Summit County 12/6/96 511013 UCC-1(FX) Security Federal S & L Attachment missing Ass OH Summit County 12/6/96 511014 UCC-1(FX) Dove Management Attachment missing Services, Inc. OH Summit County 12/27/96 511756 UCC-1(FX) Security Federal S & L 11-P5-166 Pentium PC GDBPent166PIB Ass Serial Nos 6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11-MONO17010AAWW CrystalScan 700 Monitor (15.9 viewable); 11-SWRKIT125ABUS Office '95 Pro CD; 1-FFAHO1; Freight & Handling OH Summit County 12/27/96 511757 UCC-1(FX) Dove Management 11-P5-166 Pentium PC GDBPent166PIB Services, Inc. Serial Nos 6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11-MONO17010AAWW CrystalScan 700 Monitor (15.9 viewable); 11-SWRKIT125ABUS Office '95 Pro CD; 1-FFAHO1; Freight & Handling OH Summit County 4/18/97 21001204 UCC-1(FX) Dove Management P5-166 Professional Pentium PC, Services, Inc. SN GDBPENT166PIB; 10-P5-166 Midtower/GDB Ser # 6875988, 5989, 5990, 5991, 5992, 5993, 5994, 5995, 5996, 5997; 10 SWRKIT125AAUS/Microsoft 95; 10-MONO21005AAWW Vivitron 1100 Viewable Area OH Summit County 4/18/97 21001202 UCC-1(FX) Dove Management 1-Allsteel Dedicated Truck for W459C From Services, Inc. Allsteel to Venture, Tag Warren/W459R; 1-Sandglo Item 1/4" Plate Glass w/Polished Edges (2 pieces), Approx Dim 168"x48", Tag Warren/WA624; 15- Allsteel Interchange Item AEP Panel Port, Color Black, Tag etc OH Summit County 4/18/97 21001203 UCC-1(FX) Security Federal S & L 1-Allsteel Dedicated Truck for W459C From Ass Allsteel to Venture, Tag Warren/W459R; 1-Sandglo Item 1/4" Plate Glass w/Polished Edges (2 pieces), Approx Dim 168"x48", Tag Warren/WA624; 15-Allsteel Interchange Item AEP Panel Port, Color Black, Tag etc
6 176
12/30/97 OH Summit County 5/20/97 21002537 UCC-1(FX) Dove Management 10-166 PIH, P5-166 Professional PC Ser# Services, Inc. GDBPENT166PIH 700797, 7798, 7799, 7800, 7801, 7802, 7803, 7804, 7805, 7806; 10-MONO17008AAWW Vivitron 700 Monitor (15.9 viewable); 10 SWRKIT125AAUS, Microsoft Office 95 Professional on CD; 1-FFAH01 OH Summit County 5/20/97 21002538 UCC-1(FX) Security Federal S & L 10-166 PIH, P5-166 Professional PC Ser# Ass GDBPENT166PIH 7007797, 7798, 7799, 7800, 7801, 7802, 7803, 7804, 7805, 7806; 10-MONO17008AAWW Vivitron 700 Monitor (15.9 viewable); 10 SWRKIT125AAUS, Microsoft Office 95 Professional on CD; 1-FFAH01 OH Summit County 5/21/97 21002574 UCC-1(FX) Security Federal S & L 1-Electro Static Coater, MDL SCO-4000, Ass Ser 10687-C, Spec-XM 0007 OH Summit County 5/21/97 21002575 UCC-1 (FX) Dove Management 1-Electro Static Coater, MDL Services, Inc. SCO-4000, Ser 10687-C, Spec-XM 0007 OH Summit County 6/19/97 21003748 UCC-1 (FX) Dove Management 3-Allsteel Item APCF-6524N Non-Powered Services, Inc. Panel, Dimensions 65"x24", Fabric Grade 1 Roberts Ridge VV9RG, Paint Green Non- Metallic, Tag Warren/W602A/Area A/ MKTING-Sales; 12-Allsteel Item APCF-6536 Powered Panel, Dimensions 65"x36", Fabric Grade etc OH Summit County 6/19/97 21003749 UCC-1(FX) Security Federal S & L 3-Allsteel Item APCF-6524N Non-Powered Ass Panel, Dimensions 65"x24", Fabric Grade 1 Roberts Ridge VV9RG, Paint Green Non- Metallic, Tag Warren/W602A/Area A/ MKTING-Sales; 12-Allsteel Item APCF-6536 Powered Panel, Dimensions 65"x36", Fabric Grade etc OH Summit County 7/18/97 21005101 UCC-1(FX) Security Federal S & L 15-SOFTW SYMIX V.40 User License; 1 SOFTW Ass Migrate 8-Progress Users from SCO to HP Enterprise Server & 8 Clients; 16 SOFTW Progress User & Database Servers; 1 SOFTW Progress 4GL Development System; 1 HARDW Hewlett-Packard 9000 D210 Server, 128mb etc OH Summit County 7/18/97 21005100 UCC-1(FX) Dove Management 15-SOFTW SYMIX V.40 User License; 1 SOFTW Services, Inc. Migrate 8-Progress Users from SCO to HP Enterprise Server & 8 Clients; 16 SOFTW Progress User & Database Servers; 1 SOFTW Progress 4GL Development System; 1 HARDW Hewlett-Packard 9000 D210 Server, 128mb etc OH Summit County 7/23/97 21005340 UCC-1(FX) Security Federal S & L 1-Electro Static Coater, MDL SCO-400 C, Ass Ser 10687-E, Spec-KM 0007 OH Summit County 7/23/97 21005341 UCC-1(FX) Dove Management 1-Electro Static Coater, MDL SCO-400 C, Services, Inc. Ser 10687-E, Spec-KM 0007*
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12/30/97 OH Summit County 7/31/97 21005652 UCC-1(FX) Security Federal S & L Henredon Item C9386B Sofa-516B-80252, Ass Dimen 76"L x 39"D x 35"H, Tag Warren/WA824; Key City Item 313 Lose Pillow Back Chair 189-75535, Dimen 36"W x 41"D x 38"H, Tag Warren/WA824; Stanley Item 589-15-01 SQ Cocktail Table 356- 87857, Dimen 40"W x 40" etc OH Summit County 7/31/97 21005653 UCC-1(FX) Dove Management Henredon Item C9386B Sofa-516B-80252, Services, Inc. Dimen 76"L x 39"D x 35"H, Tag Warren/WA824; Key City Item 313 Lose Pillow Back Chair 189-75535, Dimen 36"W x 41"D x 38"H, Tag Warren/WA824; Stanley Item 589-15-01 SQ Cocktail Table 356- 87857, Dimen 40"W x 40" etc OH Summit County 8/13/97 21006106 UCC-1(FX) Dove Management 12-GA G5-200 Professional PC Services, Inc. Ser# 7257128, 7129, 7130, 7131, 7132, 7133, 7134, 7135, 7136, 7137, 7138, 7139; 12-17" Vivitron Monitor; 12-MS Office Professional 95 on CD APL ENGINEERED MATERIALS, INC. 2307 East Aurora Rd, Suite One Twinsburg, OH 44087 Summit County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- IL Secretary of State 8/14/91 2883308 UCC-1 The Champaign National Rents re real estate Bank IL Secretary of State 11/17/95 3471524 UCC-1 Aldrich Chemical Ownership interest of Debtor in Company, Inc. Aldrich- APL, LLC IL Secretary of State 7/9/96 3562595 CONT BankIllinois, Successor Rents re real estate The Champaign National Bank OH Secretary of State 1/24/96 AM45283 UCC-1 Levetz Investments, Inc. 1-Beechcraft King Air 300, aircraft, all parts & accessories thereto, all instruments, accounts & chattel paper arising therefrom (including leases & conditional sales contracts), & the proceeds of all of the foregoing, including proceeds in the etc
8 178
12/30/97 ENERGY-WISE LIGHTING, INC. 2307 East Aurora Rd, Suite One Twinsburg, OH 44087 Summit County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Secretary of State 11/18/94 AL43453 UCC-1 General Electric Inventory consisting of lamps & light Company GE Lighting bulbs (including w/o limitation, incandescent, fluorescent, high intensity discharge, quartz, photo, miniature, holiday & accessories & parts relating thereto), lighting fixtures including parts & components etc OH Secretary of State 5/24/96 05249617301 AMEND General Electric Inventory consisting of lamps & light Company GE Lighting bulbs (including w/o limitation, incandescent, fluorescent, high intensity discharge, quartz, photo miniature, holiday & accessories & parts relating thereto), lighting fixtures including parts & components etc OH Summit County 11/15/94 487528 UCC-1(FX) General Electric Inventory consisting of lamps & light Company GE Lighting bulbs (including w/o limitation, incandescent, fluorescent, high intensity discharge, quartz, photo, miniature, holiday & accessories & parts relating thereto), lighting fixtures including parts & components etc OH Summit County 6/5/96 487528 AMEND(FX) General Electric Inventory consisting of lamps & light Company GE Lighting bulbs (including w/o limitation, incandescent, fluorescent, high intensity discharge, quartz, photo, miniature, holiday & accessories & parts relating thereto), lighting fixtures including parts & components etc LIGHTING RESOURCES INTERNATIONAL, INC. 3000 Seneca Industrial Pkwy Bellevue, OH 44811 Huron County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Huron County 5/15/97 77266 UCC-1(FX) AT & T Capital Leasing Sharp SD2060, Sharp SF2214, Sharp FO6500, Services, Inc. Sharp FO5400, Equipment Lease No 620826, This transaction is a true lease & is not intended by the parties as a secured transaction. Filing is only intended to make the true lease a matter of public rec etc OH Secretary of State 4/26/96 AM68503 UCC-1 AT & T Credit Definity & Intuity under lease No.5618813 Corporation [illegible] & all attachments, accessories, additions, substitutions, products, replacements & rentals & a right to use license for any software related to any of the foregoing, & proceeds therefrom etc
9 179
12/30/97 OH Secretary of State 1/8/97 AN31531 UCC-1 Brennan Leasing Yale Industrial Fork Lift Truck Model Company GLC050DENUAE083, Ser No. N546824 OH Secretary of State 5/5/97 AN61511 UCC-1 AT & T Capital Leasing Sharp SD2060, Sharp SF2214, Sharp FO6500, Services, Inc. Sharp FO5400 - Equipment Lease No 00620826. This transaction is a true lease & is not intended by the parties as a secured transaction. Filing is only intended to make the true lease a matter of public etc MICROSUN Technologies, Inc. 2307 East Aurora Rd, Suite One Twinsburg, OH 44087 Summit County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Cuyahoga County 11/17/97 1402406 UCC-1(FX) Sanwa Business Credit 1-New Mitsubishi Forklift Model: FG15B-LP Corporation S/N: AF31-51256 including, but not limited to, all replacements, parts, repairs, attachments & accessories incorporated herein or affixed thereto now owned or hereafter acquired OH Secretary of State 11/19/97 AP0004062 UCC-1 Sanwa Business Credit [Attachment missing- not available] Corporation RUUD LIGHTING, INC. 9201 Washington Ave Racine, WI 54406 Racine County, WI GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- WI Secretary of State 5/11/95 7501507516 UCC-1 General Electric Inventory consisting of lamps & light Company, GE Lighting bulbs now or hereafter sold or consigned to the debtor by General Electric Company & A/R, contracts rights, chattel paper, & any other right to the payment of money & security therefore, now or hereafter etc
10 180
12/30/97 SPECIALTY DISCHARGE LIGHTING, INC. 101 Shawnee Dr Bellevue, OH 44811 Huron County, OH GS/CA: Yes / No JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Huron County 6/17/96 75404 UCC-1(FX) AT & T Capital Leasing P5-133 Pro Gateway 2000, P5-150 Services, Inc. Gateway 2000. Equipment Lease No.00561731. This transaction is a true lease & is not intended by the parties as a secured transaction. Filing is only intended to make the true lease a matter of public record. Etc OH Secretary of State 8/30/93 AK43106 UCC-1 AT & T Capital HP-54600A Digital Oscilloscope Corporation S/N 3227A07440; HP 54650A HP-IB Interface S/N 3230A03925; TEK P6015A High Voltage Probe S/N B010117 OH Secretary of State 6/17/96 AM81510 UCC-1 AT & T Capital Leasing P5-133 Pro Gateway 2000, P5-150 Services, Inc. Gateway 2000. Equipment Lease No. 00561731. This transaction is a true lease & is not intended by the parties as a secured transaction. Filing is only intended to make the true lease a matter of public record. etc THE LIGHT SOURCE, INC. 32000 Aurora Rd Solon, OH 44139 Cuyahoga County, OH GS/CA: Yes / No JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Secretary of State 7/13/95 AM00017 UCC-1 Osram Sylvania, Inc. All Osram Sylvania [illegible]... manufactured and/or branded... merchandise inventory including... bulbs, flourscent lamps, headlamps.. carbide, glass, etc regardless of type...or hereafter acquired & any A/R created or proceeds received as a etc VENTURE LIGHTING INTERNATIONAL, INC. 32000 Aurora Rd Solon, OH 44139 Cuyahoga County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ----------- --------- ------------- -------- OH Cuyahoga County 5/17/91 1197400 CONT(FX) Philips Lighting Co. Computer print-out no detail
11 181
12/30/97 OH Cuyahoga County 5/17/91 1023621 UCC-1(FX) Philips Lighting Co. Computer print-out no detail OH Cuyahoga County 9/8/93 1259219 UCC-1(FX) Yale Financial Serv. Inc. Computer print-out no detail OH Cuyahoga County 10/28/93 1263708 UCC-1(FX) Xerox Corp. Computer print-out no detail OH Cuyahoga County 11/29/93 1266087 UCC-1(FX) General Electric Co. Computer print-out no detail OH Cuyahoga County 6/30/94 1284365 CONT(FX) Siemens Credit Corp. Computer print-out no detail OH Cuyahoga County 6/30/94 1149137 UCC-1(FX) Siemens Credit Corp. Computer print-out no detail OH Cuyahoga County 2/24/95 1305407 UCC-1(FX) IBM Credit Corp. Computer print-out no detail OH Cuyahoga County 2/24/95 1305420 UCC-1(FX) IBM Credit Corp. Computer print-out no detail OH Cuyahoga County 4/14/95 1309620 UCC-1(FX) General Electric Capital Computer print-out no detail Computer OH Cuyahoga County 7/13/95 1317922 UCC-1(FX) Osram Sylvania, Inc. Computer print-out no detail OH Cuyahoga County 9/13/95 1323196 UCC-1(FX) American Financial Computer print-out no detail Resources, Inc. OH Cuyahoga County 7/23/96 1349905 UCC-1(FX) Security Federal S & L 1-HP Envisex Base Unit, 10MB RAM; 1- Ass Multimedia 19" Color X Station; 1-ADD 8MB DRAM; 1-HP-UX Keyboard; 1-Digitizing Tablet; 1-ADD HP 16 MB RAM; 1-ME 10 Unix; 1 GDBPent 133P1B P5-133 Pro PC; 1-Office 95 Pro CD; 1-Monitor WW SON 20 VIV, 19.1" View; etc OH Cuyahoga County 7/23/96 1349902 UCC-1(FX) Security Federal S & L 4-Model P5-166 Intel P5-166MHZ, Tower Ass Case, KBD, Mouse, 32MB EDO DRAM, 1.44M, 3.5" DSHD Floppy, 2.5GB EIDE Hard Drive, CDROM-8X; 4-Soundblaster 16 Bit Sound Card-Speakers;4-Ethernet Card 10/100; 4-Matrox Millenium Video Card4-MB WRAM, 17" Vivitr etc OH Cuyahoga County 7/23/96 1349903 UCC-1(FX) Security Federal S & L Model #R105, 1-3x5 Bulb Former 5x7 Ass potential; 1-Lathe Bed; 1-Control Unit OH Cuyahoga County 7/23/96 1349904 UCC-1(FX) Security Federal S & L EDP Equipment Schedule: 3-GA P 5133 Ass Professional PC; 3-20" Vivitron Color Monitor; 3-Office 95 on CD; 1-GA P5-133 Professional PC; 1-17" Vivitron Color Monitor; 1-Office 95 on CD; 5-GA P5-133 Professional PC; 5-20" Vivitron Color Monitor; 5-MSF etc. OH Cuyahoga County 10/2/96 1355623 UCC-1(FX) Security Federal S & L 8-PS-166 Intel P5-166MHZ; Tower Case, Ass KBD; Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DS HD Floppy, 2.0GB Eide WD Hard Drive, CDROM-8X; 8-Ethenet Card 10/100; 8-Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95-Installed, MS Office Prof etc
12 182 12/30/97
OH Cuyahoga County 10/7/96 1355917 UCC-1(FX) Security Federal S & L Rebuilt CHI-Fong Flare Machine Model Ass #CRFA-12-H; Rebuilt Badalex Stem Machine OH Cuyahoga County 11/27/96 1360246 UCC-1(FX) American Financial 1-Ricoh 8680 Copier System, This is a Resources lease transaction & is being filed for notification purposes only OH Cuyahoga County 12/3/96 1360566 UCC-1(FX) Security Federal S & L 1-CM Furnance 10-0022-34D, Ass 346-36-1Z-240V-3PH 480V-3PE OH Cuyahoga County 12/5/96 1360945 UCC-1(FX) Security Federal S & L Computer print-out no detail Ass OH Cuyahoga County 1/2/97 1363450 UCC-1(FX) Security Federal S & L 11-P5-166 Pentium PC, GDBPENT166IB Serial Ass Nos-6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11- MONO17010AAWW CrystalScan700 Monitor (15.9 viewable); 11-SWRKIT125ABUS Office 95 Pro CD; 1 FFAH01, Freight & handling OH Cuyahoga County 11/21/97 1402905 UCC-1(FX) American Financial 1 Ricoh 8680 Copier, This is a lease Resources transaction& is being filed for notification purposes only. LS#4557252 OH Secretary of State 9/7/93 AK44159 UCC-1 Yale Financial Services, (1) Used Yale Forklift ERC030A w/battery Inc. charger, & all accessions, additions, replacements, & substitutions thereto & therefor, & all proceeds including insurance proceeds, thereof OH Secretary of State 11/29/93 AK61791 UCC-1 General Electric Inventory consisting of lamps & light Company GE Lighting bulbs (including w/o limitation incandescent, fluorescent, high intensity discharge, quartz, photo, miniature, holiday & accessories & parts relating thereto), lighting fixtures including parts & components etc OH Secretary of State 2/22/95 AL64948 UCC-1 IBM Credit Corp. All computer, information processing, & other peripheral equipment & goods referenced on IBM Supplement # 205504 dated 2/16/95 Qty Description 017-Gateway 486DX-66 (2/17/95) 9405345 UCC Log No. CPQZ4205504 OH Secretary of State 2/22/95 AL65116 UCC-1 IBM Credit Corp. All computer, information processing, & other peripheral equipment & goods referenced on IBM Supplement #205360 dated 2/16/95 Qty Description 001-Apple Powerbook 520 160MB 008-Apple Quadra 630 33MHZ (2/17/95) 9405345 UCC Log No. CPQZ4205360 OH Secretary of State 4/14/95 AL77868 UCC-1 General Electric Capital Equipment Schedule 1 to Master Equipment Computer Leasing Lease Agreement dated as of 1/20/95: Corporation 1-Hewlett Packard 9000/A4090A Base CPU, 1-Apple Powerbook Duo
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12/30/97 JUDSDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - -------------------- ---------- ---------- --------- ------------- --------- OH Secretary of State 7/13/95 AM00016 UCC-1 Osram Sylvania, Inc. All OSRAM Sylvania Inc. and/or affiliates manufactured and/or branded (Sylvania Osram/Sylvania Lighting Services [illegible]...inventory including... bulbs, flourescent lamps... wire... received as a result of the sale of such merchandise inventory OH Secretary of State 9/11/95 AM13649 UCC-1 American Financial 1-Ricoh 6655 Copier. This is a Lease Resources Transaction & is being filed for notification purposes only OH Secretary of State 1/24/96 AM45284 UCC-1 Levetz Investments, Inc. 1-Beechcraft King Air 300, aircraft, all parts & accessories thereto, all instruments, accounts & chattel paper arising therefrom (including leases & conditional sales contracts) & the proceeds of all the foregoing, including proceeds in the etc OH Secretary of State 7/15/96 AM88264 UCC-1 Security Federal S & L Model #R105, 1-3x5 Bulb Former 5x7 Ass Potential; 1-Lathe Bed; 1-Control Unit OH Secretary of State 7/26/96 AM91048 UCC-1 Security Federal S & L 4-Model P5-166 Intel...; 4-Soundblaster Ass 16 Bit...; 4-Ethenet Card 10/100; 4-Matrox Millenium Video Card 4MB WRAM...; 4-21" Vivitron Upgrade; 4-NT Workstation Upgrade 3.51; 4-Shipping Configuration OH Secretary of State 10/4/96 AN08068 UCC-1 Security Federal S & L 8-PS-166 Intel P5-166MHZ, Tower Case, KBD, Ass Mouse; 8-32MB EDO DRAM, 1.44M 3.5 DSHD Floppy, 2.0GB...WD Hard Drive, CDROM 8X; 8 Ethenet Card 10/100; 8-Matrox Millenium Video Card-4MB WRAM, 17" Vivitron Monitor, WIN '95 Installed, MS Office Prof etc. OH Secretary of State 10/7/96 AN08873 UCC-1 Security Federal S & L Rebuilt CHI-FONG Flare Machine Model Ass # CRFA-12-H; Rebuilt Badalex Stem Machine OH Secretary of State 12/4/96 AN23136 UCC-1 Security Federal S & L 1-CM Furnance 10-0022-34D, Ass 346-36-1Z-240V-3PH 480V-3PE OH Secretary of State 12/10/96 AN24590 UCC-1 American Financial 1-Ricoh 8680 Copier System - This is a Resources lease transaction & is being filed for notification purposes only OH Secretary of State 12/11/96 AN25034 UCC-1 Security Federal S & L 4-Allsteel Interchange Item APCF4130N Ass Panel Complete Non-Powered, dimensions 41"x30", Group 2 Avalon AV9V5 Northern Lights, Paint P92 PUMICE, Tag Warren/W459C; 12-ALLSteel Interchange Item APCF4148P Panel Complete, Powered, Dimensions 41"x48", etc OH Secretary of State 12/27/96 AN28792 UCC-1 Security Federal S & L 11-PS-166 Pentium PC, Serial Nos. Ass GDBPENT166PIB 6223299, 3300, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3308, 3309; 11-MONO17010AAWW CrystalScan700 Monitor (15.9) viewable); 11-SWRKIT125ABUS Office '95 Pro CD; 1-FFAH01; Freight & Handling
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12/30/97 WEB DESIGN ASSOCIATES, INC. 275 Martinel Dr., Suite 2A Kent, OH 44240 Portage County, OH GS/CA: Yes / Yes JURISDICTION SEARCHED DATE FILED FILE NUMBER ITEM TYPE SECURED PARTY SECURITY - --------------------- ---------- ---------- --------- ------------- --------- OH Portage County 2/11/93 113476 UCC-1(FX) Dana Commercial Credit SGI Iris Indigo 4000, Pro Engineer Corporation Designer Package OH Secretary of State 2/13/93 AH98379 UCC-1 Dana Commercial Credit SGI Iris Indigo 4000, Pro Engineer Corporation Designer Package
15 185 ANNEX B to SECURITY AGREEMENT SCHEDULE OF CHIEF EXECUTIVE OFFICES
==================================================================================================================================== ASSIGNOR TAX I.D. NO. ADDRESS ==================================================================================================================================== Advanced Lighting Technologies, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ APL Engineered Materials, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ Venture Lighting International, Inc. 32000 Aurora Road Solon, Ohio 44139 - ------------------------------------------------------------------------------------------------------------------------------------ Specialty Discharge Lighting, Inc. 101 Shawnee Drive Bellevue, Ohio 44811 - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Resources International, Inc. 3000 Seneca Industrial Parkway Bellevue, Ohio 44811 - ------------------------------------------------------------------------------------------------------------------------------------ Metal Halide Technologies, Inc. 32000 Aurora Road Solon, Ohio 44139 - ------------------------------------------------------------------------------------------------------------------------------------ The Light Source, Inc. 32000 Aurora Road Solon, Ohio 44139 - ------------------------------------------------------------------------------------------------------------------------------------ Energy-Wise Lighting, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ HID Direct, Inc. 2307 East Aurora Road a/k/a Lampway Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ Bright Ideas Advertising and Design, Inc. 8500 Station Street, Suite 275 Mentor, Ohio 44060 - ------------------------------------------------------------------------------------------------------------------------------------ Metal Halide Controls, Inc. 1893 E. Aurora Road a/k/a Current Industries, Inc. Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ HID Recycling, Inc. 32000 Aurora Road Solon, Ohio 44139 - ------------------------------------------------------------------------------------------------------------------------------------ MICROSUN Technologies, Inc. 2307 E. Aurora Road a/k/a Web Design Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ Energy Efficient Products, Inc. 3000 Seneca Industrial Parkway Bellevue, Ohio 44811 - ------------------------------------------------------------------------------------------------------------------------------------
186
==================================================================================================================================== ASSIGNOR TAX I.D. NO. ADDRESS ==================================================================================================================================== Bio Light, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ Ballastronix (Delaware), Inc. c/o CT Corp. (Agent) 1209 Orange Street Wilmington, Delaware 19801 - ------------------------------------------------------------------------------------------------------------------------------------ ADLT Services, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ Advanced Lighting Systems, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ Advanced Acquisitions, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ Ruud Lighting, Inc. 9201 Washington Avenue Racine, Wisconsin 54406 - ------------------------------------------------------------------------------------------------------------------------------------
2 187 ANNEX C to SECURITY AGREEMENT SCHEDULE OF EQUIPMENT AND INVENTORY LOCATIONS
==================================================================================================================================== ASSIGNOR ADDRESS ==================================================================================================================================== Advanced Lighting Technologies, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ APL Engineered Materials, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 2401 North Willow Road Urbana, Illinois 61801-7332 - ------------------------------------------------------------------------------------------------------------------------------------ Venture Lighting International, Inc. 32000 Aurora Road Solon, Ohio 44139 - ------------------------------------------------------------------------------------------------------------------------------------ Specialty Discharge Lighting, Inc. 101 Shawnee Drive Bellevue, Ohio 44811 - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Resources International, Inc. 3000 Seneca Industrial Parkway Bellevue, Ohio 44811 - ------------------------------------------------------------------------------------------------------------------------------------ Metal Halide Technologies, Inc. 32000 Aurora Road Solon, Ohio 44139 - ------------------------------------------------------------------------------------------------------------------------------------ The Light Source, Inc. 32000 Aurora Road Solon, Ohio 44139 - ------------------------------------------------------------------------------------------------------------------------------------ Energy-Wise Lighting, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ DID Direct, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ Bright Ideas Advertising and Design, Inc. 8500 Station Street, Suite 275 Mentor, Ohio 44060 - ------------------------------------------------------------------------------------------------------------------------------------ Metal Halide Controls, Inc. 1893 E. Aurora Road a/k/a Current Industries, Inc. Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ HID Recycling, Inc. 32000 Aurora Road Solon, Ohio 44139 - ------------------------------------------------------------------------------------------------------------------------------------ MICROSUN Technologies, Inc. 1667 East 40th Street Cleveland, Ohio 44103 - ------------------------------------------------------------------------------------------------------------------------------------
188
==================================================================================================================================== ASSIGNOR ADDRESS ==================================================================================================================================== Energy Efficient Products, Inc. 3000 Seneca Industrial Parkway Bellevue, Ohio 44811 - ------------------------------------------------------------------------------------------------------------------------------------ Bio Light, Inc. 2307 East Aurora Road Suite One Twinsburg, Ohio 44087 - ------------------------------------------------------------------------------------------------------------------------------------ Ballastronix (Delaware), Inc. None - ------------------------------------------------------------------------------------------------------------------------------------ ADLT Services, Inc. None - ------------------------------------------------------------------------------------------------------------------------------------ Advanced Lighting Systems, Inc. 7830 East Evans Road Scottsdale, Arizona 85360 - ------------------------------------------------------------------------------------------------------------------------------------ Advanced Acquisitions, Inc. None - ------------------------------------------------------------------------------------------------------------------------------------ Ruud Lighting, Inc. 9201 Washington Avenue Racine, Wisconsin 54406 CERTAIN INVENTORY ALSO LOCATED ON PREMISES OF: Accu-turn Incorporated 1375 Industrial Park Drive P.O. Box 36 Union Grove, Wisconsin 53182 - ------------------------------------------------------------------------------------------------------------------------------------
2 189 ANNEX D to SECURITY AGREEMENT SCHEDULE OF TRADE AND FICTITIOUS NAMES
Name Jurisdiction Where Used - ---- ----------------------- Metal Halide Controls, Inc. a/k/a Current Industries, Inc. Ohio Bright Ideas Advertising and Design, Inc. d/b/a Bright Ideas, Inc. Ohio HID Direct, Inc. d/b/a Lampway Ohio MICROSUN Technologies, Inc. d/b/a Web Design Ohio
190 ANNEX E to SECURITY AGREEMENT SCHEDULE OF MARKS
==================================================================================================================== Registered Owner Mark U.S. Registration No. - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies, Inc. PRO ARC Reg. 1,351,568 - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies, Inc. VLI LOGO Reg. 1,357,882 - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies, Inc. VENTURE LIGHTING Reg. 1,396,659 INTERNATIONAL - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies, Inc. VENTURE Reg. 1,707,980 - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies, Inc. ENERGY MASTER Reg. 1,715,439 - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies, Inc. WHITE LUX Reg. 1,730,895 - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies, Inc. SUPER PRO-ARC Reg. 1,771,290 - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies, Inc. Recycle Logo Reg. 1,965,660 - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies, Inc. MICROSUN Reg. 2,099,921 - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies, Inc. Microsun Logo Reg. 2,103,892 - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Technologies, Inc. WYNDAM HALL Reg. 2,104,141 - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. After Sunset Reg. 1,381,231 - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. B Beta Lighting Reg. 1,768,007 (and Design) - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Deltagard Reg. 1,847,653 - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Luma Reg. 1,317,963 - --------------------------------------------------------------------------------------------------------------------
191 ANNEX F to SECURITY AGREEMENT SCHEDULE OF PATENTS AND APPLICATIONS
==================================================================================================================== U. S. PATENT NO. PATENT ISSUE DATE OR OR OWNER TITLE APPLICATION APPLICATION FILING DATE SERIAL NO. - -------------------------------------------------------------------------------------------------------------------- Venture Lighting Horizontal Burning Metal Patent 5,055,740 October 8, 1991 International, Inc. Halide Lamp - -------------------------------------------------------------------------------------------------------------------- Venture Lighting Partially Frosted Lamp Des. Patent 299,547 January 29, 1989 International, Inc. - -------------------------------------------------------------------------------------------------------------------- Venture Lighting Electrodes for Single Patent 5,051,655 September 34, 1991 International, Inc. Ended Arch Discharge Tubes - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting A Fluorescent Lamp S.N. 08/299,292 April 4, 1997 Technologies, Inc. Containing a Mercury Zinc Amalgam and A Method of Manufacture - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting A Fluorescent Lamp 08/833,292 September 1, 1994 Technologies, Inc. Containing a Mercury Zinc (Div. of 8/299,292) Amalgam and A Method of Manufacture - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Strengthening Agent For S.N. 08/702,031 August 23, 1996 Technologies, Inc. Metal Halide Particles And Improved Lamp Fill Material - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Metal Halide Lamps And S.N. 08/645,115 March 13, 1996 Technologies, Inc. Method of Manufacture - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Methods of Strengthening S.N. 08/702,038 October 9, 1996 Technologies, Inc. Metal Halide Particles, And Improved Lamp Fill Material - -------------------------------------------------------------------------------------------------------------------- Venture Lighting Horizontal Burning Metal Patent 5,539,271 July 23, 1996 International, Inc. Halide Lamp - --------------------------------------------------------------------------------------------------------------------
192
==================================================================================================================== U. S. PATENT NO. PATENT ISSUE DATE OR OR OWNER TITLE APPLICATION APPLICATION FILING DATE SERIAL NO. - -------------------------------------------------------------------------------------------------------------------- Venture Lighting High Intensity Arc Patent 5,550,422 August 27, 1996 International, Inc. Discharge Lamp Having Clip Member To Secure Base To Outer Lamp Envelope - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Metal Halide Discharge S.N. 08/457,570 June 1, 1995 Technologies, Inc. Lamp Producing A Non-White Color - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Metal Halide Arc Discharge S.N. 08/600,262 February 12, 1996 Technologies, Inc. Having Improved Operating Circuitry - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Auxiliary Lighting Control S.N. 08/899,881 July 24, 1997 Technologies, Inc. Circuit And Method For A HID Lamp Lighting System - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Unitary Socket/Electronics S.N. 08/958,933 October 28, 1997 Technologies, Inc. Assembly Module For A Metal Halide Lamp - -------------------------------------------------------------------------------------------------------------------- Advanced Lighting Lampholder Assembly With S.N. 29/078,976 November 5, 1997 Technologies, Inc. An Integral Ballast - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Floodlight Patent 4,689,729 August 25, 1987 - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Floodlight With Improved Patent 4,709,312 November 24, 1987 Reflector System - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Floodlight Structure D 333,009 February 2, 1993 (Design) - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Floodlight Structure D 340,304 October 12, 1993 (Design) - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Floodlight Structure D 343,022 January 4, 1994 (Design) - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Improved Bollard Luminaire Patent 5,105,347 April 14, 1992 - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Floodlight (Design) D 344,604 February 22, 1994 - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Optical System For Patent 5,345,369 September 6, 1994 Lamp-Mounting Elongate Roof Fixture - --------------------------------------------------------------------------------------------------------------------
193
==================================================================================================================== U. S. PATENT NO. PATENT ISSUE DATE OR OR OWNER TITLE APPLICATION APPLICATION FILING DATE SERIAL NO. - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Electrical Distribution Patent 4,655,520 April 7, 1987 System And Connector Therefor - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Outdoor Lighting Fixture D 352,126 November 1, 1994 (Design) - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Improved Apparatus And Patent 5,451,843 September 19, 1995 Method For Providing Bilevel Illumination - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Lighting Patent 5,375,045 December 20, 1994 System/Illuminating Roof Portions Having Disparate Slopes - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Electrical Apparatus With Patent 5,556,047 October 15, 1994 Noise-Suppressing Feature - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Replacement Transformer D 383,114 September 2, 1997 for Track Lighting (Design) - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Replacement Low Voltage D 373,841 September 17, 1996 Light for Track Lighting (Design) - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Replacement Low Voltage D 373,206 August 27, 1996 Light for Track Lighting (Design) - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Prismatic Area Light D 382,363 August 12, 1997 (Design) - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Prismatic Area Light D 386,275 November 11, 1997 (Design) - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Prismatic Area Light D 385,053 October 14, 1997 (Design) - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Improved Lighting-Fixture S.N. 08/801,902 Amendment filed 2/14/97 Support Pole - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Improved In-Ground S.N. 08/874,134 Filed 6/13/97 Lighting Apparatus And Related Method - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Improved Canopy Light And S.N. 08/899,350 Filed 7/24/97 Related Method - --------------------------------------------------------------------------------------------------------------------
194 ANNEX G to SECURITY AGREEMENT SCHEDULE OF COPYRIGHTS AND APPLICATIONS
Subject Copyright No. File Date Grant Date Expires - ------- ------------- --------- ---------- ------- 1989, 1990/91, 1993, 1996 & 1997 Ruud Catalogs 9/22/97 Copyright for Ruud 1994-95 Catalog TX4-226-140 3/13/96 3/25/96 1/21/69
195 EXHIBIT E-1 ---------------------------- FORM OF PLEDGE AGREEMENT ---------------------------- 196 ================================================================================ ADVANCED LIGHTING TECHNOLOGIES, INC. AS A PLEDGOR AND THE OTHER PLEDGORS NAMED HEREIN WITH NATIONAL CITY BANK, AS COLLATERAL AGENT, AS PLEDGEE ----------------------------- PLEDGE AGREEMENT DATED AS OF JANUARY 2, 1998 ----------------------------- ================================================================================ 197 PLEDGE AGREEMENT PLEDGE AGREEMENT, dated as of January 2, 1998 (as amended, modified, or supplemented from time to time, "THIS AGREEMENT"), made by each of the undersigned (each, together with its successors and assigns, a "PLEDGOR" and collectively, the "PLEDGORS"), in favor of NATIONAL CITY BANK, a national banking association, as Collateral Agent (herein, together with its successors and assigns in such capacity, the "PLEDGEE"), for the benefit of the Secured Creditors (as defined below): PRELIMINARY STATEMENTS: (1) Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. (2) This Agreement is made pursuant to the Credit Agreement, dated as of the date hereof (herein, as amended or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Advanced Lighting Technologies, Inc., an Ohio corporation (herein, together with its successors and assigns, the "BORROWER"), the financial institutions named as lenders therein, and National City Bank, as the Administrative Agent for the Lenders (as defined in the Credit Agreement), providing, among other things, for loans or advances or other extensions of credit to or for the benefit of the Borrower of up to $85,000,000, with such loans or advances being evidenced by promissory notes (the "NOTES", such term to include all notes and other securities issued in exchange therefor or in replacement thereof). (3) The Borrower or any of its Subsidiaries may from time to time be party to one or more Designated Hedge Agreements (as defined in the Credit Agreement). Any institution that participates, and in each case their subsequent assigns, as a counterparty to any Designated Hedge Agreement (collectively, the "HEDGE CREDITORS"; and the Hedge Creditors together with the Lenders, collectively the "SECURED CREDITORS"), shall benefit hereunder as herein provided. (4) Pursuant to the Subsidiary Guaranty, each Subsidiary Guarantor has jointly and severally guaranteed to the Secured Creditors the payment when due of the Guaranteed Obligations (as defined in the Subsidiary Guaranty). (5) It is a condition precedent to the making of Loans and the issuance of, and participation in, Letters of Credit under the Credit Agreement that each Pledgor shall have executed and delivered to the Pledgee this Agreement. (6) Each Pledgor desires to execute this Agreement to satisfy the condition described in the preceding paragraph. NOW, THEREFORE, in consideration of the benefits accruing to each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby makes the following representations and warranties to the Pledgee and hereby covenants and agrees with the Pledgee as follows: 1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor to the Pledgee, for the benefit of the Secured Creditors, to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under section 362(a) of the Bankruptcy Code, would become due) of such Pledgor to the Lenders, whether now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the other Credit 198 Documents to which such Pledgor is a party (including without limitation (x) in the case of the Borrower, all such obligations and indebtedness of the Borrower under the Credit Agreement and (y) in the case of each other Pledgor, all such obligations and indebtedness under the Subsidiary Guaranty to which such Pledgor is a party which relate to any of the foregoing), and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements contained in the Credit Agreement and such other Credit Documents (all such obligations and liabilities under this clause (i), being herein collectively called the "CREDIT DOCUMENT OBLIGATIONS"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Pledgor or other Subsidiary of the Borrower now existing or hereafter incurred under, arising out of or in connection with any Designated Hedge Agreement with any of the Secured Creditors including, in the case of Pledgors other than the Borrower, all obligations of such Pledgor under the Subsidiary Guaranty in respect of any Designated Hedge Agreement, and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements contained therein (all such obligations and liabilities described in this clause (ii) being herein collectively called the "HEDGE OBLIGATIONS"); (iii) any and all sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral (to the extent provided for in the Credit Documents); and (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of such Pledgor referred to in clauses (i), (ii) and (iii) above, after an Event of Default (as such term is defined in the Security Agreement) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs. All such obligations, liabilities, sums and expenses set forth in clauses (i) through (iv) of this section 1 being herein collectively called the "OBLIGATIONS", it being acknowledged and agreed that the "OBLIGATIONS" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. 2. CERTAIN DEFINITIONS; INITIAL REPRESENTATIONS, ETC. 2.1. DEFINITIONS. As used herein: "BORROWER" shall have the meaning provided in the Preliminary Statements. "CREDIT AGREEMENT" shall have the meaning provided in the Preliminary Statements. "CREDIT DOCUMENT OBLIGATIONS" shall have the meaning provided in clause (i) of section 1. "EQUITY INTERESTS" shall mean (i) all of the partnership interests in a general or limited partnership at any time owned or held by any Pledgor, and (ii) all of the membership interests in a limited liability company at any time owned or held by any Pledgor. "FOREIGN CORPORATION" shall mean a corporation that is not organized under the laws of the United States or any State or territory thereof. "HEDGE CREDITORS" shall have the meaning provided in the Preliminary Statements. 2 199 "HEDGE OBLIGATIONS" shall have the meaning provided in clause (ii) of section 1. "INTERCOMPANY AND THIRD PARTY NOTES" shall mean all promissory notes from time to time issued to, or held by, any Pledgor. "NOTICED EVENT OF DEFAULT" shall mean (i) an Event of Default specified in section 10.1(g) of the Credit Agreement and (ii) any other Event of Default under the Credit Agreement in respect of which the Pledgee has given the Borrower notice that such Event of Default constitutes a Noticed Event of Default. "OBLIGATIONS" shall have the meaning provided in section 1. "PLEDGED ENTITY" shall mean the issuer of any Equity Interests. "PLEDGED EQUITY INTERESTS" shall mean all Equity Interests at any time pledged or required to be pledged under this Agreement. "PLEDGED NOTES" shall mean all Intercompany and Third Party Notes at any time pledged or required to be pledged under this Agreement. "PLEDGED SECURITIES" shall mean all Pledged Stock and all Pledged Notes. "PLEDGED STOCK" shall mean all Stock at any time pledged or required to be pledged under this Agreement. "SECURED CREDITORS" shall have the meaning provided in the Preliminary Statements. "SECURED DEBT AGREEMENT" shall have the meaning provided in section 5. "SECURITIES" shall mean all of the Stock and Intercompany and Third Party Notes. "STOCK" shall mean (i) all of the issued and outstanding shares of stock of any corporation (other than a Foreign Corporation) at any time directly owned by any Pledgor; and (ii) all of the issued and outstanding shares of capital stock of any Foreign Corporation at any time owned by any Pledgor, PROVIDED that such Pledgor shall not be required to pledge hereunder (and the term "STOCK" shall not include) more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote. "TERMINATION DATE" shall have the meaning provided in section 18(a). 2.2. REPRESENTATIONS AND WARRANTIES AS TO COLLATERAL INITIALLY PLEDGED HEREUNDER. Each Pledgor represents and warrants that on the date hereof: (a) each Material Subsidiary of such Pledgor and the direct ownership thereof is listed on Annex A hereto; (b) the Stock owned by it which is pledged hereunder consists of the number and type of shares of the stock of the corporations described in Annex B hereto as being owned by it; (c) such Pledgor is the holder of record and sole beneficial owner of such Stock; (d) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as is set forth in Annex B hereto; 3 200 (e) the Intercompany and Third Party Notes held by such Pledgor consist of the promissory notes described in Annex C hereto; (f) the Equity Interests held by such Pledgor which is pledged hereunder constitutes that percentage of the entire interest of each Pledged Entity as is set forth on Annex D hereto; and (g) on the date hereof, such Pledgor owns or possesses no other Securities or Equity Interests required to be pledged hereunder. 3. PLEDGE OF SECURITIES, GRANT OF SECURITY INTERESTS, ETC. 3.1. PLEDGE. To secure the Obligations and for the purposes set forth in section 1, each Pledgor hereby pledges and grants to the Pledgee a first priority continuing security interest in, and as part of such grant and pledge, hereby transfers and assigns to the Pledgee all of the following whether now existing or hereafter acquired (collectively, the "COLLATERAL"): (a) such Pledgor's Equity Interest and all of such Pledgor's right, title and interest in each Pledged Entity, which is required to be pledged hereunder, including, without limitation: (i) all the capital thereof and its interest in all profits, losses and other distributions to which such Pledgor shall at any time be entitled in respect of such Equity Interest; (ii) all other payments due or to become due to such Pledgor in respect of such Equity Interest, whether under any partnership agreement, limited liability company agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise; (iii) all of its claims, rights powers, privileges, authority, options, security interests, liens and remedies, if any, under any partnership agreement, limited liability company agreement or at law or otherwise in respect of such Equity Interest; (iv) all present and future claims if any, of the Pledgor against any Pledged Entity for moneys loaned or advanced, for services rendered or otherwise; (v) all of such Pledgor's rights under any partnership agreement, limited liability company agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of such Pledgor relating to the Equity Interest including any power to terminate, cancel or modify any partnership agreement or limited liability company agreement, to execute any instruments and to take any and all other action on behalf of and in the name of such Pledgor in respect of the Equity Interest and any Pledged Entity, to make determinations, to exercise any election (including, but not limited to, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, collect or receipt for any of the foregoing, to enforce or execute any checks, or other instruments or orders, to file any claims and to take any action in connection with any of the foregoing; (vi) all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, distributions, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof; and (vii) to the extent not otherwise included, all proceeds of any or all of the foregoing; 4 201 (b) all Securities owned by such Pledgor on the date hereof, if any, which are required to be pledged hereunder, and such Pledgor hereby pledges and deposits as security with the Pledgee and delivers to the Pledgee certificates or instruments therefor duly endorsed in blank in the case of Intercompany and Third Party Notes and accompanied by undated stock powers duly executed in blank by such Pledgor in the case of Stock, or such other instruments of transfer as are acceptable to the Pledgee; and (c) all of such Pledgor's right, title and interest in and to such Securities (and in and to all certificates or instruments evidencing such Securities), which such Pledgor hereby assigns, transfers, hypothecates, mortgages, charges and sets over to the Pledgee; all of which Collateral is to be held and dealt with by the Pledgee upon the terms and conditions set forth in this Agreement. 3.2. SUBSEQUENTLY ACQUIRED SECURITIES AND EQUITY INTERESTS. If a Pledgor shall acquire (by purchase, stock dividend or otherwise) any additional Securities and/or Equity Interests at any time or from time to time after the date hereof which are required to be pledged hereunder and represented by certificates or instruments, such Pledgor will forthwith pledge and deposit such Securities and/or Equity Interests as security with the Pledgee and deliver to the Pledgee certificates or instruments thereof, duly endorsed in blank in the case of Intercompany and Third Party Notes and accompanied by undated stock powers duly executed in blank in the case of Stock, by such Pledgor or such other instruments of transfer as are acceptable to the Pledgee, and will promptly thereafter deliver to the Pledgee a certificate executed by a principal executive officer of such Pledgor describing such Securities and/or Equity Interests and certifying that the same have been duly pledged with the Pledgee hereunder. No Pledgor shall be required at any time to pledge hereunder any Stock which is more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote. 3.3. UNCERTIFICATED SECURITIES AND/OR EQUITY INTERESTS. Notwithstanding anything to the contrary contained in sections 3.1 and 3.2, if any Securities and/or Equity Interests (whether or not now owned or hereafter acquired) which are required to be pledged hereunder and are uncertificated securities, a Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all actions required to perfect the security interest of the Pledgee under applicable law (including, in any event, under sections 8-313 and 8-321 of the Uniform Commercial Code if applicable). Each Pledgor further agrees to take such actions as the Pledgee deems reasonably necessary or desirable to effect the foregoing and to permit the Pledgee to exercise any of its rights and remedies hereunder, and agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee with respect to any such pledge of uncertificated securities and/or Equity Interests promptly upon the request of the Pledgee. 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Pledged Securities, which may be held (in the discretion of the Pledgee) in the name of the relevant Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee. 5. VOTING, ETC. WHILE NO EVENT OF DEFAULT. Unless and until a Noticed Event of Default shall have occurred and be continuing, each Pledgor shall be entitled to exercise all voting rights attaching to any and all Collateral owned by it, and to give consents, waivers or ratifications in respect thereof, PROVIDED that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate, result in breach of any covenant contained in or be inconsistent with, any of the terms of this Agreement, any other Credit Document or any Designated Hedge Agreement (collectively, the "SECURED DEBT AGREEMENTS"), or which would have the effect of impairing the position or interests of the Pledgee or any Secured Creditor therein. All such rights of such Pledgor to vote and to give consents waivers and ratifications shall cease in case a Noticed Event of Default shall occur and be continuing and section 7 hereof shall become applicable. 5 202 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until a Noticed Event of Default shall have occurred and be continuing, all cash dividends or other amounts payable in respect of the Collateral shall be paid to the relevant Pledgor, PROVIDED that all dividends, distributions or other amounts payable in respect of the Collateral which are reasonably determined by the Pledgee to represent in whole or in part an extraordinary, liquidating or other distribution in return of capital not permitted by the Credit Agreement shall be paid, to the extent so determined to represent an extraordinary, liquidating or other distribution in return of capital, to the Pledgee and retained by it as part of the Collateral (unless such cash dividends and/or distributions are applied to repay the Obligations pursuant to section 9 of this Agreement). The Pledgee shall also be entitled to receive directly, and to retain as part of the Collateral: (i) all other or additional stock, other securities, partnership interests, membership interests or property (other than cash) paid or distributed by way of dividend or otherwise in respect of the Collateral; (ii) all other or additional stock, other securities, partnership interests, membership interests or property (including cash) paid or distributed in respect of the Collateral by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (iii) all other or additional stock, other securities, partnership interests, membership interests or property (including cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate, partnership or limited liability company reorganization. All dividends, distributions or other payments which are received by any Pledgor contrary to the provisions of this section 6 or section 7 shall be received in trust for the benefit of the Pledgee, shall be segregated from other property or funds of such Pledgor and shall be forthwith paid over to the Pledgee as Collateral in the same form as so received (with any necessary endorsement). 7. REMEDIES IN CASE OF AN EVENT OF DEFAULT. In case a Noticed Event of Default shall have occurred and be continuing, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement or any other Secured Debt Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, including, without limitation all the rights and remedies of a secured party upon default under the Uniform Commercial Code of the State of Ohio, and the Pledgee shall be entitled, without limitation to exercise any or all of the following rights which each Pledgor hereby agrees to be commercially reasonable: (i) to receive all amounts payable in respect of the Collateral otherwise payable under section 6 to a Pledgor; (ii) to transfer all or any part of the Collateral into the Pledgee's name or the name of its nominee or nominees; (iii) to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Pledged Note (including, without limitation, to make any demand for payment thereon); (iv) to vote all or any part of the Collateral (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (each Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney-in-fact of such Pledgor, with full power of substitution to do so); and 6 203 (v) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine, PROVIDED that at least 10 days' notice of the time and place of any such sale shall be given to the relevant Pledgor; each purchaser at any such sale shall hold the property so sold absolutely free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise, and all rights, if any, of stay and/or appraisal which it now has or may at any time in the future have under rule of law or statute now existing or hereafter enacted; at any such sale, unless prohibited by applicable law, the Pledgee on behalf of all Secured Creditors (or certain of them) may bid for and purchase (by bidding in Obligations or otherwise) all or any part of the Collateral so sold free from any such right or equity of redemption; and neither the Pledgee nor any Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall it be under any obligation to take any action whatsoever with regard thereto. 8. REMEDIES CUMULATIVE; PLEDGEE TO ACT FOR SECURED CREDITORS. 8.1. REMEDIES CUMULATIVE, ETC. Each right, power and remedy of the Pledgee provided for in this Agreement or any other Secured Debt Agreement now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee of any one or more of the rights, powers or remedies provided for in this Agreement or any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. Unless otherwise required by the Credit Documents, no notice to or demand upon any Pledgor in any case shall entitle it to any other or further notice or demand in similar other circumstances or constitute a waiver of any of the rights of the Pledgee or any other Secured Creditor to any other further action in any circumstances without demand or notice. 8.2. PLEDGEE TO ACT ON BEHALF OF SECURED CREDITORS. The Secured Creditors agree by their acceptance of the benefits hereof that this Agreement may be enforced on their behalf only by the action of the Pledgee, acting upon the instructions of the Required Lenders (or, after all Credit Document Obligations have been paid in full, instructions of the holders of at least the majority of the outstanding Hedge Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Pledgee, for the benefit of the Secured Creditors, upon the terms of this Agreement. 9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee upon any sale or other disposition of the Collateral pursuant to the terms of this Agreement, together with all other moneys received by the Pledgee hereunder, shall be applied as follows: (i) first, to the payment of all Obligations owing to the Pledgee or any of the Secured Creditors of the type described in clauses (ii) and (iii) of section 1 of this Agreement; (ii) second, to the extent monies remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Obligations shall be paid to the Secured Creditors as provided in section 9(c), with each Secured Creditor receiving an amount equal to its outstanding Obligations or, if the 7 204 proceeds are insufficient to pay in full all such Obligations, its Pro Rata Share (as defined below) of the amount remaining to be distributed; and (iii) third, to the extent monies remain after the application pursuant to the preceding clauses (i) and (ii) or following the termination of this Agreement pursuant to section 18(a) hereof, to the relevant Pledgor or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement, "PRO RATA SHARE" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, the amount (expressed as a percentage) equal to a fraction, the numerator of which is the then outstanding amount of the relevant Obligations owed such Secured Creditor and the denominator of which is the then outstanding amount of all Obligations. (c) All payments required to be made to the (i) Lenders hereunder shall be made to the Administrative Agent for the account of the respective Lenders and (ii) Hedge Creditors hereunder shall be made to the paying agent under the applicable Designated Hedge Agreement or, in the case of Designated Hedge Agreements without a paying agent, directly to the applicable Hedge Creditor. (d) For purposes of applying payments received in accordance with this section 9, the Pledgee shall be entitled to rely upon (i) the Administrative Agent for a determination (which the Administrative Agent agrees to provide upon request to the Pledgee) of the outstanding Credit Document Obligations (as defined in the Subsidiary Guaranty) and (ii) upon any Hedge Creditor for a determination (which each Hedge Creditor agrees to provide upon request to the Pledgee) of the outstanding Hedge Obligations (as defined in the Subsidiary Guaranty) owed to such Hedge Creditor. Unless it has actual knowledge (including by way of written notice from a Secured Creditor) to the contrary, the Administrative Agent under the Credit Agreement, in furnishing information pursuant to the preceding sentence, and the Pledgee, in acting hereunder, shall be entitled to assume that (x) no Credit Document Obligation other than principal, interest and regularly accruing fees are owing to any Lender and (y) no Designated Hedge Agreements or Hedge Obligations with respect thereto are in existence. (e) It is understood and agreed that each Pledgor shall remain liable to the extent of any deficiency between (x) the amount of the proceeds of the Collateral applied pursuant to clause (i) of section 9(a) and (y) the aggregate outstanding amount of the Obligations. 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to indemnify and hold harmless the Pledgee and the Secured Creditors from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and (ii) to reimburse the Pledgee and the Secured Creditors for all reasonable costs and expenses, including reasonable attorneys' fees, growing out of or resulting from this Agreement or the exercise by the Pledgee of any right or remedy granted to it hereunder or under any other Secured Debt Agreement except, with respect to clauses (i) and (ii) above, for those arising from the Pledgee's gross negligence or willful misconduct. In no event shall the Pledgee be liable, in the absence of gross negligence or willful misconduct on its part, for any matter or thing in connection with this Agreement other than to account for moneys or other property actually received by it in accordance with the terms hereof or thereof. If and to the extent that the obligations of each Pledgor under this section 11 are unenforceable for any reason, each Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8 205 12. FURTHER ASSURANCES. Each Pledgor agrees that it will join with the Pledgee in executing and, at the Pledgor's own expense, file and refile under the Uniform Commercial Code such financing statements, continuation statements and other documents in such offices as the Pledgee may deem reasonably necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee's security interest in the Collateral hereunder and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder or thereunder. 13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Pledgee shall act hereunder on the terms and conditions set forth herein and in section 11 of the Credit Agreement. 14. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except in accordance with the terms of this Agreement and the Credit Documents). 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS. (a) Each Pledgor represents, warrants and covenants that: (i) it is the legal, beneficial and record owner of, and has good and marketable title to, all Securities pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option or other encumbrance whatsoever, except the liens and security interests created by this Agreement; (ii) it has full power, authority and legal right to pledge all the Securities pledged by it pursuant to this Agreement; (iii) all the shares of the Stock pledged hereunder have been duly and validly issued and are fully paid and nonassessable; (iv) each of the Intercompany and Third Party Notes, when executed by the obligor thereof and pledged hereunder, will be the legal, valid and binding obligation of the obligor thereof, enforceable in accordance with its terms; (v) it will defend the Pledgee's right, title and interest in and to the Equity Interests and in and to the Collateral pledged by it pursuant hereto or in which it has granted a security interest pursuant hereto against the claims and demands of all other persons whomsoever, and such Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee; (vi) it is the legal and beneficial owner of and has good title to its Equity Interests and has good title to all of the other Collateral pledged by it pursuant hereto or in which it has granted 9 206 a security interest pursuant hereto, free and clear of all claims, pledges, liens, encumbrances and security interests of every nature whatsoever, except such as are created pursuant to this Agreement, and has the unqualified right to pledge and grant a security interest in the same as herein provided without the consent of any other person, firm, association or entity which has not been obtained; (vii) it has full power, authority and legal right to pledge the Equity Interests pledged by it pursuant to this Agreement and such Equity Interests have been validly acquired and are fully paid for and are duly and validly pledged hereunder; (viii) it is not in default in the payment of any portion of any mandatory capital contribution, if any, required to be made under any partnership agreement or limited liability company agreement to which such Pledgor is a party relating to any Equity Interests pledged hereunder, and such Pledgor is not in violation of any other material provisions of any partnership agreement or limited liability company agreement to which such Pledgor is a party relating thereto, or otherwise in default or violation thereunder, no Equity Interest pledged hereunder is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against such Pledgor by any person with respect thereto and as of the Initial Borrowing Date, there are no certificates, instruments, documents or other writings (other than the partnership agreements, limited liability company agreements, and certificates, if any, delivered to the Collateral Agent) which evidence any Equity Interest of such Pledgor pledged hereunder; (ix) the pledge and assignment of the Equity Interests pledged pursuant to this Agreement, together with the relevant filings, consents or recordings (which filings and recordings have been made or obtained), creates a valid, perfected and continuing first security interest in such Equity Interests and the proceeds thereof, subject to no prior lien or encumbrance or to any agreement purporting to grant to any third party a lien or encumbrance on the property or assets of such Pledgor which would include the Collateral; (x) there are no currently effective financing statements under the UCC covering any property which is now or hereafter may be included in the Collateral and such Pledgor will, without the prior written consent of the Pledgee, execute and, until the Termination Date (as hereinafter defined), there will not ever be on file in any public office any enforceable financing statement or statements covering any or all of the Collateral, except financing statements filed or to be filed in favor of the Pledgee as secured party; (xi) it shall give the Pledgee prompt notice of any written claim relating to the Collateral and shall deliver to the Pledgee a copy of each other demand, notice or document received by it which may adversely affect the Pledgee's interest in the Collateral promptly upon, but in any event within 10 days after, such Pledgor's receipt thereof; (xii) it shall not withdraw as a partner or member of any Pledged Entity as to which Equity Interests have been pledged hereunder, or file or pursue or take any action which may, directly or indirectly, cause a dissolution or liquidation of or with respect to any such Pledged Entity or seek a partition of any property of any such Pledged Entity, except as permitted by the Credit Agreement; and (xiii) a notice in the form set forth in Annex E attached hereto and by this reference made a part hereof (such notice the "NOTICE OF PLEDGE"), appropriately completed, notifying each Pledged Entity as to which Equity Interests have been pledged hereunder of the existence of this Agreement and a certified copy of this Agreement have been delivered by such Pledgor to the relevant Pledged Entity, and such Pledgor has received and delivered to the Pledgee an acknowledgment in the form set forth in Annex E attached hereto (such acknowledgment, the "PLEDGED ENTITY ACKNOWLEDGMENT"), duly executed by the relevant Pledged Entity. 10 207 (b) Each Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Collateral (including the proceeds thereof) against the claims and demands of all persons whomsoever. (c) Each Pledgor covenants and agrees that it will take no action which would violate or be inconsistent with any of the terms of any Secured Debt Agreement or which would have the effect of impairing the position or interests of the Pledgee or any Secured Creditor under any Secured Debt Agreement except as permitted by the Credit Agreement. 16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any renewal, extension, amendment or modification of, or addition or supplement to or deletion from other Credit Documents or any other Secured Debt Agreement, or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument or this Agreement except as expressly provided in such renewal, extension, amendment, modification, addition, supplement, assignment or transfer; (iii) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (iv) any limitation on any person's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to a Pledgor or any Subsidiary of a Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not a Pledgor shall have notice or knowledge of any of the foregoing. 17. REGISTRATION, ETC. (a) If a Noticed Event of Default shall have occurred and be continuing and the relevant Pledgor shall have received from the Pledgee a written request or requests that such Pledgor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Stock of its Subsidiaries which is pledged hereunder, such Pledgor as soon as practicable and at its expense will use its best efforts to cause such registration to be effected (and be kept effective) and will use its best efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Stock, including, without limitation, registration under the Securities Act of 1933, as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other governmental requirements, PROVIDED that the Pledgee shall furnish to such Pledgor such information regarding the Pledgee as such Pledgor may request in writing and as shall be required in connection with any such registration, qualification or compliance. The relevant Pledgor will cause the Pledgee to be kept reasonably advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Pledgee such number of prospectuses, offering circulars and other documents incident thereto as the Pledgee from time to time may reasonably request, and will indemnify the Pledgee and all others participating in the distribution of such Stock against all claims, losses, damages or liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein 11 208 or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to such Pledgor by the Pledgee expressly for use therein. (b) If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Pledged Stock pursuant to section 7, such Pledged Stock or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Pledged Stock or part thereof by private sale in such manner and under such circumstances as Pledgee may deem necessary or advisable in order that such sale may legally be effected without such registration, PROVIDED that at least 10 days' notice of the time and place of any such sale shall be given to the relevant Pledgor. Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion, (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Stock or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Stock or part thereof. In the event of any such sale, the Pledgee shall incur no responsibility or liability to any Pledgor for selling all or any part of the Pledged Stock at a price which the Pledgee may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until the registration as aforesaid. 18. TERMINATION; RELEASE. (a) After the Termination Date (as defined below), this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in section 11 hereof shall survive any such termination) and the Pledgee, at the request and expense of the relevant Pledgor, will execute and deliver to the relevant Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement as provided above, and will duly assign, transfer and deliver to the relevant Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Pledgee and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Pledgee hereunder. As used in this Agreement, "TERMINATION DATE" shall mean the date upon which the Total Commitment and all Designated Hedge Agreements have been terminated, no Letter of Credit nor Note under the Credit Agreement is outstanding and all other Obligations have been paid in full. (b) In the event that any part of the Collateral is sold in connection with a sale permitted by section 9.2 of the Credit Agreement or is otherwise released at the direction of the Required Lenders (or all the Lenders if required by section 13.12 of the Credit Agreement), and the proceeds of such sale or sales or from such release are to be applied in accordance with the terms of the Credit Agreement to the extent required to be so applied, the Pledgee, at the request and expense of such Pledgor will release such Collateral from this Agreement, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in possession of the Pledgee and has not theretofore been released pursuant to this Agreement. (c) At any time that a Pledgor desires that Collateral be released as provided in the foregoing section 18(a) or (b), it shall deliver to the Pledgee a certificate signed by an executive officer stating that the release of the respective Collateral is permitted pursuant to section 18(a) or (b). The Pledgee shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it as permitted by this section 18. 19. NOTICES, ETC. All notices and other communications hereunder shall be in writing and shall be delivered or mailed by first class mail postage prepaid, addressed: (i) if to any Pledgor, at its address specified in or pursuant to the Subsidiary Guaranty; 12 209 (ii) if to the Pledgee, at: National City Bank, as Administrative Agent 1900 East Ninth Street Cleveland, Ohio 44114 Attn.: Anthony J. DiMare Senior Vice President Tel. No.: (216) 575-3344 Fax No.: (216) 575-9396; with copies to: Jones, Day, Reavis & Pogue North Point 901 Lakeside Avenue Cleveland, Ohio 44114 Attn.: John W. Sager, Esq. Tel. No.: (216) 586-7228 Fax No.: (216) 579-0212 (ii) if to any Lender (other than the Pledgee), at such address as such Lender shall have specified in the Credit Agreement; (iii) if to any Hedge Creditor, at such address as such Hedge Creditor shall have specified in writing to the Pledgors and the Pledgee; or at such address as shall have been furnished in writing by any person described above to the party required to give notice hereunder. 20. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Pledgor and the Pledgee (with the consent of the Required Lenders or, to the extent required by section 13.12 of the Credit Agreement, all of the Lenders); PROVIDED, HOWEVER, that no such change, waiver, modification or variance shall be made to section 9 hereof or this section 20 without the consent of each Secured Creditor adversely affected thereby, PROVIDED FURTHER, that any change, waiver, modification or variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such Class of Secured Creditors. For the purpose of this Agreement, the term "CLASS" shall mean each class of Secured Creditors, I.E., whether (x) the Lenders as holders of the Credit Document Obligations or (y) the Hedge Creditors as holders of the Hedge Obligations. For the purpose of this Agreement, the term "REQUISITE CREDITORS" of any Class shall mean each of (x) with respect to each of the Credit Document Obligations, the Required Lenders and (y) with respect to the Hedge Obligations, the holders of 51% of all obligations outstanding from time to time under the Designated Hedge Agreements. 21. PLEDGEE NOT BOUND. (a) Nothing herein shall be construed to make the Pledgee liable as a general partner or limited partner of any Pledged Entity or a shareholder of any corporation, and the Pledgee by virtue of this Agreement or otherwise (except as referred to in the following sentence) shall not have any of the duties, obligations or liabilities of a general partner or limited partner of any Pledged Entity or a stockholder of any corporation. The parties hereto expressly agree that, unless the Pledgee shall become the absolute owner of a Equity Interest or Stock pursuant hereto, this Agreement shall not be construed as creating a partnership or joint venture among the Pledgee and/or a Pledgor. 13 210 (b) Except as provided in the last sentence of section 21(a), the Pledgee, by accepting this Agreement, did not intend to become a general partner, limited partner or member of any Pledged Entity or a shareholder of any corporation or otherwise be deemed to be a co-venturer with respect to any Pledgor or any Pledged Entity or a shareholder of any corporation either before or after an Event of Default shall have occurred. The Pledgee shall have only those powers set forth herein and shall assume none of the duties, obligations or liabilities of a general partner or limited partner of any Pledged Entity or of a Pledgor. (c) The Pledgee shall not be obligated to perform or discharge any obligation of a Pledgor as a result of the collateral assignment hereby effected. (d) The acceptance by the Pledgee of this Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate the Pledgee to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Collateral. 22. MISCELLANEOUS. This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect, subject to release and/or termination as set forth in section 18, (ii) be binding upon each Pledgor, its successors and assigns; PROVIDED, HOWEVER, that no Pledgor shall assign any of its rights or obligations hereunder without the prior written consent of the Pledgee (with the prior written consent of the Required Lenders or to the extent required by section 13.12 of the Credit Agreement, all of the Lenders), and (iii) inure, together with the rights and remedies of the Pledgee hereunder, to the benefit of the Pledgee, the Secured Creditors and their respective successors, transferees and assigns. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF OHIO. The headings of the several sections and subsections in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. 23. REQUIREMENTS OF CREDIT AGREEMENT WITH RESPECT TO PLEDGE OF ADDITIONAL COLLATERAL. As of the date hereof, all Equity Interests and Securities required to be pledged hereunder are described in Annexes B, C and D hereto. Subsequent to the date hereof, a Pledgor may be required pursuant to the provisions of section 8.11 of the Credit Agreement to pledge hereunder additional Equity Interests and Securities. 24. WAIVER OF JURY TRIAL. EACH PLEDGOR AND THE PLEDGEE EACH HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. * * * 14 211 IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. ADVANCED LIGHTING TECHNOLOGIES, INC. BY: ___________________________________ CHIEF FINANCIAL OFFICER & TREASURER VENTURE LIGHTING INTERNATIONAL, INC. BY: ___________________________________ CHIEF FINANCIAL OFFICER & TREASURER NATIONAL CITY BANK, AS COLLATERAL AGENT, AS PLEDGEE BY: ___________________________________ SENIOR VICE PRESIDENT 15 212 ANNEX A to Pledge Agreement LIST OF SUBSIDIARIES [The information included in Annex II to Credit Agreement is hereby incorporated herein by this reference thereto.] 213 ANNEX B to Pledge Agreement LIST OF STOCK
==================================================================================================================== NAME OF NAME TYPE NUMBER ISSUING OF OF OF CERTIFICATE PERCENTAGE CORPORATION PLEDGOR SHARES SHARES NO. OWNED/PLEDGED - -------------------------------------------------------------------------------------------------------------------- APL Engineered Venture Lighting common 68,515 68 100%/100% Materials, Inc. International, stock Inc. - -------------------------------------------------------------------------------------------------------------------- Venture Lighting Advanced common 6,000 3 100%/100% International, Inc. Lighting stock Technologies, Inc. - -------------------------------------------------------------------------------------------------------------------- Lighting Resources Venture common 10 5 100%/100% International, Inc. Lighting, stock International, Inc. - -------------------------------------------------------------------------------------------------------------------- Ruud Lighting, Inc. Advanced common 10,500 100%/100% Lighting stock Technologies, Inc. - --------------------------------------------------------------------------------------------------------------------
214 ANNEX C to Pledge Agreement LIST OF INTER-COMPANY AND THIRD PARTY NOTES
==================================================================================================================== ISSUER PAYEE PRINCIPAL AMOUNT INTEREST RATE MATURITY DATE - -------------------------------------------------------------------------------------------------------------------- Spectro Electric, Inc. Advanced Lighting Canadian Dollars (at Technologies, Inc. 12/31/97, approx. U.S. $1,433,868, at current exchange rate) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------
215 ANNEX D to Pledge Agreement LIST OF PLEDGED ENTITIES
==================================================================================================================== NAME OF PLEDGED ENTITY TYPE OF ORGANIZATION - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- [None required to be pledged as of the Initial Borrowing Date] - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------
216 ANNEX E to Pledge Agreement PLEDGE NOTICE [Letterhead of Pledgor] [Date] TO:[NAME OF PLEDGED ENTITY] Notice is hereby given that, pursuant to a Pledge Agreement (a true and correct copy of which is attached hereto), dated as of January 2, 1998 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "PLEDGE AGREEMENT"), among the pledgors party thereto, including the undersigned (the "PLEDGOR") and National City Bank, as Collateral Agent, as Pledgee (herein, together with its successors and assigns in such capacity, the "PLEDGEE") for the Secured Creditors described therein, the Pledgor has pledged and assigned to the Pledgee for the benefit of the Secured Creditors, and granted to the Pledgee for the benefit of the Secured Creditors a continuing security interest in, all right, title and interest of the Pledgor, whether now existing or hereafter arising or acquired, as a [limited] [general] [partner] [member] in [NAME OF PLEDGED ENTITY] (the "PLEDGED ENTITY"), and in, to and under the [TITLE OF APPLICABLE AGREEMENT] (the "GOVERNING AGREEMENT"), including, without limitation: (i) all the capital of the Pledged Entity and the Pledgor's interest in all profits, losses and other distributions to which the Pledgor shall at any time be entitled in respect of such [partnership] [membership] interest; (ii) all other payments due or to become due to the Pledgor in respect of such [partnership] [membership] interest, whether under the Governing Agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise; (iii) all of its claims, rights, powers, privileges, authority, options, security interest, liens and remedies, if any, under the Governing Agreement or at law or otherwise in respect of such [partnership] [membership] interest; (iv) all present and future claims, if any, of the Pledgor against the Pledged Entity for moneys loaned or advanced, for services rendered or otherwise; (v) all of the Pledgor's rights under the Governing Agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of the Pledgor relating to the [partnership] [membership] interest, including any power to terminate, cancel or modify the Governing Agreement, to execute any instruments and to take any and all other action on behalf of and in the name of the Pledgor in respect of the Equity Interest and the Pledged Entity, to make determinations, to exercise any election (including, but not limited, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, collect or receipt for any of the foregoing or to enforce or execute any checks, or other instruments or orders, to file any claims and to take any action in connection with any of the foregoing; (vi) all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof; and 217 (vii) to the extent not otherwise included, all proceeds of any or all of the foregoing. Pursuant to the Pledge Agreement, the Pledged Entity is hereby authorized and directed to register the Pledgor's pledge to the Pledgee on behalf of the Secured Creditors of the interest of the Pledgor on the Pledged Entity's books. The Pledgor and the Pledged Entity each hereby consents, notwithstanding anything to the contrary contained in the Governing Agreement or any other agreement for the benefit of the Pledgor or the Pledged Entity relating thereto, to (i) the grant by any other Pledgor of a security interest to the Pledgee in its Equity Interest, its interest in the Governing Agreement and its other rights and interests relating thereto, as described above, pursuant to the Pledge Agreement; and (ii) any sale, transfer or other disposition by the Pledgee of any Equity Interest of the Pledgee or any other Pledgor any or other rights or interests in connection with the foreclosure of such security interest or the exercise of any other remedies available to the Pledgee under or in connection with the Pledge Agreement in respect thereof. The Pledgor hereby requests the Pledged Entity to indicate the Pledged Entity's acceptance of this Notice and consent to and agreement with its terms and provisions by signing a copy hereof where indicated on the attached page and returning the same to the Pledgee on behalf of the Secured Creditors. [NAME OF PLEDGOR] By:______________________________________ Title: 2 218 ACKNOWLEDGMENT [NAME OF PLEDGED ENTITY] (the "PLEDGED ENTITY") hereby (i) acknowledges receipt of a copy of the assignment by [NAME OF PLEDGOR] (the "PLEDGOR") of its interest under the [TITLE OF APPLICABLE AGREEMENT] (the "GOVERNING AGREEMENT") pursuant to the terms of the Pledge Agreement, dated as of January 2, 1998 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "PLEDGE AGREEMENT"), among the Pledgors party thereto, including the Pledgor, and National City Bank, as Collateral Agent, as Pledgee (herein, together with its successors and assigns, the "PLEDGEE") on behalf of the Secured Creditors described therein; (ii) confirms its agreement to all of the terms and provisions of the letter to which this acknowledgment is attached; and (iii) confirms the registration of the Pledgor's pledge of its interest to the Pledgee on behalf of the Secured Creditors on the Pledged Entity's books. Dated: ____________, 199__ [NAME OF PLEDGED ENTITY] By: ____________________________________ Title: 3 219 EXHIBIT E-2 ---------------------------- FORM OF MORTGAGE OF SHARES OF PARRY POWER SYSTEMS LIMITED --------------------------- 220 - -------------------------------------------------------------------------------- 2 JANUARY 1998 ADVANCED LIGHTING TECHNOLOGIES, INC. NATIONAL CITY BANK AS COLLATERAL AGENT - -------------------------------------------------------------------------------- 221 CONTENTS
CLAUSE PAGE - ------ ---- 1. INTERPRETATION............................................................................................1 2. MORTGAGE..................................................................................................2 3. CONTINUING AND PRIMARY SECURITY...........................................................................3 4. WARRANTIES AND UNDERTAKINGS...............................................................................4 5. DIVIDENDS AND VOTING......................................................................................6 6. POWER OF ATTORNEY.........................................................................................7 7. SALE......................................................................................................7 8. OTHER SECURITY, ETC.......................................................................................8 9. REASSIGNMENT..............................................................................................9 10. COME-ALONG REQUIREMENT....................................................................................9 11. FURTHER PROVISIONS.......................................................................................10 SCHEDULE 1...............................................................................................13 SCHEDULE 2...............................................................................................14
i 222 A MORTGAGE is made on 2 January 1998 BETWEEN: ADVANCED LIGHTING TECHNOLOGIES, INC. (the "MORTGAGOR"), a company incorporated under the laws of the State of Ohio, United States of America; NATIONAL CITY BANK, as Lender and as the Collateral Agent (the "AGENT") under the Credit Agreement (as defined below), and for and on behalf of the Lenders party to the Credit Agreement. WHEREAS: (A) Pursuant to the Credit Agreement dated as of 2 January 1998 by and among the Mortgagor, as the borrower thereunder, the lenders from time to time a party thereto (collectively, the "LENDERS" and individually, a "LENDER") and the Agent (as such agreement may from time to time be amended, extended, renewed, supplemented or otherwise modified, the "CREDIT AGREEMENT"), the Lenders have agreed, subject to the terms and conditions stated therein, to extend credit facilities to the Mortgagor. (B) The Credit Agreement requires that the Mortgagor shall execute and deliver this Mortgage. This Mortgage is one of the Credit Documents referred to in the Credit Agreement. IT IS AGREED as follows: INTERPRETATION 1.1 Except where the context otherwise requires or where otherwise defined herein, words and expressions defined in the Credit Agreement bear the same meanings when used herein. 1.2 In this Mortgage: (a) references to the Mortgagor, the Agent or the Lenders include references to any person for the time being deriving title under each of them respectively; (b) references to this Mortgage, the Credit Agreement and the other Credit Documents are references to the same as from time to time varied supplemented or amended in any manner or respect whatsoever, and in particular by variations which increase or otherwise affect the liability of the Mortgagor or any of its Affiliates; (c) "COMPANY" means Parry Power Systems Limited (registered No. 33417889); "DEPOSIT SHARES" means the securities listed in Schedule 1 which are all registered in the name of the Mortgagor and which represent thirty-four percent (34%) of the issued share capital of the Company; "ORIGINAL SECURITIES" means the securities listed in Schedule 2 which are all registered in the name of the Mortgagor and which represent sixty-six percent (66%) of the issued share capital of the Company; "SALE EVENT" means any of the events mentioned in clause 7.1; 223 "SECURED AMOUNTS" means all and any amounts of any kind now or in the future due and payable by the Mortgagor to any of the Agent and the Lenders under or in connection with the Credit Agreement, this Mortgage or the other Credit Documents and references to the Secured Amounts include (save in clauses 3.3 and 9.1) references to any part of them; "SECURITY SHARES" means the Original Securities and all and any other shares, securities, rights, moneys and property for the time being mortgaged or charged to the Agent and the Lenders pursuant to clause 2; "SECURITY INTEREST" means any mortgage, charge, pledge, lien, right of set off or any security interest, howsoever created or arising; "SHARES" means the Deposit Shares and the Security Shares; (d) references to the Original Securities or to the Security Shares or to the Deposit Shares include references to any of them; and (e) "MORTGAGE" includes a transfer or assignment by way of mortgage. 1.3 Clause headings are for ease of reference only. MORTGAGE 2.1 In consideration of the Agent (in its individual capacity as a Lender) and the other Lenders acting under the Credit Agreement making or agreeing to make the Loans available to the Mortgagor, the Mortgagor, with full title guarantee, hereby assigns and transfers absolutely by way of first fixed mortgage and agrees to mortgage and charges and agrees to charge to the Agent and the Lenders as a continuing security for the payment and discharge of the Secured Amounts: (a) the Original Securities; (b) any other securities which the Mortgagor may, with the prior written consent of the Agent, from time to time substitute for all or any of the Original Securities; (c) all other securities and all rights, moneys (including, without limitation, dividends) and property whatsoever which may from time to time at any time be derived from, accrue on or be offered in respect of the Original Securities or the other securities referred to in clause 2.1(b) whether by way of redemption, exchange, conversion, rights, bonus, capital reorganization or otherwise howsoever. but in each case so that the covenants implied by the Law of Property (Miscellaneous Provisions) Act 1994 ("THE LP (MP) ACT") in the mortgages and charges contained in or created pursuant to this Mortgage, are construed with the omission of: (A) the words "other than" any charges, or rights which that person does not and could not reasonably be expected to know about" in section 3(1) LP (MP) Act; and (B) section 6(2) LP (MP) Act. 2 224 CONTINUING AND PRIMARY SECURITY 3.1 This Mortgage shall be a continuing security and shall be in addition to and shall not affect any continuing liens or other Security Interests to which the Agent and the Lenders are or will be entitled on such other security as may have been or may be deposited with or granted to the order of the Agent and the Lenders, which liens and other Security Interests shall remain in force independently of this Mortgage. 3.2 (a) The Security Shares are hereby deposited and mortgaged to the Agent and the Lenders as primary and not as collateral security. (b) The Deposit Shares are also hereby deposited with the Agent PROVIDED that, for the avoidance of doubt, the Deposit Shares so deposited, and any securities substituted therefor (or for such substitute securities) as permitted hereafter in this clause 3.2, are deposited for custody purposes only and are not, and, in the case of any such substitute securities, will not be, deposited by way of security, and in any event shall not be the subject of any Security Interest under this Mortgage. The Mortgagor may from time to time, with the prior written consent of the Agent, substitute any other securities for the Deposit Shares or for such other securities so substituted and the provisions of this clause 3.2 shall apply thereto. (c) Unless a Sale Event shall have occurred and be continuing, the Security Shares and the Deposit Shares delivered unto the custody of the Agent as hereinabove provided, and any securities substituted therefor which are likewise physically delivered to the Agent, and if requested by the Mortgagor shall be physically held in the possession of the Agent's solicitors, Jones, Day, Reavis & Pogue, in the City of London, England, at the principal office of such solicitors in London England, presently located at Bucklersbury House, 3 Queen Victoria Street, London EC4N 8NA, England (attention: Partner in Charge), for the benefit of the Agent and the Lenders in accordance with this Mortgage. 3.3 The liabilities and obligations of the Mortgagor under this Mortgage and the security constituted by this Mortgage shall remain in force notwithstanding any winding-up or dissolution of, or any change in constitution or corporate identity or loss of corporate identity by, the Mortgagor, or any other act, omission, neglect, event or matter whatsoever, except (i) the proper and valid payment and discharge of all the Secured Amounts, and (ii) subject to clause 3.4 below, the delivery of an absolute written discharge or release of the Mortgagor signed by the Agent on behalf of the Lenders. 3.4 Any such discharge or release referred to in clauses 3.3 or 9.1 and any composition or arrangement which the Mortgagor may effect with any of the Agent and the Lenders, shall be deemed to be made subject to the condition that it will be void, if any payment or security which any of the Agent and the Lenders (or any of them) may previously have received or may thereafter receive from any person in respect of the Secured Amounts is set aside under any applicable law or proves to have become or been for any reason invalid. 3.5 Without prejudice to the generality of clause 3.3, none of the liabilities or obligations of the Mortgagor under this Mortgage shall be impaired, and the security constituted by this Mortgage shall not be impaired, by the Agent and the Lenders (or any of them): (a) agreeing with any of the Affiliates or the Mortgagor concerning any variation or departure (however substantial) of or from any of the other Credit Documents so that any such variation or departure (including any which may have been made before the execution of this Mortgage) shall, whatever its nature, be binding upon the Mortgagor in all circumstances, notwithstanding that it may increase or otherwise affect the liability of the Mortgagor or the Secured Amounts; 3 225 (b) releasing or granting any time or any indulgence whatsoever to any of the Affiliates of the Mortgagor or any other person and, in particular, waiving any of the preconditions for the making of the credit facilities under the Credit Agreement or any contravention by any of the Affiliates of the Mortgagor of any of the other Credit Documents (or any of them) or entering into any transaction or arrangements whatsoever with or in relation to any of the Affiliates of the Mortgagor and/or any third party; (c) taking, accepting, varying, dealing with, enforcing, abstaining from enforcing, surrendering or releasing any security for or guaranty of the Secured Amounts in such manner as it or they think fit, or claiming, proving for, accepting or transferring any payment in respect of the Secured Amounts in any composition by, or winding up of; any of the Affiliates of the Mortgagor and/or or any third party or abstaining from so claiming, proving, accepting or transferring. 3.6 Rights may be exercised and demands may be made under this Mortgage from time to time, and the liabilities and obligations of the Mortgagor and the rights and security contained in this Mortgage under this Mortgage may be exercised and enforced, irrespective of: (a) whether any demands, steps or proceedings are being or have been taken against any of the Affiliates of the Mortgagor and/or any third party; or (b) whether or in what order any security or guaranty to which the Agent or the Lenders may be entitled in respect of the Secured Amounts is enforced. 3.7 The rights of the Agent and the Lenders under this Mortgage shall be in all respects several, and references in this Mortgage to the Agent and the Lenders shall include references to any one or more of them. Should any one or more of them fail to perform obligations under or in connection with any of the Credit Agreement, the other Credit Documents or any other document, that shall in no way affect the rights of the others of them under this Mortgage or the security contained in this Mortgage. WARRANTIES AND UNDERTAKINGS 4.1 The Mortgagor represents and warrants that: (a) it is the sole legal and beneficial owner of all the Shares free of all Security Interests, encumbrances, trusts, equities and claims whatsoever (save under this Mortgage) and that all the Shares are fully paid up; (b) it is or will be at such later time at which the relevant Security Shares (other than the Original Securities) become the subject of this Mortgage the sole legal and beneficial owner of all the Security Shares (other than the Original Securities) free from all Security Interests, encumbrances, trusts, equities and claims whatsoever (save under this Mortgage) and that all the Security Shares are or will at such date be fully paid-up; (c) it is or will be at such later time at which any shares are substituted in accordance with the last sentence of clause 3.2 the sole legal and beneficial owner of such substitute shares free from all Security Interests, encumbrances, trusts, equities and claims whatsoever and that all such substitute shares are or will at such date be fully paid-up; 4 226 (d) the Original Securities are all currently registered in the name of the Mortgagor and represent sixty-six per cent (66%) of the issued share capital of the Company; (e) the Deposit Shares are all currently registered in the name of the Mortgagor and represent thirty-four per cent (34%) of the issued share capital of the Company. 4.2 The Mortgagor undertakes that, for so long as any Secured Amounts remain outstanding, it shall: (a) pay to the Agent, upon demand, the amount of all expenses, including all stamp duties and any other duties or levies, which it may reasonably incur in, about or with a view to perfecting or enforcing this security or otherwise in connection with this security or the Deposit Shares, together with interest on the amount of any payments made by the Agent in respect of such expenses at the default rate described in the Credit Agreement from the date of payment until the date of repayment and as well after as before judgment and so that any amount payable hereunder may be debited to any account of the Mortgagor with the Agent; (b) promptly pay all calls, installments and other payments which may be made or become due in respect of the Shares and so that, in the event of default by the Mortgagor, the Agent may do so on behalf of the Mortgagor and clause 4.2(a) shall apply accordingly; (c) forthwith sign, seal, deliver and complete all transfers, renunciations, proxies, mandates, assignments, deeds and documents and do all acts and things which the Agent may, in its absolute discretion, at any time and from time to time specify: (i) for enabling or assisting the Agent to perfect its title to and security over the Security Shares; (ii) to vest the Security Shares in the Agent or its nominee or nominees provided that the Agent shall not seek to so vest the Security Shares until an Event of Default occurs and is continuing; (iii) subject to clause 5, to exercise (or enable its nominee or nominees to exercise) any rights or powers attaching to the Security Shares; (iv) (after the occurrence of a Sale Event) to sell or dispose of the Security Shares; or (v) otherwise to enforce any of the rights of the Agent and the Lenders under or in connection with this Mortgage; (d) not (without the written consent of the Agent): (i) create or permit to exist over all or part of the Shares (or any interest therein) any Security Interest (other than, in respect of the Security Shares, this Mortgage or the Pledge Agreement referred to in clause 11.14 of this Agreement) whether ranking prior to, pari passu with or behind the security contained in this Mortgage; 5 227 (ii) sell, transfer or otherwise dispose of the Shares or any interest therein or attempt or agree to so dispose; or (iii) permit any person other than the Mortgagor to be registered as or become the holder of the Shares; (e) forward to the Agent all notices, reports, accounts, circulars and other documents relating to the Shares or which are sent to the holders of the Shares as soon as they are received; (f) take such action as the Agent may in its absolute discretion direct, in respect of any proposed compromise, arrangement, capital reorganization, conversion, exchange, repayment or take-over offer affecting or in respect of the Shares or any of them or any proposal made for varying or abrogating any rights attaching to the Shares or any of them; (g) indemnify each of the Agent and the Lenders (and any of their nominees) on demand from and against all losses, actions, claims and liabilities which any of them may incur in connection with the Deposit Shares or as holders of the Security Shares or any interest in the Security Shares, except for any such losses, actions, claims and liabilities which are determined by a final order of any court of competent jurisdiction to have resulted directly from the gross negligence or willful misconduct to the person to be indemnified hereunder; and (h) ensure that the registered Shares which are not registered in the name of the Mortgagor or the Agent (or its nominee) are at all times registered in the names of persons who have executed declarations of trust in favour of the Mortgagor and the Agent in such forms as the Agent may specify, being (if at any time the Agent so requires) persons nominated by the Agent. DIVIDENDS AND VOTING 5.1 Until an Event of Default shall have occurred and is continuing and the Mortgagor's rights under this clause 5.1 are terminated by notice to the Mortgagor, at the Agent's option, then: (a) cash dividends paid in respect of the Security Shares or any of them received by the Mortgagor or, if the Agent shall become the registered holder of the Security Shares, received by the Agent (or its nominee) shall, if the Agent is the registered holder thereof, on request by the Mortgagor, be released to the Mortgagor or, if the Agent shall not be such registered holder, shall be retained by the Mortgagor only to the extent in either case that the Mortgagor is entitled to receive such dividends under the terms of the Credit Agreement; and (b) subject to clause 4.2(f), the Agent will if the Security Shares are no longer registered in the name of the Mortgagor exercise all voting and other rights and powers attached to the Security Shares as the Mortgagor may from time to time in writing reasonably direct, and the Agent shall instruct any nominee for the time being registered as holder of the Security Shares accordingly. 5.2 If an Event of Default occurs and is continuing, then, subject to clause 5.1: (a) all and any dividends and other distributions accruing on or deriving from the Security Shares (notwithstanding that they may have accrued in respect of an earlier period) shall: 6 228 (i) if received by the Mortgagor (or any nominee of the Mortgagor) be held on trust and forthwith paid and transferred to the Agent; and (ii) when and if received by the Agent (or its nominee) shall form part of the Security Shares and be held by the Agent on trust for the Agent and the Lenders on the terms of this Mortgage as additional security (and, if cash, be paid into a cash collateral deposit account and may be applied by the Agent at any time and from time to time thereafter in or towards the discharge of the Secured Amounts as the Agent thinks fit); (b) the Agent may from time to time exercise (and may from time to time direct the exercise of) all voting and other rights and powers (by statute or otherwise) attached to or conferred on the Security Shares in such manner as the Agent (in its absolute discretion) thinks fit and the Mortgagor shall, and shall procure that any nominee of the Mortgagor shall, comply with any such directions of the Agent; and (c) the Mortgagor shall (and shall procure that any nominee of the Mortgagor shall) forthwith agree to accept short notice for and to attend all or any meetings or class meetings of the holders of the Security Shares, to appoint proxies and exercise all voting and other rights and powers which may at any time be exercisable by the holders of the Security Shares as the Agent may from time to time direct. 5.3 The rights and powers attached to the Security Shares shall, for the purposes of clause 5.2(b), include (without limitation) all powers given to trustees by sections 10(3) and 10(4) of the Trustee Act 1925 (as amended) in respect of securities subject to a trust and shall be exercisable without any need for any further consent or authority of the Mortgagor. POWER OF ATTORNEY 6. The Mortgagor hereby irrevocably and by way of security for the payment by it and each of its Affiliates of the Secured Amounts and the performance of their obligations under the Credit Agreement, this Mortgage and the other Credit Documents appoints the Agent as its true and lawful attorney (with full power to appoint substitutes and to sub-delegate) on behalf of the Mortgagor and in the Mortgagor's own name or otherwise, at any time and from time to time, to sign, seal, deliver and complete all transfers, renunciations, proxies, mandates, assignments, deeds and documents and do all acts and things which the Agent may, in its sole and absolute discretion, consider to be necessary or advisable to perfect its security over the Security Shares or to give proper effect to the intent and purposes of this Mortgage or to enable or assist in any way in the exercise of any power of sale of the Security Shares (whether arising under this Mortgage or implied by statute or otherwise). SALE 7.1 The following shall constitute Sale Events under this Mortgage: (a) if an Event of Default occurs and is continuing; or (b) if any of the Loans is declared to be immediately due and payable under the Credit Agreement. 7 229 7.2 On or any time after the occurrence of a Sale Event and without prior notice to the Mortgagor, the Agent may exercise all the powers and rights of a mortgagee conferred by statute or otherwise and (without prejudice to the generality of the foregoing) may sell or otherwise dispose (and instruct any nominee of the Agent or the Mortgagor to sell or otherwise dispose) of all the title to and interest in the Security Shares or (as the Agent may elect and without prejudice to any later exercise of this power) the whole or part of the equitable interest divested of the legal title for such consideration (which may comprise or include shares or debentures), upon such terms and generally in such manner as the Agent may, in its sole and absolute discretion, think fit. 7.3 The provisions of the Law of Property Act 1925 (or any statutory re-enactment, variation or modification thereof or any law of similar effect in any jurisdiction) relating to the power of sale conferred by that Act are hereby varied so that Section 103 shall not apply, and such provisions are hereby extended as set out in clause 7.2. 7.4 None of the Agent and the Lenders shall be liable for any loss or damage occasioned by any sale or disposal of the Shares (or interest therein) or arising out of the exercise of or failure to exercise any of their powers under this Mortgage or for any neglect or default to pay any installment or accept any offer or notify the Mortgagor of any such matter or for any other loss of any nature whatsoever in connection with the Shares except to the extent that the loss or damage arises from the gross negligence or wilful misconduct of the Agent or any of the Lenders. 7.5 All moneys arising from the exercise of the powers of the Agent or the Lenders (subject to any claims ranking in priority to the Secured Amounts) shall be applied in or towards discharging, in the following order of priority: (a) all costs, charges, expenses and liabilities paid or incurred by the Agent (including any amounts for which it is entitled to be indemnified and all stamp duties and any other duties or levies) in connection with or as a result of the exercise of its rights and powers under this Mortgage or in connection with the Security Shares, in such order as the Agent may from time to time determine; (b) all other Secured Amounts in such order as may be provided in the Credit Agreement, or if not so provided, in such order as the Agent may from time to time determine; and (c) (subject to any rights of set off; combination, or retention) the claims of those entitled to any surplus. OTHER SECURITY, ETC. 8.1 Section 93 of the Law of Property Act 1925 (restricting rights of consolidation of mortgages) (or any statutory re-enactment, variation or modification thereof or any law of similar effect in any jurisdiction) shall not apply in relation to this Mortgage. 8.2 Subject to clause 11.14 of this Mortgage, this security is in addition to and shall not affect or be merged in any bills, notes, guarantees, indemnities, undertakings, Security Interests, or other security whatsoever which any of the Agent and the Lenders may hold now or hereafter in connection with the Credit Agreement or the Subsidiary Guaranty or the obligations of any other person liable for any of the Secured Amounts. 8 230 REASSIGNMENT 9.1 At such time as the Mortgagor shall have no further obligations (actual or contingent, present or future, joint or several) under or in connection with the Credit Agreement or the other Credit Documents and none of the Secured Amounts remains outstanding, this Mortgage shall terminate and the Agent shall at the request and cost of the Mortgagor execute (and/or cause any of its nominees to execute) such documents as the Mortgagor may reasonably request and which may be required to evidence such termination and reassign (subject to the provisions of clause 3.4) all of the Agent's then right, title and interest in and to such of the Security Shares then held by the Agent (or its nominee) to the person entitled to the Security Shares. 9.2 If the Agent or its nominee or nominees shall be required to transfer the Security Shares pursuant to clause 9.1 or otherwise, the Agent may require the transferee to accept delivery, transfer or registration of other securities of the same type, class and denomination in lieu of the Security Shares and ensure that its nominees (if any) do likewise. COME-ALONG REQUIREMENT 10.1 In the event that any of the Agent and the Lenders, (the "COME-ALONG TRANSFEROR") exercises its rights under this Agreement, and, in connection therewith, obtains an offer from a third party to acquire all, but not less than all, of the shares or interest of any issuer of the Shares, then the Come-Along Transferor shall have the right (the "COME-ALONG RIGHT") to compel the Mortgagor to sell and the Mortgagor hereby agrees to sell, within 30 days, all, but not less than all, of its shares of or interest in such issuer of the Shares, and further agrees to vote in favour of, and otherwise authorize and take all further action necessary or desirable to consummate the sale of all or substantially all of the assets of such issuer to such third party; PROVIDED, HOWEVER, that the Mortgagor shall receive consideration per share or percentage of interest owned identical to that received by the Come-Along Transferor pursuant to such transfer. This Come-Along Right may be exercised by the Come-Along Transferor by providing the Mortgagor with notice (the "COME-ALONG NOTICE") setting forth (i) the name and address of the third party, (ii) the time and place of the proposed closing of the Come-Along Right, which time and place shall not be less than 5 business days after the expiration of the 30 day period described in the first sentence of this clause 10.1, (iii) the terms and conditions of such transfer, and (iv) the expected compensation to be paid per share or percentage interest of the Shares at such closing. 10.2 At the closing of the Come-Along Right, if not previously done, the Mortgagor shall deliver certificates evidencing its title to the Shares, duly endorsed and with duly executed stock transfer forms, warranting as to good legal and beneficial title, free and clear of any liens and encumbrances (other than those of the Agent and the Lenders) and adverse claims, and the compliance with any other conditions of closing applicable to the Come-Along Transferor. The Mortgagor agrees to use all reasonable efforts to take, or cause to be taken and to do, or cause to be done, all things necessary, proper, or advisable to implement and make effective as promptly as practicable any Come-Along Right pursuant to the provisions hereof. Subject to the performance by the Mortgagor of the foregoing, the Come-Along Transferor shall remit to the Mortgagor any proceeds of the Mortgagor's shares or interest in such issuer of the Shares referred to in clause 10.1 received by the Come-Along Transferor which are not proceeds of the Security Shares. 10.3 Nothing in this clause 10 shall affect or prejudice the proviso in clause 3.2 of this Mortgage. 9 231 FURTHER PROVISIONS 11.1 Any Lender may at any time and from time to time without notice and notwithstanding any settlement of account or other matter whatsoever combine or consolidate all or any of its existing accounts including accounts in the name of that Bank or of the Mortgagor jointly with others and may set off or transfer any credit balance or any sum standing to the credit of any account (whether or not the same is due to the Mortgagor by that Lender and whether or not the credit balance and the account in debit or the Secured Amounts are expressed in the same currency) in or toward satisfaction of any of the Secured Amounts and may in its absolute discretion estimate the amount of any liability of the Mortgagor which is contingent or unascertained and thereafter set off such estimated amount and no amount shall be payable by that Lender to the Mortgagor unless and until all Secured Amounts have been ascertained and fully repaid or discharged. 11.2 If any amount is received or recovered by any Lender in respect of the Secured Amounts (whether pursuant to a judgment or otherwise) in a currency (the "OTHER CURRENCY") other than the currency in which the Secured Amounts are payable (the "ORIGINAL CURRENCY"), then that Lender may convert the other currency into the original currency and the Lender (l) shall calculate the amount of the original currency it would have received if the other currency was used to purchase the original currency on the date of receipt or recovery and if such amount is less than the amount payable by the Mortgagor in the original currency, the Mortgagor, as a separate and independent obligation shall indemnify that Lender against any loss sustained by that Lender as a result (including any premium, commission, transfer or other costs incurred or charged by that Lender). 11.3 All sums of whatsoever nature which are payable by the Mortgagor under this Mortgage and which are now or at any time hereafter become subject to value added tax or any similar tax shall be deemed to be exclusive of value added tax or any similar tax and the Mortgagor in addition to such sums will indemnify the Lender from and against all claims and liabilities whatsoever in respect thereof. 11.4 Any document required to be executed under the seal of any Lender under or in connection with this Mortgage shall be validly executed if executed under the seal of a duly authorized attorney of that Lender. 11.5 Any notice or demand under this Mortgage to or upon the Mortgagor shall be in writing and shall be deemed to have been properly served upon the Mortgagor if delivered personally or if sent by telex, rapifax or prepaid first-class letter post to its registered office for the time being or to any one of its principal places of business for the time being. Any such notice or demand: (a) which is sent by telex or rapifax, shall be deemed to have been properly served upon the Mortgagor two hours after the time of despatch if such time is during regular business hours of the Mortgagor on a Business Day, otherwise it shall be deemed properly served upon the Mortgagor at 10.00 a.m. on the next succeeding Business Day; (b) which is sent by first-class prepaid letter post and is posted before the last collection of letters from the letter box in which it was posted has been made on any day, shall be deemed to have been properly served upon the Mortgagor at 10.00 a.m. on the next succeeding day upon which a delivery of letters is made. 11.6 In any action, proceedings or claim relating to this Mortgage or the security contained in this Mortgage, a statement as to any amount due to a Lender or of the Secured Amounts or any part thereof 10 232 which is certified as being correct by an officer of that Lender shall, save in the case of manifest error, be conclusive evidence that such an amount is in fact due and payable. 11.7 The rights of the Agent and the Lenders are cumulative, may be exercised as often as they consider appropriate and are in addition to their respective rights under general law; and the rights of the Agent and the Lenders (whether arising under this Mortgage or under the general law) shall not be capable of being waived or varied otherwise than by express waiver or variation in writing; and, in particular, any failure to exercise or any delay in exercising any such rights shall not operate as a variation or waiver of that or any other such right; any defective or partial exercise of such rights shall not preclude any other or further exercise of that or any other such right; and no act or course of conduct or negotiation on their part or on their behalf shall in any way preclude it from exercising any such right or constitute a suspension or variation of any such right. 11.8 If any provisions of this Mortgage become invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired but shall remain in full force and effect. 11.9 The Agent and the Lenders (or any of them) may assign all or any of their respective rights under this Mortgage and any successor to or assignee of any of the Agent or the Lenders shall be entitled to the full benefits of this Mortgage and this Mortgage shall remain valid and enforceable notwithstanding any change in the name, composition or constitution of any of the Agent and the Lenders nor any amalgamation or consolidation with any other company. 11.10 This Mortgage is governed by, and shall be construed in accordance with, the laws of England and Wales. 11.11 Each of the Mortgagor, the Agent and the Lenders agree that the courts of England are to have non-exclusive jurisdiction over any matter which may be in dispute under this Mortgage, and the Mortgagor irrevocably submits to the jurisdiction of such courts. 11.12 The Mortgagor shall at all times maintain an agent for service of process in England. Such agent shall be Bristow Cooke & Carpmeal, 10 Lincoln's Inn Fields, London WC2A 3BP, England (attention of Managing Partner), and any writ, judgement or other notice of legal process shall be sufficiently served on the Mortgagor or delivered to such agent at its address for the time being. The Mortgagor undertakes not to revoke the authority of the above agent and if, for any reason, any such agent no longer serves as agent of the Mortgagor, the Mortgagor shall promptly appoint another such agent and advise the Agent thereof. 11.13 The Mortgagor at its cost shall cause its solicitors to prepare and file, within 21 days of the date of execution and delivery of this Mortgage, a Form 395, satisfactory in form and substance to the Agent, with the English Registrar of Companies to record the particulars of this Mortgage. 11.14 This Mortgage may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. * * * 11 233 DULY DELIVERED AS A DEED by the Mortgagor on the date inserted above. EXECUTED as a DEED under ) the COMMON SEAL of ) ADVANCED LIGHTING TECHNOLOGIES, INC. ) in the presence of: ) Director Secretary ............................................... for and on behalf of NATIONAL CITY BANK for and on behalf of itself, and as Collateral Agent for the Lenders 12 234 SCHEDULE 1
AMOUNT OR NUMBER OF SECURITY DESCRIPTION OF REGISTERED SECURITY .68 shares of nil par value each Ordinary Shares in the capital of Parry Power Systems Limited (Registered No. 33417889) held by the Mortgagor.
13 235 SCHEDULE 2
AMOUNT OR NUMBER OF SECURITY DESCRIPTION OF REGISTERED SECURITY 1.32 shares of nil par value each Ordinary Shares in the capital of Parry Power Systems Limited (Registered No. 33417889) held by the Mortgagor.
14 236 EXHIBIT F-1 ---------------------------- FORM OF LANDLORD WAIVER ---------------------------- 237 LANDLORD WAIVER Dated as of January 2, 1998 TO: National City Bank, as Collateral Agent National City Center 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Anthony J. DiMare Senior Vice President Telephone: (216) 575-3344 Facsimile: (216) 575-9396 Metro-Ohio Division ------------------- ____________________________________________ (the "TENANT"), is the lessee under a lease between the Tenant and the undersigned landlord (the "LANDLORD") covering the premises located at: (the "PREMISES") more fully described in the lease attached hereto as EXHIBIT "A" and as modified by any amendments, if any, attached thereto (collectively, the "LEASE"). The Landlord is the sole owner of the Premises. The Tenant has certain of its assets located on the Premises. The Tenant has entered into a Security Agreement (the "SECURITY AGREEMENT") with National City Bank, as Collateral Agent (the "COLLATERAL AGENT") for itself and the other Secured Creditors ("SECURED CREDITORS") identified therein. As a condition to the Secured Creditors agreeing to make loans and other financial accommodations and extensions of credit, the Secured Creditors require, among other things, that the Tenant grant to the Collateral Agent, for the benefit of the Secured Creditors, liens on all of the Tenant's inventory, equipment, goods, furnishings and other tangible personal property located on the Premises (the "COLLATERAL"), and that, if required by the Secured Creditors, the Tenant grant a mortgage in favor of the Collateral Agent, for the benefit of the Secured Creditors, covering the Tenant's leasehold estate created by and under the Lease. In order to induce the Secured Creditors and the Collateral Agent (together with their agents, successors and assigns) to enter into said financing arrangements, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged: A. The Landlord hereby consents to the execution, delivery and performance by the Tenant of a leasehold mortgage as the same may be amended, supplemented or otherwise modified from time to time (the "LEASEHOLD MORTGAGE"), covering the Premises, and the Landlord agrees that the execution, delivery and performance of the Leasehold Mortgage will not constitute a breach or default under the Lease; PROVIDED that the terms and provisions of the Leasehold Mortgage shall not impair or otherwise affect the terms and provisions of the Lease or the rights, remedies and entitlements of the Landlord under the Lease and shall not create any obligation or duty on the part of the Landlord except as herein expressly stated. In the event of inconsistencies in the provisions of the Landlord's rights, remedies and entitlements under the Lease and any such Leasehold Mortgage, it is agreed that the provisions of the Lease shall control. B. The Landlord hereby agrees not to modify or amend the Lease without the prior written consent of the Collateral Agent, which consent will not be unreasonably withheld or delayed. 238 C. The Landlord hereby certifies and agrees that: 1. The Lease is in full force and effect, all conditions to the commencement of the term of the Lease have been satisfied. 2. The Tenant is not in default under the Lease, nor are there any events or conditions which, by the passage of time or giving of notice or both, would constitute a default thereunder by the Tenant. 3. The Landlord is not aware of any disputes, action, suit, condemnation proceeding, claim, or right of setoff pending or threatened with respect to the Lease or the Premises. 4. None of the Collateral shall be deemed to be fixtures. 5. The Landlord will not assert against the Collateral any statutory, contractual or possessory liens including, without limitation, rights of levy or distraint for rent, all of which it hereby waives. The Landlord will not assert any claims or rights of surcharge against the Collateral of whatever nature, including, but not limited to, any claim or right under 11 U.S.C. section 506(c) or any similar statute, whether state or federal. 6. The Landlord will notify the Collateral Agent in writing if the Tenant defaults on its Lease obligations to the Landlord and allow the Collateral Agent fifteen (15) days from notice in which to cure or cause the Tenant to cure any such defaults as more specifically provided in the Lease. 7. If there is an Event of Default under the Security Agreement and the Collateral Agent undertakes to enforce its security interest in the Collateral and/or to foreclose on the Tenant's leasehold estate pursuant to the Leasehold Mortgage, the Collateral Agent may, at its option and by written notice to the Landlord, (a) lease the Premises from the Landlord on the same terms and for the same purposes only as set forth in the Lease and exercise the other rights as lessee thereunder as described therein and/or (b) assign the Lease and/or the attornment rights hereunder to, or enter into sublease with, a purchaser of all or any part of the Collateral, only with the prior written consent of the Landlord, which consent shall not be unreasonably withheld or delayed. D. If an Event of Default occurs under the Security Agreement and the Collateral Agent undertakes to enforce its security in the Collateral, but chooses not to exercise its attornment rights under paragraph C(7) above, the Landlord will permit the Collateral Agent to (a) remain on the Premises for forty-five (45) days after the Collateral Agent notifies the Landlord of the Event of Default, PROVIDED the Collateral Agent pays the rental payments due under the Lease for the period of time the Collateral Agent uses the Premises, or (b) at the Collateral Agent's option, to remove the Collateral from the Premises within a reasonable time, not to exceed forty-five (45) days after the Collateral Agent notifies the Landlord of the Event of Default under the Security Agreement, PROVIDED the Collateral Agent pays the rental payments due under the Lease for the period of time the Collateral Agent uses the Premises, and will not hinder the Collateral Agent's actions in enforcing its liens on the Collateral. In the event the Collateral Agent does not exercise its attornment rights, the Landlord shall be entitled to show the Premises to prospective tenants or purchasers after reasonable notice to the Collateral Agent. E. If the Collateral Agent or its successors and assigns invokes the provisions of paragraph C(7), the Collateral Agent agrees to pay the Landlord all reasonable costs, including attorneys' fees, which may be associated with the Collateral Agent's exercise of its rights under said provisions. -2- 239 F. If requested by the Collateral Agent, the Landlord will execute an instrument, in recordable form, embodying the provisions of this agreement. Any notice(s) required or desired to be given hereunder shall be directed to the party to be notified at the address stated herein by certified mail, return receipt requested, and shall be deemed given when mailed. The agreements contained herein shall continue in force until the earlier of (1) the expiration or termination of the Lease (provided no provision is made for the extension or renewal of the Lease) or (2) the date on which all of the obligations and liabilities to the Secured Creditors are paid and satisfied in full and all financing arrangements secured by the Security Agreement have been terminated. Upon the termination of this agreement, the Collateral Agent shall within fifteen (15) days thereafter execute and deliver a release or satisfaction of the Leasehold Mortgage (if the same has been executed) in recordable form and such other documents as are necessary to allow the Landlord to freely use, transfer or encumber the property subject to this agreement. If the Collateral Agent fails to comply with this release requirement, the Collateral Agent agrees that the undersigned as Landlord shall be entitled to the remedy of specific performance and agrees to pay reasonable attorneys' fees incident to securing release of any such Leasehold Mortgage. The Landlord will notify all successor owners, transferees, purchasers and mortgagees of the existence of this agreement. This agreement may not be modified or terminated orally and shall be binding upon the successors, assigns and personal representatives of the Landlord, upon any successor owner or transferee of the Premises, and upon any purchasers, including any mortgagee, from the Landlord. If the person signing this agreement on behalf of the Landlord is signing as agent or in another representative capacity, such person represents that such person is authorized to, and that this agreement does, bind the owner of the Premises. This agreement shall be construed and enforced under the laws of the State in which the Premises are located. This agreement shall be effective only when the acknowledgement hereinafter set forth has been signed by a duly authorized representative of National City Bank on behalf of itself and as Collateral Agent for the other Secured Creditors. THE LANDLORD AGREES THAT NOTHING CONTAINED IN THIS AGREEMENT SHALL BE CONSTRUED AS AN ASSUMPTION BY THE COLLATERAL AGENT OR ANY OF THE OTHER SECURED CREDITORS OF ANY OBLIGATIONS OF THE TENANT CONTAINED IN THE LEASE. THIS AGREEMENT SHALL NOT IMPAIR OR OTHERWISE AFFECT THE TENANT'S OBLIGATIONS TO PAY RENT AND ANY OTHER SUMS PAYABLE BY THE TENANT OR TO OTHERWISE PERFORM ITS OBLIGATIONS TO THE LANDLORD PURSUANT TO THE TERMS OF THE LEASE NOR SHALL ANY PROVISION OF THE LEASEHOLD MORTGAGE IMPAIR OR AFFECT THE TERMS AND PROVISIONS OF THE LEASE EXCEPT AS SET FORTH HEREIN. -3- 240 IN WITNESS WHEREOF, this agreement has been executed and delivered this _____ day of _____________, 1998. Witnesses: _____________________________________ [Name of Landlord] _________________________ Print Name: By:__________________________________ _________________________ Name: Print Name: Title: LANDLORD'S ADDRESS: CORPORATE ACKNOWLEDGMENT STATE OF _____________ ) ) ss.: COUNTY OF _______________ ) On this ____ day of _______________, 1998, before me, the undersigned Notary Public in and for the above State, personally appeared ___________________________________, to me personally known, who being by me duly sworn, did say that he is the __________________________ of _____________________________, a corporation, and that the instrument was signed on behalf of the corporation by authority of its board of directors and by him as an officer of the corporation and that the instrument is his free act and deed and the free act and deed of the corporation. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my official seal this ____ day of __________, 1998 at _______________, _____________. ______________________________________ Notary Public My commission expires: _______________ [Notarial Seal] -4- 241 ACKNOWLEDGMENT BY COLLATERAL AGENT NATIONAL CITY BANK, as Collateral Agent for itself and for the other Secured Creditors, hereby acknowledges that the consent by the above-named Landlord to the placement of a Leasehold Mortgage on the Tenant's interest as Lessee, shall not impair or otherwise affect the terms and provisions of the Lease or the rights, remedies and entitlements of the Landlord under the Lease and shall not create any obligation or duty on the part of the Landlord except as expressly stated in this agreement. It is further acknowledged that in the event of any inconsistency in the provisions of the Landlord's rights, remedies and entitlements under the Lease and any such Leasehold Mortgage, the provisions of the Lease shall be deemed to control. NATIONAL CITY BANK, as Collateral Agent By:_________________________ Vice President ACKNOWLEDGMENT AND CONSENT BY TENANT The undersigned hereby acknowledges and consents to the foregoing agreement. The undersigned further acknowledges and agrees that it will pay the Landlord's reasonable legal fees incident to this Landlord Agreement. THE UNDERSIGNED FURTHER ACKNOWLEDGES AND CONFIRMS THAT NOTHING CONTAINED IN THE AGREEMENT RELIEVES THE UNDERSIGNED OF ANY OF ITS DUTIES OR OBLIGATIONS UNDER OR PURSUANT TO THE LEASE. ___________________________________ [Tenant] By:________________________________ Title: -5- 242 EXHIBIT "A" to Landlord Waiver Lease (attached hereto) 243 EXHIBIT F-2 ---------------------------- FORM OF MORTGAGEE WAIVER ---------------------------- 244 MORTGAGEE WAIVER Dated as of January 2, 1998 TO: National City Bank, as Collateral Agent National City Center 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Anthony J. DiMare Senior Vice President Telephone: (216) 575-3344 Facsimile: (216) 575-9396 Metro-Ohio Division ------------------- ______________________________________ (the "COMPANY") is the mortgagor under a first mortgage from the Company in favor of the undersigned (the "MORTGAGE HOLDER") covering the premises (the "PREMISES") more fully described in such first mortgage, which was recorded in the official mortgage records of indicated below (such first mortgage, as from time to time amended, supplemented or otherwise modified, including any first mortgage entered into in replacement thereof or in substitution therefor in connection with any refinancing thereof, the "FIRST MORTGAGE"): Location of Premises: ________________________________________________________. First Mortgage recorded: _____________________________________________________. The Company has certain of its assets located on the Premises. The Company has entered into a Security Agreement (the "SECURITY AGREEMENT") with National City Bank, as Collateral Agent (the "COLLATERAL AGENT") for itself and the other Secured Creditors ("SECURED CREDITORS") identified therein. As a condition to the Secured Creditors agreeing to make loans and other financial accommodations and extensions of credit, the Secured Creditors require, among other things, that the Company grant to the Collateral Agent, for the benefit of the Secured Creditors, liens on all of the Company's: (i) inventory, and (ii) goods, manufacturing, office and similar equipment and other items of tangible personal property, all of which can be physically removed from the Premises without undue difficulty or damage which is not fully repaired, located on the Premises (collectively, the "COLLATERAL"). 245 In order to induce the Secured Creditors and the Collateral Agent (together with their agents, successors and assigns) to enter into said financing arrangements, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Mortgage Holder hereby certifies and agrees that: 1. If requested by the Collateral Agent, the Mortgagor Holder will promptly furnish to the Collateral Agent a copy of any amendment to or other modification of the First Mortgage or any of the other documents referred to therein relating to the indebtedness secured thereby. 2. The Mortgagor Holder will use reasonable efforts to notify the Collateral Agent of the commencement of any foreclosure or similar proceedings under the First Mortgage. 3. The First Mortgage Holder is not aware of any default by the Company under the First Mortgage, nor is the Mortgage Holder aware of any events or conditions which, by the passage of time or giving of notice or both, would constitute a default thereunder by the Company. 4. None of the Collateral shall be deemed to be fixtures or other property subjected to the lien of the First Mortgage. Any such lien of the First Mortgage on any of the Collateral is hereby waived and released. 5. The Mortgage Holder will not assert against the Collateral any statutory, contractual or possessory liens, all of which it hereby waives. The Mortgage Holder will not assert any claims or rights of surcharge against the Collateral of whatever nature, including, but not limited to, any claim or right under 11 U.S.C. section 506(c) or any similar statute, whether state or federal. 6. The Mortgage Holder will notify the Collateral Agent in writing if the Company defaults on its payment or other material obligations to the Mortgage Holder under the First Mortgage as a consequence of which the Mortgage Holder intends to exercise any remedies under the First Mortgage, and allow the Collateral Agent fifteen (15) days from notice in which to cure or cause the Company to cure any such defaults as more specifically provided in the First Mortgage. 7. If (i) an Event of Default under the Security Agreement occurs and is continuing and the Collateral Agent undertakes to enforce its security in the Collateral through foreclosure proceedings or otherwise, and (ii) the Mortgage Holder is a "mortgagee in possession" or has through foreclosure, deed in lieu of foreclosure or otherwise obtained possession of the Premises, then the Mortgage Holder will permit the Collateral Agent to enter onto and remain on the Premises for forty-five (45) days after the Collateral Agent so notifies the Mortgagor that it intends to enter the Premises for the purpose of realizing upon the Collateral, without interference from the Mortgage Holder, PROVIDED (1) the Collateral Agent removes the Collateral from the Premises within such forty-five (45) day period, (2) the Collateral Agent repairs any damage to the Premises and improvements located thereon caused by such removal, and (3) the Collateral Agent pays to the Mortgage Holder a fair market rental for the period of time the Collateral Agent is in possession of the Premises for such removal purposes. 8. If the Collateral Agent or its successors and assigns invokes the provisions of paragraph 7, the Collateral Agent agrees to pay the Mortgage Holder all reasonable costs, including attorneys' fees, which may be associated with the Collateral Agent's exercise of its rights under said provisions. -2- 246 Any notice(s) required or desired to be given hereunder shall be directed to the party to be notified at the address stated herein by certified mail, return receipt requested, and shall be deemed given when mailed. The agreements contained herein shall continue in force until the earliest of (1) the satisfaction and discharge of the First Mortgage (provided no provision is made for the extension, renewal or replacement of the First Mortgage by a mortgage held by the Mortgage Holder), (2) sixty (60) days after the Mortgage Holder notifies the Collateral Agent that the Mortgage Holder is a "mortgagee in possession" or has taken title to the Premises through a deed in lieu of foreclosure, and (3) the date on which all of the obligations and liabilities secured by the Security Agreement are paid and satisfied in full and all financing arrangements secured by the Security Agreement have been terminated. Upon the termination of this agreement as provided in clause (3) above, or notice from the Mortgage Holder to the Collateral Agent of termination of this agreement as provided in clause (1) or (2) above, the Collateral Agent shall within fifteen (15) days thereafter execute and deliver to the Mortgage Holder a release or satisfaction of this agreement. If the Collateral Agent fails to comply with this release requirement, the Collateral Agent agrees that the undersigned as Mortgage Holder shall be entitled to the remedy of specific performance and agrees to pay reasonable attorneys' fees incident to securing such release. The undersigned Mortgage Holder will notify all transferees and purchasers of its rights under the First Mortgage of the existence of this agreement. This agreement may not be modified or terminated orally and shall be binding upon the successors, assigns and personal representatives of the undersigned, and upon any transferee of the rights of the Mortgage Holder under the First Mortgage. This agreement shall be construed and enforced under the laws of the State in which the Premises are located. This agreement shall be effective only when the acknowledgements hereinafter set forth have been signed by (i) a duly authorized representative of National City Bank on behalf of itself and as Collateral Agent for the other Secured Creditors, and (ii) a duly authorized representative of the Company. THE MORTGAGE HOLDER AGREES THAT NOTHING CONTAINED IN THIS AGREEMENT SHALL BE CONSTRUED AS AN ASSUMPTION BY THE COLLATERAL AGENT OR ANY OF THE OTHER SECURED CREDITORS OF ANY OBLIGATIONS OF THE COMPANY CONTAINED IN THE FIRST MORTGAGE OR ANY OTHER NOTE OR OTHER DOCUMENT REFERRED TO THEREIN EVIDENCING THE INDEBTEDNESS SECURED THEREBY. THIS AGREEMENT SHALL NOT IMPAIR OR OTHERWISE AFFECT THE COMPANY'S OBLIGATIONS TO PAY PRINCIPAL OR INTEREST OR ANY OTHER SUMS PAYABLE BY THE COMPANY OR TO OTHERWISE PERFORM ITS OBLIGATIONS TO THE MORTGAGE HOLDER PURSUANT TO THE TERMS OF THE FIRST MORTGAGE. [The balance of this page is intentionally blank.] -3- 247 IN WITNESS WHEREOF, this agreement is executed and delivered this _____ day of _____________, 1998. Witnesses: _______________________________________ Name of First Mortgage Holder _________________________ Print Name: By:____________________________________ _________________________ Name: Print Name: Title: ADDRESS: CORPORATE ACKNOWLEDGMENT STATE OF _____________ ) ) ss.: COUNTY OF _______________ ) On this ____ day of _______________, 1998, before me, the undersigned Notary Public in and for the above State, personally appeared ___________________________________, to me personally known, who being by me duly sworn, did say that he is the __________________________ of _____________________________, a corporation, and that the instrument was signed on behalf of the corporation by authority of its board of directors and by him as an officer of the corporation and that the instrument is his free act and deed and the free act and deed of the corporation. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my official seal this ____ day of __________, 1998 at ____________________, __________. _________________________ Notary Public My commission expires: ______________ [Notarial Seal] -4- 248 ACKNOWLEDGMENT BY COLLATERAL AGENT NATIONAL CITY BANK, as Collateral Agent for itself and for the other Secured Creditors hereby acknowledges and agrees to the provisions of the foregoing Mortgagee Waiver intended to be binding on the Collateral Agent. NATIONAL CITY BANK, as Collateral Agent By:____________________________________ Vice President ACKNOWLEDGMENT AND CONSENT The undersigned hereby acknowledges and consents to the foregoing Mortgagee Waiver. THE UNDERSIGNED FURTHER ACKNOWLEDGES AND CONFIRMS THAT NOTHING CONTAINED IN THE FOREGOING MORTGAGEE WAIVER RELIEVES THE UNDERSIGNED OF ANY OF ITS DUTIES OR OBLIGATIONS UNDER OR PURSUANT TO THE FIRST MORTGAGE OR ANY NOTE, LOAN AGREEMENT OR OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH. _______________________________________ [Name of Company] By:____________________________________ Vice President -5- 249 EXHIBIT G ---------------------------- FORM OF BAILEE LETTER ---------------------------- 250 BAILEE LETTER Dated as of January 2, 1998 TO: National City Bank, as Collateral Agent National City Center 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Anthony J. DiMare Senior Vice President Telephone: (216) 575-3344 Facsimile: (216) 575-9396 Metro-Ohio Division ------------------- __________________________________________________ (the "COMPANY"), stores goods at the undersigned's premises located at the following address (the "PREMISES"): _____________________________________ [Address] The Company has entered into a Security Agreement (the "SECURITY AGREEMENT") with National City Bank, as Collateral Agent (the "COLLATERAL AGENT") for itself and the other Secured Creditors ("SECURED CREDITORS") identified therein. As a condition to the Secured Creditors agreeing to make loans and other financial accommodations and extensions of credit, the Secured Creditors require, among other things, that the Company grant to the Collateral Agent, for the benefit of the Secured Creditors, liens on all of the Company's inventory, equipment, goods, furnishings and other tangible personal property located on the Premises (the "COLLATERAL"). In order to induce the Secured Creditors and the Collateral Agent (together with their agents, successors and assigns) to enter into said financing arrangements, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agrees as follows: I. The undersigned will notify the Collateral Agent in writing if (i) the storage of the Company's goods at the Premises has been terminated by the Company; (ii) the Company is more than 60 days in arrears in any storage or other charges payable to the undersigned; or (iii) the Company defaults on its storage or other obligations to the undersigned and, in such event, allow the Collateral Agent fifteen (15) days from notice in which to cure or cause the Company to cure any such defaults. II. If an Event of Default under the Security Agreement shall have occurred and be continuing and the Collateral Agent undertakes to enforce its security interest in the Collateral, the Collateral Agent may, at its option and by written notice to the undersigned with reference to this paragraph II, store the items of the Collateral located at the Premises for the account of the Collateral Agent (and not the Company), on the same terms and for the same purposes only as the Company could have done, with any charges to accrue for the account of the Collateral Agent from the last date paid by the Company. 251 III. If an Event of Default under the Security Agreement shall have occurred and be continuing and the Collateral Agent notifies the undersigned thereof in writing with reference to this paragraph III, the undersigned will hold the items of Collateral located at the Premises for the benefit of the Collateral Agent and will act only on the written instructions of the Collateral Agent with respect thereto, to the exclusion of any instructions from the Company, until the Collateral Agent notifies the undersigned in writing to the contrary. IV. If the Collateral Agent or its successors and assigns invokes the provisions of paragraph II or III, the Collateral Agent agrees to pay the undersigned all reasonable costs, including attorneys' fees, which may be associated with the Collateral Agent's exercise of its rights under said provisions. Any notice(s) required or desired to be given hereunder shall be directed to the party to be notified at the address stated herein by certified mail, return receipt requested, and shall be deemed given when mailed. The agreements contained herein shall continue in force until the earlier of (1) the expiration or termination of the storage of the Company's goods at the Premises or (2) the date on which all of the obligations and liabilities to the Secured Creditors are paid and satisfied in full and all financing arrangements secured by the Security Agreement have been terminated. Upon the termination of this agreement as provided in clause (2) above, the Collateral Agent shall so notify the undersigned. This agreement may not be modified or terminated orally and shall be binding upon the successors, assigns and personal representatives of the undersigned. This agreement shall be construed and enforced under the laws of the jurisdiction in which the Premises are located. This agreement shall be effective only when the acknowledgements hereinafter set forth have been signed by (i) a duly authorized representative of National City Bank on behalf of itself and as Collateral Agent for the other Secured Creditors, and (ii) the Company. Very truly yours, _____________________________________________ [Name of Bailee] By:__________________________________________ Name: Title: -2- 252 ACKNOWLEDGMENT BY COLLATERAL AGENT NATIONAL CITY BANK, as Collateral Agent for itself and for the other Secured Creditors, hereby accepts and agrees to the foregoing. NATIONAL CITY BANK, as Collateral Agent By:__________________________________________ Vice President ACKNOWLEDGMENT BY COMPANY The undersigned hereby accepts and agrees to the foregoing. _____________________________________________ By:__________________________________________ Title: -3- 253 EXHIBIT H ---------------------- FORM OF COMPLIANCE CERTIFICATE ---------------------- 254 QUARTER/ANNUAL COVENANT COMPLIANCE CERTIFICATE CERTIFIED ON ______ ("THIS DATE") AS OF _______ (THE "REPORT DATE") PURSUANT TO SUBSECTION (c) OF SECTION 8.1 OF THE CREDIT AGREEMENT (REFERRED TO BELOW) Reference is made to the Credit Agreement (the "CREDIT AGREEMENT"), dated as of January 2, 1998, among ADVANCED LIGHTING TECHNOLOGIES, INC. (the "BORROWER"), the financial institutions named therein as Lenders, and NATIONAL CITY BANK, as administrative agent (the "ADMINISTRATIVE AGENT") for the Lenders thereunder. Each term that is defined in the Credit Agreement shall have the same meaning in this certificate as is ascribed thereto by the Credit Agreement. Pursuant to subsection (c) of Section 8.1 of the Credit Agreement, I certify to the Lenders that I am the Borrower's Chief Financial Officer and further certify to the Lenders, to the best of my knowledge and belief, as follows: 1. Enclosed herewith are ________. These financial statements have been prepared in accordance with the Credit Agreement and fairly present, in all material respects, the financial condition of the Company as at the closing date thereof (the "REPORT DATE") and the results of operations for the fiscal period then ending, all in accordance with the GAAP. 2. No Event of Default nor Default existed at the report date, nor does any exist at this date. 3. The calculations attached hereto indicate compliance or non-compliance with certain sections of the Credit Agreement. By: Advanced Lighting Technologies, Inc. ________________________ ________________________ Nicholas R. Sucic Date Chief Financial Officer 255 Advanced Lighting Technologies, Inc. Covenant Compliance Certificate Rolling Four Quarter Basis I. SECTION 9.7 - TOTAL INDEBTEDNESS/EBITDA RATIO Total Indebtedness $____ EBITDA: Consolidated Net Income $____ Plus Provision for Income Taxes $____ Plus Total Net Cash Interest Expense $____ Plus Depreciation and Amortization $____ Plus Extraordinary and other Non-recurring Non-Cash Losses and Non-Cash Charges $____ Less Gain on Sales of Assets and Extraordinary Gains ($____) Equals EBITDA $____ Ratio of Total Indebtedness/EBITDA 0.00 to 1.00 Maximum Allowed (4.00x through 12/31/98; 3.75 to 1.00 thereafter through 12/31/99; and 3.50x thereafter) IN COMPLIANCE? YES/NO
II. SECTION 9.8 - INTEREST COVERAGE RATIO EBIT plus Amortization Consolidated Net Income $____ Plus Provision for Income Taxes $____ Plus Total Net Cash Interest Expense $____ Plus Amortization $____ Total $____ $____ Total Net Cash Interest Expense $____ Interest Coverage Ratio (EBIT plus Amortization to Total Net Cash Interest Expense) 0.00 to 1.00 Minimum Required (4.00 to 1.00) IN COMPLIANCE? YES/NO
256 Advanced Lighting Technologies, Inc. Covenant Compliance Certificate Roiling Four Quarter Basis III. Section 9.9 - Capital Expenditures Capital Expenditures for FQE or FYE __/__/__ $____ Maximum Allowed FQE 3/31/98 $6,500,000 FQE 6/30/98 $6,500,000 FYE 6/30/99 $26,000,000 FYE 6/30/00 $20,000,000 Any FYE thereafter $15,000,000 IN COMPLIANCE? YES/NO
IV. SECTION 9 10 - CERTAIN LEASES Payments on Leases $____ Exclude: Capital Leases $____ Leases of Corporate HQ & other Real Property referred to in Section 9.3(1) $____ Total $____ Maximum Allowed ($2,500,000) IN COMPLIANCE? Yes/No
V. SECTION 9.11- MINIMUM CONSOLIDATED TANGIBLE NET WORTH Consolidated Tangible Net Worth $____ Minimum Required Base Amount $100,800,000 Plus 75% of Quarterly Net Income for each FQ starting 3/31/98 FQE $____ FQE $____ FQE $____ Plus Cash Stock Proceeds $____ Plus 90% impact of Stock Issued in Acquisitions $____ Total Minimum Required $____ IN COMPLIANCE? YES/NO
2 257 Advanced Lighting Technologies, Inc. Covenant Compliance Certificate Rolling Four Quarter Basis VI. SECTION 9.4(b) - INDEBTEDNESS OF CANADIAN SUBSIDIARIES Indebtedness of Canadian Subsidiaries $____ Maximum Allowed (U.S.$10,000,000) $10,000,000 IN COMPLIANCE? YES/NO
VII. SECTION 9.4(c) - CAPITAL LEASE INDEBTEDNESS Capitalized Lease Obligations $____ Maximum Allowed (together with Indebtedness referred to in Section 9.4(e), $15,000.000) IN COMPLIANCE? YES/NO
VIII. SECTION 9.4(d) - INDEBTEDNESS OF LIGHTING RESOURCES Indebtedness of Lighting Resources - Eximbank Financing $____ Maximum Allowed ($10.000.000) IN COMPLIANCE? YES/NO
IX. SECTION 9.4(e) - INDEBTEDNESS SUBJECT TO LIENS PERMITTED BY SECTION 9.3(k) Outstanding Indebtedness Permitted by Section 9.3(e) $____ Maximum Allowed ($10,000,000) IN COMPLIANCE? YES/NO
X. SECTION 9.4(f) - INDEBTEDNESS RELATED TO A CORPORATE HEADQUARTERS AND CERTAIN OTHER REAL PROPERTY Indebtedness Related to Corporate Headquarters $____ Indebtedness Related to Other Real Property $____ Total $____ Maximum Allowed ($45,000,000) IN COMPLIANCE? YES/NO
3 258 Advanced Lighting Technologies, Inc. Covenant Compliance Certificate Roiling Four Quarter Basis XI. SECTION 9. 4(g) - INDEBTEDNESS OF OTHER FOREIGN SUBSIDIARIES Indebtedness of Other Foreign Subsidiaries $____ Maximum Allowed ($8,000,000) IN COMPLIANCE? YES/NO
XII. APPLICABLE EUROCURRENCY MARGIN AND COMMITMENT FEE RATE Total Indebtedness/EBITDA (from above) 0.00 to 1.00 Corresponding Pricing Grid Level Greater Than or Equal to 0.00 to 1.00 But Less Than 0.00 to 1.00 Applicable Eurocurrency Margin for period (in basis points) _____ Applicable Commitment Fee Rate for period (in basis points) _____
4 259 EXHIBIT I FORM OF OPINION OF COUNSEL TO THE BORROWER ________ __, 1998 The Administrative Agent, the Collateral Agent and each of the Lenders party to the Credit Agreement referred to below c/o National City Bank 1900 East Ninth Street Cleveland, Ohio 44114 Re: Credit Agreement, dated as of January 2, 1998, with Advanced Lighting Technologies, Inc. ----------------------------------------- Ladies and Gentlemen: We have acted as special counsel to Advanced Lighting Technologies, Inc., a Delaware corporation (the "BORROWER"), in connection with (i) the execution and delivery of the Credit Agreement, dated as of January 2, 1998 (the "CREDIT AGREEMENT"), among the Borrower, the financial institutions party thereto (the "LENDERS"), and National City Bank, as Administrative Agent, and (ii) the transactions contemplated thereby. Unless otherwise indicated, capitalized terms used herein but not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. This opinion letter is delivered by us to you at the request of the Borrower in accordance with the requirements of section 6.1(j) of the Credit Agreement. As such special counsel, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, records and matters of law as we have considered necessary as a basis for the opinions set forth herein, including without limitation the following: (a) the Credit Agreement; (b) the Notes delivered today pursuant to the Credit Agreement; (c) the Pledge Agreement; (d) the Security Agreement; and (e) the Subsidiary Guaranty. The documents referred to in clauses (a) through (e) above are herein sometimes referred to as the "CREDIT DOCUMENTS" and the documents referred to in clauses (c) and (d) above are herein sometimes referred to as the "SECURITY DOCUMENTS". In our examination we have assumed the genuineness of all signatures (other than as to any Credit Party), the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such copies. As to questions 260 of fact not independently verified by us we have relied, to the extent we deemed appropriate, upon representations and certificates of officers of the respective Credit Parties, public officials and other appropriate persons, as well as the representations and warranties set forth in the Credit Documents. All assumptions and statements of reliance as to factual matters herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items relied upon. We have also assumed the due authorization of all parties executing documents and instruments, other than the Credit Parties, and that such documents and instruments constitute the legal, valid and binding undertaking of each such other party, enforceable against each such other party in accordance with their respective terms. We have also assumed that the Administrative Agent, the Collateral Agent and each of the Lenders will enforce their rights under the Credit Documents, in a commercially reasonable manner, consistent with good faith and fair dealing. This opinion letter is subject to, and is to be construed in accordance with, the principles and limitations set forth in the Special Report by the TriBar Opinion Committee, U.C.C. Security Interest Opinions, 49 Bus. Law. 362 (1993). We understand that you have considered the applicability of fraudulent transfer laws to the transactions contemplated by the Credit Documents, as to which laws we express no opinion, and have satisfied yourself with respect thereto. Our examination of matters of law in connection with the opinions expressed herein has been limited to the present federal laws of the United States, the present laws of the State of Ohio, the present corporate laws of the State of Delaware, and the present UCC (as hereinafter defined) of certain other jurisdictions as reported in CCH Secured Transactions Guide, to present judicial interpretations thereof, and to the facts as they presently exist. In rendering this opinion, we assume no obligations to revise or supplement this opinion should the present laws of any jurisdiction mentioned above be changed by legislative action, judicial decision, or otherwise, or should the facts as they presently exist change. No opinions expressed herein shall be deemed to cover any other laws. We have neither examined nor requested an examination of the indices or records of any court or governmental or other agency, authority, instrumentality or entity, nor have we made inquiry of any person or entity, except as expressly set forth in this opinion letter. In addition, we have not independently verified or investigated the accuracy or completeness of any factual information and, because the scope of our examination did not include such verification, we assume no responsibility for the accuracy or completeness of any such information. As used herein, to our knowledge, shall mean, to the actual knowledge of the lawyers who have been actively involved in the negotiation of the Credit Documents and the lawyers who are the current primary contacts for the Borrower at the firm. Based upon the foregoing and subject to the qualifications, assumptions and limitations contained in this opinion letter, we are of the opinion that: 1. CORPORATE STATUS, ETC. (a) The Borrower and each of its Material Subsidiaries which is a Credit Party, other than Ruud Lighting, Inc., a Wisconsin corporation ("RLI"), (i) is a validly existing corporation under the laws of the jurisdiction of its formation and has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposed to engage and (ii) to our knowledge, is duly qualified and is authorized to do business and is in good standing in each jurisdiction where it is required to be so qualified except where the failure to be so qualified would not have a Material Adverse Effect.(6) (b) RLI is a corporation existing under the laws of the State of Wisconsin and, based solely on a certificate of the Department of Financial Institutions of the State of Wisconsin (the "DEPARTMENT OF FINANCIAL INSTITUTIONS"), (i) has filed with the Department of Financial Institutions during its most recently - -------- (6) An appropriate qualification to clause (ii) may be included as to the good standing of a particular Subsidiary as a foreign corporation in a specified jurisdiction. 2 261 completed report year the required annual report; (ii) is not the subject of a proceeding under the Wisconsin Business Corporation Law to cause its administrative dissolution; (iii) no determination has been made by the Department of Financial Institutions that grounds exist for such action with respect to RLI; (iv) no filing has been made with the Department of Financial Institutions of a decree of dissolution with respect to RLI; and (v) no Certificate of Dissolution of RLI has been filed with the Department of Financial Institutions. RLI has the corporate power and authority to own its properties and assets and to carry on its business as currently being conducted. 2. MATERIAL SUBSIDIARIES. To our knowledge, Annex II to the Credit Agreement correctly sets forth each Material Subsidiary of the Borrower and the direct and indirect ownership interest of the Borrower therein. 3. CORPORATE POWER AND AUTHORITY, ETC. Each Credit Party has the corporate power and authority to execute, deliver and carry out the terms and provisions of the Credit Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the Credit Documents to which it is a party. 4. CREDIT DOCUMENTS. Each Credit Party has duly executed and delivered each Credit Document to which it is a party and each such Credit Document to which it is a party constitutes the legal, valid and binding agreement or obligation of such Credit Party enforceable against such Credit Party in accordance with its terms, except to the extent that the enforceability thereof may be limited by (i) applicable bankruptcy, insolvency, reorganization, fraudulent or preferential transfer, moratorium or similar laws, and related judicial doctrines, including but not limited to equitable subordination, from time to time in effect affecting creditors' rights and remedies generally, (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits on the availability of equitable remedies), whether such principles are considered in a proceeding at law or in equity, and (iii) the qualification that certain other provisions of such Credit Documents may be unenforceable in whole or in part under the laws (including judicial decisions) of the State of Ohio or other applicable jurisdictions, but the inclusion of such provisions does not affect the validity as against any Credit Party of any of such Credit Documents as a whole, and such Credit Documents contain adequate provisions for enforcing payment of the obligations governed or secured thereby and for the realization of the principal rights and benefits afforded thereby, subject to the other qualifications and limitations contained in this opinion letter. 5. NO VIOLATION. Neither the execution, delivery or performance at the date hereof by any Credit Party of the Credit Documents to which it is a party, nor compliance with the terms and provisions thereof at the date hereof, (i) will contravene any provision of any State of Ohio or United States federal law, statute, rule, regulation (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System), or, to our knowledge, any order, writ, injunction or decree of any court or governmental instrumentality applicable to the Borrower or its properties and assets, (ii) will conflict or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (other than the Liens created pursuant to the Security Documents) upon any of the property or assets of any Credit Party pursuant to the terms of any material indenture, mortgage, deed of trust, agreement or other instrument of which we have knowledge to which any Credit Party is a party or by which it or any of its property or assets are bound or to which it may be subject and such conflict, breach or default results in a Material Adverse Effect or (iii) will violate any provision of the charter, by-laws or code of regulations of any Credit Party. 6. GOVERNMENTAL APPROVALS. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any Ohio or United States federal governmental or public body or authority, or any subdivision thereof, is required to authorize or is required as a condition to (i) the execution, delivery and performance by any Credit Party of any Credit Document to which it is a party, or (ii) the legality, validity, binding effect or enforceability of any such Credit 3 262 Document, except that we note that filings and recordings with governmental authorities will be required to establish and perfect certain Liens and security interests granted pursuant to the Security Documents. 7. LITIGATION. To our knowledge, there are no actions, suits or proceedings pending or, to, our knowledge, threatened with respect to the Borrower or any other Credit Party (i) that have, or could reasonably be expected to have, a Material Adverse Effect, or (ii) which question the validity or enforceability of any of the Credit Documents, or of any action to be taken by any Credit Party pursuant to any of the Credit Documents to which it is a party. 8. INVESTMENT COMPANY ACT, ETC. Neither the Borrower nor any of the other Credit Parties is subject to regulation with respect to the creation or incurrence of Indebtedness under the Investment Company Act of 1940, as amended, the Interstate Commerce Act, as amended, the Federal Power Act, as amended, the Public Utility Holding Company Act of 1935, as amended, or any applicable state public utility law. 9. PLEDGED STOCK AND PLEDGED NOTES. After giving effect to the delivery to the Pledgee of the Pledged Stock and Pledged Notes (as each such term is defined in the Pledge Agreement) listed on Annex A and B of the Pledge Agreement, and assuming the continued exclusive possession by the Pledgee of such Pledged Stock and Pledged Notes in the State of Ohio, the security interest created in favor of the Pledgee under the Pledge Agreement constitutes a valid and enforceable perfected security interest in such Pledged Stock and Pledged Notes, except as follows: (a) in the case of the issuance of additional shares or other distributions in respect of such Pledged Shares of additional instruments (as such term is defined in Article 9 of the Uniform Commercial Code (the "UCC"), the security interest of the Pledgee therein will be perfected only if exclusive possession thereof is obtained in accordance with the provisions of the Pledge Agreement and sections 9-308 and 9-309 of the UCC; and (b) in the case of non-identifiable cash proceeds, continuation of perfection of the Pledgee's security interest therein is limited to the extent set forth in section 9-306 of the UCC. No filings or recordings are required under the UCC of any applicable jurisdiction in order to perfect the security interest created under the Pledge Agreement with respect to such Pledged Stock and Pledged Notes. 10. SECURITY AGREEMENT. We have examined the financing statements (the "FINANCING STATEMENTS") to be filed in the filing offices listed for each Credit Party on Schedule A attached hereto (the "FILING OFFICES"). Upon the filing of the Financing Statements in the Filing Offices, assuming that the representations made by the relevant Credit Party in the Security Agreement with respect to the location of its chief executive office and the location of its Collateral (as defined in the Security Agreement) are and remain true and correct, all filings, registrations and recordings necessary to create and perfect the security interests granted by each Credit Party which is a party to the Security Agreement in and to the Collateral thereunder will have been accomplished and the security interests granted to the Collateral Agent pursuant to the Security Agreement in and to such Collateral will constitute a perfected security interest therein, in each case to the extent that the Collateral consists of the type of property in which a security interest may be perfected by filing a financing statement under the UCC as in effect in the State of Ohio and the other jurisdictions in which the Filing Offices are located. 11. PATENTS, TRADEMARKS AND COPYRIGHTS. The recordation of the Security Agreement in the United States Patent and Trademark Office will be effective, under United States federal law, to perfect the security interest granted to the Collateral Agent in the patents and trademarks specifically identified in Annexes E and F of the Security Agreement, and the filing of the Security Agreement with the United States Copyright Office will be effective, under United States federal law, to perfect the security interest granted to the Collateral Agent in the copyrights specifically identified in Annex G to the Security Agreement. 4 263 * * * * * The opinions set forth above are subject to the following assumptions, qualifications and limitations: (a) We express no opinion as to the enforceability of any provision in the Credit Documents: (i) permitting the secured party or any other person to sell or otherwise dispose of, or purchase, any collateral subject thereto, or enforce any other right or remedy thereunder (including without limitation any self-help or taking-possession remedy), except in compliance with the UCC and other applicable laws; (ii) establishing standards for the performance of the obligations of good faith, diligence, reasonableness and care prescribed by the UCC or of any of the obligations referred to in section 9-501(3) of the UCC; (iii) limiting the ability of any debtor or any other person to transfer voluntarily or involuntarily (by way of sale, creation of a security interest, attachment, levy, garnishment or other judicial process) its right, title or interest in or to any collateral subject thereto, to the extent any such provision would not be given effect under section 9-311 of the UCC; (iv) relating to forum selection to the extent the forum is a federal court; (v) relating to forum selection to the extent that the enforceability of any such provision is to be determined by any court other than a court of the State of Ohio; (vi) specifying that provisions thereof may be waived only in writing, to the extent that an oral agreement or an implied agreement by trade practice or course of conduct has been created that modifies any provision of such Credit Documents; or (vii) purporting to provide that matters provided in the Credit Documents are in the sole or uncontrolled discretion of Lenders, the Administrative Agent or the Collateral Agent or subject to the exclusive judgment of Lenders, the Administrative Agent or the Collateral Agent; (b) We express no opinion as to the enforceability of (i) any purported waiver, release, variation, disclaimer, consent or other agreement to similar effect (all of the foregoing, collectively, a "WAIVER") by any Credit Party under any of the Credit Documents to the extent limited by sections 1-102(3) or 9-501(3) of the UCC or other provisions of applicable law (including judicial decisions), or to the extent that such a Waiver applies to a right, claim, duty, defense or ground for discharge otherwise existing or occurring as a matter of law (including judicial decisions), except to the extent that such a Waiver is effective under and is not prohibited by or void or invalid under section 9-501 of the UCC or other provisions of applicable law (including judicial decisions), or (ii) any Waiver by a guarantor or other surety insofar as it relates to causes or circumstances that would operate as a discharge or release of, or defense available to, a guarantor or other surety thereunder as a matter of law (including judicial decisions), except to the extent that such a Waiver is effective under and is not prohibited by or void or invalid under applicable law (including judicial decisions). (c) We express no opinion as to the enforceability of the security interests under the Security Documents in any item of the Collateral (as such term is defined respectively in the Security Agreement and the Pledge Agreement) which is subject to any restriction on or prohibition against transfer contained in any security, instrument or document evidencing or relating to such item. (d) Our opinions with respect to security interests are subject to the effect on such security interests of the provisions of sections 9-301 (persons who take priority over unperfected security interests; 5 264 rights of "lien creditor"), 9-307 (protection of buyers of goods), 9-308 (protection of purchasers of chattel paper or instruments), 9-309 (protection of purchasers of instruments, documents and securities), 9-310 (priority of certain liens arising by operation of law), 9-312 (priorities among conflicting security interests in the same collateral), 9-313 (priority of security interests in fixtures), 9-314 (accessions), 9-315 (priority when goods are commingled or processed), and 9-318 (defenses against assignee, etc.), of the UCC. (e) We express no opinion with respect to any security interest created under the Credit Documents which purports to secure any present or future obligations that are determined, in the case of obligations and liabilities created in the future, not to constitute "future advances" within the meaning of UCC section 9-204(3), because such advance is determined not to have been within the contemplation of the parties at the time the Credit Documents were executed, or is determined not to be of the same character or class as the obligations or liabilities created or arising under the Credit Documents. (f) We express no opinion as to the validity or enforceability of any provisions which may be contained in a guarantee or other suretyship document made by a guarantor or other surety, to the effect that amendments or other waivers or modifications of provisions of documents governing the underlying primary obligations will not affect the obligations of the guarantor or other surety, in circumstances where such any such amendment, waiver or other modification so radically changes the essential nature of the terms and conditions of the underlying primary obligations that, in effect, a new contract has arisen between the primary obligor and any person for whose benefit the underlying primary obligation was originally undertaken. (g) We have assumed that each Credit Party has rights in the collateral in which such Credit Party purports to grant a security interest pursuant to the Security Documents. (h) We have assumed that (A) none of the Collateral (as defined in the Security Agreement) is or will become fixtures, (B) any Financing Statement that does not bear a notation that it is to be filed in a local filing office is to be filed with the secretary of state or equivalent state office in the applicable state, and (C) all applicable filing or recording fees or taxes, including, but not limited to, recording taxes, documentary taxes, and stamp taxes, have been or will be timely paid. (i) We express no opinion as to the right, title or interest of any entity to any real or personal property or other assets. (j) We express no opinion as to (A) the rank or priority of any security interest, or (B) the accuracy or completeness of any descriptions of the Collateral contained in the Security Agreement or the Financing Statements. (k) Article 9 of the UCC requires the filing of continuation statements within the period of six months before the expiration of a specified period from the date of the original filing of the applicable Financing Statement. We also call to your attention that the perfection of any security interest in any of the following Collateral will be terminated to the extent that security interests therein are perfected under the UCC by the filing of the Financing Statements: (i) as to any Collateral acquired by a debtor more than four months after such debtor changes its name, identity or corporate structure so as to make the Financing Statements seriously misleading, unless new appropriate UCC-1 financing statements indicating the new name, identity or corporate structure of such debtor are properly filed before the expiration of such four-month period and (ii) as to any personal property consisting of mobile goods (as defined in the UCC), four months after the relevant debtor changes its chief executive office to a new jurisdiction outside the state in which such debtor is now located (or, if earlier, when perfection under the laws of the state in which such debtor is now located would have ceased as set forth in the preceding sentence) unless such security interests in mobile goods are perfected in such new jurisdiction before that termination. If such new filing is not made, the security interest is deemed unperfected against a person who becomes a purchaser after the change. 6 265 (l) We call to your attention that the perfection of any security interest in personal property consisting of ordinary goods (as defined in the UCC) will be terminated to the extent that security interests therein are perfected under the UCC by the filing of the Financing Statements four months after such ordinary goods are moved to a new jurisdiction outside the state in which such ordinary goods were located at the time the Financing Statements were filed with respect thereto unless such security interests in ordinary goods are perfected in such new jurisdiction before such termination. Similarly, in those jurisdictions in which Financing Statements are filed in local filing offices at the county level because the applicable debtor has only one place of business in the jurisdiction or such local filing is otherwise required, the perfection by means of the filing of such Financing Statements of any security interest in personal property consisting of ordinary goods (as defined in the applicable UCC) located in such jurisdiction may be terminated if the debtor establishes a different place of business in another county in such jurisdiction or such ordinary goods are moved outside of the county in which a Financing Statement was initially filed to another county in the same state unless such security interest is perfected in such new county. (m) We express no opinion with respect to proceeds as to (i) the effect of limitations under section 9-306 of the UCC on the perfection of a security interest in proceeds, (ii) the rights of a person in possession of proceeds consisting of money or instruments (as defined in section 9-105 of the UCC), and (iii) the rights of a purchaser of negotiable instruments or chattel paper (as defined in section 9-105 of the UCC) to the extent provided in sections 9-308 and 9-309 of the UCC. (n) We express no opinion, with respect to any collateral subject to the security interest of the Pledge Agreement or the Security Agreement after the date hereof, as to (i) interests created by predecessors in title to such property, or (ii) section 552 of the Bankruptcy Code, under which a bankruptcy court has discretion as to the extent to which postpetition proceeds may be subject to a lien arising from a security agreement entered into by a debtor before the commencement of its bankruptcy case. (o) We express no opinion with respect to (i) any Collateral consisting of crops (growing or to be grown), timber, minerals, equipment used in farming operations, farm products or accounts or general intangibles arising from or relating to the sale of farm products by a farmer, or (ii) the effect on the perfection of the security interest purported to be created by the Security Agreement of any statute or treaty of the United States that provides for national or international registration or national or international certification of title, or (except as provided in paragraph 11 above with respect to patents, trademarks and copyrights) that specifies a place of filing or method of perfection different from that specified in the UCC. (p) Except as provided in paragraph 5 above with respect to compliance with Regulations G, T, U and X of the Board of Governors of the Federal Reserve System, we express no opinion as to the compliance or noncompliance, or the effect of the compliance or noncompliance, of any of the addressees or their assigns or participants with any state or federal laws or regulations applicable to any of them by reason of their status as or affiliation with a federally insured depository institution. (q) We note for your information that, as a matter of public policy, provisions of documents obligating a party to pay costs and expenses of enforcement may not be given effect in a proceeding brought in the courts of the State of Ohio. (r) We express no opinion as to any Material Subsidiary or Credit Party that is a Foreign Subsidiary. (s) We express no opinion as to (i) the payment of attorneys' fees under any of the foregoing instruments; (ii) any "self-help" remedies exercised by a Lender, the Administrative Agent or the Collateral Agent; (iii) any ex parte judicial brought by a Lender, the Administrative Agent or the Collateral Agent permitting it to act as attorney-in-fact for any Credit Party; (iv) provisions purporting to establish as to third parties nonculpability for actions taken on behalf of a Lender, the Administrative Agent or the Collateral Agent; or (v) provisions purporting to permit a Lender, the Administrative Agent or the Collateral Agent to act as attorney-in-fact for any Credit Party. 7 266 (t) We express no opinion as to any impact on the Credit Parties or Lenders, the Administrative Agent or the Collateral Agent or any of the Credit Documents, and other instruments and agreements executed in connection with the Credit Documents of any existing statutes, laws, regulations and ordinances respecting environmental or wetlands matters, including, but not limited to, those issued by, under, or in connection with the United States Army Corps of Engineers, the United States Environmental Protection Agency or any similar agency instituted or created by or under the authority of any agency of any state. (u) We have assumed: (i) that to the extent that perfection of a security interest in the property covered by such agreements requires a filing, registration or recording in any of the Filing Offices, any such filings, registrations or recordings have been properly made; (ii) that the Lenders have given value to each Credit Party; and (iii) the security interest in that portion of the Collateral consisting of instruments (as defined in section 9-309 of the UCC) will be a valid and perfected security interest under the UCC if and to the extent the secured party takes possession of and holds the instruments. (v) We express no opinion as to the validity, perfection or priority of the security interests as they relate to (i) any Collateral covered by a true lease naming a Credit party as lessee or (ii) any interest or any claim in or under any policy of insurance. (w) In rendering the opinions expressed in paragraphs 1 and 3 relating to RLI, we have relied upon the opinion of Reinhart Boerner Van Deuren Norris & Rieselbach, S. C. dated the date hereof, as limited by the qualifications set forth therein. This opinion letter is being furnished only to the addressees and is solely for their benefit and the benefit of their participants and assigns in connection with the transactions contemplated by the Credit Documents. This opinion letter may not be relied upon for any other purpose, or relied upon by any other person, firm or corporation for any purpose, without our prior written consent. Very truly yours, COWDEN, HUMPHREY & SARLSON CO, L.P.A. 8 267 EXHIBIT J ---------------------------- FORM OF ASSIGNMENT AGREEMENT ---------------------------- 268 ASSIGNMENT AGREEMENT DATE:_____________ Reference is made to the Credit Agreement described in Item 2 of Annex I annexed hereto (as such Credit Agreement may hereafter be amended, modified or supplemented from time to time, the "CREDIT AGREEMENT"). Unless defined in Annex I attached hereto, terms defined in the Credit Agreement are used herein as therein defined. _____________ (the "ASSIGNOR") and ______________ (the "ASSIGNEE") hereby agree as follows: 1. The Assignor hereby sells and assigns to the Assignee without recourse and without representation or warranty (other than as expressly provided herein), and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof which represents the percentage interest specified in Item 4 of Annex I (the "ASSIGNED SHARE") of all of Assignor's outstanding rights and obligations under the Credit Agreement indicated in Item 4 of Annex I, including, without limitation, all rights and obligations with respect to the Assigned Share of the Assignor's Commitment and of the Loans, Unpaid Drawings and the Notes held by the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment will be as set forth in Item 4 of Annex I. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any liens or security interests; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the other Credit Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or the other Credit Documents or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any of its Subsidiaries or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or the other Credit Documents or any other instrument or document furnished pursuant thereto. 3. The Assignee (i) represents and warrants that it is duly authorized to enter into and perform the terms of this Assignment Agreement; (ii) confirms that it has received a copy of the Credit Agreement and the other Credit Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement; (iii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Credit Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; [and] (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender[; and (vi) to the extent legally entitled to do so, attaches the forms described in section 5.4(b)(ii) of the Credit Agreement.(7) 4. Following the execution of this Assignment Agreement by the Assignor and the Assignee, an executed original hereof (together with all attachments) will be delivered to the Administrative Agent. The effective date of this Assignment Agreement shall be the date of execution hereof by the Assignor, the Assignee and the consent hereof by the Administrative Agent and the receipt by the Administrative Agent of the administrative fee referred to in section 13.4(b) of the Credit Agreement, unless otherwise specified in Item 5 of Annex I hereto (the "SETTLEMENT DATE"). - -------- (7) If the Assignee is organized under the laws of a jurisdiction outside the United States. 269 5. Upon the delivery of a fully executed original hereof to the Administrative Agent, as of the Settlement Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment Agreement, have the rights and obligations of a Lender thereunder and under the other Credit Documents and (ii) the Assignor shall, to the extent provided in this Assignment Agreement, relinquish its rights and be released from its obligations under the Credit Agreement and the other Credit Documents. 6. It is agreed that upon the effectiveness hereof, the Assignee shall be entitled to (x) all interest on the Assigned Share of the Loans at the rates specified in Item 6 of Annex I, (y) all Facility Fee (if applicable) on the Assigned Share of the Commitment at the rate specified in Item 7 of Annex I, and (z) all Letter of Credit Fees (if applicable) on the Assignee's participation in all Letters of Credit at the rate specified in Item 8 of Annex I hereto, which, in each case, accrue on and after the Settlement Date, such interest and, if applicable, Facility Fee and Letter of Credit Fees, to be paid by the Administrative Agent, upon receipt thereof from the Borrower, directly to the Assignee. It is further agreed that all payments of principal made by the Borrower on the Assigned Share of the Loans which occur on and after the Settlement Date will be paid directly by the Administrative Agent to the Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor an amount specified by the Assignor in writing which represents the Assigned Share of the principal amount of the respective Loans made by the Assignor pursuant to the Credit Agreement which are outstanding on the Settlement Date, net of any closing costs, and which are being assigned hereunder. The Assignor and the Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Settlement Date directly between themselves on the Settlement Date. 7. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO. * * * IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. [NAME OF ASSIGNOR], [NAME OF ASSIGNEE], as Assignor as Assignee By:____________________________ By:____________________________ Title: Title: Acknowledged and Agreed: National City Bank, as Administrative Agent By: ______________________________ Vice President 2 270 ANNEX I ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT ANNEX I 1. The Borrower: 2. Name and Date of Credit Agreement: Credit Agreement, dated as of January 2, 1998, among Advanced Lighting Technologies, Inc., the Lenders from time to time party thereto, and National City Bank, as Administrative Agent. 3. Date of Assignment Agreement: _________ __, ____ 4. Amounts (as of date of item #3 above):
Commitments Loans a. Aggregate Amount for all Lenders $_________ $_________ b. Assigned Share _________% _________% c. Amount of Assigned Share $_________ $_________
5. Settlement Date: _________ __, ____ 6. Rate of Interest to the Assignee: As set forth in section 2.7 of the Credit Agreement (unless otherwise agreed to by the Assignor and the Assignee).(8) - -------- (8) The Borrower and the Administrative Agent shall direct the entire amount of the interest to the Assignee at the rate set forth in section 2.7 of the Credit Agreement, with the Assignor and Assignee effecting any agreed upon sharing of interest through payments by the Assignee to the Assignor. 271 7. Commitment Fee: As set forth in section 4.1(a) of the Credit Agreement (unless otherwise agreed to by the Assignor and the Assignee).(9) 8. Letter of Credit Fees: As set forth in section 4.1(b) of the Credit Agreement (unless otherwise agreed to by the Assignor and the Assignee).(10) 9. Notices:
ASSIGNOR: ASSIGNEE: - ---------------------- ---------------------- - ---------------------- ---------------------- - ---------------------- ---------------------- Attention: Attention: Telephone No.: Telephone No.: Facsimile No.: Facsimile No.:
10. Payment Instructions:
ASSIGNOR: ASSIGNEE: - ---------------------- ---------------------- - ---------------------- ---------------------- - ---------------------- ---------------------- ABA No.: ABA No.: Account No.: Account No.: Reference: Reference: Attention: Attention:
- -------- (9) The Borrower and the Administrative Agent shall direct the entire amount of the Commitment Fee to the Assignee at the rate set forth in section 4.1(a) of the Credit Agreement, with the Assignor and the Assignee effecting any agreed upon sharing of Commitment Fee through payment by the Assignee to the Assignor. (10) The Borrower and the Administrative Agent shall direct the entire amount of the Letter of Credit Fees to the Assignee at the rate set forth in section 4.1(b) of the Credit Agreement, with the Assignor and the Assignee effecting any agreed upon sharing of the Letter of Credit Fees through payment by the Assignee to the Assignor. 2 272 EXHIBIT K SECTION 5.4(b)(ii) CERTIFICATE Reference is hereby made to the Credit Agreement dated as of January 2, 1998, among Advanced Lighting Technologies, Inc., the financial institutions party thereto from time to time, and National City Bank, as Administrative Agent (the "CREDIT AGREEMENT"). Pursuant to the provisions of section 5.4(b)(ii) of the Credit Agreement, the undersigned hereby certifies that it is not a "bank" as such term is used in section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended. [Name of Bank] By: ____________________________ Title Dated: __________ EX-10.3 4 EXHIBIT 10.3 1 Exhibit 10.3 ================================================================================ ================================================================================ ADVANCED LIGHTING TECHNOLOGIES, INC. AS THE BORROWER AND THE FINANCIAL INSTITUTIONS NAMED HEREIN AS LENDERS AND NATIONAL CITY BANK AS ADMINISTRATIVE AGENT --------------------- AMENDMENT NO. 1 DATED AS OF FEBRUARY 26, 1998 TO CREDIT AGREEMENT DATED AS OF JANUARY 2, 1998 --------------------- ================================================================================ ================================================================================ 2 AMENDMENT NO. 1 TO CREDIT AGREEMENT THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT, dated as of February 26, 1998 ("THIS AMENDMENT"), among: (I) ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation (herein, together with its successors and assigns, the "BORROWER"); (II) the financial institutions listed on the signature pages hereof (the "LENDERS"); and (III) NATIONAL CITY BANK, a national banking association, as Administrative Agent (the "ADMINISTRATIVE AGENT") for the Lenders under the Credit Agreement: PRELIMINARY STATEMENTS: (1) The Borrower, the Lenders named therein, and the Administrative Agent entered into the Credit Agreement, dated as of January 2, 1998 (herein referred to as the "CREDIT AGREEMENT"; with the terms defined therein, or the definitions of which are incorporated therein, being used herein as so defined). (2) The Borrower has requested the Lenders and the Administrative Agent to modify certain of the provisions of the Credit Agreement in order, among other things, to permit the Borrower to issue and sell up to $100,000,000 aggregate principal amount of its Senior Notes due 2008, and the Lenders and the Administrative Agent are willing to so modify the provisions of the Credit Agreement, all as more fully set forth below. NOW, THEREFORE, the parties hereby agree as follows: SECTION 1. AMENDMENTS. 1.1. INDEBTEDNESS COVENANT. Effective on the Effective Date (as hereinafter defined), (a) the Lenders consent to the incurrence by the Borrower of additional Indebtedness consisting of up to $100,000,000 aggregate principal amount of its Senior Notes due 2008 offered and sold as contemplated by the Company's offering memorandum relating thereto, as furnished by the Company to the Lenders prior to the execution and delivery hereof by any Lender; and (b) in order to give full effect to the foregoing consent, Annex III to the Credit Agreement is amended by adding thereto a reference to such aggregate principal amount of the Company's Senior Notes due 2008. 1.2. PRICING. The Borrower agrees that, effective on the Effective Date and continuing until changed in accordance with the terms of the Credit Agreement in connection with the delivery subsequent to the Effective Date of consolidated financial statements of the Company which reflect the issuance of the Borrower's Senior Notes due 2008 and demonstrate the basis for any change, the Applicable Eurocurrency Margin will be 175.00 basis points, the Applicable Prime Rate Margin will be 25.00 basis points and the 3 Applicable Commitment Fee Rate will be 37.50 basis points. The Credit Agreement shall be deemed amended to take into account the preceding sentence, notwithstanding anything to the contrary contained in the Credit Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants as follows: 2.1. AUTHORIZATION, VALIDITY AND BINDING EFFECT. This Amendment has been duly authorized by all necessary corporate action on the part of the Borrower, has been duly executed and delivered by a duly authorized officer or officers of the Borrower, and constitutes the valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms. 2.2. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The representations and warranties of the Borrower contained in the Credit Agreement, as amended hereby, are true and correct on and as of the date hereof as though made on and as of the date hereof, except to the extent that such representations and warranties expressly relate to a specified date, in which case such representations and warranties are hereby reaffirmed as true and correct when made. 2.3. NO EVENT OF DEFAULT, ETC. No condition or event has occurred or exists which constitutes or which, after notice or lapse of time or both, would constitute an Event of Default. 2.4. COMPLIANCE. The Borrower is in full compliance with all covenants and agreements contained in the Credit Agreement, as amended hereby. SECTION 3. EFFECTIVENESS. This Amendment shall become effective on and as of the date (the "EFFECTIVE DATE"), on or before March 31, 1998, on which the following conditions are satisfied: (a) this Amendment shall have been executed by the Borrower and the Administrative Agent, and counterparts hereof as so executed shall have been delivered to the Administrative Agent; (b) the Acknowledgment and Consent appended hereto shall have been executed by the Credit Parties named therein, and counterparts hereof as so executed shall have been delivered to the Administrative Agent; (c) the Administrative Agent shall have been notified by all of the Lenders that such Lenders have executed this Amendment (which notification may be by facsimile or other written confirmation of such execution); and 2 4 (d) the Borrower shall have completed the issuance and sale of its Senior Notes due 2008 as contemplated by the Company's offering memorandum relating thereto, as furnished by the Company to the Lenders prior to the execution and delivery hereof by any Lender, and the Borrower shall have notified the Administrative Agent that such issuance and sale have been completed. The Administrative Agent shall notify the Borrower and each Lender in writing of the effectiveness hereof. 4. SECTION RATIFICATIONS. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement, and except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect. 5. SECTION MISCELLANEOUS. 5.1. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure to the benefit of the Borrower, each Lender and the Administrative Agent and their respective permitted successors and assigns. 5.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in this Amendment shall survive the execution and delivery of this Amendment, and no investigation by the Administrative Agent or any Lender or any subsequent Loan or issuance of a Letter of Credit shall affect the representations and warranties or the right of the Administrative Agent or any Lender to rely upon them. 5.3. REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any and all other agreements, instruments or documentation now or hereafter executed and delivered pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference therein to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby. 5.4. EXPENSES. As provided in the Credit Agreement, but without limiting any terms or provisions thereof, the Borrower agrees to pay on demand all costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, and execution of this Amendment, including without limitation the costs and fees of the Administrative Agent's special legal counsel, regardless of whether this Amendment becomes effective in accordance with the terms hereof, and all costs and expenses incurred by the Administrative Agent or any Lender in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby. 5.5. SEVERABILITY. Any term or provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the term or provision so held to be invalid or unenforceable. 5.6. APPLICABLE LAW. This Amendment shall be governed by and construed in accordance with the laws of the State of Ohio. 3 5 5.7. HEADINGS. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. 5.8. ENTIRE AGREEMENT. This Amendment is specifically limited to the matters expressly set forth herein. This Amendment and all other instruments, agreements and documentation executed and delivered in connection with this Amendment embody the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersede any and all prior commitments, agreements, representations and understandings, whether written or oral, relating to the matters covered by this Amendment, and may not be contradicted or varied by evidence of prior, contemporaneous or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties hereto relating to the subject matter hereof or any other subject matter relating to the Credit Agreement. 5.9. COUNTERPARTS. This Amendment may be executed by the parties hereto separately in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same agreement. 4 6 IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the date first above written. ADVANCED LIGHTING TECHNOLOGIES, INC. By:/s/ ---------------------------------------- Chief Financial Officer & Treasurer NATIONAL CITY BANK, individually and as Administrative Agent By:/s/ ---------------------------------------- Senior Vice President NBD BANK By:/s/ ---------------------------------------- First Vice President PNC BANK, NATIONAL ASSOCIATION By:/s/ ---------------------------------------- Vice President NATIONAL BANK OF CANADA, a Canadian Chartered Bank, Cleveland Representative Office By:/s/ ---------------------------------------- Vice President 5 7 ACKNOWLEDGMENT AND CONSENT For the avoidance of doubt, and without limitation of the intent and effect of sections 6 and 10 of the Subsidiary Guaranty (as such term is defined in the Credit Agreement referred to in the Amendment No. 1 to Credit Agreement (the "AMENDMENT"), to which this Acknowledgment and Consent is appended), each of the undersigned hereby unconditionally and irrevocably (i) acknowledges receipt of a copy of the Credit Agreement and the Amendment, and (ii) consents to all of the terms and provisions of the Credit Agreement as amended by the Amendment. Capitalized terms which are used herein without definition shall have the respective meanings ascribed thereto in the Credit Agreement referred to herein. This Acknowledgment and Consent is for the benefit of the Lenders and the Administrative Agent, any other person who is a third party beneficiary of the Subsidiary Guaranty, and their respective successors and assigns. No term or provision of this Acknowledgment and Consent may be modified or otherwise changed without the prior written consent of the Administrative Agent, given as provided in the Credit Agreement. This Acknowledgment and Consent shall be binding upon the successors and assigns of each of the undersigned. This Acknowledgment and Consent may be executed by any of the undersigned in separate counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, each of the undersigned has duly executed and delivered this Acknowledgment and Consent as of the date of the Amendment referred to herein. APL ENGINEERED MATERIALS, INC. LIGHTING RESOURCES INTERNATIONAL, INC. VENTURE LIGHTING INTERNATIONAL, INC. BALLASTRONIX (DELAWARE), INC. SPECIALTY DISCHARGE LIGHTING, INC. ADVANCED LIGHTING SYSTEMS, INC. METAL HALIDE TECHNOLOGIES, INC. THE LIGHT SOURCE, INC. ENERGY-WISE LIGHTING, INC. By: /s/ HID DIRECT, INC. ------------------------------------- BRIGHT IDEAS ADVERTISING AND DESIGN, INC. Louis S. Fisi, Secretary, METAL HALIDE CONTROLS, INC. on behalf of each of the above corporations a/k/a Current Industries, Inc. HID RECYCLING, INC. MICROSUN TECHNOLOGIES, INC. ENERGY EFFICIENT PRODUCTS, INC. RUUD LIGHTING, INC. BIO LIGHT, INC. ADLT SERVICES, INC. ADVANCED ACQUISITIONS, INC. By:/s/ ------------------------------------ Alan J. Ruud, President By: /s/ ------------------------------------------ Nicholas R. Sucic, Vice President, on behalf of each of the above corporations
EX-10.4 5 EXHIBIT 10.4 1 Exhibit 10.4 ================================================================================ ADVANCED LIGHTING TECHNOLOGIES, INC., Issuer and THE BANK OF NEW YORK, Trustee ------------------ Indenture Dated as of March 18, 1998 8% Senior Notes due 2008 ------------------ ================================================================================ 2 CROSS-REFERENCE TABLE ---------------------
TIA Sections Indenture Sections - ------------ ------------------ Sec. 310(a)(1)......................................................... 7.10 (a)(2).......................................................... 7.10 (b)............................................................. 7.03; 7.08 Sec.311(a)............................................................. 7.03 (b)............................................................. 7.03 Sec. 312(a)............................................................ 2.04 (b)............................................................. 10.02 (c)............................................................. 10.02 Sec.313(a)............................................................. 7.06 (b)(2).......................................................... 7.07 (c)............................................................. 7.05; 7.06; 10.02 (d)............................................................. 7.06 Sec. 314(a)............................................................ 7.05; 10.02 (a)(4).......................................................... 4.17; 10.02 (c)(1).......................................................... 10.03 (c)(2).......................................................... 10.03 (e)............................................................. 4.17; 10.04 Sec.315(a)............................................................. 7.02 (b)............................................................. 7.05; 10.02 (c)............................................................. 7.02 (d)............................................................. 7.02 (e)............................................................. 6.11 Sec. 316(a)(1)(A)...................................................... 6.05 (a)(1)(B)....................................................... 6.04 (b)............................................................. 6.07 (c)............................................................. 9.03 Sec. 317(a)(1)......................................................... 6.08 (a)(2).......................................................... 6.09 (b)............................................................. 2.05 Sec. 318(a)............................................................ 10.01 (c)............................................................. 10.01
Note: The Cross-Reference Table shall not for any purpose be deemed to be a part of this Indenture. 3 TABLE OF CONTENTS
Page ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS ........................................................ 1 SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT .................. 21 SECTION 1.03. RULES OF CONSTRUCTION .............................................. 22 ARTICLE TWO THE NOTES SECTION 2.01. FORM AND DATING .................................................... 23 SECTION 2.02. RESTRICTIVE LEGENDS ................................................ 24 SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS ........................ 26 SECTION 2.04. REGISTRAR AND PAYING AGENT ......................................... 27 SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST ................................ 28 SECTION 2.06. TRANSFER AND EXCHANGE .............................................. 28 SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES ............................. 29 SECTION 2.08. SPECIAL TRANSFER PROVISIONS ........................................ 31 SECTION 2.09. REPLACEMENT NOTES .................................................. 33 SECTION 2.10. OUTSTANDING NOTES .................................................. 34 SECTION 2.11. TEMPORARY NOTES .................................................... 34 SECTION 2.12. CANCELLATION ....................................................... 35 SECTION 2.13. CUSIP NUMBERS ...................................................... 35 SECTION 2.14. DEFAULTED INTEREST ................................................. 35 SECTION 2.15. ISSUANCE OF ADDITIONAL NOTES ....................................... 35 ARTICLE THREE REDEMPTION SECTION 3.01. RIGHT OF REDEMPTION ................................................ 35 SECTION 3.02. NOTICES TO TRUSTEE ................................................. 36 SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED .................................. 36
- -------- Note: The Table of Contents shall not for any purposes be deemed to be a part of this Indenture. 4 ii SECTION 3.04. NOTICE OF REDEMPTION ............................................... 37 SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION ..................................... 38 SECTION 3.06. DEPOSIT OF REDEMPTION PRICE ........................................ 38 SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION ............................. 38 SECTION 3.08. NOTES REDEEMED IN PART ............................................. 38 ARTICLE FOUR COVENANTS SECTION 4.01. PAYMENT OF NOTES ................................................... 39 SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY .................................... 39 SECTION 4.03. LIMITATION ON INDEBTEDNESS ......................................... 39 SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS .................................. 42 SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES .......................................... 44 SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES .......................................... 45 SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES ... 45 SECTION 4.08. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES ........ 46 SECTION 4.09. LIMITATION ON LIENS ................................................ 47 SECTION 4.10. LIMITATION ON SALE-LEASEBACK TRANSACTIONS .......................... 47 SECTION 4.11. LIMITATION ON ASSET SALES .......................................... 48 SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL ....................... 49 SECTION 4.13. EXISTENCE .......................................................... 49 SECTION 4.14. PAYMENT OF TAXES AND OTHER CLAIMS .................................. 49 SECTION 4.15. MAINTENANCE OF PROPERTIES AND INSURANCE ............................ 50 SECTION 4.16. NOTICE OF DEFAULTS ................................................. 50 SECTION 4.17. COMPLIANCE CERTIFICATES ............................................ 50 SECTION 4.18. COMMISSION REPORTS AND REPORTS TO HOLDERS .......................... 51 SECTION 4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS ............................ 51 ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. WHEN COMPANY MAY MERGE, ETC. ....................................... 52 SECTION 5.02. SUCCESSOR SUBSTITUTED .............................................. 53
5 iii
ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT .................................................. 53 SECTION 6.02. ACCELERATION ....................................................... 54 SECTION 6.03. OTHER REMEDIES ..................................................... 55 SECTION 6.04. WAIVER OF PAST DEFAULTS ............................................ 55 SECTION 6.05. CONTROL BY MAJORITY ................................................ 55 SECTION 6.06. LIMITATION ON SUITS ................................................ 56 SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT ............................... 56 SECTION 6.08. COLLECTION SUIT BY TRUSTEE ......................................... 56 SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM ................................... 57 SECTION 6.10. PRIORITIES ......................................................... 57 SECTION 6.11. UNDERTAKING FOR COSTS .............................................. 58 SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES ................................. 58 SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE ..................................... 58 SECTION 6.14. DELAY OR OMISSION NOT WAIVER ....................................... 58 ARTICLE SEVEN TRUSTEE SECTION 7.01. GENERAL ............................................................ 59 SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE .......................................... 59 SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE ....................................... 60 SECTION 7.04. TRUSTEE'S DISCLAIMER ............................................... 60 SECTION 7.05. NOTICE OF DEFAULT .................................................. 60 SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS ...................................... 61 SECTION 7.07. COMPENSATION AND INDEMNITY ......................................... 61 SECTION 7.08. REPLACEMENT OF TRUSTEE ............................................. 62 SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. .................................. 63 SECTION 7.10. ELIGIBILITY ........................................................ 63 SECTION 7.11. MONEY HELD IN TRUST ................................................ 63 ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS ............................... 63
6 iv SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE .............................. 64 SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS .................................. 66 SECTION 8.04. APPLICATION OF TRUST MONEY; MISCELLANEOUS .......................... 68 SECTION 8.05. REPAYMENT TO COMPANY ............................................... 68 SECTION 8.06. REINSTATEMENT ...................................................... 69 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. WITHOUT CONSENT OF HOLDERS ......................................... 69 SECTION 9.02. WITH CONSENT OF HOLDERS ............................................ 70 SECTION 9.03. REVOCATION AND EFFECT OF CONSENT ................................... 71 SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES ................................... 72 SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC. ................................... 72 SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT ................................ 72 ARTICLE TEN MISCELLANEOUS SECTION 10.01. TRUST INDENTURE ACT OF 1939 ....................................... 72 SECTION 10.02. NOTICES ........................................................... 72 SECTION 10.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT ................ 74 SECTION 10.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION ..................... 74 SECTION 10.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR ....................... 75 SECTION 10.06. PAYMENT DATE OTHER THAN A BUSINESS DAY ............................ 75 SECTION 10.07. GOVERNING LAW ..................................................... 75 SECTION 10.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS ..................... 75 SECTION 10.09. NO RECOURSE AGAINST OTHERS ........................................ 75 SECTION 10.10. SUCCESSORS ........................................................ 75 SECTION 10.11. DUPLICATE ORIGINALS ............................................... 76 SECTION 10.12. SEPARABILITY ...................................................... 76 SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC. ................................. 76 EXHIBIT A Form of Note ........................................................ A-1 EXHIBIT B Form of Certificate to Be Delivered in Connection with Legended Offshore Global Notes or Offshore Physical Notes .................................... B-1 EXHIBIT C Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Non-QIB Accredited Investors ......... C-1
7 v EXHIBIT D Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S ......................... D-1
8 INDENTURE, dated as of March 18, 1998, between ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation (the "COMPANY"), and THE BANK OF NEW YORK, a New York banking corporation, trustee (the "TRUSTEE"). RECITALS The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance initially of up to $100,000,000 aggregate principal amount of the Company's 8% Senior Notes due 2008 (the "Notes") issuable as provided in this Indenture. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done, and the Company has done all things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee hereunder and duly issued by the Company, valid obligations of the Company as hereinafter provided. This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act of 1939, as amended, that are required to be a part of and to govern indentures qualified under the Trust Indenture Act of 1939, as amended. AND THIS INDENTURE FURTHER WITNESSETH For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders, as follows. ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. ------------ "Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with an Asset Acquisition by a Restricted Subsidiary and not Incurred in connection with, or in anticipation of, such Person becoming a Restricted Subsidiary or such Asset Acquisition; provided that Indebtedness of such Person which is redeemed, defeased, retired or otherwise repaid at the time of or immediately upon consummation of the transactions by which such Person becomes a Restricted Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness. "Adjusted Consolidated Net Income" means, for any period, the aggregate net income (or loss) of the Company and its Restricted Subsidiaries for such period determined in conformity with GAAP; provided that the following items shall be excluded in computing Adjusted Consolidated Net Income (without duplication): (i) the net income of any Person that is not a Restricted 9 2 Subsidiary, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries by such Person during such period; (ii) solely for the purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of the first paragraph of Section 4.04 (and in such case, except to the extent includable pursuant to clause (i) above), the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries; (iii) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary; (iv) any gains or losses (on an after-tax basis) attributable to Asset Sales; (v) except for purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of the first paragraph of Section 4.04, any amount paid or accrued as dividends on Preferred Stock of the Company or any Restricted Subsidiary owned by Persons other than the Company and any of its Restricted Subsidiaries; and (vi) all extraordinary gains and extraordinary losses (on an after-tax basis). "Adjusted Consolidated Net Tangible Assets" means the total amount of assets of the Company and its Restricted Subsidiaries (less applicable depreciation, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of the Company and its Restricted Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the most recent quarterly or annual consolidated balance sheet of the Company and its Restricted Subsidiaries, prepared in conformity with GAAP and filed with the Commission or provided to the Trustee pursuant to Section 4.18. "Affiliate" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" means any Registrar, Co-Registrar, Paying Agent or authenticating agent. "Agent Members" has the meaning provided in Section 2.07(a). 10 3 "Asset Acquisition" means (i) an investment by the Company or any of its Restricted Subsidiaries in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with the Company or any of its Restricted Subsidiaries; provided that such Person's primary business is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such investment or (ii) an acquisition by the Company or any of its Restricted Subsidiaries of the property and assets of any Person other than the Company or any of its Restricted Subsidiaries that constitute substantially all of a division or line of business of such Person; provided that the property and assets acquired are related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such acquisition. "Asset Disposition" means the sale or other disposition by the Company or any of its Restricted Subsidiaries (other than to the Company or another Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of any Restricted Subsidiary or (ii) all or substantially all of the assets that constitute a division or line of business of the Company or any of its Restricted Subsidiaries. "Asset Sale" means any sale, transfer or other disposition (including by way of merger, consolidation or sale-leaseback transaction) in one transaction or a series of related transactions by the Company or any of its Restricted Subsidiaries to any Person other than the Company or any of its Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted Subsidiary, (ii) all or substantially all of the property and assets of an operating unit or business of the Company or any of its Restricted Subsidiaries or (iii) any other property and assets (other than the Capital Stock or other Investment in an Unrestricted Subsidiary) of the Company or any of its Restricted Subsidiaries outside the ordinary course of business of the Company or such Restricted Subsidiary and, in each case, that is not governed by Article Five; provided that "Asset Sale" shall not include (a) sales or other dispositions of inventory, receivables and other current assets, (b) sales, transfers or other dispositions of assets constituting a Restricted Payment permitted to be made under Section 4.04, or (c) sales or other dispositions of assets for consideration at least equal to the fair market value of the assets sold or disposed of, to the extent that the consideration received would satisfy clause (B) of Section 4.11. "Average Life" means, at any date of determination with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such debt security and (b) the amount of such principal payment by (ii) the sum of all such principal payments. "Board of Directors" means the Board of Directors of the Company or any committee of such Board of Directors duly authorized to act under this Indenture. 11 4 "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in The City of New York, or in the city of the Corporate Trust Office of the Trustee, are authorized by law to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all Common Stock and Preferred Stock. "Capitalized Lease" means, as applied to any Person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person. "Capitalized Lease Obligations" means the discounted present value of the rental obligations under a Capitalized Lease. "Change of Control" means such time as (i) (a) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total voting power of the Voting Stock of the Company on a fully diluted basis and (b) such ownership represents a greater percentage of the total voting power of the Voting Stock of the Company, on a fully diluted basis, than may then be voted by the Existing Stockholders on such date; or (ii) individuals who on the Closing Date constitute the Board of Directors (together with any new or successor directors whose election by the Board of Directors or whose nomination by the Board of Directors for election by the Company's stockholders was approved by a vote of at least two-thirds of the members of the Board of Directors on the date of their election or nomination) cease for any reason to constitute a majority of the members of the Board of Directors then in office. "Closing Date" means the date on which the Notes are originally issued under this Indenture. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the TIA, then the body performing such duties at such time. 12 5 "Common Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's equity, other than Preferred Stock of such Person, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all series and classes of such common stock. "Company" means the party named as such in the first paragraph of this Indenture until a successor replaces it pursuant to Article Five of this Indenture and thereafter means the successor. "Company Order" means a written request or order signed in the name of the Company (i) by its Chairman, a Vice Chairman, its President, Executive Vice President, Senior Vice President or a Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Consolidated EBITDA" means, for any period, Adjusted Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest Expense, (ii) income taxes (other than income taxes (either positive or negative) attributable to extraordinary gains or losses or Asset Sales or Asset Dispositions), (iii) depreciation expense, (iv) amortization expense and (v) all other non-cash items reducing Adjusted Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be, made), less all non-cash items increasing Adjusted Consolidated Net Income, all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP; provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Adjusted Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (B) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries. "Consolidated Interest Expense" means, for any period, the aggregate amount of interest in respect of Indebtedness (including, without limitation, amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting; all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; the net costs associated with Interest Rate Agreements; and Indebtedness that is Guaranteed or secured by the Company or any of its Restricted Subsidiaries) and all but the principal component of 13 6 rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be accrued by the Company and its Restricted Subsidiaries during such period; excluding, however, (i) any amount of such interest of any Restricted Subsidiary if the net income of such Restricted Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the definition thereof (but only in the same proportion as the net income of such Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the definition thereof) and (ii) any premiums, fees and expenses (and any amortization thereof) payable in connection with the offering of the Notes, all as determined on a consolidated basis (without taking into account Unrestricted Subsidiaries) in conformity with GAAP. "Consolidated Net Worth" means, at any date of determination, stockholders' equity as set forth on the most recently available quarterly or annual consolidated balance sheet of the Company and its Restricted Subsidiaries (which shall be as of a date not more than 90 days prior to the date of such computation and which shall not take into account Unrestricted Subsidiaries), less any amounts attributable to Disqualified Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of the Capital Stock of the Company or any of its Restricted Subsidiaries, each item to be determined in conformity with GAAP (excluding the effects of foreign currency exchange adjustments under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 52). "Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date of this Indenture, located at 101 Barclay Street, Floor 21 West, New York, New York 10286; Attention: Corporate Trust Trustee Administration. "Credit Facility" means the Credit Facility dated as of January 2, 1998, as amended on February 26, 1998, and effective on the Closing Date, among the Company and the lenders party thereto and any other lenders or borrowers from time to time party thereto, collateral documents, instruments and agreements executed in connection therewith and any amendments, supplements, substitutions, modifications, extensions, renewals, restatements, replacement, refinancings or refundings thereof. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement. "Default" means any event that is, or after notice or the passage of time or both would be, an Event of Default. 14 7 "Depositary" means The Depository Trust Company, its nominees, and their respective successors. "Disqualified Stock" means any class or series of Capital Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the Notes or (iii) convertible into or exchangeable for Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Section 4.11 and Section 4.12 and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to Section 4.11 and Section 4.12. "Eligible Accounts Receivable" means at the time of reference thereto accounts receivable as set forth on the most recent consolidated balance sheet filed pursuant to Section 4.18, less accounts receivable of Unrestricted Subsidiaries as of the date of such balance sheet. "Eligible Inventory" means at the time of reference thereto inventory as set forth on the most recent consolidated balance sheet filed pursuant to Section 4.18, less inventory of Unrestricted Subsidiaries as of the date of such balance sheet. "Event of Default" has the meaning provided in Section 6.01. "Excess Proceeds" has the meaning provided in Section 4.11. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means any securities of the Company containing terms identical to the Notes (except that such Exchange Notes shall be registered under the Securities Act) that are issued and exchanged for the Notes pursuant to the Registration Rights Agreement and this Indenture. "Existing Stockholders" means (i) Mr. Wayne R. Hellman, (ii) any trust to the extent that any member of Wayne R. Hellman's family has "beneficial" (as defined in Rule 13d-3 under the Exchange Act) ownership of the res thereof and (iii) any "group" (within the meaning of 15 8 Sections 13(d) and 14(d)(2) of the Exchange Act) that includes parties specified in clauses (i) or (ii) above if such parties "beneficially own" (within the meaning of Rule 13d-3 under the Exchange Act) Voting Stock representing a majority of the voting power of the Voting Stock owned by such group. "fair market value" means the price that would be paid in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution. "Foreign Subsidiaries" means Ballastronix Inc., Parry Power Systems Ltd. and any other Subsidiary of the Company incorporated or organized, as the case may be, outside of the United States of America. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations contained or referred to in this Indenture shall be computed in conformity with GAAP applied on a consistent basis, except that calculations made for purposes of determining compliance with the terms of the covenants and with other provisions of this Indenture shall be made without giving effect to (i) the amortization of any expenses incurred in connection with the offering of the Notes and (ii) except as otherwise provided, the amortization of any amounts required or permitted to be amortized by Accounting Principles Board Opinion Nos. 16 and 17, as subsequently modified or amended, or the write-off of such amounts. "Global Notes" has the meaning provided in Section 2.01. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm's-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. 16 9 "Guaranteed Indebtedness" has the meaning provided in Section 4.07. "Holder" means the registered holder of any Note. "Incur" means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that neither the accrual of interest nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person at any date of determination (without duplication), (i) all indebtedness of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto, but excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations (other than obligations described in (i) or (ii) above or (v), (vi) or (vii) below) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement), (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except Trade Payables, (v) all Capitalized Lease Obligations, (vi) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise included in this definition, obligations under Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided (A) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP, (B) that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be "Indebtedness" and (C) that Indebtedness shall not include any liability for federal, state, local or other taxes. 17 10 "Indenture" means this Indenture as originally executed or as it may be amended or supplemented from time to time by one or more indentures supplemental to this Indenture entered into pursuant to the applicable provisions of this Indenture. "Institutional Accredited Investor" means an institution that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Interest Coverage Ratio" means, on any Transaction Date, the ratio of (i) the aggregate amount of Consolidated EBITDA for the then most recent four fiscal quarters prior to such Transaction Date for which reports have been filed with the Commission pursuant to Section 4.18 (the "FOUR QUARTER PERIOD") to (ii) the aggregate Consolidated Interest Expense during such Four Quarter Period. In making the foregoing calculation, (A) pro forma effect shall be given to any Indebtedness Incurred or repaid during the period (the "REFERENCE PERIOD") commencing on the first day of the Four Quarter Period and ending on the Transaction Date (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such Four Quarter Period unless any portion of such Indebtedness is projected, in the reasonable judgment of the senior management of the Company, to remain outstanding for a period in excess of 12 months from the date of the Incurrence thereof), in each case as if such Indebtedness had been Incurred or repaid on the first day of such Reference Period; (B) Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period; (C) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur during such Reference Period as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and (D) pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Company or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period; provided that to the extent that clause (C) or (D) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition, such pro forma calculation shall be based upon the four full fiscal quarters immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available, as determined by the Company. 18 11 "Interest Payment Date" means each semiannual interest payment date on March 15 and September 15 of each year, commencing September 15, 1998 for so long as any Note remains Outstanding. "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement. "Investment" in any Person means any direct or indirect advance, loan or other extension of credit (including, without limitation, by way of Guarantee or similar arrangement; but excluding advances to customers in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable on the balance sheet of the Company or its Restricted Subsidiaries) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, bonds, notes, debentures or other similar instruments issued by, such Person and shall include (i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair market value of the Capital Stock (or any other Investment), held by the Company or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a Restricted Subsidiary, including without limitation, by reason of any transaction permitted by clause (iii) of Section 4.06; provided that the fair market value of the Investment remaining in any Person that has ceased to be a Restricted Subsidiary shall be deemed not to exceed the aggregate amount of Investments previously made in such Person valued at the time such Investments were made less the net reduction of such Investments. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall include the fair market value of the assets (net of liabilities (other than liabilities to the Company or any of its Restricted Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value of the assets (net of liabilities (other than liabilities to the Company or any of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be considered a reduction in outstanding Investments and (iii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer. "Investment Grade Securities" means debt securities or debt instruments with (A) a final maturity no later than one year after date of acquisition thereof and (B) a rating of BBB+ or higher by S&P or Baa1 or higher by Moody's or the equivalent of such rating by such rating organization, or, if no rating of S&P or Moody's then exists, the equivalent of such rating by any other nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) designated by the Company, but excluding any debt securities or instruments constituting loans or advances among the Company and its Subsidiaries. 19 12 "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to give any security interest). "Maturity", with respect to any Note, means the date on which the principal of such Note or an installment of principal becomes due and payable as provided in or pursuant to this Indenture, whether at the Stated Maturity or by declaration of acceleration, notice of redemption or repurchase, notice of option to elect repayment or otherwise, and includes any Redemption Date and Payment Date. "MicroSun" means Microsun Technologies, Inc., an Ohio corporation. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations have recourse to the Company or any Restricted Subsidiary) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of (i) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Restricted Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (A) is secured by a Lien on the property or assets sold or (B) is required to be paid as a result of such sale and (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP and (b) with respect to any issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations have recourse to the Company or any Restricted Subsidiary) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorney's fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. 20 13 "Non-U.S. Person" means a person who is not a "U.S. person" (as defined in Regulation S). "Notes" means any of the securities, as defined in the first paragraph of the recitals hereof, that are authenticated and delivered under this Indenture. For all purposes of this Indenture, the term "Notes" shall include the Notes initially issued on the Closing Date, any Exchange Notes to be issued and exchanged for any Notes pursuant to the Registration Rights Agreement and this Indenture and any other Notes issued after the Closing Date under this Indenture. For purposes of this Indenture, all Notes shall vote together as one series of Notes under this Indenture. "Offer to Purchase" means an offer to purchase Notes by the Company from the Holders commenced by mailing a notice to the Trustee for delivery to each Holder stating: (i) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "PAYMENT DATE"); (iii) that any Note not tendered will continue to accrue interest pursuant to its terms; (iv) that, unless the Company defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; (v) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Payment Date, a facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and (vii) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. On the Payment Date, the Company shall (i) accept for payment on a pro rata basis (with any rounding determined by the Company to be reasonable) Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officers' Certificate specifying the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof (with any rounding determined by the Company to be reasonable). The Company shall publicly 21 14 announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company shall comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Notes pursuant to an Offer to Purchase. "Officer" means, with respect to the Company, (i) the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer, the President, the Executive Vice President, the Senior Vice President, any Vice President or the Chief Financial Officer, and (ii) the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant Secretary. "Officers' Certificate" means a certificate signed by one Officer listed in clause (i) of the definition thereof and one Officer listed in clause (ii) of the definition thereof or two officers listed in clause (i) of the definition thereof. Each Officers' Certificate (other than certificates provided pursuant to TIA Section 314(a)(4)) shall include the statements provided for in TIA Section 314(e). "Offshore Global Note" has the meaning provided in Section 2.01. "Offshore Physical Notes" has the meaning provided in Section 2.01. "Opinion of Counsel" means a written opinion signed by legal counsel, who may be an employee of or counsel to the Company, that meets the requirements of Section 10.04 hereof. Each such Opinion of Counsel shall include the statements provided for in TIA Section 314(e). "Outstanding", when used with respect to any Note, means, as of the date of determination, all such Notes theretofore authenticated and delivered under this Indenture, except: (a) any such Note theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) any such Note for whose payment at the Maturity thereof money in the necessary amount has been theretofore deposited pursuant hereto (other than pursuant to Section 8.02 and 8.03) with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated and in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Notes, provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (c) any such Note with respect to which the Company has effected defeasance pursuant to the terms hereof, except to the extent provided in Article Eight; and 22 15 (d) any such Note which has been paid pursuant to Section 2.09 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, unless there shall have been presented to the Trustee proof satisfactory to it that such Note is held by a bona fide purchaser in whose hands such Note is a valid obligation of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder or are present at a meeting of Holders of Notes for quorum purposes or for purposes of making calculations required by TIA Section 313, Notes owned by the Company or any other obligor upon the Notes or any Affiliate of the Company or such other obligor, shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making any such determination or relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Notes so owned which shall have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee (A) the pledgee's right so to act with respect to such Notes and (B) that the pledgee is not the Company or any other obligor upon the Notes or an Affiliate of the Company or such other obligor. "Paying Agent" has the meaning provided in Section 2.04, except that, for the purposes of Article Eight, the Paying Agent shall not be the Company or a Subsidiary of the Company or an Affiliate of any of them. The term "Paying Agent" includes any additional Paying Agent. "Permitted Investment" means (i) an Investment in the Company or a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, the Company or a Restricted Subsidiary; provided that such person's primary business is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash Investments; (iii) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP; (iv) stock, obligations or securities received in satisfaction of judgments; (v) an Investment in any Person consisting solely of the transfer to such Person of an Investment in another Person that is not a Restricted Subsidiary; (vi) Investment Grade Securities; (vii) Interest Rate Agreements and Currency Agreements designed solely to protect the Company or its Restricted Subsidiaries against fluctuations in interest rates or foreign currency exchange rates; (viii) Investments, not to exceed $30 million at any one time outstanding (and for purposes of this clause (viii) an Investment shall be deemed to be outstanding in the amount of the excess (but not, in any event, less than zero) of the amount of such Investment on the date or dates made, less the return of capital to the Company and its Restricted Subsidiaries with respect to such Investment); and (ix) Investments, to the extent the consideration therefor consists of Capital Stock 23 16 (other than Disqualified Stock) of the Company or net cash proceeds from the sale of such Capital Stock, if such Capital Stock was issued or sold within 90 days of the making of such Investment. "Permitted Liens" means (i) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (ii) statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers' acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (v) easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of business of the Company or any of its Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof) upon real or personal property acquired after the Closing Date; provided that (a) such Lien is created solely for the purpose of securing Indebtedness Incurred, in accordance with Section 4.03, to finance the cost (including the cost of improvement or construction) of the item of property or assets subject thereto and such Lien is created prior to, at the time of or within six months after the later of the acquisition, the completion of construction or the commencement of full operation of such property or to refinance Indebtedness previously so secured, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of such cost and (c) any such Lien shall not extend to or cover any property or assets other than such item of property or assets and any improvements on such item; (vii) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets; (ix) any interest or title of a lessor in the property subject to any Capitalized Lease or operating lease; (x) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (xi) Liens on property of, or on shares of Capital Stock or Indebtedness of, any Person existing at the time such Person becomes, or becomes a part of, any Restricted Subsidiary; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets acquired; (xii) Liens in favor of the Company or any Restricted Subsidiary; (xiii) Liens arising from the rendering of a final judgment or order against the Company or any Restricted Subsidiary that does not give rise to an Event of 24 17 Default; (xiv) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (xv) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (xvi) Liens encumbering customary initial deposits and margin deposits, and other Liens that are within the general parameters customary in the industry and incurred in the ordinary course of business, in each case, securing Indebtedness under Interest Rate Agreements and Currency Agreements and forward contracts, options, future contracts, futures options or similar agreements or arrangements designed solely to protect the Company or any of its Restricted Subsidiaries from fluctuations in interest rates, currencies or the price of commodities; (xvii) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of the Company and its Restricted Subsidiaries prior to the Closing Date; and (xviii) Liens on or sales of receivables. "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Physical Notes" has the meaning provided in Section 2.01. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's preferred or preference equity, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all series and classes of such preferred or preference stock. "principal" of a debt security, including the Notes, means the principal amount due on the Stated Maturity as shown on such debt security. "Private Placement Legend" means the legend initially set forth on the Notes in the form set forth in Section 2.02. "Public Equity Offering" means an underwritten public offering of Common Stock by the Company pursuant to an effective registration statement under the Securities Act. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Redemption Date" means, when used with respect to any Note to be redeemed, the date fixed for such redemption by or pursuant to this Indenture. 25 18 "Redemption Price" means, when used with respect to any Note to be redeemed, the price at which such Note is to be redeemed pursuant to this Indenture. "Registrar" has the meaning provided in Section 2.04. "Registration Rights Agreement" means the Registration Rights Agreement, dated March 13, 1998 between the Company and Morgan Stanley & Co. Incorporated and certain permitted assigns specified therein. "Registration Statement" means the Registration Statement as defined and described in the Registration Rights Agreement. "Regular Record Date" for the interest payable on any Interest Payment Date means the March 1 or September 1 (whether or not a Business Day), as the case may be, next preceding the related Interest Payment Date. "Regulation S" means Regulation S under the Securities Act. "Responsible Officer", when used with respect to the Trustee, means any vice president, any assistant vice president, any assistant secretary, any assistant treasurer, any trust officer or assistant trust officer, or any other officer of the Trustee in its Corporate Trust Department customarily performing functions similar to those performed by any of the above-designated officers and in each case having direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "Restricted Payments" has the meaning provided in Section 4.04. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Security Register" has the meaning provided in Section 2.04. "Significant Subsidiary" means, at any date of determination, any Restricted Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets 26 19 of the Company and its Restricted Subsidiaries, all as set forth on the most recently available consolidated financial statements of the Company for such fiscal year, as determined by the Company. "S&P" means Standard & Poor's Ratings Service and its successors. "Stated Maturity" means, (i) with respect to any debt security, the date specified in such debt security as the fixed date on which the final installment of principal of such debt security is due and payable and (ii) with respect to any scheduled installment of principal of or interest on any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable. "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person. "Subsidiary Guarantee" has the meaning provided in Section 4.07. "Temporary Cash Investment" means any of the following: (i) direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally guaranteed by the United States of America or any agency thereof, (ii) time deposit accounts, certificates of deposit and money market deposits maturing within one year of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) commercial paper, maturing not more than 270 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P, (v) securities with maturities of one year or less from the date of acquisition issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least BBB+ by S&P or Baa1 by Moody's and (vi) time deposit accounts, certificates of deposits and money market deposits aggregating no more than $10 million at any one time outstanding, issued by one of the five largest 27 20 (based on assets on the most recent December 31 for which data is available) banks organized under the laws of the country in which the Foreign Subsidiary marking the deposit referred to above is organized, if such bank is not under material government intervention. "TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S. Code Sec. 77aaa-77bbbb), as in effect on the date this Indenture was executed, except as provided in Section 9.06; provided that in the event the Trust Indenture Act of 1939 is amended after the Closing Date, "TIA" or "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939, as so amended. "Trade Payables" means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services, in each case required to be paid within one year. "Transaction Date" means, with respect to the Incurrence of any Indebtedness by the Company or any of its Restricted Subsidiaries, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made. "Trustee" means the party named as such in the first paragraph of this Indenture until a successor replaces it in accordance with the provisions of Article Seven of this Indenture and thereafter means such successor. "United States Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended and as codified in Title 11 of the United States Code, as amended from time to time hereafter, or any successor federal bankruptcy law. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Restricted Subsidiary (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the Company or such Restricted Subsidiary (or both, if applicable) at the time of such designation, (B) either (I) the Subsidiary to be so designated has total assets of $1,000 or less or (II) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.04 and (C) if applicable, the Incurrence of Indebtedness and the Investment referred to in clause (A) of this proviso would be permitted under Section 4.03 and Section 4.04. The Board of Directors may designate any Unrestricted Subsidiary 28 21 to be a Restricted Subsidiary; provided that (x) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such designation and (y) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately after such designation would, if Incurred at such time, have been permitted to be Incurred (and shall be deemed to have been Incurred) for all purposes of this Indenture. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Global Notes" has the meaning provided in Section 2.01. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof at any time prior to the Stated Maturity of the Notes, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. "U.S. Physical Notes" has the meaning provided in Section 2.01. "Voting Stock" means with respect to any Person, Capital Stock of any class or kind having the power to vote for the election of directors, managers or other voting members of the governing body of such Person (not including, however, any Capital Stock having such right to vote only upon the happening of certain events or under limited circumstances). "Wholly Owned" means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director's qualifying shares or Investments by foreign nationals mandated by applicable law) by such Person or one or more Wholly Owned Subsidiaries of such Person. SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made 29 22 a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security holder" means a Holder or a Noteholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company or any other obligor on the Notes. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a rule of the Commission and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP as defined in Section 1.01; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and words in the plural include the singular; (v) provisions apply to successive events and transactions; (vi) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (vii) all ratios and computations based on GAAP contained in this Indenture shall be computed in accordance with the definition of GAAP set forth in Section 1.01; and (viii) all references to Sections or Articles refer to Sections or Articles of this Indenture unless otherwise indicated. 30 23 ARTICLE TWO THE NOTES SECTION 2.01. FORM AND DATING. The Notes and the Trustee's certificate of authentication shall be substantially in the form annexed hereto as Exhibit A with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange agreements to which the Company is subject or usage. The Company shall approve the form of the Notes and any notation, legend or endorsement on the Notes. Each Note shall be dated the date of its authentication. The terms and provisions contained in the form of the Notes annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a part of this Indenture. To the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more permanent global Notes in registered form, without interest coupons, substantially in the form set forth in Exhibit A (the "U.S. GLOBAL NOTES"), registered in the name of the nominee of the Depositary, deposited with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the U.S. Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, in accordance with the instructions given by the Holder thereof, as hereinafter provided. Notes offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of one or more permanent global Notes in registered form, without interest coupons, substantially in the form set forth in Exhibit A (the "OFFSHORE GLOBAL NOTES"), registered in the name of the nominee of the Depositary, deposited with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Offshore Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Notes (i) offered and sold to Institutional Accredited Investors who are not QIBs or (ii) issued pursuant to Section 2.07 in exchange for interests in U.S. Global Notes shall be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in Exhibit A (the "U.S. PHYSICAL Notes"). 31 24 Notes issued pursuant to Section 2.07 in exchange for interests in the Offshore Global Notes shall be in the form of permanent certificated Notes in registered form substantially in the form set forth in Exhibit A (the "OFFSHORE PHYSICAL NOTES"). The Offshore Physical Notes and U.S. Physical Notes are sometimes collectively herein referred to as the "PHYSICAL NOTES." The U.S. Global Notes and the Offshore Global Notes are sometimes referred to herein as the "GLOBAL NOTES." The definitive Notes shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities depositary or of any securities exchange on which the Notes may be listed, all as determined by the Officers executing such Notes, as evidenced by their execution of such Notes. SECTION 2.02. RESTRICTIVE LEGENDS. Unless and until a Note is exchanged for an Exchange Note in connection with, or a Note is resold pursuant to, an effective Registration Statement pursuant to the Registration Rights Agreement, (i) each U.S. Global Note and U.S. Physical Note shall bear the legend set forth below on the face thereof unless removed in accordance with Section 2.08(e) hereof and (ii) each Offshore Physical Note and each Offshore Global Note shall bear the legend set forth below on the face thereof until at least the 41st day after the Closing Date and receipt by the Company and the Trustee of a certificate substantially in the form of Exhibit B hereto: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, 32 25 FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. Each Global Note, whether or not an Exchange Note, shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER 33 26 ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.08 OF THE INDENTURE. SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS. Subject to Article Four and applicable law, the aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is unlimited. The Notes shall be executed by two Officers of the Company. The signature of these Officers on the Notes may be by facsimile or manual signature in the name and on behalf of the Company. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee or authenticating agent authenticates the Note, the Note shall be valid nevertheless. A Note shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. At any time and from time to time after the execution of this Indenture, the Trustee or an authenticating agent shall upon receipt of a Company Order authenticate for original issue Notes in the aggregate principal amount specified in such Company Order; provided that the Trustee shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of the Company in connection with such authentication of Notes. Such Company Order shall specify the amount of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated and, in case of an issuance of Notes pursuant to Section 2.15, shall certify that such issuance is in compliance with Article Four. The Trustee may appoint an authenticating agent to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such authenticating agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. 34 27 The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 in principal amount and any integral multiple of $1,000 in excess thereof. SECTION 2.04. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (the "REGISTRAR"), an office or agency where Notes may be presented for payment (the "PAYING AGENT") and an office or agency where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served, which shall be in the Borough of Manhattan, The City of New York. The Company shall cause the Registrar to keep a register of the Notes and of their transfer and exchange (the "SECURITY REGISTER"). The Security Register shall be in written form or any other form capable of being converted into written form within a reasonable time. The Company may have one or more co-Registrars and one or more additional Paying Agents. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall give prompt written notice to the Trustee of the name and address of any such Agent and any change in the address of such Agent. If the Company fails to maintain a Registrar, Paying Agent and/or agent for service of notices and demands, the Trustee shall act as such Registrar, Paying Agent and/or agent for service of notices and demands. The Company may remove any Agent upon written notice to such Agent and the Trustee; provided that no such removal shall become effective until (i) the acceptance of an appointment by a successor Agent to such Agent as evidenced by an appropriate agency agreement entered into by the Company and such successor Agent and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as such Agent until the appointment of a successor Agent in accordance with clause (i) of this proviso. The Company, any Subsidiary of the Company, or any Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar, and/or agent for service of notice and demands. The Company initially appoints the Trustee as Registrar, Paying Agent, authenticating agent and agent for service of notice and demands. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders and shall otherwise comply with TIA Sec. 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee as of each Regular Record Date and at such other times as the Trustee may reasonably request the names and addresses of Holders as they appear in the Security Register, including the aggregate principal amount of Notes held by each Holder. 35 28 SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST. Not later than 10:00 a.m. (New York City time) each due date of the principal, premium, if any, and interest on any Notes, the Company shall deposit with the Paying Agent money in immediately available funds sufficient to pay such principal, premium, if any, and interest so becoming due. The Company shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, and interest on the Notes (whether such money has been paid to it by the Company or any other obligor on the Notes), and such Paying Agent shall promptly notify the Trustee of any default by the Company (or any other obligor on the Notes) in making any such payment. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed, and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. Upon doing so, the Paying Agent shall have no further liability for the money so paid over to the Trustee. If the Company or any Subsidiary of the Company or any Affiliate of any of them acts as Paying Agent, it will, on or before each due date of any principal of, premium, if any, or interest on the Notes, segregate and hold in a separate trust fund for the benefit of the Holders a sum of money sufficient to pay such principal, premium, if any, or interest so becoming due until such sum of money shall be paid to such Holders or otherwise disposed of as provided in this Indenture, and will promptly notify the Trustee of its action or failure to act. SECTION 2.06. TRANSFER AND EXCHANGE. The Notes are issuable only in registered form. A Holder may transfer a Note only by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Indenture. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Registrar in the Security Register. Prior to the registration of any transfer by a Holder as provided herein, the Company, the Trustee, and any agent of the Company shall treat the person in whose name the Note is registered as the owner thereof for all purposes whether or not the Note shall be overdue, and neither the Company, the Trustee, nor any such agent shall be affected by notice to the contrary. Furthermore, any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Note may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent) and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry. When Notes are presented to the Registrar or a co-Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other authorized denominations (including an exchange of Notes for Exchange Notes), the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met (including that such Notes are duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and Registrar duly executed by the Holder thereof or by an attorney who is authorized in writing to act on behalf of the Holder); provided that no exchanges of Notes for Exchange Notes shall occur until a 36 29 Registration Statement shall have been declared effective by the Commission and that any Notes that are exchanged for Exchange Notes shall be canceled by the Trustee. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration of transfer or exchange or redemption of the Notes, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other similar governmental charge payable upon exchanges pursuant to Section 2.11, 3.08 or 9.04). The Registrar shall not be required (i) to issue, register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Notes selected for redemption under Section 3.03 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES. (a) The U.S. Global Notes and Offshore Global Notes initially shall (i) be registered in the name of the Depositary for such Global Notes or the nominee of such Depositary, (ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 2.02. Members of, or participants in, the Depositary ("AGENT MEMBERS") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as its custodian, or under such Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Note. (b) Transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in Global Notes may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 2.08. In addition, U.S. Physical Notes and Offshore Physical Notes, if any, shall be transferred to all beneficial owners in exchange for their beneficial interests in the U.S. Global Notes or the Offshore Global Notes, as the case may be, if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the U.S. Global Notes or the Offshore Global Notes, as the case may be, and a successor depositary is not appointed by the Company within 90 days of such notice, (ii) an Event of Default 37 30 has occurred and is continuing and the Registrar has received a request from the Depositary or (iii) in accordance with the rules and procedures of the Depositary and the provisions of Section 2.08. (c) Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form of an interest in another Global Note will, upon transfer, cease to be an interest in such Global Note and become an interest in such other Global Note and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest. (d) In connection with any transfer of a portion of the beneficial interests in a Global Note to beneficial owners pursuant to paragraph (b) of this Section 2.07, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such Global Note in an amount equal to the principal amount of the beneficial interest in such Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Notes or Offshore Physical Notes, as the case may be, of like tenor and amount. (e) In connection with the transfer of the U.S. Global Notes or the Offshore Global Notes, in whole, to beneficial owners pursuant to paragraph (b) of this Section 2.07, the U.S. Global Notes or Offshore Global Notes, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the U.S. Global Notes or Offshore Global Notes, as the case may be, an equal aggregate principal amount of U.S. Physical Notes or Offshore Physical Notes, as the case may be, of authorized denominations. (f) Any U.S. Physical Note delivered in exchange for an interest in the U.S. Global Notes pursuant to paragraph (b), (d) or (e) of this Section 2.07 shall, except as otherwise provided by paragraph (e) of Section 2.08, bear the legend regarding transfer restrictions applicable to the U.S. Physical Note set forth in Section 2.02. (g) Any Offshore Physical Note delivered in exchange for an interest in the Offshore Global Notes pursuant to paragraph (b), (d) or (e) of this Section 2.07 shall, except as otherwise provided by paragraph (e) of Section 2.08, bear the legend regarding transfer restrictions applicable to the Offshore Physical Note set forth in Section 2.02. (h) The registered holder of a Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. 38 31 SECTION 2.08. SPECIAL TRANSFER PROVISIONS. Unless and until a Note is exchanged for an Exchange Note in connection with, or a Note is resold pursuant to, an effective Registration Statement pursuant to the Registration Rights Agreement, the following provisions shall apply: (a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The following provisions shall apply with respect to the registration of any proposed transfer of a Note to any Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons): (i) The Registrar shall register the transfer of any Note, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the time period referred to in Rule 144(k) under the Securities Act or (y) the proposed transferee has delivered to the Registrar (A) a certificate substantially in the form of Exhibit C hereto and (B) if the aggregate principal amount of the Notes being transferred is less than $100,000, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act. (ii) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Notes, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) above and (y) instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the U.S. Global Notes in an amount equal to the principal amount of the beneficial interest in the U.S. Global Notes to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Notes of like tenor and amount. (b) TRANSFERS TO QIBS. The following provisions shall apply with respect to the registration of any proposed transfer of a Note to a QIB (excluding Non-U.S. Persons): (i) If the Note to be transferred consists of (x) either Offshore Physical Notes prior to the removal of the Private Placement Legend or U.S. Physical Notes, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing 39 32 representations in order to claim the exemption from registration provided by Rule 144A or (y) either an interest in Offshore Global Notes prior to the removal of the Private Placement Legend or an interest in the U.S. Global Notes, the transfer of such interest may be effected only through the book entry system maintained by the Depositary. (ii) If the proposed transferee is an Agent Member, and the Note to be transferred consists of U.S. Physical Notes, upon receipt by the Registrar of the documents referred to in paragraph (i) above and instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of U.S. Global Notes in an amount equal to the principal amount of the U.S. Physical Notes to be transferred, and the Trustee shall cancel the U.S. Physical Notes so transferred. (c) TRANSFERS OF INTERESTS IN THE OFFSHORE GLOBAL NOTES OR OFFSHORE PHYSICAL NOTES. The following provisions shall apply with respect to any transfer of interests in Offshore Global Notes or Offshore Physical Notes: (i) prior to the removal of the Private Placement Legend from the Offshore Global Notes or Offshore Physical Notes pursuant to Section 2.02, the Registrar shall refuse to register such transfer unless such transfer complies with Section 2.08(b) or Section 2.08(d), as the case may be, and (ii) after such removal, the Registrar shall register the transfer of any such Note without requiring any additional certification. (d) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following provisions shall apply with respect to any transfer of a Note to a Non-U.S. Person: (i) The Registrar shall register any proposed transfer to any Non-U.S. Person if the Note to be transferred is a U.S. Physical Note or an interest in U.S. Global Notes, upon receipt of a certificate substantially in the form of Exhibit D hereto from the proposed transferor. (ii) (a) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Notes, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (ii) and (y) instructions in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the U.S. Global Notes in an amount equal to the principal amount of the beneficial interest in the U.S. Global Notes to be transferred, and (b) if the proposed transferee is an Agent Member, upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures, the 40 33 Registrar shall reflect on its books and records the date and an increase in the principal amount of the Offshore Global Notes in an amount equal to the principal amount of the U.S. Physical Notes or the U.S. Global Notes, as the case may be, to be transferred, and the Trustee shall cancel the Physical Note, if any, so transferred or decrease the amount of the U.S. Global Notes. (e) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (a)(i)(x) or (c)(ii) of this Section 2.08 exist or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (f) GENERAL. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall not register a transfer of any Note unless such transfer complies with the restrictions on transfer of such Note set forth in this Indenture. In connection with any transfer of Notes, each Holder agrees by its acceptance of the Notes to furnish the Registrar or the Company such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine (but may rely on a determination made by the Company with respect to) the sufficiency of any such certifications, legal opinions or other information. Without in any way limiting the Trustee's responsibilities hereunder with respect to transfers, the Trustee shall have no additional obligation or duty to monitor, determine or inquire as to compliance with applicable law with respect to any transfer of any interest in any Security. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.07 or this Section 2.08. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. SECTION 2.09. REPLACEMENT NOTES. If a mutilated Note is surrendered to the Trustee or if the Holder claims that the Note has been lost, destroyed or wrongfully taken, then, in the absence of notice to the Company or the Trustee that such Note has been acquired by a bona fide 41 34 purchaser, the Company shall issue and the Trustee shall authenticate a replacement Note of like tenor and principal amount and bearing a number not contemporaneously outstanding; provided that the requirements of this paragraph and the second paragraph of Section 2.10 are met. An indemnity bond must be furnished that is sufficient in the judgment of both the Trustee and the Company to protect the Company, the Trustee or any Agent from any loss that any of them may suffer if a Note is replaced. The Company may charge such Holder for its expenses and the expenses of the Trustee in replacing a Note. In case any such mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, the Company in its discretion may pay such Note instead of issuing a new Note in replacement thereof. Every replacement Note is an additional obligation of the Company and shall be entitled to the benefits of this Indenture. SECTION 2.10. OUTSTANDING NOTES. Notes Outstanding at any time are all Notes that have been authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section 2.10 as not outstanding. If a Note is replaced or paid pursuant to Section 2.09, it ceases to be Outstanding unless and until the Trustee and the Company receive proof satisfactory to them that the replaced or paid Note is held by a bona fide purchaser. If the Paying Agent (other than the Company or an Affiliate of the Company) holds at the Maturity thereof money sufficient to pay Notes payable on that date, then on and after that date such Notes cease to be Outstanding and interest on them shall cease to accrue. SECTION 2.11. TEMPORARY NOTES. Until definitive Notes are ready for delivery, the Company may prepare and execute and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have insertions, substitutions, omissions and other variations determined to be appropriate by the Officers executing the temporary Notes, as evidenced by their execution of such temporary Notes. If temporary Notes are issued, the Company will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for such purpose pursuant to Section 4.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall be entitled to the same benefits under this Indenture as definitive Notes. SECTION 2.12. CANCELLATION. The Company at any time may deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company may 42 35 have acquired in any manner whatsoever, and may deliver to the Trustee for cancellation any Notes previously authenticated hereunder which the Company has not issued and sold. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee shall cancel all Notes surrendered for transfer, exchange, payment or cancellation and shall dispose of them in accordance with its normal procedure. Except as expressly permitted by this Indenture, the Company may not issue new Notes to replace Notes it has paid in full or delivered to the Trustee for cancellation. SECTION 2.13. CUSIP NUMBERS. The Company in issuing the Notes may use "CUSIP", "CINS" or "ISIN" numbers (if then generally in use), and the Trustee shall use CUSIP, CINS or ISIN numbers, as the case may be, in notices of redemption or exchange as a convenience to Holders; provided that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption or exchange and that reliance may be placed only on the other identification numbers printed on the Notes. The Company will promptly notify the Trustee of any change in "CUSIP", "CINS" or "ISIN" numbers for the Notes. SECTION 2.14. DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Notes, it shall pay, or shall deposit with the Paying Agent money in immediately available funds sufficient to pay, the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date. A special record date, as used in this Section 2.14 with respect to the payment of any defaulted interest, shall mean the 15th day next preceding the date fixed by the Company for the payment of defaulted interest, whether or not such day is a Business Day. At least 15 days before the subsequent special record date, the Company shall mail to each Holder and to the Trustee a notice that states the subsequent special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.15. ISSUANCE OF ADDITIONAL NOTES. The Company may, subject to Article Four of this Indenture and applicable law, issue additional Notes under this Indenture. The Notes issued on the Closing Date and any additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture. ARTICLE THREE REDEMPTION SECTION 3.01. RIGHT OF REDEMPTION. (a) The Notes shall be redeemable, at the Company's option, in whole or in part, at any time or from time to time, on or after March 15, 2003 and prior to Maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's last address, as it appears in the Security Register, at the 43 36 following Redemption Prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date that is prior to the Redemption Date to receive interest due on an Interest Payment Date), if redeemed during the 12-month period commencing March 15 of the years set forth below:
Redemption Year Price ---- ---------- 2003............................... 104.000% 2004............................... 102.667 2005............................... 101.333 2006 and thereafter................ 100.000
(b) At any time and from time to time prior to March 15, 2001, the Company may redeem up to 35% of the principal amount of the Notes with the proceeds of one or more Public Equity Offerings, at any time or from time to time in part, at a Redemption Price (expressed as a percentage of principal amount) of 108%, plus accrued and unpaid interest to the Redemption Date (subject to the rights of Holders of record on the relevant Regular Record Date that is prior to the Redemption Date to receive interest due on an Interest Payment Date); provided that after any such redemption Notes representing at least 65% of the Notes originally issued remain Outstanding and that notice of such redemption is mailed within 60 days of the relevant Public Equity Offering. SECTION 3.02. NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to Section 3.01, it shall notify the Trustee in writing of the Redemption Date and the principal amount of Notes to be redeemed and the clause of this Indenture pursuant to which redemption shall occur. SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed in compliance with the requirements, as certified to it by the Company, of the principal national securities exchange or automated quotation system, if any, on which the Notes are listed or, if the Notes are not listed on a national securities exchange or automated quotation system, by lot or by such other method as the Trustee in its sole discretion shall deem fair and appropriate; provided that no Note of $1,000 in principal amount or less shall be redeemed in part. The Trustee shall make the selection from the Notes outstanding and not previously called for redemption. Notes in denominations of $1,000 in principal amount may only be redeemed in whole. The Trustee may select for redemption portions (equal to $1,000 in principal amount or any integral multiple thereof) of Notes that have denominations larger than $1,000 in principal amount. Provisions of this Indenture that apply to Notes called for redemption also apply to 44 37 portions of Notes called for redemption. The Trustee shall notify the Company and the Registrar promptly in writing of the Notes or portions of Notes to be called for redemption. SECTION 3.04. NOTICE OF REDEMPTION. With respect to any redemption of Notes pursuant to Section 3.01, at least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail to each Holder whose Notes are to be redeemed. The notice shall identify the Notes (including CUSIP, CINS or ISIN number(s), as applicable) to be redeemed and shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the name and address of the Paying Agent; (iv) that Notes called for redemption must be surrendered to the Paying Agent in order to collect the Redemption Price; (v) that, unless the Company defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date and the only remaining right of the Holders is to receive payment of the Redemption Price plus accrued interest to the Redemption Date upon surrender of the Notes to the Paying Agent; (vi) that, if any Note is being redeemed in part, the portion of the principal amount (equal to $1,000 in principal amount or any integral multiple thereof) of such Note to be redeemed and that, on and after the Redemption Date, upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion thereof will be reissued; and (vii) that, if any Note contains a CUSIP, CINS or ISIN number as provided in Section 2.13, no representation is being made as to the correctness of the CUSIP, CINS or ISIN number either as printed on the Notes or as contained in the notice of redemption and that reliance may be placed only on the other identification numbers printed on the Notes. At the Company's request (which request may be revoked by the Company at any time prior to the time at which the Trustee shall have given such notice to the Holders), made in writing to the Trustee at least 45 days (or such shorter period as shall be satisfactory to the Trustee) before 45 38 a Redemption Date, the Trustee shall give the notice of redemption pursuant to Section 3.01 in the name and at the expense of the Company. If, however, the Company gives such notice to the Holders, the Company shall concurrently deliver to the Trustee an Officers' Certificate stating that such notice has been given. SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender of any Notes to the Paying Agent, such Notes shall be paid at the Redemption Price, plus accrued interest, if any, to the Redemption Date. Notice of redemption shall be deemed to be given when mailed, whether or not the Holder receives the notice. In any event, failure to give such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of Notes held by Holders to whom such notice was properly given. SECTION 3.06. DEPOSIT OF REDEMPTION PRICE. On or prior to 10:00 a.m., New York City time, any Redemption Date, the Company shall deposit with the Paying Agent (or, if the Company is acting as its own Paying Agent, shall segregate and hold in trust as provided in Section 2.05) money sufficient to pay the Redemption Price of and accrued interest on all Notes to be redeemed on that date other than Notes or portions thereof called for redemption on that date that have been delivered by the Company to the Trustee for cancellation. SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION. If notice of redemption has been given in the manner provided above, the Notes or portion of Notes specified in such notice to be redeemed shall become due and payable on the Redemption Date at the Redemption Price stated therein, together with accrued interest to such Redemption Date, and on and after such date (unless the Company shall default in the payment of such Notes at the Redemption Price and accrued interest to the Redemption Date, in which case the principal, until paid, shall bear interest from the Redemption Date at the rate prescribed in the Notes), such Notes shall cease to accrue interest. Upon surrender of any Note for redemption in accordance with a notice of redemption, such Note shall be paid and redeemed by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders registered as such at the close of business on the relevant Regular Record Date. SECTION 3.08. NOTES REDEEMED IN PART. Upon surrender of any Note that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Note equal in principal amount to the unredeemed portion of such surrendered Note. 46 39 ARTICLE FOUR COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Company shall pay the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. An installment of principal, premium, if any, or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company, a Subsidiary of the Company, or any Affiliate of any of them) holds on that date money designated for and sufficient to pay the installment. If the Company or any Subsidiary of the Company or any Affiliate of any of them acts as Paying Agent, an installment of principal, premium, if any, or interest shall be considered paid on the due date if the entity acting as Paying Agent complies with the last sentence of Section 2.05. As provided in Section 6.09, upon any bankruptcy or reorganization procedure relative to the Company, the Trustee shall serve as the Paying Agent for the Notes. The Company shall pay interest on overdue principal and premium, if any, to the extent lawful, at the rate per annum specified in the Notes. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in the Borough of Manhattan, The City of New York, an office or agency where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 10.02. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby initially designates the Corporate Trust Office of the Trustee as such office of the Company in accordance with Section 2.04. SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (other than the Notes and Indebtedness existing on the Closing Date); provided that the Company may Incur Indebtedness 47 40 if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Interest Coverage Ratio would be greater than 2.5:1. Notwithstanding the foregoing, the Company and any Restricted Subsidiary (except as specified below) may Incur each and all of the following: (i) Indebtedness of the Company under the Credit Facility or any other agreement in an aggregate principal amount outstanding at any time not to exceed $100 million, less any amount of such Indebtedness permanently repaid as provided under Section 4.11; (ii) Indebtedness owed (A) to the Company evidenced by an unsubordinated promissory note or (B) to any Restricted Subsidiary; provided that any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or another Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (ii); (iii) Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding Indebtedness (other than Indebtedness Incurred under clause (i), (ii), (iv), (vi), (vii), (viii), (ix), (x) or (xii) of this paragraph) and any refinancings thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes shall only be permitted under this clause (iii) if (A) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes, (B) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes and (C) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded; and provided further that in no event may Indebtedness of the Company be refinanced by means of any Indebtedness of any Restricted Subsidiary pursuant to this clause (iii); (iv) Indebtedness (A) in respect of performance, surety or appeal bonds provided in the ordinary course of business, (B) under Currency Agreements and Interest Rate Agreements; provided that such agreements (x) are designed solely to protect the Company or its Restricted Subsidiaries against fluctuations in foreign currency exchange rates or interest rates and (y) do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder; and (C) arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, 48 41 in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with such disposition; (v) Indebtedness of the Company, to the extent the net proceeds thereof are promptly (A) used to purchase Notes tendered in an Offer to Purchase made as a result of a Change in Control or (B) deposited to defease the Notes in accordance with Article Eight; (vi) Guarantees of the Notes and Guarantees of Indebtedness of the Company by any Restricted Subsidiary provided the Guarantee of such Indebtedness is permitted by and made in accordance with Section 4.07; (vii) Indebtedness of the Company, not to exceed $15 million in any fiscal year of the Company, Incurred to finance capital expenditures; (viii) Indebtedness of the Company in an aggregate principal amount outstanding at any time not to exceed the sum of 80% of Eligible Accounts Receivable and 60% of Eligible Inventory; (ix) Indebtedness of Foreign Subsidiaries in an aggregate principal amount outstanding at any time not to exceed the greater of (A) $20 million and (B) one-third of Consolidated EBITDA for the then most recent four fiscal quarters covered by filings made pursuant to Section 4.18; (x) Indebtedness of Restricted Subsidiaries, not to exceed $10.5 million, secured by real property of such Restricted Subsidiaries; (xi) Acquired Indebtedness, provided that, pro forma for the transactions in which such Acquired Indebtedness is Incurred, the Interest Coverage Ratio would be no less than 2.5:1; and (xi) Indebtedness of the Company (in addition to Indebtedness permitted under clauses (i) through (xi) above) in an aggregate principal amount outstanding at any time not to exceed $70 million, less any amount of such Indebtedness permanently repaid as provided under Section 4.11. (b) Notwithstanding any other provision of this Section 4.03, the maximum amount of Indebtedness that the Company or a Restricted Subsidiary may Incur pursuant to this Section 4.03 shall not be deemed to be exceeded, with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of currencies. (c) For purposes of determining any particular amount of Indebtedness under this Section 4.03, (i) Indebtedness Incurred under the Credit Facility on or prior to the Closing Date shall be treated as Incurred pursuant to clause (i) of the second paragraph of this Section 4.03, (ii) Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included and (iii) any Liens granted pursuant to the equal and ratable provisions referred to in Section 4.09 shall not be treated as Indebtedness. For purposes of determining compliance with this Section 4.03, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses (other than Indebtedness referred to in clause (i) of the preceding sentence), the Company, in its sole discretion, shall classify, and from time to time may reclassify, such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses. 49 42 SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, (i) declare or pay any dividend or make any distribution on or with respect to its Capital Stock (other than (x) dividends or distributions payable solely in shares of its Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to acquire shares of such Capital Stock and (y) pro rata dividends or distributions on Common Stock of Restricted Subsidiaries held by minority stockholders) held by Persons other than the Company or any of its Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock of (A) the Company or an Unrestricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by any Person or (B) a Restricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by any Affiliate of the Company (other than a Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such holder) of 5% or more of the Capital Stock of the Company, (iii) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness of the Company that is subordinated in right of payment to the Notes or (iv) make any Investment, other than a Permitted Investment, in any Person (such payments or any other actions described in clauses (i) through (iv) above being collectively "RESTRICTED PAYMENTS") if, at the time of, and after giving effect to, the proposed Restricted Payment: (A) a Default or Event of Default shall have occurred and be continuing, (B) except in the case of an Investment, the Company could not Incur at least $1.00 of Indebtedness under the first paragraph of Section 4.03 or (C) the aggregate amount of all Restricted Payments (the amount, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution; provided that Restricted Payments, to the extent made solely in Capital Stock other than Disqualified Stock, shall for purposes of this clause (C) be deemed to be in an amount equal to zero) made after the Closing Date shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount of such loss) (determined by excluding income resulting from transfers of assets by the Company or a Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal quarter immediately following the Closing Date and ending on the last day of the last fiscal quarter preceding the Transaction Date for which reports have been filed with the Commission or provided to the Trustee pursuant to Section 4.18 plus (2) the aggregate Net Cash Proceeds received by the Company after the Closing Date from the issuance and sale permitted by this Indenture of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Company, including an issuance or sale permitted by this Indenture of Indebtedness of the Company for cash subsequent to the Closing Date upon the conversion of such Indebtedness into Capital Stock (other than Disqualified Stock) of the Company, or from the issuance to a Person who is not a Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (in each case, exclusive of any Disqualified Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the Stated 50 43 Maturity of the Notes) plus (3) an amount equal to the net reduction in outstanding Investments (other than reductions in outstanding Permitted Investments) in any Person resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such Investment (except, in each case, to the extent any such payment or proceeds are included in the calculation of Adjusted Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed, in each case, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. The amount of any Investment "outstanding" at any time shall be deemed to be equal to the amount of such Investment on the date made, less the return of capital to the Company and its Restricted Subsidiaries with respect to such Investment (up to the amount of such Investment on the date made). Notwithstanding anything herein to the contrary, Investments made through the transfer of equipment shall be valued at the book value at the time of Investment with respect to such equipment. (b) The foregoing provision shall not be violated by reason of: (i) the payment of any dividend within 60 days after the date of declaration thereof if, at said date of declaration, such payment would comply with the foregoing paragraph; (ii) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is subordinated in right of payment to the Notes including premium, if any, and accrued and unpaid interest, with the proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of the second paragraph of Section 4.03(a); (iii) the repurchase, redemption or other acquisition of Capital Stock of the Company or an Unrestricted Subsidiary (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock (other than Disqualified Stock) of the Company (or options, warrants or other rights to acquire such Capital Stock); (iv) the making of any principal payment or the repurchase, redemption, retirement, defeasance or other acquisition for value of Indebtedness of the Company which is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of, a substantially concurrent offering of, shares of the Capital Stock (other than Disqualified Stock) of the Company (or options, warrants or other rights to acquire such Capital Stock); (v) payments or distributions, to dissenting stockholders pursuant to applicable law, pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of Article Five; or (vi) dividends consisting of rights to purchase Common Stock, or consisting of Common Stock, of MicroSun; provided that the balance sheet value of MicroSun's assets, net of intangible assets, does not exceed $10 million as of the date of such dividend; provided that, except in the case of clauses (i) and (iii), no Default or Event of Default shall have occurred and be continuing or occur as a consequence of the actions or payments set forth therein. (c) Each Restricted Payment permitted pursuant to paragraph (b) of this Section 4.04 (other than the Restricted Payment referred to in clause (ii) thereof, an exchange of Capital Stock 51 44 for Capital Stock or Indebtedness referred to in clause (iii) or (iv) thereof and an Investment referred to in clause (vi) thereof), and the Net Cash Proceeds from any issuance of Capital Stock referred to in clauses (iii) and (iv) thereof, shall be included in calculating whether the conditions of clause (C) of the first paragraph of this Section 4.04 have been met with respect to any subsequent Restricted Payments. In the event the proceeds of an issuance of Capital Stock of the Company are used for the redemption, repurchase or other acquisition of the Notes, or Indebtedness that is pari passu with the Notes, then the Net Cash Proceeds of such issuance shall be included in clause (C) of the first paragraph of this Section 4.04 only to the extent such proceeds are not used for such redemption, repurchase or other acquisition of Indebtedness. SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions permitted by applicable law on any Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (iii) make loans or advances to the Company or any other Restricted Subsidiary or (iv) transfer any of its property or assets to the Company or any other Restricted Subsidiary. The foregoing provisions shall not restrict any encumbrances or restrictions: (i) existing on the Closing Date in the Credit Facility, this Indenture or any other agreements in effect on the Closing Date, and any extensions, refinancings, renewals or replacements of such agreements; provided that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced; (ii) existing under or by reason of applicable law; (iii) with respect to any Person or the property or assets of such Person acquired by the Company or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired; (iv) in the case of clause (iv) of the first paragraph of this Section 4.05, (A) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, (B) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by this Indenture or (C) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary; (v) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such 52 45 Restricted Subsidiary; or (vi) encumbrances or restrictions relating solely to Foreign Subsidiaries that support Indebtedness Incurred under clause (ix) of the second paragraph of paragraph (a) of Section 4.03. Nothing contained in this Section 4.05 shall prevent the Company or any Restricted Subsidiary from (1) creating, incurring, assuming or suffering to exist any Liens otherwise permitted under Section 4.09 or (2) restricting the sale or other disposition of property or assets of the Company or any of its Restricted Subsidiaries that secure Indebtedness of the Company or any of its Restricted Subsidiaries. SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except (i) to the Company or a Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying shares or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law; (iii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under Section 4.04 if made on the date of such issuance or sale; (iv) and the issuance or sale of Common Stock of any Restricted Subsidiaries if the proceeds thereof are applied in accordance with Section 4.11. SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES. The Company will not permit any Restricted Subsidiary, directly or indirectly, to Guarantee any Indebtedness of the Company which is pari passu with or subordinate in right of payment to the Notes ("GUARANTEED INDEBTEDNESS"), unless (i) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for a Guarantee (a "SUBSIDIARY GUARANTEE") of payment of the Notes by such Restricted Subsidiary and (ii) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall not be applicable to any Guarantee of any Restricted Subsidiary (x) that existed at the time such Person became a Restricted Subsidiary and was not Incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or (y) of the Indebtedness Incurred under the Credit Facility. If the Guaranteed Indebtedness is (A) pari passu with the Notes, then the Guarantee of such Guaranteed Indebtedness shall be pari passu with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to the Notes, then the Guarantee of such Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes. 53 46 Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted Subsidiary may provide by its terms that it shall be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all of the Company's and each other Restricted Subsidiary's Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by this Indenture) or (ii) the release or discharge of the Guarantee which resulted in the creation of such Subsidiary Guarantee, except a discharge or release by or as a result of payment under such Guarantee. SECTION 4.08. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any holder (or any Affiliate of such holder other than an entity that is an Affiliate solely by reason of being a Subsidiary of the Company) of 5% or more of any class of Capital Stock of the Company or with any Affiliate of the Company or any Restricted Subsidiary, except upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than could be obtained, at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefor, in a comparable arm's-length transaction with a Person that is not such a holder or an Affiliate. The foregoing limitation does not limit, and shall not apply to (i) transactions (A) approved by a majority of the disinterested members of the Board of Directors or (B) for which the Company or a Restricted Subsidiary delivers to the Trustee a written opinion of a nationally recognized firm having expertise in the specific area which is the subject of such determination stating that the transaction is fair to the Company or such Restricted Subsidiary from a financial point of view; (ii) any transaction solely between the Company and any of its Wholly Owned Restricted Subsidiaries or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of reasonable and customary regular fees to directors of the Company who are not employees of the Company; (iv) any payments or other transactions pursuant to any tax-sharing agreement between the Company and any other Person with which the Company files a consolidated tax return or with which the Company is part of a consolidated group for tax purposes; (v) any Restricted Payments not prohibited under Section 4.04 or (vi) any issuance of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans or incentive plans approved by the Board of Directors. Notwithstanding the foregoing, any transaction or series of related transactions covered by the first paragraph of this Section 4.08 and not covered by clauses (ii) through (v) of this paragraph, the aggregate amount of which (until after the Stated Maturity of the Notes) exceeds $1 million in value, must be approved or determined to be fair in the manner provided for in clause (i)(A) or (B) above. 54 47 SECTION 4.09. LIMITATION ON LIENS. The Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on any of its assets or properties of any character, or any shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without making effective provision for all of the Notes and all other amounts due under this Indenture to be directly secured equally and ratably with (or, if the obligation or liability to be secured by such Lien is subordinated in right of payment to the Notes, prior to) the obligation or liability secured by such Lien. The foregoing limitation does not apply to (i) Liens existing on the Closing Date, including Liens securing obligations under the Credit Facility; (ii) Liens granted after the Closing Date on any assets or Capital Stock of the Company or its Restricted Subsidiaries created in favor of the Holders; (iii) Liens with respect to the assets of a Restricted Subsidiary granted by such Restricted Subsidiary to the Company or a Wholly Owned Restricted Subsidiary to secure Indebtedness owing to the Company or such other Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under the second paragraph of Section 4.03; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced; (v) Liens on any property or assets of a Restricted Subsidiary securing Indebtedness of such Restricted Subsidiary permitted under Section 4.03; (vi) Liens with respect to real property to secure Indebtedness Incurred pursuant to clause (x) of the second paragraph of Section 4.03(a) or (vii) Permitted Liens. SECTION 4.10. LIMITATION ON SALE-LEASEBACK TRANSACTIONS. The Company will not, and will not permit any Restricted Subsidiary to, enter into any sale-leaseback transaction involving any of its assets or properties whether now owned or hereafter acquired, whereby the Company or a Restricted Subsidiary sells or transfers such assets or properties and then or thereafter leases such assets or properties or any part thereof or any other assets or properties which the Company or such Restricted Subsidiary, as the case may be, intends to use for substantially the same purpose or purposes as the assets or properties sold or transferred. The foregoing restriction does not apply to any sale-leaseback transaction if (i) the lease is for a period, including renewal rights, of not in excess of three years; (ii) the lease secures or relates to industrial revenue or pollution control bonds; (iii) the transaction is solely between the Company and any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within 12 months after the sale or transfer of any assets or properties is completed, applies an amount not less than the net proceeds received from such sale in accordance with clause (A) or (B) of the first paragraph of Section 4.11. SECTION 4.11. LIMITATION ON ASSET SALES. The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless (i) the consideration received by 55 48 the Company or such Restricted Subsidiary is at least equal to the fair market value of the assets sold or disposed of and (ii) at least 75% of the consideration received consists of cash or Temporary Cash Investments. In the event and to the extent that the Net Cash Proceeds received by the Company or any of its Restricted Subsidiaries from one or more Asset Sales occurring on or after the Closing Date in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the date closest to the commencement of such 12-month period for which a consolidated balance sheet of the Company and its Subsidiaries has been filed with the Commission pursuant to Section 4.18), then the Company shall or shall cause the relevant Restricted Subsidiary to (i) within twelve months after the date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently repay unsubordinated Indebtedness of the Company, or any Restricted Subsidiary providing a Subsidiary Guarantee pursuant to Section 4.07 or Indebtedness of any other Restricted Subsidiary, in each case owing to a Person other than the Company or any of its Restricted Subsidiaries or (B) invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement), in property or assets (other than current assets) of a nature or type or that are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, the Company and its Restricted Subsidiaries existing on the date of such investment and (ii) apply (no later than the end of the 12-month period referred to in clause (i)) such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided in the following paragraph of this Section 4.11. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (i) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." Notwithstanding the foregoing, to the extent that any or all of the Net Cash Proceeds of any Asset Sale of assets based outside the United States are prohibited or delayed by applicable local law from being repatriated to the United States and such Net Cash Proceeds are not actually applied in accordance with the foregoing paragraphs, the Company shall not be required to apply the portion of such Net Cash Proceeds so affected but may permit the applicable Restricted Subsidiaries to retain such portion of the Net Cash Proceeds so long, but only so long, as the applicable local law will not permit repatriation to the United States (the Company hereby agreeing to cause the applicable Restricted Subsidiary to promptly take all actions required by the applicable local law to permit such repatriation) and once such repatriation of any such affected Net Cash Proceeds is permitted under the applicable local law, such repatriation will be immediately effected and such repatriated Net Cash Proceeds will be applied in the manner set forth in this covenant as if the Asset Sale had occurred on such date; provided that to the extent that the Company has determined in good faith that repatriation of any or all of the Net Cash Proceeds of such Asset Sale would have a material adverse tax cost consequence, the Net Cash Proceeds so affective may be 56 49 retained by the applicable Restricted Subsidiary for so long as such material adverse tax cost event would continue. If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this Section 4.11 totals at least $20 million, the Company shall commence, not later than the fifteenth Business Day of such month, and consummate an Offer to Purchase from the Holders on a pro rata basis an aggregate principal amount of Notes equal to the Excess Proceeds on such date, at a purchase price equal to 100% of the principal amount of the Notes, plus, in each case, accrued interest (if any) to the Payment Date. SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL. The Company shall commence, within 30 days after the occurrence of a Change of Control, and consummate an Offer to Purchase for all Notes then outstanding, at a purchase price equal to 101% of the principal amount thereof, plus accrued interest, if any, to the Payment Date. SECTION 4.13. EXISTENCE. Subject to Article Five of this Indenture, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and the existence of each of its Restricted Subsidiaries in accordance with the respective organizational documents of the Company and each such Restricted Subsidiary and the rights (whether pursuant to charter, partnership certificate, agreement, statute or otherwise), licenses and franchises of the Company and each such Restricted Subsidiary; provided that the Company shall not be required to preserve any such right, license or franchise, or the existence of any Restricted Subsidiary, if the maintenance or preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries taken as a whole. SECTION 4.14. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge and shall cause each of its Restricted Subsidiaries to pay or discharge, or cause to be paid or discharged, before the same shall become delinquent (i) all material taxes, assessments and governmental charges levied or imposed upon (a) the Company or any such Restricted Subsidiary, (b) the income or profits of any such Restricted Subsidiary which is a corporation or (c) the property of the Company or any such Restricted Subsidiary and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a lien upon the property of the Company or any such Restricted Subsidiary; provided that the Company shall not be required to pay or discharge, or cause to be paid or discharged, any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established. SECTION 4.15. MAINTENANCE OF PROPERTIES AND INSURANCE. The Company will cause all properties used or useful in the conduct of its business or the business of any of its Restricted Subsidiaries to be maintained and kept in good condition, repair and working order and supplied 57 50 with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided that nothing in this Section 4.15 shall prevent the Company or any such Restricted Subsidiary from discontinuing the use, operation or maintenance of any of such properties or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Company, desirable in the conduct of the business of the Company or such Subsidiary. The Company will provide or cause to be provided, for itself and its Restricted Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties, including, but not limited to, products liability insurance and public liability insurance, with reputable insurers or with the government of the United States of America, or an agency or instrumentality thereof, in such amounts, with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry in which the Company or any such Restricted Subsidiary, as the case may be, is then conducting business. SECTION 4.16. NOTICE OF DEFAULTS. In the event that any Officer becomes aware of any Default or Event of Default, the Company, promptly after it becomes aware thereof, will give written notice thereof to the Trustee. SECTION 4.17. COMPLIANCE CERTIFICATES. (a) The Company shall deliver to the Trustee, within 45 days after the end of each fiscal quarter (90 days after the end of the last fiscal quarter of each year), an Officers' Certificate stating whether or not the signers know of any Default or Event of Default that occurred during such fiscal quarter. In the case of the Officers' Certificate delivered within 90 days after the end of the Company's fiscal year, such certificate shall contain a certification from the principal executive officer, principal financial officer or principal accounting officer of the Company that a review has been conducted of the activities of the Company and its Restricted Subsidiaries and the Company's and its Restricted Subsidiaries' performance under this Indenture and that the Company has complied with all conditions and covenants under this Indenture. For purposes of this Section 4.17, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. If any of the officers of the Company signing such certificate has knowledge of such a Default or Event of Default, the certificate shall describe any such Default or Event of Default and its status. The first certificate to be delivered pursuant to this Section 4.17(a) shall be for the first fiscal quarter beginning after the execution of this Indenture. (b) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, beginning with the fiscal year in which this Indenture was executed, a certificate signed by the Company's independent certified public accountants stating (i) that their audit examination 58 51 has included a review of the terms of this Indenture and the Notes as they relate to accounting matters, (ii) that they have read the most recent Officers' Certificate delivered to the Trustee pursuant to paragraph (a) of this Section 4.17 and (iii) whether, in connection with their audit examination, anything came to their attention that caused them to believe that the Company was not in compliance with any of the terms, covenants, provisions or conditions of Article Four and Section 5.01 of this Indenture as they pertain to accounting matters and, if any Default or Event of Default has come to their attention, specifying the nature and period of existence thereof; provided that such independent certified public accountants shall not be liable in respect of such statement by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of an audit examination conducted in accordance with generally accepted auditing standards in effect at the date of such examination. SECTION 4.18. COMMISSION REPORTS AND REPORTS TO HOLDERS. Whether or not the Company is required to file reports with the Commission, the Company shall file with the Commission all such reports and other information as it would be required to file with the Commission by Section 13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company shall supply the Trustee and each Holder or shall supply to the Trustee for forwarding to each such Holder, without cost to such Holder, copies of such reports and information within 15 days after the date it files such reports and information with the Commission or after the date it would have been required to file such reports and information with the Commission had it been subject to such sections of the Exchange Act; provided, however, that the copies of such reports and information mailed to Holders may omit exhibits, which the Company will supply to any Holder at such Holder's request. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 59 52 ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. WHEN COMPANY MAY MERGE, ETC. The Company shall not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into the Company unless: (i) the Company shall be the continuing Person, or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or that acquired or leased such property and assets of the Company shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, all of the obligations of the Company on all of the Notes and under this Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction on a pro forma basis, the Company or any Person becoming the successor obligor of the Notes shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction; (iv) immediately after giving effect to such transaction on a pro forma basis the Company, or any Person becoming the successor obligor of the Notes, as the case may be, could Incur at least $1.00 of Indebtedness under the first paragraph of Section 4.03; provided that this clause (iv) shall not apply to a consolidation, merger or sale of all (but not less than all) of the assets of the Company if all Liens and Indebtedness of the Company or any Person becoming the successor obligor on the Notes, as the case may be, and its Restricted Subsidiaries outstanding immediately after such transaction would, if Incurred at such time, have been permitted to be Incurred (and all such Liens and Indebtedness, other than Liens and Indebtedness of the Company and its Restricted Subsidiaries outstanding immediately prior to the transaction, shall be deemed to have been Incurred) for all purposes of this Indenture; and (v) the Company delivers to the Trustee an Officers' Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (iii) and (iv)) and Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture comply with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with; provided, however, that clauses (iii) and (iv) above do not apply if, in the good faith determination of the Board of Directors of the Company, whose determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change the state of incorporation of the Company; and provided further that any such transaction shall not have as one of its purposes the evasion of the foregoing limitations. SECTION 5.02. SUCCESSOR SUBSTITUTED. Upon any consolidation or merger, or any sale, conveyance, transfer, lease or other disposition of all or substantially all of the property and assets of the Company in accordance with Section 5.01 of this Indenture, the successor Person formed by such consolidation or into which the Company is merged or to which such sale, conveyance, 60 53 transfer, lease or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided that the Company shall not be released from its obligation to pay the principal of, premium, if any, or interest on the Notes in the case of a lease of all or substantially all of its property and assets. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. Any of the following events shall constitute an "EVENT OF DEFAULT" hereunder: (a) the Company defaults in the payment of the principal of (or premium, if any, on) any Note when the same becomes due and payable at its Maturity; (b) the Company defaults in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; (c) the Company defaults in the performance of, or breaches the provisions of, Article Five or fails to make or consummate an Offer to Purchase in accordance with Section 4.11 or 4.12; (d) the Company defaults in the performance of or breaches any covenant or agreement of the Company in this Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above), and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes then Outstanding; (e) there occurs with respect to any issue or issues of Indebtedness of the Company or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness exists on the Closing Date or shall hereafter be created, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; 61 54 (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Company or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (h) the Company or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors. SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 that occurs with respect to the Company) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then Outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any, and accrued interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal, premium, if any, and accrued interest shall be immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (e) of Section 6.01 has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (e) shall be remedied or cured by the Company or the relevant Significant Subsidiary or waived by the holders of the relevant 62 55 Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in clause (g) or (h) of Section 6.01 occurs with respect to the Company, the principal of, premium, if any, and accrued interest on the Notes then Outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in principal amount of the Outstanding Notes by written notice to the Company and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may, and at the direction of the Holders of at least a majority in principal amount of the Outstanding Notes shall, pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, premium, if any, or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Sections 6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount of the Outstanding Notes, by notice to the Trustee, may waive an existing Default or Event of Default and its consequences, except a Default in the payment of principal of, premium, if any, or interest on any Note as specified in clause (a) or (b) of Section 6.01 or in respect of a covenant or provision of this Indenture which cannot be modified or amended without the consent of the Holder of each Outstanding Note affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 6.05. CONTROL BY MAJORITY. The Holders of at least a majority in aggregate principal amount of the Outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders of Notes. 63 56 SECTION 6.06. LIMITATION ON SUITS. A Holder may not institute any proceeding, judicial or otherwise, with respect to this Indenture or the Notes, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (i) the Holder gives the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in aggregate principal amount of Outstanding Notes make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer (and if requested provide) the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (v) during such 60-day period, the Holders of a majority in aggregate principal amount of the Outstanding Notes do not give the Trustee a direction that is inconsistent with the request. For purposes of Section 6.05 of this Indenture and this Section 6.06, the Trustee shall comply with TIA Section 316(a) in making any determination of whether the Holders of the required aggregate principal amount of Outstanding Notes have concurred in any request or direction of the Trustee to pursue any remedy available to the Trustee or the Holders with respect to this Indenture or the Notes or otherwise under the law. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of the principal of, premium, if any, or interest on, such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default in payment of principal, premium or interest specified in clause (a), (b) or (c), of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor of the Notes for the whole amount of principal, premium, if any, and accrued interest remaining unpaid, together with interest on overdue principal, premium, if any, and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate specified in the Notes, and such further 64 57 amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor of the Notes), its creditors or its property and shall be entitled and empowered to collect and receive any monies, securities or other property payable or deliverable upon conversion or exchange of the Notes or upon any such claims and to distribute the same, and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article Six, it shall pay out the money in the following order: First: to the Trustee for all amounts due under Section 7.07; Second: to Holders for amounts then due and unpaid for principal of, premium, if any, and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal, premium, if any, and interest, respectively; and Third: to the Company or any other obligors of the Notes, as their interests may appear, or as a court of competent jurisdiction may direct. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the 65 58 costs of the suit, and the court may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by Holders of more than 10% in principal amount of the Outstanding Notes. SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then, and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Company, Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or wrongfully taken Notes in Section 2.09, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.14. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article Six or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. ARTICLE SEVEN TRUSTEE SECTION 7.01. GENERAL. The duties and responsibilities of the Trustee shall be as provided by the TIA and as set forth herein. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not herein expressly so provided, every provision of this Indenture relating to the conduct or affecting 66 59 the liability of or affording protection to the Trustee shall be subject to the provisions of this Article Seven. SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Subject to TIA Sections 315(a) through (d): (i) the Trustee may rely, and shall be protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper person; (ii) before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 10.04. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion; (iii) the Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any attorney or agent appointed with due care by it hereunder; (iv) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; (v) the Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers, provided that the Trustee's conduct does not constitute negligence or bad faith; (vi) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (vii) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall 67 60 determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company personally or by agent or attorney; (viii) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; and (ix) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to TIA Sections 310(b) and 311. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee (i) makes no representation as to the validity or adequacy of this Indenture or the Notes, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder, (ii) shall not be accountable for the Company's use or application of the proceeds from the Notes and (iii) shall not be responsible for any statement in the Notes other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULT. If any Default or any Event of Default occurs and is continuing and if such Default or Event of Default is known to the Trustee shall mail to each Holder in the manner and to the extent provided in TIA Section 313(c) notice of the Default or Event of Default within 45 days after it occurs, unless such Default or Event of Default has been cured; provided, however, that, except in the case of a default in the payment of the principal of, premium, if any, or interest on any Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each March 15, beginning with March 15, 1999, the Trustee shall mail to each Holder as provided in TIA Section 313(c) a brief report dated as of such March 15, if required by TIA Section 313(a). 68 61 A copy of each report at the time of its mailing to the Holders of Securities shall be mailed to the Company and filed with the Commission and each stock exchange on which the Securities are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Securities are listed on any stock exchange or of any delisting thereof. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee such compensation as shall be agreed upon in writing for its services hereunder. The compensation of the Trustee shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by the Trustee without negligence or bad faith on its part. Such expenses shall include the reasonable compensation and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any and all loss, damage, claim or liability or expense, including taxes (other than taxes based on the income of the Trustee) incurred by it without negligence or bad faith on its part in connection with the acceptance or administration of this Indenture and its duties under this Indenture and the Notes, including the costs and expenses of defending itself against any claim or liability and of complying with any process served upon it or any of its officers in connection with the exercise or performance of any of its powers or duties under this Indenture and the Notes. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder, unless the Company is materially prejudiced thereby. The Company shall defend the claim and the Trustee shall cooperate in the defense. Unless otherwise set forth herein, the Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal of, premium, if any, and interest on particular Notes. If the Trustee incurs expenses or renders services after the occurrence of an Event of Default specified in clause (g) or (h) of Section 6.01, the expenses and the compensation for the services will be intended to constitute expenses of administration under Title 11 of the United States Bankruptcy Code or any applicable federal or state law for the relief of debtors. The provisions of this Section 7.07 shall survive the termination of this Indenture. 69 62 The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign at any time by so notifying the Company in writing at least 30 days prior to the date of the proposed resignation. The Holders of a majority in principal amount of the Outstanding Notes may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee with the consent of the Company. The Company may remove the Trustee if: (i) the Trustee is no longer eligible under Section 7.10; (ii) the Trustee is adjudged a bankrupt or an insolvent; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting. If the Trustee resigns or is removed, or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If the successor Trustee does not deliver its written acceptance required by the next succeeding paragraph of this Section 7.08 within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the Outstanding Notes may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after the delivery of such written acceptance, subject to the lien provided in Section 7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, (ii) the resignation or removal of the retiring Trustee shall become effective and (iii) the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. If the Trustee is no longer eligible under Section 7.10 or shall fail to comply with TIA Section 310(b), any Holder who satisfies the requirements of TIA Section 310(b) may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. 70 63 The Company shall give notice of any resignation and any removal of the Trustee and each appointment of a successor Trustee to all Holders. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligation under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee herein, provided such corporation shall be otherwise qualified and eligible under this Article. SECTION 7.10. ELIGIBILITY. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have a combined capital and surplus of at least $25 million as set forth in its most recent published annual report of condition that is subject to supervision or examination by federal or state authority. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.10, the Trustee shall resign immediately in the manner and with the effect specified in this Article. SECTION 7.11. MONEY HELD IN TRUST. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law and except for money held in trust under Article Eight of this Indenture. ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS. Except as otherwise provided in this Section 8.01, the Company may terminate its obligations under the Notes and this Indenture if: (i) all Notes previously authenticated and delivered (other than destroyed, lost or stolen Notes that have been replaced or Notes that are paid pursuant to Section 4.01 or Notes for whose payment money or securities have theretofore been held in trust and thereafter repaid to the Company, as provided in Section 8.05) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder; or 71 64 (ii) (A) the Notes mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, (B) the Company irrevocably deposits in trust with the Trustee during such one-year period, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds solely for the benefit of the Holders for that purpose, money or U.S. Government Obligations sufficient (in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee), without consideration of any reinvestment of any interest thereon, to pay principal, premium, if, any, and interest on the Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, (C) no Default or Event of Default with respect to the Notes shall have occurred and be continuing on the date of such deposit, (D) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound and (E) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with. With respect to the foregoing clause (i), the Company's obligations under Section 7.07 shall survive. With respect to the foregoing clause (ii), the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes are no longer Outstanding. Thereafter, only the Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Notes and this Indenture except for those surviving obligations specified above. SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE. The Company will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes on the 123rd day after the date of the deposit referred to in clause (A) of this Section 8.02, and the provisions of this Indenture will no longer be in effect with respect to the Notes, and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same if: (A) with reference to this Section 8.02, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10) and conveyed all right, title and interest to the Trustee for the benefit of the Holders, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee for the benefit of the Holders as security for payment of the principal of, premium, if any, and interest, if any, on the Notes, and dedicated solely to, the benefit of the Holders, in and to (1) money in an amount, (2) U.S. Government Obligations that, through the payment of interest, premium, if any, and principal in respect thereof in accordance 72 65 with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (A), money in an amount or (3) a combination thereof in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, the principal of, premium, if any, and accrued interest on the outstanding Notes on the Stated Maturity of such principal or interest; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal, premium, if any, and interest with respect to the Notes; (B) the Company has delivered to the Trustee (1) either (x) an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for federal income tax purposes as a result of the Company's exercise of its option under this Section 8.02 and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred which Opinion of Counsel shall be based upon (and accompanied by a copy of) a ruling of the Internal Revenue Service to the same effect unless there has been a change in applicable federal income tax law after the Closing Date such that a ruling is no longer required or (y) a ruling directed to the Trustee received from the Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel and (2) an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the Investment Company Act of 1940 and that after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the United States Bankruptcy Code, after one year following the deposit), the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against the Company under either such statute, and either (I) the trust funds will no longer remain the property of the Company (and therefore will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally) or (II) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Company, (a) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to the extent not paid to the Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise except for the effect of Section 552(b) of the United States Bankruptcy Code on interest on the trust funds accruing after the commencement of a case under such statute and (b) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding; 73 66 (C) immediately after giving effect to such deposit on a pro forma basis, no Default or Event of Default shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after such date of such deposit, and such deposit shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (D) if the Notes are then listed on a national securities exchange, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Notes will not be delisted as a result of such deposit, defeasance and discharge; and (E) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02 have been complied with. Notwithstanding the foregoing, prior to the end of the 123-day (or one year) period referred to in clause (B)(2) of this Section 8.02, none of the Company's obligations under this Indenture shall be discharged. Subsequent to the end of such 123-day (or one year) period with respect to this Section 8.02, the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes are no longer Outstanding. Thereafter, only the Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. If and when a ruling from the Internal Revenue Service or an Opinion of Counsel referred to in clause (B)(1) of this Section 8.02 is able to be provided specifically without regard to, and not in reliance upon, the continuance of the Company's obligations under Section 4.01, then the Company's obligations under such Section 4.01 shall cease upon delivery to the Trustee of such ruling or Opinion of Counsel and compliance with the other conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Notes and this Indenture except for those surviving obligations in the immediately preceding paragraph. SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS. The Company may omit to comply with any term, provision or condition set forth in clauses (iii) and (iv) of Section 5.01 and Sections 4.03 through 4.11 and clause (c) of Section 6.01 with respect to clauses (iii) and (iv) of Section 5.01, clause (d) of Section 6.01 with respect to Sections 4.01, 4.02 and 4.12 through 4.19 and clauses (e) and (f) of Section 6.01 shall be deemed not to be Events of Default, in each case with respect to the Outstanding Notes if: (i) with reference to this Section 8.03, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the 74 67 requirements of Section 7.10) and conveyed all right, title and interest to the Trustee for the benefit of the Holders, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee for the benefit of the Holders as security for payment of the principal of, premium, if any, and interest, if any, on the Notes, and dedicated solely to, the benefit of the Holders, in and to (A) money in an amount, (B) U.S. Government Obligations that, through the payment of interest, premium, if any, and principal in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (i), money in an amount or (C) a combination thereof in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, the principal of, premium, if any, and interest on the Outstanding Notes on the Stated Maturity of such principal or interest; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal, premium, if any, and interest with respect to the Notes; (ii) the Company has delivered to the Trustee an Opinion of Counsel to the effect that (A) the creation of the defeasance trust does not violate the Investment Company Act of 1940, (B) after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the United States Bankruptcy Code, after one year following the deposit), the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against the Company under either such statute, and either (1) the trust funds will no longer remain the property of the Company (and therefore will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally) or (2) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Company, (x) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to the extent not paid to the Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise (except for the effect of Section 552(b) of the United States Bankruptcy Code on interest on the trust funds accruing after the commencement of a case under such statute) and (y) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding, (C) the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to federal income tax on the same amount and in the same manner and at the same times as would 75 68 have been the case if such deposit and defeasance had not occurred and (D) the Trustee, for the benefit of the Holders, has a valid first-priority security interest in the trust funds; (iii) immediately after giving effect to such deposit on a pro forma basis, no Default or Event of Default shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after such date of such deposit, and such deposit shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (iv) if the Notes are then listed on a national securities exchange, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Notes will not be delisted as a result of such deposit, defeasance and discharge; and (v) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.03 have been complied with. SECTION 8.04. APPLICATION OF TRUST MONEY; MISCELLANEOUS. Subject to Section 8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the case may be, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with the Notes and this Indenture to the payment of principal of, premium, if any, and interest on the Notes; but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 8.01, 8.02 or 8.03 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of Outstanding Notes. SECTION 8.05. REPAYMENT TO COMPANY. Subject to Sections 7.07, 8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the Company upon request set forth in an Officers' Certificate any excess money held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of principal, premium, if any, or interest that remains unclaimed for two years; PROVIDED that the Trustee or Paying Agent before being required to make any payment may cause to be published at the expense of the Company once in a newspaper of general circulation in The City of New York and, or mail to each Holder entitled to such money at such Holder's address (as set forth in the Security Register) notice that such money remains unclaimed and that after a date specified therein (which shall be at least 30 days from the date of such publication or mailing) any unclaimed balance of such 76 69 money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or 8.03, as the case may be; provided that, if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, when authorized by a resolution of its Board of Directors (as evidenced by a Board Resolution delivered to the Trustee), and the Trustee may amend or supplement this Indenture or the Notes without notice to or the consent of any Holder: (1) to cure any ambiguity, defect or inconsistency in this Indenture; provided that such amendments or supplements shall not, in the good faith opinion of the Board of Directors as evidenced by a Board Resolution, adversely affect the interests of the Holders in any material respect; (2) to comply with Article Five; (3) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA; (4) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee; or 77 70 (5) to make any change that, in the good faith opinion of the Board of Directors as evidenced by a Board Resolution, does not materially and adversely affect the rights of any Holder. SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Sections 6.04 and 6.07 and without prior notice to the Holders, the Company, when authorized by its Board of Directors (as evidenced by a Board Resolution delivered to the Trustee), and the Trustee may amend this Indenture and the Notes with the written consent of the Holders of a majority in principal amount of the Notes then outstanding, and the Holders of a majority in principal amount of the Notes then Outstanding by written notice to the Trustee may waive future compliance by the Company with any provision of this Indenture and the Notes. Notwithstanding the provisions of this Section 9.02, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 6.04, may not: (i) change the Stated Maturity of the principal of, or any installment of interest on, any Note; (ii) reduce the principal amount of, premium, if any, or interest on any Note; (iii) change any place or currency of payment of principal of, premium, if any, or interest on, any Note; (iv) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of redemption, on or after the Redemption Date) on any Note; (v) reduce the percentage or principal amount of Outstanding Notes the consent of whose Holders is necessary to modify or amend this Indenture or to waive compliance with certain provisions of or certain Defaults under this Indenture; (vi) waive a default in the payment of principal of, premium, if any, or interest on, any Note; or (vii) modify any of the provisions of this Section 9.02, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby. 78 71 It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. The Company will mail supplemental indentures to Holders upon request. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. SECTION 9.03. REVOCATION AND EFFECT OF CONSENT. Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the Note of the consenting Holder, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to its Note or portion of its Note. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver shall become effective on receipt by the Trustee of written consents from the Holders of the requisite percentage in principal amount of the Outstanding Notes. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then, notwithstanding the last two sentences of the immediately preceding paragraph, those persons who were Holders at such record date (or their duly designated proxies) and only those persons shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder unless it is of the type described in the second paragraph of Section 9.02. In case of an amendment or waiver of the type described in the second paragraph of Section 9.02, the amendment or waiver shall bind each Holder who has consented to it and every subsequent Holder of a Note that evidences the same indebtedness as the Note of the consenting Holder. SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES. If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder to deliver such Note to the Trustee. At the Company's expense, the Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder and the Trustee may place an appropriate notation on any Note thereafter authenticated. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate 79 72 a new Note that reflects the changed terms. Failure to make the appropriate notation, or issue a new Note, shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture and that it will be valid and binding upon the Company. Subject to the preceding sentence, the Trustee shall sign such amendment, supplement or waiver if the same does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article Nine shall conform to the requirements of the TIA as then in effect. ARTICLE TEN MISCELLANEOUS SECTION 10.01. TRUST INDENTURE ACT OF 1939. Prior to the effectiveness of the Registration Statement, this Indenture shall incorporate and be governed by the provisions of the TIA that are required to be part of and to govern indentures qualified under the TIA. After the effectiveness of the Registration Statement, this Indenture shall be subject to the provisions of the TIA that are required to be a part of this Indenture and shall, to the extent applicable, be governed by such provisions. SECTION 10.02. NOTICES. Any notice or communication shall be sufficiently given if in writing and delivered in person, mailed by first-class mail or sent by telecopier transmission addressed as follows: if to the Company: ------------------ Advanced Lighting Technologies, Inc. 2307 East Aurora Road Suite One Twinsburg, OH 44087 Telecopier No.: (330) 405-1335 Attention: Chief Financial Officer 80 73 if to the Trustee: ------------------ The Bank of New York 101 Barclay Street, Floor 21 West New York, NY 10286 Telecopier No.: (212) 815-5915 Attention: Corporate Trust Trustee Administration The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Holder shall be mailed to it at its address as it appears on the Security Register by first-class mail and shall be sufficiently given to him if so mailed within the time prescribed. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Copies of any such communication or notice to a Holder shall also be mailed to the Trustee and each Agent at the same time. Failure to transmit a notice or communication to a Holder as provided herein or any defect in any such notice or communication shall not affect its sufficiency with respect to other Holders. Except for a notice to the Trustee, which is deemed given only when received, and except as otherwise provided in this Indenture, if a notice or communication is mailed in the manner provided in this Section 10.02, it is duly given, whether or not the addressee receives it. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 10.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: 81 74 (i) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (ii) an Opinion of Counsel stating that, in the opinion of such Counsel, all such conditions precedent have been complied with. SECTION 10.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each person signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; (iii) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with; provided, however, that, with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 10.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 10.06. PAYMENT DATE OTHER THAN A BUSINESS DAY. If an Interest Payment Date, Redemption Date, Payment Date, Stated Maturity or date of Maturity of any Note shall not be a Business Day, then payment of principal of, premium, if any, or interest on such Note, as the case may be, need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date, Redemption Date, Payment Date, Stated Maturity or date of Maturity of such Note; provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Payment Date, Stated Maturity or date of Maturity, as the case may be. 82 75 SECTION 10.07. GOVERNING LAW. This Indenture and the Notes shall be governed by the laws of the State of New York excluding (to the greatest extent permissible by law) any rule of law that would cause the application of the laws of any jurisdiction other than the State of New York. SECTION 10.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any Subsidiary of the Company. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 10.09. NO RECOURSE AGAINST OTHERS. No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company contained in this Indenture or in any of the Notes, or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator or against any past, present or future partner, stockholder, other equityholder, officer, director, employee or controlling person, as such, of the Company or of any successor Person, either directly or through the Company or any successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Notes. SECTION 10.10. SUCCESSORS. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 10.11. DUPLICATE ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 10.12. SEPARABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms and provisions hereof. 83 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. ADVANCED LIGHTING TECHNOLOGIES, INC. By: /s/ Wayne R. Hellman ----------------------------------- Name: Wayne R. Hellman Title: CEO and President THE BANK OF NEW YORK, Trustee By: /s/ Mary Jane Morrissey ----------------------------------- Name: Mary Jane Morrissey Title: Vice President 84 EXHIBIT A [APPLICABLE LEGENDS] [FACE OF NOTE] ADVANCED LIGHTING TECHNOLOGIES, INC. 8% Senior Notes due 2008 [CUSIP] [CINS] [ISIN] [__________] No. ____ $_________ ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation (the "Company", which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to _____________, or its registered assigns, the principal sum of ____________ ($____) on March 15, 2008. Interest Payment Dates: March 15 and September 15, commencing September 15, 1998. Regular Record Dates: March 1 and September 1. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. 85 IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. ADVANCED LIGHTING TECHNOLOGIES, INC. By: ------------------------------ Name: Title: By: ------------------------------ Name: Title: (Trustee's Certificate of Authentication) This is one of the 8% Senior Notes due 2008 described in the within-mentioned Indenture. Date: March 18, 1998 THE BANK OF NEW YORK as Trustee By: ----------------------------- Authorized Signatory 86 A-3 [REVERSE SIDE OF NOTE] ADVANCED LIGHTING TECHNOLOGIES, INC. 8% Senior Note due 2008 1. Principal and Interest. ----------------------- The Company will pay the principal of this Note on March 15, 2008. The Company promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate per annum shown above. If an exchange offer (the "Exchange Offer") registered under the Securities Act is not consummated and a shelf registration statement (the "Shelf Registration Statement") under the Securities Act with respect to resales of the Notes is not declared effective by the Commission, on or before 180 days after March 18, 1998 in accordance with the terms of the Registration Rights Agreement dated March 13, 1998 between the Company and Morgan Stanley & Co. Incorporated, the annual interest rate borne by the Notes shall be increased by 0.5% from the rate shown above accruing from 180 days after March 18, 1998, payable in cash semiannually, in arrears, on each Interest Payment Date, commencing September 15, 1998 until the Exchange Offer is consummated or the Shelf Registration Statement is declared effective; provided that in the case of a Shelf Registration Statement, if the Company is unable to cause such Shelf Registration Statement to become effective because Holders of Notes have not provided information with respect to themselves required by law to be included therein pursuant to the Company's request in accordance with the Registration Rights Agreement, such 0.5% increase in the interest rate shall be payable only to Holders that have furnished such information required by law to be included therein to the Company pursuant to its request in accordance with Registration Rights Agreement from but excluding the date such information is provided to the Company to but excluding the date the Shelf Registration Statement is declared effective by the Commission. The Holder of this Note is entitled to the benefits of such Registration Rights Agreement. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from March 18, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months and, in the case of an incomplete month, the number of days elapsed based on a 30-day month. 87 A-4 The Company shall pay interest on overdue principal and premium, if any, to the extent lawful, at a rate per annum that is 2% in excess of the rate otherwise payable. 2. Method of Payment. ------------------ The Company will pay interest (except defaulted interest) on the principal amount of this Note as provided above on each March 15 and September 15, commencing September 15, 1998 to the persons who are Holders (as reflected in the Security Register at the close of business on the March 1 or September 1 in each case whether or not a Business Day, immediately preceding the related Interest Payment Date), in each case, even if the Note is canceled on registration of transfer or registration of exchange after such record date; provided that, with respect to the payment of principal, the Company will make payment to the Holder that surrenders this Note to a Paying Agent on or after the Maturity hereof. The Company will pay principal, premium, if any, and as provided above, interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, and interest by its check payable in such money. It may mail an interest check to a Holder's registered address (as reflected in the Security Register). If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. 3. Paying Agent and Registrar. --------------------------- Initially, the Trustee will act as authenticating agent, Paying Agent and Registrar. The Company may change any authenticating agent, Paying Agent or Registrar without notice. The Company, any Subsidiary or any Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar. 4. Indenture; Limitations. ----------------------- The Company issued the Notes under an Indenture dated as of March 18, 1998 (the "Indenture"), between the Company and The Bank of New York, trustee (the "Trustee"). Capitalized terms herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture shall control. The Notes are general unsecured obligations of the Company. 88 A-5 The Company may, subject to Article Four of the Indenture and applicable law, issue additional Notes under the Indenture. 5. Optional Redemption. -------------------- The Notes are redeemable, at the Company's option, in whole or in part, at any time or from time to time, on or after March 15, 2003 and prior to Maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each Holder's last address, as it appears in the Security Register, at the following Redemption Prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date that is prior to the Redemption Date to receive interest due on an Interest Payment Date), if redeemed during the 12-month period commencing March 15 of the years set forth below:
Year Redemption Price ---- ---------------- 2003 104.000% 2004 102.667 2005 101.333 2006 and thereafter 100.000
At any time and from time to time prior to March 15, 2001, the Company may redeem up to 35% of the principal amount of the Notes with the proceeds of one or more Public Equity Offerings, at any time or from time to time in part, at a Redemption Price (expressed as a percentage of principal amount) of 108%, plus accrued and unpaid interest to the Redemption Date (subject to the rights of Holders of record on the relevant Regular Record Date that is prior to the Redemption Date to receive interest due on an Interest Payment Date); provided that after any such redemption Notes representing at least 65% of the Notes originally issued remain Outstanding and that notice of such redemption is mailed within 60 days of the relevant Public Equity Offering. Notes in original denominations larger than $1,000 may be redeemed in part. On and after the Redemption Date, interest ceases to accrue on Notes or portions of Notes called for redemption, unless the Company defaults in the payment of the Redemption Price. 6. Repurchase upon Change of Control. ---------------------------------- Upon the occurrence of any Change of Control, each Holder shall have the right to require the repurchase of its Notes by the Company in cash pursuant to the offer described in the Indenture at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (the "Payment Date"). 89 A-6 A notice of such Change of Control will be mailed within 30 days after any Change of Control occurs to each Holder at its last address as it appears in the Security Register. Notes in original denominations larger than $1,000 may be sold to the Company in part. On and after the Payment Date, interest ceases to accrue on Notes or portions of Notes surrendered for purchase by the Company, unless the Company defaults in the payment of the purchase price. 7. Denominations; Transfer; Exchange. ---------------------------------- The Notes are in registered form without coupons in denominations of $1,000 of principal amount and multiples of $1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Notes selected for redemption. Also, it need not register the transfer or exchange of any Notes for a period of 15 days before the day of mailing of a notice of redemption of Notes selected for redemption. 8. Persons Deemed Owners. ---------------------- A Holder shall be treated as the owner of a Note for all purposes. 9. Unclaimed Money. ---------------- If money for the payment of principal, premium, if any, or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company at its written request. After that, Holders entitled to the money must look to the Company for payment, unless an abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 10. Discharge Prior to Maturity. ---------------------------- If the Company deposits with the Trustee money or U.S. Government Obligations sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Notes (a) to Maturity, the Company will be discharged from the Indenture and the Notes, except in certain circumstances for certain provisions thereof, and (b) to the Stated Maturity, the Company will be discharged from certain covenants set forth in the Indenture. 11. Amendment; Supplement; Waiver. ------------------------------ Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then 90 A-7 Outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of at least a majority in principal amount of the Notes then Outstanding. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency and make any change that does not materially and adversely affect the rights of any Holder. 12. Restrictive Covenants. ---------------------- The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries, among other things, to Incur additional Indebtedness, make Restricted Payments, suffer to exist restrictions on the ability of Restricted Subsidiaries to make certain payments to the Company, issue Capital Stock of Restricted Subsidiaries, Guarantee Indebtedness of the Company, engage in transactions with Affiliates, suffer to exist or incur Liens, enter into sale-leaseback transactions, use the proceeds from Asset Sales, or merge, consolidate or transfer substantially all of its assets. Within 45 days after the end of each fiscal quarter (90 days after the end of the last fiscal quarter of each year), the Company shall deliver to the Trustee an Officers' Certificate stating whether or not the signers thereof know of any Default or Event of Default under such restrictive covenants. 13. Successor Persons. ------------------ When a successor person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor person will be released from those obligations. 14. Defaults and Remedies. ---------------------- Any of the following events constitutes an "Event of Default" under the Indenture: (a) default in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (b) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; (c) default in the performance or breach of Article Five of the Indenture or the failure to make or consummate an Offer to Purchase in accordance with Section 4.11 or 4.12 of the Indenture; (d) default in the performance of or breach of any covenant or agreement of the Company in the Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above), and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then Outstanding; (e) there occurs with respect to any issue or issues of Indebtedness of the Company or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness exists on the Closing Date or shall hereafter be created, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated 91 A-8 Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Company or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (h) the Company or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors. If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee may, and at the direction of the Holders of at least 25% in aggregate principal amount of the Notes then Outstanding shall, declare all the Notes to be due and payable. If a bankruptcy or insolvency default with respect to the Company occurs and is continuing, the Notes automatically become due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of at least a majority in principal amount of the Notes then Outstanding may direct the Trustee in its exercise of any trust or power. 15. Trustee Dealings with the Company. ---------------------------------- The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from and perform services for the Company or its Affiliates and may otherwise deal with the Company or its Affiliates as if it were not the Trustee. 92 A-9 16. No Recourse Against Others. --------------------------- No incorporator or any past, present or future partner, stockholder, other equityholder, officer, director, employee or controlling person, as such, of the Company or of any successor Person shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 17. Authentication. --------------- This Note shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on the other side of this Note. 18. Abbreviations. -------------- Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act). The Company will furnish a copy of the Indenture to any Holder upon written request and without charge. Requests may be made to Advanced Lighting Technologies, Inc., 2307 East Aurora Road, Suite One, Twinsburg, OH 44087; Attention: Nicholas R. Sucic. 19. Governing Law. -------------- The Indenture and this Note shall be governed by the laws of the State of New York excluding (to the greatest extent permissible by law) any rule of law that would cause the application of the laws of any jurisdiction other than the State of New York. 93 A-10 [FORM OF TRANSFER NOTICE] FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. - ---------------------------------- - --------------------------------------------------------------------------- Please print or typewrite name and address including zip code of assignee - --------------------------------------------------------------------------- the within Note and all rights thereunder, hereby irrevocably constituting and appointing ---------------------------------------------------------------------- attorney to transfer said Note on the books of the Company with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL NOTES OTHER THAN EXCHANGE NOTES, NOTES RESOLD PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, UNLEGENDED OFFSHORE GLOBAL NOTES AND UNLEGENDED OFFSHORE PHYSICAL NOTES] In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date the Shelf Registration Statement is declared effective or (ii) the end of the period referred to in Rule 144(k) under the Securities Act, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] --------- [ ] (a) this Note is being transferred in compliance with the exemption from registration under the Securities Act of 1933 provided by Rule 144A thereunder. or -- [ ] (b) this Note is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture. 94 A-11 If none of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Note in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.08 of the Indenture shall have been satisfied. Date: -------------- ------------------------------------ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933 and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: -------------- ------------------------------ NOTICE: To be executed by an executive officer 95 A-12 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by the Company pursuant to Section 4.11 or 4.12 of the Indenture, check the Box: / / If you wish to have a portion of this Note purchased by the Company pursuant to Section 4.11 or 4.12 of the Indenture, state the amount: $___________________. Date: ----------- Your Signature: ------------------------------------------------------------------ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ------------------------------ 96 EXHIBIT B --------- Form of Certificate to be ------------------------- Delivered in Connection with ---------------------------- Legended Offshore Global Notes or Offshore Physical Notes --------------------------------------------------------- _______,____ The Bank of New York 101 Barclay Street New York, New York 10286 Attention: Corporate Trust Trustee Administration Re: Advanced Lighting Technologies, Inc. (the "Company") [__]% Senior Notes due 2008 (the "Notes") ----------------------------------------- Dear Sirs: This letter relates to U.S. $ principal amount of Notes represented by a Note (the "Legended Note") which bears a legend outlining restrictions upon transfer of such Legended Note. Pursuant to Section 2.02 of the Indenture dated as of March [ __ ],1998 (the "Indenture") relating to the Notes, we hereby certify that we are (or we will hold such securities on behalf of) a person outside the United States to whom the Notes could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933. Accordingly, you are hereby requested to exchange the legended certificate for an unlegended certificate representing an identical principal amount of Notes, all in the manner provided for in the Indenture. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By: ---------------------------------- Authorized Signature 97 EXHIBIT C Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ----------------------------------------- _______,___ The Bank of New York 101 Barclay Street New York, New York 10286 Attention: Corporate Trust Trustee Administration Re: Advanced Lighting Technologies, Inc. (the "Company") [__]% Senior Notes due 2008 (the "Notes") ----------------------------------------- Dear Sirs: In connection with our proposed purchase of $_______________ aggregate principal amount of the Notes, we confirm that: 1. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture dated as of March [__], 1998 (the "Indenture") relating to the Notes and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with such restrictions and conditions and the Securities Act of 1933, amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Notes within the time period referred to in Rule 144(k) of the Securities Act, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of an aggregate principal amount of less than $100,000, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available) or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. 98 C-2 3. We understand that, on any proposed resale of any Notes, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By: ---------------------------- Authorized Signature 99 EXHIBIT D --------- Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S -------------------------------------------------- _______,___ The Bank of New York 101 Barclay Street New York, New York 10286 Attention: Corporate Trust Trustee Administration Re: Advanced Lighting Technologies, Inc. (the "Company") [__]% Senior Notes due 2008 (the "Notes") ----------------------------------------- Dear Sirs: In connection with our proposed sale of U.S.$_________ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933 and, accordingly, we represent that: (1) the offer of the Notes was not made to a person in the United States; (2) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States; (3) no directed selling efforts have been made by us in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act of 1933. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: ------------------------ Authorized Signature EX-10.5 6 EXHIBIT 10.5 1 CONFIDENTIAL EXHIBIT 10.5 EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT entered into and effective as of February 12, 1998, between ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation ("ADLT" or "Employer"), and NICHOLAS R. SUCIC ("EMPLOYEE"); WITNESSETH: ----------- WHEREAS, ADLT and Employee desire to terminate any and all prior agreements, whether oral or written, between the Employee and ADLT relating to Employee's employment; and WHEREAS, ADLT and Employee desire to enter into an Employment Agreement as set forth herein below to ensure ADLT of the services of Employee as Chief Financial Officer of ADLT and to set forth the rights and duties of the parties hereto, NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties agree as follows: 1. TERMINATION OF PRIOR AGREEMENTS. ADLT and Employee hereby terminate any and all prior agreements, whether oral or written, between the parties or ADLT relating to Employee's employment. 2. EMPLOYMENT. (a) ADLT hereby employs Employee, and Employee hereby accepts employment, upon the terms and conditions hereinafter set forth. (b) During the term of this Employment Agreement, (for purposes hereof, all references to the term of this Employment Agreement shall be deemed to include all renewals or extensions hereof, if any), Employee shall devote his full business time to his employment and shall perform diligently such duties as are, or may be, required by the Board of Directors of ADLT or their designee, which duties shall be within the bounds of reasonableness and acceptable business standards and ethics. (c) During the term of this Employment Agreement, Employee shall not, without the prior written consent of ADLT, which shall not be unreasonably withheld, directly or indirectly, render services of a business, professional or commercial nature to any other person or firm, whether for compensation or otherwise, other than in the performance of duties naturally inherent in the businesses of ADLT or any subsidiary or affiliate of ADLT; provided, however, that Employee may continue to render 2 services to and participate in philanthropic and charitable causes, in each case, in a manner and to the extent consistent with his past practice. 3. TERM AND POSITION. (a) Subject to the termination provisions contained herein, the term of this Employment Agreement shall commence as of the date hereof and shall continue for a term of three years from such date, subject, however, to the provisions of Section 6. (b) Employee shall serve as Chief Financial Officer of ADLT and in such offices or positions with ADLT as shall be agreed upon by Employee and the Board of Directors of ADLT, as the case may be, without, however, any change in Employee's compensation (but such offices or positions shall be consistent with the office and position stated herein). (c) The principal business office of Employee shall be in Northeast Ohio; however, Employee maintains a residence and a business office in Hudson, Ohio, from which the Employee may perform his duties under this Agreement. Employee shall not be required to relocate without Employee's consent. 4. COMPENSATION. (a) Subject to the provisions of this Employment Agreement, for all services which Employee may render to ADLT during the term of this Employment Agreement, Employee shall receive a salary at the rate of One Hundred Seventy-Five Thousand Dollars ($175,000) per annum for the first year of this Agreement, which shall be payable in equal, consecutive biweekly installments. (b) Provided that Employee satisfactorily performs his services under this Employment Agreement, Employee shall be entitled to salary increases from time to time as determined by the Compensation Committee of ADLT. (c) Provided that Employee has satisfactorily performed his services under this Employment Agreement, Employee shall be eligible for bonuses from time to time as determined by the Compensation Committee of ADLT. 5. OTHER BENEFITS. During the term of this Employment Agreement, Employee shall be entitled to such vacation privileges, life insurance, medical and hospitalization benefits, and such other benefits as are typically provided to other executive officers of ADLT and its subsidiaries in comparable positions. 2 3 6. TERMINATION AND FURTHER COMPENSATION. (a) The employment of Employee under this Employment Agreement, for the term thereof, may be terminated by the Board of Directors of ADLT for cause at any time. For purposes hereof, the term "cause" shall mean: (i) Employee's fraud, dishonesty, willful misconduct or gross negligence in the performance of his duties hereunder; or (ii) Employee's material breach of this Agreement, in whole or in part. Any termination by reason of the foregoing shall not be in limitation of any other right or remedy ADLT may have under this Employment Agreement or otherwise. (b) In the event of (i) termination of the Employment Agreement for any of the reasons set forth in Subparagraph (a) of this Section 6, or (ii) if Employee shall voluntarily terminate his employment hereunder prior to the end of the term of this Employment Agreement, then in either event Employee shall be entitled to no further salary, bonus or other benefits under this Employment Agreement, except as to that portion of any unpaid salary and other benefits accrued and earned by him hereunder up to and including the effective date of such termination. In the event the Employee voluntarily terminates this Agreement, Employee shall provide 30 days' prior written notice to ADLT of such voluntary termination. (c) In the event that ADLT terminates Employee's employment without "cause" (as defined herein above) or Employee terminates employment with "good reason" (as defined below) prior to the end of the term of this Employment Agreement, then Employee shall be entitled to all salary and medical benefits for the remainder of the term of this Employment Agreement all upon the terms and as set forth herein. At the conclusion of the term of this Employment Agreement, all salary, medical and other benefits as set forth herein shall cease. Employee shall have no other rights and remedies except as set forth in this Section 6. For purposes hereof, the term "good reason" shall mean (i) without the express written consent of Employee, a material reduction of Employee's duties, authority, compensation, benefits or responsibilities or (ii) a material breach of this Agreement by ADLT. (d) In the event of Employee's death or permanent disability (as defined herein below) occurring during the term of this Employment Agreement, this Employment Agreement shall be deemed terminated for cause and Employee or his estate, as the case may be, shall be entitled to no further salary or other compensation provided for herein except as to that portion of any unpaid salary accrued or earned by Employee hereunder up to and including the date of death or permanent disability, and any benefits under any insurance policies or other plans. 3 4 (e) "Permanent disability" means the inability of Employee to perform satisfactorily his usual or customary occupation for a period of 120 days in the aggregate out of 150 consecutive days as a result of a physical or mental illness or other disability which in the written opinion of a physician of recognized ability and reputation, is likely to continue for a significant period of time. (f) In the event this Employment Agreement is terminated with cause, before the end of the term, ADLT may, in its sole discretion, notify Employee that ADLT intends to continue to pay all compensation, benefits and monies due under the terms of the Employment Agreement for the remainder of the term. In such event, and provided ADLT continues to make such payments, Employee shall continue to be bound by the terms of the non-competition provisions in Section 7 hereof. 7. COVENANTS REGARDING NON-COMPETITION AND CONFIDENTIAL INFORMATION. (a) Non-Competition. (i) Recognizing that Employee will have been involved as an executive officer of ADLT and its affiliates, including ADLT, are engaged in the supply of products and/or services in every state of the United States and internationally, therefore, upon termination of his employment, for any reason, he agrees that he will not, for a period of three years immediately following such termination, engage, in the United States or in any country where ADLT or any of their affiliates conducts business, either directly or indirectly on behalf of himself or on behalf of any employee, consultant, principal, substantial shareholder or investor, partner or officer of any corporation, in any business of the type and character or in competition with the business carried on by ADLT or its affiliates (as conducted on the date Employee ceases to be employed by ADLT in any capacity). (ii) Employee will not, for a period of three years immediately following the termination of his employment, either directly or indirectly or on behalf of another as an employee, agent, principal, partnership or other entity, recruit, hire or otherwise entice any employees of ADLT or its affiliates to leave the Employer. (iii) Employee will not disclose, divulge, discuss, copy or otherwise use or suffer to be used in any manner, in competition with, or contrary to the interests of ADLT or its affiliates, the customer lists, manufacturing methods, product research or engineering data or other trade secrets of ADLT or any of its affiliates, it being acknowledged by Employee that all such information regarding the business of ADLT or its affiliates developed, compiled or 4 5 obtained by or furnished to Employee while Employee shall have been employed by or associated with ADLT or its affiliates is confidential information and ADLT's or its affiliates' exclusive property. Employee's obligations under this Section 7(a)(iii) will not apply to any information which (A) is known to the public other than as a result of Employee's acts or omissions, (B) is approved for release, in writing, by the Company, (C) is disclosed to Employee by a third party without restriction, or (D) Employee is legally required to disclose. (b) Employee expressly agrees and understands that the remedy at law for any breach by him of this Section 7 will be inadequate and that the damages flowing from such breach are not readily susceptible to being measured in monetary terms. Accordingly, it is acknowledged that upon adequate proof of Employee's violation of any legally enforceable provision of this Section 7, ADLT shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach. Nothing in this Section 7 shall be deemed to limit ADLT's remedies at law or in equity for any breach by Employee of any of the provisions of this Section 7 which may be pursued or availed of by ADLT or any of its affiliates including but not limited to ADLT. (c) In the event Employee shall violate any legally enforceable provision of this Section 7 as to which there is a specific time period during which he is prohibited from taking certain actions or from engaging in certain activities as set forth in such provision then, in such event, such violation shall toll the running of such time period from the date of such violation until such violation shall cease. 8. RENEWAL. Not later than six (6) months prior to the termination of this Agreement, Employer shall be entitled to notify Employee whether it desires to renew this Employment Agreement with Employee for an additional period of three (3) years, which notice, if given, shall contain the compensation and other benefits proposed to be paid and provided to Employee by Employer. For a period of thirty (30) days after receipt of such notice, Employee shall have the option to accept such offer of renewal or, in the alternative, shall be entitled to consult with Employer with respect to different compensation and/or benefits to be paid and provided to Employee by Employer during said renewal period of employment. If at the end of said thirty (30) day period Employee and Employer are unable to agree, then this Employment Agreement shall not be renewed at the end of the term thereof, unless otherwise agreed to by the parties. In the event, however, that Employer does not, timely notify Employee of its desire to renew this Employment Agreement, then this Employment Agreement shall not be renewed at the end of the term thereof, unless otherwise agreed upon by the parties. 5 6 9. SEVERABLE PROVISIONS. The provisions of this Employment Agreement are severable and if any one or more provisions may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions and any partially unenforceable provision to the extent enforceable in any jurisdiction shall, nevertheless, be binding and enforceable. 10. ARBITRATION. Any controversy or claim arising out of or relating to this Employment Agreement, or the breach thereof, shall be settled by arbitration by a single arbitrator in the City of Cleveland, State of Ohio, in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. The Arbitrator shall be deemed to possess the powers to issue mandatory orders and restraining orders in connection with such arbitration; PROVIDED, HOWEVER, that nothing in this Section 10 shall be construed so as to deny ADLT the right and power to seek and obtain injunctive relief in a court of equity for any breach or threatened breach of Employee of any of his covenants contained in Section 7 hereof. 11. NOTICES. (a) Each notice, request, demand or other communication ("NOTICE") by either party to the other party pursuant to this Agreement shall be in writing and shall be personally delivered or sent by U.S. certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight commercial courier, charges prepaid, or by facsimile transmission (but each such Notice sent by facsimile transmission shall be confirmed by sending a copy thereof to the other party by U.S. mail or commercial courier as provided herein no later than the following business day), addressed to the address of the receiving party or to such other address as such party shall have communicated to the other party in accordance with this Section. Any Notice hereunder shall be deemed to have been given and received on the date when personally delivered, on the date of sending when sent by facsimile, on the third business day following the date of sending when sent by mail or on the first business day following the date of sending when sent by commercial courier. (b) If a Notice is to ADLT, then such Notice shall be addressed to Advanced Lighting Technologies, Inc., attention of the Board of Directors. (c) If a Notice is to Employee, then such Notice shall be addressed to Employee at his home address last known on the payroll records of ADLT. 6 7 12. WAIVER. The failure of either party to enforce any provision or provisions of this Employment Agreement shall not in any way be construed as a waiver of any such provision or provisions as to any future violations thereof, nor prevent that party thereafter from enforcing each and every other provision of this Employment Agreement. The rights granted the parties herein are cumulative and the waiver of any single remedy shall not constitute a waiver of such party's right to assert all other legal remedies available to it under the circumstances. 13. MISCELLANEOUS. This Employment Agreement supersedes all prior agreements and understandings between the parties and may not be modified or terminated orally. No modification, termination or attempted waiver shall be valid unless in writing and signed by the party against whom the same it is sought to be enforced. 14. GOVERNING LAW. This Employment Agreement shall be governed by and construed according to the laws of the State of Ohio. IN WITNESS WHEREOF, the parties have executed this Employment Agreement on the day and year first set forth above. WITNESS: ADVANCED LIGHTING TECHNOLOGIES, INC. By: /s/ Jacqueline Massaro By: /s/ Wayne R. Hellman ------------------------- --------------------- Name: Jacqueline Massaro Name: Wayne R. Hellman ------------------------- Its: Chief Executive Officer and President WITNESS: By: /s/ Jacqueline Massaro /s/ Nicholas R. Sucic ------------------------- --------------------- Name: Jacqueline Massaro NICHOLAS R. SUCIC ------------------------- 7 EX-11 7 EXHIBIT 11 1 ADVANCED LIGHTING TECHNOLOGIES, INC. EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE (in thousands except per share dollar amount.)
Three Months Ended March 31, ---------------------------------------------------------- 1998 1997 ---------------------------------------------------------- Shares Amount EPS Shares Amount EPS ---------------------------------------------------------- Income (loss) from continuing operations before extraordinary charge $(28,059) $ 1,970 Loss from discontinued operations (6,753) (88) Extraordinary charge, net of tax benefits (604) -- -------- ------- NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $(35,416) $ 1,882 ======== ======= Weighted average shares: Basic: Outstanding at beginning of period 16,478 13,297 Issued pursuant to public offering -- -- Issued in acquisitions 3,387 70 Issued for exercise of stock options 17 36 Issuable in connection with an acquisition 35 35 ------- -------- BASIC WEIGHTED AVERAGE SHARES 19,917 13,438 ======= ======= Diluted: Basic from above 19,917 13,438 Effect of options -- 364 ------- ------- DILUTED WEIGHTED AVERAGE SHARES 19,917 13,802 ======= ======== Earnings (loss) per share: Basic: Income (loss) from continuing operations before extraordinary charge $(1.41) $ 0.15 Loss from discontinued operations (0.34) (0.01) Extraordinary charge, net of tax benefits (0.03) -- ------ ------ BASIC EARNINGS PER SHARE $(1.78) $ 0.14 ====== ====== Diluted Income (loss) from continuing operations before extraordinary charge $(1.41) $ 0.14 Loss from discontinued operations (0.34) -- Extraordinary charge, net of tax benefits (0.03) -- ------ ------ DILUTED EARNINGS PER SHARE $(1.78) $ 0.14 ====== ======
Nine Months Ended March 31, ---------------------------------------------------------- 1998 1997 ---------------------------------------------------------- Shares Amount EPS Shares Amount EPS ---------------------------------------------------------- Income (loss) from continuing operations before extraordinary charge $(22,238) $ 4,743 Loss from discontinued operations (7,292) (241) Extraordinary charge, net of tax benefits (604) -- -------- ------- NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $(30,134) $ 4,502 ======== ======= Weighted average shares: Basic: Outstanding at beginning of period 13,435 10,845 Issued pursuant to public offering 2,924 2,285 Issued in acquisitions 1,112 25 Issued for exercise of stock options 34 15 Issuable in connection with an acquisition 35 35 ------- -------- BASIC WEIGHTED AVERAGE SHARES 17,540 13,205 ======= ======= Diluted: Basic from above 17,540 13,205 Effect of options -- 298 ------- ------- DILUTED WEIGHTED AVERAGE SHARES 17,540 13,503 ======= ======== Earnings (loss) per share: Basic: Income (loss) from continuing operations before extraordinary charge $(1.27) $ 0.36 Loss from discontinued operations (0.42) (0.02) Extraordinary charge, net of tax benefits (0.03) -- ------ ------ BASIC EARNINGS PER SHARE $(1.72) $ 0.34 ====== ====== Diluted Income (loss) from continuing operations before extraordinary charge $(1.27) $ 0.35 Loss from discontinued operations (0.42) (0.02) Extraordinary charge, net of tax benefits (0.03) -- ------ ------ DILUTED EARNINGS PER SHARE $(1.72) $ 0.33 ====== ======
27 EX-27 8 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ADVANCED LIGHTING TECHNOLOGIES, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUN-30-1998 JUL-1-1997 MAR-31-1998 30,621 4,075 42,449 397 41,461 124,690 92,666 10,869 325,521 37,044 117,520 0 0 20 165,580 325,521 110,891 110,891 66,241 96,471 35,168 0 1,649 (21,320) 918 (22,238) (7,292) (604) 0 (30,134) (1.72) (1.72)
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