OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement"), dated as of September 30,
1999, is among General Electric Company, a New York corporation ("Purchaser"),
Xxxxx X. Xxxxxxx ("Xxxxxxx"), and Xxxx X. Xxxx ("Ruud"). Xxxxxxx and Xxxx are
hereinafter sometimes collectively referred to the "Shareholders".
RECITALS:
A. The Shareholders are shareholders of Advanced Lighting
Technologies, Inc., an Ohio corporation (the "Company").
B. The Company and Purchaser are parties to a Stock Purchase
Agreement, dated September 28, 1999, under which the Company has agreed, among
other things, to sell and Purchaser has agreed to purchase 761,250 shares of
preferred stock of the Company (the "Stock Purchase Agreement").
C. The Company, Purchaser, the Shareholders and certain trusts
controlled by the Shareholders are parties to a Contingent Warrant Agreement of
even date herewith (the "Contingent Warrant Agreement"), under which the Company
has agreed to issue to Purchaser warrants to purchase Common Shares of the
Company upon the happening of certain events and the Shareholders have agreed to
grant Purchaser proxies to vote and options to purchase certain shares of common
stock of the Company held by the Shareholders.
D. It is a condition to Purchaser's consummating the transactions
contemplated by the Stock Purchase Agreement that the Shareholders enter into
this Agreement and grant the options contemplated hereby on the terms and
subject to the conditions contained herein.
NOW, THEREFORE, based upon the foregoing premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS.
The following terms when used in this Agreement shall, except where
the context otherwise requires, have the following meanings (such definitions to
be equally applicable to the singular and plural forms thereof):
"Accountant's Certificate" shall have the meaning ascribed thereto in
clause f. of Section 2.2 of the Contingent Warrant Agreement.
"Affiliate" shall mean, 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.
"Agreement" shall mean this Option Agreement as originally executed
and as amended, modified or supplemented from time to time.
"Appraised Value" shall mean, in respect of any Common Share on any
date herein specified, the fair saleable value of such Common Share (determined
without giving effect to the discount for (i) a minority interest, or (ii) any
lack of liquidity of the Common Share, or (iii) to the fact that the Company may
have no class of equity registered under the Exchange Act) based on the equity
value of Company, as determined by an investment banking or valuation firm
selected in accordance with the following sentences, divided by the number of
Common Shares outstanding on a Fully Diluted Basis as determined in accordance
with GAAP (assuming the payment of the exercise prices for such shares). The
determination of the Appraised Value per Common Share shall be made by an
investment banking or valuation firm of nationally recognized standing selected
by Purchaser and acceptable to the Shareholders. If the investment banking or
valuation firm selected by Purchaser is not acceptable to the Shareholders and
the Purchaser and the Shareholders cannot agree on a mutually acceptable
investment banking or valuation firm, then Purchaser and the Shareholders,
collectively, shall each choose one such investment banking or valuation firm
and the respective chosen firms shall agree on another investment banking or
valuation firm which shall make the determination. The Shareholders shall
retain, at their sole cost, such investment banking or valuation firm as may be
necessary for the determination of Appraised Value required by the terms of this
Agreement.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required to be closed in the State of New York.
"Common Shares" shall mean the Common Shares, par value $.001, of the
Company.
"Company" shall mean Advanced Lighting Technologies, Inc., an Ohio
corporation.
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"Contingent Warrant Agreement" shall mean the Contingent Warrant
Agreement, of event date herewith, among the Company, Purchaser, the
Shareholders and certain trusts controlled by the Shareholders.
"Current Market Price" shall mean, in respect of any Common Share on
any date herein specified, if there shall then be a public market for the Common
Shares, the average of the daily market prices for twenty (20) consecutive
Business Days immediately preceding such date or, if there is no such public
market, the Appraised Value per Common Share. The daily market price for each
such Business Day shall be (i) the last sale price on such day on the principal
stock exchange or NASDAQ-NMS on which such Common Shares are then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange or NASDAQ-NMS, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange or NASDAQ-NMS, or
(iii) if the Common Shares are not then listed or admitted to trading on any
stock exchange or NASDAQ-NMS, the average of the last reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
NASDAQ or the National Quotation Bureau, Inc., or (iv) if neither such
corporation at the time is engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business, or (v) if there is
no such firm, as furnished by any member of the NASD selected mutually by
Purchaser and the Shareholders or, if they cannot agree upon such selection, as
selected by two such members of the NASD, one of which shall be selected by
Purchaser and one of which shall be selected by the Shareholders.
"Determination Period" shall mean any two consecutive fiscal quarters,
commencing with the fiscal quarters ending September 30, 1999 and December 31,
1999, and continuing each fiscal quarter thereafter.
"EBITDA" shall mean, for any period and without duplication, net
earnings (loss) of the Company and its Subsidiaries determined on a consolidated
basis for such period plus the sum of the following amounts (but only to the
extent included in determining net income (loss) for such period): (i)
depreciation and amortization expense for such period, plus (ii) Interest
Expense for such period, plus (iii) the amount of any reduction pursuant to the
proviso of the definition of Interest Expense in this Section 1, plus (iv)
income tax expense in respect of such period, minus (v) extraordinary gains and
gains from sales of assets for such period, plus (vi) extraordinary losses and
losses from sales of assets for such period. EBITDA shall be determined using
generally accepted accounting principles and practices in effect on the date of
this Agreement.
"EBITDA Ratio" shall mean, for any period of determination, the ratio
of (i) EBITDA to (ii) Interest Expense.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fully Diluted Basis" means, with respect to any determination or
calculation, that such determination or calculation is performed on a fully
diluted basis (assuming the issuance of all Common Shares issuable under any
then outstanding options, warrants or convertible securities of any kind)
determined in accordance with GAAP for purposes of determining book value or net
income per share.
"GAAP" shall mean generally accepted accounting principles as in
effect on the date hereof and consistently applied and maintained throughout the
period indicated. Whenever any accounting term is used herein which is not
otherwise defined, it shall have the meaning ascribed thereto under GAAP.
"Xxxxxxx" shall mean Xxxxx X. Xxxxxxx.
"Xxxxxxx Option" shall have the meaning provided in Section 2.1.
"Xxxxxxx Option Shares" shall mean Common Shares owned by Xxxxxxx,
individually, in an amount equal to fifty percent (50%) of the Total Option
Shares.
"Interest Expense" shall mean, for any period (a) the total
consolidated interest expense of the Company and its Subsidiaries determined on
a consolidated basis and in any event shall include all interest expense with
respect to any indebtedness in respect of which the Company or any Subsidiary is
wholly or partially liable excluding interest on indebtedness to the Company
from any Subsidiary and interest on indebtedness to any Subsidiary from the
Company; provided, however, the amount of interest expense determined in
accordance with GAAP for any period shall be reduced by any amortization of
deferred financing costs in an amount up to but not exceeding $125,000 with
respect to any single fiscal quarter, minus (b) gross interest income of the
Company and its Subsidiaries determined on a consolidated basis.
"Option Closing" shall have the meaning provided in Section 2.5.
"Option Notice" shall have the meaning provided in Section 2.5.
"Option Period" shall have the meaning provided in Section 2.3.
"Option Purchase Price" shall have the meaning provided in Section
2.4.
"Options" shall have the meaning provided in Section 2.2.
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"Person" shall mean any natural person, corporation, firm,
partnership, association, government, governmental agency or other entity,
whether acting in an individual, fiduciary or other capacity.
"Purchaser" shall mean General Electric Company, a New York
corporation.
"Required Ratio" shall mean 2 to 1.
"Ruud" shall mean Xxxx X. Xxxx.
"Ruud Option" shall have the meaning provided in Section 2.2.
"Ruud Option Shares" shall mean Common Shares owned by Ruud,
individually, in an amount equal to fifty percent (50%) of the Total Option
Shares.
"Second Occurrence Failure" shall mean the second occurrence of the
Company's EBITDA Ratio being less than the Required Ratio for any Determination
Period.
"Shareholders" shall mean Xxxxxxx and Xxxx, collectively.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement,
dated September 28, 1999, between the Company and Purchaser.
"Subsidiary" of the Company shall mean any other corporation of which
more than 50% of the outstanding shares of capital stock having ordinary voting
power for the election of directors is owned directly or indirectly by the
Company, by the Company and one or more Subsidiaries, or by one or more other
Subsidiaries.
"Total Option Shares" shall mean the number of Common Shares that when
combined with all other Common Shares owned by Purchaser or its Affiliates at
the time of determination will result in Purchaser having twenty-five percent
(25%) of the voting power of the Company's capital stock. The time of
determination of the Total Option Shares shall be the first Business Day
immediately following Purchaser's receipt of the Accountant's Certificate
indicating a Second Occurrence Failure.
ARTICLE II. OPTION AGREEMENT
Section 2.1. Grant of Xxxxxxx Option. Xxxxxxx does hereby grant to
Purchaser, or Purchaser's nominee, the exclusive and irrevocable right,
privilege and option (the "Xxxxxxx Option") to purchase at any time or from time
to time during the Option Period, upon the terms and conditions set forth
herein, all but not less than all of the Xxxxxxx Option Shares (such Xxxxxxx
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Option Shares being subject to adjustment from time to time to take into account
any action taken by the Company in respect of its Common Shares, including,
without limitation, stock splits, dividends, combinations and
reclassifications), or any securities into which the Xxxxxxx Option Shares
hereafter may be converted.
Section 2.2. Grant of Ruud Option. Ruud does hereby grant to
Purchaser, or Purchaser's nominee, the exclusive and irrevocable right,
privilege and option (the "Ruud Option") to purchase at any time or from time to
time during the Option Period, upon the terms and conditions set forth herein,
all but not less than all of the Ruud Option Shares (such Ruud Option Shares
being subject to adjustment from time to time to take into account any action
taken by the Company in respect of its Common Shares, including, without
limitation, stock splits, dividends, combinations and reclassifications), or any
securities into which the Ruud Option Shares hereafter may be converted. The
Xxxxxxx Option and the Ruud Option are hereinafter sometimes collectively
referred to as the "Options".
Section 2.3. Option Period. The Options are granted on the date hereof
and may be exercised by Purchaser from and after the date Purchaser has received
the Accountant's Certificate indicating a Second Occurrence Failure and ending
on the date that is the later of (i) the one (1) year anniversary of the date of
Purchaser's receipt of the Accountant's Certificate indicating a Second
Occurrence Failure, and (ii) the close of business on the 30th day following
receipt of all governmental and regulatory approvals (including, without
limitation, any approvals required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended) necessary in connection with Purchaser's
ownership of a twenty-five percent (25%) interest in the Company (the "Option
Period").
Section 2.4. Purchase Price. The purchase price of the Xxxxxxx Option
Shares and the Ruud Option Shares shall be the Current Market Price of such
shares at the time of the Second Occurrence Failure.
Section 2.5. Exercise of the Options. Purchaser may exercise the
Options at any time during the Option Period by delivery to Xxxxxxx, with
respect to the exercise of the Xxxxxxx Option, and to Ruud, with respect to the
exercise of the Ruud Option, of written notice thereof at the notice address for
Xxxxxxx and Xxxx, respectively, set forth in Section 4.4 hereof (an "Option
Notice"). The Xxxxxxx Option and the Ruud Option must both be exercised if
either is exercised. The closing (an "Option Closing") of the purchase and sale
of the Xxxxxxx Option Shares or the Ruud Option Shares, as the case may be,
shall occur as soon as practicable after the delivery of the Option Notice
pertaining to such shares but in no event later than ten (10) days from the date
of delivery of that Option Notice. The obligation of Purchaser to consummate the
purchase of any of the Xxxxxxx Option Shares or the Ruud Option Shares at any
Option Closing is conditioned upon the receipt by the Company and the
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Shareholders of all governmental and regulatory approvals required for the
ownership of the Xxxxxxx Option Shares or the Ruud Option Shares, as the case
may be. At an Option Closing, certificates representing the Xxxxxxx Option
Shares or the Ruud Option Shares, as the case may be, shall be delivered,
together with stock powers duly executed in blank, to the Purchaser free and
clear of any and all claims, liens, charges, pledges or encumbrances and the
Purchaser shall deliver to Xxxxxxx and Xxxx, as the case may be, their
respective allocable portion of the Option Purchase Price. Xxxxxxx and Ruud
shall pay any and all transfer and similar taxes imposed in connection with the
sale of the Xxxxxxx Option Shares and the Ruud Option Shares to Purchaser.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Shareholders jointly and severally represent and warrant to
Purchaser as follows:
Section 3.1. Capacity; Binding Obligation. Each Shareholder has the
capacity to enter into this Agreement, to perform its obligations hereunder, and
to consummate the transactions contemplated hereby. This Agreement constitutes
(or will constitute when executed and delivered) a legal, valid, and binding
obligation of each Shareholder, enforceable against each Shareholder in
accordance with its terms. Neither the execution, delivery, and performance of
this Agreement, nor the sale of the Xxxxxxx Option Shares or the Ruud Option
Shares will violate any provision of any law, any order of any court or other
agency of government, the Second Amended and Restated Articles of Incorporation
of the Company, as amended, the Code of Regulations of the Company or any
agreement or instrument to which either Shareholder is a party or by which
either Shareholder is bound, or be in conflict with, result in a breach of, or
constitute (with notice or lapse of time, or both) a default under any such
agreement or instrument.
Section 3.2. Securities. As of the date hereof, the Xxxxxxx Option
Shares and the Ruud Option Shares are duly authorized, validly issued, fully
paid and nonassessable. As of the date hereof, except as disclosed in writing to
the Purchaser, the Xxxxxxx Option Shares and the Ruud Option Shares are owned by
Xxxxxxx and Xxxx, respectively, free and clear of all liens, encumbrances and
restrictions on transfer, other than restrictions contained in this Agreement,
the Contingent Warrant Agreement and under applicable state and federal
securities laws. Following the sale of the Xxxxxxx Option Shares or the Ruud
Option Shares or both to Purchaser in accordance with this Agreement, such
shares will be duly authorized, validly issued, fully paid and nonassessable and
will be owned by Purchaser free and clear of all liens, encumbrances and
restrictions on transfer, other than restrictions under applicable state and
federal securities laws.
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ARTICLE IV. MISCELLANEOUS
Section 4.1. Binding Effect. The Options granted herein shall be
binding upon and inure to the benefit of the parties hereto and their respective
executors, heirs, administrators, successors and assigns.
Section 4.2. No Outside Representations. This Agreement shall be
deemed to contain all of the terms and conditions agreed upon by the parties, it
being understood that there are no outside representations or oral agreements of
the parties other than those contained in the Contingent Warrant Agreement.
Section 4.3. Assignment. Purchaser shall not have the right to assign
this Agreement or any of its rights and obligations hereunder, except to any
Affiliate of Purchaser, without the consent of the Company.
Section 4.4. Notices. All notices given hereunder shall be in writing
and deemed given when mailed by registered or certified mail, return receipt
requested, postage prepaid, or sent by Federal Express or other similar
overnight service, addressed to the party to whom directed at the address set
forth below, or to such other address as may from time to time be designated by
notice given in the manner provided in this Section 4.4 or when delivered
personally.
Purchaser: GE Lighting
0000 Xxxxx Xx.
Xxxxxxxxx, XX 00000
Attention: President and Chief
Executive Officer
With a copy to: GE Lighting
0000 Xxxxx Xx.
Xxxxxxxxx, XX 00000
Attention: General Counsel
The Shareholders: Xxxxx X. Xxxxxxx
c/o Advanced Lighting Technologies, Inc.
00000 Xxxxxx Xxxx
Xxxxx, Xxxx 00000
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With a copy to: Xxxxxx, Xxxxxxxx & Sarlson Co., L.P.A.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
and: Xxxx X. Xxxx
c/o Advanced Lighting Technologies, Inc.
00000 Xxxxxx Xxxx
Xxxxx, Xxxx 00000
With a copy to: Xxxxxx, Xxxxxxxx & Sarlson Co., L.P.A.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
Section 4.5. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Section 4.6. Prudential Letter. At the time of execution of this
Agreement, the Shareholders shall deliver to Purchaser a letter executed by a
duly authorized officer of Prudential Securities substantially in the form of
Exhibit A attached hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
PURCHASER:
GENERAL ELECTRIC COMPANY
By: /s/ Xxxx X. Xxxxxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: President and CEO, GE Lighting
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THE SHAREHOLDERS:
/s/ Xxxxx X. Xxxxxxx
-----------------------
Xxxxx X. Xxxxxxx
/s/ Xxxx X. Xxxx
-------------------
Xxxx X. Xxxx
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