In what can only be described as a turn of events, former CEO of TCP International Holdings Ellis Yan has agreed to buy all shares of company stock that he currently does not own. The announcement comes nine months after TCP sued Yan, claiming he was engaged in unfair and deceptive trade practices against TCP.
The suit, filed on March 21, claims Yan was working with his brother, Solomon, on a separate lighting company while he was CEO at TCP. The allegations include the Yan brothers, “attempted to mislead TCP’s customers and prospective customers and influence their purchasing decisions by presenting TCP’s long-standing experience in the industry, established infrastructure and product offerings as those of QLS – a brand new company.” The suit also claims, “deceptive and unfair practices undertaken by Yan and QLS, including using TCP marketing materials and providing TCP light bulbs as sample products.”
Press Release Announcing TCP Change In Ownership
TCP International Holdings, Ltd. (TCP) today announced that it has entered into a definitive merger agreement pursuant to which, and subject to the terms and conditions set forth therein, a group controlled by Ellis Yan and Solomon Yan will acquire all TCP shares not owned by the buyers or their affiliates.
Under the terms of the agreement, which was unanimously approved by TCP’s Board of Directors, TCP shareholders will receive per share consideration of $1.00 in cash. The merger is subject to certain closing conditions, including approval by at least 90 percent of TCP’s shareholders and receipt by the buyers of sufficient financing to repay certain of TCP’s indebtedness. The merger is expected to be completed prior to the end of TCP’s first quarter of fiscal year 2018.
“The dramatic transition of the lighting market over the last few years from CFL to LED technology has caused TCP to re-examine our business and how we can succeed in this competitive space,” said Brian Catlett, CEO of TCP. “As the founders of TCP, the Yans bring many years of lighting industry know-how and operational expertise to TCP. The merger will deliver compelling and immediate value to our shareholders and will allow TCP to continue its focus on designing, developing and delivering exceptional lighting products into the market as a private company.”
Press Release Announcing Lawsuit Against Ellis Yan (Dated March 21, 2017)
TCP International Holdings Ltd. today filed a lawsuit against its former Chairman and Chief Executive Officer Ellis Yan for recent actions that have involved unfair competition and deceptive trade practices, tortious interference, and violations of restrictive covenants in Yan’s employment agreement with TCP. The suit, filed today in U.S. District Court, Northern District of Ohio, Eastern Division, also names newly formed company Quality Light Source LLC (QLS) and others associated with QLS as defendants. This case involves misrepresentations to TCP’s customers and the public at large about the facilities, capabilities and products of QLS.
In the suit, TCP states that Yan has been working with Solomon Yan, who is Ellis Yan’s brother and former Vice Chairman of the Company, and others to set up QLS as a lighting company to unfairly compete with TCP. Through its investigations, TCP has learned that the defendants have attempted to mislead TCP’s customers and prospective customers and influence their purchasing decisions by presenting TCP’s long-standing experience in the industry, established infrastructure and product offerings as those of QLS – a brand new company.
The suit cites a number of deceptive and unfair practices undertaken by Yan and QLS, including using TCP marketing materials and providing TCP light bulbs as sample products.
In addition, the suit states that Ellis Yan violated terms of his Executive Employment Agreement with the Company that prohibit him from competing with TCP or soliciting its employees until July 1, 2017, and permanently prohibit him from disclosing TCP’s confidential and proprietary information. According to the suit, Ellis Yan has attempted to induce TCP employees to leave the Company and work for him, as well as providing confidential information to others at QLS.
“Ellis Yan’s actions are clearly prohibited and harmful to TCP, our customers and our employees, and we could not stand idly by while he and his associates continued to provide false information and misrepresent themselves to our customers,” said TCP Chairman George Strickler. “We are confident in the merits of our case, and we hope the court will take swift action to halt these unfair and deceptive practices. TCP remains a strong business with a promising future, and we are well-positioned to continue serving customers in a marketplace that is fair and competitive.”
TCP is seeking injunctive relief to restrain the defendants from unfairly competing with TCP and from passing off the Company’s marketing materials and products as those belonging to QLS. In addition, the Company is seeking a temporary restraining order to prohibit Ellis Yan from continuing to violate the non-compete, non-solicitation and confidentiality provisions of his employment agreement.
As the Company has previously reported, earlier investigations by the Audit Committee of the TCP Board of Directors found, among other things, that actions related to certain payments by Ellis Yan and undisclosed related party transactions involving Solomon Yan, while they held positions with TCP, resulted in a material weakness in the effectiveness of the Company’s internal control over financial reporting. Ellis and Solomon Yan stepped down from day-to-day involvement in the operations of the Company in 2015 and 2016, respectively. Earlier this year Ellis Yan resigned as Chairman of the Company, and Solomon Yan resigned as Vice Chairman.
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