<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ASTROPOWER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 3674 51-0315869
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
ASTROPOWER, INC. DR. ALLEN M. BARNETT, PRESIDENT
SOLAR PARK ASTROPOWER, INC.
NEWARK, DELAWARE 19716-2000 SOLAR PARK
(302) 366-0400 NEWARK, DELAWARE 19716-2000
(NAME, ADDRESS, INCLUDING ZIP CODE (302) 366-0400
AND TELEPHONE NUMBER, INCLUDING AREA (NAME, ADDRESS, INCLUDING ZIP CODE
CODE, OF REGISTRANT'S PRINCIPAL AND TELEPHONE NUMBER, INCLUDING AREA
EXECUTIVE OFFICE) CODE, OF AGENT FOR SERVICE)
COPIES TO:
PETER LANDAU, ESQ. WILLIAM C. ROGERS, ESQ.
OPTON HANDLER FEILER & LANDAU, LLP CHOATE, HALL & STEWART
52 VANDERBILT AVENUE EXCHANGE PLACE, 53 STATE STREET
NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02109-2891
(212) 599-1744 (617) 248-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: as soon as
practicable after effective date of Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED PROPOSED
AMOUNT AGGREGATE MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock .............. 3,105,000 Shares(1) $10.00 $31,050,000 $9,159.75
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Total...................... $9,159.75
</TABLE>
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(1) Represents the maximum number of securities that could be issued in the
transactions described in the Registration Statement including
Underwriters' over-allotment option.
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 18, 1997
PROSPECTUS
2,700,000 Shares
[LOGO]
Common Stock
-----------
All of the shares of Common Stock offered hereby (the "Offering") are being
sold by AstroPower, Inc. ("AstroPower" or the "Company"). Prior to the
Offering, there has been no public market for the Common Stock of the Company.
It is currently anticipated that the initial public offering price will be
between $8.00 and $10.00 per share. See "Underwriting" for information relating
to the method of determining the initial public offering price. Application has
been made for inclusion of the Common Stock on the Nasdaq National Market under
the symbol "APWR."
-----------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CAREFULLY
CONSIDERED BEFORE PURCHASING SHARES OF COMMON STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
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<S> <C> <C> <C>
Per Share................................. $ $ $
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Total (3)................................. $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $400,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 405,000 shares of Common Stock solely to cover over-
allotments, if any. If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company will
be $ , $ and $ , respectively. See "Underwriting."
-----------
The shares of Common Stock offered by this Prospectus are offered by the
several Underwriters named herein, subject to prior sale, when, as and if
delivered to and accepted by them and subject to the right of the Underwriters
to reject orders in whole or part. It is expected that delivery of the shares
of Common Stock will be made in New York, New York on or about , 1998.
-----------
Needham & Company, Inc. First Albany Corporation
The date of this Prospectus is , 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
Solar energy the economic source for off-grid electric power
Solar electric power is the most cost-effective source of electricity for an
expanding number of rapidly growing applications not served by the electric
utility grid. These remote electric power applications account for more than
75% of the current $1.8 billion solar electric power systems market.
Solar cells are the key component for a wide range of remote electric power
applications.
Communications and Transportation Infrastructure
Wireless communication systems require networks of base stations and
repeaters sited for optimum signal coverage, often without access to the
electric utility grid.
(ART)
Communications trunk lines using radio links or optical fiber (shown)
require repeater stations to boost signal strength which are often located
where utility electric power is not available.
(ART)
Cellular pay telephones in the developing world and emergency call boxes on
highways (shown) benefit from solar electric power in widely distributed
locations.
(ART)
Solar electric systems power smart transportation infrastructure
applications such as monitoring, telemetry, signaling and remote actuation for
highways (shown), railroads, air traffic control, pipelines and electric power
transmission networks.
(ART)
Village and Home Applications
Solar electric power systems provide clean, silent,reliable power for remote
homes (shown), for recreational applications on boats and recreational
vehicals, and at vacation cabins and eco-resorts .
(ART)
Packaged small-scale solar home systems can provide lighting, radio, and
TV to the estimated 2 billion people currently without electric power. Such
systems are an affordable and direct way of acquiring these amenities.
(ART)
Community-based solar electric systems power pumps for disease-free potable
water (shown), medical equipment in health clinics, lighting in schools, and
other essential services.
(ART)
Photos courtesy Photocomm, Atersa, and Soluz
AstroPower is scaling up its low-cost Silicon-Film process with a new 9
megawatt (annual capacity) solar cell plant. The Company plans further major
expansion of Silicon-Film capacity in 1999.
(ART)
AstroPower has qualified its Silicon-Film production machine in pilot
production for over ten months, and plans to use this machine for high volume
production in its new 9 megawatt plant.
WAFER PRODUCTION
The Company s proprietary continuous process produces large area crystalline
silicon sheets at high speed.
(ART)
This unique wafer formation process provides unprecedented economies of
scale.
(ART)
SOLAR CELL FABRICATION
Silicon-Film wafers are fabricated into solar cells using processes and
equipment very similar to those in the Company s current 5 MW single crystal
silicon solar cell line.
(ART)
The Company sells approximatly 50% of its solar cells to OEM customers
around the world who assemble solar cells into modules.
(ART)
MODULE ASSEMBLY
Silicon-Film solar cells are assembled into modules with the equipment and
processes which the Company currently uses to assemble modules based on its
single crystal silicon solar cells.
(ART)
The Company sells its modules to distibutors and system integrators who
combine modules with other components to form complete solar electric power
systems
(ART)
SOLAR ARRAY
STORAGE
BATTERY
POWER
CONDITIONING
AND CONTROL
ELECTRICAL
LOADS
Solar energy a clean, renewable source for on-grid electric power
Customer-sited solar electric power systems connected to the electric
utility grid are a fast-growing segment of the market, and currently account
for approximately 20% of total industry sales. The beneficial environmental
attributes of solar electric power have stimulated a variety of financial
incentive programs aimed at compensating customers for the substantially higher
current cost of solar power compared to grid power.
The AstroPowered brand is being promoted around the world for grid-connected
power applications.
(ART)
In Germany and Switzerland, over 40 municipalities and states offer
incentive programs for grid-connected solar electric power systems. Solar cells
and modules are often architecturally integrated for aesthetic reasons.
(ART)
A Japanese government program is currently providing subsidy to over 10,000
individual homeowners per year to encourage the installation of rooftop mounted
grid-connected solar electric power systems.
(ART)
Grid-connected systems are being installed in the U.S. under a variety of
state and utility funded programs. The recently proposed Million Solar Roofs
program, if implemented, would sharply expand the U.S. market for solar
electric power.
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Silicon-Film(TM) is a trademark of the Company. This Prospectus also
includes product names and other trade names and trademarks of companies other
than the Company.
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
COMMON STOCK AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and Financial Statements and Notes
thereto, appearing elsewhere in this Prospectus. Except as otherwise specified,
all information in this Prospectus (i) reflects a 3-for-4 reverse stock split
to be effected as of the effective date of the Registration Statement of which
this Prospectus is a part; (ii) the adoption of the Company's Amended and
Restated Certificate of Incorporation and Amended and Restated By-Laws
effective as of the effective date of the Registration Statement of which this
Prospectus is a part; and (iii) assumes no exercise of the Underwriters' over-
allotment option. See "Underwriting."
THE COMPANY
AstroPower, Inc. ("AstroPower" or the "Company") develops, manufactures,
markets and sells photovoltaic ("PV") solar cells, modules and panels for
generating solar electric power. Solar cells are semiconductor devices which
convert sunlight directly into electricity. Solar electric power is used off
the electric utility grid for many applications in the communications and
transportation industries and in remote villages and homes. Solar electric
power is also used in on-grid applications by existing electric utility
customers to provide a clean, renewable source of alternative or supplementary
electric power.
The Company has developed a new proprietary technology, Silicon-Film(TM),
which it believes will provide significantly lower manufacturing costs for
solar cells than any other current process. Silicon-Film(TM) is an advanced
continuous sheet process for forming the crystalline silicon wafers from which
solar cells are fabricated. Silicon-Film(TM): (i) uses raw material which is
lower in cost than the solar or semiconductor grade silicon used in other solar
cell processes; (ii) operates at continuous high processing speeds, leading to
lower capital and manufacturing costs than conventional batch processes; and
(iii) produces crystalline silicon sheets which are larger than those obtained
from conventional processes, capturing economies of scale in manufacturing,
materials utilization and solar cell and module fabrication.
The Company currently produces most of its solar cells from silicon wafers
recycled from the semiconductor industry in its current 5 megawatt ("MW")
annual capacity plant. In October 1997, the Company commenced equipment
purchases and site acquisition for the scale-up of its Silicon-Film(TM) process
in a new 9 MW annual capacity plant (the "9 MW plant"). The Company expects to
commence Silicon-Film(TM) production in this plant in the second quarter of
1998 and to reach full capacity production in early 1999. In addition, assuming
successful and timely ramp up of its 9 MW plant, the Company intends to
implement a further major increase in Silicon-Film(TM) capacity in 1999. The
Company's planned expansion would approximately triple manufacturing capacity
in 1998 and further increase capacity in 1999 by a factor of two or more. The
Company intends to utilize a portion of the proceeds of the Offering for the
completion and ramp up of the 9 MW plant. A further portion of the proceeds is
intended to satisfy the equity capital requirements for the Company's planned
1999 capacity expansion.
The Company believes that its Silicon-Film(TM) process is well characterized
in pilot production with regard to yields, product quality and production
costs. The Company's Silicon-Film(TM) production machine is intended to be used
in high-volume production in the 9 MW plant. This machine has been qualified in
pilot production for ten months in over 100 production runs aggregating more
than 500 hours. To date, the Company has produced more than 130,000 Silicon-
Film(TM) solar cells. Fabrication of Silicon-Film(TM) solar cells uses
processes and equipment very similar to the Company's current 5 MW single
crystal solar cell and module line, and Silicon-Film(TM) modules are assembled
with the equipment and processes currently used in this line.
PV Energy Systems, Inc., an independent solar energy market research firm
("PV Energy Systems"), estimates 1997 worldwide solar electric power industry
shipments at 114 MW, corresponding to solar electric power system revenues of
approximately $1.8 billion. Over the 17 year period since 1980, industry
shipments have increased at a compound annual rate of 22% and are forecast to
continue to increase through the year 2005 at an approximate compound annual
rate of 24%. The growth of the solar electric power market is being driven by
the expanding number of rapidly growing needs for electricity off-grid where
solar electric power is the most cost-effective energy source and by widespread
demand for an environmentally-friendly alternative source of on-grid
electricity. Current demand for solar electric power systems significantly
exceeds aggregate industry manufacturing capacity. The Company expects that,
due to its low-cost Silicon-Film(TM) products, it will experience revenue
growth rates in excess of the market's overall growth rate.
The Company sells its solar cells, modules and panels to distribution and
manufacturing customers which either resell such products to other marketing
intermediaries or which assemble such products into completed systems for sale
to end users. The Company uses a "tiered" customer strategy, which aims to grow
volume with existing customers while selectively adding new customers, thereby
obtaining access to high growth market segments while maintaining geographic
diversification.
The Company has leveraged and plans to continue to leverage its resources
through research and development contracts with government research
laboratories and agencies, alliances with corporate partners and the utility
industry, and affiliations with strategic customers.
2
<PAGE>
In August 1997, the Company entered into a strategic relationship with
Corning Incorporated ("Corning"), a major manufacturer of specialty materials
and high technology products. Corning has loaned the Company $5.0 million to be
used for ramping up Silicon-Film(TM) manufacturing capacity and has agreed to
provide research, development, engineering and manufacturing assistance for a
three year period.
The Company was incorporated in Delaware in 1989 as a successor to a business
that was organized in 1983. The Company's principal executive offices are
located at Solar Park, Newark, Delaware 19716-2000 and its telephone number is
(302) 366-0400.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Compa- 2,700,000 shares
ny................................
Common Stock outstanding after the 8,053,191 shares (1)
Offering..........................
Use of proceeds.................... For major expansion of manufacturing
capacity and associated capital
expenditures, product development and
commercialization, working capital and
other general corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq National Market "APWR"
symbol............................
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Product sales.......... $1,003 $2,476 $3,434 $5,356 $ 6,237 $ 4,581 $ 9,334
Research contracts..... 3,779 3,694 3,676 4,589 4,346 3,359 2,778
------ ------ ------ ------ ------- ------- -------
Total revenues........ 4,782 6,170 7,110 9,945 10,583 7,940 12,112
Income (loss) from
continuing
operations(2).......... (244) 423 17 98 (2,363) (2,122) 454
Net income (loss)....... $ (765) $ 257 $ 17 $ 98 $(2,363) $(2,122) $ 454
Pro forma income (loss)
per share(3)........... $ (0.40) $ 0.08
Pro forma weighted
average shares
outstanding............ 5,893 6,026
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA(4) AS ADJUSTED(5)
-------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......................... $ 5,358 $ 5,358 $27,558
Total assets............................. 13,852 13,852 36,052
Long-term debt........................... 5,797 5,797 5,797
Total stockholders' equity (deficit)..... (2,340) 3,458 25,658
</TABLE>
- -------
(1) Based upon the number of shares outstanding at September 30, 1997. Includes
Common Stock issuable upon conversion of outstanding Preferred Stock, which
will occur simultaneous with the closing of the Offering. Excludes 740,741
shares of Common Stock issuable upon conversion of the Company's 7%
convertible note issued on August 19, 1997 at a conversion price of $6.75
per share. Also excludes 1,149,778 shares of Common Stock issuable upon
exercise of stock options outstanding at September 30, 1997 with an average
exercise price of $3.87 per share. See Notes 1, 8, 9 and 13 of Notes to
Financial Statements, "Description of Capital Stock" and "Management--
Executive Compensation."
(2) In 1992, the Company made the decision to dispose of its Canadian
subsidiary, which was a small assembler of modules and a systems
integrator. This subsidiary was subsequently divested in 1994.
(3) See Note 1 of Notes to Financial Statements for information concerning
computation of pro forma income (loss) per share.
(4) Gives effect to the conversion of all of the outstanding Preferred Stock
into shares of Common Stock, which will occur simultaneous with the closing
of the Offering. The Company's Preferred Stock consists of two separate
series: Series A Redeemable Convertible Preferred Stock and Series B
Convertible Preferred Stock, of which there were 1,309,626 and 336,409
shares outstanding respectively, as of September 30, 1997. Each share of
Preferred Stock is convertible into one share of Common Stock. See Note 8
of Notes to Financial Statements, "Description of Capital Stock."
(5) Adjusted to reflect the sale by the Company of the 2,700,000 shares of
Common Stock offered hereby (at an assumed initial public offering price of
$9.00 per share) and the application of the estimated net proceeds
therefrom, after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company. See
"Use of Proceeds" and "Capitalization."
3
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered by this Prospectus
involves a high degree of risk. In addition to the other information in this
Prospectus, prospective investors should carefully consider the following risk
factors before making a decision to purchase the Common Stock offered hereby.
This Prospectus contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company's
management as well as assumptions made by and information currently available
to the Company's management. When used in this document, the words
"anticipate", "believe", "estimate", "expect", "going forward" and similar
expressions, as they relate to the Company or Company management, are intended
to identify forward-looking statements. Such statements reflect the current
views of the Company with respect to future events and are subject to certain
risks, uncertainties and assumptions, including the risk factors described in
this Prospectus. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated or expected. The Company does not intend to update these forward-
looking statements.
SCALE-UP OF NEW MANUFACTURING PLANT
The Company plans to begin manufacturing Silicon-Film(TM) products in a new
9 MW annual capacity plant in the second quarter of 1998. This plant will
require a substantial investment of the Company's capital, including all of
the $5.0 million recently loaned to the Company by Corning and a portion of
the net proceeds of the Offering. Approximately 70% of the equipment for the 9
MW plant has been ordered and a lease for the facility is expected to be
entered into in January 1998. The new plant will utilize the Company's
proprietary Silicon-Film(TM) production equipment which has produced more than
130,000 solar cells in pilot production for sale and for use in commercial and
demonstration programs. The Company believes, on the basis of its Silicon-
Film(TM) pilot production, that it has demonstrated manufacturing yields,
equipment capability, product performance and product quality that will enable
it to produce solar cells at costs lower than competitors when manufactured in
large quantities. However, the successful completion and operation of the 9 MW
plant will require substantial engineering and is subject to significant
risks, including risks of cost overruns and delays. There can be no assurance
that the Company will successfully operate its Silicon-Film(TM) processes in
high volume, make planned process and equipment improvements, enter into
contracts for the production of such equipment, obtain timely delivery of such
equipment, implement multiple production lines or be able to hire and train
the additional employees and management needed to operate the 9 MW plant. To
the extent that the Company's financial and operational plans and capital
budgets assume increases in productivity, equipment performance and energy
conversion efficiency of solar cells produced in its 9 MW plant over the
levels achieved in pilot production, any failure by the Company to achieve
these projected increases, or any failure or significant delay in starting and
ramping up the 9 MW plant, could materially and adversely affect the Company's
business, results of operations and financial condition. See "Use of Proceeds"
and "Business--Manufacturing and Research Facilities."
HIGH-VOLUME OPERATION OF SILICON-FILM(TM) PRODUCTION EQUIPMENT
The Company has produced more than 130,000 Silicon-Film(TM) solar cells,
representing over 300 kilowatts of rated generating capacity, using its
Silicon-Film(TM) production machines. The Company's current production machine
began operation in February 1997 and has made more than 100 production runs
aggregating more than 500 hours. Upon completion of the 9 MW plant, the
Company will begin continuous high-volume production of Silicon-Film(TM)
products using its current Silicon-Film(TM) production machine. The Company
believes that the production results obtained from the current machine
demonstrate the Company's ability to produce Silicon-Film(TM) products at
full-scale production levels. However, there can be no assurance that the
current machine will perform as anticipated at continuous production levels.
The Company may not ultimately be able to operate the current machine at full-
scale production levels without experiencing significant delays, equipment
breakdowns, higher costs or lower product quality. In addition, to the extent
that the Company's business and financial
4
<PAGE>
projections assume increased levels of productivity and economies of scale
upon achieving full-scale production levels, the failure to achieve such
increases could materially and adversely affect the Company's business,
results of operations and financial condition.
ACCEPTANCE OF SILICON-FILM(TM) PRODUCTS IN THE SOLAR ELECTRIC POWER MARKET
The Company believes it can produce its Silicon-Film(TM) solar cells at a
lower cost per watt than competing technology because of the continuous nature
of the Silicon-Film(TM) manufacturing process, the use of inexpensive raw
materials and the elimination of costly manufacturing steps that must be used
in other competing technologies. The Company believes that the anticipated
lower cost per watt of solar cells produced by the Silicon-Film(TM) process
will provide it with significant price advantages over current and potential
alternative technologies. However, there is no assurance that the Company will
be able to sell its Silicon-Film(TM) products at a lower price per watt than
conventional solar cells because the Company may not be able to produce
Silicon-Film(TM) products at projected costs and/or because prices for
competing solar cells may decline more rapidly than anticipated. Although the
Company plans to price its Silicon-Film(TM) solar cells competitively, the
market acceptance of the Company's Silicon-Film(TM) products may also be
affected by Silicon-Film's(TM) lower energy conversion efficiency and power
produced per unit of area compared to some other competing solar cell
products. The Company's Silicon-Film(TM) products may also fail to win market
acceptance due to the development of new products or technologies by its
competitors. Other factors that any affect the acceptance of the Company's
Silicon-Film(TM) products include the size, appearance and quality of Silicon-
Film(TM) solar cells and the market acceptance of module products and systems
assembled by manufacturers over which the Company has no control. The failure
of the Company's Silicon-Film(TM) products to achieve market acceptance and/or
price advantage could materially and adversely affect the Company's business,
results of operations and financial condition.
FUTURE EXPANSION OF MANUFACTURING CAPACITY
The Company expects to commence Silicon-Film(TM) production in the 9 MW
plant in the first half of 1998 and to reach full capacity production in early
1999. In addition, assuming successful and timely ramp of the 9 MW plant, the
Company intends to implement another major increase in Silicon-Film(TM)
capacity in 1999 (the "Future Expansion"). The Company believes that this
Future Expansion, based on its experience with the 9 MW plant, will result in
increases in productivity and equipment performance, mostly through economies
of scale associated with high volume commercial production and advances in
Silicon-Film(TM) manufacturing technology. Based on its pilot production and
the expected results from its 9 MW plant, the Company also believes that it
will achieve further increases in the energy conversion efficiency of the
Silicon-Film(TM) solar cells as it implements and scales up the Future
Expansion. However, there can be no assurance that the 9 MW plant will be
successfully completed, that production in the 9 MW plant will reach maximum
capacity, or that the Company will be able to utilize additional manufacturing
capacity from the Future Expansion. There can also be no assurance that
increased levels of productivity, throughput levels, periods of equipment
operation or product energy conversion efficiencies will be obtained or can be
consistently maintained as a result of the Future Expansion. If the Company is
unable for any reason to successfully complete, scale-up or efficiently
utilize additional manufacturing capacity as a result of the Future Expansion,
the Company's business, results of operations and financial condition could be
materially and adversely affected.
MANAGEMENT OF GROWTH
The Company's planned rapid expansion of Silicon-Film(TM) manufacturing
capacity in 1998 and 1999 entails a planned threefold expansion of the
Company's manufacturing capacity in 1998 and a further two-fold expansion of
that manufacturing capacity in 1999. This planned expansion, involving major
increases in facilities and employees and enhancements to its operating
systems, could place a significant strain on the Company's senior management
team and other resources. Based on its planned expansion, the Company will
require a significant increase in the number of its manufacturing employees in
both 1998 and again in 1999. The Company
5
<PAGE>
may be unable to hire and train a sufficient number of employees on a timely
basis or to upgrade its operating systems without undue cost or delay. The
expansion may also require substantial additions to the Company's operating
and financial management team. The inability of the Company to effectively
manage the budgeting, forecasting and other process control issues presented
by such a rapid expansion could have an adverse effect on the Company's
operations and financial results. In addition, the Company will be required to
implement an enlarged sales and marketing plan for Silicon-Film(TM) technology
and expand its marketing and sales staff. There can be no assurance that the
Company will be able to successfully recruit and train required personnel and
manage its planned growth, and its failure to do so could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Business--Marketing, Sales and Customer Support", and "--
Employees"; "Management"; and "Risk-Factors--Scale-Up of New Manufacturing
Plant" and "--Future Expansion of Manufacturing Capacity."
UNCERTAINTY OF ADDITIONAL FINANCING
As mentioned above, assuming successful and timely ramp up of its 9 MW
plant, the Company intends to implement another major increase in Silicon-
Film(TM) capacity during 1999. The Company expects that the net proceeds of
the Offering, together with existing sources of capital and projected cash
generated from operations, will be sufficient to fund its activities for the
next 24 months, including the scale-up of the 9 MW plant and the equity
capital requirements for the Future Expansion. In the next 24 months, changes
in technology, a significant delay in implementation of the 9 MW plant or the
Future Expansion, or a significant decrease in manufacturing efficiency or
operating margins may require further capital. The inability of the Company to
obtain the necessary capital or financing to fund the Future Expansion could
materially and adversely affect the Company's business, results of operations
and financial condition. Furthermore, there can be no assurance that the
Company will be profitable in the future or that the net proceeds of any
financing, together with any funds provided by operations and present capital,
will be sufficient to fund the Company's ongoing needs for product
development, manufacturing, marketing and working capital. Additional
financing may not be available when needed or may not be available on terms
acceptable to the Company. If additional funds are raised by issuing equity
securities, stockholders may incur dilution. If adequate funds are not
available, the Company may be required to delay, scale back or eliminate one
or more of its development programs or otherwise limit the development,
manufacture or sale of Silicon-Film(TM) solar cells, which could materially
and adversely affect the Company's business, results of operations and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
PROTECTION OF PROPRIETARY TECHNOLOGY
The Company's ability to compete effectively will depend in part on its
ability to maintain the proprietary nature of its technology and manufacturing
processes through a combination of patent and trade secret protection. The
Company is assigned ten issued United States patents in the field of
photovoltaics and related optoelectronics materials and devices which expire
beginning in April 2003 and ending in April 2016. In addition, the Company has
three United States patents pending. Patent applications in the United States
are maintained in secrecy until patents issue and publication of discoveries
in the scientific literature tends to lag behind actual discoveries. The
Company therefore cannot be certain that it was the first creator of
inventions covered by pending patent applications or the first to file patent
applications on such inventions, and there can be no assurance that the
Company's pending patent applications will result in issued patents.
International counterparts of four issued patents have been filed under the
Patent Cooperation Treaty. Patent applications filed in foreign countries are
subject to laws, rules, and procedures which differ from those of the United
States, and thus there can be no assurance that the Company's foreign patent
applications will result in issued patents or that such patents will provide
meaningful patent protection. In addition, no assurance can be given that
patents issued to the Company will not be intentionally infringed upon or
designed around or that any of its issued patents will provide meaningful
patent protection. The inability of the Company to maintain the proprietary
nature of its products and core technologies could have a material adverse
effect on the Company's business, results of operations and financial
condition. See "Business -- Patents and Proprietary Technology."
6
<PAGE>
COMPETITION
The markets for the Company's products are intensely competitive. There are
many competitors engaged in all areas of solar electric power generation in the
United States and abroad including, among others, major electrical, oil and
chemical companies, specialized electronics firms, universities, research
institutions and foreign government-sponsored companies. Most of these entities
have substantially greater financial, research and development, manufacturing
and marketing resources than the Company. There is also a large number of
smaller companies involved in the development, manufacturing and marketing of
solar electric power products and systems. See "Business--Competition."
UNCERTAINTY OF SOLAR ELECTRIC POWER MARKET GROWTH
The market for solar electric power products has grown steadily in the past.
PV Energy Systems reports that the shipment volume of solar electric power
products has grown at an average compound annual rate of approximately 22%, 11%
and 17% since 1980, 1990 and 1993, respectively. However, there can be no
assurance that the solar electric power market, or the particular market
segments and/or geographic regions where the Company sells its products, will
continue to grow. The Company's strategy of significantly increasing
manufacturing capacity is based in part on the assumption of continuing market
growth. The Company believes that its assumption of continuing market growth is
reasonable based on the large overall market for solar electric power products
and services world-wide, historical growth trends in the solar electric power
industry and solar electric power market growth forecasts that have been
developed by independent third parties. For example, PV Energy Systems predicts
that solar electric power product shipments will grow at an average compound
annual rate of 24% through the year 2005. However, in the event that the market
for solar electric power does not experience continuing growth, or that the
particular market segments and/or geographic sales regions where the Company
sells the majority of its products do not continue to grow, this factor could
have a material adverse effect on the Company's business, results of operations
and financial condition.
DEPENDENCE ON KEY CUSTOMERS; CUSTOMER CONCENTRATION
The Company's strategy has been to market its products to a limited group of
key customers. The Company's five largest customers accounted for, in the
aggregate, approximately 60.0%, 60.3% and 74.6% of the Company's product sales
in fiscal years 1995, 1996 and for the nine months ended September 30, 1997,
respectively. The Company's product sales accounted for 53.9%, 58.9% and 77.1%
of the Company's total revenues in fiscal years 1995, 1996 and for the nine
months ended September 30, 1997, respectively. The remainder of the Company's
total revenues for these periods was derived from government-related research
and development contracts. The loss or significant reduction of purchases by
one or more of these customers could have a material adverse effect on the
Company's business, results of operations and financial condition. The Company
expects to continue its strategy of selling solar electric power products to
relatively few customers and that such customers will account for a high
percentage of its revenue in the foreseeable future. The Company believes that
it has successfully managed the level of customer concentration in the past,
and that the level of customer concentration will decrease as the Company's
manufacturing capacity increases, but there can be no assurance that the
Company's sales strategy of focusing on a small group of customers will be
successful in the future or can be successfully changed in the future to
another sales strategy. See "Business -- Customers."
RELIANCE ON MARKETING INTERMEDIARIES
The Company's marketing strategy has been to sell its products to marketing
intermediaries selected to provide access to certain important market segments
and regions around the world. The Company's customers are not end users of the
Company's products but are distributors, module manufacturers or system
integrators who either resell the Company's products to other customers, or
package the Company's products into systems for resale to end users. These
marketing intermediaries are not under the direct control of the Company. The
Company therefore has no control over the ability of its customers to market
and sell to end users. In addition, the Company has no control over the
financial performance of its customers which may affect the ability of these
7
<PAGE>
customers to buy products manufactured by the Company in the future. Any
reduction in sales activities by the Company's customers or a termination of
their relationship with the Company could have a material adverse effect on the
Company's business, results of operations and financial condition.
AVAILABILITY OF SYSTEM FINANCING FOR REMOTE ELECTRIC POWER APPLICATIONS
Solar electric power is used in many applications and has proven to be a
cost-effective source of electric power where the electric power grid is
unavailable. Solar electric power has also proven to be cost-effective in
competition with diesel generators and/or other alternative forms of off-grid
power generation. The Company estimates that remote electric power applications
currently comprise approximately 76% of the market for solar electric power.
Because of the high capital costs of solar electric power systems, users may
not have sufficient resources or credit to acquire such systems, particularly
in developing countries, and the Company believes that the availability of
financing, such as loans and lease arrangements, could have a significant
effect on the rate of growth of remote solar electric power. Such financing
programs are becoming increasingly available through electric utility
companies, banks, local governments and the World Bank. To the extent that the
Company believes that the increased availability of system financing will play
a role in expanding the market for solar electric power products, particularly
in developing countries, and to the extent that the Company's plans for
increased sales of solar electric power products include increased sales within
this market segment, the lack of increased availability of system financing or
the elimination of existing system financing programs could have a material
adverse effect on the Company's business, results of operations and financial
condition.
AVAILABILITY OF SUBSIDIES AND CONSUMER INCENTIVES FOR GRID-CONNECTED
APPLICATIONS
Approximately 19% of the market for solar electric power is for grid-
connected applications, according to PV Energy Systems. The cost of solar
electric power currently substantially exceeds the cost of power furnished by
the conventional electric utility grid. Governmental bodies in many countries,
notably the United States, Germany and Japan, have provided subsidies in the
form of cost reductions, tax write-offs, and other incentives to end users,
distributors, systems integrators and manufacturers of solar electric power
products to promote the use of solar energy in grid connected applications and
reduce dependency on other forms of energy. Although the Company believes that
grid-connected applications currently account for a limited fraction of the
total market for solar electric power systems, these applications are generally
predicted by third party market research firms to be among the most rapidly
growing solar electric power market segments in the future. Therefore, the
future market for solar products depends in some measure on the willingness of
governments to enter into and to continue programs for solar electric power
subsidies and consumer incentives. There can be no assurance that government
subsidization of solar energy will continue into the future. Any reduction or
elimination of government subsidies may have a material adverse effect on the
Company's business, results of operations and financial condition.
SUPPLY AND COST OF SILICON WAFERS AND OTHER RAW MATERIALS
The Company purchases and recycles silicon wafers from the semiconductor
industry for use in manufacturing its single crystal solar cells. 93.4% of the
Company's total product sales in the nine months ended September 30, 1997 was
derived from solar cells and modules manufactured from single crystal silicon
wafers. However, the Silicon-FilmTM process is the focus of the Company's plans
for capacity expansion and the Silicon-FilmTM process does not use recycled
silicon wafers.
Although the Company has generally been successful in obtaining sufficient
quantities of quality wafers in the past, there can be no assurance that such
wafers will be available at cost-effective prices in the future. The absence of
cost-effective sources of supply and the inability of the Company to locate
alternative sources of low-cost high-quality wafers could have a material
adverse effect on the Company's business, results of operations and financial
condition.
8
<PAGE>
The Company presently has multiple sources of supply for its required raw
materials, including silicon wafers and silicon, although for economic and
quality control reasons the Company utilizes single sources of supply for
certain materials. In situations where it relies on single sources of supply,
the Company believes that an adequate supply of materials is available to meet
its foreseeable needs and, to date, the Company generally has been able to
obtain supplies of such materials in a timely manner. There can be no assurance
that supplies of the Company's critical materials will be adequate in the
future or that the cost of such materials will remain low enough for the
Company to maintain a cost-competitive market position for its solar electric
power products.
PRIOR LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE PROFITABILITY
The Company generated net income for the nine months ended September 30,
1997. It incurred a net loss in two of the last five fiscal years and, as of
September 30, 1997, had an accumulated deficit of approximately $5.1 million.
For the nine months ended September 30, 1997, the Company reported net income
of $454,000 as compared to a net loss of $2.1 million for the nine months ended
September 30, 1996. The net income (loss) for the years ended December 31,
1992, 1993, 1994, 1995 and 1996 was $(765,000), $257,000, $17,000, $98,000 and
$(2.4 million), respectively. There can be no assurance that the Company will
continue to be profitable. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
INTERNATIONAL SALES
Approximately 86.7% and 70.7% of the Company's product sales for the year
ended December 31, 1996 and the nine months ended September 30, 1997,
respectively, was attributable to international sales. The Company expects that
international sales will continue to represent a significant portion of the
Company's product sales. To date, in connection with its international sales,
the Company has not experienced any material adverse impact on its business,
results of operations or financial condition, however, there can be no
assurance that this will be true in the future. All past international sales
were denominated in United States dollars and the Company expects this practice
to continue but there can be no assurance that future sales will be protected
from foreign currency fluctuations. The Company believes that there are
additional risks associated with the political and economic stability of
foreign countries inasmuch as this impacts the ability of its foreign customers
to pay for their purchases. The Company is also subject to other risks
associated with international sales, including but not limited to tariff
regulations, requirements for export licenses, long accounts receivable cycles,
potentially adverse tax consequences and the burdens of complying with a wide
variety of foreign laws, including compliance with technical standards.
STRATEGIC ALLIANCES
The Company has developed, and will continue to develop, strategic customers,
strategic alliances and cooperative agreements with other companies and
organizations to provide support to its own manufacturing and marketing
resources. The Company's strategy is to seek strategic customers in certain
markets and with certain expertise. To accelerate the commercialization of its
Silicon-Film(TM) technology, the Company has entered into strategic alliances
with Corning and GPU International. There can be no assurance that the Company
will be able to enter into additional alliances or that existing and/or future
alliances will achieve their goals. To the extent the Company enters into
strategic alliances, the terms of such alliances may require the Company and
its partners to share revenues and/or expenses from certain activities or for
the Company to grant to its partners licenses to manufacture, market and/or
sell products based upon its Silicon-Film(TM) technology, which could
materially impact the Company's business, results of operations and financial
condition. See "Business--Business Strategy" and "--Strategic Alliances."
BACKLOG
The Company's order backlog as of September 30, 1997 was approximately $4.1
million, of which $3.0 million was attributable to product sales. All of the
product orders included in backlog are covered by signed purchase orders or
contracts and represent products or services to be delivered within the next 12
months.
9
<PAGE>
Although purchase orders with customers typically specify dollar volumes of
products to be purchased over an extended time period, in some instances such
orders also provide that scheduled shipment dates of particular volumes are
released to the Company only a few days or weeks prior to the required delivery
dates. Accordingly, the Company does not believe that its backlog as of any
particular date is representative of actual sales for any succeeding period,
and there can be no assurance that current order backlog will lead to sales in
any future period. In addition, the Company's customers may cancel or defer
orders without significant penalty. Termination or reduction of existing or
future purchase orders from customers of the Company could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Backlog."
TECHNOLOGICAL CHANGE AND COMPETING TECHNOLOGIES
The Company believes it has developed a new technology for solar electric
power applications. The future success of the Company will depend, however, in
large part upon its ability to keep pace with advancing solar electric power
technology. In addition to the Company's Silicon-Film(TM) technology, there is
a variety of competing technologies under active development by other
companies, including amorphous silicon, cadmium telluride and copper indium
diselenide, as well as advanced concepts for the manufacture of both bulk
silicon and thin film crystalline silicon. Any of these competing technologies
could achieve manufacturing costs less than the manufacturing costs achieved by
the Silicon-Film(TM) products being developed by the Company. There can also be
no assurance that the Company's development efforts will not be rendered
obsolete by technological advances of others or that other materials will not
prove more advantageous for the commercialization of solar electric power
products. The Company believes that to remain competitive in the future, it
will need to invest significant financial resources in research and
development.
GOVERNMENT CONTRACTS
The Company intends to continue to complement and enhance its own resources
with funding derived from contracts with agencies of the United States
government. The percentage of the Company's total revenue derived from
government-related contracts was approximately 59.9%, 51.7%, 46.1%, 41.1% and
22.9% of total revenue for fiscal years 1993, 1994, 1995 and 1996 and for the
the nine months ended September 30, 1997, respectively. The Company's contracts
involving the United States government are subject to various risks such as the
risk of termination at the convenience of the government. To date, the
government has not terminated any of the Company's contracts. Other risks
include potential disclosure of the Company's confidential information to third
parties, audits and the exercise of "march-in" rights by the government. March-
in rights refer to the right of the United States government or government
agency to exercise its non-exclusive, royalty-free, irrevocable worldwide
license to any technology developed under contracts funded by the government if
the contractor fails to continue to develop the technology. There can be no
assurance that the United States government will continue its commitment to
programs to which the Company's development projects are applicable or that the
Company can compete successfully to obtain funding available pursuant to such
programs. A reduction or discontinuance of such commitment or of the Company's
participation in such programs could have a material adverse effect on the
Company's business, operating results and financial condition. Substantially
all of the Company's revenues from government contracts including overhead
rates are subject to audit under various federal statutes. The Company has
received final approval of its overhead rates through 1993. Audits of 1994 and
1995 rates began in December 1997. It is the Company's opinion that adjustments
to such revenue, if any, will not have a material adverse effect on its
business, results of operations and financial condition.
ENVIRONMENTAL REGULATIONS
The Company uses, generates and discharges toxic, volatile or otherwise
hazardous chemicals and wastes in its research and development and
manufacturing activities. Therefore, the Company is subject to a variety of
federal, state and local governmental regulations related to the storage, use
and disposal of these materials. The Company believes that it has all the
permits necessary to conduct its business. However, failure to comply with
10
<PAGE>
present or future regulations could result in fines being imposed on the
Company, suspension of production or a cessation of operations. The Company
believes that it has properly handled its hazardous materials and wastes and
has not contributed to any contamination at its premises. The Company is not
aware of any environmental investigation, proceeding or action by federal or
state agencies involving these premises. However, under certain federal and
state statutes and regulations, a governmental agency may seek recovery and
response costs from both operators and owners of property where releases of
hazardous substances have occurred or are ongoing. Any failure by the Company
to control the use of, or to restrict adequately the discharge of, hazardous
substances could subject it to substantial financial liabilities and could have
a material adverse effect on the Company's business, results of operations and
financial condition.
POTENTIAL FLUCTUATIONS IN ANNUAL OR QUARTERLY RESULTS
The Company has experienced and may continue to experience significant annual
and quarterly fluctuations in its operating results. The Company's annual and
quarterly operating results may fluctuate as a result of a variety of factors
including the timing of orders from, and shipments to, major customers, the
timing of new product introductions by the Company or its competitors, delays
in the planned Silicon-Film(TM) manufacturing expansion, variations in the mix
of products sold by the Company or its competitors, including possible
decreases in average selling prices of the Company's products in response to
competitive pressures, market acceptance of new and enhanced versions of the
Company's products, the availability and cost of key raw materials,
requirements for cost sharing on government contracts and fluctuations in
general economic conditions. In addition, the Company's annual and quarterly
operating results may fluctuate as a result of the issuance of stock options to
Corning pursuant to an existing agreement with Corning at exercise prices below
the then current fair market value of the Company's Common Stock. There can be
no assurance that the Company will be able to achieve and sustain consistent
profitability on an annual or quarterly basis.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on its corporate officers and other principal
members of its management and technical personnel. None of such personnel is
covered by an employment contract other than Dr. Allen M. Barnett, the
Company's President and Chief Executive Officer, and Dr. George W. Roland,
President and Chief Executive Officer of the Company's Solar Power Business.
The Company's success in the future will depend in part on attracting and
retaining qualified management and technical personnel. There can be no
assurance that the Company will be successful in hiring or retaining qualified
personnel. Loss of key personnel or inability to hire and retain qualified
personnel could have a material adverse effect on the Company's business,
results of operations and financial condition. The Company maintains and is the
beneficiary of a $500,000 insurance policy on the life of Dr. Barnett. See
"Business--Employees" and "Management."
ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Company's
Common Stock. Consequently, the initial public offering price of the Common
Stock has been determined by negotiations between the Company and the
representatives of the Underwriters and may bear no relationship to the price
of the Common Stock after the Offering. There can be no assurance that any
active public market for the Company's Common Stock will develop or be
sustained after the Offering. The trading price of the Company's Common Stock
could be subject to wide fluctuations in response to variations in the actual
or anticipated quarterly operating results of the Company, announcements of new
products or technological innovations by the Company or its competitors, and
general conditions in the solar electric power industry. In addition, stock
markets have experienced extreme price and volume trading volatility in recent
years. This volatility has had a substantial effect on the market prices of
securities of many high-technology companies for reasons frequently unrelated
to the operating performance of the specific companies. These broad market
fluctuations may adversely affect the market price of the Company's Common
Stock. See "Underwriting."
11
<PAGE>
CONTROL BY EXISTING STOCKHOLDERS
Following the Offering, the Company's officers and directors together with
their affiliates will beneficially own approximately 41.7% of the Company's
outstanding Common Stock. As a result, they may have the ability to elect the
Company's directors and to determine all corporate actions requiring
stockholder approval. This concentration of ownership may also have the effect
of delaying or preventing a change in control of the Company. See "Principal
Stockholders."
ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW
PROVISIONS; POSSIBLE ISSUANCE OF PREFERRED STOCK
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. Section 203 prohibits certain publicly held Delaware
corporations from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder", unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and stock transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates, owns, or
within three years prior to the date on which the determination of whether
such person is an interested stockholder is being made, did own 15% or more of
the Company's voting stock. Parallel provisions have been included in the
Company's Amended and Restated Certificate of Incorporation. These provisions
may make it more difficult for a third party to acquire, or may discourage
acquisition bids for, the Company. The Company's Amended and Restated
Certificate of Incorporation and By-Laws contain additional provisions that
may also have the effect of discouraging a third party from making an
acquisition proposal for the Company. The Amended and Restated Certificate of
Incorporation and By-Laws of the Company, among other things: (i) classify the
Board of Directors into three classes, with directors of each class serving
for a staggered three-year period; (ii) provide that directors may be removed
only for cause and only upon the affirmative vote of the holders of at least
80% of the outstanding shares of Common Stock entitled to vote for such
directors; (iii) permit the Board of Directors but not the Company's
stockholders, to fill vacancies and newly created directorships on the Board
of Directors; and (iv) provide that any action required or permitted to be
taken by the stockholders of the Company must be effected at an annual or
special meeting of stockholders and not by any consent in writing by such
stockholders. Special meetings of stockholders may be called only by the Board
of Directors. Such provisions would make the removal of incumbent directors
more difficult and time-consuming and may have the effect of discouraging a
tender offer or other takeover attempt not previously approved by the Board of
Directors. In addition, 5 million shares of the Company's Preferred Stock may
be issued in the future without further stockholder approval and upon such
terms and conditions, and having such rights, privileges and preferences, as
the Board of Directors may determine. The rights of the holders of Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The issuance
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or discouraging a third
party from acquiring, a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue any shares of Preferred
Stock. See "Description of Capital Stock--Delaware Law and Certain Charter and
By-Law Provisions."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market following
the Offering could have an adverse effect on the price of the Common Stock,
and future sales of Common Stock by existing stockholders could also have an
adverse effect on such price and on the Company's ability to raise capital.
Beginning 360 days after the date of this Prospectus, shares of Common
Stock will be eligible for sale in the public market upon the expiration of
lock-up agreements between the Company's stockholders and the Underwriters,
subject in some cases to the volume and other restrictions of Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"). Additionally,
740,741 shares of Common Stock are issuable upon conversion of outstanding
convertible debt and an additional 1,200,000 shares of Common Stock are
reserved for issuance
12
<PAGE>
under the Company's stock option plan. Approximately 90 days after the date of
this Prospectus, the Company intends to register the shares subject to
outstanding options as well as reserved for issuance under the Company's stock
option plan, which shares would then be eligible for sale in the public market,
although all of these shares and all shares acquired under the Company stock
option plan by employees are subject to agreements not to sell until days
after the date of this Prospectus. Certain holders of shares of Common Stock
will have the right, under certain conditions, to participate in future Company
registrations. See "Shares Eligible for Future Sale."
DILUTION
The initial public offering price substantially exceeds the net tangible book
value of the Common Stock as adjusted for the receipt of the net proceeds from
the Offering, resulting in immediate and substantial dilution of $5.81 per
share to purchasers of Common Stock in the Offering. See "Dilution."
ABSENCE OF DIVIDENDS
The Company has never paid any dividends and it is currently anticipated that
no cash dividends will be paid to the holders of the Common Stock in the
foreseeable future. See "Dividend Policy."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,700,000 shares of
Common Stock offered hereby are estimated to be $22.2 million, assuming an
initial public offering price of $9.00 per share and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company.
The Company currently anticipates that a portion of the net proceeds from
the Offering and all of the $5.0 million recently loaned to the Company by
Corning will be used for the rapid scale-up of the Company's 9 MW Silicon-
Film(TM) plant. Approximately 70% of the equipment for the 9 MW plant has been
ordered and a lease for the facility is expected to be entered into in January
1998. In addition, a portion of the proceeds of the Offering will be used to
expand the capacity of the Company's existing single crystal silicon solar
cell manufacturing line. These two expansions will approximately triple the
Company's aggregate production capacity over the next 12 months. The remainder
of the proceeds of the Offering will be used to fund research, development and
commercialization programs, for general working capital purposes and, assuming
the scale-up of the 9 MW plant is successful, the Company's equity capital
requirements for the Future Expansion.
The amounts actually expended for each purpose may vary significantly
depending upon numerous factors, including the progress of the Company's
research and development programs, the phase-in of incremental capacity,
technological advances, determinations as to the commercial potential of the
Company's technologies and products, and the status of competitive products.
The establishment of additional research arrangements with government agencies
will also affect the amounts expended for each purpose. Pending such uses, the
Company intends to invest the net proceeds of the Offering in short-term
investment-grade, interest-bearing instruments. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
DIVIDEND POLICY
The Company has not declared or paid any cash dividends and does not
anticipate that it will do so in the foreseeable future. The Company currently
intends to retain future earnings, if any, to provide funds for the growth and
development of the Company's business. Any future determination to pay
dividends will be at the discretion of the Company's Board of Directors and
will be dependent upon the Company's earnings, capital requirements, operating
and financial condition, and such other factors as the Board of Directors may
deem relevant.
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CAPITALIZATION
The following table sets forth as of September 30, 1997 (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the
Company after giving effect to the conversion of all outstanding shares of
Preferred Stock into Common Stock upon consummation of the Offering and (iii)
the pro forma as adjusted capitalization of the Company after giving effect to
the sale of 2,700,000 shares of Common Stock offered by the Company hereby at
an assumed public offering price of $9.00 per share and the application of the
estimated net proceeds therefrom. The information set forth below should be
read in conjunction with the Financial Statements and the Notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997(1)
----------------------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(2)(3)
--------------- ---------------- ---------------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Short-term debt(4)............ $ 469 $ 469 $ 469
=============== =============== ===============
Long-term debt, excluding
current maturities(5)........ 5,797 5,797 5,797
--------------- --------------- ---------------
Series A Redeemable
Convertible Preferred Stock
($.01 par value; 1,331,250
shares authorized; 1,309,626
issued and
outstanding)(5)(6)........... 5,798 -- --
Stockholders' equity:
Series B Convertible
Preferred Stock ($.01 par
value; 750,000 shares
authorized, 336,409 shares
issued and
outstanding)(5)(6)......... 3 -- --
Common Stock ($.01 par
value; 15,000,000 shares
authorized, 3,707,156
shares issued and
outstanding; 5,353,191
shares issued and
outstanding, pro forma;
8,053,191 shares issued and
outstanding, pro forma as
adjusted)(6)(7)............ 37 54 81
Additional paid-in capital.. 2,763 8,547 30,720
Accumulated deficit......... (5,143) (5,143) (5,143)
--------------- --------------- ---------------
Total stockholders' equity
(deficit)................ (2,340) 3,458 25,658
--------------- --------------- ---------------
Total capitalization.... $ 9,255 $ 9,255 $ 31,455
=============== =============== ===============
</TABLE>
- --------
(1) Reflects a 3-for-4 reverse stock split to be effected as of the effective
date of the Registration Statement of which this Prospectus is a part.
(2) Reflects Common Stock issuable upon conversion of outstanding Preferred
Stock, which will occur simultaneous with the closing of the Offering.
(3) Adjusted to give effect to the sale by the Company of 2,700,000 shares of
Common Stock offered (at an assumed initial public offering price of $9.00
per share) and the application of the net proceeds as set forth in "Use of
Proceeds."
(4) Consists of note payable--stockholder of $58,000, note payable--bank of
$75,000 and current maturities of long-term debt of $336,000.
(5) See Notes 3, 8 and 13 of Notes to Financial Statements for information
concerning the Company's notes payable, long-term debt, convertible note
and Convertible Preferred Stock.
(6) Effective upon the consummation of the Offering, the Company's authorized
capital stock will consist of 25,000,000 shares of Common Stock, par value
$.01 per share, and 5,000,000 shares of Preferred Stock, par value $.01
per share.
(7) Excludes 1,149,778 shares of Common Stock issuable upon exercise of stock
options outstanding at September 30, 1997 with a weighted average exercise
price of $3.87 per share.
15
<PAGE>
DILUTION
The net tangible book value of the Company at September 30, 1997 was
approximately $3.5 million or $0.65 per share, after giving effect to the
conversion of all outstanding shares of Preferred Stock into Common Stock upon
the consummation of the Offering. "Net tangible book value" per share
represents the amount of total tangible assets of the Company less total
liabilities, divided by the number of shares of Common Stock outstanding.
After giving effect to the sale of the 2,700,000 shares of Common Stock
offered by the Company hereby at an assumed public offering price of $9.00 per
share (after deducting the underwriting discounts and commissions and
estimated offering expenses payable by the Company), the pro forma tangible
net book value of the Company at September 30, 1997 would have been $25.7
million or $3.19 per share. This represents an immediate increase in net
tangible book value of $2.54 per share to existing stockholders and an
immediate dilution of $5.81 per share to new stockholders. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $9.00
Pro forma net tangible book value per share at September 30,
1997......................................................... $0.65
Increase attributable to new stockholders..................... 2.54
-----
Pro forma net tangible book value after the Offering............ 3.19
-----
Dilution per share to new stockholders.......................... $5.81
=====
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1997, the number of shares purchased from the Company, the total consideration
paid and the average price per share paid by existing stockholders and to be
paid by purchasers of shares offered hereby (before deducting the underwriting
discounts and commissions and estimated offering expenses payable by the
Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders
(1)(2)................... 5,353,191 66.5% $ 8,601,128 26.1% $ 1.61
New stockholders ......... 2,700,000 33.5 24,300,000 73.9 9.00
--------- ----- ----------- -----
Total................... 8,053,191 100.0 $32,901,128 100.0
========= ===== =========== =====
</TABLE>
- --------
(1) Excludes 1,149,778 shares of Common Stock issuable upon the exercise of
stock options outstanding at September 30, 1997 and 740,741 shares
issuable upon conversion of the Company's 7% convertible note issued on
August 19, 1997. To the extent such options are exercised, there will be
further dilution to new stockholders. See Notes 9 and 13 of the Notes to
Financial Statements.
(2) Gives effect to the conversion of all of the outstanding Preferred Stock
into shares of Common Stock, which will occur simultaneous with the
closing of the Offering. The Company's Preferred Stock consists of two
separate series: Series A Redeemable Convertible Preferred Stock and
Series B Convertible Preferred Stock, of which there were 1,309,626 and
336,409 shares outstanding respectively as of September 30, 1997. Each
share of Preferred Stock is convertible into one share of Common Stock.
See Note 8 of Notes to Financial Statements and "Description of Capital
Stock."
16
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below as of December 31, 1995 and 1996
and September 30, 1997 and for each of the three years in the period ended
December 31, 1996 and for the nine months ended September 30, 1997 have been
derived from the audited Financial Statements of the Company included
elsewhere in this Prospectus. The selected financial data as of December 31,
1992, 1993 and 1994 and for each of the two years in the period ended December
31, 1993 are derived from audited financial statements not included herein.
The selected financial data for the nine months ended September 30, 1996 are
derived from the unaudited financial statements of the Company, which, in
management's opinion, include all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the information
set forth therein. The results of operations for prior periods, including the
nine months ended September 30, 1996 and 1997, are not necessarily indicative
of the results that may be expected for 1997 or future years. The information
set forth below should be read in conjunction with the Company's Financial
Statements and the Notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- -------- --------
(UNAUDITED)
STATEMENT OF OPERATIONS
DATA: (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales.......... $ 1,003 $ 2,476 $ 3,434 $ 5,356 $ 6,237 $ 4,581 $ 9,334
Research contracts..... 3,779 3,694 3,676 4,589 4,346 3,359 2,778
------- ------- ------- ------- ------- -------- --------
Total revenues........ 4,782 6,170 7,110 9,945 10,583 7,940 12,112
Cost of revenues:
Cost of product
sales................. 1,878 2,224 2,954 4,483 6,896 5,484 6,747
Cost of research
contracts............. 1,890 2,168 2,299 3,029 2,580 1,977 1,954
------- ------- ------- ------- ------- -------- --------
Total cost of
revenues............. 3,768 4,392 5,253 7,512 9,476 7,461 8,701
------- ------- ------- ------- ------- -------- --------
Gross profit.......... 1,014 1,778 1,857 2,433 1,107 479 3,411
Operating expenses:
Product development
costs................. 117 125 220 314 776 565 755
General and
administrative
expenses.............. 854 898 1,172 1,469 1,859 1,447 1,397
Selling expenses....... 198 268 377 444 660 486 624
------- ------- ------- ------- ------- -------- --------
Operating income
(loss)............... (155) 487 88 206 (2,188) (2,019) 635
Other expense (income):
Interest expense....... 16 30 42 115 169 107 217
Other expense
(income).............. 73 34 29 (7) 6 (4) (45)
------- ------- ------- ------- ------- -------- --------
Income (loss) from
continuing operations
before income taxes.. (244) 423 17 98 (2,363) (2,122) 463
Income taxes............ -- -- -- -- -- -- 9
------- ------- ------- ------- ------- -------- --------
Net income (loss) from
continuing
operations........... (244) 423 17 98 (2,363) (2,122) 454
Loss from discontinued
operations(1).......... 520 166 -- -- -- -- --
------- ------- ------- ------- ------- -------- --------
Net income (loss)..... $ (764) $ 257 $ 17 $ 98 $(2,363) $ (2,122) $ 454
======= ======= ======= ======= ======= ======== ========
Pro forma income (loss)
per share(2)........... $ (0.40) $ 0.08
======= ========
Pro forma weighted
average shares
outstanding(2)......... 5,893 6,026
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 30, 1997
------------------------------------------ --------------------
PRO
FORMA
1992 1993 1994 1995 1996 ACTUAL (3)
------ ------- ------- -------- ------ --------- ---------
BALANCE SHEET DATA: (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital......... $ 284 $ 1,515 $ 1,309 $ 1,420 $ (970) $ 5,358 $ 5,358
Total assets............ 4,526 6,412 7,148 8,615 7,887 13,852 13,852
Short-term debt......... 85 168 264 812 955 469 469
Long-term debt.......... 82 356 250 651 528 5,797 5,797
Total liabilities....... 2,021 2,495 2,657 3,894 4,948 10,394 10,394
Redeemable Convertible
Preferred Stock........ 5,369 5,798 5,798 5,798 5,798 5,798 --
Total stockholders'
equity (deficit)....... (2,864) (1,881) (1,308) (1,077) (2,860) (2,340) 3,458
</TABLE>
- -------
(1) In 1992, the Company made the decision to dispose of its Canadian
subsidiary, which was a small assembler of modules and a systems
integrator. This subsidiary was subsequently divested in 1994.
(2) See Note 1 of Notes to Financial Statements for information concerning
computation of pro forma income (loss) per share.
(3) Gives effect to the conversion of all outstanding Preferred Stock into
1,646,035 shares of Common Stock, which will occur simultaneously with the
closing of the Offering. The Company's Preferred Stock consists of two
separate series: Series A Redeemable Convertible Preferred and Series B
Convertible Preferred, of which there were 1,309,626 and 336,409 shares
outstanding, respectively, as of September 30, 1997. Each share of
Preferred Stock is convertible into one share of Common Stock. See Note 8
of Notes to Financial Statements and "Description of Capital Stock".
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company develops, manufactures, markets and sells PV solar cells,
modules and panels for generating solar electric power. Solar cells are
semiconductor devices which convert sunlight directly into electricity. Solar
electric power is used off the electric utility grid for many applications in
the communications and transportation industries and in remote villages and
homes. Solar electric power is also used in on-grid applications by existing
electric utility customers to provide a clean, renewable source of alternative
or supplementary electric power.
The Company was founded in 1989 as a successor to a business that was
organized in 1983 to develop thin crystalline silicon photovoltaic and related
optoelectronic technology. Initial revenue came from contract research
performed primarily for agencies of the United States government. The Company
commenced commercial solar cell manufacturing operations in 1988 with silicon
wafers purchased from third parties. Since then the commercial portion of the
business has grown steadily. Recently, the growth of product revenue has
accelerated, accounting for 77.1% of total revenue for the nine month period
ended September 30, 1997.
The Company has received significant assistance in its transition from
primarily a contract research organization to a commercial manufacturer of
solar cells and modules. Such assistance originated from the U.S. Department
of Energy in the form of cost-sharing contracts designed to assist the Company
in expanding its manufacturing capabilities and in reducing its manufacturing
costs.
The Company currently generates product revenues from the sale of solar
cells, modules and panels. Although the Company plans a significant expansion
of its Silicon-Film(TM) manufacturing capacity in 1998, the predominant source
of its product revenues to date has been single crystal products. Product
sales are recognized upon shipment. Solar cell prices and manufacturing costs
vary depending upon supply and demand in the market for solar cells and
modules, order size, yields, the costs of raw materials, particularly
reclaimed silicon wafers recycled from the semiconduct industry and other
factors. In addition, the Company also earns revenue from contracts with
various federal governmental agencies to conduct research on advanced Silicon-
Film(TM) products and optoelectronic devices. Generally, these contracts last
from six months to three years. The Company recognizes research contract
revenue at the time costs benefiting the contracts are incurred, which
approximates the percentage of completion method.
Solar cells manufactured by the Company are sold to original equipment
manufacturers that assemble the solar cells into modules. Modules are sold to
distributors and value-added resellers. The sale of a module results in
substantially more revenue to the Company than the sale of solar cells due to
the value of the additional materials, labor and overhead added during the
module assembly process. Accordingly, the Company's product sales are affected
not just by changes in total solar cells produced, but by changes in the mix
between solar cells and modules sold. In 1994, the Company commenced
manufacturing modules in substantial quantities as a means of expanding its
customer base. Currently, the gross margin percentages for modules are less
than that of solar cells.
The Company has developed a proprietary process called Silicon-Film(TM) for
the manufacture of sheets of polycrystalline silicon. Wafers made from these
sheets are used in the Company's solar cell manufacturing process. Silicon-
Film(TM) technology has been under development since the Company's inception
in 1983 and, after several successful field tests, Silicon-Film(TM) products
are currently being shipped to selected customers. In order to speed up the
technical and commercial viability of Silicon-Film(TM), the Company
accelerated its commitment to this technology in 1996 by investing $776,000 in
product development, thus contributing to the net loss for the year of $2.4
million. The Company is preparing to expand its Silicon-Film(TM) capacity and
production and expects to lease space in January 1998 for a new plant for
production of Silicon-Film(TM) solar cells, modules and panels. This facility
is being partially funded by the $5.0 million borrowed from Corning.
For the nine months ended September 30, 1997, 70.7% of the Company's product
revenues is generated by sales to customers located outside of the United
States. The Company believes that international sales will continue to account
for a significant portion of its product sales for the foreseeable future.
Current sales are denominated in U.S. dollars and foreign exchange rate
fluctuations have not had an impact on the Company's results of operations.
18
<PAGE>
Substantially all of the Company's revenues from government contracts are
subject to audit under various federal statutes. The Company has received
final approval of its overhead rates through 1993. Audits of 1994 and 1995
rates began in December 1997. It is management's opinion that adjustments to
such revenue, if any, will not have a material adverse effect on the Company's
business, results of operations and financial condition.
As described in Note 13 of Notes to Financial Statements, the Company has
entered into an agreement with Corning that provides for the issuance of stock
options to Corning in return for services performed. The Company's annual and
quarterly operating results may fluctuate as a result of the issuance of
options at exercise prices below the then current fair market value of the
Company's Common Stock.
RESULTS OF OPERATIONS
The following table sets forth selected financial data as a percentage of
total revenues for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales.............. 48.3% 53.9% 58.9% 57.7% 77.1%
Research contracts......... 51.7 46.1 41.1 42.3 22.9
------- ------- ------- -------- --------
Total revenues........... 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Product sales.............. 41.5 45.1 65.1 69.1 55.7
Research contracts......... 32.4 30.4 24.4 24.9 16.1
------- ------- ------- -------- --------
Total cost of revenues... 73.9 75.5 89.5 94.0 71.8
Gross profit............. 26.1 24.5 10.5 6.0 28.2
Operating expenses:
Product development ex-
penses.................... 3.1 3.2 7.3 7.1 6.3
General and administrative
expenses.................. 16.5 14.7 17.7 18.2 11.5
Selling expenses........... 5.3 4.5 6.2 6.1 5.2
------- ------- ------- -------- --------
Income (loss) from opera-
tions................... 1.2 2.1 (20.7) (25.4) 5.2
Other expense................ 1.0 1.1 1.6 1.3 1.4
------- ------- ------- -------- --------
Net income (loss) before
income taxes................ 0.2 1.0 (22.3) (26.7) 3.8
Income taxes................. -- -- -- -- 0.1
------- ------- ------- -------- --------
Net income (loss)............ 0.2% 1.0% (22.3)% (26.7)% 3.7%
======= ======= ======= ======== ========
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996.
Revenues. Total revenues for the nine month period ended September 30, 1997
were $12.1 million, an increase of $4.2 million, or 52.5%, from $7.9 million
for the nine month period ended September 30, 1996. Product sales for the nine
month period ended September 30, 1997 were $9.3 million, an increase of $4.8
million, or 103.8%, from $4.6 million for the nine month period ended
September 30, 1996. The increase in product sales was attributable to
increased levels of production. Research contract revenue for the nine month
period ended September 30, 1997 was $2.8 million, a decline of $581,000, or
17.3%, from $3.4 million for the nine month period ended September 30, 1996.
The decline in research contract revenue was primarily attributable to a
reduction in the Company's contract overhead rates as a result of its ongoing
transformation from a government contractor to a manufacturing company.
Gross Profit. Gross profit for the nine month period ended September 30,
1997 was $3.4 million, an increase of $2.9 million, or 611.5%, from $479,000
for the nine month period ended September 30, 1996. Gross
19
<PAGE>
profit on product sales for the nine month period ended September 30, 1997 was
$2.6 million, an increase of $3.5 million from $(903,000) for the nine month
period ended September 30, 1996. Gross profit margin on product sales for the
nine month period ended September 30, 1997 was 27.7%, as compared to (19.7)%
for the nine month period ended September 30, 1996. During 1996 the Company
significantly increased its staffing and overhead in its manufacturing
operations but did not experience a proportionate increase in manufacturing
output. For several months, the Company's manufacturing costs exceeded the
revenues generated from the sales of such products. In addition, during the
nine month period ended September 30, 1996, the Company reevaluated its
ability to process certain of the silicon wafers in its inventory, and
determined that a downward adjustment in their carrying value of $220,000 was
appropriate. During 1997, the Company began to realize the benefits of the
costs incurred in 1996, as production capacity and output increased
significantly. As a result, the Company was able to realize the significant
increases in product sales noted above without a commensurate increase in
costs.
Gross profit on research contracts for the nine month period ended September
30, 1997 was $825,000, a decrease of $558,000, or 40.4%, from $1.4 million for
the nine month period ended September 30, 1996. Gross profit margin on
research contracts for the nine month period ended September 30, 1997 was
29.7% as compared to 41.2% for the nine month period ended September 30, 1996.
The decrease in gross profit and gross profit margin was attributable to a
reduction in the Company's contract overhead rates as a result of its ongoing
transition to a manufacturing company, which reduced the amount of overhead
expenses that were previously allocated to government contracts.
Product Development Expenses. Product development expenses for the nine
month period ended September 30, 1997 were $755,000, an increase of $189,000,
or 33.5%, from $565,000 for the nine month period ended September 30, 1996.
The increase in product development expenses was attributable to increased
resources dedicated to Silicon-Film(TM) and solar cell manufacturing
engineering.
General and Administrative Expenses. General and administrative expenses for
the nine month period ended September 30, 1997 and 1996 were $1.4 million.
Expenses remained constant as reduced personnel expenses and a reduction in
the provision for bad debt expense were offset by an increase in employee
benefit costs.
Selling Expenses. Selling expenses for the nine month period ended September
30, 1997 were $624,000, an increase of $138,000, or 28.4%, from $486,000 for
the nine month period ended September 30, 1996. The increase in selling
expenses was attributable to increased salary and benefit expenses to
employees as well as sales commissions paid to third parties.
Interest Expense. Interest expense for the nine month period ended September
30, 1997 was $217,000, an increase of $110,000, or 103.2%, from $107,000 for
the nine month period ended September 30, 1996. The increase in interest
expenses was attributable to higher levels of debt outstanding as well as
higher interest rates on the outstanding balances.
Other Income. Other income for the nine month period ended September 30,
1997 was $45,000, an increase of $41,000 from $4,000 for the nine month period
ended September 30, 1996. The increase in other income was attributable to
increased interest income and corresponding cash balances as a result of the
convertible note issued to Corning.
Income Taxes. Income tax expense for the nine month period ended September
30, 1997 was $9,000 as compared with $0 for the nine month period ended
September 30, 1996. The 1997 expense represents the Company's Alternative
Minimum Tax liability.
YEARS ENDED DECEMBER 31, 1996 AND 1995.
Revenues. Total revenues for 1996 were $10.6 million, an increase of
$639,000, or 6.4%, from $9.9 million for 1995. Product sales for 1996 were
$6.2 million, an increase of $882,000, or 16.5%, from $5.4 million for 1995.
The increase in product sales was attributable to increased levels of
production and a shift in product mix from solar cells to modules. Research
contract revenue for 1996 was $4.3 million, a decline of $243,000,
20
<PAGE>
or 5.3%, from $4.6 million for 1995. The decline in research contract revenue
was primarily attributable to the completion of a large contract in 1995.
Gross Profit. Gross profit for 1996 was $1.1 million, a decrease of $1.3
million, or 54.5%, from $2.4 million for 1995. Gross profit on product sales
for 1996 was $(659,000), a decrease of $1.5 million, or (175.5)%, from
$873,000 for 1995. The decrease in product gross profit was attributable to
several factors. First, in preparation for an anticipated increase in
manufacturing output, the Company increased its labor and overhead cost
structure through the hiring of additional personnel. The anticipated increase
in manufacturing output did not occur because the Company experienced
difficulty in purchasing recyclable silicon wafers so that the Company's
revenue level could not support its expanding infrastructure. For several
months, manufacturing costs exceeded revenues generated from the sales of such
products. Second, the Company reevaluated its ability to process certain of
the silicon wafers in its inventory which had been purchased over the
preceding several years and determined that a downward adjustment in their
carrying value of $220,000 was required. The Company has since implemented
significant changes in its wafer procurement activities. Finally, the
Company's Silicon-Film(TM) pilot production activities reduced revenues and
gross margin from the Company's single crystal business. As a result of the
foregoing, gross profit margin on product sales for 1996 was (10.6)%, as
compared to 16.3% for 1995.
Gross profit on research contracts for 1996 was $1.8 million, an increase of
$206,000, or 13.2%, from $1.6 million for 1995. The increase in research
contracts gross profit was attributable to the completion of two projects in
1995 that had large cost-sharing provisions, requiring the Company to fund a
portion of the operating costs of the affected contracts. As a result, gross
profit margin on research contracts for 1996 was 40.6%, as compared to 34.0%
for 1995.
Product Development Expenses. Product development expenses for 1996 were
$776,000, an increase of $462,000, or 147.1%, from $314,000 for 1995. The
increase in product development expenses was attributable to increased
engineering and related resources dedicated toward improving the performance
of the Company's Silicon-Film(TM) products.
General and Administrative Expenses. General and administrative expenses for
1996 were $1.9 million, an increase of $390,000, or 26.5%, from $1.5 million
for 1995. The increase in general and administrative expenses was attributable
to increased salary and employee benefit expenses, combined with an increased
provision for bad debts and less absorption of general and administrative
expenses into self-constructed assets.
Selling Expenses. Selling expenses for 1996 were $660,000, an increase of
$216,000, or 48.6%, from $444,000 for 1995. The increase in selling expenses
was attributable to increased salary expenses resulting from the addition of
additional sales personnel, as well as higher travel costs for employees and
commissions paid to third-parties.
Interest Expense. Interest expense for 1996 was $169,000, an increase of
$53,000, or 45.7%, from $116,000 for 1995. The increase in interest expense
was attributable to higher levels of debt outstanding, as well as higher
interest rates on the outstanding balances.
YEARS ENDED DECEMBER 31, 1995 AND 1994.
Revenues. Total revenues for 1995 were $9.9 million, an increase of $2.8
million, or 39.9%, from $7.1 million for 1994. Product sales for 1995 were
$5.4 million, an increase of $1.9 million, or 56.0%, from $3.4 million for
1994. The increase in product sales was attributable to an approximate 21.0%
increase in solar cell sales and an approximate 165.0% increase in module
sales resulting from a shift in production from a focus primarily on solar
cells to an increased focus on modules. Research contract revenue for 1995 was
$4.6 million, an increase of $914,000, or 24.9%, from $3.7 million for 1994.
The increase in research contract revenue was primarily attributable to a
higher level of contract research as well as the completion in mid-1995 of two
contracts with provisions for the Company to share operating costs.
Gross Profit. Gross profit for 1995 was $2.4 million, an increase of
$576,000, or 31.0%, from $1.9 million for 1994. Gross profit on product sales
for 1995 was $873,000, an increase of $392,000, or 81.5%, from
21
<PAGE>
$481,000 for 1994. The increase in product gross profit was attributable to
increased product shipments resulting from an expansion of the Company's
manufacturing capacity and a related increase in revenues. Gross profit margin
on product sales for 1995 was 16.3%, as compared to 14.0% for 1994. The
increase in gross profit margin was attributable to costs related to the
scale-up of the Company's module manufacturing operations in 1994.
Gross profit on research contracts for 1995 was $1.6 million, an increase of
$200,000, or 14.4%, from $1.4 million for 1994. The increase in research
contracts gross profit was attributable to the completion in mid-1995 of two
contracts with provisions for the Company to share operating costs. Gross
profit margin on research contracts for 1995 was 34.0% a decrease from 37.5%
for 1994. The decrease in gross profit margin was attributable to fixed
overhead rates on certain of the Company's longer-term contracts and the
Company's inability to recover increased operating costs.
Product Development Expenses. Product development expenses for 1995 were
$314,000, an increase of $93,000, or 42.3%, from $220,000 for 1994. The
increase in product development expenses was attributable to an expansion of
the Company's engineering efforts related to its Silicon-Film(TM)products.
General and Administrative Expenses. General and administrative expenses for
1995 were $1.5 million, an increase of $297,000, or 25.3%, from $1.2 million
for 1994. The increase in general and administrative expenses was attributable
to increased salary expenses due to staff additions, higher travel expenses,
higher depreciation as a result of additions to its information systems
hardware, increased insurance expenses and lower absorption of general and
administrative expenses into self-constructed assets.
Selling Expenses. Selling expenses for 1995 were $444,000, an increase of
$68,000, or 18.0%, from $377,000 for 1994. The increase in selling expenses
was attributable to higher levels of advertising and consulting expenses.
Interest Expense. Interest expense for 1995 was $116,000, an increase of
$73,000, or 173.8%, from $42,000 for 1994. The increase in interest expense
was attributable to higher levels of debt outstanding.
Interest and Other Income. Other income for 1995 was $7,000, an increase of
$36,000 from an expense of $(29,000) for 1994. The increase in other income
was attributable to the absence of the amortization of organizational expenses
which were present for 1994.
22
<PAGE>
QUARTERLY RESULTS
The following tables represent the unaudited quarterly results of operations
of the Company for the 11 most recent fiscal quarters ended September 30,
1997. The information has been prepared by the Company on a basis consistent
with the Company's annual audited financial statements and includes all
adjustments, consisting only of normal recurring adjustments, which management
considers necessary for a fair presentation of the information for the periods
presented.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1995 1995 1995 1995 1996 1996 1996 1996 1997 1997 1997
-------- -------- --------- -------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales... $1,162 $1,359 $1,246 $1,589 $1,353 $ 1,559 $1,668 $1,657 $2,481 $3,281 $3,572
Research con-
tracts......... 965 1,097 1,343 1,184 1,094 1,146 1,120 987 1,005 929 845
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Total revenues.. 2,127 2,456 2,589 2,773 2,447 2,705 2,788 2,644 3,486 4,210 4,417
Cost of revenues:
Product sales... 911 1,151 1,152 1,269 1,195 2,566 1,722 1,412 1,821 2,400 2,526
Research
contracts...... 605 787 877 759 618 658 701 603 688 659 606
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Total cost of
revenues....... 1,516 1,938 2,029 2,028 1,813 3,224 2,423 2,016 2,509 3,059 3,132
Gross profit
(loss)......... 611 518 560 745 634 (519) 365 629 977 1,151 1,285
Operating ex-
penses:
Product
development
expenses....... 53 72 61 127 118 230 216 210 247 246 261
General and
administrative
expenses....... 334 383 405 348 465 546 436 414 428 469 502
Selling ex-
penses......... 87 102 114 141 139 177 171 174 174 232 218
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Income (loss)
from
operations..... 137 (39) (20) 129 (88) (1,472) (458) (169) 128 204 304
Other expense.... 18 29 29 33 32 34 38 72 53 54 65
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Net income (loss)
before income
taxes........... 119 (68) (49) 96 (120) (1,506) (496) (241) 75 150 239
Income taxes..... -- -- -- -- -- -- -- -- 1 3 5
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Net income
(loss).......... $ 119 $ (68) $ (49) $ 96 $ (120) $(1,506) $ (496) $ (241) $ 74 $ 147 $ 234
====== ====== ====== ====== ====== ======= ====== ====== ====== ====== ======
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
------------------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1995 1995 1995 1995 1996 1996 1996 1996 1997 1997 1997
-------- -------- --------- -------- -------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales... 54.6% 55.3% 48.1% 57.3% 55.3% 57.6% 59.8% 62.7% 71.2% 77.9% 80.9%
Research
contracts...... 45.4 44.7 51.9 42.7 44.7 42.4 40.2 37.3 28.8 22.1 19.1
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Total revenues.. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Products sales.. 42.8 46.9 44.5 45.8 48.8 94.9 61.8 53.4 52.2 57.0 57.2
Research
contracts...... 28.5 32.0 33.9 27.4 25.3 24.3 25.1 22.8 19.7 15.7 13.7
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Total cost of
revenues....... 71.3 78.9 78.4 73.2 74.1 119.2 86.9 76.2 71.9 72.7 70.9
Gross profit
(loss)......... 28.7 21.1 21.6 26.8 25.9 (19.2) 13.1 23.8 28.0 27.3 29.1
Operating
expenses:
Product
development
expenses....... 2.5 2.9 2.4 4.6 4.8 8.5 7.7 7.9 7.1 5.8 5.9
General and
administrative
expenses....... 15.5 15.6 15.5 12.3 19.0 20.2 15.7 16.1 12.3 10.9 10.9
Selling
expenses....... 4.1 4.2 4.4 5.1 5.7 6.5 6.1 6.6 5.0 5.5 4.9
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Income (loss)
from
operations..... 6.6 (1.6) (0.7) 4.8 (3.6) (54.4) (16.4) (6.8) 3.7 5.1 7.4
Other expense.... 1.0 1.2 1.2 1.3 1.3 1.3 1.4 2.3 1.6 1.6 2.1
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Net income (loss)
before income
taxes........... 5.6 (2.8) (1.9) 3.5 (4.9) (55.7) (17.8) (9.1) 2.1 3.5 5.3
Income taxes..... -- -- -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Net income
(loss).......... 5.6% (2.8)% (1.9)% 3.5% (4.9)% (55.7)% (17.8)% (9.1)% 2.1% 3.5% 5.3%
====== ====== ====== ====== ====== ======= ====== ====== ====== ====== ======
</TABLE>
23
<PAGE>
The Company has experienced substantial product sales growth during the
above periods and has experienced, and may continue to experience,
fluctuations in its quarterly operating results. Such fluctuations are due to
timing of customer orders and shipments, variations in manufacturing
quantities and yields, the impact of government contract cost sharing
requirements and other factors. A large portion of the Company's costs are
fixed in the one to three month time frame and, as a result, fluctuations in
quantities of products manufactured and shipped have resulted, and may in the
future result, in large fluctuations in the Company's quarterly gross margin
and operating results. To date, there has not been any significant seasonality
in the Company's operations.
During 1996, the Company began to increase its manufacturing capacity, which
resulted in a large increase in the cost structure. However, there was not a
commensurate increase in production quantities and as result, the Company's
product gross margin was adversely affected. In the quarter ended June 30,
1996, the Company reevaluated its ability to process certain of the silicon
wafers in its inventory and determined that a downward adjustment in their
carrying value of $220,000 was required. In addition, for several months, the
Company's manufacturing costs exceeded the revenues generated from the sales
of such products. At the same time, the Company reduced the number of its
employees in order to reduce its cost structure.
Beginning in July 1995, a new phase of one of the Company's largest
government contracts allowed the Company's cost sharing requirement to be met
with the purchase of manufacturing equipment, rather than the sharing of
operating costs. As a result, the level of contract gross profit increased
beginning in this quarter. Research contracts gross profit declined during
1997 as a result of the Company's ongoing transition to a commercial
manufacturer, and the corresponding decline in the overhead expenses that were
previously allocated to government contracts.
The operating results for any quarter are not necessarily indicative of
results for any subsequent period or of the Company's overall performance. The
Company's quarterly operating results have varied in the past and may vary in
the future for the same reasons. See "Risk Factors--Potential Fluctuations in
Annual or Quarterly Results."
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $1.4 million, $(970,000) and $5.4 million
as of December 31, 1995, December 31, 1996 and September 30, 1997,
respectively. The Company had cash and cash equivalents of $29,000, $25,000
and $5.1 million for the same respective periods. At September 30, 1997, $5.0
million of the cash balance was restricted for use in connection with the
Company's planned scale-up of its new Silicon-Film(TM) 9 MW plant.
Net cash provided by (used in) operating activities was $(10,000),
$(88,000), $367,000 and $633,000 for the years ended December 31, 1994, 1995,
1996 and the nine months ended September 30, 1997. The net cash from operating
activities represents primarily net income (loss) plus depreciation and is
partially offset by changes in working capital. The fluctuations in cash
provided by or used in operations are due primarily to changes in accounts
receivable, accounts payable, inventories and net income (loss).
Net cash used in investing activities was $947,000, $864,000, $970,000 and
$374,000 for the years ended December 31, 1994, 1995, 1996 and the nine months
ended September 30, 1997, respectively, all of which represented expenditures
for capital equipment. In connection with the establishment of the 9 MW plant,
the Company expects its capital expenditures will increase significantly in
the last quarter of 1997 and for the year ended December 31, 1998. As of
September 30, 1997, the Company's outstanding commitments for capital
expenditures aggregated $500,000. See "Use of Proceeds" and "Risk Factors--
Scale-Up of New Manufacturing Plant."
Net cash provided by financing activities was $500,000, $905,000, $599,000
and $4.8 million for the years ended December 31, 1994, 1995, 1996 and the
nine months ended September 30, 1997, respectively. In August 1997, the
Company issued a convertible note for $5.0 million to Corning, the proceeds of
which will
24
<PAGE>
be used for a portion of the capital required to scale up the 9 MW plant. The
cash provided by financing activities for the years ended December 31, 1994,
1995 and 1996 represented private placements of securities and bank debt.
At December 31, 1996, the Company was not in compliance with covenants
contained in its borrowing agreements with two of its financial lenders.
During 1997, the Company entered into several forbearance agreements with its
primary lender. In November 1997, the Company negotiated a new agreement with
this lender to provide for additional term loan borrowing for equipment
purchases of $250,000 and to increase its line of credit by $200,000. The
maturity date of the new agreement is March 31, 1999. Total amounts
outstanding with this lender at September 30, 1997 were $562,000. During the
term of the agreement, the Company must comply with certain covenants.
In January 1997, the Company renegotiated its borrowing agreement with
another lender. The agreement provides for the borrowing of up to $750,000 for
capital equipment secured by such equipment. At September 30, 1997, the amount
outstanding under this facility was $640,000.
In April 1997, the Company received an advance payment from a customer for
$1.0 million, as part of a $5.0 million supply agreement for the delivery of
products through the end of 1998. This amount will be credited to the customer
against future shipments during the term of the agreement. The customer has
the right to convert any or all of the unapplied advance payment for an
equivalent amount of the Company's Common Stock at the then prevailing market
price.
The Company believes that cash generated from operations, its current cash
balance and the funds available under its bank borrowings, when combined with
the net proceeds to be generated from the Offering, will be sufficient to
satisfy the Company's projected working capital and planned capital
expenditures for the next 24 months.
INCOME TAXES
As of September 30, 1997, net operating loss carryforwards totaling
approximately $4.5 million were available to reduce federal and state taxable
income. The net operating loss carryforwards expire through 2012. The Tax
Reform Act of 1986 and other income tax regulations contain provisions which
may limit the net operating loss carryforwards available to be used in any
given year if certain events occur, including certain changes in ownership
interests. The Company has established a valuation allowance for the entire
amount of the net deferred tax asset since inception.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share", which
specifies the computation, presentation and disclosure requirements for
earnings per share. This statement supersedes Accounting Principles Board
Opinion No. 15 and is effective for financial statements issued for periods
ending after December 15, 1997. This statement requires restatement of all
prior period earnings per share data presented after the effective date. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", was issued in June 1997. The statement establishes
standards for reporting and display of comprehensive income in financial
statements. This statement is effective for the Company's financial statements
for the year ended December 31, 1998. The adoption of this statement is not
expected to have a material effect on the Company's financial statements.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information", was issued in June 1997.
This statement establishes standards for the way public business enterprises
report information about operating segments. It also establishes standards for
related disclosure about products and services, geographical areas, and major
customers. This statement is effective for the Company's financial statements
for the year ended December 31, 1998. The adoption of this statement is not
expected to have a material effect on the Company's financial statements.
25
<PAGE>
EFFECTS OF INFLATION AND EXCHANGE RATES
The Company has not been materially affected by inflation or changes in
foreign exchange rates. However, there can be no assurance that the Company's
business will not be affected by inflation or foreign exchange rates in the
future. See "Risk Factors--International Sales."
YEAR 2000
The Company's current data processing systems are not year 2000 compliant.
The Company believes that, within the next 18 months, it will have to replace
its current systems with new systems that are year 2000 compliant. The cost of
such systems is currently estimated at approximately $500,000.
26
<PAGE>
BUSINESS
The Company develops, manufactures, markets and sells PV solar cells,
modules and panels for generating solar electric power. Solar cells are
semiconductor devices which convert sunlight directly into electricity. Solar
electric power is used off the electric utility grid for many applications in
the communications and transportation industries and in remote villages and
homes. Solar electric power is also used in on-grid applications by existing
electric utility customers to provide a clean, renewable source of alternative
or supplementary electric power.
THE SOLAR ELECTRIC POWER MARKET
PV Energy Systems estimates 1997 worldwide solar electric power industry
shipments at 114 MW, corresponding to system revenues of approximately $1.8
billion. Over the 17 year period since 1980, industry shipments have increased
at a compound annual rate of 22% and are forecast to continue to increase
through the year 2005 at an approximate compound annual rate of 24%. In
particular, it is currently estimated that the solar electric power market has
grown by approximately 30% from 1996 to 1997. The growth of the solar electric
power market is being driven by the expanding number of rapidly growing needs
for electricity off-grid where solar electric power is the most cost-effective
energy source and by widespread demand for an environmentally-friendly
alternative source of on-grid electricity. Current demand for solar electric
power systems significantly exceeds aggregate industry manufacturing capacity.
The Company expects that, due to its low-cost Silicon-Film(TM) products, it
will experience revenue growth rates in excess of the market's overall growth
rate.
The use of solar electric power in commercial applications has grown over
the past two decades from initial satellite power supplies to a diversified
industry serving a large variety of terrestrial applications. Solar electric
power systems supply electrical power using only sunlight as "fuel", producing
electricity even under low light conditions on cloudy days. Because of their
reliability, modularity, low maintenance and lack of conventional fuel
requirements, such systems are used for a wide variety of stand-alone (not
connected to a utility network or grid) applications where conventional
sources of power are impractical or too expensive.
Solar electric power systems compete in their commercial use with other
sources of off-grid electric power, such as diesel engine generators. Solar
electric power systems are also used to supplement power from electric utility
grids. The electric power industry comprises one of the world's largest
industrial segments, with annual equipment revenues in excess of $200 billion.
Currently, annual shipments of electric power equipment, as defined by
equipment capacity, are approximately 90,000 MW. By contrast, shipments of
solar electric power systems are only about 0.1% of the electrical generating
capacity installed each year. Since the scale of solar electric power
shipments is very small compared to that of the electric power equipment
industry as a whole, small changes in solar electric power cost can have a
material impact on the size of the solar electric power equipment industry.
SOLAR ELECTRIC POWER PRODUCTS
The solar electric power industry sells four main classes of products: solar
cells, modules, panels and systems. Solar cells are semiconductor devices that
convert light, usually sunlight, directly into electricity according to a
phenomenon of physics known as the photovoltaic effect. The rated power of the
typical solar cells ranges from 1.0 to 3.3 watts. Modules are assemblies of
solar cells connected together and encapsulated in a weatherproof package. The
rated power of typical modules ranges from 50 to 120 watts. Industry revenues
in 1997 at the module level are estimated to be approximately $500.0 million.
Panels are assemblies of several modules connected together. Solar electric
power systems typically include one or more modules, a storage battery and
electric equipment for power conditioning and control. As noted above, 1997
industry revenue at the system level is estimated to be $1.8 billion.
27
<PAGE>
SOLAR ELECTRIC POWER PRODUCTS
[LOGO DIPICTING SOLAR ELECTRIC POWER PRODUCTS]
ASTROPOWER'S MANUFACTURING TECHNOLOGY
The conventional processing technology used to process raw silicon into
wafers comprises one-half to two-thirds of the total cost of a solar cell. The
raw material is formed into ingots of single crystal silicon, or blocks of
polycrystalline silicon, and must be sawed into wafers in a time-consuming and
costly process that also results in significant waste of material. As solar
cell sizes become larger, the limitations of the ingot-forming process and the
wafer sawing process become more acute and add significantly more expense. The
Company has developed new technology that it believes avoids costs inherent in
conventional silicon wafer processing and provides an important competitive
advantage in the solar electric power market. The Company believes it is
uniquely positioned to capture increasing market share as a result.
NEW LOW-COST SILICON-FILM(TM) TECHNOLOGY. The Company's Silicon-Film(TM)
technology involves a continuous production process to manufacture crystalline
silicon sheets and layers. This proprietary process is designed to
substantially reduce wafer cost while retaining the appearance, performance,
stability and reliability of conventionally-manufactured silicon wafers. The
Company believes that its proprietary Silicon-Film(TM) process is different
from any other process presently identified for producing solar cells and that
its Silicon-Film(TM) technology offers a number of advantages for both wafer
and solar cell production including:
Low-cost raw material. The Silicon-Film(TM) process does not require
the use of high-purity silicon as raw material feedstock for the
process.
Continuous process. Silicon-Film(TM) technology is a continuous sheet
manufacturing process, leading to lower capital cost and lower
manufacturing cost than conventional batch processes.
Size versatility. Silicon-Film(TM) wafers and solar cells can be
manufactured to virtually any desired size (at least up to 12" by 24").
This provides the ability to make a large variety of solar cell and
module designs, capturing economies of scale in both manufacturing and
material utilization.
Ease of scale-up. The Silicon-Film(TM) process uses equipment that is
easily scaled up for large volume production of wafers.
Technology base. The Silicon-Film(TM) process capitalizes on an
existing base of silicon material technology and market experience
already established for the solar cell and semiconductor industries.
Potential for new products. Silicon-Film(TM) technology offers the
promise of a series of new products based on improvement of existing
technology and development of next-generation technologies.
28
<PAGE>
RECYCLED SEMICONDUCTOR WAFER TECHNOLOGY. The Company also manufactures
silicon solar cells using wafers recycled from the semiconductor industry. The
Company has developed a sequence of proprietary processes that allows these
recycled wafers to be fabricated into high performance solar cells. By using
recycled wafers, it is not necessary to prepare bulk silicon which must be
subsequently sawed into wafers. In addition, an external source of supply
allows for flexible manufacturing, where production can be rapidly increased
without the purchase of expensive crystal growing, casting or sawing
equipment. As a result of these advantages, the Company believes that by
purchasing recycled wafers its silicon wafer costs are less than those for
wafers produced by other companies for the manufacture of solar cells.
Commercial sales of such products by the Company started in 1989. For the
first nine months of 1997 solar cell and module revenues from recycled wafers
represented 93.4% of the Company's total product sales.
BUSINESS STRATEGY
The Company's goal is to become the leading supplier of high-quality, low-
cost solar cells and modules. To achieve this goal, the Company intends to:
CAPITALIZE ON THE ADVANTAGES OF THE SILICON-FILM(TM) PROCESS. The Company
intends to capitalize on the advantages of its unique proprietary Silicon-
Film(TM) process. These include (i) lower cost, which the Company believes
will allow it to capture increasing market share while achieving favorable
gross margins, and (ii) size scaleability, providing a broader range of
product sizes, shapes and power ratings from a high-volume manufacturing
process that is amenable to extensive automation.
RAPIDLY EXPAND MANUFACTURING CAPACITY. The Company is building a 9 MW
capacity Silicon-Film(TM) plant, and is expanding the capacity of its existing
single crystal silicon solar cell manufacturing line. These two expansions
will approximately triple the Company's aggregate production capacity over the
next 12 months. The Company is also planning significant additional capacity
expansion in 1999 which would further increase capacity by a factor of two or
more.
ADD NEW STRATEGIC CUSTOMERS. The Company plans to continue to sequentially
acquire targeted new strategic customers including module manufacturing
companies, system integrators and distributors, as its manufacturing volume
scale-up allows. New customers will be selected to further broaden the
Company's presence in high growth market segments. The Company intends to use
this customer acquisition strategy to diversify its customer base
geographically and across all major market segments.
INCREASE SALES VOLUME WITH EXISTING CUSTOMERS. Following the initial
acquisition of a strategic customer, the Company seeks to build sales volume
over time by transitioning from a secondary supplier to a primary supplier to
each customer and by increasing each customer's volume through the referral of
sales leads.
DEVELOP THE ASTROPOWER BRAND. The Company intends to broaden and extend its
"AstroPowered" promotional campaign to (i) create brand identity and awareness
as a technology and cost leader in solar electric power products and (ii)
assist the Company's OEM customers and distributors in promoting their
products to end users through association with the Company's "AstroPowered"
brand and technical leadership.
DEVELOP NEXT-GENERATION SILICON-FILM(TM) TECHNOLOGIES. The Company believes
that its present Silicon-Film(TM) products are the first generation of a
series of new products that it will develop using its technical expertise and
proprietary technology. Intended future products will advance the state-of-
the-art in Silicon-Film(TM) solar cell technology and enhance its competitive
position in the solar electric power industry.
29
<PAGE>
PRODUCTS AND PRODUCT STRATEGY
The Company designs, manufactures, markets and sells solar cells, modules and
panels. Since their initial development, solar cells and modules have
progressively increased in size. This trend is primarily due to two factors:
(i) the ability to form and slice larger ingots of silicon has advanced
considerably over the past two decades, driven largely by the semiconductor
industry's switch from 4" wafers to 6" wafers, and most recently to 8" wafers;
and (ii) larger solar cells are generally more cost effective, since per-unit
handling and processing costs are spread over more watts per cell, and since
certain module assembly costs can be allocated over more watts.
SOLAR CELLS. From 1991 through 1995, the Company introduced three generations
of progressively larger single crystal silicon solar cells. The latest of these
products, the AP-106, was the first six inch solar cell to be commercially
introduced, and remains to this date the largest and most powerful solar cell
commercially available.
HISTORICAL EVOLUTION OF ASTROPOWER'S SINGLE CRYSTAL SILICON SOLAR CELLS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
GRAPH GRAPH GRAPH
- ---------------------------------------------------------------------
Product AP-104 AP-105 AP-106
- ---------------------------------------------------------------------
Introduction date 1991 1993 1995
- ---------------------------------------------------------------------
Nominal size 4" 5" 6"
- ---------------------------------------------------------------------
Nominal power (watts) 1.4 2.0 3.3
</TABLE>
The AP-225 is the Company's first Silicon-Film(TM)solar cell to be produced
in volume. As of November 30, 1997, more than 130,000 of these solar cells have
been produced and shipped to customers as fully assembled modules and panels.
The Company has begun to supply its key solar cell customers with AP-225
samples, and plans to formally introduce this product in the first half of
1998. The Company intends to introduce the AP-225 as a lower-cost, higher-power
alternative to five inch single crystal silicon solar cells, currently the
standard component for supply to independent module assembly companies.
Although larger in area than five inch single crystal solar cells, AP-225
Silicon-Film(TM) solar cells can be assembled into modules utilizing the same
basic equipment and production processes.
PLANNED EVOLUTION OF ASTROPOWER'S SILICON-FILM(TM) SOLAR CELLS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
GRAPH GRAPH
- --------------------------------------------------------------------------------
Product AP-225 Large Area Solar Cell
- --------------------------------------------------------------------------------
Nominal size 6" 12" X 24"
- --------------------------------------------------------------------------------
Nominal power (watts) 2.25 18
</TABLE>
30
<PAGE>
One of the Company's key product strategies is to continue to exploit
economies of scale in solar cell manufacturing. The Company believes that
Silicon-Film(TM) technology is uniquely capable of achieving solar cell sizes
larger than any other crystalline silicon technology, and that this represents
a significant cost advantage for the Company. The Company has incorporated
this strategy into the marketing message printed on its promotional material,
which reads: "AstroPower--The Large Solar Cell Company."
The Company plans to continue to capitalize on the scaleability of the
Silicon-Film(TM) process by developing solar cell configurations larger than
6^ . The Company has fabricated 12^ by 24^ Silicon-Film(TM) solar cells in the
laboratory. Such large-area solar cells may either be utilized directly in
panels for use in grid-connected applications, or cut into a variety of
smaller sizes for assembly into modules covering a range of rated power. The
Company believes that the planned next-generation product configuration will
have two primary advantages compared with other currently available solar
cells: (i) economies of scale to reduce manufacturing cost; and (ii)
flexibility of size to meet a broad range of end-use configuration
requirements more effectively than its competitors.
MODULES. Module sales represent an important complement to the Company's
solar cell business. Presently, the Company primarily manufactures and sells
two types of modules. The Company's AP-7105 contains 36 series-connected 5^
single crystal solar cells and is rated at 75 watts, which is the most common
type of 12-volt battery charging module sold today. The AP-1206 contains 36
series-connected 6^ single crystal solar cells and is rated at 120 watts. The
Company has also begun selling limited quantities of modules incorporating
Silicon-Film(TM) solar cells.
The Company's strategy is to sell fully-assembled modules to distributors
and system integrators in those regions around the world such as the U.S.,
Japan and Central America which do not yet have a large number of independent
module assemblers. The Company currently sells approximately 50% of its total
solar cell production in the form of assembled modules.
PANELS. The Company recently introduced a large area panel consisting of
four individual modules mounted on a common mechanical support structure and
electrically interconnected at the factory. The rated power of this product
ranges from 300 watts to 450 watts, depending on the specific model, and is
designed to be the largest increment of PV capacity which can be handled and
installed by two people.
The Company's strategy is to design and sell panels for use in large arrays
such as the grid-connected residential rooftop systems being marketed by GPU
Solar, a joint venture between the Company and GPU International.
SOLAR ELECTRIC POWER APPLICATIONS
Solar cells, modules and panels are utilized in a wide range of end-use
applications, which can be grouped into three primary market segments: Remote
Electric Power, Grid-Connected Power and Consumer Electronics. The Remote
Electric Power market segment is typically divided into segments:
Communications and Transportation Infrastructure and Village & Home. The
following table shows (i) the breakdown of 1997 industry shipments into these
market segments, (ii) the historical compounded annual growth rate by segment
for the period 1993 through 1997 and (iii) the projected compounded annual
growth rate by segment through the year 2000, according to PV Energy Systems.
<TABLE>
<CAPTION>
ESTIMATED PROJECTED
1993 - 1997 -
ESTIMATED 1997 % OF TOTAL 1997 2000
MARKET SEGMENT SHIPMENTS SHIPMENTS CAGR CAGR
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Remote Electric Power 86MW 76% 13% 19%
Communications and
Transportation
Infrastructure 41 MW 36% 12% 13%
Village & Home 45 MW 40% 15% 23%
- ------------------------------------------------------------------------------
Grid-Connected Power 22 MW 19% 53% 40%
- ------------------------------------------------------------------------------
Consumer Electronics 6 MW 5% 5% 0%
</TABLE>
31
<PAGE>
REMOTE ELECTRIC POWER MARKET SEGMENT. The Remote Electric Power market
segment involves the use of solar electric power systems to supply electricity
in locations not served by the utility grid. Historically, the most common
method of supplying power in such locations has been diesel generator sets.
However, in remote locations where regular transportation of fuel is expensive
or impractical, or in locations where no trained maintenance personnel are
available, or if electricity is required only sporadically, or if only a
relatively small amount of electricity is required, solar electric power
systems can supply electricity at lower cost because of two inherent
advantages compared with diesel generators. These advantages include (i) solar
electric power systems require very little maintenance and no fuel, and (ii)
unlike diesel generators, which typically have a minimum rated output of 5,000
to 10,000 watts, and which do not operate efficiently when partially loaded or
sporadically utilized, solar electric power systems are highly modular, having
typical generating capacity increments of 50 to 75 watts. Accordingly, solar
electric power systems can be configured to supply the exact amount of energy
required for a particular application.
There are two primary application groups within the Remote Electric Power
market segment: Communication and Transportation Infrastructure and Village &
Home.
SELECTED SOLAR ELECTRIC POWER APPLICATIONS AND USES IN THE REMOTE ELECTRIC
POWER MARKET SEGMENT
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Communication and . Repeater stations for line-of-sight data communication radio-
Transportation links
Infrastructure
. Repeater stations on fiber-optic data transmission lines
. Base stations and repeaters for cellular and personal
communication service ("PCS") networks
. Direct broadcast satellite communication networks
. Emergency call boxes located on highways or in other public
areas
. Monitoring, telemetry and remote actuation systems for
highways; railroads; oil and gas pipelines; water reservoirs,
tributaries and tanks; electricity transmission and
distribution networks
. Navigation radio beacons for airline traffic control,
illuminated obstruction lights on towers and chimneys, runway
lights for remote airfields and illuminated beacons for marine
navigation on buoys and lighthouses
. Portable warning signs used at highway construction sites
. Lighting systems for compounds, streets, parking lots,
billboards and signs
- -------------------------------------------------------------------------------------
Village & Home . ""Solar Home Systems" supplying basic services such as light,
Applications radio and television
. Coleman(TM)-style "solar lanterns"
. Wireless pay telephones
. Deep-well pumps for potable water
. Vaccine refrigeration, lighting and medical equipment for
health clinics
. Schools
. Remote (off-grid) homes
. Vacation cabins
. Battery charging on boats and RVs
</TABLE>
32
<PAGE>
Growth in the Communication and Transportation Infrastructure market segment
is expected to be driven by the proliferation of wireless communications
products and services, and by increased efforts within the transportation
industry to optimize the economic utilization of fixed assets through system
automation. Growth in the Village & Home market is expected to be driven by
economic growth in the developing world, increasing availability of system
financing and maturation of the distribution infrastructure for system
installation and maintenance.
GRID-CONNECTED POWER MARKET SEGMENT. Grid-connected applications relate to
the utilization of solar electric power systems in locations where electricity
is already available from a utility grid. Most grid-connected solar electric
power systems are located on single-family homes or are integrated into the
exterior surface of commercial buildings. Power generated by such systems can
be utilized directly at the site or sold back into the utility grid for other
consumers to use. Grid-connected solar electric power systems may also include
a small amount of battery storage to provide power during a utility outage.
Most grid-connected solar electric power systems generate only a portion of
the annual electrical energy consumed at the site. However, in some cases,
homes or buildings with such systems actually become net providers of energy
to the utility grid.
There are many factors which affect the cost of solar electric power in
grid-connected installations, including system installation cost, sunlight
availability, financing cost and tax issues. However, the installed cost of
grid-connected solar electric power systems will have to be reduced by
approximately a factor of two before significant market penetration can be
expected. It is the Company's belief that if this cost goal can be achieved,
the market for grid-connected solar electric power systems could expand
dramatically.
The Company believes that growth in the Grid-Connected Power market segment
for the foreseeable future will be driven by public interest in the
environment, government policies and utility industry restructuring. Most
grid-connected solar electric power systems are currently installed in Japan,
Europe and the U.S. under a variety of subsidy programs. In Japan, over 10,000
residential grid-connected solar electric power systems are being installed
annually under a government program offering a subsidy of approximately 30% of
the total system cost. In Germany and Switzerland, over 40 municipalities and
states offer "rate-based" incentive programs for consumers who install solar
electric power systems. In the U.S., a utility consortium named Utility
PhotoVoltaic Group has funded over $64 million in projects since 1995, and
several states, including California and Arizona, have enacted legislation to
provide incentives for increased utilization of grid-connected solar electric
power systems. The U.S. federal government recently proposed a "Million Solar
Roofs" program which, if implemented, would sharply increase the number of
grid-connected solar electric power systems installed in the U.S.
CONSUMER ELECTRONIC MARKET SEGMENT. The Consumer Electronic market segment
comprises a variety of applications where solar electric power is used for
small consumer products such as calculators, radios, watches and toys. Such
applications are often novelty applications for solar electric power that
require only small amounts of electricity. They do not require higher-power
solar electric power products such as those manufactured by the Company.
CUSTOMERS
The Company sells its solar cells and modules to a limited group of key
customers. These customers are distribution or module manufacturing companies
that either sell to other marketing intermediaries or directly to end users.
The Company classifies its customers into one of three types: (i) independent
local module manufacturing companies ("MODCOs"); (ii) system integrators; and
(iii) distributors. The table below explains the role of each of these types
of customers in the distribution of the Company's products.
33
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF THIS TYPE IN
THE COMPANY'S CURRENT
CUSTOMER TYPE CUSTOMER DESCRIPTION TOP TEN CUSTOMERS
------------------------------------------------------------------------------
<C> <S> <C>
MODCO Purchases solar cells from the 5
Company and assembles them into
finished modules
------------------------------------------------------------------------------
System Integrator Purchases finished modules from 3
the Company and incorporates them
into solar electric power
systems.
------------------------------------------------------------------------------
Distributor Purchases finished modules from 2
the Company and resells them to
lower volume users including home
owners, OEMs and other
professional customers.
</TABLE>
The Company uses a "tiered" customer acquisition and growth strategy aimed
at acquiring new key customers while growing volume with existing customers.
First, the Company targets new customers who provide access to high growth
market segments while maintaining geographical diversity. Often a new supply
relationship with such a customer is as a secondary product supplier. Once a
successful supply relationship has been established, the Company's objective
is to become the primary product supplier to each new key customer, growing
volume within each account through a progressively increased share of each
customer's business. The combination of growth within each account and
selective new customer acquisition drives the Company's strategy for rapid
sales growth.
Sales to the Company's ten largest customers accounted for approximately
41.7%, 44.0%, 46.0% and 70.2% of its total revenues in fiscal 1994, 1995 and
1996, and the nine months ended September 30, 1997, respectively.
During fiscal 1994 and 1995, Showa Solar Energy K.K., a Siemens AG affiliate
based in Singapore, accounted for 25.0% and 10.4% of the Company's total
revenues, respectively. During fiscal 1996, Tata BP Solar, an Indian joint
venture of British Petroleum Co. p.l.c. and the Tata Group, accounted for
12.9% of the Company's total revenues. During the nine months ended September
30, 1997, Solar Fabrik, an independent MODCO based in Germany; Photocomm,
Inc., a systems integrator located in Arizona and Atersa, an independent
Spanish MODCO, accounted for 19.2%, 13.8% and 10.9% of the Company's total
revenues, respectively. No other customers represented more than 10% of the
Company's total revenues for any such periods. The Company expects that sales
of its products to a limited number of customers will continue to result in a
high concentration of net sales to relatively few customers for the
foreseeable future, and that the loss of certain of these customers could have
a material adverse effect on the Company's business, results of operations and
financial condition. See "Risk Factors--Dependence on Key Customers; Customer
Concentration."
A large percentage of the Company's product sales are to international
customers. For the year ended December 31, 1996 and for the nine months ended
September 30, 1997, the approximate geographic breakdown of product revenue is
shown in the table below:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
REGION DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------------------------------------------------------------------------
<S> <C> <C>
North America 13.2% 29.3%
----------------------------------------------------------------------------------
Europe 49.4% 58.7%
----------------------------------------------------------------------------------
Africa 6.6% 6.0%
----------------------------------------------------------------------------------
Asia 30.7% 6.0%
</TABLE>
The Company anticipates that international customers will continue to
account for the majority of product sales for the foreseeable future.
34
<PAGE>
MARKETING, SALES AND CUSTOMER SUPPORT
The Company markets its products through trade shows, on-going customer
communications, promotional material, direct mail and advertising. In
addition, the Company's customer service and applications engineering
personnel provide support to customers and gather information on current
product performance and future product requirements. Sales of the Company's
solar cells and modules are handled by an internal sales force based at the
Company's offices in Newark, Delaware and in Germany.
MANUFACTURING AND RESEARCH FACILITIES
The Company's research and development and manufacturing facilities are
currently located at its Newark, Delaware headquarters. The solar cell line
used to manufacture solar cells, the module production facility and the pilot
Silicon-Film(TM) production line are located at this facility. The
manufacturing facility includes a full complement of equipment for solar cell
and module manufacturing and is continually upgraded to improve capacity and
product quality. Included in this facility are equipment to condition wafers
by mechanical and chemical means, tube furnaces for diffusion, equipment for
effecting junction edge-isolation, continuous process screen-printing and
firing equipment for applying electrical contacts to solar cells, coating
deposition equipment for applying anti-reflection coating on solar cells, a
solar cell tester and tabbing/stringing, lamination and test equipment for
assembling modules.
The Company is scaling-up a new 9 MW plant that will be solely dedicated to
the production of Silicon-Film(TM) wafers, solar cells and modules. This
facility will utilize manufacturing technology and equipment developed during
the pilot phase of Silicon-Film(TM) production with the addition of mechanized
and automated product handling and manufacturing enhancements to improve
productivity and quality. The Company believes that a dedicated high-volume
plant is necessary to manufacture the volume of Silicon-Film(TM) product it
expects to sell. Such a single-purpose plant is expected to improve quality by
focusing worker training and product improvement activities in a manner not
possible in a multi-product manufacturing facility. Initial production from
the new plant is planned to start in the second quarter of 1998 and to reach
capacity in 1999. The Company plans additional major capacity expansion in
1999 to accommodate increases in sales of Silicon-Film(TM) product anticipated
in future years. The Company anticipates that its new plants will be in the
immediate area of its existing Newark, Delaware location.
The research and development portion of the Newark, Delaware facility is
equipped with standard semiconductor device development, fabrication and
evaluation equipment, including wafer polishing facilities; seven liquid phase
epitaxial growth systems for silicon and III-V compounds; tube furnaces for
diffusion, oxidation, alloying, and heat treatment; photolithography
equipment, vacuum (thermal, e-beam, and magnetron sputtering) deposition for
metals and antireflection coatings; plating baths for obtaining low resistance
contacts; and standard process evaluation equipment including a scanning
electron microscope with energy dispersive spectroscopy capability. The wafer
production pilot line facility includes high volume wafer production equipment
that is being operated for pilot production of Silicon-Film(TM) wafers and
associated equipment for handling and sizing of wafers before they are
transferred to solar cell manufacturing.
QUALITY ASSURANCE
The Company intends to maintain its reputation as a manufacturer and
supplier of quality products and to continuously improve the quality of its
products and services. Quality testing starts with the wafer, is continued at
several steps during solar cell and module manufacturing, and is implemented
at each solar cell and module manufacturing step by the staff directly
responsible for the daily operation of the manufacturing line. Each operator
is trained to recognize and report on the quality of his or her work. Process
control issues are communicated to technicians, engineering personnel,
supervisors and co-workers and this team works together to effect an immediate
corrective action and eliminate the cause of the problem.
Quality assurance measures have enabled the Company to achieve international
and domestic product certifications for many of its modules. In June 1996, the
Commission of European Communities ("CEC") issued
35
<PAGE>
Qualification Certificates for environmental stability and performance for the
Company's standard module types AP-1106, AP-1206, AP-6105, and AP-7105. In
August, 1996 the Company received UL listing for the Company's standard module
types AP-1106, AP-1206, AP-6105 and AP-7105. In August 1997, the Company
received UL listing for Silicon-Film(TM)module products. UL listing confirms
that the Company's modules meets the UL 1703 Standard for Flat-Plate
Photovoltaic Modules and Panels. The Company intends to submit all new module
products for such approval.
STRATEGIC ALLIANCES
The Company has leveraged, and plans to continue to leverage, its resources
in manufacturing technology, marketing and sales of solar electric power
products through collaborative agreements with corporate partners and
customers. It has developed several strategic alliances which the Company
feels will substantially assist in commercializing its Silicon-Film(TM)
technology. Such strategic alliances aid the Company by providing access to
technology, markets, customers and useful competitive information that
otherwise would be difficult or expensive to obtain. The Company has the
following ongoing manufacturing and technology relationships:
CORNING INCORPORATED. In August 1997, the Company and Corning entered into
agreements (the "Corning Agreements") under which the Company borrowed $5.0
million from Corning and which provide that Corning will provide research,
development, engineering and manufacturing assistance to the Company for a
three year period. The two companies will work jointly to accelerate the
implementation and ramp-up of a new manufacturing facility for the Company
which will produce photovoltaic solar cells and modules based on the Company's
Silicon-Film(TM) technology.
Corning manufactures optical fiber and photonic components, high-performance
glass and components for televisions, and other electronic displays and
equipment; advanced materials for scientific and environmental markets; and
consumer products. Corning's total revenues in 1996 were $3.7 billion.
The Corning Agreements provide that the Company and Corning each grant to
the other a non-exclusive and royalty free worldwide license with respect to
new technology developed pursuant to the Corning Agreements which is either
owned by Corning or the Company or jointly owned by the Company and Corning
with respect to products relating to photovoltaic energy cells, modules and
arrays, but which does not involve a license to the Company's existing
technology including its Silicon-Film(TM) technology.
With respect to each project under the Corning Agreements in which Corning
elects to participate at the Company's request, Corning shall be compensated
monthly in the form of options to purchase shares of the Company's Common
Stock based on man-years of personnel contributed by Corning to the project.
The $5.0 million borrowed from Corning is to be used towards the
engineering, design, lease, construction or expansion of facilities and
purchase of equipment and related tooling or working capital devoted to the
manufacture of products derived from the Company's Silicon-Film(TM)
technology. The loan is for four years with interest at 7% per annum and is
convertible into Common Stock of the Company at a conversion price per share
equal to the lesser of (i) $9.00 or (ii) 75% of the price per share to the
public in an initial public offering of Common Stock by the Company. In the
event the loan remains unpaid after the due date, the Company, if requested by
Corning, shall grant to Corning a non-exclusive license to use all of the
Company's Silicon-Film(TM) intellectual property under fair market terms and
conditions as then shall be negotiated. Corning has a security interest in
certain physical assets.
Until the loan from Corning is repaid or converted by Corning into the
Company's capital stock, Corning has certain first offer rights to provide
equity financing for the Company and with respect to any sale or merger of the
Company or sale or licensing of its technology or assets.
If the Company sells more than 5% of its capital stock or other securities
convertible into more than 5% of its capital stock, Corning may, at its
option, purchase all or part of such securities. On August 19, 1999, the 5%
36
<PAGE>
exclusion expires and thereafter Corning's rights apply to all sales of the
Company's equity securities. Corning also has a right of first offer in respect
of any merger, consolidation or similar transaction involving the Company, or a
sale of its assets or business, or a sale or licensing of the Company's
Silicon-Film(TM) technology.
The Company has the right to prepay the Corning loan anytime after August 19,
1999 upon sixty days notice to Corning. Upon prepayment or conversion of the
loan, Corning's rights described in the previous paragraph expire.
In conjunction with the Corning loan and Corning Agreements described above,
Corning has not entered into a standstill agreement prohibiting its acquisition
of Company stock from third parties.
The Company must notify Corning of any subsequent financing needs or of any
plans or proposals involving any of the other transactions described above and
the terms on which the Company is willing to enter into any such transaction,
and Corning has thirty days to express its intent to participate and if so, to
what extent or not to participate in such transaction. In the event that
Corning declines to participate in such transaction, the Company is free for a
period of one year after the date of its notice to Corning to consummate such
transaction or transaction(s) with third parties under terms no more favorable
to such third parties as the Company had proposed to Corning.
GPU INTERNATIONAL. In July 1997, the Company and GPU International, Inc.
("GPUI") concluded an agreement to form a 50/50 joint venture named GPU Solar
to develop, manufacture, and test market grid-connected residential rooftop PV
systems for the U.S. market using the Company's solar electric power modules.
GPUI is an unregulated subsidiary of General Public Utilities ("GPU"), a major
New Jersey based electric utility company and one of the top 10 independent
power developers world-wide. During the first year of operation, GPU Solar
plans to install between 20 and 40 pilot systems (approximately 100 kW total)
in several locations around the country. All of these systems will utilize the
Company's large area Silicon-Film(TM)panels. The Company believes that GPU's
expertise involving electrical system design and installation will help
facilitate the development of high reliability, low cost PV products
appropriate for use in typical U.S. residences, and that GPUI's power marketing
experience and credibility will help GPU Solar develop its strategy for this
rapidly growing market segment.
COMPETITION
The market for solar electric power components and systems is intensely
competitive. The Company believes that this market will continue to be
intensely competitive, particularly if products with significant cost or
performance advances are developed. The Company also believes that while a
single technology (single crystal silicon) has been dominant throughout the
industry's approximately 20 year history, this market will be characterized by
future technological change. See "Risk Factors -- Technological Change and
Competing Technology" and " -- Competition."
A number of large U.S., Japanese, and European companies are actively engaged
in the development, manufacturing and marketing of solar electric power
components and systems. These include Siemens Solar Industries, Amoco/Enron
Solar, Kyocera Corporation, British Petroleum Co. p.l.c., Sanyo Electric Co.,
Ltd., Sharp Corp., Shell Solar Energy B.V., ASE GmbH (an affiliate of RWE) and
Canon. All of these companies have significantly greater resources to devote to
the research, development, manufacturing and marketing than the Company. There
are also a large number of smaller companies involved in both the development
of, as well as the ongoing manufacturing and marketing of, solar electric power
components and systems.
There are a variety of competing technologies currently under active
development by a large number of organizations. These technologies include
amorphous silicon, cadmium telluride and copper indium diselenide, as well as
advanced concepts for both bulk (ingot based) and thin film crystalline
silicon. Any of these competing
37
<PAGE>
technologies could theoretically achieve manufacturing costs per watt lower
than the Silicon-Film(TM) technology developed by the Company.
The Company believes that the principal competitive factors in the market for
solar electric power components are the following: price per watt; long term
stability and reliability, product performance (primarily conversion
efficiency); ease of handling/installation; product quality; and reputation.
CONTRACT RESEARCH AND DEVELOPMENT
The Company selectively pursues contract research programs funded by third
parties to help support the development of new technical capabilities and
products. These programs have been selected to complement and enhance the
Company's long-term development strategy under conditions that permit the
Company to retain the technology it develops. Substantial third-party funding
has been received from various agencies of the U.S. government. Total sums
expended for research, development and manufacturing engineering in the years
ended December 31, 1994, 1995 and 1996 and for the nine months ended September
30, 1997 were $2.5 million, $3.3 million, $3.3 million and $2.7 million,
respectively. Of those amounts, approximately $2.3 million, $3.0 million, $2.6
million and $2.0 million respectively, were externally funded and are a
component of contract revenue and approximately $220,000, $314,000, $776,000
and $755,000 respectively were internally funded expenditures by the Company.
The Company's research and development effort is divided into two areas:
Advanced Silicon-Film(TM) Solar Cell Products and Advanced Optoelectronic
Products.
ADVANCED SILICON-FILM(TM) SOLAR CELL PRODUCTS. The Company believes that its
present Silicon-Film(TM) products are the first generation of a series of
future products that it will develop using its technical expertise and
proprietary technology. The Company believes that these products will advance
the state-of-the-art in Silicon-Film(TM)solar cell technology and provide it
with new products to enhance the Company's competitive position in the solar
electric power business. A portion of this research has been and is currently
funded by the Department of Energy through subcontracts administered by the
National Renewable Energy Laboratory in Golden, Colorado.
The designs of future generation Silicon-Film(TM) products are characterized
by thin (less than 150 micrometer) layers of crystalline silicon on a low-cost
substrate and incorporate various other materials to enhance the current- and
power-generating efficiency of the solar cells. These advanced solar cells are
expected to result in materials and manufacturing cost reductions on a per watt
basis relative to the Silicon-Film(TM) products presently manufactured by the
Company. The Company is also developing new designs for solar modules using its
advanced solar cell technology which incorporate thin solar cells and new
interconnection methods. New designs will enable lower cost modules, which the
Company believes will lead to new portable solar power applications.
ADVANCED OPTOELECTRONIC PRODUCTS. Optoelectronic products combine optical
processing and electronic processing within a single device. Familiar examples
of optoelectronic products or devices are the remote channel switching unit
used to change channels on a television set and the numerical displays of
common digital home appliances such as microwave ovens or digital alarm clocks.
The Company is developing several optoelectronic devices based upon energy
conversion from light into electrical signals. Funding for most of this
research has come from third parties, including the National Science
Foundation, the Department of Commerce through the National Institute of
Science and Technology, the Department of Energy, the Department of the Air
Force, the National Aeronautics and Space Administration, the Ballistic Missile
Defense Organization and the Defense Advanced Research Products Agency. The
optoelectronic products under investigation and development by the Company are
focused on specialized market opportunities,
38
<PAGE>
primarily military applications at the present time. There can be no assurance
that such products will ever become revenue-generating commercial products.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company's policy is to protect its technologies by filing patent
applications with respect to technology considered important to business
development. The Company also relies upon unpatented know-how, continuing
technological innovation and the pursuit of licensing opportunities in order to
develop and maintain its competitive position. The Company has been awarded ten
U.S. patents in the field of photovoltaics and had three patents pending as of
September 30, 1997. The Company decides on a case-by-case basis whether and in
what countries it will file foreign counterparts of a U.S. patent application.
International counterparts of four issued patents have been filed under the
Patent Cooperation Treaty. The Company will continue to file other U.S. and
international patent applications to protect technology it considers important
to providing a market advantage for its products. The Company believes that its
patents offer it a competitive advantage but there can be no assurance that any
patents, issued or in process, will not be intentionally circumvented or
infringed upon by others.
In addition to patent protection, the Company relies on the law of unfair
competition and trade secrets to protect its proprietary rights. The Company
considers several elements of the Silicon-Film(TM)manufacturing process to be
trade secrets. The Company attempts to protect its trade secrets and other
proprietary information through non-disclosure agreements with customers,
suppliers and consultants and limits dissemination of information to a need-to-
know basis. Although the Company seeks to protect its proprietary information,
there can be no assurance that others will not either develop independently the
same or similar information or obtain access to information that the Company
believes is proprietary.
Employees are required to sign confidential information non-disclosure
agreements upon the commencement of employment with the Company. The Company's
non-disclosure agreements provide that all confidential information developed
or made known to the individual during the course of the individual's
relationship with the Company is to be kept confidential and not disclosed to
third parties except in specific circumstances. In the case of employees, the
agreements provide that all inventions made by the individual shall be the
exclusive property of the Company. There can be no assurance, however, that
these agreements will provide meaningful protection for the Company's trade
secrets or adequate remedies in the event of unauthorized use or disclosure of
such information.
Silicon-Film(TM) is a trademark of the Company.
SUPPLY AND COST OF SILICON WAFERS AND OTHER RAW MATERIALS
The Company purchases and recycles silicon wafers from the semiconductor
industry for use in its single crystal solar cell manufacturing processes.
Although the Company has generally been successful in obtaining sufficient
quantities of quality wafers in the past, there can be no assurance that such
wafers will be available at cost effective prices in the future. The absence of
cost effective sources of supply and the inability of the Company to locate
alternative sources of low-cost, high-quality wafers could have a material
adverse effect on the Company's business, results of operations and financial
condition.
The Company presently has multiple sources of supply for its required raw
materials, including silicon, although for economic and quality control reasons
the Company utilizes single sources of supply for certain materials. In
situations where it relies on single sources of supply, the Company believes
that an adequate supply of materials is available to meet its foreseeable needs
and, to date, the Company generally has been able to obtain supplies of such
materials in a timely manner. There can be no assurance that supplies of the
Company's critical materials will be adequate in the future or that the cost of
such materials will remain low enough for the Company to maintain a cost-
competitive market position for its solar electric power products.
ENVIRONMENTAL REGULATIONS
The Company uses, generates and discharges toxic, volatile or otherwise
hazardous chemicals and wastes in its research and development and
manufacturing activities. Therefore, the Company is subject to a variety of
39
<PAGE>
federal, state and local governmental regulations related to the storage, use
and disposal of these materials. The Company believes that it has all the
permits necessary to conduct its business. However, failure to comply with
present or future regulations could result in fines being imposed on the
Company, suspension of production or a cessation of operations. The Company
believes that it has properly handled its hazardous materials and wastes and
has not contributed to any contamination at its premises. The Company is not
aware of any environmental investigation, proceeding or action by federal or
state agencies involving these premises. However, under certain federal and
state statutes and regulations, a governmental agency may seek recovery and
response costs from both operators and owners of property where releases of
hazardous substances have occurred or are ongoing. Any failure by the Company
to control the use of, or to restrict adequately the discharge of, hazardous
substances could subject it to substantial financial liabilities and could
have a material adverse effect on the Company's business, results of
operations and financial condition.
EMPLOYEES
As of September 30, 1997, the Company had 153 full time employees, of whom
31 were engaged in research and development, 104 in manufacturing, four in
sales and marketing and 14 in administration. None of the Company's employees
are covered by collective bargaining agreements. The Company has experienced
no work stoppages and believes that its employee relations are good.
Ten of the Company's management and professional employees have advanced
degrees in engineering and science, including six Ph.D.s. To date, the Company
has been able to attract the scientific, engineering, technical and other
personnel required by its business. Such experienced professionals are in
demand and the Company must compete for their services with other
organizations which may be able to offer more favorable salary and benefits.
Historically, turnover among technical and professional employees has been
low.
BACKLOG
Backlog for the Company's products as of September 30, 1996 and 1997 totaled
$2.4 million and $4.1 million, respectively. The Company's product backlog as
of October 31, 1997 was approximately $6.5 million. Backlog for the Company's
research contracts as of September 30, 1996 and 1997 totaled $3.5 million and
$1.1 million, respectively. Backlog for products consists of purchase orders
for which a customer has scheduled delivery within the next 12 months. Orders
included in the backlog may be canceled or rescheduled by customers without
significant penalty. Backlog for government contracts consists of signed, open
contracts only. Backlog as of any particular date should not be relied upon as
indicative of the Company's net revenues for any future period.
FACILITIES
Since July 1991, the Company's administrative, research and manufacturing
facilities have been located in a 40,000 square foot, one-story building built
by and leased from University of Delaware, Newark, Delaware. The term of the
lease is 20 years with an option by the Company to cancel at the end of nine
years (July 2000). The annual cash rental payment for 1996 was $187,800 and
increases approximately 6% each year. See "Note 8 of Notes to Financial
Statements."
The Company contemplates the establishment of a new manufacturing facility
in 1998, in addition to the present facility. See "Risk Factors--Scale-Up of
New Manufacturing Plant", "Use of Proceeds" and "Business--Manufacturing and
Research Facilities."
LEGAL PROCEEDINGS
The Company is not a party to any material litigation and is not aware of
any pending or threatened litigation against the Company that could have a
material adverse affect upon the Company's business, operating results or
financial condition.
40
<PAGE>
MANAGEMENT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Dr. Allen M. Barnett............ 57 President and Chief Executive Officer
and Director
Dr. George W. Roland............ 58 President and Chief Executive Officer,
Solar Power Business and Director
Peter C. Aschenbrenner.......... 42 Vice President, Marketing and Sales
Louis C. DiNetta................ 47 Vice President, Advanced Optoelectronic
Products
Dr. Robert B. Hall.............. 56 Vice President, Chief Scientist
Thomas J. Stiner................ 43 Vice President and Chief Financial Officer
Dr. George S. Reichenbach (1)... 68 Director
Charles R. Schaller............. 61 Director and Secretary
Clare E. Nordquist (1) (2)...... 62 Director
Gilbert H. Steinberg (1) (2).... 66 Director
</TABLE>
- --------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Dr. Allen M. Barnett is a founder of the Company and has served as its
President and Chief Executive Officer and as a director since the Company's
incorporation as a separate entity in 1989. From 1983 to 1989, Dr. Barnett
served as General Manager of the AstroPower Division of Astrosystems, Inc.
From 1976 to 1993, Dr. Barnett was a Professor of Electrical Engineering at
the University of Delaware. From 1976 to 1979, Dr. Barnett served as Director
of the Institute of Energy Conversion at the University of Delaware. Dr.
Barnett is a technical expert in thin-film materials and devices and has been
active in photovoltaic research and development since 1975, during which time
he has been awarded 21 U.S. patents, authored or co-authored numerous
technical publications and garnered several professional awards. Dr. Barnett
is Chairman of the Solar Energy Industries Association and serves on a number
of national and international committees in the field. Dr. Barnett received a
B.S. and M.S. in Electrical Engineering from the University of Illinois, and a
Ph.D. in Electrical Engineering from Carnegie Institute of Technology.
Dr. George W. Roland has served as President and Chief Executive Officer of
the Company's Solar Power Business since 1996 and was elected a director in
March 1997. From 1995 to 1996, Dr. Roland served as Vice President and General
Manager of the Company's Solar Power Business. From 1993 to June 1995 Dr.
Roland served as President of Siemens Solar Industries L.P., an affiliate of
Siemens Corporation (USA). Prior to that, Dr. Roland served in various
positions, including Vice President and Division Manager of the Metalworking
Systems Division, at Kennametal, Inc. Dr. Roland began his industry career in
1968 as a research and development engineer at Westinghouse Electric
Corporation's Research and Development Center in Pittsburgh, Pennsylvania,
throughout which time he has been awarded 15 U.S. patents and has authored
numerous technical publications. Dr. Roland received a B.S. in Geology from
Acadia University and a Ph.D. in Geological Science from Lehigh University.
Peter C. Aschenbrenner has served as Vice President, Marketing and Sales
since 1995. From 1994 to 1995 Mr. Aschenbrenner served as Director of
Marketing with the Company. From 1991 to 1994, Mr. Aschenbrenner served in a
number of capacities with Siemens Solar Industries, L.P., including Director
of Marketing from 1992 to 1994 and Director of Technology Development from
1991 to 1992. From 1988 to 1990, Mr. Aschenbrenner served as a Managing
Director of PV Electric GmBH, a joint venture between Siemens AG and Arco
Solar, Inc. Mr. Aschenbrenner received a B.A. in Product Design from Stanford
University.
41
<PAGE>
Louis C. DiNetta has served as Vice President, Advanced Optoelectronic
Products since 1996. He joined the AstroPower Division of Astrosystems, Inc.
in 1985. Mr. DiNetta is responsible for the research and development of new
photonic energy conversion devices and related optoelectronic products. From
1976 to 1985, Mr. DiNetta worked at the Institute of Energy Conversion at the
University of Delaware, where he was responsible for planning and organization
of device fabrication, as well as process and equipment development to support
various research projects. Mr. DiNetta received a B.S.A.S. in Physics from the
University of Delaware.
Dr. Robert B. Hall has served as Vice President and Chief Scientist since
joining the AstroPower Division of Astrosystems, Inc. in 1983. Dr. Hall's
responsibilities include research and development of thin-film crystalline
materials and ceramic structures for thin-film polycrystalline devices. From
1974 to 1983, Dr. Hall served as Manager, Device Development at the Institute
of Energy Conversion at the University of Delaware. Dr. Hall has more than 18
years of solar cell development experience. His accomplishments include
development of copper sulfide/cadmium sulfide CdS as the first thin film solar
cell with greater than 10.0% conversion efficiency, development of the first
zinc phosphide solar cell and the development of a reliable deposition process
for copper indium selenide solar cells. Dr. Hall received a B.A. in Physics
from Gettysburg College and an M.S. and Ph.D. in Physics from the University
of Delaware.
Thomas J. Stiner has served as Chief Financial Officer of the Company since
December 1997. From June 1993 to November 1997, Mr. Stiner served as
Controller and Treasurer. Mr. Stiner was elected Vice President in 1995. From
1984 to 1993 Mr. Stiner served as a Senior Manager at KPMG Peat Marwick LLP.
Mr. Stiner is a Certified Public Accountant and received a B.S. in Business
Administration from Bloomsburg University.
Dr. George S. Reichenbach has served as a director of the Company since
1989. Mr. Reichenbach is a Senior Vice President of Advent International
Corporation, a venture capital firm, and serves as a director of Progressive
Systems Technology, a semiconductor capital equipment manufacturer.
Previously, Dr. Reichenbach worked at the Massachusetts Institute of
Technology where he served as an Assistant Professor and Associate Professor
of Mechanical Engineering. Dr. Reichenbach received a B.S. in Mechanical
Engineering from Yale University and a Ph.D. in Mechanical Engineering from
the Massachusetts Institute of Technology.
Charles R. Schaller has served as Secretary and a director of the Company
since 1989. Mr. Schaller is a management consultant specializing in the
petrochemicals industry and a venture developer concentrating in the area of
specialty materials, and serves as Chairman of the Board of Directors of
Medarex Inc., a publicly held biotechnology firm. From 1985 to 1989, Mr.
Schaller served as President and Chief Operating Officer of Essex Vencap,
Inc., a venture development subsidiary of Essex Chemical Corporation. Mr.
Schaller has more than 33 years of experience in sales, marketing, management,
business and venture development and management consulting in the chemical,
petrochemical and specialty materials areas. Mr. Schaller received a B.E. in
Chemical Engineering from Yale University and is a graduate of the Harvard
Business School Program for Management Development.
Clare E. Nordquist has served as a director of the Company since 1995. Mr.
Nordquist is the Managing General Partner of Materia Ventures Associates LP, a
venture capital partnership specializing in advanced technology materials
companies and serves as a director of Leading Edge Ceramics, LLC, a
manfacturer and distributor of ceramic powders and shapes; Minco Acquisition
Corporation, the parent of numerous companies which manufacture fused silica
and fused magnesia; and Viox Corporation, a custom producer of electronic
grade, high purity glass powders utilized primarily in electronics
applications. Mr. Nordquist received a B.S. in Ceramic Engineering from the
University of Washington and an M.B.A. from the University of Denver.
Gilbert Steinberg has served as a director of the Company since 1989. Mr.
Steinberg is Vice President and Chief Financial Officer of Astrosystems, Inc.,
which is a manufacturer of electronic, electromechanical and power conversion
devices. Mr. Steinberg is the founder of Mentortech, Inc., a publicly held
company specializing in software development and computer training consulting.
Mr. Steinberg received a B.S. in Industrial Engineering at the Massachusetts
Institute of Technology and an M.S. in Mathematics from Adelphi College.
42
<PAGE>
All directors hold office until the next annual meeting of stockholders or
until their successors have been elected. Officers serve at the discretion of
the Board of Directors. There are no family relationships between any of the
directors or executive officers of the Company. The Company does not currently
pay any cash or other compensation to its directors for serving in that
capacity. The Board of Directors has a Compensation Committee that makes
recommendations concerning salaries and incentive compensation for executive
officers of the Company and administers the Company's employee stock plans and
an Audit Committee that reviews the results and scope of the audit and other
services provided by the Company's independent auditors. Dr. Reichenbach and
Mr. Nordquist are the designees of Advent International Corporation and Arete
Ventures, Inc., respectively, and were elected directors pursuant to the 1989
Stock Purchase Agreement relating to the purchase of shares of Series A
Redeemable Convertible Preferred Stock.
The Amended and Restated By-Laws of the Company provide for a classified
Board of Directors. At the 1998 annual meeting of stockholders, the directors
shall be divided into three classes, as nearly equal in number as possible,
with the directors of the first class elected for a term of one year, the
directors of the second class elected for a term of two years, and the
directors of the third class elected for a term of three years. Thereafter,
following such initial classification and election, directors elected to
succeed those directors whose terms expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders after
their election.
The classified Board of Directors may have the effect of deterring or
delaying any attempt by any group to obtain control of the Company by a proxy
contest since a third party would be required to have its nominees elected at
two separate annual meetings of the Board of Directors in order to elect a
majority of the members of the Board of Directors. See "Risk Factors--Anti-
takeover Effect Delaware Law and of Certain Charter and By- Law Provisions."
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Chief Executive Officer of the Company and those other executive officers
of the Company whose total salary, bonus and other compensation earned for
1994, 1995 or 1996 exceeded $100,000:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATIONYEAR SECURITIES
--------------------------- UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION($) (1)
- ------------------------- ---- ---------- --------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Dr. Allen M. Barnett..... 1996 $225,819(2) $25,275(2) 21,000 $2,375
President and Chief 1995 232,378(2) 43,531(2) 21,000 2,310
Executive Officer 1994 188,403(2) 29,039(2) 21,000 2,310
Dr. George W. Roland..... 1996 139,034 15,000 187,500 2,375
President and Chief 1995 63,173(3) 30,000 60,000 527
Executive Officer,
Solar Power Business
Peter C. Aschenbrenner... 1996 106,779 7,000 -- 1,416(4)
Vice President,
Marketing and Sales 1995 96,833 12,000 -- 1,626(4)
1994 79,285 10,000 37,500 45,712(4)
Thomas J. Stiner......... 1996 80,800 20,000 7,500 2,375
Vice President and Chief 1995 75,004 8,000 -- 2,168
Financial Officer 1994 64,509 10,000 15,000 --
</TABLE>
- --------
(1) Includes matching contributions by the Company under its 401(k) Plan.
(2) Dr. Barnett elected to postpone receipt of salary payments of $69,876,
$64,755 and $79,047, as well as all bonus amounts for the years ended
December 31, 1994, 1995 and 1996.
(3) Dr. Roland joined the Company in June 1995.
(4) Includes $1,200 annual expense allowance for all years and for 1994,
relocation reimbursement of $44,512. In addition to these amounts, the
Company paid moving expenses of $22,098 for Mr. Aschenbrenner.
43
<PAGE>
STOCK OPTIONS
The following table provides information regarding grants of stock options
made during the fiscal year ended December 31, 1996 to the persons named in
the Cash Compensation Table above:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
NAME GRANTED (#) FISCAL YEAR SHARE ($) DATE 5% ($) 10% ($)
---- ----------- ------------- --------- ---------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Allen M. Barnett.... 21,000 5.7% $3.12 1/1/06 $ 71,400 $ 152,320
Dr. George W. Roland.... 187,500 51.1% 4.00 5/1/06 472,500 1,195,000
Peter C. Aschenbrenner.. -- -- -- -- -- --
Thomas J. Stiner........ 7,500 2.0% 4.00 4/1/06 18,900 47,800
</TABLE>
- --------
(1) Options awarded under the Plan generally provide for vesting over a period
of four years, with vesting occurring 25% per year on the anniversary date
of the option award. The Board of Directors has the discretion, subject to
plan limits, to modify the terms of outstanding options. The options
listed for Dr. Barnett are immediately vested. The options listed for Dr.
Roland vest upon the effective date of the Registration Statement of which
this Prospectus is a part.
(2) All options were granted with an exercise price equal to the fair market
value of the Common Stock as determined by the Board of Directors on the
date of grant, other than those granted to Dr. Barnett. In determining the
fair market value of the Common Stock, for which no trading market
existed, the Board of Directors took into consideration such factors as
the most recent sale prices and preferences of the Company's Preferred
Stock, recent results of operations and other relevant data. The options
granted to Dr. Barnett were granted in connection with an amendment to his
employment agreement in 1991. The option price approximates the average
price per share paid by the purchasers of Series A Redeemable Convertible
Preferred Stock, which price was in excess of the fair market value of the
Common Stock on the date of grant.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the 10-year option term. The assumed 5%
and 10% rates of stock appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent the Company's
estimate of the future Common Stock price. This table does not take into
account any appreciation in the price of the Common Stock to date, which
exceeds the hypothetical gains shown in the table.
OPTION EXERCISES AND HOLDINGS
The following table sets forth, for each person named in the Cash
Compensation Table above, information regarding the exercise of stock options
during the fiscal year ended December 31, 1996 and the year-end value of
unexercised options. No options were exercised by the Named Executive Officers
during 1996:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT YEAR-END (#) OPTIONS AT YEAR END ($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Allen M. Barnett.... -- -- 147,000 -- $129,360 --
Dr. George W. Roland.... -- -- 15,000 232,500 -- --
Peter C. Aschenbrenner.. -- -- 18,750 18,750 -- --
Thomas J. Stiner........ -- -- 30,000 22,500 -- --
</TABLE>
- --------
(1) Calculated on the basis of the fair market value of the Common Stock at
December 31, 1996 of $4.00 per share, as determined by the Company's Board
of Directors, minus the per share exercise price, multiplied by the number
of shares underlying the option. See note 2, "Option Grants in Last Fiscal
Year."
44
<PAGE>
BENEFIT PLANS
STOCK OPTION PLAN. The Company adopted a Stock Option Plan (the "Plan") in
1989 under which a total of 1,200,000 shares are currently reserved for
issuance to employees, including officers and directors who are employees or
consultants. Options granted pursuant to the Plan may be either incentive
stock options or non-qualified stock options. The Plan is administered by the
Compensation Committee of the Board of Directors which selects the employees
to whom the options are granted, determines the number of shares subject to
each option, sets the time or times when the options will be granted,
determines the time when the options may be exercised and establishes the
market value of the shares at the date of grant and exercise date. The Plan
provides that the purchase price under the option shall be at least 100
percent of the fair market value of the shares of the Company's Common Stock
at the date of grant. The options are not transferable. There are limitations
on the amount of incentive stock options that an employee can be granted in a
single calendar year. The term of each option granted under the Plan is
determined by the Compensation Committee, but in no event may such term exceed
ten years. Options granted under the Plan generally provide for vesting in
four equal annual installments beginning on the first anniversary of the date
of grant. As of September 30, 1997, options to purchase an
aggregate of 1,149,778 shares were outstanding at a weighted average exercise
price of $3.87 per share and 30,021 shares remained available for future
option grants under the Plan.
COMPENSATORY STOCK PLAN. Prior to the adoption of the Plan in 1989, the
Company had a compensatory stock plan for the issuance of shares to employees
and consultants. At September 30, 1997, the only remaining obligation under
this plan was the reservation of 39,999 shares for issuance to a former
consultant of the Company.
RETIREMENT SAVINGS PLAN. The Company maintains a Retirement Savings Plan
(the "401(k) Plan") which is intended to qualify under Section 401(k) of the
Internal Revenue Code. Employees of the Company who have attained age 21 and
completed at least one month of service with the Company are eligible to make
contributions to the 401(k) Plan on a pre-tax basis of up to 15% of the
participant's compensation in any year in accordance with limitations defined
in the Code. Under the 401(k) Plan, the Company may make a discretionary
contribution to this plan. The total contribution made by a participant and by
the Company on behalf of that participant cannot exceed the lesser of 25% of
the participant's annual compensation or $30,000 for any one plan year. The
pre-tax contributions made by a participant, the discretionary contribution
made by the Company and the earnings thereon are at all times fully vested. A
participant's fully vested benefit under the 401(k) Plan may be distributed to
the participant upon his retirement, death, disability or termination of
employment or upon reaching age 59 1/2.
At December 31, 1996, the Company had accrued a contribution to the 401(k)
Plan of $66,822. The Company's contribution on behalf of the Named Executive
Officers were as follows: Dr. Allen M. Barnett--$2,375; Dr. George W. Roland--
$2,375; Peter Aschenbrenner--$216; Thomas J. Stiner--$2,375.
EMPLOYMENT ARRANGEMENTS
Dr. Allen M. Barnett entered into a new employment agreement with the
Company effective April 1, 1997 providing for a base salary of $175,000 per
year. The agreement is for an initial term ending March 31, 2000. After the
initial term, the agreement will continue in effect for an indefinite period
until the Company or Dr. Barnett elects to terminate the agreement by written
notice to the other party at least six months prior to the effective date of
termination. Other principal terms of the agreement provide for yearly vesting
of options to purchase 37,500 shares of the Company's Common Stock at $5.33
per share and yearly bonuses of not less than $50,000 if contemplated
financial or other objectives determined each year by the Board of Directors
and Dr. Barnett are achieved. In the event of the termination of the agreement
due to disability or death, Dr. Barnett or his estate would be entitled to
receive his base salary for the longer of the remaining term of the agreement
or two years plus all other compensation and benefits in the case of
disability and a pro rata portion in the case of death. In the event of
termination due to a change of control of the Company, Dr. Barnett would be
entitled to a lump sum payment of one year's salary and bonus, a payment of
salary and bonus from the date of termination through the remaining term of
the agreement and the immediate vesting of all remaining options. In the event
of termination, other than for death or disability, Dr. Barnett is restricted
from competing with the Company for one year thereafter.
45
<PAGE>
Dr. George W. Roland entered into an employment agreement with the Company
effective May 1, 1996, providing for a base salary of $155,000 per year for an
unspecified term. In the event of termination for any reason other than cause,
as defined in the employment agreement, the Company must pay him nine months
salary. Dr. Roland was granted a non-qualified option to acquire 187,500
shares of the Company's Common Stock, all of which will vest and be
exercisable upon the effective date of a registration statement covering the
Company's first bona fide, firm commitment, public offering of Common Stock
("Public Offering") or if the Company merges or consolidates into or with, or
sells or transfers all or substantially all of its assets to, or transfers all
of its capital stock to, another corporation or entity which is not an
affiliate of the Company ("Sale"). If the Company terminates his employment
within twelve months prior to such Public Offering or Sale and he was not
terminated for cause, he shall continue to be vested with respect to all his
options upon the effective date of the Registration Statement relating to the
Public Offering or the effective date of a Sale. If he voluntarily terminates
his employment prior to such Public Offering or Sale he forfeits all rights to
such options. All vested options are exercisable, in whole or part in, at a
price of $4.00 per share upon the following terms and conditions (i) at any
time for a period of seven years following the completion of the Public
Offering or Sale, provided that he is employed by the Company at the time of
such exercise, (ii) at any time for a period of two years following the
completion of the Public Offering or Sale provided that he shall have been
terminated by the Company, other than for cause, within the twelve months
preceding such Public Offering or Sale, or (iii) at any time for a period
equal to the lesser of two years from the date of his termination from the
Company, or seven years from the date of the Public Offering or Sale, provided
that he shall not have been terminated by the Company for cause and he shall
have been employed by the Company at the time of such Public Offering or Sale.
Dr. Roland also was granted a qualified option to purchase 60,000 shares of
the Company's Common Stock at $4.00 per share in connection with his initial
employment in June 1995.
The Board of Directors has approved a 1997 bonus plan for Drs. Barnett and
Roland in an amount of up to $50,000 each, measured against a set of
performance criteria agreed to by Drs. Barnett and Roland and the Board of
Directors.
The Company's employment agreements with Dr. Barnett and Dr. Roland and its
employment arrangements with other executive officers and significant
employees impose customary confidentiality obligations and provide for the
assignment to the Company of all rights to any technology developed by the
employee during the time of his or her employment.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to the Delaware General Corporation Law the Company has adopted
provisions in its Amended and Restated Certificate of Incorporation that
eliminate the personal liability of its directors and officers to the Company
and its stockholders for monetary damages for breach of the directors'
fiduciary duties in certain circumstances. The Company's Amended and Restated
By-Laws require the Company to indemnify its directors, officers, employees
and other agents to the fullest extent permitted by law.
The Company believes that the limitation of liability provisions in its
Amended and Restated Certificate of Incorporation and the indemnification
provisions of its Amended and Restated By-Laws will enhance the Company's
ability to continue to attract and retain qualified individuals to serve as
directors and officers.
There is no pending litigation or proceeding involving a director, officer
or employee of the Company to which the indemnification agreements would
apply. The Company plans to procure officers' and directors' liability
insurance coverage.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company consists of Messrs. Nordquist,
Reichenbach and Steinberg. During the fiscal year ended December 31, 1996, no
executive officer of the Company served on the board of directors or
compensation committee of another company that had an executive officer
serving on the Company's Board of Directors or Compensation Committee.
46
<PAGE>
CERTAIN TRANSACTIONS
At September 30, 1997, the Company owed its President $554,357, in the form
of salary, bonus and automobile reimbursements. The amounts are related to the
excess of his salary and bonus and auto allowance over the amounts actually
paid from July 1990 to March 1997. On December 15, 1997, the Company agreed
that one-third of this amount will be paid per year in each of 1998, 1999 and
2000, with interest on the unpaid balance at 6% per annum from January 1,
1998.
At September 30, 1997, the Company owed Astrosystems, Inc. $58,000 in
principal and $39,523 in accrued interest under the terms of an unsecured
promissory note.
47
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of September
30, 1997, and as adjusted to reflect the sale of the Common Stock being
offered hereby (assuming no exercise of the Underwriters' over-allotment
option) by (i) each shareholder who is known by the Company to own
beneficially 5% or more of the outstanding shares of Common Stock, (ii) each
of the Company's directors, (iii) each Named Executive Officer and (iv) all
directors and officers of the Company as a group. Except as otherwise
indicated, the Company believes that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING OWNED AFTER OFFERING
----------------------------- ---------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT (1) NUMBER PERCENT (1)
- ------------------------------------ -------------- -------------- --------- -----------
<S> <C> <C> <C> <C>
Astrosystems, Inc. (2)..... 1,193,750 21.2% 1,193,750 14.3%
1220 Market Street, Suite
603
Wilmington, DE 19801
The Dow Chemical Company... 560,833 10.0% 560,833 6.7%
2030 Dow Center
Midland, MI 48674
Entities Affiliated with
Advent International
Corp.(3).................. 477,081 8.5% 477,081 5.7%
101 Federal Street
Boston, MA 02110
Entities Affiliated with
Materia Ventures
Associates (4)............ 159,069 2.8% 159,069 1.9%
3435 Carillon Point
Kirkland, WA 98033
Dr. Allen M. Barnett (5)... 1,435,206 25.5% 1,435,206 17.2%
Dr. George W. Roland (6)... 30,000 * 30,000 *
Peter C. Aschenbrenner
(7)....................... 28,125 * 28,125 *
Louis C. DiNetta (8)....... 14,625 * 14,625 *
Robert B. Hall (9)......... 87,251 1.6% 87,251 1.1%
Thomas J. Stiner (10)...... 40,313 * 40,313 *
Dr. George S. Reichenbach
(3)....................... 477,081 8.5% 477,081 5.7%
Charles R. Schaller........ 5,250 * 5,250 *
Clare E. Nordquist (4)..... 159,069 2.8% 159,069 1.9%
Gilbert Steinberg (2)...... 1,193,750 21.2% 1,193,750 14.3%
All directors and officers
as a group
(ten persons) (11)........ 3,470,670 61.6% 3,470,670 41.7%
</TABLE>
- --------
* Less than one percent.
(1) Applicable percentage of ownership is based on 5,630,504 shares of Common
Stock outstanding (assuming conversion of all the outstanding shares of
Series A Redeemable Convertible Preferred Stock and Series B Convertible
Preferred Stock on a one-for-one basis) as of September 30, 1997 and
8,330,504 shares of Common Stock outstanding after completion of the
Offering and treats as outstanding all shares (277,313) issuable on
exercise of options exercisable within 60 days of the date of this
Prospectus held by beneficial owners that are included in the first
column.
48
<PAGE>
(2) Represents 1,193,750 shares held by Astrosystems, Inc. Mr. Steinberg, a
director of the Company, is an officer, director and shareholder of
Astrosystems, Inc. and disclaims beneficial ownership of shares held by
Astrosystems, Inc. except to the extent of his pecuniary interest therein.
(3) Includes the ownership by the following venture capital funds managed by
Advent International Corporation: 89,095 shares owned by Adhill Limited
Partnership, 59,396 shares owned by Adval Limited Partnership, 59,396
shares owned by Advent Future Limited Partnership, 1,909 shares owned by
Advent International Investors Limited Partnership, 89,095 shares owned by
Advent Performance Materials Limited Partnership, 89,095 shares owned by
Adwest Limited Partnership and 89,095 shares owned by World Technology
Limited Partnership. In its capacity as manager of these funds, Advent
International Corporation exercises sole voting and investment power with
respect to all shares held by these funds. Dr. Reichenbach is a Senior
Vice President of Advent International Corporation, a venture capital
firm, which is the manager of the funds affiliated with the Advent
International Group. Dr. Reichenbach disclaims beneficial ownership of the
shares held by the Advent International Group except to the extent of his
pecuniary interest therein.
(4) Represents an aggregate of 159,069 shares held by two limited partnerships
of which Materia Ventures Associates is the general partner. Mr. Nordquist
is the Managing General Partner of Materia Ventures Associates and
disclaims beneficial ownership of the shares held by Materia Ventures
Associates except to the extent of his pecuniary interest therein.
(5) Includes 1,181,365 shares held by a family trust of which Dr. Barnett is a
beneficiary and also 162,750 shares subject to currently exercisable
options within 60 days from the date of this Prospectus.
(6) Includes 30,000 shares subject to options within 60 days from the date of
this Prospectus.
(7) Includes 28,125 shares subject to options within 60 days from the date of
this Prospectus.
(8) Includes 10,125 shares subject to options within 60 days from the date of
this Prospectus.
(9) Includes 6,000 shares subject to options within 60 days from the date of
this Prospectus.
(10) Includes 40,313 shares subject to options within 60 days from the date of
this Prospectus.
(11) Includes an aggregate of 277,313 shares held by all directors and
officers that are subject to options exercisable within 60 days from the
date of this Prospectus. See notes 4 through 9 above.
49
<PAGE>
DESCRIPTION OF CAPITAL STOCK
CAPITAL STOCK
Effective upon the consummation of the Offering, the Company's authorized
capital stock will consist of 25,000,000 shares of Common Stock, par value
$.01 per share, and 5,000,000 shares of Preferred Stock, par value $.01 per
share.
As of September 30, 1997, there are 3,707,156 shares of Common Stock
outstanding (5,353,191 after giving effect to the conversion of outstanding
shares of Preferred Stock) held by approximately 200 stockholders of record.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share for each share
held of record on all matters submitted to a vote of stockholders.
Accordingly, holders of a majority of the shares of Common Stock entitled to
vote in any election of directors may elect all of the directors standing for
election. Subject to preferential rights with respect to any outstanding
Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor and are entitled to share ratably in the assets of the
Company legally available, after payments of all debts and other liabilities,
for distribution to its stockholders in the event of a liquidation,
dissolution or winding up of the Company. Holders of Common Stock have no
cumulative voting rights nor any preemptive, subscription, redemption or
conversion rights. All outstanding shares of Common Stock are, and the shares
of Common Stock offered hereby by the Company upon completion of the Offering
will be, validly issued, fully paid and non-assessable. The rights,
preferences and privileges of holders of Common Stock are subject to, and may
be adversely affected by, the rights of the holders of shares of any series of
Preferred Stock which the Company may designate and issue in the future.
PREFERRED STOCK
Prior to the Offering, there were issued and outstanding two series of
Preferred Stock, consisting of 1,309,626 shares of Series A Redeemable
Convertible Preferred Stock and 336,409 shares of Series B Convertible
Preferred Stock. The two series of Preferred Stock were held by 36 and 58
shareholders, respectively. Each share of Series A Redeemable Convertible
Preferred and Series B Convertible Preferred Stock will be automatically
converted into one share of Common Stock (1,646,035 shares of Common Stock in
the aggregate) upon the completion of the Offering and such shares of
Preferred Stock will no longer be outstanding.
Upon the completion of the Offering, the Company will have the authority to
issue up to 5,000,000 shares of so-called "blank-check" preferred stock which
authorizes the Board of Directors to establish one or more series of Preferred
Stock and to fix and determine the relative rights, preferences and
limitations of each class or series so authorized without any further vote or
action by the stockholders. The Board of Directors may issue Preferred Stock
with voting and conversion rights which could adversely affect the voting
power of the holders of Common Stock and have the effect of delaying or
preventing a change of control of the Company. After the completion of the
Offering, no shares of Preferred Stock will be outstanding. All of the shares
of Series A Redeemable Convertible Preferred Stock and Series B Convertible
Preferred Stock that are currently outstanding will be considered as retired
after the conversion. The Company has no current intention to issue any shares
of Preferred Stock.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
CERTAIN ANTI-TAKEOVER PROVISIONS. The Company is subject to the provisions
of Section 203 of the Delaware General Corporation Law. Section 203 prohibits
certain publicly held Delaware corporations from engaging in a "business
combination" with an "interested stockholder" for a period of three years
after the date of the transaction in which the person became an "interested
stockholder", unless the business combination is approved in a prescribed
manner. A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an "interested stockholder" is a person or
entity who, together with affiliates and associates, owns or within the three
years prior to the date on which the determination of whether such person is
an interested stockholders is being made, did own 15% or more of the
corporation's voting stock. This statute contains provisions enabling a
corporation to avoid the statute's restrictions if the stockholders holding a
majority of the corporation's voting stock approve an amendment to the
corporation's Certificate of Incorporation or By-Laws. Parallel provisions
50
<PAGE>
have been included in the Company's Amended and Restated Certificate of
Incorporation. These provisions may make it more difficult for a third party
to acquire, or discourage acquisition bids for the Company.
The Company's Amended and Restated Certificate of Incorporation and Amended
and Restated By-Laws contain provisions that may have the effect of
discouraging a third party from making an acquisition proposal for the
Company. The Amended and Restated Certificate of Incorporation and Amended and
Restated By-Laws of the Company, among other things, (i) classify the Board of
Directors into three classes, with directors of each class serving for a
staggered three-year period, (ii) provide that directors may be removed only
for cause and only upon the affirmative vote of the holders of at least 80% of
the outstanding shares of Common Stock entitled to vote for such directors,
(iii) permit the Board of Directors, but not the Company's stockholders, to
fill vacancies and newly created directorships on the Board of Directors and
(iv) provide that any action required or permitted to be taken by the
stockholders of the Company must be effected at an annual or special meeting
of stockholders and not by any consent in writing by such stockholders.
Special meetings of stockholders may be called only by the Board of Directors.
Such provisions would make the removal of incumbent directors more difficult
and time-consuming and may have the effect of discouraging a tender offer or
other takeover attempt not previously approved by the Board of Directors.
ELIMINATION OF MONETARY LIABILITY FOR OFFICERS AND DIRECTORS. The Company's
Amended and Restated Certificate of Incorporation also incorporates certain
provisions permitted under the General Corporation Law of Delaware relating to
the liability of directors. The provisions eliminate a director's liability
for monetary damages for a breach of fiduciary duty, including gross
negligence, except in circumstances involving certain wrongful acts, such as
the breach of a director's duty of loyalty or acts or omissions which involve
intentional misconduct or a knowing violation of law. These provisions do not
eliminate a director's duty of care nor do they prevent recourse against
directors through equitable remedies such as injunctive relief. Moreover, the
provisions do not apply to claims against a director for violations of certain
laws, including federal securities laws.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Company's Amended and
Restated Certificate of Incorporation also contains provisions to indemnify
the directors, officers, employees or other agents to the fullest extent
permitted by the General Corporation Law of Delaware. These provisions may
have the practical effect in certain cases of eliminating the ability of
shareholders to collect monetary damages from directors. The Company believes
that these provisions will assist the Company in attracting or retaining
qualified individuals to serve as directors.
REGISTRATION RIGHTS
The holders of approximately 1,646,035 shares of Series A Redeemable
Convertible Preferred Stock and Series B Convertible Preferred Stock are
entitled to certain rights with respect to the registration of such shares
under the Securities Act. Corning also holds certain rights with respect to
the registration of the shares into which its note may be converted. Corning
may, on and after six months from the date of this Prospectus, require the
Company to use its best reasonable efforts to file within thirty days
thereafter a registration statement for all shares of Common Stock issued or
issuable upon conversion of such note. The Company is required to issue
740,741 shares of Common Stock upon conversion of the note, assuming an
initial public offering price of $9.00 per share. Furthermore, if the Company
proposes to register any of its securities under the Securities Act, either
for its own account or the account of other security holders exercising
registration rights, Corning is entitled to notice of such registration and is
entitled to include its shares of Common Stock therein, provided, among other
conditions, that the underwriters of any offering have the right to limit the
number of such shares included in such registration. The Company has also
granted registration rights to Dr. Barnett and Dr. Roland in connection with
certain options which may be granted pursuant to their employment agreements.
See "Management-- Employment Arrangements."
TRANSFER AGENT AND REGISTRATION
The Transfer Agent and Registrar for the Common Stock of the Company is
American Stock Transfer & Trust Company.
51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding 8,053,191
shares of Common Stock. Of these shares, the 2,700,000 shares sold in the
Offering (plus up to 405,000 additional shares if the Underwriters exercise
their over-allotment option) will be freely tradeable without restriction or
further registration (except by affiliates of the Company or persons acting as
underwriters) under the Securities Act. The remaining 5,353,191 shares of
Common Stock (the "Restricted Shares") may not be sold publicly unless they
are registered under the Securities Act or are sold pursuant to an exemption
from registration, such as the exemption provided by Rule 144 promulgated
under the Securities Act.
In general, commencing 90 days after the completion of the Offering, Rule
144 allows a person who has beneficially owned Restricted Shares for at least
one year, including persons who may be deemed affiliates of the Company, to
sell, within any three-month period, up to the number of Restricted Shares
that does not exceed the greater of (i) one percent of the then outstanding
shares of Common Stock, and (ii) the average weekly trading volume during the
four calendar weeks preceding the date on which notice of the sale is filed
with the Securities and Exchange Commission. A person who is not deemed to
have been an affiliate of the Company at any time during the 90 days preceding
a sale and who has beneficially owned his or her Restricted Shares for at
least two years would be entitled to sell such Restricted Shares without
regard to the volume limitations described above and the other conditions of
Rule 144. Upon the completion of the Offering, 1,478,316 of the shares of
Common Stock held by existing shareholders will be eligible for sale without
restriction in the public market and an additional 3,851,084 shares will be
eligible for sale in the public market subject to compliance with the volume
limitations and other limitations of Rule 144. The remaining 23,791 shares may
not be sold pursuant to Rule 144 until such shares have been held for at least
one year.
Notwithstanding the foregoing, the Company, its executive officers and
directors and certain stockholders of the Company, who upon completion of the
Offering will own an aggregate of 3,470,670 shares of Common Stock, (41.7% of
the shares outstanding after the Offering), assuming that the Underwriters'
over-allotment option is not exercised, have agreed with the Underwriters not
to sell, contract to sell or otherwise dispose of any shares of Common Stock
owned or controlled by them for a period of 360 days after the date of this
Prospectus without permission of the Representatives of the Underwriters,
except for certain issuances by the Company. See "Underwriting."
The Company intends to file a registration statement on Form S-8 to register
shares subject to the 1989 Stock Option Plan after 90 days following the date
of this Prospectus. In addition, after the Offering, certain holders of
Restricted Shares will be entitled to certain rights with respect to
registration of such shares under the Securities Act. Registration of such
Restricted Shares under the Securities Act would result in such shares
becoming freely tradeable without restriction under the Securities Act
immediately upon the effectiveness of such registration. See "Description of
Capital Stock--Registration Rights."
Market sales of a substantial number of shares of Common Stock, or the
availability of such shares for sale in the public market, could adversely
affect prevailing market prices of the Common Stock.
52
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement,
the Underwriters named below, represented by Needham & Company, Inc. and First
Albany Corporation (the "Representatives"), have severally agreed to purchase
from the Company, and the Company has agreed to sell to each Underwriter, the
aggregate number of shares of Common Stock set forth opposite their respective
names on the table below. The Underwriting Agreement provides that the
obligations of the Underwriters to pay for and accept delivery of the shares
of Common Stock are subject to certain conditions precedent, and that the
Underwriters are committed to purchase and pay for all shares if any shares
are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Needham & Company, Inc.........................................
First Albany Corporation.......................................
---------
Total........................................................ 2,700,000
=========
</TABLE>
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the public
offering price per share set forth on the cover page of this Prospectus and to
certain dealers (who may include the Underwriters) at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession to certain other dealers (who may
include the Underwriters) not in excess of $ per share. After the Offering
to the public, the Offering price and other selling terms may be changed by
the Representatives.
The Company has granted an option to the Underwriters exercisable during the
30-day period after the date of this Prospectus, to purchase up to a maximum
of 405,000 shares of Common Stock at the public offering price per share, less
the underwriting discounts and commissions, set forth on the cover page of
this Prospectus. The Underwriters may exercise such option only to cover over-
allotments made in connection with the sale of the Common Stock offered
hereby. To the extent the Underwriters exercise such option, each of the
Underwriters will be committed, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares of Common Stock to be purchased by such Underwriters, as shown in the
above table, bears to the total shown.
In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriters against certain liabilities that may be incurred in connection
with the Offering, including liabilities under the Securities Act, or to
contribute payments that the Underwriters may be required to make in respect
thereof.
The Company has agreed, without the prior written consent of Needham &
Company, Inc. not to offer, sell, contract to sell, grant options to purchase,
or otherwise dispose of, any equity securities of the Company or any other
securities exchangeable for or convertible into shares of Common Stock or any
other equity security of the Company for a period of days after the date of
this Prospectus, subject to certain limited exceptions. The Company's
directors, officers and certain other stockholders of the Company, who
collectively hold in the aggregate shares of Common Stock, have agreed,
without the prior written consent of Needham & Company, Inc. not to, directly
or indirectly, sell, contract to sell, make any short sale, pledge, or
otherwise dispose of, any shares of Common Stock, options to acquire shares of
Common Stock or securities exchangeable for or convertible into shares of
Common Stock, for a period of days after the effective date of the
Registration Statement to which this Prospectus relates. Needham & Company,
Inc. may, in its sole discretion and at any time without notice, release all
or any portion of the securities subject to such lock-up agreements. See
"Shares Eligible for Future Sale."
The Representatives have informed the Company that the Underwriters do not
expect to make sales to accounts over which they exercise discretionary
authority in excess of 5% of the number of shares of Common Stock offered
hereby.
53
<PAGE>
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriters may over-allot in connection with the Offering,
creating a short position in the Common Stock for their own account. To cover
over-allotments or to stabilize the price of the Common Stock, the
Underwriters may bid for, and purchase, Common Stock in the open market. The
Underwriters may also impose a penalty bid whereby they may reclaim selling
concessions allowed to an underwriter or a dealer for distributing Common
Stock in the Offering if the Underwriters repurchase previously distributed
Common Stock in transactions to cover their short position, in stabilization
transactions or otherwise. Finally, the Underwriters may bid for, and
purchase, shares of Common Stock in market making transactions including
"passive" market making transactions (see below). These activities may
stabilize or maintain the market price of the Common Stock at a level above
that which might otherwise prevail in the absence of these activities. The
Underwriters are not required to engage in these activities, and may
discontinue any of these activities at any time without notice.
Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price will be determined by
negotiations among the Company and the Representatives. Among the factors to
be considered in such negotiations are the history of, and the prospects for,
the Company and the industry in which it competes, an assessment of the
Company's management, the Company's past and present operations, its past and
present earnings and the trend of such earnings, financial performance, the
prospects for future earnings of the Company, the present state of the
Company's development, the general condition of the securities markets at the
time of the Offering and the market prices of and demand for publicly traded
common stock of comparable companies in recent periods.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby is being passed
upon for the Company by Opton Handler Feiler & Landau, LLP, New York, New
York. Certain legal matters with respect to the Offering are being passed upon
for the Underwriters by Choate, Hall & Stewart, Boston Massachusetts. Members
of the firm of Opton Handler Feiler & Landau, LLP own an aggregate of 129,900
shares of Common Stock of the Company.
EXPERTS
The financial statements of the Company as of December 31, 1995, 1996 and
September 30, 1997 and each of the years in the three year period ended
December 31, 1996 and the nine months ended September 30, 1997 have been
included herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein and upon the authority of said firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form S-1 under the
Securities Act with the Securities and Exchange Commission (the "Commission")
in Washington D.C. with respect to the shares of Common Stock offered hereby.
This Prospectus, which is part of the Registration Statement, does not contain
all the information set forth in the Registration Statement and the exhibits
and schedules thereto. For further information with respect to the Company and
the Common Stock offered hereby, reference is hereby made to the Registration
Statement and such exhibits and schedules which may be inspected without
charge at, or copies of such material may be obtained at prescribed rates
from, the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W. Washington, D.C. 20549, and at the Commission's regional
offices located at Citicorp Center, 550 W. Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, at Seven World Trade Center, 13th Floor, New
York, New York 10048, and at 5757 Wilshire Boulevard, Los Angeles, California
90024. Copies of such material also may be obtained from the Public Reference
Section of the Commission, 450 Fifth Street,
54
<PAGE>
N.W., Judiciary Plaza, Washington, D.C. 20549 and are also available on the
Commission's web site at http://www.sec.gov. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete and in each instance reference is made to
the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
The Company intends to furnish its stockholders with annual reports
containing financial statements certified by its independent auditors and
quarterly reports for the three quarters of each fiscal year containing
unaudited consolidated financial information.
55
<PAGE>
ASTROPOWER, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of KPMG Peat Marwick, LLP, Independent Auditors..................... F-1
Balance Sheets............................................................. F-2
Statements of Operations................................................... F-4
Statements of Stockholders' Deficit........................................ F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
56
<PAGE>
When the transaction referred to in Note 15 of the Notes to Financial
Statements has been consummated, we will be in a position to render the
following report.
/s/ KPMG Peat Marwick LLP
_____________________________________
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
AstroPower, Inc.:
We have audited the accompanying balance sheets of AstroPower, Inc. as of
September 30, 1997, December 31, 1996 and 1995, and the related statements of
operations, stockholders' deficit, and cash flows for the nine-month period
ended September 30, 1997 and each of the years in the three-year period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AstroPower, Inc. as of
September 30, 1997, December 31, 1996 and 1995, and the results of its
operations and its cash flows for the nine-month period ended September 30,
1997 and each of the years in the three-year period ended December 31, 1996,
in conformity with generally accepted accounting principles.
Wilmington, Delaware
December 5, 1997, except as to Note 15
and the last sentence of Note 6,
which are as of December 15, 1997
F-1
<PAGE>
ASTROPOWER, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER
1995 1996 30, 1997
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash (including restricted cash of
$5,000,000 at September 30, 1997)..... $ 29,017 $ 24,930 $ 5,131,691
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $44,683 in 1995, $47,836
in 1996 and $57,998 in 1997.......... 2,291,100 2,012,936 2,824,654
Other, including amounts due from
employees and a stockholder.......... 50,052 32,223 49,513
Inventories............................ 2,136,043 1,214,188 1,203,044
Prepaid expenses....................... 47,028 59,270 124,781
----------- ----------- -----------
Total current assets................ 4,553,240 3,343,547 9,333,683
PROPERTY AND EQUIPMENT:
Machinery and equipment............... 5,136,448 6,038,393 6,629,555
Furniture and fixtures................ 156,052 145,882 147,489
Leasehold improvements................ 38,204 184,077 196,918
Construction in progress.............. 555,261 488,044 256,504
----------- ----------- -----------
5,885,965 6,856,396 7,230,466
Less accumulated depreciation and
amortization......................... (1,838,560) (2,313,129) (2,712,177)
----------- ----------- -----------
4,047,405 4,543,267 4,518,289
OTHER ASSETS............................ 14,411 -- --
----------- ----------- -----------
Total assets........................ $ 8,615,056 $ 7,886,814 $13,851,972
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
ASTROPOWER, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable..................... $ 1,334,937 $ 1,799,973 $ 1,876,104
Note payable--stockholder............ 58,000 58,000 58,000
Note payable--bank................... 475,050 531,200 75,000
Current maturities of long-term
debt................................ 279,401 365,683 335,589
Accrued payroll and payroll taxes
(includes $422,326 in 1995, $530,412
in 1996 and $184,786 in 1997, due to
the Company's President and Chief
Executive Officer).................. 704,157 1,034,841 807,119
Accrued expenses..................... 59,332 190,086 239,057
Advance from customer................ 222,276 333,536 584,607
----------- ----------- -----------
Total current liabilities.......... 3,133,153 4,313,319 3,975,476
OTHER LIABILITIES:
Long-term debt, excluding current
maturities.......................... 651,398 527,811 5,797,317
Deferred compensation and other
(including amounts due to officers
and a stockholder).................. 109,006 106,493 467,729
Advance from customer--non-current... -- -- 153,096
----------- ----------- -----------
760,404 634,304 6,418,142
----------- ----------- -----------
Total liabilities.................. 3,893,557 4,947,623 10,393,618
----------- ----------- -----------
REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series A Convertible Preferred Stock,
1,331,250 shares authorized,
1,309,626 shares issued and
outstanding, $.0l per share par
value, liquidation preference of
$8,808,188, redeemable, 8% dividend
rate, non-cumulative................ 5,798,725 5,798,725 5,798,725
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Series B Convertible Preferred Stock,
750,000 shares authorized; 252,001
in 1995, 328,909 in 1996 and 336,409
in 1997 shares issued and
outstanding, $.01 per share par
value, 8% dividend rate, non-
cumulative.......................... 2,520 3,289 3,364
Common Stock, 15,000,000 shares
authorized, 3,697,632 in 1995,
3,701,775 in 1996 and 3,707,156 in
1997 shares issued and outstanding,
$.01 per share par value............ 36,977 37,018 37,072
Additional paid-in capital........... 2,117,529 2,697,396 2,761,967
Accumulated deficit.................. (3,234,252) (5,597,237) (5,142,774)
----------- ----------- -----------
Total stockholders' deficit........ (1,077,226) (2,859,534) (2,340,371)
----------- ----------- -----------
Total liabilities and
stockholders' deficit........... $ 8,615,056 $ 7,886,814 $13,851,972
=========== =========== ===========
</TABLE>
F-3
<PAGE>
ASTROPOWER, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------- -----------------------
1994 1995 1996 1996 1997
---------- ---------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Product sales......... $3,434,170 $5,355,710 $ 6,237,349 $ 4,580,662 $9,333,817
Research contracts.... 3,675,339 4,589,098 4,346,118 3,359,281 2,778,211
---------- ---------- ----------- ----------- ----------
Total revenues...... 7,109,509 9,944,808 10,583,467 7,939,943 12,112,028
COST OF REVENUES:
Product sales......... 2,953,494 4,482,957 6,896,109 5,483,924 6,747,199
Research contracts.... 2,298,759 3,028,488 2,579,994 1,976,610 1,953,654
---------- ---------- ----------- ----------- ----------
Total cost of
revenues........... 5,252,253 7,511,445 9,476,103 7,460,534 8,700,853
Gross profit........ 1,857,256 2,433,363 1,107,364 479,409 3,411,175
OPERATING EXPENSES:
Product development
expenses............. 220,191 313,551 775,963 565,350 754,645
General and
administrative
expenses............. 1,172,110 1,468,779 1,858,862 1,447,169 1,396,708
Selling expenses...... 376,842 444,393 660,468 486,443 624,478
---------- ---------- ----------- ----------- ----------
Income (loss) from
operations......... 88,113 206,640 2,187,929 (2,019,553) 635,344
OTHER EXPENSE (INCOME):
Interest expense...... 42,126 115,593 168,782 106,948 217,340
Interest income....... (9,266) (6,695) (5,685) (4,147) (40,909)
Other expense
(income)............. 38,404 (228) 11,959 -- (4,550)
---------- ---------- ----------- ----------- ----------
Total other
expense............ 71,264 108,670 175,056 102,801 171,881
NET INCOME (LOSS) BEFORE
INCOME TAXES........... 16,849 97,970 (2,362,985) (2,122,354) 463,463
INCOME TAXES............ -- -- -- -- (9,000)
---------- ---------- ----------- ----------- ----------
NET INCOME (LOSS)....... $ 16,849 $ 97,970 $(2,362,985) $(2,122,354) $ 454,463
========== ========== =========== =========== ==========
PRO FORMA DATA:
Pro forma income
(loss) per share..... $ (0.40) $ 0.08
=========== ==========
Pro forma weighted
average shares
outstanding.......... 5,892,549 6,025,747
=========== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ASTROPOWER, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------- ----------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
-------- ------- --------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1994................... 158,251 $ 1,583 3,667,588 $36,677 $1,429,319 $(3,349,071) $(1,881,492)
Issuance of Series B
Convertible Preferred
Stock,
net of issuance
costs................. 76,500 765 -- -- 509,235 -- 510,000
Common Stock issued.... -- -- 11,732 117 46,809 -- 46,926
Net income............. -- -- -- -- -- 16,849 16,849
-------- ------- --------- ------- ---------- ----------- -----------
BALANCE, DECEMBER 31,
1994................... 234,751 2,348 3,679,320 36,794 1,985,363 (3,332,222) (1,307,717)
Issuance of Series B
Convertible Preferred
Stock,
net of issuance
costs................. 17,250 172 -- -- 82,318 -- 82,490
Common Stock issued.... -- -- 18,312 183 49,848 -- 50,031
Net income............. -- -- -- -- -- 97,970 97,970
-------- ------- --------- ------- ---------- ----------- -----------
BALANCE, DECEMBER 31,
1995................... 252,001 2,520 3,697,632 36,977 2,117,529 (3,234,252) (1,077,226)
Issuance of Series B
Convertible Preferred
Stock,
net of issuance
costs................. 76,908 769 -- -- 574,736 -- 575,505
Common Stock issued.... -- -- 4,143 41 5,131 -- 5,172
Net loss............... -- -- -- -- -- (2,362,985) (2,362,985)
-------- ------- --------- ------- ---------- ----------- -----------
BALANCE, DECEMBER 31,
1996................... 328,909 3,289 3,701,775 37,018 2,697,396 (5,597,237) (2,859,534)
Issuance of Series B
Convertible Preferred
Stock................. 11,250 112 -- -- 89,888 -- 90,000
Purchase and retirement
of Series B
Convertible Preferred
Stock................. (3,750) (37) -- -- (29,963) -- (30,000)
Common Stock issued.... 5,381 54 4,646 -- 4,700
Net income............. -- -- -- -- -- 454,463 454,463
-------- ------- --------- ------- ---------- ----------- -----------
BALANCE, SEPTEMBER 30,
1997................... 336,409 $ 3,364 3,707,156 $37,072 $2,761,967 $(5,142,774) $(2,340,371)
======== ======= ========= ======= ========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ASTROPOWER, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- -----------------------
1994 1995 1996 1996 1997
--------- --------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss)...... $ 16,849 $ 97,970 $(2,362,985) $(2,122,355) $ 454,463
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Depreciation and
amortization......... 304,603 432,842 474,569 375,606 399,048
Common stock issued
for services......... -- 37,500 -- -- --
Changes in working
capital items:
Accounts receivable.. 234,265 (740,700) 278,164 18,708 (811,718)
Inventories.......... (728,164) (267,408) 921,855 855,750 11,144
Prepaid expenses..... (35,910) 20,862 5,587 (71,087) (68,751)
Accounts payable and
accrued expenses.... 412,684 16,945 595,790 1,044,334 125,101
Accrued payroll and
payroll taxes....... 49,679 140,562 330,684 339,388 141,849
Estimated costs to
complete loss
contracts........... (298,997) (19,956) -- -- --
Advance from
customer............ 20,756 151,520 111,260 404,167
Other................ 14,019 41,493 12,143 (50,657) (22,384)
--------- --------- ----------- ----------- ----------
Net cash provided by
(used in) operating
activities........... (10,216) (88,370) 367,067 389,687 632,919
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures... (946,557) (863,881) (970,431) (745,106) (374,070)
--------- --------- ----------- ----------- ----------
Net cash used in
investing activities.. (946,557) (863,881) (970,431) (745,106) (374,070)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from long-term
debt.................. -- 600,000 202,097 202,097 5,618,077
Proceeds from line of
credit................ 95,000 380,050 175,000 175,000 --
Debt repayments........ (104,735) (161,036) (358,200) (169,111) (834,865)
Proceeds from issuance
of common stock....... -- 3,031 4,875 4,100 4,700
Proceeds from issuance
of preferred stock.... 510,000 82,490 575,505 138,125 90,000
Repurchase of preferred
stock................. -- -- -- -- (30,000)
--------- --------- ----------- ----------- ----------
Net cash provided by fi-
nancing activities..... 500,265 904,535 599,277 350,211 4,847,912
--------- --------- ----------- ----------- ----------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............ (456,508) (47,716) (4,087) (5,208) 5,106,761
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF PERIOD.... 532,841 76,733 29,017 29,017 24,930
--------- --------- ----------- ----------- ----------
CASH AND CASH
EQUIVALENTS AT END OF
PERIOD................. $ 76,333 $ 29,017 $ 24,930 $ 23,809 $5,131,691
========= ========= =========== =========== ==========
SUPPLEMENTAL DISCLOSURE:
Interest paid.......... $ 34,798 $ 102,203 $ 129,555 $ 97,703 $ 124,766
========= ========= =========== =========== ==========
OTHER NONCASH FINANCING
AND INVESTING
ACTIVITIES:
During 1995, 2,375
shares of Common Stock
valued at $9,500 were
issued to settle a
liability accrued at
December 31, 1994.
During 1995, the
Company acquired
approximately $131,000
of equipment under a
capital lease
agreement.
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
AstroPower, Inc. was incorporated in April 1989. In September 1989 it
purchased the assets and assumed certain liabilities of the AstroPower
Division, an unincorporated division of Astrosystems, Inc., a public company.
The Company develops, manufactures, markets and sells PV solar cells,
modules and panels for generating solar electric power. Solar cells are
semiconductor devices which convert sunlight directly into electricity. Solar
electric power is used off the electric utility grid for many applications in
the communications and transportation industries and in remote villages and
homes. Solar electric power is also used in on-grid applications by existing
electric utility customers to provide a clean, renewable source of alternative
or supplementary electric power. Availability of silicon wafers, a significant
raw material in the Company's manufacturing process, is subject to market
conditions in the semiconductor industry, however, the Company is not
dependent on a single supplier or only a few suppliers. See Note 11.
INTERIM FINANCIAL STATEMENTS
The financial statements for the nine months ended September 30, 1996 are
unaudited and, in the opinion of the management of the Company, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results for the interim period. The results of
operations for the nine months ended September 30, 1997 are not necessarily
indicative of the results to be expected for the full year.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with an original maturity of three months or
less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts
receivable, accounts payable, accrued expenses, note payable-stockholder and
borrowings. The carrying values of cash, accounts receivable, accounts
payable, accrued expenses and note payable-stockholder are considered to be
representative of their respective fair values because of the short-term
nature of these balances. The carrying value of the Company's bank borrowings
are considered to approximate their fair values, due to the market rates of
interest on the borrowings. The Company's convertible note does not have a
readily ascertainable market value due to the conversion feature of the note
and the various rights granted to the noteholder with respect to certain
future transactions. See Note 13.
INVENTORIES
Inventories are reported at lower of cost or market. Cost is determined
using the weighted average method.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method based on the assets estimated useful lives, ranging
from 5 to 15 years. Maintenance, repairs and minor renewals are charged to
expense as incurred.
Included in machinery and equipment at September 30, 1997 is $4,560,146
representing self-constructed assets. In costing the equipment, the Company
uses a full cost approach whereby direct material, direct labor
F-7
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
and related overhead costs are capitalized. The total labor and overhead costs
of self-constructed assets capitalized for the years ended December 31, 1995
and 1996 and the nine months ended September 30, 1997, were $307,833,
$303,677, and $86,134 respectively. Capitalization of cost begins after the
equipment design is established.
REVENUE RECOGNITION
Revenue from product sales is recognized when products are shipped. Revenue
related to the Company's fixed price, cost-plus and cost-sharing research
contracts are recognized at the time costs benefiting the contracts are
incurred, which approximates the percentage of completion method. Provisions
for estimated losses are made in the period in which losses are determined.
Accounts receivable includes unbilled accounts receivable consisting of
material, labor and overhead expended on contracts.
PRODUCT DEVELOPMENT EXPENSES
These expenses represent the material, labor and overhead costs incurred to
develop processes in support of the Company's Silicon-FilmTM wafer, solar cell
and module engineering effort which are not funded by research contracts.
INCOME TAXES
The Company accounts for income taxes in accordance with the asset and
liability method of accounting for income taxes. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
revenues and expense, and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
PRO FORMA INCOME PER SHARE
Pro forma income per share is calculated using the weighted average number
of shares of common stock and common stock equivalents outstanding during the
year and the assumed conversion of all outstanding preferred shares into
common shares at or prior to the Company's proposed initial public offering.
The pro forma fully diluted income per share, which includes the effect of the
shares issuable upon the conversion of the convertible promissory note and
advance from customer, would not have been materially different from pro forma
income per share.
Pursuant to the requirements of the Securities and Exchange Commission, all
options to purchase common shares issued in the twelve months preceding the
initial filing of the Company's Registration Statement for its initial public
offering have been treated as if they were outstanding for all periods using
the treasury stock method. The Financial Accounting Standards Board issued
SFAS No. 128, Earnings Per Share, in February 1997, effective for financial
statements for periods ending after December 15, 1997.
F-8
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) INVENTORIES
A summary of inventories is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
<S> <C> <C> <C>
Raw materials............................ $ 839,494 $ 491,085 $ 902,542
Work-in-process.......................... 89,180 105,538 162,623
Finished goods........................... 1,207,369 617,565 137,879
---------- ---------- ----------
$2,136,043 $1,214,188 $1,203,044
========== ========== ==========
</TABLE>
(3) DEBT
A summary of the Company's long-term debt follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1995 1996 1997
--------- --------- -------------
<S> <C> <C> <C>
Bank term loans--primary lender; initial
interest to be prime plus 1% (9.5% at
September 30, 1997); secured by accounts
receivable, inventory and equipment;
payable in principal installments of
$17,500 per month through March 31, 1999,
at which time the balance is due......... $ 807,143 $ 641,428 $ 487,143
Bank term loan, with interest at prime
plus 1.5% (10.0% at September 30, 1997)
secured by property and equipment and the
guarantee of the Company's President and
Chief Executive Officer; payable in
principal installments of $10,000 per
month beginning February 10, 1997 through
January 10, 1999, at which time the
balance is due........................... -- 202,097 640,174
Delaware Economic Development Authority
term loan, with interest at 4.8%, due in
60 equal installments of $1,878,
commencing February 1, 1993, secured by
property and equipment................... 42,894 21,961 5,589
Capital lease obligation, payable through
June 1997, with interest at 9%, secured
by equipment............................. 80,762 28,008 --
7% convertible promissory note due August
19, 2001, collateralized by certain
physical assets, as described in Note
13....................................... -- -- 5,000,000
--------- --------- ----------
930,799 893,494 6,132,906
Less current maturities................... (279,401) (365,683) (335,589)
--------- --------- ----------
$ 651,398 $ 527,811 $5,797,317
========= ========= ==========
</TABLE>
The aggregate maturities of long-term debt for each of the twelve month
periods subsequent to September 30, 1997 are as follows:
<TABLE>
<CAPTION>
PERIODS ENDING SEPTEMBER 30,
----------------------------
<S> <C>
1998............................ $ 335,589
1999............................ 797,317
2000............................ --
2001............................ 5,000,000
----------
$6,132,906
==========
</TABLE>
The unsecured note payable to a stockholder bears interest at the rate of
9.01% and is payable on demand. The Company has not made any interest payments
on the note since October 31, 1990. The accrued interest on the note was
$30,374, $35,615 and $39,523 at December 31, 1995 and 1996 and at September
30, 1997, respectively, and is included in the caption "Accrued expenses" in
the balance sheet.
F-9
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1996, the Company was not in compliance with covenants
contained in borrowing agreements with its primary lender. During 1997, the
Company entered into several forebearance agreements with the lender, and on
November 24, 1997, the Company entered into an amended and restated loan
agreement providing for an increase in its line of credit from $400,000 to
$600,000, subject to borrowing base limitations, and an increase in its term
loan facility to $737,000. The Company must comply with covenants to measure
Tangible Net Worth, Ratio of Liabilities to Tangible Net Worth and Cash Flow
Coverage, as defined in the agreement. As a result of this amended and
restated agreement, approximately $277,000 of long-term debt originally
scheduled to mature through September 1998 has been excluded from current
maturities. Amounts available under line of credit and term loan facilities as
of September 30, 1997 were approximately $525,000 and $250,000, respectively.
In January 1997, the Company renegotiated its borrowing agreement with
another bank, which provided for a loan of $750,000 for capital improvements
secured by equipment and requires the Company to maintain a maximum ratio of
total liabilities to total net worth, of 2.25 to 1. At September 30, 1997, the
outstanding balance was $640,174.
(4) INCOME TAXES
No income tax provision was recorded for the years ended December 31, 1994,
1995 and 1996. An income tax provision of $9,000 was recorded for the nine
months ended September 30, 1997. Income tax expense (benefit) differed from
the amounts computed by applying the U.S. federal income tax rate of 34% to
pretax income (loss) from operations as a result of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- SEPTEMBER 30,
1994 1995 1996 1997
------- -------- --------- -------------
<S> <C> <C> <C> <C>
Computed "expected" tax expense
(benefit)......................... $ 5,729 $ 33,310 $(803,415) 157,577
Reduction in income taxes resulting
from utilization of net operating
loss carryforwards................ (5,729) (33,310) -- (148,577)
Increase in valuation allowance for
deferred tax assets--net operating
loss carryforwards ............... -- -- 770,392 --
Other.............................. -- -- 33,023 --
------- -------- --------- --------
Actual tax expense................. $ -- $ -- $ -- $ 9,000
======= ======== ========= ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30,
1995 1996 1997
---------- ----------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Deferred revenue.................. $ 85,247 $ 133,000 $ 293,178
Advances from customer............ 133,690 161,958 193,288
Federal and state net operating
loss carryforward................ 1,015,000 1,750,000 1,801,598
Other............................. 8,188 -- 263,111
---------- ----------- -----------
Total gross deferred tax assets... 1,242,125 2,044,958 2,551,175
Less valuation allowance.......... (902,995) (1,673,387) (1,896,867)
---------- ----------- -----------
Net deferred tax assets............. 339,130 371,571 654,308
Deferred tax liabilities:
Plant and equipment, due to
differences in depreciation
methods and basis................ (339,130) (371,571) (654,308)
---------- ----------- -----------
Net deferred amount................. $ -- $ -- $ --
========== =========== ===========
</TABLE>
F-10
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The change in the valuation allowance results from management's assessment
of whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment. At
September 30, 1997, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $4.5 million which are available
to offset future federal and state taxable income, if any, through 2012.
(5) OPERATING LEASE OBLIGATIONS
The Company leases a 40,000 square foot building from the University of
Delaware (the "University"). Although the lease agreement is for a term of 20
years (expiring June 30, 2011), the Company may cancel the lease after nine
years (June 30, 2000). Under the agreement with the University, the scheduled
cash payments over the next five years differ from rental expense calculated
under the straight-line method. The following summarizes expected charges to
rent expense contrasted with expected cash outflow as required by the lease
agreement:
<TABLE>
<CAPTION>
ANNUAL RENT EXPECTED
EXPENSE CASH PAYMENTS
----------- -------------
<S> <C> <C>
December 31, 1998............................... $184,489 $209,200
December 31, 1999............................... 184,489 220,800
December 31, 2000............................... 184,489 233,600
December 31, 2001............................... 184,489 245,800
December 31, 2002............................... 184,489 259,400
</TABLE>
In addition, the Company has agreed to fund anticipated renovations to the
facility after lease expiration. The amounts to be paid to the University for
this purpose are $26,000 annually through 2001.
Total rent expense charged to operations for the years ended December 31,
1994, 1995, and 1996 and for the nine months ended September 30, 1997 amounted
to approximately $205,000, $229,000, $219,000 and $174,000, respectively.
(6) RELATED PARTIES
At December 31, 1995 and 1996 and September 30, 1997, the Company owed its
President and Chief Executive Officer $422,326, $530,412 and $554,357,
respectively, in the form of salary and automobile reimbursements. The amounts
are related to the excess of the negotiated annual salary and monthly auto
allowance under a contract which ended March 31, 1997 over the amounts
actually paid to such person. On December 15, 1997, the Company agreed that
one-third of this amount will be paid per year in each of 1998, 1999 and 2000,
with interest on the unpaid balance at 6% per year from January 1, 1998.
(7) EMPLOYEE BENEFIT PLAN
The Company maintains a defined contribution plan under the provisions of
Internal Revenue Code Section 401(k). Employees having attained the age of 21
and with one month of service are eligible to participate and make voluntary
contributions to the plan. The amount charged to expense for the years ended
December 31, 1994, 1995 and 1996 and the nine months ended September 30, 1997
was $26,900, $50,600, $66,800 and $105,000, respectively. The Company does not
provide any postemployment benefits.
F-11
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(8) CAPITAL STOCK
In 1995, 17,250 shares of Series B Convertible Preferred Stock were issued,
resulting in gross proceeds to the Company of $120,000.
In 1996 the Company distributed a private placement memorandum providing for
the sale of up to $4.0 million of Series B Convertible Preferred Stock. The
Company raised gross proceeds of $615,000 through the private placement
offering in 1996 and $90,000 in 1997.
The Company may, at its option, require the conversion of all Series A
Redeemable Convertible Preferred Stock and Series B Convertible Preferred
Stock to Common Stock upon the closing of the sale of shares of Common Stock
in an initial public offering at a price of at least $10.00 per share,
resulting in gross proceeds to the Company of at least $12.0 million. In
October 1997, the Series A Redeemable Convertible Preferred Stock and Series B
Convertible Preferred Stock holders agreed to waive the requirement for an
initial public offering price of $10.00 as it relates to the Offering
described in Note 15. The Company has granted to the Series A Redeemable
Convertible Preferred Stock and Series B Convertible Preferred Stock holders
certain registration rights with respect to these securities.
Upon any liquidation, dissolution or winding up of the Company, holders of
Series B Convertible Preferred Stock shall rank on a parity with the holders
of Series A Redeemable Convertible Preferred Stock and both the holders of
Series A Redeemable Convertible Preferred Stock and Series B Convertible
Preferred Stock will be entitled to receive a distribution out of the assets
of the Company available for distribution equal to the price per share paid
for the Series A Redeemable Convertible Preferred Stock and Series B
Convertible Preferred Stock (subject to any appropriate adjustment), after and
subject to the payment in full of all amounts required to be distributed to
the holder of any other class or series of stock of the Company ranking on
liquidation prior and in preference to the Series A Redeemable Convertible
Preferred Stock and Series B Convertible Preferred Stock, but before any
payment shall be made to the holders of Common Stock. Thereafter, and before
any payments to the holders of Common Stock, the holders of Series A
Redeemable Convertible Preferred Stock shall be entitled to an additional
payment equal to the price per share paid for the Series A Redeemable
Convertible Preferred Stock.
The Series A Redeemable Convertible Preferred Stock and Series B Convertible
Preferred Stock may be converted into common stock on a one-for-one basis
subject to anti-dilution adjustments with respect to any stock splits,
dividends, reclassifications and similar transactions. Upon any sale of Common
Stock, or other securities convertible into Common Stock for less than the
conversion price then in effect, the conversion price will be reduced
automatically to such lower price. Shares issued as a dividend or distribution
on Series A Redeemable Convertible Preferred Stock and shares, not to exceed
1,200,000, issued to directors, employees or consultants pursuant to a stock
option plan or other stock plan or agreement or shares issued by reason of a
dividend, stock split, split-up or other distribution on shares of common
stock issued pursuant to any of the foregoing are excluded from the anti-
dilution adjustments. Shares of Series A Redeemable Convertible Preferred
Stock and Series B Convertible Preferred Stock are entitled to the number of
votes equal to the number of shares of Common Stock into which they are
convertible.
Pursuant to a redemption provision, the Series A Redeemable Convertible
Preferred stockholders could, at their option, request that the Company redeem
the Series A Redeemable Convertible Preferred Stock on May 15, 1994. Although
the Company did not provide a required redemption offer, it advised the
holders of the Series A Redeemable Convertible Preferred Stock that it
recognizes the continuing right as of May 15, 1994, of each holder of the
Series A Redeemable Convertible Preferred Stock to require the Company to
redeem all of the shares of Series A Redeemable Convertible Preferred Stock
held by such holder on such date at the redemption price that would have been
in effect on such date or such lesser number of shares of Series A Redeemable
Convertible Preferred Stock as the holder may determine. The redemption price
is to be paid in cash out of funds
F-12
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
legally available and is to be determined based on the original price paid per
share plus an amount equal to 8% compounded annually for each year a dividend
is not declared and paid upon the Series A Redeemable Convertible Preferred
Stock.
At December 31, 1995 and 1996 and as of September 30, 1997, the value of the
Series A Redeemable Convertible Preferred Stock has been accreted to its
redemption value of $5,798,725.
The terms of the Series A Redeemable Convertible Preferred Stock require
that 66 2/3% of the Series A Redeemable Convertible Preferred Stockholders
approve dividends other than those paid in common stock.
(9) EMPLOYEE STOCK OPTION PLAN
The Company adopted a Stock Option Plan ("the Plan") in 1989 under which a
total of 1,200,000 shares are currently reserved for issuance to employees,
including officers and directors who are employees or consultants. Options
granted pursuant to the Plan may be either incentive stock options or non-
qualified stock options. The Plan is administered by the Board of Directors
which selects the employees to whom the options are granted, determines the
number of shares subject to each option, sets the time or times when the
options will be granted, determines the time when the options may be exercised
and establishes the market value of the shares at the date of grant and
exercise date. The Plan provides that the purchase price under the option
shall be at least 100 percent of the fair market value of the shares of the
Company's Common Stock at the date of grant. The options are not transferable.
There are limitations on the amount of incentive stock options that an
employee can be granted in a single calendar year. The terms of each option
granted under the Plan are determined by the Board of Directors, but in no
event may such term exceed ten years. The Plan provides for vesting of the
incentive stock options over a four-year period, with vesting occurring 25%
per year on the anniversary date of the option award.
Stock option transactions during the years ended December 31, 1994, 1995 and
1996 and the nine months ended September 30, 1997 under the 1989 Plan, are
summarized below:
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE PRICE AVERAGE
SHARES RANGE PER SHARE EXERCISE PRICE(1)
------- --------------- -----------------
<S> <C> <C> <C>
Balance, December 31, 1993....... 322,838 $0.33-$4.00 $2.43
Granted........................ 115,800 3.12- 4.00 3.84
Cancelled...................... (46,284) 0.33- 4.00 1.89
-------
Balance, December 31, 1994....... 392,354 0.33- 4.00 2.91
Granted........................ 125,475 3.12- 4.00 3.86
Exercised...................... (6,561) 0.33- 4.00 0.47
Cancelled...................... (12,480) 0.33- 4.00 3.01
-------
Balance, December 31, 1995....... 498,788 0.33- 4.00 3.17
Granted........................ 179,325 3.12- 4.00 3.95
Exercised...................... (4,069) 0.33- 4.00 1.20
Cancelled...................... (45,132) 0.67- 4.00 3.57
-------
Balance, December 31, 1996....... 628,912 0.33- 4.00 3.51
Granted........................ 352,950 3.12- 5.33 4.67
Exercised...................... (5,381) 0.33- 4.00 0.88
Cancelled...................... (14,203) 0.67- 4.00 3.83
------- -----
Balance, September 30, 1997...... 962,278 0.33- 5.33 $3.87
======= =====
</TABLE>
- --------
(1)Includes options described below.
F-13
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of stock options exercisable as of December 31,
1994, 1995 and 1996 and September 30, 1997:
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE PRICE AVERAGE
SHARES RANGE PER SHARE EXERCISE PRICE
------- --------------- --------------
<S> <C> <C> <C>
December 31, 1994..................... 202,940 $ 0.33-$4.00 $2.00
December 31, 1995..................... 269,747 0.33- 4.00 2.64
December 31, 1996..................... 357,825 0.33- 4.00 2.88
September 30, 1997.................... 467,857 0.33- 4.00 3.15
</TABLE>
Prior to the adoption of the Plan, the Company had a compensatory stock plan
for the issuance of shares to employees and consultants. At September 30,
1997, the Company had reserved 39,999 shares for a commitment under this plan.
The balance sheet caption "Accrued payroll and payroll taxes" contains a
provision for these shares.
In addition to the options in the table above, during 1996 the Company
granted an option for 187,500 shares to an officer of the Company, at an
exercise price of $4.00 per share. All of the options vest upon the effective
date of the Company's initial public offering.
The Company applies APB Opinion 25 and related interpretations in accounting
for stock options issued to employees. Accordingly, because the exercise price
equaled the estimated fair value of the Company's stock at the measurement
date, no compensation cost has been recognized for the plan. Had compensation
cost for the plan been determined based on the fair value at the grant dates
for awards consistent with the method required by FASB Statement 123, the
Company's net income (loss) would have been changed to the pro forma amounts
for the periods indicated below:
<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
----------- -----------
<S> <C> <C>
Net loss for the year ended December 31, 1996.... $(2,362,985) $(2,442,769)
Net income for the nine months ended September
30, 1997........................................ 454,463 227,562
</TABLE>
As a private entity the Company uses the minimum value method for valuing
options and an interest rate of 6.5%.
(10) GOVERNMENT CONTRACTS
During the years ended December 31, 1994, 1995 and 1996 and the nine months
ended September 30, 1997, substantially all of the Company's contract revenues
were attributable to U.S. government contracts under which the Company was
either a prime contractor or a subcontractor.
To date, a large percentage of the Company's revenues have been generated by
research and development contracts, principally with the U.S. government.
Orders under government prime or subcontracts are customarily subject to
termination at the convenience of the government, in which event the
contractor is normally entitled to reimbursement for allowable costs and to a
reasonable allowance for profits, unless the termination of a contract was due
to a default on the part of the contractor. No termination of contracts by the
government occurred during the years ended December 31, 1994, 1995 and 1996
and the nine months ended September 30, 1997.
Substantially all of the Company's revenues from government contracts are
subject to audit under various federal statutes. The Company has received
final approval of its overhead rates through 1993. Audits of 1994 and 1995
rates began in December 1997. It is management's opinion that adjustments to
such revenue, if any, will not have a material effect on the Company's
financial position or results of operation.
F-14
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Certain of the Company's contracts contain retainage provisions. At December
31, 1996 and September 30, 1997, retainage amounts included in accounts
receivable were approximately $112,000 and $165,000, respectively. The Company
estimates that approximately 30% of the retainage amounts at December 31, 1996
will be collected during 1997. At December 31, 1996 and September 30, 1997,
unbilled accounts receivable were approximately $211,000.
(11) BUSINESS AND CREDIT CONCENTRATIONS
The following table shows the percentage of total revenues contributed by
significant customers for the periods presented. A significant customer is
defined as one contributing 10% or more of total revenues:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1994 1995 1996 1997
---- ---- ---- -------------
<S> <C> <C> <C> <C>
Customer A...................................... 51% 46% 41% 23%
Customer B...................................... 25% 10% 12% 19%
Customer C...................................... -- -- -- 14%
Customer D...................................... -- -- -- 11%
Customer E...................................... -- -- -- 10%
</TABLE>
Customer A represents the U.S. government. Included in the September 30,
1997 amount is a total of 13 contracts totaling $2,778,211 administered by six
agencies of the U.S. government, with contract revenues ranging from 0.1% to
11.2% of total revenues.
During the nine months ended September 30, 1997, the five largest product
sales customers accounted for approximately 58% of revenues and 75% of product
sales. At September 30, 1997, approximately 91% of accounts receivable were
due from the Company's six largest customers, of which 35% represented amounts
due from agencies of the U.S. government representing Customer A and 56%
represented amounts due from the Company's five largest product sales
customers in 1997. The loss of one or more of these major customers could have
a material adverse effect on the Company's business, results of operations and
financial conditions.
(12) GEOGRAPHIC DISTRIBUTION OF PRODUCT SALES
Total product sales are summarized as a percentage by geographic area as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ----------------------
1994 1995 1996 1996 1997
------- ------- ------- ------------ --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Domestic:............ 20% 32% 14% 15% 29%
Export:
Europe............. 11% 22% 49% 43% 59%
Asia............... 69% 46% 30% 38% 6%
Africa............. 0% 0% 7% 4% 6%
</TABLE>
All of the Company's research contract revenues are within the United
States.
F-15
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(13) STRATEGIC ALLIANCES
CORNING INCORPORATED
In August 1997, the Company and Corning Incorporated ("Corning") entered
into a Research and Development Umbrella Agreement ("R&D Agreement") under
which Corning will provide research, development, engineering and
manufacturing assistance to the Company for a three year period. Corning will
be compensated for such services in the form of options to purchase shares of
the Company's Common Stock based upon man-years of personnel contributed by
Corning to the project. Unless otherwise agreed, such services shall not
exceed the equivalent of five man-years for each year of the R&D Agreement.
The exercise price per share and the options per man-year follow:
<TABLE>
<CAPTION>
OPTIONS PER
EXERCISE PRICE MAN-YEAR
-------------- -----------
<S> <C> <C>
Year 1......................................... $ 8.00 50,000
Year 2......................................... 10.67 30,000
Year 3......................................... 13.33 21,428
</TABLE>
At September 30, 1997, no options were issued to Corning.
As part of the R&D Agreement, the Company received $5.0 million in cash in
exchange for its four-year secured 7% note collateralized by all physical
assets described below, which is convertible into common stock of the Company
at a conversion price equal to the lesser of (i) $8.00 per share or (ii) 75%
of the price per share received by the Company in an initial public offering
of its stock. The Company may repay the note in full without penalty after two
years from its date of issuance. In the event the note remains outstanding
after its four-year due date, the Company shall grant to Corning a non-
exclusive license to use all of the Company's Silicon-Film(TM) intellectual
property under fair market terms and conditions as shall be then negotiated.
The granting of the license does not prevent Corning from seeking payment of
the note. The proceeds of the note are restricted for the engineering, design,
lease, construction or expansion of facilities and purchase of equipment and
related tooling or working capital devoted to the manufacture of products
derived from the Company's Silicon-Film(TM) technology.
In addition, under certain circumstances, Corning has future rights to
participate in (i) equity or other financings involving instruments
convertible into equity of the Company; (ii) proposals in respect of any
merger, consolidation or similar transaction involving the Company, or any
sale of other disposition of a material portion of the capital stock of the
Company or its assets of business; and (iii) any plans or proposals to sell or
license any intellectual property relating to the Company's Silicon-Film(TM)
technology.
GPU SOLAR
In July 1997, the Company entered into a joint venture with GPU
International to form GPU Solar to develop, manufacture and test market grid-
connected residential rooftop photovoltaic systems for the U.S. market using
the Company's modules. The Company's contribution to the joint venture will be
specified services and reduced pricing on sales to the joint venture.
(14) ADVANCE FROM CUSTOMER
On March 26, 1997, the Company entered into a supply agreement with a
customer for the purchase of solar cells through December 31, 1998, for a
total sales value of approximately $5.0 million. The advance payment of $1.0
million, which bears interest at 6%, will be credited to the customer against
future shipments during 1997, with the balance at December 31, 1997 to be
credited to the customer's account in equal monthly
F-16
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
amounts during 1998. The customer has the right to convert any or all of the
unapplied advance payment for an equivalent amount of the Company's common
stock at the then prevailing market price. The balance of the advance at
September 30, 1997 was $735,816.
(15) SUBSEQUENT EVENT
On December 15, 1997, the Company's Board of Directors authorized the filing
of a Registration Statement on Form S-1 in connection with a planned initial
public offering of the Company's Common Stock and increased the authorized
shares of Common Stock and Preferred Stock to 25,000,000 and 5,000,000,
respectively. The Company intends to effect a stock split in the form of a
stock dividend in the amount of three shares for every four shares outstanding
as of the effective date of the initial public offering. All share and per
share information in the accompanying financial statements have been
retroactively adjusted to give effect to the planned modification to the
Company's capital structure.
F-17
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURI-
TIES OTHER THAN THE SHARES OF COMMON STOCK TO WHICH THIS PROSPECTUS RELATES,
OR AN OFFER IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AU-
THORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 2
Risk Factors............................................................. 4
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Financial Data.................................................. 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 27
Management............................................................... 41
Certain Transactions..................................................... 47
Principal Shareholders................................................... 48
Description of Capital Stock............................................. 50
Shares Eligible for Future Sale.......................................... 52
Underwriting............................................................. 53
Legal Matters............................................................ 54
Experts.................................................................. 54
Additional Information................................................... 54
Index to Financial Statements............................................ 56
</TABLE>
----------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK TO WHICH THIS PROSPECTUS RELATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,700,000 Shares
[LOGO OF ASTROPOWER, INC.]
Common Stock
----------------
PROSPECTUS
----------------
Needham & Company, Inc.
First Albany Corporation
----------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following expenses are estimated:
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 9,160
Accounting Fees................................................. $125,000
Legal Fees...................................................... $100,000
Printing, Engraving and Mailing................................. $125,000
Transfer agent and registrar's fees............................. $ 10,000
Blue Sky fees and expenses...................................... $ 7,500
Miscellaneous expenses.......................................... $ 23,340
--------
TOTAL....................................................... $400,000
========
</TABLE>
- --------
* Actual
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VIII of the Company's Amended and Restated Certificate of
Incorporation provides in part as follows:
The corporation shall, to the fullest extent permitted by 145 of the General
Corporation Law of the State of Delaware, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and
the indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any By-Law,
agreement, vote of stockholders of disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee, or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the registrant's By-Laws, Certificate of Incorporation,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnifications against public
policy as expressed in the act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person in connection with the securities being registered), the
Registrant will, unless in the opinion of its counsel, the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the following securities were sold or issued by
the Company without registration under the Securities Act of 1933, as amended
(the "Act"):
In the period January 5th through December 25th, 1995, the Company issued an
aggregate of 6,561 shares of Common Stock to twelve (12) employees and one (1)
officer upon the exercise of stock options granted pursuant to the Company's
1989 Stock Option Plan for an aggregate consideration of $3,031.
On February 24, 1995, the Company issued 2,250 shares of its Series B
Convertible Preferred Stock to one (1) person in consideration for services
rendered in the amount of $15,000.
II-1
<PAGE>
On April 21, 1995, the Company issued 9,375 shares of Common Stock to one
(1) person in consideration for services rendered in the amount of $37,500. On
December 15, 1995 the Company issued an aggregate of 2,000 shares of Common
Stock to three (3) individuals in consideration of consulting services
rendered, having an aggregate value of $8,000. Also on December 15, 1995, the
Company issued an aggregate of 15,000 shares of its Series B Convertible
Preferred Stock to two (2) individuals for an aggregate consideration of
$120,000.
On June 30, 1995, the Company issued 375 shares of Common Stock to one (1)
employee pursuant to its obligations under a prior compensatory stock plan
which was terminated in 1989.
In the period February 8, 1996 through December 5, 1996, the Company issued
an aggregate of 4,069 shares of Common Stock to nineteen (19) employees upon
the exercise of stock options granted pursuant to the Company's 1989 Stock
Option Plan for an aggregate consideration of $4,875 and issued 75 shares of
Common Stock as a gift to one (1) employee.
In the period April, 1996 through January 30, 1997 the Company issued 88,158
shares of Series B Convertible Preferred Stock in a private offering for total
proceeds aggregating $705,270 to twenty-three (23) persons, all of whom the
Company reasonably believes were "accredited" investors as that term is
defined in Regulation D under the Act.
In the period January 2, 1997 through October 31, 1997, the Company issued
an aggregate of 5,381 shares of its Common Stock to nine (9) employees upon
the exercise of stock options granted pursuant to the Company's 1989 Stock
Option Plan for an aggregate consideration of $4,700.
The above securities were issued in reliance on the exemption from
registration under Section 4(2) as not involving any public offering. Claims
of such exemptions are based upon the following: (i) all of the purchasers in
such transactions were sophisticated investors with the requisite knowledge
and experience in financial and business matters to evaluate the merits and
risk of an investment in the Company, were able to bear the economic risk of
an investment in the Company, had access to or were furnished with the kinds
of information that registration under the Act would have provided and
acquired securities for their own accounts in transactions not involving any
general solicitations or advertising, and not with a view to the distribution
thereof, (ii) a restrictive legend was placed on each certificate evidencing
the securities; and (iii) each purchaser acknowledged in writing that he knew
the securities were not registered under the Act or any State securities laws,
and were "RESTRICTED SECURITIES" as that term defined in Rule 144 under the
Act, that the securities may not be offered for sale, sold or otherwise
transferred within the United States except pursuant to an effective
Registration Statement under the Act and any applicable State securities laws,
or pursuant to any exemption from registration under the Act, the availability
of which is to be established to the satisfaction of the Company.
ITEM 16. EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES
Unless otherwise noted, the following exhibits are filed with this
Registration Statement.
16 (A) EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
2.1 Series A Preferred Stock Purchase Agreement dated September 20, 1989 by
and among AstroPower, Inc., et al and the Purchasers named therein.
2.2 Series B Stock Purchase Agreement dated between August 1993 and September
1996 by and among AstroPower, Inc. et al and the Purchasers named
therein.
3.1 Certificate of Incorporation of the Registrant, as Amended.
3.2 By-Laws of the Registrant.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
3.3 Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be effective immediately prior to the effectiveness of
the Offering.
3.4 Form of Amended and Restated By-Laws of the Registrant, to be effective
immediately prior to the effectiveness of the Offering.
4.1 Specimen certificate representing the Common Stock of the Registrant.*
5.1 Opinion of Opton Handler Feiler & Landau, LLP with respect to the
legality of the securities being registered.*
10.1 1989 Stock Option Plan, as amended.
10.2 Lease for premises at Solar Park, Newark, Delaware dated July 1, 1991
between the Company and the University of Delaware.
10.3 Employment Agreement between the Company and Dr. Allen M. Barnett dated
April 1, 1997.
10.4 Employment Agreement between the Company and Dr. George W. Roland dated
May 1, 1996.
10.5 1997 Bonus Plan for Drs. Barnett and Roland.
10.6 Amended and Restated Loan Agreement between the Company and Mellon Bank
(DE), N.A. dated November 24, 1997.
10.7 Amended and Restated Security Agreement between the Company and Mellon
Bank (DE), N.A. dated November 24, 1997.
10.8 Amended and Restated Line of Credit Note between the Company and Mellon
Bank (DE), N.A. dated November 24, 1997.
10.9 Amended and Restated Term Loan Note between the Company and Mellon Bank
(DE), N.A. dated November 24, 1997.
10.10 Business Loan Agreement between the Company and Artisans' Savings Bank
dated January 10, 1997.
10.11 Promissory Note between the Company and Artisans' Savings Bank dated
January 10, 1997.
10.12 Commercial Security Agreement between the Company and Artisans' Savings
Bank dated January 10, 1997.
10.13 Commercial Guaranty between Allen M. Barnett and Artisans' Savings Bank
dated January 10, 1997.
10.14 Operating Agreement between the Company and GPU International dated July
1, 1997.
10.15 Performance Agreement between the Company and GPU International dated
July 1, 1997.
10.16 Note Purchase Agreement between the Company and Corning Inc. dated
August 19, 1997.
10.17 Security Agreement between the Company and Corning Inc. dated August 19,
1997.
10.18 Promissory Note between the Company and Corning Inc. dated August 19,
1997.
10.19 Research and Development Umbrella Agreement between the Company and
Corning Inc. dated August 19, 1997.
10.20 Promissory note to Astrosystems, Inc.
23.1 Consent of KPMG Peat Marwick, LLP
23.2 Consent of Opton Handler Feiler & Landau, LLP (contained in Exhibit
5.1).
27.1 Financial Data Schedule
</TABLE>
- --------
* To be supplied by Amendment.
II-3
<PAGE>
(16) (B) FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation and Qualifying Accounts
Other schedules are omitted because of the absence of conditions under which
they are required or because the required information is given in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
being offered therein, and the Offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the Offering.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the registrant's By-
Laws, Certificate of Incorporation, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange
Commission, such indemnifications against public policy as expressed
in the act and is therefore unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer,
or controlling person in connection with the securities being
registered), the Registrant will, unless in the opinion of its
counsel, the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(4) To provide to the Underwriter at the closing specified in the
Underwriting agreement certificates in such denominations and
registered in such names as required by the Underwriter to permit
prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEWARK, DELAWARE, ON
DECEMBER 18, 1997.
Astropower, Inc.
/s/ Allen M. Barnett
By: _________________________________
ALLEN M. BARNETT
PRESIDENT, CHIEF EXECUTIVE
OFFICER AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED:
SIGNATURE TITLE DATE
/s/ Allen M. Barnett President, Chief December 18,
- ------------------------------------- Executive Officer 1997
ALLEN M. BARNETT and Director
/s/ George S. Reichenbach Director December 18,
- ------------------------------------- 1997
GEORGE S. REICHENBACH
/s/ Thomas J. Stiner Vice President, December 18,
- ------------------------------------- Chief Financial 1997
THOMAS J. STINER Officer and
Principal
Accounting Officer
/s/ George W. Roland President and Chief December 18,
- ------------------------------------- Executive Officer 1997
GEORGE W. ROLAND of the Solar Power
Business and
Director
/s/ Gilbert Steinberg Director December 18,
- ------------------------------------- 1997
GILBERT STEINBERG
/s/ Clare E. Nordquist Director December 18,
- ------------------------------------- 1997
CLARE E. NORDQUIST
/s/ Charles R. Schaller Director December 18,
- ------------------------------------- 1997
CHARLES R. SCHALLER
II-5
<PAGE>
EXHIBIT 16 (b)
ASTROPOWER, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
CHARGED TO CHARGED TO DEDUCTIONS-
BEGINNING COSTS AND OTHER ACCOUNTS ENDING
PERIOD ENDED DESCRIPTION BALANCE EXPENSES ACCOUNTS WRITTEN-OFF BALANCE
------------ ----------- ---------- ---------- ---------- ----------- ----------
<C> <S> <C> <C> <C> <C> <C>
Sept. 30,
1997......... Allowance for bad debts (47,836) (37,052) 26,890 (57,998)
Dec. 31,
1996......... Allowance for bad debts (44,683) (87,680) 84,527 (47,836)
Dec. 31,
1995......... Allowance for bad debts (32,902) (85,406) 73,625 (44,683)
Dec. 31,
1994......... Allowance for bad debts (28,208) (72,801) 68,106 (32,902)
<CAPTION>
CHARGED TO CHARGED TO DEDUCTIONS-
BEGINNING COSTS AND OTHER ACCOUNTS ENDING
PERIOD ENDED DESCRIPTION BALANCE EXPENSES ACCOUNTS WRITTEN-OFF BALANCE
------------ ----------- ---------- ---------- ---------- ----------- ----------
<C> <S> <C> <C> <C> <C> <C>
Sept. 30, Deferred tax valuation (1,673,387) (223,480) (1,896,867)
1997......... allowance
Dec. 31, Deferred tax valuation (902,995) (770,392) (1,673,387)
1996......... allowance
Dec. 31, Deferred tax valuation (837,040) (65,955) (902,995)
1995......... allowance
Dec. 31, Deferred tax valuation (303,050) (533,990) (837,040)
1994......... allowance
</TABLE>
<PAGE>
EXHIBIT 1.1
_________ SHARES*
ASTROPOWER, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
January __, 1998
Needham & Company, Inc.
First Albany Corporation
As Representatives of the several Underwriters
c/o Needham & Company, Inc.
445 Park Avenue
New York, New York 10022
Ladies and Gentlemen:
AstroPower, Inc., a Delaware corporation (the "Company"), proposes to issue
-------
and sell ________ shares (the "Firm Shares") of the Company's Common Stock,
-----------
$0.01 par value per share (the "Common Stock"), to you and to the several other
------------
Underwriters named in Schedule I hereto (collectively, the "Underwriters"), for
------------
whom you are acting as representatives (the "Representatives"). The Company has
---------------
also agreed to grant to you and the other Underwriters an option (the "Option")
------
to purchase up to an additional ______ shares of Common Stock, on the terms and
for the purposes set forth in Section 1(b) (the "Option Shares"). The Firm
-------------
Shares and the Option Shares are referred to collectively herein as the
"Shares."
------
The Company confirms as follows its agreement with the Representatives and the
several other Underwriters:
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties and agreements of the
Company herein contained and subject to all the terms and conditions of
this Agreement, (i) the Company agrees to issue and sell the Firm Shares to
the several Underwriters and (ii) each of the Underwriters, severally and
not jointly, agrees to purchase from the Company the respective number of
Firm Shares set forth opposite that Underwriter's name in Schedule I
hereto, at the purchase price of $____ for each Firm Share.
(b) Subject to all the terms and conditions of this Agreement, the Company
grants the Option to the several Underwriters to purchase, severally and
not jointly, up to ______ of the Option Shares, at the same price per share
as the Underwriters shall pay for the Firm Shares. The Option may be
exercised only to cover
- ---------------
* Plus an option to purchase up to an additional ____ shares from the Company to
cover over-allotments.
<PAGE>
over-allotments in the sale of the Firm Shares by the Underwriters and may
be exercised in whole or in part at any time (but not more than once) on or
before the 30th day after the date of this Agreement upon written or
telegraphic notice (the "Option Shares Notice") by the Representatives to
--------------------
the Company no later than 12:00 noon, New York City time, at least two and
no more than five business days before the date specified for closing in
the Option Shares Notice (the "Option Closing Date"), setting forth the
-------------------
aggregate number of Option Shares to be purchased and the time and date for
such purchase. On the Option Closing Date, the Company will issue and sell
to the Underwriters the number of Option Shares set forth in the Option
Shares Notice, and each Underwriter will purchase such percentage of the
Option Shares as is equal to the percentage of Firm Shares that such
Underwriter is purchasing, as adjusted by the Representatives in such
manner as they deem advisable to avoid fractional shares.
2. Delivery and Payment. Delivery of the Firm Shares shall be made to the
Representatives for the accounts of the Underwriters against payment of the
purchase price by certified or official bank checks or by wire transfer payable
in same-day funds to the order of the Company at the office of Needham &
Company, Inc., 445 Park Avenue, New York, New York 10022, at 10:00 a.m., New
York City time, on the third (or, if the purchase price set forth in Section
1(b) hereof is determined after 4:30 p.m., Washington D.C. time, the fourth)
business day following the commencement of the offering contemplated by this
Agreement, or at such time on such other date, not later than seven business
days after the date of this Agreement, as may be agreed upon by the Company and
the Representatives (such date is hereinafter referred to as the "Closing
-------
Date").
- ----
To the extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner specified above) will take
place at the offices specified above for the Closing Date at the time and date
(which may be the Closing Date) specified in the Option Shares Notice.
Certificates evidencing the Shares shall be in definitive form and shall be
registered in such names and in such denominations as the Representatives shall
request at least two business days prior to the Closing Date or the Option
Closing Date, as the case may be, by written notice to the Company. For the
purpose of expediting the checking and packaging of certificates for the Shares,
the Company agrees to make such certificates available for inspection at least
24 hours prior to the Closing Date or the Option Closing Date, as the case may
be.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Firm Shares and Option Shares by the Company to the
respective Underwriters shall be borne by the Company. The Company will pay and
save each Underwriter and any subsequent holder of the Shares harmless from any
and all liabilities with respect to or resulting from any failure or delay in
paying Federal and state stamp and other transfer taxes, if any, which may be
payable or determined to be payable in connection with the original issuance or
sale to such Underwriter of the Shares.
3. Representations and Warranties of the Company. The Company represents,
warrants and covenants to each Underwriter that:
(a) A registration statement (Registration No. 333-___) on Form S-1 relating to
the Shares, including a preliminary prospectus and such amendments to such
registration statement as may have been required to the date of this
Agreement, has been prepared by the Company under the provisions of the
Securities Act of 1933, as amended (the "Act"), and the rules and
---
regulations (collectively referred to as the "Rules and Regulations") of
---------------------
the Securities and Exchange Commission (the "Commission") promulgated
----------
thereunder, and has been filed with the Commission. The term "Preliminary
-----------
Prospectus" as used herein means a preliminary prospectus as contemplated
----------
by Rule 430 or Rule 430A of the Rules and Regulations included at any time
as part of the registration statement. Copies of such registration
statement and amendments and of each related Preliminary Prospectus have
been delivered to the Representatives. If such registration statement
2
<PAGE>
has not become effective,
a further amendment to such registration statement, including a form of
final prospectus, necessary to permit such registration statement to become
effective will be filed promptly by the Company with the Commission. If
such registration statement has become effective, a final prospectus
containing information permitted to be omitted at the time of effectiveness
by Rule 430A of the Rules and Regulations will be filed promptly by the
Company with the Commission in accordance with Rule 424(b) of the Rules and
Regulations. The term "Registration Statement" means the registration
----------------------
statement as amended at the time it becomes or became effective (the
"Effective Date"), including financial statements and all exhibits and any
---------------
information deemed to be included by Rule 430A and includes any
registration statement relating to the offering contemplated by this
Agreement and filed pursuant to Rule 462(b) of the Rules and Regulations.
The term "Prospectus" means the prospectus as first filed with the
----------
Commission pursuant to Rule 424(b) of the Rules and Regulations or, if no
such filing is required, the form of final prospectus included in the
Registration Statement at the Effective Date.
(b) No order preventing or suspending the use of any Preliminary Prospectus
has been issued by the Commission. On the Effective Date, the date the
Prospectus is first filed with the Commission pursuant to Rule 424(b) (if
required), at all times subsequent to and including the Closing Date and, if
later, the Option Closing Date and when any post-effective amendment to the
Registration Statement becomes effective or any amendment or supplement to the
Prospectus is filed with the Commission, the Registration Statement and the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment or supplement thereto), including the financial
statements included in the Prospectus, did and will comply with all applicable
provisions of the Act and the Rules and Regulations and will contain all
statements required to be stated therein in accordance with the Act and the
Rules and Regulations. On the Effective Date and when any post-effective
amendment to the Registration Statement becomes effective, no part of the
Registration Statement, the Prospectus or any such amendment or supplement did
or will contain an 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 therein not misleading. At the Effective Date, the date the
Prospectus or any amendment or supplement to the Prospectus is filed with the
Commission and at the Closing Date and, if later, the Option Closing Date, the
Prospectus did not and will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
foregoing representations and warranties in this Section 3(b) do not apply to
any statements or omissions made in reliance on and in conformity with
information relating to any Underwriter furnished in writing to the Company by
the Representatives specifically for inclusion in the Registration Statement or
Prospectus or any amendment or supplement thereto. The Company acknowledges
that the statements set forth under the heading "Underwriting" in the Prospectus
constitute the only information relating to any Underwriter furnished in writing
to the Company by the Representatives specifically for inclusion in the
Registration Statement.
(c) The Company does not own, and at the Closing Date and, if later, the
Option Closing Date, will not own, directly or indirectly, any shares of stock
or any other equity or long-term debt securities of any corporation or have any
equity interest in any corporation, firm, partnership, joint venture,
association or other entity. The Company is, and at the Closing Date and, if
later, the Option Closing Date, will be, a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. The Company has, and at the Closing Date and, if later, the
Option Closing Date, will have, full power and authority to conduct its business
as contemplated by the Prospectus, to own or lease all the assets owned or
leased by it and to conduct its business as described in the Registration
Statement and the Prospectus. The Company is, and at the Closing Date and, if
later, the Option Closing Date, will be, duly licensed or qualified to do
business and in good standing as a foreign corporation in all jurisdictions in
which the nature of the activities conducted by it or the character of the
assets owned or leased by it makes such license or qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not materially and adversely affect the Company or its business,
properties, business prospects, condition
3
<PAGE>
(financial or other) or results of operations. The Company is not, and at the
Closing Date and, if later, the Option Closing Date, will not be, engaged in any
discussions or a party to any agreement or understanding, written or oral,
regarding the acquisition of an interest in any corporation, firm, partnership,
joint venture, association or other entity where such discussions, agreements or
understandings would require amendment to the Registration Statement pursuant to
applicable securities laws. Complete and correct copies of the Certificate of
Incorporation and of the by-laws of the Company and all amendments thereto have
been delivered to the Representatives, and no changes therein will be made
subsequent to the date hereof and prior to the Closing Date or, if later, the
Option Closing Date.
(d) All of the outstanding shares of capital stock of the Company have been
duly authorized, validly issued and are fully paid and nonassessable and were
issued in compliance with all applicable state and federal securities laws; the
Shares have been duly authorized and when issued and paid for as contemplated
herein will be validly issued, fully paid and nonassessable; no preemptive or
similar rights exist with respect to any of the Shares or the issue and sale
thereof. The Underwriters will receive good and valid title to the Shares
purchased from the Company, free and clear of all liens, claims, security
interests, pledges, charges, encumbrances, preemptive rights, stockholders'
agreements and voting trusts and other defects in title. The description of the
capital stock of the Company in the Registration Statement and the Prospectus
is, and at the Closing Date and, if later, the Option Closing Date, will be,
complete and accurate in all respects. Except as set forth in the Prospectus,
the Company does not have outstanding, and at the Closing Date and, if later,
the Option Closing Date, will not have outstanding, any options to purchase, or
any rights or warrants to subscribe for, or any securities or obligations
convertible into, or any contracts or commitments to issue or sell, any shares
of capital stock, or any such warrants, convertible securities or obligations.
No further approval or authority of stockholders or the Board of Directors of
the Company will be required for the issuance and sale of the Shares as
contemplated herein.
(e) The audited financial statements and schedules included in the
Registration Statement or the Prospectus present fairly the financial condition
of the Company as of the respective dates thereof and the results of operations
and cash flows of the Company for the respective periods covered thereby, all in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the entire period involved, except as otherwise disclosed in
the Prospectus. No other financial statements or schedules of the Company are
required by the Act or the Rules and Regulations to be included in the
Registration Statement or the Prospectus. KPMG Peat Marwick, LLP (the
"Accountants"), who have reported on such financial statements and schedules,
- ------------
are independent accountants with respect to the Company as required by the Act
and the Rules and Regulations. The summary financial and statistical data
included in the Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the financial
statements presented therein.
(f) Subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus and prior to the Closing Date and, if
later, the Option Closing Date, except as set forth in or contemplated by the
Registration Statement and the Prospectus, (i) there has not been and will not
have been any change in the capitalization of the Company (other than in
connection with the exercise of options to purchase the Company's Common Stock
granted pursuant to the Company's stock option plan from the shares reserved
therefor as described in the Registration Statement), or any material adverse
change in the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company, arising for any reason
whatsoever, (ii) the Company has not incurred, nor will it incur, except in the
ordinary course of business as described in the Prospectus, any material
liabilities or obligations, direct or contingent, nor has the Company entered
into nor will it enter into, except in the ordinary course of business as
described in the Prospectus, any material transactions other than pursuant to
this Agreement and the transactions referred to herein and (iii) the Company has
not and will not have paid or declared any dividends or other distributions of
any kind on any class of its capital stock.
4
<PAGE>
(g) The Company is not, will not become as a result of the transactions
contemplated hereby, and does not intend to conduct its business in a manner
that would cause it to become, an "investment company" or an "affiliated person"
of, or "promoter" or "principal underwriter" for, an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
(h) Except as set forth in the Registration Statement and the Prospectus,
there are no actions, suits or proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its officers in
their capacity as such, nor any basis therefor, before or by any Federal or
state court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling, decision
or finding might materially and adversely affect the Company or the business,
properties, business prospects, condition (financial or otherwise) or results of
operations of the Company.
(i) The Company has, and at the Closing Date and, if later, the Option Closing
Date, will have, performed all the obligations required to be performed by it,
and is not, and at the Closing Date, and, if later, the Option Closing Date,
will not be, in default, under any contract or other instrument to which it is a
party or by which its property is bound or affected, which default could
materially and adversely affect the Company or the business, properties,
business prospects, condition (financial or other) or results of operations of
the Company. To the best knowledge of the Company, no other party under any
contract or other instrument to which it is a party is in default in any respect
thereunder, which default could materially and adversely affect the Company or
the business, properties, business prospects, condition (financial or other) or
results of operations of the Company. The Company is not, and at the Closing
Date and, if later, the Option Closing Date, will not be, in violation of any
provision of its Certificate or Incorporation or by-laws.
(j) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
consummation by the Company of the transactions on its part contemplated herein,
except such as have been obtained under the Act or the Rules and Regulations and
such as may be required under state securities or Blue Sky laws or the by-laws
and rules of the National Association of Securities Dealers, Inc. (the "NASD")
----
in connection with the purchase and distribution by the Underwriters of the
Shares.
(k) The Company has full corporate power and authority to enter into this
Agreement. This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with the terms hereof. The
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company pursuant to the
terms or provisions of, or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or give any party a right to
terminate any of its obligations under, or result in the acceleration of any
obligation under, the Certificate of Incorporation or by-laws of the Company,
any indenture, mortgage, deed of trust, voting trust agreement, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument to which the Company is a party or by
which the Company or any of its properties is bound or affected, or violate or
conflict with any judgment, ruling, decree, order, statute, rule or regulation
of any court or other governmental agency or body applicable to the business or
properties of the Company.
(l) The Company has good and marketable title to all properties and assets
described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described in the
Prospectus or are not material to the business of the Company. The Company has
valid, subsisting and enforceable leases for the properties described in the
Prospectus as leased by it. The Company owns or leases all such properties as
are necessary to its operations as contemplated by the Prospectus, except
5
<PAGE>
where the failure to so own or lease would not materially and adversely affect
the business, properties, business prospects, condition (financial or otherwise)
or results of operations of the Company.
(m) There is no contract, agreement, instrument, lease, license, certificate,
permit or other arrangement, whether written or oral, of a character required to
be described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required. All such contracts to which the Company is a party have been duly
authorized, executed and delivered by the Company, constitute valid and binding
agreements of the Company and are enforceable against and by the Company in
accordance with the terms thereof.
(n) No statement, representation, warranty or covenant made by the Company in
this Agreement or made in any certificate or document required by Section 5 of
this Agreement to be delivered to the Representatives was or will be, when made,
inaccurate, untrue or incorrect.
(o) Neither the Company nor any of its directors, officers or controlling
persons has taken, directly or indirectly, any action designed, or which might
reasonably be expected, to cause or result, under the Act or otherwise, in, or
which has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
(p) No holder of securities of the Company has rights to the registration of
any securities of the Company because of the filing of the Registration
Statement, which rights have not been waived by the holder thereof as of the
date hereof.
(q) The Company has filed a registration statement pursuant to Section 12(g)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to
------------
register the Common Stock, has filed an application to list the Shares on the
Nasdaq National Market ("NNM"), and has received notification that the listing
---
has been approved, subject to notice of issuance of the Shares.
(r) The Company has not distributed and will not distribute any prospectus or
other offering material in connection with the offer and sale of the Shares,
other than the Preliminary Prospectus or the Prospectus or other offering
materials permitted by the Act and the Rules and Regulations to be distributed.
(s) Except as disclosed in or specifically contemplated by the Prospectus (i)
the Company owns or has adequate rights to use all trademarks, trade names,
inventions, designs, trade secrets, know-how, patent rights, copyrights or other
information (collectively, "Intellectual Property"), and has such other
---------------------
licenses, approvals and governmental authorizations sufficient to conduct its
business as now conducted and as now proposed to be conducted, (ii) to the
Company's knowledge, none of the patent rights owned or licensed by the Company
is unenforceable or invalid; the Company has duly and properly filed or caused
to be filed with the United States Patent and Trademark Office (the "PTO") and
---
applicable foreign and international patent authorities all patent applications
described or referred to in the Registration Statement and Prospectus and
believes that the Company has complied with the PTO's duty of candor and
disclosure for such patent applications; the Company is unaware of any facts
which preclude the grant of a patent from its pending patent applications; the
Company has no knowledge of any facts which would preclude the Company from
having clear title to its pending patent applications; and the Company is not
aware of the granting of any patent rights to third parties or the filing of any
patent applications by third parties or any other rights of third parties to any
of the Company's Intellectual Property, (iii) the Company has no knowledge of
any infringement by it of trademarks, trade name rights, patent rights,
copyrights, licenses, trade secrets or other similar rights of others, where
such infringement could have a material and adverse effect on the Company or the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company, and (iv) there is no claim being made
against the Company, or to the best of the Company's knowledge, any employee of
the
6
<PAGE>
Company, regarding trademark, trade name, patent, copyright, license, trade
secret or other infringement which could have a material and adverse effect on
the Company or the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company.
(t) The Company has filed all federal, state, local and foreign income tax
returns which have been required to be filed and has paid all taxes and
assessments received by it to the extent that such taxes or assessments have
become due. The Company has no tax deficiency which has been or, to the best
knowledge of the Company, might be asserted or threatened against it which could
have a material and adverse effect on the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company.
(u) The pro forma financial information set forth in the Registration
Statement reflects, subject to the limitations set forth in the Registration
Statement as to such pro forma financial information, the results of operations
of the Company purported to be shown thereby for the periods indicated and
conforms to the requirements of Regulation S-X of the Rules and Regulations and
management of the Company believes (i) the assumptions underlying the pro forma
adjustments are reasonable, (ii) that such adjustments have been properly
applied to the historical amounts in the compilation of such statements, and
(iii) that such statements present fairly, with respect to the Company, the pro
forma financial position and results of operations and the other information
purported to be shown therein at the respective dates or for the respective
periods therein specified.
(v) The Company owns or possesses all authorizations, approvals, orders,
licenses, registrations, other certificates and permits of and from all
governmental regulatory officials and bodies, necessary to conduct its business
as contemplated in the Prospectus, except where the failure to own or possess
all such authorizations, approvals, orders, licenses, registrations, other
certificates and permits would not materially and adversely affect the Company
or the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company. There is no proceeding
pending or threatened (or any basis therefor known to the Company) which may
cause any such authorization, approval, order, license, registration,
certificate or permit to be revoked, withdrawn, cancelled, suspended or not
renewed; and the Company is conducting its business in compliance with all laws,
rules and regulations applicable thereto (including, without limitation, all
applicable federal, state and local environmental laws and regulations) except
where such noncompliance would not materially and adversely affect the Company
or the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company.
(w) The Company maintains insurance of the types and in the amounts generally
deemed adequate for its business, including, but not limited to, insurance
covering real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
(x) Neither the Company has nor, to the best of the Company's knowledge, any
of its employees or agents at any time during the last five years (i) made any
unlawful contribution to any candidate for foreign office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
4. Agreements of the Company. The Company covenants and agrees with the
several Underwriters as follows:
(a) The Company will not, either prior to the Effective Date or thereafter
during such period as the Prospectus is required by law to be delivered in
connection with sales of the Shares by an Underwriter or
7
<PAGE>
dealer, file any amendment or supplement to the Registration Statement or
the Prospectus, unless a copy thereof shall first have been submitted to
the Representatives within a reasonable period of time prior to the filing
thereof and the Representatives shall not have objected thereto in good
faith.
(b) The Company will use its best efforts to cause the Registration Statement
to become effective, and will notify the Representatives promptly, and will
confirm such advice in writing, (i) when the Registration Statement has
become effective and when any post-effective amendment thereto becomes
effective, (ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus or for
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose or the threat thereof, (iv)
of the happening of any event during the period mentioned in the second
sentence of Section 4(e) that in the judgment of the Company makes any
statement made in the Registration Statement or the Prospectus untrue or
that requires the making of any changes in the Registration Statement or
the Prospectus in order to make the statements therein, in the light of the
circumstances in which they are made, not misleading and (v) of receipt by
the Company or any representative or attorney of the Company of any other
communication from the Commission relating to the Company, the Registration
Statement, any Preliminary Prospectus or the Prospectus. If at any time
the Commission shall issue any order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal of such order at the earliest possible moment. If the
Company has omitted any information from the Registration Statement
pursuant to Rule 430A of the Rules and Regulations, the Company will comply
with the provisions of and make all requisite filings with the Commission
pursuant to said Rule 430A and notify the Representatives promptly of all
such filings.
(c) The Company will furnish to each Representative, without charge, one signed
copy of each of the Registration Statement and of any post-effective
amendment thereto, including financial statements and schedules, and all
exhibits thereto and will furnish to the Representatives, without charge,
for transmittal to each of the other Underwriters, a copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules but without exhibits.
(d) The Company will comply with all the provisions of any undertakings
contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time to time, the Company will
deliver to each of the Underwriters, without charge, as many copies of the
Prospectus or any amendment or supplement thereto as the Representatives
may reasonably request. The Company consents to the use of the Prospectus
or any amendment or supplement thereto by the several Underwriters and by
all dealers to whom the Shares may be sold, both in connection with the
offering or sale of the Shares and for any period of time thereafter during
which the Prospectus is required by law to be delivered in connection
therewith. If during such period of time any event shall occur which in
the judgment of the Company or counsel to the Underwriters should be set
forth in the Prospectus in order to make any statement therein, in the
light of the circumstances under which it was made, not misleading, or if
it is necessary to supplement or amend the Prospectus to comply with law,
the Company will forthwith prepare and duly file with the Commission an
appropriate supplement or amendment thereto, and will deliver to each of
the Underwriters, without charge, such number of copies of such supplement
or amendment to the Prospectus as the Representatives may reasonably
request.
(f) Prior to any public offering of the Shares, the Company will cooperate with
the Representatives and counsel to the Underwriters in connection with the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representatives
may request; provided, that in no event shall the Company be obligated to
qualify to do business in any jurisdiction where it is not now
8
<PAGE>
so qualified or to take any action which would subject it to general
service of process in any jurisdiction where it is not now so subject.
(g) The Company will, so long as required under the Rules and Regulations,
furnish to its stockholders as soon as practicable after the end of each
fiscal year an annual report (including a balance sheet and statements of
income, stockholders' equity and cash flow of the Company and its
consolidated subsidiaries, if any, certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries, if any, for such quarter in reasonable detail.
(h) During the period of five years commencing on the Effective Date, the
Company will furnish to the Representatives and each other Underwriter who
may so request copies of such financial statements and other periodic and
special reports as the Company may from time to time distribute generally
to the holders of any class of its capital stock, and will furnish to the
Representatives and each other Underwriter who may so request a copy of
each annual or other report it shall be required to file with the
Commission.
(i) The Company will make generally available to holders of its securities as
soon as may be practicable but in no event later than the last day of the
fifteenth full calendar month following the calendar quarter in which the
Effective Date falls, an earnings statement (which need not be audited but
shall be in reasonable detail) for a period of 12 months ended commencing
after the Effective Date, and satisfying the provisions of Section 11(a) of
the Act (including Rule 158 of the Rules and Regulations).
(j) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company will pay or
reimburse if paid by the Representatives all costs and expenses incident to
the performance of the obligations of the Company under this Agreement and
in connection with the transactions contemplated hereby, including but not
limited to costs and expenses of or relating to (i) the preparation,
printing and filing of the Registration Statement and exhibits to it, each
Preliminary Prospectus, Prospectus and any amendment or supplement to the
Registration Statement or Prospectus, (ii) the preparation and delivery of
certificates representing the Shares, (iii) the printing of this Agreement,
the Agreement Among Underwriters, any Selected Dealer Agreements, any
Underwriters' Questionnaires, any Underwriters' Powers of Attorney, and any
invitation letters to prospective Underwriters, (iv) furnishing (including
costs of shipping and mailing) such copies of the Registration Statement,
the Prospectus and any Preliminary Prospectus, and all amendments and
supplements thereto, as may be requested for use in connection with the
offering and sale of the Shares by the Underwriters or by dealers to whom
Shares may be sold, (v) the listing of the Shares on the NNM, (vi) any
filings required to be made by the Underwriters with the NASD, and the
fees, disbursements and other charges of counsel for the Underwriters in
connection therewith, (vii) the registration or qualification of the Shares
for offer and sale under the securities or Blue Sky laws of such
jurisdictions designated pursuant to Section 4(f), including the fees,
disbursements and other charges of counsel to the Underwriters in
connection therewith, and the preparation and printing of preliminary,
supplemental and final Blue Sky memoranda, (viii) fees, disbursements and
other charges of counsel to the Company (but not those of counsel for the
Underwriters, except as otherwise provided herein) and (ix) the transfer
agent for the Shares.
(k) The Company will not at any time, directly or indirectly, take any action
designed or which might reasonably be expected to cause or result in, or
which will constitute, stabilization of the price of the shares of Common
Stock to facilitate the sale or resale of any of the Shares.
(l) The Company will apply the net proceeds from the offering and sale of the
Shares to be sold by the Company in the manner set forth in the Prospectus
under "Use of Proceeds" and shall file such reports with
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the Commission with respect to the sale of the Shares and the application
of the proceeds therefrom as may be required in accordance with Rule 463
under the Act.
(m) During the period beginning from the date hereof and continuing to and
including the date 360 days after the date of the Prospectus, without the
prior written consent of Needham & Company, Inc., the Company will not
offer, sell, contract to sell, grant options to purchase or otherwise
dispose of any of the Company's equity securities of the Company or any
other securities convertible into or exchangeable with its Common Stock or
other equity security (other than pursuant to employee stock option plans
or the conversion of convertible securities or the exercise of warrants
outstanding on the date of this Agreement). During the period of 360
days after the date of the Prospectus, the Company will not file with the
Commission or cause to become effective any registration statement relating
to any securities of the Company without the prior written consent of
Needham & Company, Inc.
(n) During the period of 360 days after the date of the Prospectus, the
Company will not, without the prior written consent of Needham & Company,
Inc., grant options to purchase shares of Common Stock at a price less than
the initial public offering price.
(o) The Company will cause each of its officers, directors and certain
stockholders designated by the Representatives to, enter into lock-up
agreements with the Representatives to the effect that they will not,
without the prior written consent of Needham & Company, Inc., sell,
contract to sell or otherwise dispose of any shares of Common Stock or
rights to acquire such shares according to the terms set forth in Schedule
II hereto.
(p) The Company will not file with the Commission any registration statement on
Form S-8 relating to shares of its Common Stock prior to 90 days after the
effective date of the Registration Statement.
5. Conditions of the Obligations of the Underwriters. The obligations of each
Underwriter hereunder are subject to the following conditions:
(a) Notification that the Registration Statement has become effective shall be
received by the Representatives not later than 5:00 p.m., New York City time, on
the date of this Agreement or at such later date and time as shall be consented
to in writing by the Representatives and all filings required by Rule 424 and
Rule 430A of the Rules and Regulations shall have been made.
(b) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or threatened by the Commission, (ii) no order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Shares under the securities or Blue Sky laws of any jurisdiction shall be
in effect and no proceeding for such purpose shall be pending before or
threatened or contemplated by the Commission or the authorities of any such
jurisdiction, (iii) any request for additional information on the part of the
staff of the Commission or any such authorities shall have been complied with to
the satisfaction of the staff of the Commission or such authorities and (iv)
after the date hereof no amendment or supplement to the Registration Statement
or the Prospectus shall have been filed unless a copy thereof was first
submitted to the Representatives and the Representatives do not object thereto
in good faith, and the Representatives shall have received certificates, dated
the Closing Date and, if later, the Option Closing Date and signed by the Chief
Executive Officer and the Treasurer of the Company (who may, as to proceedings
threatened, rely upon the best of their information and belief), to the effect
of clauses (i), (ii) and (iii) of this paragraph.
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business
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prospects, properties, management, condition (financial or otherwise) or results
of operations of the Company, whether or not arising from transactions in the
ordinary course of business, in each case other than as described in or
contemplated by the Registration Statement and the Prospectus, and (ii) the
Company shall not have sustained any material loss or interference with its
business or properties from fire, explosion, flood or other casualty, whether or
not covered by insurance, or from any labor dispute or any court or legislative
or other governmental action, order or decree, which is not described in the
Registration Statement and the Prospectus, if in the judgment of the
Representatives any such development makes it impracticable or inadvisable to
consummate the sale and delivery of the Shares by the Underwriters at the
initial public offering price.
(d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company or any of its officers or
directors in their capacities as such, before or by any Federal, state or local
court, commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, in which litigation or proceeding an unfavorable
ruling, decision or finding would, in the judgment of the Representatives,
materially and adversely affect the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the Company.
(e) Each of the representations and warranties of the Company contained herein
shall be true and correct in all material respects at the Closing Date, and,
with respect to the Option Shares, at the Option Closing Date, and all covenants
and agreements contained herein to be performed on the part of the Company and
all conditions contained herein to be fulfilled or complied with by the Company
at or prior to the Closing Date and, with respect to the Option Shares, at or
prior to the Option Closing Date, shall have been duly performed, fulfilled or
complied with.
(f) The Representatives shall have received an opinion, dated the Closing Date
and, with respect to the Option Shares, the Option Closing Date, satisfactory in
form and substance to the Representatives and counsel for the Underwriters from
Opton Handler Feiler & Landau, LLP, counsel to the Company, with respect to the
following matters:
(i) The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation; has full
corporate power and authority to conduct all the activities conducted by it, to
own or lease all the assets owed or leased by it and to conduct its business as
contemplated by the Prospectus; and is duly licensed or qualified to do business
and is in good standing as a foreign corporation in all jurisdictions in which
the nature of the activities conducted by it or the character of the assets
owned or leased by it makes such license or qualification necessary and where
the failure to be licensed or qualified would have a material and adverse effect
on the business or financial condition of the Company.
(ii) All of the outstanding shares of capital stock of the Company have been
duly authorized, validly issued and are fully paid and nonassessable, to such
counsel's knowledge, were issued pursuant to exemptions from the registration
and qualification requirements of federal and applicable state securities laws,
and were not issued in violation of or subject to any preemptive or, to such
counsel's knowledge, similar rights;
(iii) The specimen certificate evidencing the Common Stock filed as an
exhibit to the Registration Statement is in due and proper form under Delaware
law, the Shares have been duly authorized and, when issued and paid for as
contemplated by this Agreement, will be validly issued, fully paid and
nonassessable; and no preemptive or similar rights exist with respect to any of
the Shares or the issue and sale thereof.
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(iv) To such counsel's knowledge, the Company does not own or control,
directly or indirectly, any shares of stock or any other equity or long-term
debt securities of any corporation or have any equity interest in any
corporation, firm, partnership, joint venture, association or other entity.
(v) The authorized and outstanding capital stock of the Company is as set
forth in the Registration Statement and the Prospectus in the column entitled
"Actual" under the caption "Capitalization" (except for subsequent issuances, if
any, pursuant to this Agreement or pursuant to reservations, agreements,
employee benefit plans or the exercise of convertible securities, options or
warrants referred to in the Prospectus). To such counsel's knowledge, except as
disclosed in or specifically contemplated by the Prospectus, there are no
outstanding options, warrants of other rights calling for the issuance of, and
no commitments, plans or arrangements to issue, any shares of capital stock of
the Company or any security convertible into or exchangeable or exercisable for
capital stock of the Company. The description of the capital stock of the
Company in the Registration Statement and the Prospectus conforms in all
material respects to the terms thereof.
(vi) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened to which the Company is a party or to which
any of its properties is subject that are required to be described in the
Registration Statement or the Prospectus but are not so described.
(vii) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
consummation by the Company of the transactions on its part contemplated under
this Agreement, except such as have been obtained or made under the Act or the
Rules and Regulations and such as may be required under state securities or Blue
Sky laws or the by-laws and rules of the NASD in connection with the purchase
and distribution by the Underwriters of the Shares.
(viii) The Company has full corporate power and authority to enter into
this Agreement. This Agreement has been duly authorized, executed and delivered
by the Company.
(ix) The execution and delivery of this Agreement, the compliance by the
Company with all of the terms hereof and the consummation of the transactions
contemplated hereby does not contravene any provision of applicable law or the
Certificate of Incorporation or By-Laws of the Company, and to the best of such
counsel's knowledge will not result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company pursuant to the
terms and provisions of, result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or give any party a right to
terminate any of its obligations under, or result in the acceleration of any
obligation under, any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument known to such
counsel to which the Company is a party or by which the Company or any of its
properties is bound or affected, or violate or conflict with (i) any judgment,
ruling, decree or order known to such counsel or (ii) any statute, rule or
regulation of any court or other governmental agency or body, applicable to the
business or properties of the Company.
(x) To such counsel's knowledge, there is no document or contract of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an
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exhibit to the Registration Statement which is not described or filed as
required, and each description of such contracts and documents that is contained
in the Registration Statement and Prospectus fairly presents in all material
respects the information required under the Act and the Rules and Regulations.
(xi) The statements under the captions "Risk Factors -- Shares Eligible for
Future Sale," "Risk Factors -- Effect of Delaware Law and Certain Charter and
By-Law Provisions; Possible Issuance of Preferred Stock," "Management -- Stock
Option Plan," "Management --Employment Arrangements," "Certain Transactions,"
"Description of Capital Stock," and "Shares Eligible for Future Sale" in the
Prospectus, insofar as the statements constitute a summary of documents referred
to therein or matters of law, are accurate summaries and fairly and correctly
present, in all material respects, the information called for with respect to
such documents and matters (provided, however, that such counsel may rely on
representations of the Company with respect to the factual matters contained in
such statements, and provided further that such counsel shall state that nothing
has come to the attention of such counsel which leads them to believe that such
representations are not true and correct in all material respects).
(xii) The Company is not an "investment company" or an "affiliated person"
of, or "promoter" or "principal underwriter" for, an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
(xiii) The Shares have been duly authorized for listing on the NNM, subject
to notice of issuance.
(xiv) To such counsel's knowledge, no holder of securities of the Company
has rights, which have not been waived or satisfied, to require the register
with the Commission shares of Common Stock or other securities, as part of the
offering contemplated hereby.
(xv) The Registration Statement has become effective under the Act, and to
the best of such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceeding for that purpose
has been instituted or is pending, threatened or contemplated.
(xvi) The Registration Statement and the Prospectus comply as to form in
all material respects with the requirement of the Act and the Rules and
Regulations (other than the financial statements, schedules and other financial
data contained in the Registration Statement or the Prospectus, as to which such
counsel need express no opinion).
(xvii) Such counsel has participated in the preparation of the Registration
Statement and Prospectus and has no reason to believe that, as of the Effective
Date the Registration Statement, or any amendment or supplement thereto, (other
than the financial statements, schedules and other financial data contained
therein, as to which such counsel need express no opinion) contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus, or any amendment or supplement thereto, as of its date and
the Closing Date and, if later, the Option Closing Date, contained or contains
any untrue statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (other than the financial statements,
schedules and other financial data contained therein, as to which such counsel
need express no opinion).
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In rendering such opinion, such counsel may rely upon as to matters of local
law on opinions of counsel satisfactory in form and substance to the
Representatives and counsel for the Underwriters, provided that the opinion of
counsel to the Company shall state that they are doing so, that they have no
reason to believe that they and the Underwriters are not entitled to rely on
such opinions and that copies of such opinions are to be attached to the
opinion.
(g) The Representatives shall have received an opinion, dated the Closing
Date and the Option Closing Date, from Choate, Hall & Stewart, counsel to the
Underwriters, with respect to the Registration Statement, the Prospectus and
this Agreement, which opinion shall be satisfactory in all respects to the
Representatives.
(h) Concurrently with the execution and delivery of this Agreement, the
Accountants shall have furnished to the Representatives a letter, dated the date
of its delivery, addressed to the Representatives and in form and substance
satisfactory to the Representatives, confirming that they are independent
accountants with respect to the Company as required by the Act and the Rules and
Regulations and with respect to certain financial and other statistical and
numerical information contained in the Registration Statement. At the Closing
Date and, as to the Option Shares, the Option Closing Date, the Accountants
shall have furnished to the Representatives a letter, dated the date of its
delivery, which shall confirm, on the basis of a review in accordance with the
procedures set forth in the letter from the Accountants, that nothing has come
to their attention during the period from the date of the letter referred to in
the prior sentence to a date (specified in the letter) not more than five days
prior to the Closing Date and the Option Closing Date, as the case may be, which
would require any change in their letter dated the date hereof if it were
required to be dated and delivered at the Closing Date and the Option Closing
Date.
(i) Concurrently with the execution and delivery of this Agreement and at
the Closing Date and, as to the Option Shares, the Option Closing Date, there
shall be furnished to the Representatives a certificate, dated the date of its
delivery, signed by each of the Chief Executive Officer and the Treasurer of the
Company, in form and substance satisfactory to the Representatives, to the
effect that:
(i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus and (A) as of the date of such
certificate, such documents are true and correct in all material respects and do
not omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not untrue or misleading and (B) in the
case of the certificate delivered at the Closing Date and the Option Closing
Date, since the Effective Date no event has occurred as a result of which it is
necessary to amend or supplement the Prospectus in order to make the statements
therein not untrue or misleading.
(ii) Each of the representations and warranties of the Company contained in
this Agreement were, when originally made, and are, at the time such certificate
is delivered, true and correct.
(iii) Each of the covenants required to be performed by the Company herein
on or prior to the date of such certificate has been duly, timely and fully
performed and each condition herein required to be satisfied or fulfilled on or
prior to the date of such certificate has been duly, timely and fully satisfied
or fulfilled.
(j) The Shares shall be qualified for sale in such jurisdictions as the
Representatives may reasonably request and each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing Date
or the Option Closing Date.
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(k) Prior to the Closing Date, the Shares shall have been duly authorized
for listing on the NNM upon official notice of issuance.
(l) The Company shall have furnished to the Representatives such
certificates, in addition to those specifically mentioned herein, as the
Representatives may have reasonably requested as to the accuracy and
completeness at the Closing Date and the Option Closing Date of any statement in
the Registration Statement or the Prospectus, as to the accuracy at the Closing
Date and the Option Closing Date of the representations and warranties of the
Company herein, as to the performance by the Company of its obligations
hereunder, or as to the fulfillment of the conditions concurrent and precedent
to the obligations hereunder of the Representatives.
6. Indemnification.
(a) The Company will indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter and each person,
if any, who controls each Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, liabilities, expenses and damages (including any and all investigative,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim asserted), to
which they, or any of them, may become subject under the Act, the Exchange Act
or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on any untrue statement or alleged untrue statement of
a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any amendment or supplement to the Registration
Statement or the Prospectus, or the omission or alleged omission to state in
such document a material fact required to be stated in it or necessary to make
the statements in it not misleading in the light of the circumstances in which
they were made, or arise out of or are based in whole or in part on any
inaccuracy in the representations and warranties of the Company contained herein
or any failure of the Company to perform its obligations hereunder or under law
in connection with the transactions contemplated hereby; provided, however, that
(i) the Company will not be liable to the extent that such loss, claim,
liability, expense or damage arises from the sale of the Shares in the public
offering to any person by an Underwriter and is based on an untrue statement or
omission or alleged untrue statement or omission made in reliance on and in
conformity with information relating to any Underwriter furnished in writing to
the Company by the Representatives, on behalf of any Underwriter, expressly for
inclusion in the Registration Statement, the Preliminary Prospectus or the
Prospectus and (ii) the Company will not be liable to any Underwriter, the
directors, officers, employees or agents of such Underwriter or any person
controlling such Underwriter with respect to any loss, claim, liability,
expense, or damage arising out of or based on any untrue statement or omission
or alleged untrue statement or omission or alleged omission to state a material
fact in the Preliminary Prospectus which is corrected in the Prospectus if the
person asserting any such loss, claim, liability, charge or damage purchased
Shares from such Underwriter but was not sent or given a copy of the Prospectus
at or prior to the written confirmation of the sale of such Shares to such
person. The Company acknowledges that the statements set forth under the
heading "Underwriting" in the Preliminary Prospectus and the Prospectus
constitute the only information relating to any Underwriter furnished in writing
to the Company by the Representatives on behalf of the Underwriters expressly
for inclusion in the Registration Statement, the Preliminary Prospectus or the
Prospectus. This indemnity agreement will be in addition to any liability that
the Company might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who signs the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to each Underwriter, as set forth in
Section 6(a), but only insofar as losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with
information
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relating to any Underwriter furnished in writing to the Company by the
Representatives, on behalf of such Underwriter, expressly for use in the
Registration Statement, the Preliminary Prospectus or the Prospectus. The
Company acknowledges that the statements set forth under the heading
"Underwriting" in the Preliminary Prospectus and the Prospectus constitute the
only information relating to any Underwriter furnished in writing to the Company
by the Representatives on behalf of the Underwriters expressly for inclusion in
the Registration Statement, the Preliminary Prospectus or the Prospectus. This
indemnity will be in addition to any liability that each Underwriter might
otherwise have.
(c) Any party that proposes to assert the right to be indemnified under this
Section 6 shall, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 6, notify each such
indemnifying party in writing of the commencement of such action, enclosing with
such notice a copy of all papers served, but the omission so to notify such
indemnifying party will not relieve it from any liability that it may have to
any indemnified party under the foregoing provisions of this Section 6 unless,
and only to the extent that, such omission results in the loss of substantive
rights or defenses by the indemnifying party. If any such action is brought
against any indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in and, to
the extent that it elects by delivering written notice to the indemnified party
promptly after receiving notice of the commencement of the action from the
indemnified party, jointly with any other indemnifying party similarly notified,
to assume the defense of the action, with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense, the indemnifying party will not be
liable to the indemnified party for any legal or other expenses except as
provided below and except for the reasonable costs of investigation subsequently
incurred by the indemnified party in connection with the defense. The
indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party, (ii)
the indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(iii) a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (iv) the indemnifying
party has not in fact employed counsel to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm admitted to practice in such jurisdiction at any one time for all
such indemnified party or parties. All such fees, disbursements and other
charges will be reimbursed by the indemnifying party promptly as they are
incurred. Any indemnifying party will not be liable for any settlement of any
action or claim effected without its written consent (which consent will not be
unreasonably withheld).
(d) If the indemnification provided for in this Section 6 is applicable in
accordance with its terms but for any reason is held to be unavailable to or
insufficient to hold harmless an indemnified party under paragraphs (a), (b) and
(c) of this Section 6 in respect of any losses, claims, liabilities, expenses
and damages referred to therein, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any contribution
received by the Company from persons other than the Underwriters, such as
persons who control the Company within the meaning of the Act, officers of the
Company who signed the Registration Statement and directors of the Company, who
also may be liable for
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contribution) by such indemnified party as a result of such losses, claims,
liabilities, expenses and damages in such proportion as shall be appropriate to
reflect the relative benefits received by the Company, on the one hand, and the
Underwriters, on the other hand. The relative benefits received by the Company,
on the one hand, and the Underwriters, on the other hand, shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. If, but only if, the
allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one hand,
and the Underwriters, on the other hand, with respect to the statements or
omissions which resulted in such loss, claim, liability, expense or damage, or
action in respect thereof, as well as any other relevant equitable
considerations with respect to such offering. Such relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Representatives on behalf of the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 6(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss claim, liability, expense or
damage, or action in respect thereof, referred to above in this Section 6(d)
shall be deemed to include, for purposes of this Section 6(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no Underwriter shall be required to contribute
any amount in excess of the underwriting discounts received by it and no person
found guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Section 6(d) are several in proportion to their
respective underwriting obligations and not joint. For purposes of this Section
6(d), any person who controls a party to this Agreement within the meaning of
the Act will have the same rights to contribution as that party, and each
officer of the Company who signed the Registration Statement will have the same
rights to contribution as the Company, subject in each case to the provisions
hereof. Any party entitled to contribution, promptly after receipt of notice of
commencement of any action against any such party in respect of which a claim
for contribution may be made under this Section 6(d), will notify any such party
or parties from whom contribution may be sought, but the omission so to notify
will not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have under this Section 6(d). No party will
be liable for contribution with respect to any action or claim settled without
its written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this Section 6
and the representations and warranties of the Company contained in this
Agreement shall remain operative and in full force and effect regardless of (i)
any investigation made by or on behalf of the Underwriters, (ii) acceptance of
any of the Shares and payment therefor or (iii) any termination of this
Agreement.
7. Reimbursement of Certain Expenses. In addition to its other obligations
under Section 6(a) of this Agreement, the Company hereby agrees to reimburse on
a quarterly basis the Underwriters for all reasonable legal and other expenses
incurred in connection with investigating or defending any claim, action,
investigation, inquiry or other proceeding arising out of or based upon, in
whole or in part, any statement or omission or alleged statement or omission, or
any inaccuracy in the representations and warranties of the Company contained
herein or failure of the Company to perform its or their respective obligations
hereunder or under law, all as described in Section 6(a), notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the obligations
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under this Section 7 and the possibility that such payment might later be held
to be improper; provided, however, that, to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them.
8. Termination. The obligations of the several Underwriters under this
Agreement may be terminated at any time on or prior to the Closing Date (or,
with respect to the Option Shares, on or prior to the Option Closing Date), by
notice to the Company from the Representatives, without liability on the part of
any Underwriter to the Company if, prior to delivery and payment for the Firm
Shares or Option Shares, as the case may be, in the sole judgment of the
Representatives, (i) trading in any of the equity securities of the Company
shall have been suspended by the Commission or by the Nasdaq Stock Market, (ii)
trading in securities generally on The Nasdaq Stock Market shall have been
suspended or limited or minimum or maximum prices shall have been generally
established on such exchange, or additional material governmental restrictions,
not in force on the date of this Agreement, shall have been imposed upon trading
in securities generally by such exchange, by order of the Commission or any
court or other governmental authority, or by The Nasdaq Stock Market, (iii) a
general banking moratorium shall have been declared by either Federal, New York
State or [STATE WHERE CLOSING OCCURS] authorities or (iv) any material adverse
change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any outbreak
or material escalation of hostilities or other calamity or crisis shall have
occurred, the effect of which is such as to make it, in the sole judgment of the
Representatives, impracticable or inadvisable to proceed with completion of the
public offering or the delivery of and payment for the Shares.
If this Agreement is terminated pursuant to this Section 8, the Company
shall not be under any liability to any Underwriter except as provided in
Sections 4(j), 6 and 7 hereof; but, if for any other reason the purchase of the
Shares by the Underwriters is not consummated or if for any reason the Company
shall be unable to perform its obligations hereunder, the Company will reimburse
the several Underwriters for all out-of-pocket expenses (including the fees,
disbursements and other charges of counsel to the Underwriters) incurred by them
in connection with the offering of the Shares.
9. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements at the Closing Date and the Option Closing Date, and such
representations, warranties, covenants and agreements of the Underwriters and
the Company, including the agreements contained in Section 4 and the indemnity
and contribution agreements contained in Section 6, shall remain operative and
in full force and effect regardless of any investigation made by, or on behalf
of, the Company, the Underwriters or any person or entity which is entitled to
be indemnified under Section 6, and shall survive delivery of the Firm Shares or
the Option Shares. In addition, the provisions of Sections 6, 7, 8, 9 and 11
shall survive termination of this Agreement, whether such termination occurs
before or after the Closing Date or the Option Closing Date.
10. Substitution of Underwriters. If any one or more of the Underwriters
shall fail or refuse to purchase any of the Firm Shares which it or they have
agreed to purchase hereunder, and the aggregate number of Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate number of Firm Shares, the other
Underwriters shall be obligated, severally, to purchase the Firm Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase, in the proportions which the number of Firm Shares which they have
respectively agreed to purchase pursuant to Section 1 bears to the aggregate
number of Firm Shares which all such non-defaulting Underwriters have so agreed
to purchase, or in such other proportions as the Representatives may specify;
provided that in no event shall the maximum number of Firm Shares which any
Underwriter has become obligated to purchase pursuant to Section 1 be increased
pursuant to this Section 9 by more than one-ninth of such number of Firm Shares
without the prior written consent of such Underwriter. If any Underwriter or
Underwriters shall fail or refuse to purchase any Firm
18
<PAGE>
Shares and the aggregate number of Firm Shares which such defaulting Underwriter
or Underwriters agreed but failed or refused to purchase exceeds one-tenth of
the aggregate number of the Firm Shares and arrangements satisfactory to the
Representatives and the Company for the purchase of such Firm Shares are not
made within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter and the Company for the
purchase or sale of any Shares under this Agreement. In any such case either the
Representatives or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or in any
other documents or arrangements may be effected. Any action taken pursuant to
this Section 10 shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
11. Miscellaneous. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, Solar Park,
Newark, DE 19716, Attention: Allan Barnett, with a copy to Peter Landau, Esq.,
Opton Handler Feiler & Landau, LLP, or (b) if to the Underwriters, to the
Representatives at the offices of Needham & Company, Inc., 445 Park Avenue, New
York, New York 10022, Attention: Corporate Finance Department, with a copy to
William C. Rogers, Esq., Choate, Hall & Stewart, Exchange Place, 53 State
Street, Boston, MA 02109. Any such notice shall be effective only upon
receipt. Any notice under Section 8 or 10 may be made by telex or telephone,
but if so made shall be subsequently confirmed in writing as required herein.
This Agreement has been and is made solely for the benefit of the
several Underwriters and the Company, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" as used in this Agreement
shall not include a purchaser, as such purchaser, of Shares from any of the
several Underwriters.
Any action required or permitted to be made by the Representatives under
this Agreement may be taken by them jointly or by Needham & Company, Inc.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
entirely within such State.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement 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.
The Company and the Underwriters each hereby waive any right they may
have to a trial by jury in respect of any claim based upon or arising out of
this Agreement or the transactions contemplated hereby.
19
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company and the several Underwriters.
Very truly yours,
AstroPower, Inc.
By:
--------------------------
Allan Barnett, President
Confirmed as of the date first
above mentioned:
Needham & Company, Inc.
First Albany Corporation
Acting on behalf of themselves
and as the Representatives of
the other several Underwriters
named in Schedule I hereto.
By: Needham & Company, Inc.
By:
-------------------------
Name:
Title:
20
<PAGE>
SCHEDULE I
UNDERWRITERS
Number of
Firm
Shares
Underwriters to be Purchased
- ------------ ---------------
Needham & Company, Inc. ......................................
First Albany Corporation......................................
--------
Total
========
21
<PAGE>
SCHEDULE II
FORM OF LOCK-UP AGREEMENT
The undersigned is a holder of securities of AstroPower, Inc., a Delaware
corporation (the "Company"), and wishes to facilitate the public offering of
shares of the Common Stock (the "Common Stock") of the Company (the "Offering").
The undersigned recognizes that such Offering will be of benefit to the
undersigned.
In consideration of the foregoing and in order to induce you to act as
underwriters in connection with the Offering, the undersigned hereby agrees that
he, she or it will not, without the prior written approval of Needham & Company,
Inc., acting on its own behalf and/or on behalf of other representatives of the
underwriters, directly or indirectly, sell, contract to sell, make any short
sale, pledge, or otherwise dispose of, or enter into any hedging transaction
that is likely to result in a transfer of, any shares of Common Stock, options
to acquire shares of Common Stock or securities exchangeable for or convertible
into shares of Common Stock of the Company which he, she or it may own, for a
period commencing as of the date hereof and ending on the date which is
360 days after the date of the final Prospectus relating to the
Offering. The undersigned confirms that he, she or it understands that the
underwriters and the Company will rely upon the representations set forth in
this Agreement in proceeding with the Offering. The undersigned further
confirms that the agreements of the undersigned are irrevocable and shall be
binding upon the undersigned's heirs, legal representatives, successors and
assigns. The undersigned agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of
securities held by the undersigned except in compliance with this Agreement.
This Agreement shall be binding on the undersigned and his, her or its
respective successors, heirs, personal representatives and assigns.
22
<PAGE>
EXHIBIT 2.1
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
This Agreement dated as of September 20th 1989 is entered into by and among
Astropower Inc., a Delaware corporation (the "Company"), Astrosystems
Incorporated, a Delaware corporation, on behalf of itself and its subsidiary ASI
Solar Energy Corporation ("Astrosystems"), Essex Vencap, Inc., a New Jersey
------------
corporation ("Essex"), and Allen M. Barnett ("Barnett") (each of a, Essex and
----- -------
Barnett are referred to herein individually as a "Founder", and collectively as
the "Founders"), and the Purchasers listed on Exhibit A hereto.
---------
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
--------------------------------
1.1 Authorization. The Company has, or before the First Closing (as
-------------
defined in Section 2.1) will have, duly authorized the sale and issuance of
1,775,000 shares of its Series A Convertible Preferred Stock, $.0l par value per
share (the "Series A Preferred"), having the rights, restrictions, privileges
------------------
and preferences set forth in the Certificate of Amendment attached hereto as
Exhibit B (the "Certificate of Amendment"). The Company has, or on or before the
- --------- ------------------------
First Closing will have, adopted and filed the Certificate of Amendment with the
Secretary of State of the State of Delaware.
1.2 Sale of Shares. Subject to the terms and conditions of this
--------------
Agreement, at each Closing the Company will sell and issue to each of the
Purchasers listed on Exhibit A, and each of the Purchasers listed on Exhibit A
--------- ---------
will purchase, the number of shares of Series A Preferred set forth opposite
such Purchaser's name on Exhibit A for the purchase price set forth thereon.
---------
The shares of Series A Preferred being sold under this Agreement are referred to
as the "Shares".
------
1.3 Separate Agreements. The Company's agreement with each of the
-------------------
Purchasers is a separate agreement, and the sale of the Shares to each of the
Purchasers is a separate sale.
1.4 Use of Proceeds. The Company will use the proceeds from the sale
---------------
of the Shares for product development and other working capital purposes.
1
<PAGE>
2. Closings.
--------
2.1 First Closing. The closing of the sale and purchase of the
-------------
Shares as set forth on Exhibit A under the heading "First Closing" (the "First
--------- ------
Closing") is taking place simultaneously with the execution of this Agreement at
- ---------
the offices of a Handler Gottlieb a Landau & Hirsch, 52 Vanderbilt Avenue,
New York, New York at 10:00 A.M. on ___________ _____, 1989.
At the First Closing, the Company will deliver to each of the Purchasers a
certificate for the number of Shares being purchased by such Purchaser,
registered in the name of such Purchaser, against payment to the Company of
$1.85 per share (the "First Closing Price") by wire transfer, check, or other
method acceptable to the Company. The date of the First Closing is hereinafter
referred to as the "First Closing Date". If at the First Closing any of the
------------------
conditions specified in Section 6 shall not have been fulfilled, each of the
Purchasers shall, at his or its election, be relieved of all of his or its
obligations under this Agreement without thereby waiving any other rights he or
it may have by reason of such failure or such non-fulfillment.
2.2 Second Closing.
--------------
(a) The Closing of the sale and purchase of the Shares as set
forth on Exhibit A under the heading "Second Closing" (the "Second Closing")
--------------
shall take place at the offices of a Handler Gottlieb Feiler Landau &
Hirsch, 52 Vanderbilt Avenue, New York, New York, within thirty (30) days after
the Second Closing Conditions (as defined below) are met (the "Second Closing
--------------
Date"). The First Closing and the Second Closing are sometimes referred to
- ----
hereinafter collectively as the "Closings" and individually as a "Closing". The
-------- -------
parties hereto acknowledge that the price per Share to be paid by the Purchasers
at the Second Closing (the "Second Closing Price") shall be $15,000,000 divided
by (4,595,066+a) if the Purchasers reasonably determine that the milestone
conditions set forth as paragraphs 1 and 2 of Exhibit C have been fulfilled
---------
within 90 days after the First Closing and $12,000,000 divided by (4,595,066+x)
per Share if the Purchasers reasonably determine that the milestone conditions
set forth as paragraphs 1 and 2 of Exhibit C have been fulfilled 90 days or more
---------
after the First Closing. As used in the preceding sentence, 'x' equals the
number of Shares sold at the First Closing. Thus, if 540,541 Shares are sold at
the First Closing and the milestone conditions set forth on Exhibit C are
---------
fulfilled within 90 days after the First Closing, the price per Share payable by
the Purchasers at the Second Closing shall be $2.92 per Share.
2
<PAGE>
(a) The obligation of the Purchasers to purchase Shares at the Second
Closing is conditioned upon fulfillment of the milestone conditions set forth on
Exhibit C hereto (the "Second Closing Conditions"). At the Second Closing, the
- --------- ----------------------------
Company will deliver to each of the Purchasers a certificate for the number of
shares being purchased by such Purchaser, registered in the name of such
Purchaser, against payment to the Company of the purchase price therefor, by
wire transfer, check, or other method acceptable to the Company. If at the
Second Closing any of the conditions specified in Section 7 shall not have been
fulfilled, each of the Purchasers shall, at his or its election, be relieved of
all of his or its obligations under this Agreement without thereby waiving any
of the rights he or it may have by reason of such failure or such non-
fulfillment.
(c) Notwithstanding the provisions of Sections 2.2(a) and (a) above,
upon a reasonable determination by the Purchasers prior to December 31, 1989
that the milestone conditions set forth as paragraphs 1 and 2 of Exhibit C have
---------
been fulfilled, the Purchasers shall deposit with Hale and Dorr ("Escrow Agent")
------------
the amount of the purchase price set forth on Exhibit A under the heading
---------
"Second Closing." Such amount shall be held by Escrow Agent pursuant to the
terms of an Escrow Agreement in the form of Exhibit D until the earlier of (a)
---------
receipt by Escrow Agent of a notice signed on behalf of the Company and each
Purchaser that the milestone condition set forth as paragraph 3 of Exhibit C has
---------
been fulfilled (the "Confirmation Notice"), or (ii) June 30, 1990. If the
-------------------
Escrow Agent receives the Confirmation Notice prior to June 30, 1990, the Escrow
Agent shall pay such escrowed amount, plus all interest earned thereon, to the
Company. If the Escrow Agent does not receive the Confirmation Notice prior to
June 30, 1990, the Escrow Agent shall pay such escrowed amount, plus all
interest earned thereon, to the Purchasers and all obligations of the Purchasers
with respect to the Second Closing shall cease.
(a) Notwithstanding the provisions of Section 2.2(a), affiliates of
GenAm (U.S.), Inc., Advent International Corporation, a Venture Capital
Corporation, Pierce Nordquist Associates or Ventures West Management III, Ltd.
shall have the right to purchase Shares at the First Closing Price and shall be
deemed to have purchased such Shares at the First Closing, if such Shares are
purchased within thirty (30) days after the First Closing. The parties hereto
acknowledge that the Company shall have the right prior to December 31, 1989 to
issue and sell Shares to entities who are not parties to this Agreement, which
such entities shall be entitled to all of the rights of Purchasers hereunder,
provided that the purchase of Shares by such entities is approved by at least
two-thirds (2/3) of the Purchasers, that such entities pay the Second Closing
Price for such Shares and
3
<PAGE>
that such entities agree to be bound by all of the obligations of Purchasers
hereunder.
3. Representations of the Company. Subject to and except as disclosed by
------------------------------
the Company in Exhibit E hereto, the Company hereby represents and warrants to
---------
each of the Purchasers as follows:
3.1 Organization and Standing. The Company is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted by it and to enter into and
perform this Agreement and to carry out the transactions contemplated by this
Agreement. The Company is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the failure
to so qualify would have a material adverse effect on the operations or
financial condition of the Company. The Company has furnished to the Purchasers
true and complete copies of its Certificate of Incorporation and By-Laws, each
as amended to date and presently in effect.
3.2 Capitalization. The authorized capital stock of the Company
--------------
(immediately prior to the First Closing) will consist of 10,000,000 shares of
Common Stock, of which 4,444,444 shares are issued and outstanding, and
1,775,000 shares of Preferred Stock, $.0l par value per share, none of which are
issued and outstanding. All of the issued and outstanding shares of Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in Exhibit E hereto or provided in this
---------
Agreement, (i) no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of capital
stock of the Company is authorized or outstanding, (ii) there is not any
commitment of the Company to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets of the
Company, and (iii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. Except as provided in this Agreement, no person or entity is
entitled to (i) any preemptive or similar right with respect to the issuance of
any capital stock of the Company, or (ii) any rights with respect to the
registration of any capital stock of the Company under the Securities Act of
1933, as amended (the "Securities Act"). All of the issued and outstanding
---------------
shares of Common Stock have been offered, issued and sold by the Company in
compliance with applicable Federal and state securities laws.
4
<PAGE>
To the best of the Company's knowledge, no stockholder of the Company has
granted options or other rights to purchase any shares of Common Stock from such
stockholder.
3.3 Subsidiaries. Except as set forth on Exhibit E, the Company has
------------ ---------
no subsidiaries and does not own or control, directly or indirectly, any other
corporation, association or business entity.
3.4 Stockholder List and Agreements. Attached as Exhibit F is a true
------------------------------- ---------
and complete list of the stockholders of the Company, showing the number of
shares of Common Stock or other securities of the Company held by each
stockholder as of the date of this Agreement and the consideration paid to the
Company, if any, for such shares. Except as contemplated by this Agreement,
there are no agreements, written or oral, between the Company and any holder of
its capital stock, or, to the best knowledge of the Company, among any holders
of its capital stock, relating to the acquisition, disposition or voting of the
capital stock of the Company.
3.5 Issuance of Shares. The issuance, sale and delivery of the
------------------
Shares in accordance with this Agreement and the issuance and delivery of the
shares of Common Stock issuable upon conversion of the Shares, have been, or
will be on or prior to the First Closing, duly authorized and reserved for
issuance, as the case may be, by all necessary corporate action on the part of
the Company, and the Shares when so issued, sold and delivered against payment
therefor in accordance with the provisions of this Agreement, and the shares of
Common Stock issuable upon conversion of the Shares when issued upon such
conversion, will be duly and validly issued, fully paid and non-assessable.
3.6 Authority for Agreement. The execution, delivery and performance
-----------------------
by the Company of this Agreement have been duly authorized by all necessary
corporate action, and this Agreement has been duly executed and delivered by the
Company. This Agreement constitutes the valid and binding obligation of the
Company enforceable in accordance with its terms. The execution of and
performance of the transactions contemplated by this Agreement and compliance
with its provisions by the Company will not violate any provision of law and
will not conflict with or result in any breach of any of the terms, conditions
or provisions of, or constitute a default under, nor is the Company otherwise in
default under its Certificate of Incorporation or By-Laws or any indenture,
lease, agreement or other instrument to which the Company is a party or by which
it or any of its properties is bound, or any decree, judgment, order, statute,
rule or regulation applicable to the Company.
5
<PAGE>
3.7 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Company
in connection with the execution and delivery of this Agreement, the offer,
issue, sale and delivery of the Shares, or the other transactions to be
consummated at the First Closing, as contemplated by this Agreement, except such
filings as shall have been made prior to and shall be effective on and as of the
First Closing. Based on the representations made by each of the Purchasers in
Section 5 of this Agreement, the offer and sale of the Shares to each of the
Purchasers will be in compliance with applicable Federal and state securities
laws.
3.8 Litigation. There is no action, suit, proceeding or
----------
investigation pending, or, to the best of the Company's knowledge, any basis
therefor or threat thereof, against the Company or any of the Founders, which
questions the validity of this Agreement or the right of the Company or any of
the Founders to enter into it, or which might result, either individually or in
the aggregate, in any material adverse change in the assets, condition
(financial or otherwise), business or prospects of the Company, nor is there any
litigation pending, or, to the best of the Company's knowledge, any basis
therefor or threat thereof, against the Company or any of the Founders by reason
of the past employment relationships of any of the Founders, the proposed
activities of the Company, or negotiations by the Company and/or any of the
Founders with possible investors in the Company.
3.9 Financial Statements. The Company has furnished to each of the
--------------------
Purchasers a complete and correct copy of the audited balance sheet of the
Company as at December 31, 1988 and the related statements of operations and
cash flows compiled by the Company and reviewed by a, Cannon, Truitt &
Sarnecki, P.A., and the unaudited balance sheet of the Company (the Balance
-------
Sheet) as at March 31, 1989 (the "Balance Sheet Date") and the related
- ------- ------------------
statements of operations and cash flows compiled by the Company (collectively,
the "Financial Statements"). The Financial Statements are complete and correct,
--------------------
are in accordance with the books and records of the Company and present fairly
the financial condition and results of operations of the Company, as at the
dates and for the periods indicated, and have been prepared in accordance with
generally accepted accounting principles consistently applied, except that the
Financial Statements have been prepared for the internal use of management and
may not be in accordance with generally accepted accounting principles because
of the absence of footnotes normally contained therein and are subject to normal
year-end audit adjustments which in the aggregate will not be material.
6
<PAGE>
3.10 Absence of Liabilities. Except as disclosed in Exhibit E, the
---------------------- ---------
Company did not have, at the Balance Sheet Date, any liabilities of any type
which in the aggregate exceeded $5,000, whether absolute or contingent, which
were not fully reflected on the Balance Sheet, and, since the Balance Sheet
Date, the Company has not incurred or otherwise become subject to any such
liabilities or obligations except in the ordinary course of business.
3.11 Taxes. The amount shown on the Balance Sheet as provision for
-----
taxes is sufficient in all material respects for payment of all accrued and
unpaid Federal, state, county, local and foreign taxes for the period then ended
and all prior periods. The Company has filed or has obtained presently
effective extensions with respect to all Federal, state, county, local and
foreign tax returns which are required to be filed by it, such returns are true
and correct and all taxes shown thereon to be due have been timely paid with
exceptions not material to the Company. Federal income tax returns of the
Company have not been audited by the Internal Revenue Service, and no
controversy with respect to taxes of any type is pending or, to the knowledge of
the Company, threatened.
3.12 Property and Assets. The Company has good title to all of its
-------------------
material properties and assets, including all properties and assets reflected in
the Balance Sheet, except those disposed of since the date thereof in the
ordinary course of business, and none of such properties or assets is subject to
any mortgage, pledge, lien, security interest, lease, charge or encumbrance
other than those the material terms of which are described in the Balance Sheet
or in Exhibit E.
---------
3.13 Patents and Trademarks. Set forth on Exhibit E is a true and
---------------------- ---------
complete list of all patents, patent applications, trademarks, service marks,
trademark and service mark applications, trade names, copyrights and licenses
presently owned or held by the Company or any or all of the Founders. The
Company owns or possesses all of the patents, trademarks, service marks, trade
names, copyrights, proprietary rights, trade secrets, and licenses or rights to
the foregoing, necessary for the conduct of the Company's business as conducted
and as proposed to be conducted. To the best of the Company's knowledge, the
business proposed by the Company will not cause the Company to infringe or
violate any of the patents, trademarks, service marks, trade names, copyrights,
licenses, trade secrets or other proprietary rights of any other person or
entity. The Company is not aware that any Founder or employee is obligated
under any contract (including any license, covenant or commitment of any
nature), or
7
<PAGE>
subject to any judgment, decree or order of any court or administrative agency,
that would interfere with the use of such Founder's or a best efforts
to promote the interests of the Company or would conflict with the Company's
business as proposed to be conducted. To the best of the Company's knowledge,
no prior employer of any Founder or any other employee of the Company has any
right to or interest in any inventions, improvements, discoveries or other
information assigned to the Company by such Founder or employee pursuant to the
nondisclosure and assignment of invention agreement (in the form attached hereto
as Exhibit G) executed by such Founder or employee, or otherwise so assigned.
---------
3.14 Insurance. The Company maintains valid policies of workers'
---------
compensation insurance and of insurance with respect to its properties and
business of the kinds and in the amounts not less than is customarily obtained
by corporations of established reputation engaged in the same or similar
business and similarly situated, including, without limitation, insurance
against loss, damage, fire, theft, public liability and other risks.
3.15 Material Contracts and Obligations. Exhibit E sets forth a list
---------------------------------- ---------
of all material agreements of any nature to which the Company is a party or by
which it is bound, including without limitation (a) each agreement which
requires future expenditures by the Company in excess of $5,000, (b) all
employment and consulting agreements, employee benefit, bonus, pension,
a, stock option, stock purchase and similar plans and arrangements,
and distributor and sales representative agreements, and (c) any agreement to
which any stockholder, officer or director of the Company, or any "affiliate" or
"associate" of such persons (as such terms are defined in the rules and
regulations promulgated under the Securities Act), is presently a party,
including without limitation any agreement or other arrangement providing for
the furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any such person or entity. The Company has
delivered to the Purchasers copies of such of the foregoing agreements as they
have requested. All of such agreements and contracts are valid, binding and in
full force and effect.
3.16 Compliance. The Company has, in all material respects, complied
----------
with all laws, regulations and orders applicable to its present and proposed
business and has all material permits and licenses required thereby. There is
no term or provision of any material mortgage, indenture, contract, agreement or
instrument to which the Company is a party or by which it is bound, or, to the
knowledge of the Company, of any provision of any state or
8
<PAGE>
Federal judgment, decree, order, statute, rule or regulation applicable to or
binding upon the Company, which materially adversely affects or, so far as the
Company may now foresee, in the future is reasonably likely to materially
adversely affect, the business, prospects, condition, affairs or operations of
the Company or any of its properties or assets. To the best of the knowledge of
the Company, none of the Founders or any of the employees of the Company is in
violation of any term of any employment contract, patent or other proprietary
information disclosure agreement or any other contract or agreement relating to
the employment of such Founder or employee by the Company.
3.17 Absence of Changes. Except as set forth on Exhibit E, since the
------------------ ---------
Balance Sheet Date, there has been no material adverse change in the condition,
financial or otherwise, net worth or results of operations of the Company, other
than changes occurring in the ordinary course of business which changes have
not, individually or in the aggregate, had a materially adverse effect on the
business, prospects, properties or condition, financial or otherwise, of the
Company.
3.18 Employees. All employees of the Company whose employment
---------
responsibility requires access to confidential or proprietary information of the
Company have executed and delivered nondisclosure and assignment of invention
agreements in the form of Exhibit G, and all of such agreements are in full
---------
force and effect. None of the employees of the Company is represented by any
labor union, and there is no labor strike or other labor trouble pending with
respect to the Company (including, without limitation, any organizational drive)
or, to the best knowledge of the Company, threatened.
3.19 Books and Records. The minute books of the Company contain
-----------------
complete and accurate records of all meetings and other corporate actions of its
stockholders and its Board of Directors and committees thereof. The stock
ledger of the Company is complete and reflects all issuances, transfers,
repurchases and cancellations of shares of capital stock of the Company.
3.20 ERISA. The Company has no employee benefit plan subject to the
-----
Employee Retirement Income Security Act of 1974.
3.21 Disclosures. Neither this Agreement nor any exhibit hereto, nor
-----------
any report, certificate or instrument furnished to any of the Purchasers or
their special counsel in connection with the transactions contemplated by this
Agreement, including, without limitation, the Business Plan of the Company dated
November 1988 (the "Plan"), when read together, contains or will contain any
----
material misstatement of fact or omits or will omit to
9
<PAGE>
state a material fact necessary to make the statements contained herein or
therein not misleading. The Company knows of no information or fact which has
or would have a material adverse effect on the financial condition, business or
prospects of the Company which has not been disclosed to the Purchasers. Each
projection furnished in the Plan was prepared with due care based on reasonable
assumptions and represents the Company's best estimate of future results based
on information available as of the date of the Plan. No projection referred to
in the preceding sentence shall be deemed to be misleading unless it is shown
that any such projection was made without a reasonable basis or was disclosed
other than in good faith.
4. Representations and Warranties of Founders. Each of the Founders
------------------------------------------
severally represents and warrants to the Purchasers as follows:
4.1 Conflicting Agreements. Such Founder is not in violation of any
----------------------
fiduciary or confidential relationship or term of any employment contract,
patent or other proprietary information disclosure or assignment agreement or
any other contract, agreement, or any judgment, decree or order of any court or
administrative agency relating to or affecting the right of such Founder to be
employed by the Company because of the nature of the business conducted or
proposed to be conducted by the Company or for any other reason. No such
relationship, term, judgment, decree, or order conflicts with such Founder's
obligations to use his best efforts to promote the interests of the Company nor
does the execution and delivery of this Agreement, nor the carrying on of the
Company's business as an officer or key employee of the Company, conflict with
any such relationship, term, judgment, decree or order.
4.2 Conflict of Interests. If and while employed by the Company, and
---------------------
without the prior written consent of the Purchasers, such Founder will devote
himself to the Company on a full-time basis and will not engage in any other
business activity, either on a full-time or part-time basis, as an employee, a
consultant or in any other capacity, and whether or not he receives any
compensation therefor; provided, however, the Purchasers recognize that Barnett
is and will continue following the execution of this Agreement to be a tenured
member of the faculty of the University of Delaware with responsibilities for
teaching, research and service and the Purchasers hereby consent to such
activities by Barnett so long as they do not interfere with Barnett's
performance of his duties to the Company; and further provided, however, that
nothing herein shall prohibit such Founder from making and managing passive
investments, which activities do not, in the aggregate, materially interfere
with
10
<PAGE>
such Founder's performance of his duties to the Company. Barnett does not own,
directly or indirectly, of record or beneficially more than one percent (1%) of
the outstanding voting securities (which shall include any security or option
convertible into or exercisable for voting securities) of any corporation other
than the Company, nor is Barnett a general partner or limited partner in a
partnership in which he has a direct or indirect interest in more than one
percent (1%) of the profits of such partnership.
4.3 Litigation. There is no action, suit or proceeding, or
----------
governmental inquiry or investigation, pending or, to the knowledge of such
Founder, threatened against such Founder, and, to the knowledge of such Founder,
there is no basis for any such action, suit, proceeding, or governmental inquiry
or investigation.
4.4 Stockholder Agreements. Except as contemplated by this
----------------------
Agreement, such Founder is not a party to and has no knowledge of any
agreements, written or oral, relating to the acquisition, disposition or voting
of the capital stock of the Company. All previous agreements relating to the
acquisition, disposition or voting of the capital stock of the Company,
including, without limitation, the Amended and Restated Barnett Agreement
between Astrosystems and Barnett, the Management Agreement among Astrosystems,
Barnett and Essex, the Option Agreement With Respect to Partnership Interest in
Voltek Associates, L.P. among Astropower, Inc. and Essex (the "Essex Voltek
Option"), and the Equity Security holders' Agreement among Astrosystems,
Astropower, Inc., Barnett and Essex, all dated as of January 31, 1986, have been
terminated.
4.5 Disclosure. To the best of such Founder's knowledge, neither
----------
this Agreement nor any Exhibit hereto, nor any report, certificate or instrument
furnished to any of the Purchasers or their special counsel in connection with
the transactions contemplated by this Agreement, including the Plan, when read
together, contains or will contain any material misstatement of fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading.
5. Representations of the Purchasers. Each of the Purchasers severally
---------------------------------
represents and warrants to the Company as follows:
5.1 Investment. Such Purchaser is acquiring the Shares, and the
----------
shares of Common Stock into which the Shares may be converted, for his or its
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the same; and, except as contemplated by this Agreement and the
11
<PAGE>
Exhibits hereto, such Purchaser has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing for
the disposition thereof.
5.2 Authority. Such Purchaser has full power and authority to enter
---------
into and to perform this Agreement in accordance with its terms. Any Purchaser
which is a corporation, partnership or trust represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
5.3 Experience. Such Purchaser has carefully reviewed the
----------
representations concerning the Company contained in this Agreement, has read the
Plan and has made detailed inquiry concerning the Company, its business and its
personnel; the officers of the Company have made available to such Purchaser any
and all written information which he or it has requested and have answered to
such Purchaser's satisfaction all inquiries made by such Purchaser; and such
Purchaser has adequate net worth and means of providing for his or its current
needs and personal contingencies to sustain a complete loss of his or its
investment in the Company; such Purchaser's overall commitment to investments
which are not readily marketable is not disproportionate to his or its net worth
and such Purchaser's investment in the Shares will not cause such overall
commitment to become excessive.
5.4 Accredited Investor. Unless otherwise indicated in writing by
-------------------
such Purchaser to the Company, such Purchaser is an Accredited Investor within
the definition set forth in Securities Act Rule 501(a).
6. Conditions to the Obligations of the Purchasers at First Closing. The
----------------------------------------------------------------
obligation of each of the Purchasers to purchase Shares at the First Closing is
subject to the fulfillment, or the waiver by such Purchaser, of the following
conditions on or before the First Closing Date:
6.1 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties contained in Sections 3 and 4 shall be true on and as of the
First Closing Date with the same effect as though such representations and
warranties had been made on and as of that date.
6.2 Performance. The Company shall have performed and complied with
-----------
all agreements and conditions contained in this Agreement required to be
performed or complied with by the Company prior to or at the First Closing.
12
<PAGE>
6.3 Opinion of Counsel. Each Purchaser shall have received an
------------------
opinion from Opton Handier Gottlieb Feiler Landau & Hirsch, counsel for the
Company, dated the First Closing Date, addressed to the Purchasers, and
satisfactory in form and substance to each Purchaser, to the effect that:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full
corporate power and authority to conduct its business as presently conducted, to
enter into and perform this Agreement and to carry out the transactions
contemplated by this Agreement. The Company is duly qualified to do business as
a foreign corporation and is in good standing in every jurisdiction in which the
failure to so qualify would have a material adverse effect on the operations or
financial condition of the Company.
(b) Except for changes contemplated by this Agreement, the
authorized capital stock of the Company is as described in subsection 3.2 of
this Agreement and, to the knowledge of such counsel, the other representations
and warranties contained in subsection 3.2 are true and correct (other than the
last sentence thereof, as to which no opinion need be expressed, and other than
the next to last sentence thereof, as to which an opinion need only be expressed
that no registration was required for the offer, issuance and sale of such
Common Stock under applicable Federal and state securities laws).
(c) The issuance, sale and delivery of the Shares by the Company
in accordance with this Agreement, and the issuance and delivery of the shares
of Common Stock issuable upon conversion of the Shares, have been duly
authorized and reserved for issuance, as the case may be, by all necessary
corporate action on the part of the Company, and the Shares when so issued, sold
and delivered against payment therefor in accordance with the provisions of this
Agreement, and the shares of Common Stock issuable upon conversion of the
Shares, when issued upon such conversion, will be duly and validly issued, fully
paid and non-assessable.
(d) The execution, delivery and performance by the Company and
the Founders of this Agreement and of the Shareholders' Agreement described in
Section 6.8 below (the "Shareholders' Agreement") and the exercise of the option
-----------------------
described in Section 6.9 below (the "Option Exercise") have been duly authorized
---------------
by all necessary corporate action, and this Agreement, the Shareholders'
Agreement and the Option Exercise have been duly executed and delivered by the
Company and the Founders. This Agreement (other than subsections 9.7 and 9.8
hereof, as to which no opinions need be expressed), the Shareholders' Agreement
and the Option Exercise constitute the
13
<PAGE>
valid and binding obligation of the Company and the Founders, enforceable in
accordance with their respective terms, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization or similar laws affecting
generally the enforcement of creditors' rights and subject to a court's
discretionary authority with respect to the granting of a decree ordering
specific performance or other equitable remedies. The execution and delivery of
this Agreement, the Shareholders' Agreement and the Option Exercise and the
offer, issue and sale of the Shares hereunder will not conflict with, or result
in any breach of any of the terms, conditions, or provisions of, or constitute a
default under, the Certificate of Incorporation or By-Laws of the Company, or
any indenture, lease, agreement, or other instrument known to such counsel to
which the Company or any of the Founders is a party or by which any of them or
any of their respective properties are bound, or any decree, judgment or order
specifically naming the Company or any of the Founders and known to such
counsel.
(e) Except as obtained and in effect at the First Closing, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration, or filing with, any governmental authority (other than
filings required to be made after the First Closing under applicable federal and
state securities laws) is required on the part of the Company in connection with
the execution and delivery of this Agreement or the Shareholders' Agreement, or
the Option Exercise or the offer, issue, sale and delivery of the Shares, or the
other transactions to be consummated at the Closing pursuant to this Agreement.
(f) Based on the representations of each of the Purchasers in
Section 5, the offer, issuance and sale of the Shares pursuant to this Agreement
are exempt from registration under the Securities Act.
(g) To the best of such counsel's knowledge, except as set forth
in Exhibit E to this Agreement, there is no action, suit or proceeding, or
---------
governmental inquiry or investigation, pending or threatened against the
Company or any of the Founders.
(h) The sublicense between the Company and Astrosystems in the
form attached hereto as Exhibit H is not in violation of the terms of that
---------
certain License Agreement dated May 1, 1983 between Astrosystems and the
University of Delaware (the "Delaware License").
6.4 Blue Sky Approvals. The Company shall have received any
------------------
requisite approvals of the securities commissioners of
14
<PAGE>
Maryland, Massachusetts, New York, Washington and British Columbia and such
approvals shall be in full force and effect on the Closing Date.
6.5 Certificates and Documents. The Company shall have delivered to
--------------------------
the Purchasers:
(i) The Certificate of Incorporation of the Company, as amended
and in effect immediately prior to the First Closing Date, certified by the
Secretary of State of the State of Delaware;
(ii) Certificates, as of the most recent practicable dates, as
to the corporate good standing of the Company issued by the Secretary of State
of the State of Delaware, confirming such good standing on or immediately prior
to the First Closing Date;
(iii) By-laws of the Company, certified by its Secretary or
Assistant Secretary as of the First Closing Date; and
(iv) Resolutions of the Board of Directors of the Company,
authorizing and approving all matters in connection with this Agreement and the
transactions contemplated hereby, certified by the Secretary or Assistant
Secretary of the Company as of the First Closing Date.
6.6 Board of Directors. Immediately after the First Closing, the
------------------
Board of Directors of the Company shall consist of Allen M. Barnett, Charles
Schaller, Gilbert Steinberg and Robert W. Shaw, Jr., or if he is unwilling or
unable to serve, another person designated by Arete Ventures, Inc.
6.7 Shareholders' Agreement. The Company, ASI Solar Energy
-----------------------
Corporation, and each Founder other than Astrosystems shall have executed and
delivered to the Purchasers the Shareholders' Agreement in the form attached
hereto as Exhibit I.
---------
6.8 Option Agreement. The Company shall have exercised the option to
----------------
acquire the assets of the Astropower Division of Astrosystems provided for in
that certain Amended and Restated Option Agreement with Astrosystems dated
January 31, 1986 in the form attached hereto as Exhibit J and Astrosystems shall
---------
have complied with its obligations under such Option Agreement.
6.9 Essex Options. The Essex Voltek Option shall have been
-------------
terminated and replaced by the Option Agreement in the form attached hereto as
Exhibit K.
- ---------
15
<PAGE>
6.10 Employment Agreement. The Company and Barnett shall have
--------------------
entered into the Employment Agreement in the form attached hereto as Exhibit L.
---------
6.11 BP Letter. The Company shall have executed and delivered to the
---------
Purchasers the letter in the form attached hereto as Exhibit M.
---------
6.12 Option Plan. The Company shall have agreed to amend and restate
-----------
any existing stock option plan it may have so that such plan shall be in the
form attached hereto as Exhibit N.
---------
6.13 Minimum and Maximum Investment. The Purchasers shall have
------------------------------
agreed to invest at the First and Second Closings an aggregate of not more than
$3,500,000 and not less than $2,500,000.
6.14 Other Matters. All corporate and other proceedings in
-------------
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers, and the Purchasers shall
have received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
7. Conditions to the Obligations of the Purchasers at the Second Closing.
---------------------------------------------------------------------
In addition to the conditions set forth in subsection 2.2(b) above, the
obligation of each of the Purchasers to purchase Shares at the Second Closing is
subject to the fulfillment, or the waiver by such Purchaser, of the following
conditions on or before the Second Closing Date:
7.1 First Closing. The First Closing shall have taken place
-------------
pursuant to the terms of this Agreement.
7.2 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties made by the Company in Section 3 shall be true
and correct when made, and shall be true and correct on the Second Closing Date
with the same force and effect as if they had been made on and as of said date
giving effect to the First Closing and transactions in the ordinary course of
business or approved by the Board of Directors of the Company subsequent to the
First Closing; and the Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to the
Second Closing Date.
16
<PAGE>
7.3 Conditions of First Closing. All conditions of Section 6 shall
---------------------------
continue to be fulfilled and the Certificate of Amendment shall not have been
amended and shall remain in full force and effect.
7.4 Board of Directors. Immediately after the Second Closing, the
------------------
Board of Directors of the Company shall include Robert W. Shaw, Jr., or if he is
unwilling or unable to serve, another person designated by Arete Ventures, Inc.,
and George S. Reichenbach, or if he is unwilling or unable to serve, another
person designated by Advent International Corporation.
7.5 Opinion of Counsel. The Purchasers shall have received from
------------------
Opton Handler Gottlieb Feiler Landau & Hirsch, counsel to the Company, an
opinion dated as of the Second Closing Date, substantially the same in form as
that delivered pursuant to Section 6.3.
7.6 Compliance Certificate. The Company shall have delivered to the
----------------------
Purchasers a Compliance Certificate, executed by the President, dated as of the
Second Closing Date, certifying as to the fulfillment of the conditions
specified in Sections 7.1, 7.2, 7.3 and 7.4.
8. Conditions to the Obligations of the Company at the First Closing.
-----------------------------------------------------------------
The obligations of the Company at the First Closing under subsection 1.2 of this
Agreement are subject to fulfillment, on or before the First Closing Date, of
each of the following conditions:
8.1 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of the Purchasers contained in Section 5 shall be true on and as
of the First Closing Date with the same effect as though such representations
and warranties had been made on and as of that date.
8.2 Blue Sky Approvals. The Company shall have received any
------------------
requisite approvals of the securities commissioners of Maryland, Massachusetts,
New York, Washington and British Columbia and such approvals shall be in full
force and effect on the First Closing Date.
9. Conditions to the Obligations of the Company at the Second Closing.
------------------------------------------------------------------
The obligations of the Company at the Second Closing under subsection 1.2 of
this Agreement are subject to fulfillment, on or before the Second Closing Date,
of each of the following conditions:
17
<PAGE>
9.1 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of the Purchasers contained in Section 5 shall be true on and as
of the Second Closing Date with the same effect as though such representations
and warranties had been made on and as of that date.
9.2 Blue Sky Approvals. The Company shall have received any
------------------
requisite approvals of the securities commissioners of Maryland, Massachusetts,
New York, Washington and British Columbia and such approvals shall be in full
force and effect on the Second Closing Date.
9.3 First Closing. The First Closing shall have taken place
-------------
pursuant to the terms of this Agreement.
10. Covenants of the Company.
------------------------
10.1 Inspection. The Company shall permit each Purchaser or any
----------
authorized representative thereof, to attend, as observers and without the right
to vote, meetings of the Board of Directors of the Company, to visit and inspect
the properties of the Company, including its corporate and financial records,
and to discuss its business and finances with officers of the Company, during
normal business hours following reasonable notice and as often as may be
reasonably requested, and to receive copies of all notices of meetings and other
notices, minutes, consents and other materials that the Company provides to its
directors.
10.2 Financial Statements and Other Information.
------------------------------------------
(a) The Company will deliver to each Purchaser:
(i) within 120 days after the end of each fiscal year of
the Company, an audited balance sheet of the Company as at the end of such year
and audited statements of income and of changes in financial condition of the
Company for such year, examined or reviewed, at the option of the Board of
Directors of the Company, by certified public accountants selected by the
Company, all of such documents to be prepared in accordance with generally
accepted accounting principles;
(ii) within 45 days after the end of each fiscal quarter
of the Company, an unaudited balance sheet of the Company as at the end of such
quarter, and unaudited statements of income and cash flow of the Company for
such fiscal quarter and for the current fiscal year to the end of such fiscal
quarter and including an aging of the Company's accounts receivable and accounts
payable and a statement of the number of employees of the Company as at the end
of such quarter;
18
<PAGE>
(iii) within 30 days after the end of each month, an
unaudited balance sheet of the Company as at the end of such month and unaudited
statements of income and cash flow of the Company for such month and for the
current fiscal year to the end of such month, setting forth in comparative form
the Company's projected financial statements for the corresponding periods for
the current fiscal year;
(iv) as soon as available, but in any event within 30
days after commencement of each new fiscal year, a business plan and projected
financial statements for such fiscal year and projected financial statements for
the two years following such new fiscal year; and
(v) with reasonable promptness, such other notices,
information and data with respect to the Company as the Company delivers to the
holders of its Common Stock, and such other information and data as such
Purchaser may from time to time reasonably request.
(b) The foregoing financial statements shall be prepared on a
consolidated basis if the Company then has any subsidiaries. The financial
statements delivered pursuant to clause (ii) and (iii) of paragraph (a) shall be
accompanied by a certificate of the chief financial officer of the Company
stating that such statements have been prepared in accordance with generally
accepted accounting principles consistently applied (except as noted) and fairly
present the financial condition of the Company at the date thereof and for the
periods covered thereby.
10.3 Material Changes and Litigation. The Company will promptly
-------------------------------
notify the Purchasers of any material adverse change in the business,
properties, assets or condition, financial or otherwise, of the Company and of
any litigation or governmental proceeding or investigation pending or, to the
best knowledge of the Company, threatened against the Company, or against any
officer, director, key employee or principal stockholder of the Company
materially affecting or which, if adversely determined, would materially
adversely affect its present or proposed business, properties, assets or
condition taken as a whole.
10.4 Key Man Insurance. For a period of three years after the
-----------------
Closing Date, the Company will maintain term life insurance upon the life of
Barnett in the amount of $500,000.
10.5 Nondisclosure Agreements. The Company will require all persons
------------------------
now or hereafter employed by the Company who
19
<PAGE>
have access to confidential and proprietary information of the Company to enter
into nondisclosure and assignment of inventions agreements substantially in the
form of Exhibit G.
---------
10.6 Right of First Refusal.
----------------------
(a) The Company hereby grants to each Purchaser a right of
first refusal to purchase, on a pro rata basis, all or any part of New
Securities (as defined below) which the Company may, from time to time, propose
to sell and issue, subject to the terms and conditions set forth below. A
Purchaser's pro rata share, for purposes of this subsection 10.6, shall equal a
fraction, the numerator of which is the number of shares of Series A Preferred
purchased by such Purchaser pursuant to this Agreement, and the denominator of
which is the total number of shares of Series A Preferred purchased by the
Purchasers pursuant to this Agreement.
(b) "New Securities" shall mean any capital stock of the
--------------
Company whether now authorized or not, and rights, options or warrants to
purchase capital stock, and securities of any type whatsoever which are, or may
become, convertible into capital stock; provided, however, that the term "New
-------- -------
Securities" does not include (i) the Shares issuable under this Agreement or the
shares of Common Stock issuable upon conversion of the Shares; (ii) securities
offered to the public pursuant to a Registration Statement (as defined in
subsection 11.1); (iii) securities issued for the acquisition of another
corporation by the Company by merger, purchase of substantially all the assets
of such corporation or other reorganization resulting in the ownership by the
Company of not less than 51% of the voting power of such corporation; (iv) not
more than 500,000 shares of Common Stock issued to employees or consultants of
the Company pursuant to a stock option plan, employee stock purchase plan,
restricted stock plan or other employee stock plan or agreement; or (v)
securities issued as a result of any stock split, stock dividend or
reclassification of Common Stock, distributable on a pro rata basis to all
holders of Common Stock.
(c) In the event the Company intends to issue New Securities,
it shall give each Purchaser written notice of such intention, describing the
amount and type of New Securities to be issued, the price thereof and the
general terms upon which the Company proposes to effect such issuance. Each
Purchaser shall have 20 days from the date of any such notice to agree to
purchase all or part of its or his pro rata share of such New Securities for the
price and upon the general terms and conditions specified in the Company's
notice by giving written notice to the Company stating the quantity of New
Securities to be so purchased. Each
20
<PAGE>
Purchaser shall have a right of overallotment such that if any Purchaser fails
to exercise his or its right hereunder to purchase his or its total pro rata
portion of New Securities, each other Purchaser may purchase a portion of such
unpurchased New Securities equal to a fraction, the numerator of which is such
Purchaser's pro rata share, as defined in Section 10.6(a), and the denominator
of which is the sum of such pro rata shares of such other Purchasers, by giving
written notice to the Company within five days from the date that the Company
provides written notice to the other Purchasers of the amount of New Securities
with respect to which such nonpurchasing Purchaser has failed to exercise its or
his right hereunder.
(d) In the event the Purchasers fail to exercise the foregoing
right of first refusal with respect to any New Securities specified in the
notice within such 20-day period (or the additional five-day period provided for
overallotments), the Company may within 120 days thereafter sell any or all of
such New Securities not agreed to be purchased by the Purchasers, at a price, in
the amount and upon general terms no more favorable to the purchasers thereof
than specified in the notice given to each Purchaser pursuant to paragraph (c)
above. In the event the Company has not sold such New Securities within such
120-day period, the Company shall not thereafter issue or sell any New
Securities without first offering such New Securities to the Purchasers in the
manner provided above. The Purchasers shall, where possible, attempt, but shall
not be obligated, to avoid applying the provisions of this Section 10.6 so as to
preclude the sale of a specified block of New Securities to a third party.
(e) For purposes of this subsection 10.6, "Purchaser" shall
include the general partners, officers or other affiliates of a Purchaser, and a
Purchaser may apportion its pro rata share among itself and such general
partners, officers and other affiliates in such proportions as it deems
appropriate.
10.7 Negative Covenants. So long as any Shares are outstanding,
------------------
neither the Company nor any subsidiary thereof shall, without the approval of
the Board of Directors of the Company and the prior written consent of the
holders of not less than sixty-six and two-thirds percent (66 2/3%) of the
outstanding Shares (or their duly appointed attorney-in-fact, if any), which
consent shall not be unreasonably withheld:
(a) Declare or pay any dividends on Common Stock or Preferred
Stock other than dividends payable solely in Common Stock;
21
<PAGE>
(b) Make any loan or advance to any subsidiary or other
corporation, partnership, or other entity unless it is wholly owned by the
Company, provided, that the Company shall have the right to make loans and
advances to AstroPower Canada Ltd. ("Canada") in an amount not to exceed $10,000
in any one case or $100,000 in the aggregate;
(c) Make any loan or advance to any person, including, without
limitation, any employee or director of the Company or any subsidiary, except
advances and similar expenditures in the ordinary course of business, loans
under the terms of an employee stock or option plan authorized pursuant to
Section 10.7(h) or loans to employees in an amount not to exceed $10,000 per
employee or $50,000 for all employees;
(d) Incur, create, assume or otherwise become primarily or
secondarily liable with respect to, or absolutely or contingently liable with
respect to, or permit to exist any indebtedness except for trade accounts of the
Company and other indebtedness not to exceed $100,000 in the aggregate;
(e) Guarantee directly or indirectly, any indebtedness except
for trade accounts of the Company or any wholly-owned subsidiary arising in the
ordinary course of business, provided that the Company shall have the right to
guarantee indebtedness of Canada in an amount not to exceed $100,000;
(f) Merge with or into or consolidate with any other
corporation or purchase or own any stock or other securities of or interest in
any subsidiary or other corporation, partnership, or other entity, or sell,
lease, or otherwise dispose of all or substantially all of its properties or
assets, provided that the Company shall have the right (i) to merge with another
corporation pursuant to a merger in which the Company is the surviving
corporation and following which the stockholders of the Company immediately
prior to such merger own at least a majority of the outstanding stock and voting
power of the Company, (ii) to acquire at least a majority of the outstanding
stock and voting power of any corporation or (iii) to acquire the management
control and at least a majority of the general partnership interest in any
general or limited partnership, if, in the case of any merger or acquisition
permitted pursuant to the foregoing clauses (i), (ii) or (iii), such merger or
acquisition would not result in a decrease in the Company's net tangible book
value per share and any such corporation with which the Company merges or any
such corporation or partnership in which the Company acquires an interest is at
the time of such merger or acquisition (x) engaged in a business or activity
contemplated by the Business
22
<PAGE>
Plan as a business or activity of the Company or (y) otherwise engaged in
research, development or commercial exploitation of solar energy;
(g) Effect any reverse stock split, stock combination,
reclassification or similar event which would result in a reduction of the
number of shares of Series A Preferred then owned by any holder thereof or a
reduction of the number of shares of Common Stock into which Series A Preferred
is convertible;
(h) Authorize or establish any stock option plan, employee
stock purchase plan, restricted stock plan or other employee stock plan or
agreement other than the stock option plan in the form attached hereto as
Exhibit N (the "1989 Plan") or amend the 1989 Plan;
- ---------
(i) Engage in any business or activity other than as
contemplated by the Business Plan;
(j) Amend or repeal any provision of, or add any provision to,
its Certificate of Incorporation, any Certificate of Designation or By-Laws if
such action will alter or change the preferences, rights, privileges or powers
of, or the restrictions provided for the benefit of, any Series A Preferred
Stock or otherwise adversely affect the rights of the holders of the Series A
Preferred Stock;
(k) Repurchase any shares of its capital stock; or
(1) Amend or waive any of its rights under the Employment
Agreement.
10.8 Termination of Covenants. Unless earlier terminated, the
------------------------
covenants of the Company contained in Sections 10.1 through 10.7 of this
Agreement shall terminate, and be of no further force or effect, upon the
effective date of a Registration Statement (as defined in subsection 11.1)
covering the Company's first bona fide firm commitment public offering of Common
Stock, resulting in gross proceeds to the Company of at least $12,000,000, at a
price per share of at least $7.50 (as adjusted for stock splits, stock
dividends, recapitalizations and similar events); provided, however, that if the
Board of Directors of the Company determines in good faith that it is in the
best interest of the Company to undertake a bona fide underwritten public
offering of the Company's Common Stock at a price per share of less than $7.50
and resulting in gross proceeds of less than $12,000,000, and the underwriter of
such offering requires as a condition thereof that any covenant set forth in
Section 10.7
23
<PAGE>
above be terminated, any such covenant, other than the covenant contained in
subsection 10.7(j), shall be terminated upon the closing of such offering if the
holders of at least 66 2/3% of the Shares consent to such termination, which
such consent shall not be unreasonably withheld. If there is no alternative
course of financing under substantially the same terms as the proposed
underwriting, refusal to so consent shall be deemed unreasonable. In addition,
the covenants set forth in Section 10.7 shall terminate, and be of no further
force or effect, if the Second Closing does not occur in accordance with the
terms of this Agreement or if at least 66 2/3% of the aggregate number of Shares
purchased at the First Closing and the Second Closing are converted to Common
Stock.
11. Registration Rights.
-------------------
11.1 Certain Definitions. As used in this Section 9 and elsewhere in
-------------------
this Agreement, the following terms shall have the following respective
meanings:
"Commission" means the Securities and Exchange Commission, or
----------
any other Federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, or any similar Federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"Registration Statement" means a registration statement filed
----------------------
by the Company with the Commission for a public offering and sale of securities
of the Company (other than a registration statement on Form S-8 or Form S-4, or
their successors or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Registration Expenses" means the expenses described in
---------------------
subsection 11.6.
"Registrable Shares" means (i) the shares of Common Stock
------------------
issued or issuable upon conversion of the Shares, (ii) any shares of Common
Stock owned by Astrosystems, (iii) any shares of Common Stock of the Company
acquired by the Purchasers pursuant to subsection 10.6 hereof, and (iv) any
other shares of Common Stock of the Company issued in respect of such shares
(because of stock splits, stock dividends, reclassifications, recapitalizations,
or similar events); provided, however, that shares of Common Stock which are
-------- -------
Registrable Shares shall cease to
24
<PAGE>
be Registrable Shares upon any sale pursuant to a Registration Statement,
Section 4 (l) of the Securities Act or Rule 144 under the Securities Act, or any
sale in any manner to a person or entity which, by virtue of Section 11 of this
Agreement, is not entitled to the rights provided by this Section 11. Wherever
reference is made in this Agreement to a request or consent of holders of a
certain percentage of Registrable Shares, the determination of such percentage
shall include shares of Common Stock issuable upon conversion of the Shares even
if such conversion has not yet been effected.
"Securities Act" means the Securities Act of 1933, as amended,
--------------
or any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Shares" shall have the meaning specified in subsection 1.2.
------
"Stockholders" means the Purchasers, the Founders and any
------------
persons or entities to whom the rights granted under this Section 11 are
transferred by any Purchasers, their successors or assigns pursuant to Section
11 hereof; provided, however, that the Founders, shall not have any of the
rights granted to Stockholders pursuant to Section 11.3 below, except that
Astrosystems shall have the rights granted to Stockholders pursuant to Section
11.3(a).
11.2 Sale or Transfer of Shares; Legend.
----------------------------------
(a) The Shares and the Registrable Shares and shares issued in
respect of the Shares or the Registrable Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the Securities
Act, or (ii) the Company first shall have been furnished with an opinion of
legal counsel, reasonably satisfactory to the Company, to the effect that such
sale or transfer is exempt from the registration requirements of the Securities
Act.
(b) Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for (i) a transfer by a Purchaser which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the transferee agrees in writing to be subject to
the terms of this Section 11 to the same extent as if he were an original
Purchaser hereunder, or (ii) a transfer made in accordance with Rule 144 under
the Securities Act.
25
<PAGE>
(c) Each certificate or other instrument representing the Shares
and the Registrable Shares and shares issued in respect of the Shares or the
Registrable Shares shall bear a legend substantially in the following form:
"The securities represented by this instrument have not been
registered under the Securities Act of 1933, as amended, and may not
be offered, sold or otherwise transferred, pledged or hypothecated
unless and until such shares are registered under such Act or an
opinion of counsel satisfactory to the Company is obtained to the
effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing
any Registrable Shares, at the request of the holder thereof, at such time as
they become eligible for resale pursuant to Rule 144(k) under the Securities
Act.
11.3 Required Registrations.
----------------------
(a) At any time after the earlier of December 31, 1992, or the
closing of the Company's first underwritten public offering of shares of Common
Stock pursuant to a Registration Statement, a Purchaser or Purchasers holding in
the aggregate at least 33% of the Shares may request, in writing, that the
Company effect the registration on Form S-1 or Form S-2 (or any successor form)
of Registrable Shares owned by such Stockholder or Stockholders having an
aggregate offering price of at least $750,000 (based on the then current market
price or fair value). If the holders initiating the registration intend to
distribute the Registrable Shares by means of an underwriting, they shall so
advise the Company in their request. In the event such registration is
underwritten, the right of other Stockholders to participate shall be
conditioned on such Stockholders' participation in such underwriting. Upon
receipt of any such request, the Company shall promptly give written notice of
such proposed registration to all Stockholders. Such Stockholders shall have the
right, by giving written notice to the Company within 30 days after the Company
provides its notice, to elect to have included in such registration such of
their Registrable Shares as such Stockholders may request in such notice of
election, subject to the approval of the underwriter, if any, managing the
offering; provided, that, in the event the Company is unable to effect the
registration of all Registrable Shares which it is requested to register, each
Stockholder who has requested to have shares registered shall have the right to
have registered no more than its pro rata share (i.e., a fraction, the numerator
of which is
26
<PAGE>
the number of Registrable Shares owned by such Stockholder and the denominator
of which is the total number of Registrable Shares owned by the Stockholders
requesting registration) of the shares being registered. Thereupon, the Company
shall, as expeditiously as possible, use its best efforts to effect the
registration, on Form S-1 or Form S-2 (or any successor form), of all
Registrable Shares which the Company has been requested to so register.
(b) At any time after the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings), a Stockholder or Stockholders holding in the aggregate at least 25%
of the Registrable Shares may request the Company, in writing, to effect the
registration on Form S-3 (or such successor form), of Registrable Shares having
an aggregate offering price of at least $250,000 (based on the current public
market price). Upon receipt of any such request, the Company shall promptly
give written notice of such proposed registration to all Stockholders. Such
Stockholders shall have the right, by giving written notice to the Company
within 30 days after the Company provides its notice, to elect to have included
in such registration such of their Registrable Shares as such Stockholders may
request in such notice of election. Thereupon, the Company shall, as
expeditiously as possible, use its best efforts to effect the registration on
Form S-3, or such successor form, of all Registrable Shares which the Company
has been requested to register.
(c) The Company shall not be required to effect more than two
registrations pursuant to paragraph (a) above or more than four registrations
pursuant to paragraph (b) above. The Company shall not be obligated to file or
seek to be declared effective any Registration Statement if the Company would
be required by the Commission to include audited financial statements as of any
date other than the end of its fiscal year. In addition, the Company shall not
be required to effect any registration (other than on Form S-3 or any successor
form relating to secondary offerings) within six months after the effective
date of any other Registration Statement of the Company.
(d) If at the time of any request to register Registrable Shares
pursuant to this subsection 11.3, the Company is engaged or has fixed plans to
engage within 30 days of the time of the request in a registered public
offering as to which the Stockholders may include Registrable Shares pursuant
to subsection 11.4 or is engaged in any other activity which, in the good faith
determination of the Company's Board of Directors, would be adversely affected
by the requested registration to the material detriment of the Company, then
the Company may at its option direct that such request be delayed for a period
not in
27
<PAGE>
excess of six months from the effective date of such offering or the date of
commencement of such other material activity, as the case may be, such right to
delay a request to be exercised by the Company not more than once in any two
year period.
11.4 Incidental Registration.
-----------------------
(a) Whenever the Company proposes to file a Registration
Statement (other than pursuant to subsection 11.3) at any time and from time to
time, it will, prior to such filing, give written notice to all Stockholders of
its intention to do so and, upon the written request of a Stockholder or
Stockholders given within 20 days after the Company provides such notice (which
request shall state the intended method of disposition of such Registrable
Shares), the Company shall use its best efforts to cause all Registrable Shares
which the Company has been requested by such Stockholder or Stockholders to
register to be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the intended methods
of distribution specified in the request of such Stockholder or Stockholders;
provided that the Purchasers and their successors and assigns shall be entitled
to include two Registrable Shares in any such registration for every one share
of the Founder's Registrable Shares included in such registering; and further
provided that the Company shall have the right to postpone or withdraw any
registration effected pursuant to this subsection 11.4 without obligation to any
Stockholder.
(b) In connection with any offering under this subsection 11.4
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such underwriting unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in the
opinion of the underwriters, jeopardize the success of the offering by the
Company. If in the opinion of the managing underwriter the registration of all,
or part of, the Registrable Shares which the holders have requested to be
included would materially and adversely affect such public offering, then the
Company shall be required to include in the underwriting only that number of
Registrable Shares, if any, which the managing underwriter believes may be sold
without causing such adverse effect, but in no event shall the amount of
Registrable Shares included in the offering be reduced below 30% of the total
amount of securities included in the offering, unless such offering is the
initial public offering of the Company's securities. If the number of
Registrable Shares to be included in the underwriting in accordance with the
foregoing is less than the total number of shares which the holders of
Registrable Shares have requested to be included, then the holders of
28
<PAGE>
Registrable Shares who have requested registration and other holders of shares
of Common Stock entitled to include shares of Common Stock in such registration
shall participate in the underwriting pro rata based upon their total ownership
of shares of Common Stock of the Company. If any holder would thus be entitled
to include more shares than such holder requested to be registered, the excess
shall be allocated among other requesting holders pro rata based upon their
total ownership of Registrable Shares.
11.5 Registration Procedures. If and whenever the Company is
-----------------------
required by the provisions of this Agreement to use its best efforts to effect
the registration of any of the Registrable Shares under the Securities Act, the
Company shall:
(a) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to keep
the Registration Statement effective for a period of not less than 120 days from
the effective date;
(c) as expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as the selling Stockholder may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Shares owned by the selling Stockholder; and
(d) as expeditiously as possible use its best efforts to register
or qualify the Registrable Shares covered by the Registration Statement under
the securities or Blue Sky laws of such states as the selling Stockholders shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the selling Stockholder; provided, however, that the Company shall not be
-------- -------
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the
29
<PAGE>
prospectus is amended to comply with the requirements of the Securities Act, the
Company shall promptly notify the selling Stockholders and, if requested, the
selling Stockholders shall immediately cease making offers of Registrable Shares
and return all prospectuses to the Company. The Company shall promptly provide
the selling Stockholders with revised prospectuses and, following receipt of the
revised prospectuses, the selling Stockholders shall be free to resume making
offers of the Registrable Shares.
11.6 Allocation of Expenses. The Company will pay all Registration
----------------------
Expenses of all registrations under this Agreement; provided, however, that if a
registration is withdrawn at the request of the Stockholders requesting such
registration (other than as a result of information concerning the business or
financial condition of the Company which is made known to the Stockholders after
the date on which such registration was requested) and if the requesting
Stockholders elect not to have such registration counted as a registration
requested under subsection 11.3, the requesting Stockholders shall pay the
Registration Expenses of such registration pro rata in accordance with the
number of their Registrable Shares included in such registration. No
Registration Statement shall be withdrawn by the Stockholders except for a bona
fide purpose. For purposes of this Section, the term "Registration Expenses"
shall mean all expenses incurred by the Company in complying with this Section
11, including, without limitation, all registration and filing fees, exchange
listing fees, printing expenses, fees and disbursements of counsel for the
Company and the fees and expenses of one counsel selected by the selling
Stockholders to represent the selling Stockholders, state Blue Sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, but excluding underwriting discounts, selling commissions and
the fees and expenses of selling Stockholders' own counsel (other than the
counsel selected to represent all selling Stockholders).
11.7 Indemnification. In the event of any registration of any of the
---------------
Registrable Shares under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless the seller of such Registrable Shares,
each underwriter of such Registrable Shares, and each other person, if any, who
controls such seller or underwriter within the meaning of the Securities Act or
the Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act, the Exchange Act, state securities or Blue Sky
laws or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable
30
<PAGE>
Shares were registered under the Securities Act, any preliminary prospectus or
final prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company will reimburse such seller, underwriter and each such controlling person
for any legal or any other expenses reasonably incurred by such seller,
underwriter or controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
-------- -------
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or omission made in such Registration Statement, preliminary prospectus or
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company, in writing, by or on
behalf of such seller, underwriter or controlling person specifically for use in
the preparation thereof.
In the event of any registration of any of the Registrable Shares under the
Securities Act pursuant to this Agreement, each seller of Registrable Shares,
severally and not jointly, will indemnify and hold harmless the Company, each of
its directors and officers and each underwriter (if any) and each person, if
any, who controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company, such directors and
officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such seller, specifically for use in connection with the preparation
of such Registration Statement, prospectus, amendment or supplement; provided,
--------
however, that the obligations of such Stockholders hereunder shall be limited to
- -------
an amount equal to the proceeds to each Stockholder of Registrable Shares sold
as contemplated herein.
31
<PAGE>
Each party entitled to indemnification under this subsection 11.7 (the
"Indemnified Party") shall give notice to the party required to provide
-----------------
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
------------------
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
--------
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
-------- -------
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 11. The Indemnified Party may participate in
such defense at such party's expense; provided, however, that the Indemnifying
-------- -------
Party shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified Party shall
consent to entry of any judgment or settle such claim or litigation without the
prior written consent of the Indemnifying Party.
11.8 Indemnification with Respect to Underwritten Offering. In the
-----------------------------------------------------
event that Registrable Shares are sold pursuant to a Registration Statement in
an underwritten offering pursuant to subsection 11.3(a), the Company agrees to
enter into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of an issuer of the
securities being registered and customary covenants and agreements to be
performed by such issuer, including without limitation customary provisions with
respect to indemnification by the Company of the underwriters of such offering.
11.9 Information by Holder. Each holder of Registrable Shares
---------------------
included in any registration shall furnish to the Company such information
regarding such holder and the distribution proposed by such holder as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 11.
11.10 "Stand-Off" Agreement. Each Stockholder, if requested by the
---------------------
Company and an underwriter of Common Stock or other
32
<PAGE>
securities of the Company, shall agree not to sell or otherwise transfer or
dispose of any Registrable Shares or other securities of the Company held by
such Stockholder for a specified period of time (not to exceed 90 days)
following the effective date of a Registration Statement; provided, that:
--------
(a) such agreement shall only apply to the first such
Registration Statement covering Common Stock of the Company to be sold on its
behalf to the public in an underwritten offering; and
(b) all Stockholders holding not less than the number of shares
of Common Stock held by such Stockholder (including shares of Common Stock
issuable upon the conversion of Shares, or other convertible securities, or upon
the exercise of options, warrants or rights) and all officers and directors of
the Company enter into similar agreements.
Such agreement shall be in writing in a form satisfactory to the Company and
such underwriter. The Company may impose stop-transfer instructions with
respect to the Registrable Shares or other securities subject to the foregoing
restriction until the end of the stand-off period.
11.11 Limitations on Subsequent Registration Rights. The Company
---------------------------------------------
shall not, without the prior written consent of Stockholders holding at least 66
2/3% of the Shares, enter into any agreement (other than this Agreement) with
any holder or prospective holder of any securities of the Company which would
allow such holder or prospective holder (a) to include securities of the Company
in any registration filed under subsection 11.3 or 11.4, or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to December 31, 1992.
11.12 Rule 144 Requirements. After the earliest of (i) the closing
---------------------
of the sale of securities of the Company pursuant to a Registration Statement,
(ii) the registration by the Company of a class of securities under Section 12
of the Exchange Act, or (iii) the issuance by the Company of an offering
circular pursuant to Regulation A under the Securities Act, the Company agrees
to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at
33
<PAGE>
any time after it has become subject to such reporting requirements); and
(c) furnish to any holder of Registrable Shares upon request a
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days following the closing
of the first sale of securities by the Company pursuant to a Registration
Statement), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company as such holder may reasonably request to avail itself of any
similar rule or regulation of the Commission allowing it to sell any such
securities without registration.
11.13 Selection of Underwriter.
------------------------
(a) In the case of any registration effected pursuant to
subsection 11.3, the requesting Stockholders shall have the right to designate
the managing underwriter in any underwritten offering.
(b) In the case of any registration initiated by the Company, the
Company shall have the right to designate the managing underwriter in any
underwritten offering, subject to the approval of a majority of the Registrable
Shares to be included in such offering, which approval shall not be unreasonably
withheld.
12. Delaware License. Astrosystems shall indemnify and hold harmless the
----------------
Company and the Purchasers from all claims, damages, losses or liabilities,
including attorneys' fees, to which the Company or the Purchasers may become
subject as a result of any claim made or action brought by the University of
Delaware (or its successor) under the Delaware License.
13. Successors and Assigns. Except as provided in Section 14, the
----------------------
provisions of this Agreement shall be binding upon, and inure to the benefit of,
the respective successors, assigns, heirs, executors and administrators of the
parties hereto.
14. Transfers of Certain Rights.
---------------------------
(a) The rights granted to a Purchaser under subsections 10.1, 10.2 and
10.6 and Section 11 may be transferred by such Purchaser to another Purchaser,
to any affiliate of the Purchaser or to any person or entity acquiring at least
Fifty Thousand (50,000) Shares or Registrable Shares; provided, however, that
-------- -------
the Company is given written notice by the transferee at the
34
<PAGE>
time of such transfer stating the name and address of the transferee and
identifying the securities with respect to which such rights are being assigned.
(b) Transferees. Any transferee (other than a Purchaser) to whom
-----------
rights under subsection 10.1, subsection 10.2, subsection 10.6 or Section 11 are
transferred shall, as a condition to such transfer, deliver to the Company a
written instrument by which such transferee agrees to be bound by the
obligations imposed upon Purchasers under Section 15, subsection 10.6 or Section
11, as the case may be, to the same extent as if such transferee were a
Purchaser hereunder.
(c) Subsequent Transferees. A transferee to whom rights are
----------------------
transferred pursuant to this Section 14 may not again transfer such rights to
any other person or entity, other than as provided in (a) or (b) above.
(d) Partners and Stockholders. Notwithstanding anything to the
-------------------------
contrary herein, any Purchaser which is a partnership or corporation may
transfer rights granted to such Purchaser under subsection 10.2, subsection 10.6
or Section 11 to any partner or stockholder thereof to whom Shares are
transferred pursuant to subsection 11.2 and who delivers to the Company a
written instrument in accordance with subparagraph (b) above and containing the
representation that the transfer is exempt from registration under the
Securities Act of 1933, as amended. In the event of such transfer, such partner
or stockholder shall be deemed a Purchaser for purposes of this Section 14 and
may again transfer such rights to any other person or entity which acquires
Shares or Registrable Shares from such partner or stockholder, in accordance
with, and subject to, the provisions of subparagraphs (a), (b) and (c) above.
15. Confidentiality. Each Purchaser agrees that he or it will keep
---------------
confidential and will not disclose or divulge any confidential, proprietary or
secret information which such Purchaser may obtain from the Company pursuant to
financial statements, reports and other materials submitted by the Company to
such Purchaser pursuant to this Agreement, or pursuant to visitation or
inspection rights granted hereunder, unless such information is known, or until
such information becomes known, to the public.
16. Survival of Representations and Warranties. All agreements,
------------------------------------------
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby.
35
<PAGE>
17. Expenses. The Company shall pay the reasonable costs and expenses of
--------
Hale and Dorr, special counsel to the Purchasers in connection with the
preparation of this Agreement and the closing of the transactions contemplated
hereby.
18. Notices. All notices, requests, consents, and other communications
-------
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid:
If to the Company, at 30 Lovett Avenue, Newark, Delaware 19711, Attention:
President, or at such other address or addresses as may have been furnished in
writing by the Company to the Purchasers; or
If to a Founder, at his address set forth below his signature to this
Agreement; or
If to a Purchaser, at his or its address set forth on Exhibit A, or at such
---------
other address or addresses as may have been furnished to the Company in writing
by such Purchaser, with a copy to William F. Winslow, Esq., Hale and Dorr, 1455
Pennsylvania Avenue, N.W., Washington, D.C. 20004.
Notices provided in accordance with this Section 18 shall be deemed
delivered upon personal delivery or 48 hours after deposit in the mail.
19. Brokers. The Company, each Founder and each Purchaser (i) represents
-------
and warrants to the other parties hereto that he or it has retained no finder or
broker in connection with the transactions contemplated by this Agreement, and
(ii) will indemnify and save the other parties harmless from and against any and
all claims, liabilities or obligations with respect to brokerage or finders'
fees or commissions, or consulting fees in connection with the transactions
contemplated by this Agreement asserted by any person on the basis of any
statement or representation alleged to have been made by such indemnifying
party.
20. Entire Agreement. This Agreement embodies the entire agreement and
----------------
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
36
<PAGE>
21. Amendments and Waivers. Except as otherwise expressly set forth in
----------------------
this Agreement, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the holders of at least 66 2/3% of the Shares. Any amendment or
waiver effected in accordance with this Section 22 shall be binding upon each
holder of any Shares (including shares of Common Stock into which such Shares
have been converted), each future holder of all such securities and the Company.
No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.
22. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
23. Headings. The headings of the sections, subsections, and paragraphs
--------
of this Agreement have been added for convenience only and shall not be deemed
to be a part of this Agreement.
24. Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity or enforceability of any other
provision.
37
<PAGE>
25. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
day and year first above written.
COMPANY:
ASTROPOWER INC.
By: /S/ Allen M. Barnett
--------------------
Name: Allen M. Barnett
----------------
Title: President
---------
FOUNDERS:
ASTROSYSTEMS INCORPORATED
By: /S/ Gilbert Steinberg, Vice President
-------------------------------------
Address:
ESSEX VENCAP, INC.
By: /S/ Charles R. Schaller, President
----------------------------------
Address:
PURCHASERS:
ADVAL LIMITED PARTNERSHIP
By: /S/ George S. Reichenbach
-------------------------
Vice President
38
<PAGE>
ADVENT FUTURE LIMITED PARTNERSHIP
By: AVENT INTERNATIONAL CORPORATION
General Partner
By: /S/ George S. Reichenbach
-------------------------
Vice President
ADVENT PERFORMANCE MATERIALS LIMITED PARTNERSHIP
By: /S/ George S. Reichenbach
-------------------------
Attorney-in-Fact
WORLD TECHNOLOGY LIMITED PARTNERSHIP
By: ADVENT INTERNATION CORPORATION
General Partner
By: /S/ George S. Reichenbach
-------------------------
Vice President
ADHILL LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: /S/ George S. Reichenbach
--------------------------
Vice President
ADWEST LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: /S/ George S. Reichenbach
--------------------------
Vice President
39
<PAGE>
ADVENT INTERNATIONAL INVESTORS LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: /S/ George S. Reichenbach
-------------------------
Vice President
UVCC FUND I
By: ARETE VENTURE MANAGEMENT ASSOCIATES
L.P., Managing General Partner
By: ARETE VENTURES, INC.,
PARTNERSHIP, General Partner
By: /S/ Robert W. Shaw, Jr.
-----------------------
President
By: /S/ Robert W. Shaw, Jr.
-----------------------
General Partner
UVCC I PARALLEL FUND, L.P.
By: ARETE VENTURES, L.P. II,
General Partner
By: ARETE VENTURES, INC.
General Partner
By: /S/ Robert W. Shaw, Jr.
-----------------------
President
By: /S/ Robert W. Shaw, Jr.
-----------------------
General Partner
40
<PAGE>
PIERCE NORDQUIST PARTNERS, L.P.
By: PIERCE NORDQUIST ASSOCIATES,
General Partner
By: /S/ Clare E. Nordquist
--------------------------------
PIERCE NORDQUIST PARTNERS II, L.P.
By: PIERCE NORDQUIST ASSOCIATES,
General Partner
By: /S/ Clare E. Nordquist
--------------------------------
VENTURES WEST III-U.S. LIMITED PARTNERSHIP
By: VENTURES WEST MANAGEMENT III, LTD.,
General Partner
By:/S/ Michael Brown
--------------------------
41
<PAGE>
EXHIBIT 2.2
PRIVATE PLACEMENT MEMORANDUM
_______________________________________________
APPENDIX B
Stock Purchase Agreement
APPENDIX C
Subscription Documents
_______________________________________________
AstroPower, Inc.
September 9, 1996
<PAGE>
Appendix B
STOCK PURCHASE AGREEMENT
<PAGE>
AstroPower, Inc.
666,667 Shares of Series B Convertible Preferred Stock
September 9, 1996
Dear Sir or Madam:
The undersigned, ASTROPOWER, INC., a Delaware Corporation (hereinafter
called the "Company"), hereby agrees with you as follows:
1. Purchase of Sale of Shares. Subject to the terms and conditions hereof,
---------------------------
the Company shall issue and shall sell to you, and you shall purchase from the
Company, the number of the shares of Series B Convertible Preferred Stock, par
value $.01 ("the Shares") of the Company set forth opposite your name on
Schedule 1. The terms of the Shares are set forth in the Confidential Private
Placement Memorandum ("Memorandum") dated September 9, 1996. The Company is
entering into other Stock Purchase Agreements ("Other Stock Agreements")
substantially similar to this Agreement (except as to the name and address of
the Purchaser) with other purchasers ("Other Purchasers"), such purchasers
together with you being herein sometimes called the "Purchasers", providing for
the sale to each of the Other Purchasers of Shares of the Company. This
Agreement and the Other Stock Agreements provide for the sale to the Purchasers
of an aggregate of 666,667 Shares of the Company, at a price of $6.00 per share.
The Shares to be sold to you are sometimes referred to herein as the "Shares",
the aggregate amount of Shares being sold to the Purchaser are sometimes
referred to herein as the "Company Shares". The sales of Company Shares and
sales to each of the Other Purchasers are to be separate sales.
2. Closings.
---------
2.1 All closing of sales contemplated hereby shall take place at the
offices of the Company, Solar Park, Newark, Delaware 19716-2000. Shares shall be
delivered by the Company to the respective Purchasers against execution of this
Agreement, a Subscription Agreement and payment of the purchase price. Such
sales shall take place at such times and dates as may be agreed upon by the
Company and the respective purchasers. In no event shall any such sale take
place after March 9, 1997 unless such date is extended by the Company as set
forth in the Memorandum.
2.2 Notwithstanding anything herein to the contrary, no Purchaser shall be
entitled to any rights as a shareholder of the Company until he has received
Shares for the amount purchased by him hereunder.
<PAGE>
3. Representations and Warranties by the Company. The Company represents and
----------------------------------------------
warrants that:
3.1 Incorporation and Qualification. The Company has been duly
--------------------------------
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and the Company is duly authorized and
empowered to own its properties and to transact its business in the
jurisdictions where their business is conducted, all as more fully described in
the Memorandum, receipt of a copy of which is hereby acknowledged by you.
3.2 Business and Title to Properties. The properties and assets of the
---------------------------------
Company are subject to no liens, mortgages, pledges, encumbrances or charges of
any kind other than liens, charges or encumbrances incidental to the conduct of
its business or the ownership of its properties and assets, which were not
incurred in connection with the borrowing of money or the obtaining of advances
of credit and in the aggregate do not materially detract from the value of such
properties and assets or materially impair the use thereof in the operation of
its business.
3.3 Capital Stock. At June 30, 1996, the authorized capital stock of the
--------------
Company consists of 20,000,000 shares of Common Stock par value $.01 per share
of which 4,933,049 are issued and outstanding and 775,000 shares of Series A
Preferred Stock, par value $.01 per share of which 1,746,168 are issued and
outstanding and 1,000,000 shares of Series B Preferred Stock, par value $.01 per
share of which 341,000 are issued and outstanding. The Shares will have full
voting rights. Shares to be issued hereunder will be validly issued, fully paid
and non-assessable. Shares do not have pre-emptive rights.
3.4 Tax Returns. Other than as set forth on the Company's financial
------------
statements included in the Memorandum the Company has filed all tax returns
which are required to be filed by it and has paid or established adequate
reserves for the payment of all taxes shown to be due and payable on said
returns or on any assessment received by it, to the extent that such taxes and
assessments have become due and payable on said returns or on an assessment
received by it.
3.5 Compliance with Other Instruments. Other than as disclosed in the
----------------------------------
Memorandum (See "Management's Discussion and Analysis of Results of Operations -
Liquidity and Capital Resources") the Company is not: in violation of its
Certificate of Incorporation or By-Laws, or any applicable law; in default under
any mortgage, lease, indenture, contract, agreement or instrument; in default
with respect to any order, writ, injunction or decree of any court; in default
in any material respect under any order, license, franchise, regulation or
demand of any Federal, State, municipal or other governmental agency.
3.6 No Materially Adverse Contracts or Occurrences. The Company is not
-----------------------------------------------
obligated under any contract or agreement or, to the best of the Company's
knowledge, subject to any charter or other corporate restriction which
materially and adversely affect its business, properties, or assets, other than
such agreements as are referred to in the Memorandum, and, to the best of the
Company's knowledge, neither the execution nor delivery of this Agreement nor
the consummation of the transactions contemplated hereby, nor compliance with
the terms and provisions hereof, will conflict with, or result in a breach of,
the terms, conditions or provisions, of, or constitute a default under, the
<PAGE>
Certificate of Incorporation or By-Laws of the Company or of any agreement of
instrument to which the Company is now a party or any restriction to which it is
subject.
3.7 Litigation. There are no actions, suits or proceedings pending, or,
-----------
to the knowledge of the Company, threatened, against or affecting the Company or
the properties of the Company in any court or by any governmental body not
covered by insurance or which would materially affect the Company.
3.8 Government Consent, Etc. No consent, approval, order of authorization
------------------------
of or registration, qualification, designation, declaration or filing with any
governmental authority on the part of the Company is required in connection with
the execution and delivery of the Shares to be purchased by you hereunder or the
carrying out of any other transaction contemplated hereby.
3.9 Offering of the Shares. Neither the Company nor anyone acting on its
-----------------------
behalf has directly or indirectly offered any of the Company's Shares (or any
other security convertible into any such shares) or any similar security of the
Company for sale to, or solicited an offer to buy the same from, anyone other
than (a) you, (b) the Other Purchasers, and (c) other investors, each of whom is
fully familiar with the assets, liabilities, financial condition, business,
operations, affairs and prospects of the Company, and is, to the best of the
Company's knowledge and belief, a sophisticated and experienced investor. All of
the Purchasers have represented to the Company in writing that they have
acquired or are acquiring the Shares of their own account for investment, with
no present intention of public resale or public distribution, and that the same
will not be resold or distributed by them in violation of the Securities Act of
1933 as the time in effect.
3.10 Disclosure. Neither this Agreement, the Memorandum nor any other
-----------
documents, certificates or written statements furnished to you by or on behalf
of the Company in connection herewith contain any material misstatement of a
fact or omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. The Company know of no information
or fact which materially adversely affects the business, operations, affairs,
prospects or condition of the Company or any of its properties or assets which
has not been set forth in this Agreement or the Memorandum. Any projection to
be furnished to Purchaser pursuant to this Agreement or the Memorandum was or
will be prepared with due care based on reasonable assumptions and represent or
will represent the Company's best estimate of future results based on
information available as of the date of the projections. No projection referred
to in the preceding sentence shall be deemed to be misleading unless it is shown
that any such projection was made without a reasonable basis or was disclosed
other than in good faith.
3.11 Corporate Action. This Agreement has been duly authorized by the
-----------------
Company and duly executed and delivered by the authorized officers of the
Company and constitutes the legal, valid and binding obligations of the Company.
3.12 Except in the Financial Statements or as otherwise noted, all
information in the Memorandum reflects a proposed amendment to the Company's
Certificate of Incorporation increasing the authorized number of Shares of
Series B Preferred Stock to 1,500,000 Shares and amending the existing
provisions of the presently issued and outstanding Shares of Series A Preferred
Stock and Series B Preferred Stock so as to conform to the provisions described
therein and herein. Such proposed amendment will
<PAGE>
not be filed, however, unless 166,666 Shares ($1,000,000) are sold. See
"Risk Factors" in the Memorandum.
4. Purchase for Investment. You represent that you are purchasing the Shares
-----------------------
for your own account, that the same is being purchased for investment, with no
present intention of public resale or public distribution; that the Shares will
not be resold or distributed by you in violation of the Securities Act of 1933
as at the time in effect, and you will deliver at execution of this Agreement an
investment letter signed by you to such effect in the form annexed hereto as
Schedule 2. You further agree that the Company shall have the right to place a
legend on the Shares to be issued and sold to you hereunder, such legend to be
substantially in the form set forth in said Schedule 2.
5. Conditions To Purchasers Obligations.
-------------------------------------
5.1 All corporate and other proceedings to be taken in connection with the
transactions contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in substance and form to you, and you shall have
received all such counterpart originals or certified or other copies of such
documents as you may reasonably request.
5.2 Opinion of the Company Counsel. You shall have received an opinion
-------------------------------
dated the Closing Date of counsel for the Company, in form and substance
satisfactory to you, to the effect (i) set forth in Section 3.1, and to the
knowledge of such counsel, Sections 3.5, 3.6, 3.7, 3.8, (ii) that this Agreement
and the Shares of Series B Preferred Stock have been duly authorized, executed
and delivered by the Company and are legal, valid and binding obligations of the
Company in accordance with their respective terms except to the extent limited
by bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights, (iii) that the shares of Series
B Preferred Stock have been validly authorized and reserved for such purpose
and, if and when they are delivered in accordance with this Agreement and
Appendix G to the Memorandum will have been validly issued and fully paid and
will be non-assessable and (iv) that the offer, issue and delivery of the Shares
each constitutes an exempt transaction under the Securities Act of 1933, as
amended, and the registration thereunder of the Shares is not required.
6. Registration Rights and Other Rights.
-------------------------------------
(a) Registration Rights. The Registration Rights granted to the holders
--------------------
of Series A Preferred Stock pursuant to "Section 11. Registration Rights" of
the Series A Stock Purchase Agreement dated September 20, 1989 among the
Company, Astrosystems, Essex, Barnett, and the Purchasers listed on Exhibit A
thereto, a copy of which is annexed hereto as Exhibit 1, are incorporated herein
by reference and granted to the Purchasers hereunder except that for the purpose
of this agreement the date of December 31, 1992 referred to in the first
sentence of "Section 11.3 Proposed Registration" therein shall be December 31,
1997.
(b) Other Rights. The rights granted and provisions contained in the
-------------
Shareholders Agreement dated September 20, 1989 among the Company, Astrosystems,
Essex, Barnett and the Series A Preferred Stock Purchasers who are signatories
thereto, a copy of which
<PAGE>
is annexed hereto as Exhibit 2, are incorporated herein by reference and each
Purchaser hereunder shall become a party to such Agreement.
7. Affirmative Covenants. The Company convenants and agrees as follows:
----------------------
7.1 Use of Proceeds. The proceeds of the sale of the Shares will be used
for working capital and equipment construction and acquisition, as set forth in
the Memorandum.
7.2 Financial Information. So long as you shall hold any of the Shares,
---------------------
the Company will deliver to you:
(a) as soon as practicable, and in any event within 120 days after the
close of each fiscal year of the Company, (i) a consolidated balance sheet of
the Company and its subsidiaries as of the end of such fiscal year and (ii)
consolidated statements of income, cash flows and common stock and shareholders'
equity of the Company and its subsidiaries for such fiscal year, in each case
setting forth in comparative form the corresponding figures for the preceding
fiscal year and to be in reasonable detail and audited by an independent public
accountant selected by the Company.
(b) as soon as practicable, and in any event within 45 days after the
close of each of the first three fiscal quarters of the Company, during such
fiscal year, (i) a consolidated balance sheet of the Company and its
subsidiaries as of the end of such fiscal quarter and (ii) consolidated
statements of income and cash flows of the Company and its subsidiaries for the
portion of the fiscal year ended with the end of such quarter, in each case
setting forth in comparative form the corresponding figures for the comparable
period of the preceding fiscal year (subject to normal year-end adjustment), all
of which quarterly financial statements shall be unaudited.
8. Expenses. Whether or not the transactions contemplated hereby shall be
--------
consummated, the Company will pay, and will indemnify and hold you harmless
against (a) all costs and expenses of the preparation of this Agreement and
other agreements and documents prepared in connection with the Shares purchased
by you hereunder, and (b) all documentary stamp taxes (including any interest or
penalties in respect thereof) payable on the issue or sale of the Shares
purchased by you hereunder. The Company represents and warrants to you that the
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on with you by the Company through its Officers and Directors.
The Company will pay and will indemnify and hold you harmless against any loss,
cost, damage or expense incurred by you as a result of the breach of the
aforesaid representation and warranty.
9. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be mailed by registered or certified first class mail, postage
prepaid, addressed (a) if to you, in the manner in which this Agreement is
addressed or at such other address as you shall have furnished to the Company in
writing, or (b) if to the Company, at Solar Park, Newark, Delaware 19716-2000
marked for the attention of the President, or at such other address as the
Company shall have furnished to you in writing.
<PAGE>
10. Parties in Interest. All convenants and agreements contained in this
-------------------
Agreement by or on behalf of either of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
11. Law Governing. This Agreement shall be construed in accordance with and
-------------
governed by the laws of the State of Delaware.
12. Modification. The terms and provisions of this Agreement may not be
------------
modified or amended except in writing.
13. Counterparts. This Agreement may be executed in two or more counterparts,
------------
each of which shall be deemed original, but all of which together shall
constitute one and the same instrument.
If you are in agreement with the foregoing, please sign in the appropriate place
on the enclosed counterpart of this letter and return such counterpart to the
undersigned, whereupon this letter shall become a binding agreement between you
and the undersigned.
Very truly yours,
ASTROPOWER, INC.
By ___________________________
THE FOREGOING AGREEMENT IS
HEREBY ACCEPTED AS OF THE
DATE FIRST ABOVE WRITTEN:
______________________________
Purchaser
<PAGE>
SCHEDULE 1
----------
TO AGREEMENT FOR PURCHASE OF SHARES OF
SERIES B CONVERTIBLE PREFERRED STOCK
PAR VALUE $.01 PER SHARE
AMOUNTS OF
SHARES TO BE AGGREGATE
PURCHASER ADDRESS PURCHASED AMOUNT
--------- ------- ------------ ---------
<PAGE>
SCHEDULE 2
Date:
AstroPower, Inc.
Solar Park
Newark, Delaware 19716-2000
Gentlemen:
In connection with my purchase of shares of Series B Convertible Preferred
Stock, par value $.01 per share (the "Shares") of AstroPower, Inc. (the
"Company"), I hereby represent that:
1. I am acquiring them for my own account for investment and without any
view to distribution or resale of such Shares.
2. I do not presently have any reason to anticipate any change in my
circumstances which would cause me to sell such Shares and my present financial
situation is such that I do not foresee the necessity of disposing of such
Shares in the foreseeable future.
3. I am aware the in issuing the Shares to me the Company is issuing
securities which have not been registered with the Securities and Exchange
Commission under the Securities Act of 1933 (the "Act"), as amended, pursuant to
an exemption under said Act, which exemption is based in part in reliance on the
truth and accuracy of my investment representation contained herein.
4. I accept the condition that before any transfer in connection with
resale of the Shares which are the subject matter of this purchase, written
approval must first be obtained from counsel for the Company.
5. I understand further that stop transfer instructions will be issued
with respect to the Shares and any shares of Common Stock into which the Shares
are convertible and that any such securities to be issued to me will bear a
legend substantially in the form as set forth below:
<PAGE>
"The securities represented by this certificate have not been registered under
the Securities Act of 1933. These securities have been acquired for investment
and may not be offered, sold, transferred, pledged or hypothecated in the
absence of an effective registration statement for the securities under the
Securities Act of 1933 or an opinion of counsel for the Company and/or the
submission to the Company that such registration is not required under the Act
pursuant to an available exemption. Furthermore, no offer, sale, transfer,
pledge or hypothecation is to take place without the prior written approval of
counsel for the Company being affixed to this certificate. The transfer agent
has been ordered to effectuate transfers of this certificate only in accordance
with the above instructions."
Very truly yours,
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
ASTROPOWER, INC.
---------------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the "corporation")
-----
is ASTROPOWER, Inc.
SECOND: The address, including street, number, city and county, of the
------
registered office of the corporation in the State of Delaware is 229 South State
Street, City of Dover, County of Kent; and the name of the registered agent of
the corporation in the State of Delaware at such address is The Prentice-Hall
Corporation System, Inc.
THIRD: The nature of the business and the purposes to be conducted and
-----
promoted by the corporation are to conduct any lawful business, to promote any
lawful purpose, and to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
FOURTH: The total number of shares of stock which the corporation shall
------
have authority to issue is Four Million, four hundred forty-four thousand, four
hundred forty-four ( 4,444,444). The par value of each of such shares shall be
one cent ($0.01). All such shares are of one class and are shares of Common
Stock.
FIFTH: The name and the mailing address of the incorporator are as
-----
follows:
NAME MAILING ADDRESS
Peter Landau 52 Vanderbilt Avenue
New York, New York, 10017
SIXTH: The corporation is to have perpetual existence.
-----
SEVENTH: Whenever a compromise or arrangement is proposed between
-------
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware
1
<PAGE>
may, on the application in a summary way of this corporation or of any creditor
or stockholder thereof or on the application of any receiver or receivers
appointed for this corporation under S 291 of Title 8 of the Delaware Code or on
the application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under S 279 of Title 8 of the Delaware Code order
a meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this corporation, as the case may be, to be summoned in
such a manner as the said court directs. If a majority in number representing
three fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
EIGHTH: For the management of the business and for the conduct of the
------
affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof , as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the Bylaws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to
have the same meaning, to wit, the total number of directors which the
corporation would have if there were no vacancies. No election of
directors need be by written ballot.
2. After the original or other Bylaws of the corporation has been adopted,
amended, or repealed, as the case may be, in accordance with the
provisions of S 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the Bylaws of the
corporation may be exercised by the Board of Directors of the
corporation; provided, however, that any provision for the
classification of directors or the corporation for staggered terms
pursuant to the provisions of subsection (d) of S 141 of the General
Corporation Law of the State of Delaware shall be set forth in an
initial Bylaw or in a Bylaw adopted by the stockholders entitled to vote
of the corporation unless provisions for such classification shall be
set forth in this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one class of
stock, each outstanding share shall entitle the holder thereof to notice
of, and the right to vote at, any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the certificate of incorporation shall entitle
the holder thereof to the right to vote at any meeting of stockholders
except as
2
<PAGE>
the provisions of paragraph (2) of subsection (b) of S 242 of the
General Corporation Law of the State of Delaware shall otherwise
require; provided, that no share of any such class which is otherwise
denied voting power shall entitle the holder thereof to vote upon the
increase or decrease in the number of authorized shares of said class.
NINTH: The personal liability of the directors of the corporation is
-----
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of S 102 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by S 145 of
-----
the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have
power to indemnify under said section from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
ELEVENTH: From time to time any of the provisions of this certificate of
--------
incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and
all rights at any time conferred upon the stockholders of the corporation by
this certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on April 27, 1989
/S/ PETER LANDAU, INCORPORATOR
-------------------------------
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ASTROPOWER, INC.
Pursuant to Section 242 of the
Delaware General Corporation Law
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Astropower, Inc. (hereinafter called the "Corporation"), organized and
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existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution was
duly adopted, setting forth amendments to the Certificate of Incorporation of
the Corporation and declaring said amendments to be advisable. The stockholders
of the Corporation duly approved said proposed amendments by written consent in
accordance with Sections 228 and 242 of the Delaware General Corporation Law.
The resolutions setting forth the amendments are as follows:
RESOLVED: That Article FOURTH of the Certificate of Incorporation of the
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Corporation be and hereby is deleted and the following Article FOURTH is
inserted in lieu thereof:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is (i) 10,000,000 shares of Common
Stock, $.0l par value per share ("Common Stock") and (ii) 1,775,000 shares of
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Preferred Stock, $.01 par value per share ("Preferred Stock").
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The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
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1. General. The voting, dividend and liquidation rights of the holders of
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the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
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each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting. Except to the extent that any
other class or series of stock of the Corporation is granted the exclusive right
to elect one or more directors, the holders of record of the shares of Common
Stock shall be entitled to elect the balance of the total number of directors of
the Corporation.
3. Dividends. Dividends may be declared and paid on the Common Stock from
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funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
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whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
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Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time to
time to issue the Preferred Stock in one or more
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series, and in connection with the creation of any such series, by resolution or
resolutions providing for the issue of the shares thereof, to determine and fix
such voting powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, conversion rights, redemption privileges
and liquidation preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by the General
Corporation Law of Delaware. Except as provided herein or to the extent class
or series voting is otherwise required by law or agreement, without limiting the
generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as provided herein or to the extent class or series
voting is otherwise required by law or agreement, no vote of the holders of the
Preferred Stock or Common Stock shall be a prerequisite to the issuance of any
shares of any series of the Preferred Stock authorized by and complying with the
conditions of the Certificate of Incorporation, the right to have such vote
being expressly waived by all present and future holders of the capital stock of
the Corporation.
C. SERIES A CONVERTIBLE PREFERRED STOCK.
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One Million Seven Hundred Seventy-Five Thousand (1,775,000) shares of the
authorized and unissued Preferred Stock of the Corporation are hereby designated
"Series A Convertible Preferred Stock" (the "Series A Preferred Stock") with the
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following rights, preferences, powers, privileges and restrictions,
qualifications and limitations.
1. Dividends.
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(a) If and only if declared by the Board of Directors of the
Corporation, the holders of shares of Series A Preferred Stock shall be entitled
to receive, prior to any declaration or payment of any cash dividend on any
other shares of capital stock of the Corporation, non-cumulative dividends at
the rate per share of 8% of the Original Series A Issue Price, as defined below,
per annum, and no more, payable annually, as declared, on such date as shall be
fixed by the Board of Directors of the Corporation.
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(b) The Corporation shall not declare or pay any dividends or any
other distributions of property, assets or instruments of indebtedness on shares
of Common Stock, other than dividends payable solely in cash or in shares of
Common Stock, without the prior written consent or affirmative vote of the
holders of at least 66 2/3% of the then outstanding shares of Series A Preferred
Stock, given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a class.
2. Liquidation, Dissolution or Winding Up.
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(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any other class or series of stock of the Corporation ranking on
liquidation prior and in preference to the Series A Preferred Stock
(collectively referred to as "Senior Preferred Stock"), but before any payment
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shall be made to the holders of Common Stock by reason of their ownership
thereof, an amount per share equal to the product of the price per share paid to
the Company for such share upon its issuance by the Company (the "Original
Series A Issue Price") (subject to appropriate adjustment in the event of any
stock dividend, stock split, combination or other similar recapitalization
affecting such shares) multiplied by two (2). If upon any such liquidation,
dissolution or winding up of the Corporation the remaining assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the holders of shares of Series A Preferred Stock the full amount to
which they shall be entitled, the holders of shares of Series A Preferred Stock
and any class or series of stock ranking on liquidation on a parity with the
Series A Preferred Stock shall share ratably in any distribution of the
remaining assets and funds of the Corporation in proportion to the respective
amounts which would otherwise be payable in respect of the shares held by them
upon such distribution if all amounts payable on or with respect to such shares
were paid in full.
(b) After the payment of all preferential amounts, if any, required to
be paid to the holders of Senior Preferred Stock, Series A Preferred Stock and
any other class or series of stock of the Corporation ranking on liquidation on
a parity with the Series A Preferred Stock, including any preferential payments
due pursuant to Subsection 2(a) above, upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Series A Preferred Stock
and Common Stock then outstanding shall be
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entitled to receive the remaining assets and funds of the Corporation available
for distribution in the following amounts and order of priority:
(i) First, each holder of Common Stock shall be entitled to
receive such assets and funds ratably in proportion to the number of shares of
Common Stock held by such stockholder until the holders of Common Stock in the
aggregate have received an amount pursuant to this Subsection 2(b)(i) which is
equal to the amount distributed to the holders of Series A Preferred Stock
pursuant to Section 2(a) above, multiplied by a fraction, the numerator of which
is the aggregate number of shares of Common Stock issued and outstanding and the
denominator of which is the aggregate number of shares of Common Stock into
which the then issued and outstanding shares of Series A Preferred Stock are
convertible; and
(ii) Thereafter, each holder of Common Stock or Series A
Preferred Stock shall be entitled to receive the balance, if any, of such assets
and funds ratably in proportion to the number of shares of Common Stock (A) held
by such stockholder, or (B) into which the shares of Series A Preferred Stock
held by such stockholder are convertible, as the case may be.
(c) Any transaction by the Corporation (including, without
limitation, any reorganization, merger, consolidation or the sale of all or
substantially all assets of the Corporation) which results in the Corporation's
stockholders immediately prior to such transaction not holding (by virtue of
such shares or securities issued solely with respect thereto) at least 50% of
the voting power of the surviving or continuing entity following such
transaction shall be deemed to be a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 2. The amount deemed distributed to
the holders of Series A Preferred Stock upon any such merger or consolidation
shall be the cash or the value of the property, rights or securities distributed
to such holders by the acquiring person, firm or other entity. The value of such
property, rights or other securities shall be determined in good faith by the
Board of Directors of the Corporation.
3. Voting
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(a) Each holder of outstanding shares of Series A Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which the shares of Series A Preferred Stock held by such
holder are convertible (as adjusted from time to time pursuant to Section 4
hereof), at each meeting of stockholders of the Corporation (and written actions
of
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stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration.
Except as provided by law, by the provisions hereof or by the provisions
establishing any other series of Preferred Stock, holders of Series A Preferred
Stock and of any other outstanding series of Preferred Stock shall vote together
with the holders of Common Stock as a single class.
(b) The number of directors which shall constitute the entire Board of
Directors of the Corporation shall be four, unless the "Second Closing" occurs
pursuant to the Stock Purchase Agreement under which Series A Preferred Stock is
first sold to investors by the Corporation, in which event the number of
directors which shall constitute the entire Board of Directors of the
Corporation shall be five. The holders of record of the shares of Series A
Preferred Stock, exclusively and as a separate class, shall be entitled to elect
one director of the Corporation, who shall be Robert W. Shaw, Jr. or, if he is
unable or unwilling to serve, another designee of Arete Ventures, Inc., unless
the "Second Closing" occurs pursuant to the Stock Purchase Agreement under which
Series A Preferred Stock is first sold to investors by the Corporation, in which
event the holders of record of the shares of Series A Preferred Stock,
exclusively and as a separate class, shall be entitled to elect two directors of
the Corporation, who shall be Robert W. Shaw, Jr., or if he is unable or
unwilling to serve, another designee of Arete Ventures, Inc., and George S.
Reichenbach, or if he is unable or unwilling to serve, another designee of
Advent International Corporation, and except to the extent that any other class
or series of stock of the Corporation is granted the exclusive right to elect
one or more directors, the holders of record of the shares of Series A Preferred
Stock, voting together without distinction as to class or series with the
holders of record of any other class of the Corporation's stock so entitled to
vote, shall be entitled to elect the balance of the total number of directors of
the Corporation. At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority of the shares of
Series A Preferred Stock then outstanding shall constitute a quorum of the
Series A Preferred Stock for the purpose of electing directors by holders of the
Series A Preferred Stock. A vacancy in any directorship filled by the holders
of Series A Preferred Stock shall be filled only by vote or written consent in
lieu of a meeting of the holders of the Series A Preferred Stock.
(c) The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers of the Series A Preferred Stock so as to affect
adversely the Series A Preferred Stock, without the written consent or
affirmative vote of the
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holders of at least 66 2/3% of the then outstanding shares of Series A Preferred
Stock, given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a class. For this purpose, without limiting the
generality of the foregoing, the authorization or issuance of any Common Stock
or series of Preferred Stock with preference or priority over, or on a parity
with the Series A Preferred Stock as to voting rights or the right to receive
either dividends or amounts distributable upon liquidation, dissolution or
winding up of the Corporation shall be deemed to affect adversely the Series A
Preferred Stock.
4. Optional Conversion. The holders of the Series A Preferred Stock shall
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have conversion rights as follows (the "Conversion Rights"):
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(a) Right to Convert. Each share of Series A Preferred Stock shall be
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convertible, at the option of the holder thereof, at any time and from time to
time, into such number of fully paid and nonassessable shares of Common Stock as
is determined by dividing the Original Series A Issue Price for such share of
Series A Preferred Stock by the Conversion Price (as defined below) in effect at
the time of conversion. The conversion price at which each share of Common
Stock shall be deliverable upon conversion of Series A Preferred Stock without
the payment of additional consideration by the holder thereof (the "Conversion
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Price") shall initially be the Original Series A Issue Price for such share of
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Series A Preferred Stock. Such initial Conversion Price, and the rate at which
shares of Series A Preferred Stock may be converted into shares of Common Stock,
shall be subject to adjustment as provided below.
In the event of a liquidation of the Corporation, the Conversion Rights
shall terminate at the close of business on the first full day preceding the
date fixed for the payment of any amounts distributable on liquidation to the
holders of Series A Preferred Stock.
(b) Fractional Shares. No fractional shares of Common Stock shall be
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issued upon conversion of the Series A Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
(c) Mechanics of Conversion.
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(i) In order for a holder of Series A Preferred Stock to convert
shares of Series A Preferred Stock into shares of
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Common Stock, such holder shall surrender the certificate or certificates for
such shares of Series A Preferred Stock, at the office of the transfer agent for
the Series A Preferred Stock (or at the principal office of the Corporation if
the Corporation serves as its own transfer agent), together with written notice
that such holder elects to convert all or any number of the shares of the Series
A Preferred Stock represented by such certificate or certificates. Such notice
shall state such holder's name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
If required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
his or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date"). The Corporation shall, as soon as practicable after the
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Conversion Date, issue and deliver at such office to such holder of Series A
Preferred Stock, or to his or its nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the Series A
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Series A Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series A Preferred Stock. Before taking any action which
would cause an adjustment reducing the Conversion Price below the then par value
of the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, the Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.
(iii) Upon any such conversion, no adjustment to the Conversion
Price shall be made for any accrued and unpaid dividends on the Series A
Preferred Stock surrendered for conversion or on the Common Stock delivered upon
conversion.
(iv) All shares of Series A Preferred Stock which shall have
been surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the rights,
if any, to receive notices and to vote, shall immediately cease and terminate on
the
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Conversion Date, except only the right of the holders thereof to receive shares
of Common Stock in exchange therefor and payment of any accrued and unpaid
dividends thereon. Any shares of Series A Preferred Stock so converted shall be
retired and canceled and shall not be reissued, and the Corporation may from
time to time take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly.
(d) Adjustments to Conversion Price for Diluting Issues:
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(i) Special Definitions. For purposes of this Subsection 4(d),
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the following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
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subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, excluding options issued pursuant to a plan specified in subsection
4(d)(i)(D)(III) below (subject to appropriate adjustment for any stock dividend,
stock split, combination or other similar recapitalization affecting such
shares).
(B) "Original Issue Date" shall mean the date on which a
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share of Series A Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
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indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
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shares of Common Stock issued (or, pursuant to Subsection 4(d)(iii) below,
deemed to be issued) by the Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:
(I) upon conversion of up to 1,400,000 shares of
Series A Preferred Stock;
(II) as a dividend or distribution on Series A
Preferred Stock;
(III) to directors, employees or consultants of the
Corporation pursuant to a stock option plan,
employee stock purchase plan, restricted
stock plan or other stock plan or agreement,
provided, that the number of shares of Common
Stock so issued or issuable shall not exceed
500,000; or
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(IV) by reason of a dividend, stock split, split-
up or other distribution on shares of Common
Stock excluded from the definition of
Additional Shares of Common Stock by the
foregoing clauses (I), (II), and (III); or
(ii) No Adjustment of Conversion Price. No adjustment in the
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number of shares of Common Stock into which the Series A Preferred Stock is
convertible shall be made, by adjustment in the applicable Conversion Price
thereof: (a) unless the consideration per share (determined pursuant to
Subsection 4(d)(v)) for an Additional Share of Common Stock issued or deemed to
be issued by the Corporation is less than the applicable Conversion Price in
effect on the date of, and immediately prior to, the issue of such Additional
Shares, or (b) if prior to such issuance, the Corporation receives written
notice from the holders of at least 66 2/3% of the then outstanding shares of
Series A Preferred Stock agreeing that no such adjustment shall be made as the
result of the issuance of Additional Shares of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of
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Common Stock.
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If the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Subsection 4(d)(v) hereof)
of such Additional Shares of Common Stock would be less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common Stock are deemed to be issued:
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(A) No further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) If such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(C) No readjustment pursuant to clause (B) above shall
have the effect of increasing the Conversion Price to an amount which exceeds
the lower of (i) the Conversion Price on the original adjustment date, or (ii)
the Conversion Price that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date and such
readjustment date;
(D) Upon the expiration or termination of any unexercised
Option, the Conversion Price shall not be readjusted, but the Additional Shares
of Common Stock deemed issued as the result of the original issue of such Option
shall not be deemed issued for the purposes of any subsequent adjustment of the
Conversion Price; and
(E) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price then in effect shall
forthwith be readjusted to such Conversion Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security not exercised or converted prior to such change been made upon the
basis of such change, but no further adjustment shall be made for the actual
issuance of Common Stock upon the exercise or conversion of any such Option or
Convertible Security.
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(iv) Adjustment of Conversion Price Upon Issuance of Additional
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Shares of Common Stock.
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In the event the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Subsection 4(d)(iii), but excluding
shares issued as a dividend or distribution as provided in Subsection 4(f) or
upon a stock split or combination as provided in Subsection 4(e)), without
consideration or for a consideration per share less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
then and in such event, such Conversion Price shall be reduced, concurrently
with such issue, to a price equal to the lowest per share consideration at which
such Additional Shares of Common Stock are issued; provided that the issuance of
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Additional Shares of Common Stock for no consideration shall be deemed to be an
issuance at a per share consideration of $0.01; and further provided that, for
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the purpose of this Subsection 4(d)(iv), all shares of Common Stock issuable
upon conversion of shares of Series A Preferred Stock outstanding immediately
prior to such issue shall be deemed to be outstanding, and immediately after any
Additional Shares of Common Stock are deemed issued pursuant to Subsection
4(d)(iii) (other than shares excluded from the definition of "Additional Shares
of Common Stock" by virtue of clause (IV) of Subsection 4(d)(i)(D)), such
Additional Shares of Common Stock shall be deemed to be outstanding.
Notwithstanding the foregoing, the applicable Conversion Price shall not be
so reduced at such time if the amount of such reduction would be an amount less
than $0.05, but any such amount shall be carried forward and reduction with
respect thereto made at the time of and together with any subsequent reduction
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate $0.05 or more.
(v) Determination of Consideration. For purposes of this
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Subsection 4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
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(I) insofar as it consists of cash, be computed at
the aggregate of cash received by the Corporation, excluding amounts paid or
payable for accrued interest or accrued dividends;
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(II) insofar as it consists of property other than
cash, be computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and (II) above,
as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration
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per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Subsection 4(d)(iii), relating to options
and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(e) Adjustment for Stock Splits. If the Corporation shall at any time
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or from time to time after the Original Issue Date for a series of the Preferred
Stock effect a subdivision of the outstanding Common Stock, the Conversion Price
then in effect immediately before that subdivision shall be proportionately
decreased. Any adjustment under this paragraph shall become effective at the
close of business on the date the subdivision becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the event
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the Corporation at any time, or from time to time after the Original Issue Date
for a series of Preferred Stock
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shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price for such series of Preferred Stock then in effect shall be decreased as of
the time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying the
Conversion Price for such series of Preferred Stock then in effect by a
fraction:
(1) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for such series of Preferred Stock shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Conversion Price for such series of Preferred Stock shall be
adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions.
(g) Adjustments for Other Dividends and Distributions. In the event
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the Corporation at any time or from time to time after the Original Issue Date
for a series of Preferred Stock shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of such series of Preferred Stock shall receive upon conversion thereof
in addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation that they would have received had their
Preferred Stock been converted into Common Stock on the date of such event and
had thereafter, during the period from the date of such event to and including
the conversion date, retained such securities receivable by them as aforesaid
during such period giving application to all adjustments called for during such
period, under this paragraph with respect to the rights of the holders of the
Preferred Stock.
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(h) Adjustment for Reclassification, Exchange, or Substitution.
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If the Common Stock issuable upon the conversion of the Preferred Stock shall be
changed into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification, or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation, or sale of assets provided
for below), then and in each such event the holder of each such share of
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification, or other change, by holders of the
number of shares of Common Stock into which such shares of Preferred Stock might
have been converted immediately prior to such reorganization, reclassification,
or change, all subject to further adjustment as provided herein.
(i) Adjustment for Merger or Reorganization, etc. In case of any
--------------------------------------------
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation (other than a consolidation, merger or sale which is treated as a
liquidation pursuant to Subsection 2(c)), each share of Series A Preferred Stock
shall thereafter be convertible into the kind and amount of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock of the Corporation deliverable upon conversion of such Series A Preferred
Stock would have been entitled upon such consolidation, merger or sale; and, in
such case, appropriate adjustment (as determined in good faith by the Board of
Directors) shall be made in the application of the provisions in this Section 4
set forth with respect to the rights and interest thereafter of the holders of
the Series A Preferred Stock, to the end that the provisions set forth in this
Section 4 (including provisions with respect to changes in and other adjustments
of the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A Preferred Stock.
(j) No Impairment. The Corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, payment of
dividends, transfer of assets, consolidation, merger, dissolution, issue or sale
of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or
15
<PAGE>
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.
(k) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of Series A Preferred Stock.
(1) Notice of Record Date. In the event:
---------------------
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock
or other securities of the Corporation;
(ii) that the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock or a stock dividend or
stock distribution thereon), or of any consolidation or
merger of the Corporation into or with another corporation,
or of the sale of all or substantially all of the assets of
the Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock, and shall cause to
be mailed to the holders of the Series A Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least ten
days prior to the record date specified in (A) below or twenty days before the
date specified in (B) below, a notice stating
16
<PAGE>
(A) the record date of such dividend, distribution, subdivision
or combination, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, subdivision or
combination are to be determined, or
(B) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution
or winding up.
5. Mandatory Conversion.
--------------------
(a) The Corporation may, at its option, require all (and not less than
all) holders of shares of Series A Preferred Stock then outstanding to convert
their shares of Series A Preferred Stock into shares of Common Stock, (i) at the
then effective conversion rate pursuant to Section 4, at any time on or after
the closing of the sale of shares of Common Stock, at a price of at least $7.50
per share (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other similar recapitalizations affecting such shares), in a
bona fide firm commitment public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, resulting in at least
$12,000,000 of gross proceeds to the Corporation or (ii) upon the authorization
of such conversion by the prior written consent or affirmative vote at a meeting
of the holders of at least 66 2/3% of the then outstanding shares of Series A
Preferred consenting or voting (as the case may be) separately as a class.
(b) All holders of record of shares of Series A Preferred Stock will
be given at least 10 days' prior written notice of the date fixed and the place
designated for mandatory conversion of all such shares of Series A Preferred
Stock pursuant to this Section 5. Such notice will be sent by first class or
registered mail, postage prepaid, to each record holder of Series A Preferred
Stock at such holder's address last shown on the records of the transfer agent
for the Series A Preferred Stock (or the records of the Corporation, if it
serves as its own transfer agent). On or before the date fixed for conversion,
each holder
17
<PAGE>
of shares of Series A Preferred Stock shall surrender his or its certificate or
certificates for all such shares to the Corporation at the place designated in
such notice, and shall thereafter receive certificates for the number of shares
of Common Stock to which such holder is entitled pursuant to this Section 5. On
the date fixed for conversion, all rights with respect to the Series A Preferred
Stock so converted, including the rights, if any, to receive notices and vote,
will terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Series A Preferred Stock has
been converted, and payment of any accrued but unpaid dividends thereon. If so
required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his or its attorney duly authorized in writing. As soon as practicable after
the date of such mandatory conversion and the surrender of the certificate or
certificates for Series A Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series A Preferred Stock
which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the date such certificates are so
required to be surrendered, be deemed to have been retired and canceled and the
shares of Series A Preferred Stock represented thereby converted into Common
Stock for all purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. The
Corporation may thereafter take such appropriate action as may be necessary to
reduce the authorized Series A Preferred Stock accordingly.
6. Optional Redemption
-------------------
(a) On May 15, 1994, each holder of the Series A Preferred Stock shall
have the right to compel the Corporation to redeem all of the shares of Series A
Preferred Stock held by such holder on such date, or such lesser number of
shares of Series A Preferred Stock as the holder may determine. On such date,
(the "Redemption Date"), the redemption price for each share to be redeemed
shall be paid by the Corporation in cash in an amount equal to the Original
Series A Issue Price (subject to appropriate
18
<PAGE>
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares) plus an amount equal to eight
percent (8%) of the Original Series A Price per annum, compounded annually, for
each year in which the dividend specified in Section 1 above is not declared and
paid upon the Series A Preferred Stock (the "Redemption Price").
(b) Between 60 and 45 days prior to the Redemption Date, the
Corporation shall provide each holder of Series A Preferred Stock with a written
offer (addressed to the holder at its address as it appears on the stock
transfer books of the Corporation) to redeem shares of Series A Preferred Stock
as provided above, which notice shall specify the Redemption Price. Each holder
of Series A Preferred Stock will have until 15 days prior to the Redemption Date
to provide the Corporation with written notice of such holder's acceptance of
the redemption offer, which notice shall specify the number of shares to be
redeemed. All notices or offers hereunder shall be sent by certified mail,
return receipt requested, and shall be deemed to have been provided when
received.
(c) On or prior to the Redemption Date, each holder of Series A
Preferred Stock accepting the Corporation's redemption offer shall surrender his
or its certificate or certificates representing the shares to be redeemed, in
the manner and at the place designated in the Corporation's redemption offer.
If less than all shares represented by such certificate or certificates are
redeemed, the Corporation shall issue a new certificate for the unredeemed
shares. From and after the Redemption Date, unless there shall be a default in
payment of the Redemption Price, all rights of each holder with respect to
shares of Series A Preferred Stock redeemed on the Redemption Date shall cease
(except the right to receive the Redemption Price without interest upon
surrender of the certificate or certificates therefor), and such shares shall
not be deemed to be outstanding for any purpose whatsoever. Such shares of
Series A Preferred Stock shall not be reissued, and the Corporation may from
time to time take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly. Nothing herein shall prevent
or restrict the purchase by the Corporation, from time to time, of the whole or
any part of the Series A Preferred Stock at such price or prices as the
Corporation may determine subject to the provisions of applicable law.
(d) For the purpose of determining whether funds are legally available
for redemption of shares of Series A Preferred Stock as provided herein, the
Corporation shall value its assets at the highest amount permissible under
applicable law. If on the
19
<PAGE>
Redemption Date funds of the Corporation legally available therefor shall be
insufficient to redeem all the shares of Series A Preferred Stock required to be
redeemed as provided herein, funds to the extent legally available shall be used
for such purpose and the Corporation shall effect such redemption pro rata
according to the number of shares of Series A Preferred Stock held by each
holder accepting the Corporation's redemption offer. The redemption
requirements provided hereby shall be continuous, so that if on the Redemption
Date such requirements shall not be fully discharged, without further action by
any holder of Series A Preferred Stock funds legally available shall be applied
therefor until such requirements are fully discharged.
7. Covenants.
---------
So long as any Series A Preferred Stock shall be outstanding, the
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than 66 2/3% of the outstanding shares of
Series A Preferred Stock (or their duly appointed attorney-in-fact, if any)
which consent shall not be unreasonably withheld:
(a) Declare or pay any dividends on Common Stock or Preferred
Stock other than dividends payable solely in Common Stock;
(b) Make any loan or advance to any subsidiary or other
corporation, partnership, or other entity unless it is wholly owned by the
Corporation, provided, that the Corporation shall have the right to make loans
and advances to AstroPower Canada Ltd. ("Canada") in an amount not to exceed
$10,000 in any one case or $100,000 in the aggregate;
(c) Make any loan or advance to any person, including, without
limitation, any employee or director of the Corporation or any subsidiary,
except advances and similar expenditures in the ordinary course of business,
loans under the terms of an employee stock or option plan authorized pursuant to
Section 7(h) or loans to employees in an amount not to exceed $10,000 per
employee or $50,000 for all employees;
(d) Incur, create, assume or otherwise become primarily or
secondarily liable with respect to, or absolutely or contingently liable with
respect to, or permit to exist any indebtedness except for trade accounts of the
Corporation and other indebtedness not to exceed $100,000 in the aggregate;
(e) Guarantee directly or indirectly, any indebtedness except for
trade accounts of the Corporation or any
20
<PAGE>
wholly-owned subsidiary arising in the ordinary course of business, provided
that the Corporation shall have the right to guarantee indebtedness of Canada in
an amount not to exceed $100,000;
(f) Merge with or into or consolidate with any other corporation
or purchase or own any stock or other securities of or interest in any
subsidiary or other corporation, partnership, or other entity, or sell, lease,
or otherwise dispose of all or substantially all of its properties or assets,
provided that the Corporation shall have the right (i) to merge with another
corporation pursuant to a merger in which the Corporation is the surviving
corporation and following which the stockholders of the Corporation immediately
prior to such merger own at least a majority of the outstanding stock and voting
power of the Corporation, (ii) to acquire at least a majority of the outstanding
stock and voting power of any corporation or (iii) to acquire the management
control and at least a majority of the general partnership interest in any
general or limited partnership, if, in the case of any merger or acquisition
permitted pursuant to the foregoing clauses (i), (ii) or (iii), such merger or
acquisition would not result in a decrease in the Corporation's net tangible
book value per share and any such corporation with which the Corporation merges
or any such corporation or partnership in which the Corporation acquires an
interest is at the time of such merger or acquisition (x) engaged in a business
or activity contemplated by the Business Plan of the Corporation dated November
1988 as a business or activity of the Corporation or (y) otherwise engaged in
research, development or commercial exploitation of solar energy;
(g) Effect any reverse stock split, stock combination,
reclassification or similar event which would result in a reduction of the
number of shares of Series A Preferred then owned by any holder thereof or a
reduction of the number of shares of Common Stock into which Series A Preferred
is convertible;
(h) Authorize or establish any stock option plan, employee stock
purchase plan, restricted stock plan or other employee stock plan or agreement
other than the Corporation's 1989 Employee Stock Option Plan (the "1989 Plan")
or amend the 1989 Plan;
(i) Engage in any business or activity other than as contemplated
by the Business Plan of the Corporation dated November 1988;
(j) Amend or repeal any provision of, or add any provision to,
its Certificate of Incorporation, any Certificate of
21
<PAGE>
Designation or By-Laws if such action will alter or change the preferences,
rights, privileges or powers of, or the restrictions provided for the benefit
of, any Series A Preferred Stock or otherwise adversely affect the rights of the
holders of the Series A Preferred Stock;
(k) Repurchase any shares of its capital stock; or
(l) Increase the number of directors which constitutes the
entire Board of Directors of the Corporation.
Each covenant of the Corporation contained in this Section 7 shall terminate,
and be of no further force or effect, upon the termination of such covenant
pursuant to the Stock Purchase Agreement under which Series A Preferred Stock is
first sold to investors by the Corporation.
8. Stock Combinations. In no event shall the Corporation effect any
------------------
reverse stock split, stock combination, reclassification or similar event which
would result in a reduction in the number of shares of Series A Preferred Stock
then owned by any holder thereof or a reduction in the number of shares of
Common Stock into which Series A Preferred Stock is convertible.
9. Residual Rights. All rights accruing to the outstanding shares of the
---------------
Corporation and not expressly provided for to the contrary herein shall be
vested in the Common Stock.
RESOLVED: That Article ELEVENTH of the Certificate of Incorporation be and
---------
hereby is deleted in its entirety.
22
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed
hereto and this Certificate of Amendment to be signed by its President and
attested by its Secretary this 11th day of September, 1989.
---------
ASTROPOWER,INC.
By: /S/ Allen M. Barnett
--------------------
Allen M. Barnett President
ATTEST:
/S/ Charles R. Schaller, Secretary
23
<PAGE>
State of Delaware
Office of the Secretary of State
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "ASTROPOWER, INC.11 FILED IN THIS OFFICE ON THE TWELFTH DAY OF
NOVEMBER, A.D. 1993, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
William T Quillen, Secretary of State
AUTHENTICATION: *4142631
DATE: 11/12/1993
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF ASTROPOWER, INC.
Pursuant to Section 242 of the
Delaware General Corporation Law
Astropower, Inc. (hereinafter called the "Corporation"), organized and
--------------
existing under and by virtue of the General Corporation law of the State of
Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution was
duly adopted, setting forth amendments to the Certificate of Incorporation of
the Corporation and declaring said amendments to be advisable. The stockholders
of the Corporation duly approved said proposed amendments by written consent in
accordance with Sections 228 and 242 of the Delaware General Corporation law.
The resolutions setting forth the amendments are as follows:
RESOLVED: That the first paragraph of Article FOURTH of the
---------
Certificate of Incorporation of the Corporation relating to the total number of
shares of stock which this Corporation shall have authority to issue be and
hereby is deleted and the following Article FOURTH is inserted in lieu thereof:
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is (i) 20,000,000 shares of Common
Stock, $.01 par value per share ("Common Stock") and (ii) 2,775,000 shares of
--------------
Preferred Stock $.01 par value per share ("Preferred Stock").
-------------------
RESOLVED: That Section 2. Liquidation, Disolution or Winding Up of
--------- -------------------------------------
Paragraph C. Series A Convertible Preferred Stock of Article Fourth of the
------------------------------------
Certificate of Incorporation be and hereby is deleted and the following Section
2 is inserted in lieu thereof:
2. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of shares
of Series A Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its Stockholders,
after and subject to the payment in full of all amounts required to be
distributed to the holders of any other class or series of stock of the
Corporation ranking on
2
<PAGE>
liquidation prior and in preference to the Series A Preferred Stock
(collectively referred to as "Senior Preferred Stock"), but before any payment
------------------------
shall be made to the holders of Common Stock by reason of their ownership
thereof, an amount per share equal to the price per share paid to the Company
for such share upon its issuance by the Company (the "Original Series A Issue
------------------------
Price") (subject to appropriate adjustment in the event of any stock dividend,
- -------
stock split, combination or other similar recapitalization affecting such
shares). If upon any such liquidation, dissolution or winding up of the
Corporation the remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of shares of Series
A Preferred Stock the full amount to which they shall be entitled, the holders
of shares of Series A Preferred Stock and any class or series of stock ranking
on liquidation on a parity with Series A Preferred Stock shall share ratably in
any distribution of the remaining assets and funds of the Corporation in
proportion to the respective amounts which would otherwise be payable in respect
of the shares held by them upon such distribution if all amounts payable on or
with respect to such shares were paid in full.
(b) After the payment of all preferential amounts, if any,
required to be paid to the holders of Senior Preferred Stock, Series A Preferred
Stock and any other class or series of stock of the Corporation ranking on
liquidation on a parity with Series A Preferred Stock, including any
preferential payments due pursuant to Subsection 2(a) above, upon the
dissolution, liquidation or winding up of the Corporation, the holders of shares
of Series A Preferred Stock then outstanding shall be entitled to receive an
additional amount per share equal to the Original Series A Issue Price. If the
remaining assets of the Corporation available for distribution to its
Stockholders shall be insufficient to pay the holders of Series A Preferred
Stock the full amount to which they shall be entitled pursuant to this Section
2(b), the holders of Series A Preferred Stock shall share ratably in any
distribution of the remaining assets of the Corporation in proportion to the
respective amounts which would otherwise be payable pursuant to this Section
2(b) in respect of the shares held by them upon such distribution if all amounts
payable on or with respect to such shares were paid in full.
(c) Thereafter the remaining assets and funds of the
Corporation available for distribution shall be distributed in the following
amounts and order of priority:
(i) First, each holder of Common Stock shall be
entitled to receive such assets and funds ratably in proportion to the number of
shares of Common Stock held by such stockholder until the holders of Common
Stock in the aggregate have received an amount pursuant to this Subsection
2(b)(i) which is equal to the amount distributed to the holders of Series A
Preferred Stock and any class or series of stock ranking on liquidation on a
parity with Series A Preferred Stock pursuant to Sections 2(a) above, multiplied
by a fraction, the numerator of which is the aggregate number of shares of
Common Stock issued and outstanding and the denominator of which is the
aggregate number of shares of Common Stock into which the then issued and
outstanding shares of Series A Preferred Stock and any class or series of stock
ranking on liquidation on a parity with Series A Preferred Stock are
convertible; and
3
<PAGE>
(ii) Thereafter, each holder of Common Stock or
Series A Preferred Stock and any class or series of stock ranking on liquidation
on a parity with Series A Preferred Stock shall be entitled to receive the
balance, if any, of such assets and funds ratably in proportion to the number of
shares of Common Stock (A) held by such stockholder, or (B) into which the
shares of Series A Preferred Stock and any class or series of stock ranking on
liquidation on a parity with Series A Preferred Stock held by such stockholder
are convertible, as the case may be.
(d) Any transaction by the Corporation (including, without
limitation, any reorganization, merger, consolidation or the sale of all or
substantially all assets of the Corporation) which results in the Corporation's
stockholders immediately prior to such transaction not holding (by virtue of
such shares or securities issued solely with respect thereto) at least 50% of
the voting power of the surviving or continuing entity following such
transaction shall be deemed to be a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 2. The amount deemed distributed to
the holders of Series B Preferred Stock upon any such merger or consolidation
shall be the cash or the value of the property, rights or securities distributed
to such holders by the acquiring person, firm or other entity. The value of
such property, rights or other securities shall be determined in good faith by
the Board of Directors of the Corporation.
RESOLVED: That under the second paragraph of Article Fourth of the Certificate
- ---------
of Incorporation of the Corporation which sets forth a statement of the
designations and the powers, privileges and rights, and the qualifications,
limitations or restrictions thereof in respect of each class of capital stock of
the Corporation, there be added a new paragraph designated "D. Series B
--------
Convertible Preferred Stock", as follows:
- ----------------------------
D. SERIES B CONVERTIBLE STOCK.
--------------------------
One Million (1,000,000) shares of the authorized and unissued
Preferred Stock of the Corporation are hereby designated "Series B Convertible
Preferred Stock" (the "Series B Preferred Stock") with the following rights,
---------------------------
preferences, powers, privileges and restrictions, qualifications and
limitations.
1. Dividends.
---------
(a) If and only if declared by the Board of Directors of
the Corporation, the holders of shares of Series B Preferred Stock shall be
entitled to receive, prior to any declaration or payment of any cash dividend on
any other shares of capital stock of the Corporation other than shares that have
parity on liquidation with Series B Preferred Stock, non-cumulative dividends at
the rate per share of 8% of the Original Series B Issue Price, as defined below,
per annum, and no more, payable annually, as declared, on such date as shall be
fixed by the Board of Directors of the Corporation.
(b) The Corporation shall not declare or pay any dividends
or any other distributions of property, assets or instruments of indebtedness on
shares of Common Stock,
4
<PAGE>
other than dividends payable solely in cash or in shares of Common Stock,
without the prior written consent or affirmative vote of the holders of at least
66 2/3% of the then outstanding shares of Series B Preferred Stock, given in
writing or by vote at a meeting, consenting or voting (as the case may be)
separately as a class.
2. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of shares
of Series B Preferred Stock then outstanding shall rank on a parity with the
Series A Preferred Stock then outstanding, and shall be entitled to be paid out
of the assets of the Corporation available for distribution to its Stockholders,
after and subject to the payment in full of all amounts required to be
distributed to the holders of any other class or series of stock of the
Corporation ranking on liquidation prior and in preference to the Series B
Preferred Stock (collectively referred to as "Senior Preferred Stock"), but
-------------------------
before any payment shall be made to the holders of Common Stock by reason of
their ownership thereof, an amount per share equal to the price per share paid
to the Company for such share upon its issuance by the Company (the "Original
---------
Series B Issue Price") (subject to appropriate adjustment in the event of any
- ----------------------
stock dividend, stock split, combination or other similar recapitalization
affecting such shares). If upon any such liquidation, dissolution or winding up
of the Corporation the remaining assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of Series B Preferred Stock the full amount to which they shall be
entitled, the holders of shares of Series B Preferred Stock and any class or
series of stock ranking on liquidation on a parity with Series B Preferred Stock
shall share ratably in any distribution of the remaining assets and funds of the
Corporation in proportion to the respective amounts which would otherwise be
payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
(b) Additional distributions, if any, to the holders of
Series B Preferred Stock upon liquidation, dissolution or winding up of the
Corporation shall be as set forth in Section 2(c) of paragraph C of Article
FOURTH above.
(c) Any transaction by the Corporation (including, without
limitation, any reorganization, merger, consolidation or the sale of all or
substantially all assets of the Corporation) which results in the Corporation's
stockholders immediately prior to such transaction not holding (by virtue of
such shares or securities issued solely with respect thereto) at least 50% of
the voting power of the surviving or continuing entity following such
transaction shall be deemed to be a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 2. The amount deemed distributed to
the holders of Series B Preferred Stock upon any such merger or consolidation
shall be the cash or the value of the property, rights or securities distributed
to such holders by the acquiring person, firm or other entity. The value of
such property, rights or other securities shall be determined in good faith by
the Board of Directors of the Corporation.
5
<PAGE>
3. Voting.
------
(a) Each holder of outstanding shares of Series B Preferred
Stock shall be entitled to the number of votes equal to the number of whole
shares of Common Stock into which the shares of Series B Preferred Stock held by
such holder are convertible (as adjusted from time to time pursuant to Section 4
hereof), at each meeting of stockholders of the Corporation (and written actions
of stockholders in lieu of meetings) with respect to any and all matters
presented to the stockholders of the Corporation for their action or
consideration. Except as provided by law, by the provisions hereof or by the
provisions establishing any other series of Preferred Stock, holders of Series B
Preferred Stock and of any other outstanding series of Preferred Stock shall
vote together with the holders of Common Stock as a single class.
(b) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series B Preferred Stock so
as to affect adversely the Series B Preferred Stock, without the written consent
or affirmative vote of the holders of at least 66 2/3% of the then outstanding
shares of Series B Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class. For this
purpose, without limiting the generality of the foregoing, the authorization or
issuance of any Common Stock or series of Preferred Stock with preference or
priority over, or on a parity with the Series B Preferred Stock as to voting
rights or the right to receive either dividends or amounts distributable upon
liquidation, dissolution or winding up of the Corporation shall be deemed to
affect adversely the Series B Preferred Stock.
4. Optional Conversion. The holders of the Series B Preferred Stock
-------------------
shall have conversion rights as follows (the "Conversion Rights"):
-------------------------
(a) Right to Convert. Each share of Series B Preferred
----------------
Stock shall be convertible, at the option of the holder thereof, at any time and
from time to time, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Original Series B Issue Price for
such share of Series B Preferred Stock by the Conversion Prices (as defined
below) in effect at the time of conversion. The conversion price at which each
share of Common Stock shall be deliverable upon conversion of Series B Preferred
Stock without the payment of additional consideration by the holder thereof the
"Conversion Price") shall initially be the Original Series B Issue Price for
- -------------------
such share of Series B Preferred Stock. Such initial Conversion Price, and the
rate at which shares of Series B Preferred Stock may be converted into shares of
Common Stock, shall be subject to adjustment as provided below.
In the event of a liquidation of the Corporation, the Conversion Rights
shall terminate at the close of business on the first full day preceding the
date fixed for the payment of any amounts distributable on liquidation to the
holders of Series B Preferred Stock.
(b) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon conversion of the Series B Preferred Stock. In lieu of any
fractional shares to which the holder
6
<PAGE>
would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the then effective Conversion Price.
(c) Mechanics of Conversion.
-----------------------
(i) In order for a holder of Series B Preferred
Stock to convert shares of Series B Preferred Stock into shares of Common Stock,
such holder shall surrender the certificate or certificates for such shares of
Series B Preferred Stock, at the office of the transfer agent for the Series B
Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of the Series B
Preferred Stock represented by such certificate or certificates. Such notice
shall state such holder's name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
If required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
his or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date"). The Corporation shall, as soon as practicable after the
- ------------------
Conversion Date, issue and deliver at such office to such holder of Series B
Preferred Stock, or to his or its nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled
together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the
Series B Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued stock, for the purpose of effecting the conversion
of the Series B Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series B Preferred Stock. Before taking any action which
would cause an adjustment reducing the Conversion Price below the then par value
of the shares of Common stock issuable upon conversion of the Series B Preferred
Stock, the Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for any accrued and unpaid dividends on the
Series B Preferred Stock surrendered for conversion or on the Common Stock
delivered upon conversion.
(iv) All shares of Series B Preferred Stock which
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the holders thereof
to receive shares of Common Stock in exchange therefor and payment of any
accrued and unpaid dividends thereon. Any shares of Series B Preferred Stock so
converted shall be retired and canceled and shall not be reissued, and the
Corporation may from time to time take
7
<PAGE>
such appropriate action as may be necessary to reduce the authorized Series B
Preferred Stock accordingly.
(d) Adjustments to Conversion price for Diluting Issues:
----------------------------------------------------
(i) Special Definitions. For purposes of this
-------------------
Subsection 4(d), the following definitions shall apply:
(A) "Option" shall mean rights, options or
--------
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, excluding options issued pursuant to a plan specified in
subsection 4 (d) (i) (D) (IV) below (subject to appropriate adjustment for any
stock dividend, stock split, combination or other similar recapitalization
affecting such shares).
(B) "Original Issue Date" shall mean the date on
---------------------
which a share of Series B Preferred stock was first issued.
(C) "Convertible Securities" shall mean any
------------------------
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall
-----------------------------------
mean all shares of Common Stock issued (or, pursuant, to Subsection 4(d)(iv)
below, deemed to be issued) by the Corporation after the Original Issue Date,
other than shares of Common Stock issued or issuable:
(I) upon conversion of up to 1,775,000 shares
of Series A Preferred Stock.
(II) upon conversion of up to 1,000,000 shares
of Series B Preferred Stock;
(III) as a dividend or distribution on Series B
Preferred Stock;
(IV) to directors, employees or consultants of
the Corporation pursuant to a stock
option plan, employee stock purchase
plan, restricted stock plan or other
stock plan or agreement,
8
<PAGE>
provided, that the number of shares of
Common Stock so issued or issuable shall
not exceed 500,000; or
(V) by reason of a dividend, stock split,
split-up or other distribution on shares
of Common Stock excluded from the
definition of Additional Shares of Common
Stock by the foregoing clauses (I), (II),
(III) or (IV); or
(ii) No Adjustment of Conversion Price. No
---------------------------------
adjustment in the number of shares of Common Stock into which the Series B
Preferred Stock is convertible shall be made, by adjustment in the applicable
Conversion Price thereof: (a) unless the consideration per share (determined
pursuant to Subsection 4(d)(v)) for an Additional Share of Common Stock issued
or deemed to be issued by the Corporation is less than the applicable conversion
Price in effect on the date of, and immediately prior to the issue of such
Additional Shares, or (b) if prior to such issuance, the Corporation receives
written notice from the holders of at least 66 2/3% of the then outstanding
shares of Series A Preferred Stock agreeing that no such adjustment shall be
made as the result of the issuance of Additional Shares of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional
----------------------------------------------
Shares of Common Stock.
----------------------
If the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options, or in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Subsection 4(d)(v) hereof)
of such Additional Shares of Common Stock would be less than the applicable
Conversion price in effect on the date of an immediately prior to such issue, or
such record date, as the case may be, and provided further that in any such case
in Additional Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(B) If such Options or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any increase
in the consideration
9
<PAGE>
payable to the Corporation or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed to
reflect such increase of decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities;
(C) No readjustment pursuant to clause (B)
above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (i) the conversion Price on the original adjustment
date, or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date;
(D) Upon the expiration or termination of any
unexercised Option, the conversion Price shall not be readjusted, but the
Additional Shares of Common Stock deemed issued as the result of the original
issue of such Option shall not be deemed issued for the purposes of any
subsequent adjustment of the Conversion Price; and
(E) In the event of any change in the number of
shares of Common Stock issuable upon the exercise, conversion or exchange of any
Option or Convertible Security, including but not limited to, a change resulting
from the antidilution provisions thereof, the conversion price then in effect
shall forthwith be readjusted to such Conversion Price as would have obtained
had the adjustment which was made upon the issuance of such Option of change
been made upon the basis of such change, but no further adjustment shall be made
for the actual issuance of Common Stock upon the exercise or conversion of any
such Option or Convertible Security.
(iv) Adjustment of Conversion Price Upon Issuance of
-----------------------------------------------
Additional Shares of Common Stock.
---------------------------------
In the event the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Subsection 4(d)(iii), but excluding
shares issued as a dividend or distribution as provided in Subsection 4(f) or
upon a stock split or combination as provided in Subsection 4 (e) without
consideration or for a consideration per share less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
then and in such event, such Conversion Price shall be reduced, concurrently
with such issue, to a price equal to the lowest per share consideration at which
such Additional Shares of Common Stock are issued; provided that the issuance of
-------------
Additional Shares of Common Stock for no consideration shall be deemed to be an
issuance at a per share consideration of $0.01; and further provided that, for
-------------
the purpose of this Subsection 4(d)(iv), all shares of Common Stock issuable
upon conversion of shares of Series B Preferred Stock outstanding immediately
prior to such issue shall be deemed to be outstanding, and immediately after any
Additional Shares of Common Stock are deemed issued pursuant to Subsection
4(d)(iii) (other than shares excluded from the definition of
"Additional Shares of
10
<PAGE>
Common Stock" by virtue of clause (IV) of Subsection 4 (d) (i) (D)), such
Additional Shares of Common Stock shall be deemed to be outstanding.
Notwithstanding the foregoing, the applicable Conversion Price shall not be
so reduced at such time if the amount of such reduction would be an amount less
than $0.05, but any such amount shall be carried forward and reduction with
respect thereto made at the time of and together with any subsequent reduction
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate $0.05 or more.
(v) Determination of Consideration. For purposes of
------------------------------
this Subsection 4(d), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
------------------
(I) insofar as it consists of cash, be
computed at the aggregate of cash received by the Corporation, excluding amounts
paid or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property
other than cash, be computed at the fair market value thereof at the time of
such issue, as determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of
Common Stock are issued together with other shares or securities or other assets
of the Corporation for consideration which covers both, be the proportion of
such consideration so received, computed as provided in clauses (I) and (II)
above, as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities.
----------------------------------
The consideration per share received by the Corporation for Additional
Shares of Common Stock deemed to have been issued pursuant to Subsection
4(d)(iii), relating to Options and Convertible Securities, shall be determined
by dividing
(x) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
11
<PAGE>
(y) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(e) Adjustment for Stock Splits. If the Corporation shall
---------------------------
at any time or from time to time after the Original Issue Date for a series of
the Preferred Stock effect a subdivision of the outstanding Common Stock, the
Conversion Price then in effect immediately before that subdivision shall be
proportionately decreased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision becomes
effective.
(f) Adjustment for Certain Dividends and Distributions.
--------------------------------------------------
In the event the Corporation at any time, or from time to time after the
Original Issue Date for a series of Preferred Stock shall make or issue, or fix
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
stock, then and in each such event the Conversion Price for such series of
Preferred Stock then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Conversion Price for
such series of Preferred Stock then in effect by a fraction:
(1) the numerator of which shall be the total
number of shares of Common Stock issued and
outstanding immediately prior to the time of such
issuance or the close of business on such record date,
and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the
close of business on such record date plus the number
of shares of Common Stock issuable in payment of such
dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for such series of Preferred Stock shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Conversion Price for such series of Preferred Stock shall be
adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions.
(g) Adjustment for Other Dividends and Distributions.
------------------------------------------------
In the event the Corporation at any time or from time to time after the
Original issue Date for a series of Preferred Stock shall make or issue, or fix
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities
12
<PAGE>
of the Corporation other than shares of Common Stock, then and in each such
event provision shall be made so that the holders of such series of Preferred
Stock shall receive upon conversion thereof in addition to the number of shares
of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Preferred Stock been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period
giving application to all adjustments called for during such period under this
paragraph with respect to the rights of the holders of the Preferred Stock.
(h) Adjustment for Reclassification, Exchange or
--------------------------------------------
Substitution.
------------
If the Common Stock issuable upon the conversion of the Preferred Stock
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for below), then and in each such event the holder of each such
share of Preferred Stock shall have the right thereafter to convert such share
into the kind and amount of shares of organization, reclassification, or other
change, by holders of the number of shares of Common Stock into which such
shares of Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further adjustment
as provided herein.
(i) Adjustment for Merger or Reorganization, etc.
--------------------------------------------
In case of any consolidation or merger of the Corporation with or into
another corporation or the sale of all or substantially all of the assets of the
Corporation to another corporation (other than a consolidation, merger or sale
which is treated as a liquidation pursuant to Subsection 2(c)), each share of
Series B Preferred Stock shall thereafter be convertible into the kind and
amount of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock of the Corporation deliverable upon
conversion of such Series B Preferred Stock would have been entitled upon such
consolidation, merger or sale; and, in such case, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made in the
application of the provisions in this Section 4 set forth with respect to the
rights and interest thereafter of the holders of Series B Preferred Stock, to
the end that the provisions set forth in this Section 4 (including provisions
with respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the Series B Preferred Stock.
(j) No Impairment. The Corporation will not, by amendment
-------------
of its Certificate of Incorporation or through any reorganization, payment of
dividends, transfer of assets, consolidation, merger, dissolution, issue or sale
of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying
13
<PAGE>
out of all the provisions of this Section 4 and in the taking of all such action
as may be necessary or appropriate in order to protect the Conversion Rights of
the holders of the Series A Preferred Stock against impairment.
(k) Certificate as to Adjustments. Upon the occurrence of
-----------------------------
each adjustment or readjustment of the Conversion Price pursuant to this Section
4, the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series B Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series B Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of Series B Preferred Stock.
(1) Notice of Record Date. In the event:
---------------------
(i) that the Corporation declares a dividend (or any
other distribution) on its Common Stock payable in
Common Stock or other securities of the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a
subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock
distribution thereon), or of any consolidation or
merger of the Corporation into or with another
corporation, or of the sale of all or substantially
all of the assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series B Preferred Stock, and shall cause to
be mailed to the holders of the Series B Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least ten
days prior to the record date specified in (A) below or twenty days before the
date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is
not to be taken, the date as of which the
14
<PAGE>
holders of Common Stock of record to be entitled
to such dividend, distribution, subdivision or
combination are to be determined, or
(b) the date on which such reclassification,
consolidation, merger, sale, dissolution,
liquidation or winding up is expected to become
effective, and the date as of which it is
expected that holders of Common Stock of record
shall be entitled to exchange their shares of
Common Stock for securities or other property
deliverable upon such reclassification,
consolidation, merger, sale, dissolution or
winding up.
5. Mandatory Conversion.
--------------------
(a) The Corporation may, at its option, require all (and
not less than all) holders of shares of Series B Preferred Stock then
outstanding to convert their shares of Series B Preferred Stock into shares of
Common Stock, (i) at the then effective conversion rate pursuant to Section 4,
at any time on or after the closing of the sale of shares of Common Stock, at a
price of at least $7.50 per share (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other similar recapitalizations
affecting such shares), in a bona fide firm commitment public offering pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, resulting in at least $12,000,000 of gross proceeds to the Corporation
or (ii) upon the authorization of such conversion by the prior written consent
or affirmative vote at a meeting of the holders of at least 66 2/3% of the then
outstanding shares of Series B Preferred consenting or voting (as the case may
be) separately as a class.
(b) All holders of record of shares of Series B Preferred
Stock will be given at least 10 days' prior written notice of the date fixed and
the place designated for mandatory conversion of all such shares of Series B
Preferred Stock pursuant to this Section 5. Such notice will be sent by first
class or registered mail, postage prepaid, to each record holder of Series B
Preferred Stock at such holder's address last shown on the records of the
transfer agent for the Series B Preferred Stock (or the records of the
Corporation, if it serves as its own transfer agent). On or before the date
fixed for conversion, each holder of shares of Series B Preferred Stock shall
surrender his or its certificate or certificates for all such shares to the
Corporation at the place designated in such notice, and shall thereafter receive
certificates for the number of shares of Common Stock to which such holder is
entitled pursuant to this Section 5. On the date fixed for conversion, all
rights with respect to the Series B Preferred Stock so converted, including the
rights, if any, to receive notices and vote, will terminate, except only the
rights of the holders thereof, upon surrender of their certificate or
certificates therefor, to receive certificates for the number of shares of
Common Stock into which such Series B Preferred Stock
15
<PAGE>
has been converted, and payment of any accrued but unpaid dividends thereon. If
so required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his or its attorney duly authorized in writing. As soon as practicable after
the date of such mandatory conversion and the surrender of the certificate or
certificates for Series B Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series B
Preferred Stock which are require to be surrendered for conversion in accordance
with the provisions hereof shall, from and after the date such certificates are
so required to be surrendered, be deemed to have been retired and canceled and
the shares of Series B Preferred Stock represented thereby converted into Common
Stock for all purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. The Corporation
may thereafter take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly.
7. Residual Rights. All rights accruing to the
---------------
outstanding shares of the Corporation and not expressly provided for to the
contrary herein shall be vested in Common Stock.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its president
and attested by its Secretary this 10th day of November, 1993.
---------
ASTROPOWER, INC.
By:_____________________________
Allen Barnett, President
ATTEST:
______________________________
Charles R. Schaller, Secretary
16
<PAGE>
EXHIBIT 3.2
BYLAWS
------
OF
--
ASTROPOWER, INC.
(a Delaware corporation)
ARTICLE ONE
-----------
STOCKHOLDERS
------------
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock
-------------------------------
in the corporation shall be signed by, or in the name of, the corporation by the
Chairman or Vice-Chairman of the Board of Directors, if any, or by the President
or a Vice-President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the corporation. Any or all the
signatures on any such certificate way be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Board of Directors may require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate of the issuance of
any such new certificate or uncertificated shares.
<PAGE>
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by
---------------------
the General Law, the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
the stock of the corporation shall be uncertificated shares. Within a reasonable
time after the issuance or transfer of any uncertificated shares, the
corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
--------------------------
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing the
full shares or uncertificated full shares before a specified date, or warrants
are exchangeable may be sold by the corporation and the proceeds thereof
distributed to the holders of scrip or warrants, or subject to any other
conditions which the Board of Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions restricting the
---------------
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may
----------------------------
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than
(2)
<PAGE>
sixty nor less than ten days before the date of such meeting. If no record date
is fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting. In order that the corporation
my determine the stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than ten
days after the date upon which the resolution fixing the record date is adopted
by the Board of Directors, the record date for determining the stockholders
meeting, when no prior action by the Board of Directors is required by the
General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the General Corporation Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action. In order
that the corporation may determine the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action.
If no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right
------------------------
to notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares," or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or
(3)
<PAGE>
holders of record of outstanding shares of stock when the corporation is
authorized to issue only one class of shares of stock, and said reference is
also intended to include any outstanding share or shares of stock and any holder
or holders of record of outstanding shares of stock of any class upon which or
upon whom the certificate of incorporation confers such rights where there are
two or more classes or series of shares of stock or upon rights notwithstanding
that the certificate of incorporation may provide for more than one class or
series of shares of rights thereunder; provided, however, that no such right
authorized number of shares of stock of any class or series which is otherwise
denied voting rights under the provisions of the certificate of incorporation,
except as any provision of law may otherwise require.
7. STOCKHOLDER MEETINGS.
--------------------
- TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A
special meeting shall be held on the date and at the time fixed by the
directors.
_ PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as directors may, from time to
time, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
--------------------------
given, stating the place, date and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meeting, unless the lapse of the
(4)
<PAGE>
prescribed period of time shall have been waived, and directed to each
stockholder at his record address or at such other address which he may have
furnished by request in writing to the Secretary of the corporation. Notice by
mail shall be deemed to be given when deposited, with postage thereon prepaid,
in the United States Mail. If a meeting is adjourned to another time, not more
than thirty days hence, and/or to another place, and if an announcement of the
adjourned time and/or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the directors, after adjournment,
fix a next record date for the adjourned meeting. Notice need not be given to
any stockholder who submits a written waiver of notice signed by him before or
after the time stated therein. Attendance of a stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of
----------------
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
------------------
over by one of the following officers in the order of seniority and if present
and acting -- the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice-President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
(5)
<PAGE>
- PROXY REPRESENTATION. Every stockholder may authorize another
--------------------
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need
------------
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and design an oath faithfully to execute the duties of inspectors at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock represented at
the meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots, or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots, or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the person presiding at the meeting, the inspector or inspectors, if
any, shall make a report in writing of any challenge, question, or matter
determined by him or them and execute a certificate of any fact found by him or
them.
- QUORUM. The holders of a majority of the outstanding shares of
------
stock shall constitute a quorum at a meeting of stockholders for the transaction
of any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holders thereof to
------
one vote. Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Any other action shall be authorized by a majority
of the votes cast except where the General Corporation Law prescribes a
different percentage of votes and/or a different exercise of voting power, and
except as may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
(6)
<PAGE>
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
-----------------------------------
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which my be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
----------
DIRECTORS
---------
1. FUNCTIONS AND DEFINITION. The business and affairs of the
------------------------
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder,
-------------------------
a citizen of the United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of 3 persons. Thereafter the number of
directors constituting the whole board shall be at least one. Subject to the
foregoing limitation and except for the first Board of Directors, such number
may be fixed from time to time by action of the stockholders or of the
directors, or, if the number is not fixed, the number shall be 3. The number of
directors may be increased or decreased by action of the stockholders or of the
directors.
3. ELECTION AND TERM. The first Board of Directors, unless the
-----------------
members thereof shall have been named in the certificate of incorporation, shall
be elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may
resign at any time upon written notice to the corporation. Thereafter,
directors who are elected at an annual meeting of stockholders, and directors
who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal. Except as the General Corporation Law may otherwise
require, in the interim between annual meetings of stockholders or of special
meetings of stockholders called for the election of directors and/or for the
removal of one or more
(7)
<PAGE>
directors and for the filling of any vacancy in that connection, newly created
directorships and any vacancies in the Board of Directors, including unfilled
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
--------
- TIME. Meetings shall be held at such time as the Board shall
----
fix, except that the first meeting of a newly elected Board shall be held as
soon after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without
-----
the State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which
----
the time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
-----------------------------------------
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meeting in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver.
- QUORUM AND ACTION. A majority of the whole Board shall
-----------------
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided, that such majority shall constitute at least one-third of the whole
Board. A majority of the directors present, whether or not a quorum is present,
may adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board. The quorum and voting provisions
hereinstated shall not be construed as conflicting with any provisions of the
General Corporation Law and these Bylaws which govern a meeting of directors
held to fill vacancies and newly created directorships in the Board or action of
disinterested directors.
(8)
<PAGE>
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
-----------------------
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
--------------------
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution passed by a
----------
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the corporation to be
affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at
--------------
any meeting of the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
(9)
<PAGE>
ARTICLE III
-----------
OFFICERS
--------
The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the
Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an
Executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board
of Directors choosing him, no officer other than the Chairman or Vice-Chairman
of the Board, if any, need be a director. Any number of offices may be held by
the same person, as the directors may determine.
Unless otherwise provided in the resolution choosing him, each
officer shall be chosen for a term which shall continue until the meeting of
the Board of Directors following the next annual meeting of stockholders and
until his successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform
such duties in the management and operation of the corporation as shall be
prescribed in the resolutions of the Board of Directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders directors, and committees of
directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
ARTICLE IV
----------
CORPORATE SEAL
--------------
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
(10)
<PAGE>
ARTICLE V
---------
FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
ARTICLE VI
----------
CONTROL OVER BYLAWS
-------------------
Subject to the provisions of the certificate of incorporation and
the provisions of the General Corporation Law, the power to amend, alter, or
repeal these Bylaws and to adopt new Bylaws may be exercised by the Board of
Directors or by the stockholders.
(11)
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ASTROPOWER, INC.
AstroPower, Inc. (hereinafter called the "Corporation"), organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
The Board of Directors of the Corporation, duly proposed this Amended and
Restated Certificate of Incorporation of the Corporation. The stockholders of
the Corporation duly approved the adoption of said Amended and Restated
Certificate of Incorporation by written consent in accordance with Sections 228
and 242 of the Delaware General Corporation Law.
The text of the Corporation's Certificate of Incorporation is hereby
restated and amended to read in its entirety as follows, effective on the date
of filing of this Amended and Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware:
ARTICLE I
NAME
The name of the corporation is AstroPower, Inc. (the "Corporation")
ARTICLE II
Address of Registered Office;
Name of Registered Agent
The address, including street, number, city and country, of the registered
office of the corporation in the State of Delaware is 1013 Centre Road, City of
Wilmington, County of New Castle; and the name of the registered agent of the
Corporation in the State of Delaware at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE III
Purpose and Powers
The nature of the business and the purposes to be conducted and promoted by
the Corporation are to conduct any lawful business, to promote any lawful
purpose, and to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
<PAGE>
ARTICLE IV
Capital Stock
1. Total Number of Shares of Stock. The total number of shares of stock of
all classes that the Corporation shall have authority to issue is 30,000,000
shares, consisting of (a) 25,000,000 shares of Common Stock, of the par value of
$.01 each (the "Common Stock") and (b) 5,000,000 shares of Preferred Stock of
the par value of $.01 each (the "Preferred Stock").
At the time this Amended and Restated Certificate of Incorporation is filed
(such time being called the "Effective Time"), each four (4) shares of Common
Stock of the Corporation issued and outstanding immediately prior to the
Effective Time shall be changed (the "Reverse Stock Split") into three (3)
shares of Common Stock, par value $.01 per share ("New Common Stock"), provided,
however, that no fractional shares shall be issued in connection with such
changes, and
(i) for each holder of shares of Common Stock outstanding immediately
prior to the Effective Time, the number of shares of New Common Stock
that shall be issued upon the Reverse Stock Split shall be computed
on the basis of the aggregate number of shares of Common Stock held
by such stockholder immediately prior to the Effective Time, and
(ii) notwithstanding any other provision of this Amended and Restated
Certificate of Incorporation or any other agreement, for each holder
of four (4) shares of Series A Preferred Stock and Series B Preferred
Stock outstanding immediately prior to the Effective Time, three (3)
shares of New Common Stock shall be issued upon the Reverse Stock
Split and upon the conversion of each four (4) shares of Series A
Preferred Stock and each four (4) shares of Series B Preferred Stock
on the basis of the aggregate number of shares of each such series
held by such stockholder immediately prior to the Effective Time.
and, for each fractional share resulting from the application of the foregoing
procedures, each stockholder shall be entitled to receive cash in an amount
equal to the amount of such fraction times the fair market value of a share of
Common Stock at the Effective Time, as determined by the Board of Directors.
2. Common Stock. Except as otherwise provided herein, all shares of Common
Stock shall be identical and shall entitle the holders thereof to the same
rights and privileges.
(a) Voting Rights of Common Stock Except as set forth herein or as
-----------------------------
otherwise required by law, each outstanding share of Common Stock shall be
entitled to vote on each matter on which the stockholders of the Corporation
shall be entitled to vote, and each holder of Common Stock shall be entitled to
one vote for each share of such stock held by such holder.
2
<PAGE>
(b) Dividends. The Board of Directors of the Corporation may cause
---------
dividends to be paid to holders of shares Common Stock out of funds legally
available for the payment of dividends.
(c) Liquidation. In the event of any voluntary or involuntary
-----------
liquidation, dissolution or winding up of the Corporation, subject to the
rights of holders of any Preferred Stock, all distributions shall be payable to
the holders of shares of Common Stock equally and ratably.
3. Preferred Stock (a) The shares of Preferred Stock of the Corporation may be
issued from time to time in one or more classes or series thereof, the shares
of each class or series thereof to have such voting powers, full or limited, or
no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as are stated and expressed herein or in
the resolution or resolutions providing for the issue of such class or series,
adopted by the Board of Directors as hereinafter provided.
(b) Authority is hereby expressly granted to the Board of Directors of
the Corporation, subject to the provisions of this Article IV and to the
limitations prescribed by the Delaware General Corporation Law, to authorize
the issue of one or more classes, or series thereof, of Preferred Stock and
with respect to each such class or series to fix by resolution or resolutions
providing for the issue of such class or series the voting powers, full or
limited, if any, of the shares of such class or series and the designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof. The authority of the Board
of Directors with respect to each class or series thereof shall include, but
not be limited to, the determination or fixing of the following:
(i) the designation of such class or series;
(ii) the dividend rate of such class or series, the conditions and date
upon which such dividends shall be payable, the relation which such dividends
shall bear to the dividends payable on any other class or classes of stock or
any other series of any class of stock of the Corporation, and whether such
dividends shall be cumulative or noncumulative;
(iii) whether the shares of such class or series shall be subject to
redemption by the Corporation and, if made subject to such redemption, the
times, prices and other terms and conditions of such redemption;
(iv) the terms and amount of any sinking fund provided for the purchase
or redemption of the shares of such class or series;
(v) whether or not the shares of such class or series shall be
convertible into or exchangeable for shares of any other class or classes of any
stock or any other series of any class of stock of the Corporation, and if
provision is made for conversion or exchange, the times, prices, rates,
adjustments and other terms and conditions of such conversion or exchange;
3
<PAGE>
(vi) the extent, if any, to which the holders of shares of such class or
series shall be entitled to vote with respect to the election of directors or
otherwise;
(vii) the restrictions, if any, on the issue or reissue of any additional
Preferred Stock;
(viii) the rights of the holders of the shares of such class or series
upon the dissolution of, or upon the distribution of assets of, the Corporation;
and
(ix) the manner in which any facts ascertainable outside the resolution
or resolutions providing for the issue of such class or series shall operate
upon the voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of such class or series.
ARTICLE V
Board of Directors
1. Power of the Board of Directors. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In furtherance, and not in limitation, of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly authorized
to:
(a) determine the rights, powers, duties, rules and procedures that
affect the power of the Board of Directors to manage and direct the
business and affairs of the Corporation, including the power to
designate and empower committees of the Board of Directors, to elect,
appoint and empower the officers and other agents of the Corporation,
and to determine the time and place of, and the notice requirements
for, Board meetings, as well as quorum and voting requirements for,
and the manner of taking, Board action; and
(b) exercise all such powers and do all such acts as may be exercised or
done by the Corporation, subject to the provisions of the laws of the
State of Delaware, this Amended and Restated Certificate of
Incorporation, and the Bylaws of the Corporation.
2. Number of Directors. The number of directors shall be fixed from time to
time exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption).
3. Classified Board of Directors. At the 1998 annual meeting of stockholders,
the directors shall be divided into three classes, as nearly equal in number as
possible, with the directors of the first class elected for a term of one year,
the directors of the second class elected for a term of two years, and the
directors of the third class elected for a term of three years. At each annual
meeting of stockholders following such initial classification and election,
directors elected to
4
<PAGE>
succeed those directors whose terms expire shall be elected for a term of office
to expire at the third succeeding annual meeting of stockholders after their
election.
4. Vacancies on the Board. Subject to the rights of the holders of any class
or series of the capital stock of the Corporation entitled to vote generally in
the election of directors (hereinafter referred to as the "Voting Stock") then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office, or other cause may be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been elected expires. No
decrease in the number of authorized directors constituting the entire Board of
Directors shall shorten the term of any incumbent director.
5. Removal of Directors. Subject to the rights of the holders of any class or
series of the Voting Stock then outstanding, any director, or the entire Board
of Directors, may be removed from office at any time, but only for cause and
only by the affirmative vote of the holders of at least 80% of the voting power
of all of the then outstanding shares of the Voting Stock, voting together as a
single class (it being understood that, for all purposes of this paragraph, this
Amended and Restated Certificate of Incorporation and the provisions of the By-
Laws of the Corporation which require the affirmative vote of the holders of at
least 80% of the voting power of all of the then outstanding shares of the
Voting Stock, voting together as a single class, to alter, amend or repeal any
provision of the By-Laws which is to the same effect as the provisions of this
Amended and Restated Certificate of Incorporation, each share of the Voting
Stock shall have the number of votes granted to it pursuant to this Amended and
Restated Certificate of Incorporation or any designation of the rights, powers
and preferences of any class or series of Preferred Stock made pursuant to this
Amended and Restated Certificate of Incorporation (a "Preferred Stock
Designation").
Notwithstanding any other provisions of this Amended and Restated
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of the Voting Stock required by law,
this Amended and Restated Certificate of Incorporation or any Preferred Stock
Designation, the affirmative vote of the holders of a least 80% of the voting
power of all of the then outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal this Article of
this Amended and Restated Certificate of Incorporation.
ARTICLE VI
Stockholder Actions and
Meetings of Stockholders
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at an annual or special meeting of stockholders of
the Corporation, and may not be
5
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effected by any consent in writing by such stockholders. Special meetings of
stockholders of the Corporation may be called only by the Board of Directors,
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exists any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption). Notwithstanding any other provisions of this Amended
and Restated Certificate of Incorporation or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any affirmative
vote of the holders of any particular class of series of the Voting Stock
required by law, this Amended and Restated Certificate of Incorporation or any
Preferred Stock Designation, the affirmative vote of the holders of at least 80%
of the voting power of all of the then outstanding shares of the Voting Stock,
voting together as a single class shall be required to alter, amend or repeal
this Article of this Amended and Restated Certificate of Incorporation.
ARTICLE VII
Certain Rights of the Corporation's Stockholders
1. Notwithstanding anything else contained herein, the Corporation shall not
engage in any business combination with any interested stockholder for a period
of 3 years following the time that such stockholder became an interested
stockholder, unless:
(a) prior to such time the Board of Directors of the Corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder, or (b) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting
stock of the Corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding
those shares owned by persons who are directors and also officers and
employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (c) at or subsequent to such
time the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder.
2. As used in this section only, the term:
(a) "business combination," when used in reference to the Corporation and
any interested stockholder of the Corporation, means:
(i) any merger or consolidation of the Corporation or any direct or
indirect majority-owned subsidiary of the Corporation with (A) the
interested stockholder, or (B) with any other corporation, partnership,
unincorporated association or other entity if the merger or consolidation
is caused by the interested stockholder and as a result of such merger or
consolidation Section 1. of this Article VII is not applicable to the
surviving entity.
6
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(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
(in one transaction or a series of transactions), except proportionately as a
stockholder of the Corporation, to or with the interested stockholder, whether
as part of a dissolution or otherwise, of assets of the Corporation or of any
direct or indirect majority owned subsidiary of the Corporation which assets
have an aggregate market value equal to 10% or more of either the aggregate
market value of all the assets of the Corporation determined on a consolidated
basis or the aggregate market value of all the outstanding stock of the
Corporation.
(iii) any transaction which results in the issuance or transfer by the
Corporation or by any direct or indirect majority-owned subsidiary of the
Corporation of any stock of the Corporation or of such subsidiary to the
interested stockholder, except (A) pursuant to the exercise, exchange or
conversion of securities exercisable for, exchangable for or convertible into
stock of the Corporation or any such subsidiary which securities were
outstanding prior to the time that the interested stockholder became such, (B)
pursuant to a merger under Section 251(g) of the Delaware General Corporation
Law; (C) pursuant to a dividend or distribution paid or made, or the exercise,
exchange or conversion of securities exercisable for, exchangeable for or
convertible into stock of the Corporation or any such subsidiary which security
is distributed, pro rata to all holders of a class or series of stock of the
Corporation subsequent to the time the interested stockholder became such, (D)
pursuant to an exchange offer by the Corporation to purchase stock made on the
same terms to all holders of said stock, or (E) any issuance or transfer of
stock of the Corporation to purchase stock made on the same terms to all holders
of said stock, or (E) any issuance or transfer of stock of the Corporation,
provided, however, that in no case under (C)-(E) above shall there be an
increase in the interested stockholder's proportionate share of the stock of any
class or series of the Corporation or of the voting stock of the Corporation;
iv) any transaction involving the Corporation or any direct or indirect
majority-owned subsidiary of the Corporation which has the effect, directly or
indirectly, of increasing the proportionate share of the stock of any class or
series, or securities convertible into the stock of any class or series, of the
Corporation or of any such subsidiary which is owned by the interested
stockholder, except as a result of immaterial changes due to fractional share
adjustments or as a result of any purchase or redemption of any shares of stock
not caused, directly or indirectly, by the interested stockholder, or
v) any receipt by the interested stockholder of the benefit, directly or
indirectly (except proportionately as a stockholder of the Corporation) of any
loans, advances, guarantees, pledges, or other financial benefits (other than
those expressly permitted in subparagraphs (i)-(iv) above) provided by or
through the Corporation or any direct or indirect majority-owned subsidiary.
(b) "interested stockholder" means any person (other than the Corporation and
any direct or indirect majority-owned subsidiary of the Corporation) that (i) is
the owner of 15%
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or more of the outstanding voting stock of the Corporation, or (ii) is
an affiliate or associate of the Corporation and was the owner of 15%
or more of the outstanding voting stock of the Corporation at any time
within the 3-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested
stockholder; and the affiliates and associates of such person;
provided, however, that the term "interested stockholder" shall not
include (x) any person who (A) owned shares in excess of the 15%
limitation set forth herein as of, or acquired such shares pursuant to
a tender offer commenced prior to, December 1, 1997, or pursuant to an
exchange offer announced prior to the aforesaid date and commenced
within 90 days thereafter and either (I) continued to own or (II) is
an affiliate or associate of the Corporation and so continued (or so
would have continued but for action taken by the Corporation) to be
the owner of 15% or more of the outstanding voting stock of the
Corporation at any time within the 3-year period immediately prior to
the due date on which it is sought to be determined whether such a
person is an interested stockholder or (B) acquired said shares from a
person described in (A) above by gift, inheritance or in a transaction
in which no consideration was exchanged; or (y) any person whose
ownership of shares in excess of the 15% limitation set forth herein
is the result of action taken solely by the Corporation, provided that
such person shall be an interested stockholder if thereafter such
person acquires additional shares of voting stock of the Corporation,
except as a result of further corporate action not caused, directly or
indirectly, by such person. For the purpose of determining whether a
person is an interested stockholder, the voting stock of the
Corporation deemed to be outstanding shall include stock deemed to be
owned by the person through application of paragraph 2.(b) of this
Article VII but shall not include any other unissued stock of such
Corporation which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion, rights,
warrants or options, or otherwise.
(c) "person" means any individual, corporation, partnership,
unincorporated association or other entity.
(d) "Stock" means, with respect to the Corporation, the capital stock of
the Corporation.
(e) "Voting stock" means, with respect to the Corporation, the stock of
any class or series entitled to vote generally in the election of
directors."
ARTICLE VIII
Indemnification
The Corporation shall, to the fullest extent permitted by Section 145 of
the General Corporation Law of the State of Delaware, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
8
<PAGE>
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity whole holding such
office, and shall continue as to a person who has ceased to be director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
ARTICLE IX
Limitation on Liability of Directors
A director of the Corporation shall, to the maximum extent now or
hereafter permitted by Section 102(b)(7) of the Delaware General Corporation Law
(or any successor provision or provisions), have no personal liability to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.
ARTICLE X
Compromise
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing three-
fourths in value of the creditors or class of creditors, and/or of the
stockholder or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
Corporation.
ARTICLE XI
Amendment of Bylaws
The Corporation's Board of Directors is hereby expressly authorized, at any
time or from time to time, to make, alter, amend and repeal the By-Laws.
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Notwithstanding any other provisions of this Amended and Restated
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class of series of the Voting Stock required by law,
this Amended and Restated Certificate of Incorporation, or any Preferred Stock
Designation, the affirmative vote of the holders of at least 80% of the voting
power of all of the then outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal this paragraph of
this Amended and Restated Certificate of Incorporation.
ARTICLE XII
Amendment of Amended and Restated Certificate of Incorporation
The Corporation hereby reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation. Except for any such amendment, alteration, change or repeal as
to which holders of any class of Preferred Stock are entitled to exercise voting
rights as provided in the resolution or resolutions providing for such class or
series of Preferred Stock pursuant to Article IV, Section 2 hereof, or unless
otherwise provided herein, any such amendment, alteration, change or repeal
shall require the affirmative vote of both (a) a majority of the members of the
Board of Directors then in office and (b) a majority of the voting power of all
of the shares of capital stock of the Corporation entitled to vote generally in
the election of directors, voting together as a single class.
ARTICLE XIII
Severability
In the event that any of the provisions of this Amended and Restated
Certificate of Incorporation (including any provision within a single article,
section, paragraph or sentence) is held by a court of competent jurisdiction to
be invalid, void or otherwise unenforceable, the remaining provisions are
severable and shall remain enforceable to the full extent permitted by law.
ARTICLE XIV
Incorporator
The name and mailing address of the incorporator is Peter Landau, 52
Vanderbilt Avenue, New York, N.Y. 10017.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has
been executed as of January______, 1988.
10
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ASTROPOWER, INC.
--------------------------
By:
Its:
11
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED
--------------------
BYLAWS
------
OF
--
ASTROPOWER, INC.
(a Delaware Corporation)
ARTICLE I
---------
CAPITAL STOCK
-------------
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock
------------ ------------ -----
in the Corporation shall be signed by, or in the name of, the Corporation by the
Chairman or Vice-Chairman of the Board of Directors, if any, or by the President
or a Vice-President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Corporation. Any or all the
signatures on any such certificate way be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Whenever the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
Corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The Corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Board of Directors may require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate of the issuance of
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the
-------------- ------
General Corporation Law, the Board of Directors of the Corporation may provide
by resolution or resolutions that some or all of any or all classes or series of
the stock of the Corporation shall be uncertificated shares. Within a
reasonable time after the issuance or transfer of any uncertificated shares, the
Corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
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3. FRACTIONAL SHARE INTERESTS. The Corporation may, but shall not be
---------- ----- ---------
required to, issue fractions of a share. If the Corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the Corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing the
full shares or uncertificated full shares before a specified date, or warrants
are exchangeable may be sold by the Corporation and the proceeds thereof
distributed to the holders of scrip or warrants, or subject to any other
conditions which the Board of Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions restricting the
----- ---------
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the Corporation shall be made
only on the stock ledger of the Corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the Corporation or with a transfer agent or a
registrar, if any, and in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the Corporation may
------ ---- --- ------------
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action.
If no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
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<PAGE>
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right
------- -- ------- -----
to notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat, as the case may be, the term "share" or "shares," or "share of
stock" or "shares of stock" or "stockholder" or "stockholders" refers to an
outstanding share or shares of stock and to a holder or holders of record of
outstanding shares of stock when the Corporation is authorized to issue only one
class of shares of stock, and said reference is also intended to include any
outstanding share or shares of stock and any holder or holders of record of
outstanding shares of stock of any class upon which or upon whom the certificate
of incorporation confers such rights where there are two or more classes or
series of shares of stock or upon rights notwithstanding that the certificate of
incorporation may provide for more than one class or series of shares of rights
thereunder; provided, however, that no such right may be authorized with respect
to shares of stock of any class or series which is otherwise denied voting
rights under the provisions of the certificate of in Corporation, except as any
provision of law may otherwise require.
ARTICLE II
----------
STOCKHOLDER MEETINGS
----------- --------
1. Annual. The annual meeting of stockholders for the election of directors
------
and the transaction of such other business as may properly be brought before the
meeting shall commencing with the year 1998 be held within 120 days of the close
of the Corporation's fiscal year unless otherwise specified by resolution
adopted by the Board of Directors.
2. Stockholder Actions and Meetings of Stockholders. Any action required or
----------- ------- --- -------- -- ------------
permitted to be taken by the stockholders of the Corporation must be effected at
an annual or special meeting of stockholders of the Corporation, and may not be
effected by any consent in writing by such stockholders. Special meetings of
stockholders of the Corporation maybe called only by the Board of Directors,
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exists any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption). Notwithstanding any other provisions of these Amended
and Restated By-Laws or any provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class or series of the capital stock of the Corporation
(hereinafter referred to as the "Voting Stock") required by law, these Amended
and Restated By-Laws or any Preferred Stock Designation, the affirmative vote of
the holders of at least 80% of the voting power of all of the then outstanding
shares of the Voting Stock, voting together as a single class shall be required
to alter, amend or repeat this paragraph of the Amended and Restated By-Laws.
3. PLACE. Annual meetings and special meetings shall be held at such place,
-----
within or without the State of Delaware, as directors may, from time to time,
fix. Whenever the directors shall fail to fix such place, the meeting shall be
held at the registered office of the Corporation in the State of Delaware.
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4. NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given,
------ -- ------ -- ------
stating the place, date and hour of the meeting and stating the place within the
city or other municipality or community at which the list of stockholders of the
Corporation may be examined. The notice of an annual meting shall state that
the meeting is called for the election of directors and for the transaction of
other business which may properly come before the meeting, and shall (if any
other action which could be taken at a special meeting is to be taken at such
annual meting) state the purpose or purposes. The notice of a special meeting
shall in all instances state the purpose or purposes for which the meeting is
called. The notice of any meeting shall also include, or be accompanied by, any
additional statements, information, or documents prescribed by the General
Corporation Law. Except as otherwise provided by the General Corporation Law, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than ten days nor more than sixty days before the date of the meeting,
unless the lapse of the prescribed period of time shall have been waived, and
directed to each stockholder at his record address or at such other address
which he may have furnished by request in writing to the Secretary of the
Corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States Mail. If a meeting is adjourned
to another time, not more than thirty days hence, and/or to another place, and
if an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the
directors, after adjournment, fix a next record date for the adjourned meeting.
Notice need not be given to any stockholder who submits a written waiver of
notice signed by him before or after the time stated therein. Attendance of a
stockholder at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice.
5. STOCKHOLDER LIST. The officer who has charge of the stock ledger of the
----------- ----
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote at any meeting of
stockholders.
6. CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by
------- -- -------
one of the following officers in the order of seniority and if present and
acting -- the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the Corporation, or in his absence, an Assistant Secretary, shall
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<PAGE>
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the Chairman of the meeting shall appoint a secretary of
the meeting.
7. PROXY REPRESENTATION. Every stockholder may authorize another person or
----- --------------
persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the Corporation generally.
8. INSPECTORS. The directors, in advance of any meeting, may, but need not,
----------
appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and design an oath faithfully to execute the duties of inspectors at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock represented at
the meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots, or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots, or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the person presiding at the meeting, the inspector or inspectors, if
any, shall make a report in writing of any challenge, question, or matter
determined by him or them and execute a certificate of any fact found by him or
them.
9. QUORUM. The holders of a majority of the outstanding shares of stock shall
------
constitute a quorum at a meeting of stockholders for the transaction of any
business. The stockholders present may adjourn the meeting despite the absence
of a quorum.
10. VOTING. Each share of stock shall entitle the holders thereof to one
------
vote. Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Any other action shall be authorized by a majority
of the votes cast except where the General Corporation Law prescribes a
different percentage of votes and/or a different exercise of voting power, and
except as may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
ARTICLE III
-----------
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BOARD OF DIRECTORS
------------------
1. Powers. The business and affairs of the Corporation shall be managed by or
------
under the direction of the Board of Directors of the Corporation.
2. Number of Directors. The number of directors shall be fixed from time to
--------------------
time exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption).
3. Classified Board of Directors. At the 1998 annual meeting of stockholders,
-----------------------------
the directors shall be divided into three classes, as nearly equal in number as
possible, with the directors of the first class elected for a term of one year,
the directors of the second class elected for a term of two years, and the
directors of the third class elected for a term of three years. At each annual
meeting of stockholders following such initial classification and election,
directors elected to succeed those directors whose terms expire shall be elected
for a term of office to expire at the third succeeding annual meeting of
stockholders after their election.
4. Vacancies on the Board. Subject to the rights of the holders of Voting
----------------------
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office, or other cause may be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been elected expires. No
decrease in the number of authorized directors constituting the entire Board of
Directors shall shorten the term of any incumbent director.
5. Removal of Directors. Subject to the rights of the holders of Voting Stock
--------------------
then outstanding, any director, or the entire Board of Directors, may be removed
from office at any time, but only for cause and only by the affirmative vote of
the holders of at least 80% of the voting power of all of the then outstanding
shares of the Voting Stock, voting together as a single class (it being
understood that, for all purposes of this paragraph, the provisions of these By-
Laws which require the affirmative vote of the holders of at least 80% of the
voting power of all of the then outstanding shares of the Voting Stock, voting
together as a single class to alter, amend or repeal any provision of these By-
Laws which is to the same effect as the provisions of the Amended and Restated
Certificate of Incorporation, each share of the Voting Stock shall have the
number of votes granted to it pursuant to the Amended and Restated Certificate
of Incorporation or any designation of the rights, powers and preferences of any
class or series of Preferred Stock made pursuant to the Amended and Restated
Certificate of Incorporation (a "Preferred Stock Designation").
6. Resignation. A resignation from the Board of Directors shall be deemed to
-----------
take effect immediately upon its being received by any incumbent corporate
officer other than an officer who is also the resigning director, unless some
other time is specified therein.
6
<PAGE>
7. MEETINGS.
--------
- TIME. Meetings shall be held at such time as the Board of
----
Directors shall fix, except that the first meeting of a newly elected Board of
Directors shall be held as soon after its election as the directors may
conveniently assemble.
- PLACE. Meetings shall be held at such place within or
-----
without the State of Delaware as shall be fixed by the Board of Directors.
- CALL. No call shall be required for regular meetings
----
for which the time and place have been fixed. Special meetings may be called by
or at the direction of the Chairman of the Board, if any, the Vice-Chairman of
the Board, if any, of the President, or of a majority of the directors in
office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall
------ -- ------ -- ------------ ------
be required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meeting in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver.
- QUORUM AND ACTION. A majority of the total number of
------ --- ------
authorized directors shall constitute a quorum except when a vacancy or
vacancies prevents such majority, whereupon a majority of the directors in
office shall constitute a quorum, provided, that such majority shall constitute
at least one-third of the whole Board. A majority of the directors present,
whether or not a quorum is present, may adjourn a meeting to another time and
place. Except as herein otherwise provided, and except as otherwise provided by
the General Corporation Law, the vote of the majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board. The
quorum and voting provisions hereinstated shall not be construed as conflicting
with any provisions of the General Corporation Law and these Bylaws which govern
a meeting of directors held to fill vacancies and newly created directorships in
the Board or action of disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board of Directors, may participate in a meeting of the Board
of Directors, or any such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
7
<PAGE>
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if
-------- -- --- -------
any and if present and acting, shall preside at all meetings. Otherwise, the
Vice-Chairman of the Board, if any and if present and acting, or the President,
if present and acting, or any other director chosen by the Board shall preside.
8. COMMITTEES. The Board of Directors may, by resolution
----------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of any member of any such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the Corporation to be
affixed to all papers which may require it.
9. WRITTEN ACTION. Any action required or permitted to be
------- ------
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
Notwithstanding any other provisions of these Amended and Restated By-Laws or
any provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, these Amended and Restated By-Laws
or any Preferred Stock Designation, the affirmative vote of the holders of at
least 80% of the voting power of all of the then outstanding shares of the
Voting Stock, voting together as a single class, shall be required to alter,
amend or repeal these paragraphs 2, 3, 4 and 5 of this Article III of these
Amended and Restated By-Laws.
ARTICLE IV
------- --
OFFICERS
--------
The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer, and, if deemed necessary, expedient, or
desirable by the Board of Directors, a Chairman of the Board, a Vice-Chairman of
the Board, an Executive Vice-President, one or more other Vice-Presidents, one
or more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers with such titles as the resolution of the Board of Directors choosing
them shall designate. Except as may otherwise be provided in the resolution of
the Board of Directors choosing him, no officer other than the Chairman or Vice-
Chairman of the Board, if any, need be
8
<PAGE>
a director. Any number of offices may be held by the same person, as the
directors may determine.
Unless otherwise provided in the resolution choosing him, each
officer shall be chosen for a term which shall continue until the meeting of
the Board of Directors following the next annual meeting of stockholders and
until his successor shall have been chosen and qualified.
All officers of the Corporation shall have such authority and perform
such duties in the management and operation of the Corporation as shall be
prescribed in the resolutions of the Board of Directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the Corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders directors, and committees of
directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
ARTICLE V
---------
CORPORATE SEAL
--------------
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE VI
----------
FISCAL YEAR
-----------
The fiscal year of the Corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
ARTICLE VII
-----------
INDEMNIFICATION
---------------
The Corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote
9
<PAGE>
of stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity whole holding such
office, and shall continue as to a person who has ceased to be director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
ARTICLE VIII
------------
LIMITATION ON LIABILITY OF DIRECTORS
------------------------------------
A director of the Corporation shall, to the maximum extent now or
hereafter permitted by Section 102(b)(7) of the Delaware General Corporation Law
(or any successor provision or provisions), have no personal liability to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.
ARTICLE IX
----------
SEVERABILITY
------------
In the event that any of the provisions of this Amended and Restated
Certificate of Incorporation (including any provision within a single article,
section, paragraph or sentence) is held by a court of competent jurisdiction to
be invalid, void or otherwise unenforceable, the remaining provisions are
severable and shall remain enforceable to the full extent permitted by law.
ARTICLE X
---------
CONTROL OVER BYLAWS
-------------------
Subject to the provisions of the Amended and Restated Certificate of
Incorporation, these Amended and Restated By-Laws and the provisions of the
General Corporation Law of the State of Delaware, the power to amend, alter, or
repeal these Amended and Restated Bylaws and to adopt new Bylaws may be
exercised by the Board of Directors or by the stockholders.
10
<PAGE>
EXHIBIT 10.1
AstroPower, Inc.
1989 STOCK OPTION PLAN
1. Purpose.
-------
The purpose of this plan (the "Plan") is to secure for AstroPower Inc. (the
"Company") and its shareholders the benefits arising from capital stock
ownership by key employees and consultants of the Company and its parent and
subsidiary corporations who are expected to contribute to the Company's future
growth and success. Except where the context otherwise requires, the term
"Company" shall include the parent and all subsidiaries of the Company as
defined in Sections 425(e) and 425(f) of the Internal Revenue Code of 1986, as
amended (the "Code").
2. Type of Options and Administration.
----------------------------------
(a) Types of Options. Options granted pursuant to the Plan shall be
----------------
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422A of the Code
or non-statutory options which are not intended to meet the requirements of
Section 422A of the Code.
(b) Administration. The Plan will be administered by the Board of
--------------
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion grant options to purchase shares of the Company's Common
Stock and issue shares upon exercise of such options as provided in the Plan.
The Board shall have authority, subject to the express provisions of the Plan,
to construe the respective option agreements and the Plan, to prescribe, amend
and rescind rules and regulations relating to the Plan, to determine the terms
and provisions of the respective option agreements, which heed not be identical,
and to make all other determinations in the judgment of the Board of Directors
necessary or desirable for the administration of the Plan. The Board of
Directors may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. No director shall be liable for any
action or determination made in good faith. The Board of Directors may, to the
full extent permitted by law, delegate any or all of its powers under the Plan
to a committee (the "Committee") appointed by the Board of Directors, and if the
Committee is so appointed all references to the Board of Directors in the Plan
shall mean and relate to such Committee.
3. Eligibility.
-----------
(a) General. Options shall be granted only to persons who are, at the
-------
time of grant, employees (including officers and directors who are employees) or
consultants of the Company. No person shall be granted any Incentive Stock
Option under the Plan who, at the time such option is granted, owns, directly or
indirectly, stock possessing more than 10% of the total combined voting
1
<PAGE>
power of all classes of stock of the Company, unless the requirements of
paragraph (b) of Section 11 are satisfied. The attribution of stock ownership
provisions of Section 425(d) of the Code, and any successor provisions thereto,
shall be applied in determining the shares of stock owned by a person for
purposes of applying the foregoing percentage limitation. A person who has been
granted an option may, if he or she is otherwise eligible, be granted an
additional option or options if the Board of Directors shall so determine.
(b) Grant of Options to Directors. From and after the registration of the
-----------------------------
Common Stock of the Company under the Securities Exchange Act of 1934 (the
"Exchange Act"), the selection of a director as a participant and the number of
shares for which an option or options may be granted to such director shall be
determined either (i) by the Board of Directors, of which a majority, as well as
a majority of the directors acting in the matter, shall be "disinterested
persons" (as hereinafter defined) or (ii) by, or only in accordance with, the
recommendations of a committee of three or more persons having full authority to
act in the matter, of which all members shall be "disinterested persons". For
the purposes of the Plan, a director or member of such committee shall be deemed
to be "disinterested" only if such person qualifies as a "disinterested person"
within the meaning of paragraph (d)(3) of Rule 16b-3 under the Exchange Act (or
any successor rule), as such term is interpreted from time to time.
4. Stock Subject to Plan.
---------------------
Subject to adjustment as provided in Section 15 below, the maximum number
of shares of Common Stock of the Company which may be issued and sold under the
Plan is 500,000 shares. Such shares may be authorized and unissued shares or
may be shares issued and thereafter acquired by the Company. If an option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares subject to such option shall
again be available for subsequent option grants under the Plan.
5. Forms of Option Agreements.
--------------------------
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be specified by the Board of Directors. Each option agreement
shall state whether the options granted thereby are Incentive Stock Options or
non-statutory options.
6. Purchase Price.
--------------
(a) General. The purchase price per share of stock deliverable upon the
-------
exercise of an option shall be determined by the Board of Directors, provided,
---------
however, that (i) in the case of an Incentive Stock Option, the exercise price
- -------
shall not be less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
paragraph (b) of Section 11, and (ii) in the case of a non-statutory option, the
exercise price shall not be less than 90% of the fair market value of such
stock, as determined by the Board of Directors, at the time of grant of such
option.
2
<PAGE>
(b) Payment of Purchase Price. Options granted under the Plan may provide
-------------------------
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or, to the extent provided in the applicable option agreement, by delivery to
the Company of shares of Common Stock of the Company already owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised, or by any combination of such methods of payment. The
fair market value of any shares of the Company's Common Stock which may be
delivered upon exercise of an option shall be determined in accordance with the
terms of the applicable option agreement.
7. Option Period.
-------------
Each option and all rights thereunder shall expire on such date as the
Board of Directors shall determine, but, in the case of Incentive Stock options,
in no event after the expiration of ten years from the day on which the option
is granted (or five years in the case of options described in paragraph (b) of
Section 11) and, in the case of non-statutory options, in no event after the
expiration of ten years plus 30 days from the day on which the option is
granted, and in either case, shall be subject to earlier termination as provided
in the Plan.
8. Exercise of Options.
-------------------
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of
Section 7 above.
9. Nontransferability of Options.
-----------------------------
No option granted under the Plan shall be assignable or transferable by the
person to whom it is granted, either voluntarily or by operation of law, except
by will or the laws of descent and distribution. During the life of the
optionee, the option shall be exercisable only by such person.
10. Effect of Termination of Employment.
-----------------------------------
No option may be exercised by an employee or consultant unless, at the time
of such exercise, such optionee is, and has been continuously since the date of
grant of his or her option, employed by the Company or performing services
pursuant to a consulting agreement with the Company, except that if and to the
extent the option agreement or instrument so provides:
(a) the option may be exercised by an optionee within the period of three
months after (i) the date the optionee ceases to be an employee of the
Company or (ii) the date such optionee's consulting agreement with the
Company is terminated (or within such lesser period as may be
specified in the applicable option agreement);
(b) if an optionee dies while in the employ of the Company, or while
performing services pursuant to a consulting agreement with the
Company or within three months after such optionee ceases to be such
an employee or consultant, the option may be exercised by
3
<PAGE>
the person to whom it is transferred by will or the laws of descent
and distribution within the period of one year after the date of death
(or within such lesser period as may be specified in the applicable
option agreement); and
(c) if an optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code or any successor provision thereto) while in the
employ of the Company or while performing services pursuant to a
consulting agreement with the Company, the option may be exercised
within the period of one year after the date the optionee ceases to
be such an employee or consultant because of such disability (or
within such lesser period as may be specified in the applicable option
agreement);
provided, however, that in no event may any option be exercised after the
- -----------------
expiration date of the option. For all purposes of the Plan and any option
granted hereunder, "employment" shall be defined in accordance with the
provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor
regulations).
11. Incentive Stock Options.
-----------------------
Options granted under the Plan which are intended to be Incentive Stock
Options shall be specifically designated as Incentive Stock Options and shall be
subject to the following additional terms and conditions:
(a) Dollar Limitation. Incentive Stock Options granted to any employee
-----------------
under the Plan (and any other incentive stock option plans of the Company) shall
not, in the aggregate, become exercisable for the first time in any one calendar
year for shares of Common Stock with an aggregate fair market value (determined
as of the respective date or dates of grant) of more than $100,000.
(b) 10% Shareholder. If any employee to whom an Incentive Stock Option is
---------------
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 425(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:
(i) The purchase price per share of the Common Stock subject to such
Incentive Stock option shall not be less than 110% of the fair market
value of one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five years from the
date of grant.
12. Additional Provisions.
---------------------
(a) Additional Option Provisions. The Board of Directors may, in its sole
----------------------------
discretion, include additional provisions in any option granted under the Plan,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, make or arrange for loans or transfer
4
<PAGE>
other property to optionees upon exercise of options, or such other provisions
as shall be determined by the Board of Directors; provided that such additional
-------------
provisions shall not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not cause any Incentive Stock Option
granted under the Plan to fail to qualify as an Incentive Stock Option within
the meaning of Section 422A of the Code.
(b) Acceleration. The Board of Directors may, in its sole discretion,
------------
accelerate the date or dates on which all or any particular option or options
granted under the Plan may be exercised.
13. General Restrictions.
--------------------
(a) Investment Representations. The Company may require any person to
--------------------------
whom an option is granted, as a condition of exercising such option, to give
written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Common Stock subject to the option for
his or her own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state securities laws.
(b) Compliance With Securities Laws. Each option shall be subject to the
-------------------------------
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any-securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares thereunder, such
option may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
14. Rights as a Shareholder.
-----------------------
The holder of an option shall have no rights as a shareholder, with
respect to any shares covered by the option until the date of issue of a stock
certificate to him or her for such shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
15. Adjustments.
-----------
(a) General . If, as a result of a merger, consolidation, sale of all or
-------
substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to the outstanding shares of Common
Stock or other securities, the outstanding shares of Common Stock are increased
or decreased, or are exchanged for a different number or kind of shares or other
securities, or additional shares or new or different shares or other securities
are distributed with respect to such shares of Common Stock or other securities,
an appropriate and proportionate adjustment may be made in (i) the maximum
number and kind of shares reserved for issuance under the Plan, (ii) the number
and kind of shares or other securities subject to then outstanding options under
the Plan, and (iii) the price for each share subject
5
<PAGE>
to any then outstanding options under the Plan, without changing the aggregate
purchase price as to which such options remain exercisable.
(b) Board Authority to Make Adjustments. Adjustments under this Section
-----------------------------------
15 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under the Plan on account
of any such adjustments.
16. Reorganization.
--------------
(a) General. In the event of a consolidation or merger in which the
-------
Company is not the surviving corporation, or which results in the acquisition of
substantially all of the Company's outstanding Common Stock by a single person,
entity or group of persons or entities acting in concert, or in the event of the
sale or transfer of all or substantially all of the assets of the Company, or in
the event of a reorganization or liquidation of the Company, the Board of
Directors of the Company, or the board of directors of any corporation assuming
the obligations of the Company, shall, as to outstanding options, either (i)
provide that such options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such options substituted for Incentive Stock options
--------
shall meet the requirements of Section 425(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options will terminate
immediately prior to the consummation of such merger, consolidation,
acquisition, reorganization, liquidation, sale or transfer unless exercised by
the optionee within a specified number of days following the date of such
notice, or (iii) in the event of a merger under the terms of which holders of
the Common Stock of the Company will receive upon consummation thereof a cash
payment for each share surrendered in the merger (the "Merger Price"), make or
provide for a cash payment to the optionees equal to the difference between (A)
the Merger Price times the number of shares of Common Stock subject to such
outstanding options (to the extent exercisable) and (B) the aggregate exercise
price of all such outstanding options in exchange for the termination of such
options. In any such case, the Board of Directors may, in its discretion,
advance the lapse of any waiting or installment periods and exercise dates.
(b) Substitute Options. The Company may grant options under the Plan in
------------------
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
17. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any option shall confer upon any optionee
any right with respect to the continuation of his or her employment by the
Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee. Whether an authorized leave of absence, or absence in military or
government service, shall
6
<PAGE>
constitute termination of employment shall be determined at the time of such
absence in accordance with the provisions of Section 1.421-7(h) of the Income
Tax Regulations (or any successor regulations).
18. Other Employee Benefits.
-----------------------
The amount of any compensation deemed to be received by an employee as a
result of the exercise of an option or the sale of shares received upon such
exercise will not constitute compensation with respect to which any other
employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
---------------------
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect, except that without the approval of the
shareholders of the Company the Board of Directors may not (a) materially
increase the benefits accruing to individuals who participate in the Plan, (b)
increase the maximum number of shares which may be issued under the Plan (except
for adjustments specifically provided in the Plan), or (c) materially modify the
requirements as to eligibility for participation in the Plan. The termination
or any modification or amendment of the Plan shall not, without the consent of
an optionee, affect his or her rights under an option previously granted to him
or her. With the consent of the optionee affected, the Board of Directors may
amend outstanding option agreements in a manner not inconsistent with the Plan.
The Board of Directors shall have the right to amend or modify the terms and
provisions of the Plan and of any outstanding Incentive Stock Options granted
under the Plan to the extent necessary to qualify any or all such options for
such favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422A of the
Code.
20. Withholding.
-----------
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an Option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. An optionee who has made an election pursuant to this Section 20(a)
may only satisfy his or her withholding obligation with shares of Common Stock
which are not subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements.
(b) Notwithstanding the foregoing, in the case of an optionee subject to
the reporting requirements of Section 16(a) of the Exchange Act, no election to
use shares for the payment of
7
<PAGE>
withholding taxes shall be effective unless made in compliance with any
applicable requirements of Rule 16b-3(e) or any successor rule under such Act.
21. Cancellation and New Grant of Options.
-------------------------------------
The Board of Directors shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock having an option exercise price per
share which may be lower or higher than the exercise price per share of the
canceled options.
22. Effective Date and Duration of the Plan.
---------------------------------------
(a) Effective Date. The Plan shall become effective when adopted by the
--------------
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, any Incentive
Stock Options previously granted under the Plan shall terminate and no further
Incentive Stock Options shall be granted. Amendments to the Plan not requiring
shareholder approval shall become effective when adopted by the Board of
Directors; amendments requiring shareholder approval (as provided in Section 19)
shall become effective when adopted by the Board of Directors, but no Incentive
Stock Option issued after the date of such amendment shall become exercisable
(to the extent that such amendment to the Plan was required to enable the
Company to grant such incentive Stock Option to a particular optionee) unless
and until such amendment shall have been approved by the Company's shareholders.
If such shareholder approval is not obtained within twelve months of the Board's
adoption of such amendment, any Incentive Stock options granted on or after the
date of such amendment shall terminate to the extent that such amendment to the
Plan was required to enable the Company to grant such option to a particular
optionee. Subject to this limitation, options may be granted under the Plan at
any time after the effective date and before the date fixed for termination of
the Plan.
(b) Termination. The Plan shall terminate upon the earlier of (i) the
-----------
close of business on the day next preceding the tenth anniversary of the date
of its adoption by the Board of Directors, or (ii) the date on which all shares
available for issuance under the Plan shall have been issued pursuant to the
exercise or cancellation of options granted under the Plan. If the date of
termination is determined under (i) above, then options outstanding on such
date shall continue to have force and effect in accordance with the provisions
of the instruments evidencing such options.
Adopted by the Board of Directors
December 20, 1989
8
<PAGE>
EXHIBIT 10.2
REVISED AGREEMENT
-----------------
THIS AGREEMENT, made the 1st day of July 1991, is by and between the UNIVERSITY
--- ----
OF DELAWARE, a Corporation of the State of Delaware, hereinafter called
(UNIVERSITY), and ASTROPOWER, INC., a Corporation of the State of Delaware,
hereinafter called (ASTROPOWER) and supersedes and replaces a similar agreement
entered into August 15, 1989.
1. UNIVERSITY will construct to its standards a 40,000 square foot building on
University land with an agreed upon design and site, including parking space.
2. The proposed building will be leased to ASTROPOWER for a term of twenty (20)
years commencing on the date of acceptance of the building by the UNIVERSITY
and ASTROPOWER and ending twenty (20) years from the acceptance date.
3. The proposed building will be utilized by ASTROPOWER in compliance with its
Business Plan, attached as Exhibit A, and made a part of this Agreement.
3a. The Agreement may be canceled by ASTROPOWER after nine (9) years, with
twelve (12) months notice of cancellation.
4. The rental for the proposed building will be paid to the UNIVERSITY by
ASTROPOWER monthly over the term of the Lease, according to the Rental Schedule
attached as Exhibit B.
5. ASTROPOWER will also pay into a REMODELING FUND $10,000 annually on the
anniversary date of this Lease over the first twenty (20) years for a total of
$200,000. The Fund is to be interest-bearing and under the control of the
UNIVERSITY. The purpose of the FUND is to defray the cost of remodeling the
building upon the termination of this Agreement by ASTROPOWER.
6. In addition, ASTROPOWER will pay into a RENOVATION FUND $8,000 annually on
the anniversary date over the first five (5) years of this Lease and $16,000
annually on the anniversary date for the next fifteen (15) years of this Lease
for a total of $280,000. The Fund will be interest-bearing and under the
control of the UNIVERSITY. The Fund will be used to pay for the cost of
renovations which will be made or supervised by the UNIVERSITY. To the fullest
extent possible, such renovations will be determined by mutual agreement.
7. In addition, the University will receive from ASTROPOWER 100,000 shares of
ASTROPOWER Capital Stock upon acceptance of the building by ASTROPOWER.
8. ASTROPOWER will pay the cost of all utilities, including telephone services
furnished to the proposed building.
9. ASTROPOWER shall maintain the premises and 6.33+ acres of grounds in good
-
order, repair, and cleanliness, reasonable wear and tear excepted, at its own
expense, including snow removal and any
1
<PAGE>
relining or cleaning needed for the paved areas; provided, however, that the
UNIVERSITY shall be responsible for repair of the exterior and structural
components of the building and paved areas to the extent of funding available in
the Renovation Fund as defined under item 6. of this Lease.
10. ASTROPOWER will not assign or sublet any part of the leased premises
without the UNIVERSITY'S written consent, such consent will not be unreasonably
withheld.
11. ASTROPOWER will not make any structural alterations or additions to the
leased premises or erect any exterior sign thereon without the written consent
of UNIVERSITY, such consent will not be unreasonably withheld.
12. ASTROPOWER, upon the termination of the Agreement, will deliver up and
surrender quiet and peaceable possession of the leased premises in as good order
and condition as the same now are, reasonable wear and tear and accident by fire
or other casualty excepted.
13. ASTROPOWER agrees to defend, indemnify, and hold harmless the UNIVERSITY,
its Trustees, personnel, and agents from and against any suits, claims, decrees,
liability, or judgments, including all costs and expenses, for loss or damage to
property and injury or death to persons on or about the premises resulting from
the negligence of ASTROPOWER, its employees, agents, contractors, guests,
invitees, and licensees.
14. ASTROPOWER, during the term of this Lease, will maintain in effect a
comprehensive general liability insurance policy with combined single limits of
at least $2,000,000 per occurrence and add the UNIVERSITY as a named insured to
cover any claims which may arise from or grow out of this Agreement. ASTROPOWER
shall furnish current certificates of insurance to evidence this insurance and
the policy shall be endorsed to require that the UNIVERSITY shall be notified of
any termination or significant change affecting this coverage.
15. The Rental payments are due and payable to the Treasurer of the UNIVERSITY
by ASTROPOWER on the first day of each month and the Remodeling Fund and
Renovation Fund payments are due and payable to the Treasurer of the UNIVERSITY
by ASTROPOWER on each anniversary date of this Agreement and interest determined
by the prime rate of the Citibank of New York, NY, shall be assessed and
compounded monthly on any such payments not made within 30 days of the due date.
Any failure of ASTROPOWER to pay Rental, Remodeling Fund and Renovation Fund
payments including interest thereon within 60 days of the due dates or perform
any material term hereof after notice and a thirty (30) day cure period, shall
at the option of UNIVERSITY, terminate all rights of ASTROPOWER hereunder. In
the event that ASTROPOWER shall be absent from the leased premises for a period
of thirty (30) consecutive days, while in default, ASTROPOWER shall, at the
option of University, be deemed to have abandoned the leased premises, and any
property left on the leased premises shall be considered abandoned and may be
disposed of by UNIVERSITY as it shall see fit. All property on the leased
premises is hereby subject to a lien in favor of UNIVERSITY, for the payment of
all sums due hereunder, to the maximum extent allowed by law. Recovery of the
leased premises by UNIVERSITY shall not relieve ASTROPOWER of any obligations
hereunder. UNIVERSITY shall have the affirmative duty to mitigate ASTROPOWER'S
2
<PAGE>
obligations under the foregoing circumstances and shall promptly attempt to let
the leased premises to others upon commercially reasonable terms and conditions,
to recover from ASTROPOWER sums due hereunder, less any consideration received
from others for the use of the leased premises, for the remaining term hereof
after paying expenses.
16. UNIVERSITY shall have the right, without undue disruption, at all
reasonable hours and upon prior reasonable notice to enter upon the entirety of
the leased premises for the purpose of making repairs and alterations which
UNIVERSITY is obligated or desires to make, and to examine the condition of the
premises.
17. In the event that all or a substantial part of the building in which the
leased premises is located is (a) damaged or destroyed and the UNIVERSITY
determines that the building shall not be repaired, or (b) is condemned by any
competent authority, this Lease shall terminate if the UNIVERSITY so elects.
18. In the event that any party hereto shall prevail in any legal action
brought by it against any other party hereto to enforce the terms hereof or
relating to the leased premises, the prevailing party shall be entitled to all
costs incurred in connection with such action, including a reasonable attorney's
fee.
19. No failure of UNIVERSITY to enforce any term hereof shall be deemed a
waiver, nor shall any acceptance of a partial payment of rent be deemed a waiver
of UNIVERSITY'S right to the full amount thereof.
20. Terms and conditions of this Agreement shall be binding upon and inure to
any successors and assigns of the parties thereto, except that the UNIVERSITY
reserves the right to renegotiate the financial terms of this Agreement in the
event ASTROPOWER is purchased by another party, or in the event another party
acquires control of ASTROPOWER.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
Signed, sealed, and delivered in the presence of:
ASTROPOWER: UNIVERSITY OF DELAWARE:
BY: /S/ ALLEN M. BARNETT, PRESIDENT BY: /S/ DAVID P. ROSELLE, PRESIDENT
------------------------------- -------------------------------
By: /S/ G.A. LOESSNER, VICE PRESIDENT
---------------------------------
AND SECRETARY
3
<PAGE>
SUPPLEMENTAL MEMORANDUM OF AGREEMENT
------------------------------------
BETWEEN THE UNIVERSITY OF DELAWARE AND ASTROPOWER, INC.
------------------------------------------------------
An agreement has been entered into on this 1st day of July ,1991 between the
------
UNIVERSITY OF DELAWARE, a Corporation of the State of Delaware, hereinafter
called (UNIVERSITY), and ASTROPOWER, INC., a Corporation of the State of
Delaware, hereinafter called (ASTROPOWER).
ASTROPOWER agrees that it will accept the building on July 1, 1991, and
The parties agree to amend Appendix B of the Revised Agreement upon the
completion of the accounting by substituting the final agreed upon total cost to
construct and equip the building for the $2 million of total costs estimated in
Exhibit B, and
It is further agreed that the amount of rent paid by ASTROPOWER to the
UNIVERSITY will be adjusted accordingly so that the resulting internal rate of
return over twenty (20) years is no less than 8.82%, and
It is further agreed that any adjustment due one party as a result of these
revisions will be paid by the other party in a lump sum in not less than thirty
(30) days and an appropriate adjustment be made to the monthly rent to be paid
thereafter, and
It is further agreed that snow removal will be provided by the UNIVERSITY during
the winter of 1991-92 and that ASTROPOWER pay the UNIVERSITY $750 for this
service on January 1, 1992.
ASTROPOWER, INC. UNIVERSITY OF DELAWARE
/S/ ALLEN M. BARNETT, PRESIDENT /S/ DAVID P. ROSELLE, PRESIDENT
- ------------------------------- -------------------------------
4
<PAGE>
EXHIBIT B
REVISED RENTAL SCHEDULE
-----------------------
As of 6/l/92
<TABLE>
<CAPTION>
Per Sq. Ft. Annual Rent on
on 40,000 40,000 Square
Year Square Feet Feet Monthly Rent
---- ------------- ---- ------------
<S> <C> <C> <C>
1 3.68 147,200 $12,266.67
2 3.88 155,200 12,933.33
3 4.10 164,000 13,666.67
4 4.33 173,200 14,433.33
5 4.57 182,800 15,233.33
6 4.82 192,800 16,066.67
7 5.09 203,600 16,966.67
8 5.37 214,800 17,900.00
9 5.67 226,800 18,900.00
10 5.98 239,200 19,933.33
11 6.31 252,400 21,033.33
12 6.66 266,400 22,200.00
13 7.03 281,200 23,433.33
14 7.42 296,800 24,733.33
15 7.83 313,200 26,100.00
16 8.26 330,400 27,533.33
17 8.72 348,800 29,066.67
18 9.20 368,000 30,666.67
19 9.71 388,400 32,366.67
20 10.25 410,000 34,166.67
</TABLE>
ASTROPOWER, INC. UNIVERSITY OF DELAWARE
/S/ ALLEN M. BARNETT, PRESIDENT /S/ DAIVD P. ROSELLE, PRESIDENT
- ------------------------------- -------------------------------
6/2/92
5
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of April, 1997 by and between ASTROPOWER, INC.
(the "Company"), a Delaware corporation with offices at Solar Park, Newark,
Delaware 19716-2000, and ALLEN M. BARNETT ("Barnett"), an individual residing at
2 Polaris Drive, Newark, Delaware 19711.
W I T N E S S E T H:
--------------------
WHEREAS, the Company intends to further improve, develop and commercially
exploit certain inventions and technology relating to photovoltaic solar cells
and related optoeletronic devices and to otherwise engage in the business of
developing, manufacturing, marketing and selling solar cells, modules, panels,
systems for solar electric applications and optoeletronic devices and performing
government-funded and other research and technology development.
WHEREAS, Barnett has certain experience and abilities in the business of the
Company and has been rendering services to AstroPower, Inc. since July 1, 1989.
WHEREAS, the Company wishes to continue to employ Barnett and Barnett wishes to
continue to render services to the Company on the terms and conditions
hereinafter provided;
NOW THEREFORE, in consideration of the mutual promises and covenants set forth
below, the Company and Barnett hereby agree to this Employment Agreement (the
"Agreement") effective as of April 1, 1997.
1. Employment of Barnett. The Company agrees to employ Barnett and Barnett
---------------------
agrees to render services to the Company for the period stated in paragraph 2(a)
below and upon the other terms and conditions hereinafter provided.
2. Term, Position, Responsibilities, Duties, Authority, Time and Location.
-----------------------------------------------------------------------
(a) Term of Employment. The term of Barnett's employment under this
------------------
Agreement shall commence as of the date first above written for a term of three
(3) years ending March 31, 2000 the "Initial Term" and will continue in effect
(the "Extended Term") after the Initial Term until either the Company or Barnett
elects to terminate the Agreement by written notice to the other party, which
written
1
<PAGE>
notice must be given six (6) months in advance of the effective date of such
termination, unless terminated prior thereto in accordance with the provisions
of this Agreement. For example if the Company or Barnett desires to terminate
the Agreement as of April 1, 2000, the party which desires to terminate the
Agreement must furnish written notice to that effect by October 1, 1999.
(b) Position, Responsibilities Duties and Authority. The Company shall
-----------------------------------------------
employ Barnett as President and Chief Executive Officer of the Company to
develop, manage, administer and direct the business of the Company. Barnett
will have overall operating and management responsibility for the Company
consistent with his background and experience. Barnett shall continue to serve
as a Director of the Company and shall also serve as a Director of any
subsidiaries of the Company if so elected by their respective shareholders.
Barnett shall, at all times, have such executive powers and authority as shall
reasonably be required to enable him to discharge his duties in a efficient
manner; provided, however, that Barnett shall at all times be subject to the
authority of the Board of Directors of the Company.
(c) Time. Except for illness and reasonable vacation periods, Barnett will
----
devote all his business time, attention, skill and efforts to the faithful
performance of his duties hereunder and the promotion of the Company's
interests. Barnett shall not be prevented from participating in charitable and
similar activities and may have personal business investments which may from
time to time require minor portions of his time so long as such activities are
not done in a manner inconsistent with his obligations hereunder.
Subject to the provisions of paragraph 6(b) herein, Barnett shall not be
prevented from investing or trading in investments for his own account including
real estate, stocks, bonds, securities, commodities or other forms of
investments.
(d) Location. Barnett shall not be required without his consent to
--------
perform his duties hereunder (except for reasonable travel in connection with
the performance of such duties) at any place other than Newark, Delaware, or
within a radius of 20 miles thereof. Barnett shall not be required to perform
any services which will necessitate moving his residence from the greater
Newark, Delaware area.
(e) Vacation. Barnett shall be entitled to reasonable paid vacation
--------
periods aggregating not less that four weeks in any calendar year during the
term of this Agreement.
3. Compensation.
------------
(a) Base Salary. For the services to be rendered by Barnett during the
-----------
term of this Agreement both as an officer and Director of the Company or
any of its subsidiaries, the Company shall pay to Barnett a Base Salary
("Base Salary")
2
<PAGE>
of $175,000 per annum payable in equal monthly or such other installments
in accordance with the general practice of the Company. The Board of
Directors of the Company (or a Compensation Committee thereof ) will review
Barnett's salary from time to time not less than annually, and may, but
shall not be obligated to, award increases in salary without the necessity
of an express written amendment of this Agreement, so long as such
increases are in writing and signed by a member of the Board of Directors
who has been so authorized by the Board of Directors.
(b) Incentive Compensation. In addition to the Base Salary provided for
----------------------
in paragraph (a) above, the Company will establish an incentive
compensation plan ("the Plan") for Barnett's benefit to be effective for
the calendar year beginning January 1, 1997 and each subsequent calendar
year or half calendar year thereafter, during his period of employment with
the Company. The Plan would provide for the establishment on an annual
basis of certain financial or other objectives for the Company, such
financial or other objectives to be determined jointly by the Board of
Directors and Barnett. The 1997 plan would be structured in a fashion such
that Barnett's incentive compensation would be equal to $50,000 if the
financial or other objectives contemplated by the Plan are achieved. For
subsequent years, Barnett's incentive compensation would be no less than
$50,000 if the contemplated financial or other objectives are achieved. The
incentive compensation to Barnett would decline proportionately to zero at
the point at which the results do not exceed an agreed upon percentage of
the objectives. For 1998 and subsequent years, the financial or other
objectives and the range of incentive compensation payable would be
established near the beginning of each year but in no event later than
February 28th.
Incentive compensation (if any) will be paid within 21 days of the
signing of the report on the Company's financial statement by the Company's
independent auditors for the calendar year in respect of which such
incentive compensation is to be paid and within 21 days of the signing by
the Company's chief financial officer of a certificate stating that such
statements have been prepared in accordance with generally accepted
accounting principles consistently applied (except as noted) and fairly
present the financial condition of the Company at the date thereof and for
the periods covered thereby, for any half calendar year in respect of which
such incentive compensation is to be paid.
Copies of the foregoing financial statements shall be delivered to
Barnett within the aforesaid 21 day period whether or not an incentive
compensation payment is due and payable.
(c) Expenses. The Company agrees to pay or reimburse Barnett for all
--------
reasonable and adequately documented travel, entertainment and other
business expenses incurred by him in performing his obligations under this
3
<PAGE>
Agreement in accordance with company-wide procedures as in effect from time
to time.
(d) Automobile. In recognition of Barnett's need for an automobile
----------
for business purposes, the Company will provide Barnett a monthly
automobile allowance of $450 in connection with his use of an automobile in
the performance of his duties hereunder and Barnett shall pay for all
maintenance, repairs, insurance, oil and gas and all costs incident
thereto. The Company will reimburse Barnett for all business related travel
involving the use of his automobile at a rate per mile in accordance with
Company-wide policy as in effect from time-to-time.
(e) Grant of Stock Options. In addition to the Base Salary and
----------------------
Incentive Compensation provided for in paragraphs (a) and (b) above,
effective for the twelve month period beginning April 1, 1997 and each
subsequent twelve month period of employment with the Company Barnett is
herewith granted an option pursuant to the Company's 1989 Stock Option Plan
to purchase 150,000 shares of the Company's Common Stock during the Initial
Term and 100,000 shares of the Company's Common Stock during the Extended
Term, all at an exercise price of $4.00 per share. Such options shall vest
at the rate of 50,000 shares per year on the last day of the year following
completion of his employment during the prior twelve month period. The
foregoing options are to be equally divided as between Incentive Stock
Options and Non-Qualified Stock Options. Upon vesting the options shall be
exercisable at any time and from time to time in whole or in part for a
period of 5 years from the date of grant with respect to Incentive Stock
Options and 10 years with respect to Non-Qualified Stock options.
In the event Barnett is employed for less than a full calendar year the
options shall vest as to a pro rata portion of 50,000 shares based on the
actual number of months he is employed. The Company agrees to reserve up to
250,000 shares under its 1989 Stock Option Plan (the "Plan") for issuance
to Barnett in connection with the options granted hereunder. This
reservation of shares is exclusive of any other shares reserved for
issuance under the Plan to Barnett under previously granted options. The
Company hereby undertakes to seek shareholder approval to increase the
number of shares available for issuance under the Plan, if such increase is
required to fulfill its obligations hereunder, at its next Annual or
Special Meeting of Stockholders and to recommend such approval to its
stockholders.
The Registration Rights provided to Founders pursuant to Section 11 of
the Series A Preferred Stock Purchase Agreement dated September 20th, 1989
shall be applicable to any shares acquired by Barnett pursuant to the
exercise of any stock options to be granted pursuant to this Agreement.
4
<PAGE>
4. Participation in Benefit Plans. The payments provided under this Agreement
------------------------------
for Barnett are in addition to any benefits to which Barnett (or his
beneficiaries or estate) may be or become entitled to under any fringe benefit,
medical, dental or group insurance, pension, profit sharing, welfare or other
benefit plan or program of the Company, and during the period of his employment
under this Agreement, Barnett shall be eligible for all benefits and emoluments
for which key executives are eligible under every such plan or program to the
extent permissible under the general terms and provisions of such plans or
programs and in accordance with the provisions thereof.
5. Other Income. To the extent that Barnett receives royalty income from the
------------
University of Delaware (the "University"), or from any other source whatsoever,
royalty income shall remain the property of Barnett and shall not serve as an
offset or credit to any compensation due Barnett pursuant to this Agreement.
6. Additional Obligations of Barnett.
---------------------------------
(a) Confidential Information. Barnett shall not knowingly disclose or
------------------------
reveal to any unauthorized person or, except on behalf of the company, make use
of any records, contracts, writings, data, knowledge or other information
pertaining to the business of the Company, its divisions, subsidiaries or
affiliates, obtained by him from any source whatsoever as a result of his
relationship with the Company, whether or not in written or other recorded form,
other than information which is a matter of public record, including, without
limitation, any customer or client lists, or information which relates to the
Company's personnel, present operations, or future planning, and Barnett
confirms that such information constitutes the exclusive property of the
Company. Barnett agrees that, at the time of terminating his relationship with
the Company, he will deliver to the Company all notes, notebooks, memoranda,
files, lists, records, documents and, in general, any and all material relating
to the Company's business or that of its divisions, subsidiaries or affiliates.
(b) Competition and Conflicts of Interest. Barnett while employed by the
-------------------------------------
Company and for a period of one year from the date of termination of such
employment, shall not knowingly act or conduct himself to the detriment of the
Company, its subsidiaries or affiliates, or in a manner which is inimical or
contrary to their interests; specifically, but without limitation, he shall not
(i) engage in competition with the Company in any of the businesses in which it
may have been engaged at any time during the period of his employment under this
Agreement, or (ii) (and until the second anniversary from the date of
termination) directly or indirectly solicit, raid, entice, induce, or approach
any person who is or was, within six months prior to Barnett's termination of
employment with the Company, an employee of the Company or of any of its
subsidiaries or affiliates to become employed by any other person, firm or
corporation.
5
<PAGE>
For this purpose, the phrase "engaging in competition" shall mean directly
or indirectly owning, managing, operating, joining, controlling or participating
in or being connected with, as an officer, employee, partner, stockholder, or
otherwise, any business, individual, partnership, firm, corporation or other
entity which is a the time engaged principally or significantly in a business
which is at the time directly or indirectly in competition with the business of
the Company; provided, however, that nothing in this paragraph 6(b) shall
prohibit Barnett from acquiring or holding any issue of stock or securities of
and such entity which has any securities listed or national securities exchange,
or quoted in the daily listing of over-the-counter market securities unless he
and members of his immediate family collectively own, directly or indirectly,
more than 2% of any class of voting securities of any such entity at any one
time.
(c) Discoveries and Inventions. If Barnett, while employed by the
--------------------------
Company, makes, either solely or jointly with others, any discovery,
improvement, or invention which pertains or relates in any way to the business,
products, publications, or processes of the Company, such discovery,
improvement, or invention (whether or not of patentable nature) shall be the
exclusive property of the Company. Barnett shall execute and deliver to the
Company, without further compensation, any and all documents which the Company
deems necessary or appropriate to prepare or prosecute applications for patents
upon such discovery, improvement, or invention, to assign and transfer to the
Company his entire right, title, and interest in and to such discovery,
improvement, or invention, and patents therefor, and otherwise more fully and
perfectly to evidence the Company's ownership thereof.
(d) Failure to Perform Obligations. Barnett recognizes and acknowledges
------------------------------
that the possible restrictions on his activities under this Agreement including,
without limitation, this paragraph 6, are required for the reasonable protection
of the Company.
(e) Life Insurance. At any time during the term of this Agreement, the
--------------
Company shall have the right to insure Barnett's life for the sole benefit of
the Company. The amount of such insurance and the type of policy taken out
shall be determined by the Company, and all premiums payable thereon shall be
the obligation of the Company. Barnett shall have no interest in any such
policy, but shall cooperate with the Company in taking out such insurance by
submitting to physical examination, by supply all information required by the
insurance company, and by executing all necessary documents, provided no
financial obligation is imposed upon him by any such documents.
7. Disability or Death.
-------------------
(a) In the event Barnett shall be unable to perform his duties here under
by virtue of illness or physical or mental incapacity or disability from any
cause
6
<PAGE>
or causes whatsoever and Barnett shall fail to perform such duties for a period
aggregating 180 calendar days within any 360 calendar day period, the Company
shall have the right upon 30 days notice, in writing, to terminate Barnett's
employment hereunder. Barnett shall be entitled to receive all compensation and
benefits due hereunder during said 180 calendar day period and his Base Salary
(as that may have been increased as provided herein) for the longer of what
would have been the remaining term of this Agreement or 2 years from the date of
termination pursuant to this paragraph. However, if prior to the expiration of
said 30 day notice Barnett has resumed his duties, he shall continue to be so
employed and continue to receive all compensation and benefits due hereunder.
Barnett agrees that upon request of the Company he will submit to an appropriate
medical examination by a doctor designated by the Company to confirm his
disability, provided, however, that in no event will Barnett be considered
disabled pursuant to any long term disability plan carried by the Company.
(b) In case of Barnett's death, this Agreement shall terminate and the
Company shall be obligated to pay to his estate, for the longer of what would
have been the remaining term of this Agreement or 2 years from the date of
death: (I) his Base Salary (as that may have been increased as provided
herein), and (ii) a pro rata portion of his incentive compensation or any other
payments which he may have earned pursuant to any benefit plan then in effect,
corresponding to the portion of the twelve month period which elapsed to the
date of death.
Any amounts payable by the Company to Barnett pursuant to paragraph (a) and
(b) shall be reduced by any payments made to Barnett on account of any Workers
Compensation benefits received by Barnett or long term disability insurance
payments made to Barnett pursuant to any disability insurance policies carried
by and paid for by the Company and in the case of death, by any death benefits
paid to Barnett's estate from any life insurance policy on his life carried by
and paid for by the Company.
8. Termination.
-----------
(a) Barnett's employment here under shall: (I) automatically terminate
upon the expiration of his term of employment or upon his death, and (ii) may
terminate at the option of the Company upon written notice to Barnett (a)
because of his fraud, misappropriation, or the like with respect to the Company;
(b) because of his disability as set forth in paragraph 7(a) herein, or (c) if
he shall have materially breached any of his covenants herein.
(b) If Barnett's employment is terminated by the Company for any reason
other than as set forth above, which termination can only occur by a 2/3 vote of
the Company's Board of Directors with Barnett not eligible to vote, he shall be
entitled to continue to receive his Base Salary (as that may have been increased
7
<PAGE>
as provided herein) and all employee benefits consistent with Section 89 of the
Internal Revenue Code of 1986, for the shorter of one year from the date of such
termination or what would have been the remaining term of the Agreement.
In the event of a termination of employment under this Paragraph 8(b),
Barnett shall not be under any obligation to seek other employment and there
shall not be any offset against amounts due Barnett under this Paragraph 8(b) on
account of any remuneration attributable to any subsequent employment that
Barnett may obtain; provided that any health or welfare benefits attributable to
--------
subsequent employment which Barnett may receive shall offset any obligation of
the Company to provide such benefits after termination of Barnett's employment
with the Company. Any amounts due Barnett under this Paragraph 8(b) are in the
nature of severance payments or liquidated damages, or both, and are not in the
nature of a penalty.
(c) If Barnett voluntarily terminates his employment hereunder, he shall
not be entitled to receive any compensation or benefits after the date of such
termination other than as may be required by law.
(d) Barnett agrees that with respect to any termination of his employment
here under, whether by the Company or by Barnett, he shall resign as an officer
of the Company and any of its subsidiaries.
9. Rights and Benefits Upon Termination Resulting From a Change in Control. In
-----------------------------------------------------------------------
the event of termination resulting from a Change in Control, Barnett shall be
entitled to the following:
(1) Options. Any unexercised options to purchase shares of the Company's
-------
Common Stock shall continue to be exercisable in accordance with their
terms and any unvested options to purchase shares of the Company's Common
Stock held by Barnett shall vest in full upon the occurrence of a Change in
Control and shall be exercisable in accordance with their terms.
(2) Severance Compensation.
----------------------
(a) a lump sum cash payment on the date of termination equal to one years
base salary (as that may have been increased as provided herein) and
the greater of his incentive compensation for the previous year or
$50,000.
(b) ( i ) his Base Salary (as that may have been increased as provided
herein), and (ii) his minimum incentive compensation or any other
payments which he could have earned pursuant to any benefit plan then
in effect, from the date of termination resulting from a Change in
Control to what would have been the remaining term of this agreement.
All other benefits and plans shall continue without modification for
the term of this Agreement.
8
<PAGE>
(3) Change in Control. For the purpose of this Agreement, a "Change in
-----------------
Control" shall be deemed to have occurred: If any "person," as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") other than a person or group of persons who are
affiliates (as such term is defined in Rule 12b-2 of the Rules and Regulations
promulgated under the Exchange Act) of the Company on the date hereof is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 33% or
more of the combined voting power of the Company's then outstanding securities;
if as the result of, or in connection with, any tender or exchange offer,
merger or other business combination, sale of assets or contested election, or
any combination of the foregoing transactions (a "Transaction") the persons who
were Directors of the Company immediately before the Transaction shall cease to
constitute a majority of the Board of the Company or any successor to the
Company; or ( c ) if there is a Change in Control of a nature that, in the
opinion of counsel for the Company, would be required to be reported in response
to Item 1 of Form 8-K under the Exchange Act, unless three-quarters of the Board
of Directors, as constituted immediately prior to the date of the Change in
Control, decide in their reasonable discretion that no Change in Control has
occurred, Barnett not being eligible to vote in his capacity as a Director.
10. Injunctive and Other Relief. Barnett and the Company recognize that the
---------------------------
services to be rendered under this Agreement by Barnett are special, unique, and
of extraordinary character, and that in the event of the breach of the
provisions of paragraph 6(a) or 6(b) herein, the Company will be without
adequate remedy at law and will therefore be entitled to specifically enforce
such restrictions by temporary or permanent injunctive or mandatory relief
obtained in an action or proceeding instituted in any court of competent
jurisdiction without the necessity of proving damages and without prejudice to
any other remedies which it may have at law or in equity.
11. Binding Agreement. This Agreement shall be binding upon, and inure to the
-----------------
benefit of, Barnett and the Company and their heirs, executors, administrators
and, successors and assigns. This Agreement, and Barnett's rights and
obligations here under, may not be assigned by Barnett.
12. Modification and Waiver.
-----------------------
(a) Amendment of Agreement. This Agreement may not be modified or amended
----------------------
except by an instrument in writing signed by the parties hereto.
(b) Waiver. No term or condition of this Agreement shall be deemed to
------
have been waived, nor shall there by any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
9
<PAGE>
not constitute a waiver of such term continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or condition
for the future or as to any act other than that specifically waived.
13. Notices. Any notice or other communication required or permitted to be
-------
given by any party hereto shall be given in writing either by (a) personal
delivery or, (b) by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
To Barnett: 2 Polaris Drive
Newark, Delaware 19711
To Company: AstroPower, Inc.
Solar Park
Newark, Delaware 19716-2000
ATTN: Secretary
or to such other address as may be designated in writing by the parties from
time to time during the term of this Agreement. All notices shall be effective
upon receipt after delivery in accordance with the above provisions.
14. Exhibits. All Exhibits attached hereto are hereby incorporated by
--------
reference into, and made a part of, this Agreement.
15. Provisions Separable. The provisions of this Agreement are independent of
--------------------
and separable from each other, and no provisions shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.
16. Entire Agreement. This Agreement contains the entire understanding among
----------------
the parties hereto with respect to the subject matter hereof, and supersedes the
Barnett Agreement, as well as prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written
except as herein contained.
17. Paragraph Headings. The paragraph headings in this Agreement are for
------------------
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
18. Governing Law. This Agreement has been executed and delivered in the State
-------------
of Delaware, and its validity, interpretation, performance, and enforcement
shall be governed by the laws of said State.
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereunto by its officers thereunto duly authorized,
and Barnett has signed this Agreement, all as of the day and year first above
written.
ATTEST: ASTROPOWER, INC,
BY
- -------------------------- -----------------------------
TITLE
-----------------------------
WITNESS:
- -------------------------- -----------------------------
Allen M. Barnett
11
<PAGE>
EXHIBIT 10.4
ASTROPOWER, INC.
Solar Park
Newark, Delaware 19716-2000
May 1, 1996
Dr. George W. Roland
255 Butterfly Lane
Montecito, California 93108-2455
Dear George:
We are pleased to offer you an agreement of employment (the "Agreement") as
follows:
1. EFFECTIVE DATE.
---------------
This Agreement will be effective as of May 1, 1996 ("Effective Date").
2. DUTIES.
-------
You shall be President and CEO of the Company's Solar Power Business
with overall responsibility and authority for the day-to-day operations of such
business and you shall perform such executive duties and assume such executive
and decision making responsibilities with regard to the business of the Company
as may be assigned to you from time to time by the Board of Directors of the
Company. You shall serve at the pleasure of the Board of Directors of the
Company. As used herein any action with respect to this Agreement and your
employment hereunder to be authorized or taken by the Board of Directors shall
be by a majority of the Board of Directors then in office.
3. COMPENSATION AND BENEFITS.
--------------------------
(a) Compensation.
------------
(1) Salary. Commencing as of the Effective Date hereof and
------
continuing throughout this Agreement, you will be compensated at the rate of
$155,000 per annum, which will be paid to you, in accordance with the payroll
practices of the Company.
(2) Bonus.
-----
(i) You shall be entitled to receive a bonus of $30,000
upon the closing of the first financing resulting in not less than $2 million
of gross proceeds to the
1
<PAGE>
Roland
Employment Agreement
May 1, 1996
(ii) You shall be entitled to a bonus for calendar year
1996 ranging from $0 to $50,000 measured against a set of performance goals to
be agreed upon by you and the Compensation Committee of the Board of Directors.
Such goals are to be established no later than 30 days from the execution of
this Agreement. Payment to you of any bonus due to you pursuant to the
foregoing shall be made within 20 days after the availability of the Company's
audited profit and loss statement for the year 1996 prepared in accordance with
generally accepted accounting principles consistently applied.
The Board of Directors of the Company (or a Compensation Committee thereof)
will review your salary and bonus from time to time not less than annually, and
may, but shall not be obligated to, award increases in salary and award bonuses
without the necessity of an express written amendment of this Agreement, so long
as such increases and/or bonuses are in writing and signed by a member of the
Board of Directors who has been so authorized by the Board of Directors.
(3) Granting of Stock Options. Because we feel that a key manager of
-------------------------
any business should have an owner's interest in the success of that business,
which is best measured by the long term increases in the value of that business,
in consideration of future services to be rendered to the Company by you, the
Company will enter into an agreement with you as of the date hereof with respect
to granting you options to acquire 250,000 shares of the Company's Common Stock,
subject to the following essential terms and conditions: The options will vest
and be exercisable as follows:
(i) Vesting.
-------
All of the options will vest upon the effective date of a
Registration Statement covering the Company's first bona fide, firm commitment,
public offering of Common Stock ("Public Offering") or if the Company merges or
consolidates into or with, or sells or transfers all or substantially all of its
assets to, or transfers all of its capital stock to, another corporation or
entity which is not an affiliate of the Company ("Sale"), provided that such
Public Offering or Sale results in gross proceeds to the Company of at least
$12,000,000, at a price per share of at least $7.50
2
<PAGE>
Roland
Employment Agreement
May 1, 1996
(as adjusted for stock splits, stock dividends, recapitalizations and similar
events); or if the holders of the Company's outstanding shares of Series A
Preferred Stock and Series B Preferred Stock agree to convert such shares into
shares of the Company's Common Stock notwithstanding that such Public Offering
or Sale results in a price per share of less than $7.50 and gross proceeds of
less than $12,000,000 (the "Public Offering").
If the Company terminates your employment within twelve month's prior to
such Public Offering or Sale and you were not terminated for Specified Cause,
you shall continue to be vested with respect to all your options upon the
effective date of the Registration Statement relating to the Public Offering or
the effective date of a Sale. If you voluntarily terminate your employment
prior to such Public Offering or Sale you shall forfeit all rights to your
options to purchase 250,000 shares.
(ii) Exercise Provisions
-------------------
Subject to the provisions of this Agreement relating to
termination for Specified Cause, all vested options will be exercisable at any
time and from time to time, in whole or in part at a price of $3 per share, (the
fair market value at May 1, 1996) as follows:
(a) for a period of two years from the completion of
the Public Offering or Sale if your employment with the Company was terminated
by the Company, other than for Specified Cause, within twelve months prior to
such Public Offering or Sale.
(b) for a period of seven years from the completion of
the Public Offering or Sale provided, you are an employee of the Company at the
time of such exercise.
(c) for a period equal to the lesser of two years from
the termination of your employment with the Company, or seven years from the
completion of the Public Offering or Sale provided, that you were an employee of
the Company at the time of the completion of the Public Offering or Sale and
that you were not terminated by the Company for Specified Cause.
3
<PAGE>
Roland
Employment Agreement
May 1, 1996
(iii) Anfi-dilution Provisions
------------------------
The option will contain anti-dilution provisions in the
event there is any change in the outstanding Common Stock by reason of a stock
dividend, split-up or reclassification and the aggregate number and kind of
shares available under the option and the option price shall be appropriately
adjusted by the Board of Directors of the Company.
(iv) Piggyback Registrations
-----------------------
You shall be entitled to unlimited piggyback registration
rights for a period of 2 years from the Public Offering.
(v) Prior Options
-------------
The qualified incentive stock options to purchase 80,000
shares of the Company's Common Stock provided for in the Company's letter to you
of May 25, 1995 shall continue in full force and effect in accordance with their
terms.
(b) Employee Benefit Plans. You will be eligible to participate in
----------------------
any employee benefit plans or programs of the Company as presently provided to
senior executives of the Company and as in effect from time to time during your
period of employment, subject to the requirements for eligibility and benefits
specified therein for all persons entitled to participate in any such plan or
plans.
(c) Vacation. You will be entitled to vacations in accordance with
--------
the Company vacation policy as in effect from time to time, but unused vacation
time may not be accrued and carried over to another period.
(d) Expenses. You will be paid or reimbursed by the Company for local
--------
commuting expenses and temporary living expenses to the extent and in the same
manner as you are presently being paid or reimbursed by the Company for such
expenses. The Company will also pay or reimburse you for a reasonable number of
round trips to California to be made by either you or your wife.
4
<PAGE>
Roland
Employment Agreement
May 1, 1996
4. TERMINATION.
------------
The Company will have the right to terminate your employment by
written notice for "Specified Cause". As used herein, the term for "Specified
Cause" means (i) the material misappropriation of assets of the Company or
perpetration of a fraud against the Company; (ii) the conviction of any crime
involving moral turpitude which constitutes a felony in the jurisdiction
involved and with respect to which appeals have been exhausted; (iii) habitual
intoxication which impairs the performance of your duties or illegal use of
habit forming substances; (iv) as defined in paragraph 8 herein, your
disability; or (v) the willful violation or breach of any material provision of
this Agreement. The Board of Directors of the Company will not terminate your
employment during the Term for "Specified Cause" as hereinabove defined in
subparagraphs (iii), (iv) or (v), unless (a) you have first received written
notice stating with specificity the nature of the breach of such provisions and
affording you an opportunity to correct the act or acts complained of within 30
days of the actual receipt of notice thereof by you, and (b) you have failed to
correct such act or acts, or, in the case of an act that cannot be corrected
within such 30 days, failed to commence and continue in good faith to correct
such act.
If the Board of Directors of the Company elects to terminate your
employment for any reason other than for Specified Cause, the Company shall be
obligated to pay you as severance 9 months salary, payable in accordance with
the regular payroll policies of the Company. In addition you shall receive any
accrued salary, vacation pay or other accrued payments.
5. COMPETITION AND CONFLICTS OF INTEREST.
--------------------------------------
While you are employed by the Company and after the termination of
your employment as set forth below in this paragraph 5, you shall not knowingly
act or conduct yourself to the detriment of the Company, its subsidiaries or
affiliates. Specifically, but without limitation, you shall not (1) knowingly
engage in competition with the Company in any of the businesses in which it may
have been engaged at any time during the period of your employment under this
Agreement, unless such
5
<PAGE>
Roland
Employment Agreement
May 1, 1996
business is discontinued, or (ii) knowingly directly or indirectly solicit,
raid, entice, induce, or approach any employee of the Company, or of any of its
subsidiaries or affiliates, to become employed by any other person, firm or
corporation. For this purpose, the phrase "engaging in competition" shall mean
directly or indirectly owning, managing, operating, joining, controlling or
participating in or being connected with, as an officer, employee, partner,
stockholder, consultant, advisor or otherwise, any business, individual,
partnership, firm, corporation or other entity which is at the time engaged
principally or significantly in a business which is at the time directly or
indirectly in competition with the business of the Company; provided, however
that nothing in this paragraph shall prohibit you from acquiring or holding any
issue of stock or securities of any such entity which has any securities listed
on a national securities exchange, or quoted in the daily listing of over the
counter market securities unless you and members of your immediate family
collectively own, directly or indirectly, more than 5% of any class of voting
securities of any such entity at any one time.
The foregoing restrictions shall be operative only in the event you
voluntarily terminate your employment prior to the completion of the Public
Offering or if your employment is terminated by the Company for specified Cause,
and they shall terminate at the expiration of six months from such termination
of your employment, unless you have been employed for less than six months in
which event they shall terminate at the expiration of that number of months
equal to the number of months you were employed by the Company.
6. RETURN OF MATERIALS.
-------------------
Upon the termination of your employment with the Company, regardless
of the date, cause or manner of such termination, you will return to the Company
all non-public printed and other materials furnished to you by the Company or
any customer of the Company, including, without limitation, all tangible
"Confidential Information" described in paragraph 7 below. Such return shall be
made as soon as practicable after the termination of your employment. In no
event will you retain or
6
<PAGE>
Roland
Employment Agreement
May 1, 1996
reproduce copies of any such non-public printed or other materials for your use
following the termination of your employment.
7. CONFIDENTIAL INFORMATION.
------------------------
In connection with your performance of services for the Company, you
may obtain knowledge of "Confidential Information", as hereinafter defined
relating to the business of the Company (or any of its subsidiaries or
affiliated companies). As used herein, "Confidential Information" means any
information or compilations of information (including, without limitation,
names, addresses or needs of customers of the Company) which is, or is designed
to be, used in the business of the Company or any of its subsidiaries or
affiliated companies or results from its (or their) research or development
activities. Except in the performance of services hereunder, you shall not
knowingly (a) publish any article with respect thereto; (b) remove from the
premises of the Company or aid in such removal, any such Confidential
Information (or reproduction of any such Confidential Information) or any
property or material related thereto (including information stored in
computerized reports or systems); or (c) sell, exchange or give away or
otherwise disclose or dispose of any such Confidential Information now or
hereafter owned by the Company whether or not the same shall or may have been
originated, discovered, or developed by you.
8. DISABILITY.
-----------
In the event you shall be unable to perform your duties hereunder by
virtue of illness or physical or mental incapacity or disability from any cause
or causes whatsoever for an aggregate period of six months within any 12 month
period, the Company shall have the right upon 30 days notice, in writing, to
terminate your employment hereunder, provided, however, that if prior to the
expiration of such 30 day notice you have resumed your duties on a full time
basis, you shall continue to be so employed and receive all compensation and
benefits due, but if within the three month period following your return to
full-time service you are absent by reason of the pre-existing cause of
7
<PAGE>
Roland
Employment Agreement
May 1, 1996
incapacity or disability for an aggregate of 30 days, the Company shall have the
right to terminate your employment forthwith. You agree that upon request of
the Company, you will submit to an appropriate medical examination by a doctor
designated by the Company and at its cost to confirm the existence of an illness
or physical or mental incapacity or disability.
9. LIFE INSURANCE.
--------------
(a) At any time during the term of this Agreement, the Company shall
have the right, but not the obligation, to insure your life for the sole benefit
of the Company. The amount of such insurance and the type of policy taken out
shall be determined by the Company and all premiums payable thereon shall be the
obligation of the Company. You shall have no interest in any such policy. You
agree to cooperate with the Company in taking out such insurance by submitting
to physical examination, by supplying all information required by the insurance
Company, and by executing all necessary documents, provided no financial
obligation is imposed upon you.
10. INDEMNIFICATION.
---------------
The Company shall, to the fullest extent permitted by Section 145 of
the General Corporation Law of the State of Delaware, as the same may be amended
and supplemented, indemnify you against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section.
11. NOTICES.
--------
All notices and other communications between you and the Company
related to this Agreement shall be in writing, and except as otherwise expressly
provide herein, shall be deemed to have been duly given when placed in the
United States mail by certified mail, return receipt request, postage prepaid,
addressed to such party as follows:
8
<PAGE>
Roland
Employee Agreement
May 1, 1996
As to the Company: Attn: Board of Directors
AstroPower, Inc.
Solar Park
Newark, Delaware 19716
Phone: (302) 366-0400
As to George W. Roland: 255 Butterfly Lane
Montecito, California 93108-2455
Either party may change his or its address (and in the case of the Company
the name of the person(s) to whose attention communications hereunder shall be
directed) from time to time by serving notice thereof upon the other party as
provided herein. The provisions of paragraphs 7 and 8 above shall survive the
termination of your employment with the Company regardless of the date, cause or
manner of such termination, and neither the termination of your employment nor
the termination of this Agreement shall impair or otherwise affect your
obligation to strictly observe the terms and conditions of paragraphs 6 and 7.
12. ENTIRE AGREEMENT.
-----------------
This letter contains the entire understanding and agreement by and
between the Company and you related to your employment by the Company and all
prior or contemporaneous oral or written agreements or instruments are merged
herein. No amendment to or modification of this Agreement shall be effective
unless the same is in writing and signed by you and the Company. No waiver by a
party to this Agreement of any breach by the other party of any provision of
this Agreement shall be deemed to be a waiver of any later or other breach or as
a waiver of any such or other provision of this Agreement.
13. INVALIDITY.
-----------
If any provision of this Agreement is declared invalid or
unenforceable as a matter of law, such invalidity or unenforceability shall not
affect or impair the validity or enforceability of any other provision of this
Agreement or the remainder of this Agreement as a whole.
9
<PAGE>
Roland
Employment Agreement
May 1, 1996
14. PARTIES IN INTEREST.
--------------------
Except as otherwise expressly provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon you and the Company,
and our respective legal representatives, successors and assigns, all as and to
the extent provided herein, and no other person shall acquire or have any right
under of by virtue of this Agreement.
15. LAW APPLICABLE.
--------------
Should any question arise at any time as to the validity,
construction, interpretation or performance of this Agreement it shall be
construed and enforced in accordance with the LAWS of the State of Delaware.
If the foregoing terms and conditions of employment are acceptable to you,
we would appreciate your signing both copies of this letter which are enclosed,
and retaining one copy for your file and returning the other copy to us for our
file.
We are all looking forward to a successful long-term business relationship.
Very truly yours,
ASTROPOWER, INC.
BY: /S/ ALLEN M. BARNETT
---------------------
Name: Allen M. Barnett
Title: President
ACCEPTED AND AGREED TO THIS
17 Day of May, 1996
BY: /S/ GEORGE W. ROLAND
---------------------
10
<PAGE>
EXHIBIT 10.5
Bonus Plan Proposal
for
Allen M. Barnett & George W. Roland
The purpose of this plan is twofold:
1. To define a bonus incentive plan for Allen and George such that their
total compensation is dependent in significant measure on the financial
performance of AstroPower; and
2. To provide equal incentive bonus to both Allen and George.
This proposal builds on the bonus incentives already established for George as
stated in his employment contract of May, 1996.
There shall be a bonus for 1997 ranging from $0 to $50,000 measured against the
following set of performance criteria:
1. Payment of one-third if the Product Revenue for 1997 in the P&L Plan of
2/4/97 ($10,020,459) is achieved. The bonus payable under this provision
will be $0 if only 80% of the plan is achieved and will scale
proportionately from 80% to 100%.
2. Payment of one-third scaled to the Net Profit for 1997 in the P&L Plan of
2/4/97 ($159,557). The bonus payable under this provision will be $0 if
only 50% of the plan is achieved and will scale proportionately from 50%
to 120%.
3. Payment of one-third if a total of at least 200 kW of Silicon-Film(TM)
product is shipped in 1997. This is three times that shipped in 1966
(66kW) and five times that shipped in 1997 to May 15th.
The bonus shall be payable within 30 days of the end of the fiscal year.
<PAGE>
EXHIBIT 10.6
AMENDED AND RESTATED LOAN AGREEMENT
between
MELLON BANK (DE), NATIONAL ASSOCIATION
and
ASTROPOWER, INC.
Dated as of November 24, 1997
<PAGE>
LOAN AGREEMENT BETWEEN MELLON BANK (DE), N.A. and
ASTROPOWER, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
I. DEFINITIONS..................................................... 1
-----------
II. CREDIT ACCOMMODATIONS........................................... 8
---------------------
2.1 The Line of Credit....................................... 8
2.2 Term Loan................................................ 9
2.4 Borrowing................................................ 10
2.5 Prepayment and Repayment................................. 10
2.6 Requirements of Law...................................... 10
III. SECURITY........................................................ 11
--------
3.1 Security Documents....................................... 11
3.2 Additional Documents..................................... 11
IV. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.................. 11
----------------------------------------------
4.1 Good Standing of the Borrower; Authorization............. 11
4.2 Compliance with Laws and Other Agreements................ 11
4.3 No Conflict; Governmental Approvals...................... 12
4.4 Financial and Other Information Regarding Borrower....... 12
4.5 Taxes.................................................... 12
4.6 Encumbrances and Guaranties.............................. 12
4.7 Material Adverse Changes................................. 13
4.8 Margin Securities........................................ 13
4.9 ERISA.................................................... 13
4.10 Pending Litigation....................................... 13
4.11 Valid, Binding and Enforceable........................... 13
4.12 Priority of Security Interests........................... 13
4.13 Environmental Matters.................................... 14
4.14 No Untrue Statements..................................... 14
V. CONDITIONS PRECEDENT TO THE BANK'S OBLIGATIONS.................. 14
----------------------------------------------
5.1 Documents to be Delivered by the Borrower at Closing..... 14
5.2 Conditions Precedent to Making Line of Credit Loans...... 15
VI. AFFIRMATIVE COVENANTS OF THE BORROWER........................... 16
-------------------------------------
6.1 Use of Proceeds.......................................... 16
6.2 Financial Statements..................................... 16
6.3 Ordinary Course of Business; Records..................... 17
6.4 Information for the Bank................................. 17
6.5 Insurance................................................ 17
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
6.6 Maintenance............................................. 18
6.7 Taxes................................................... 18
6.8 Leases.................................................. 18
6.9 Corporate Existence; Certain Rights; Laws............... 18
6.10 Notice of Litigation or Other Proceedings............... 18
6.11 Indebtedness............................................ 19
6.12 Notice of Events of Default............................. 19
6.13 ERISA................................................... 19
6.14 Deposit Accounts........................................ 19
6.15 Management.............................................. 19
6.16 Financial Covenants..................................... 19
6.17 Compliance with Environmental Laws...................... 19
6.18 Further Actions......................................... 19
VII. NEGATIVE COVENANTS............................................. 20
------------------
7.1 Fundamental Corporate Changes........................... 20
7.2 Indebtedness............................................ 20
7.3 Encumbrances............................................ 20
7.4 Guaranties.............................................. 21
7.5 Sales and Lease-Backs................................... 21
7.6 Loans, Investments...................................... 21
7.7 Change in Business...................................... 21
7.8 Capital Expenditures.................................... 21
7.9 Sale or Discount of Receivables......................... 21
7.10 Prepayment of Indebtedness.............................. 21
7.11 ERISA................................................... 22
7.12 Restricted Payments..................................... 22
7.13 Salary Limitations...................................... 22
7.14 Compliance with Federal Reserve Board Regulations....... 22
VIII. EVENTS OF DEFAULT....................................... 22
-----------------
8.1 Borrower's Failure to Pay............................... 22
8.2 Breach of Covenants or Conditions....................... 23
8.3 Defaults in Other Agreements............................ 23
8.4 Agreements Invalid...................................... 23
8.5 False Warranties; Breach of Representations............. 23
8.6 Judgments............................................... 23
8.7 Bankruptcy or Insolvency of the Borrower................ 23
IX. REMEDIES....................................................... 24
--------
9.1 Further Advances; Acceleration; Setoff.................. 24
9.2 Further Remedies; Confession of Judgment................ 25
X. MISCELLANEOUS.................................................. 26
-------------
10.1 Remedies Cumulative; No Waiver.......................... 26
10.2 Notices................................................. 26
10.3 Costs, Expenses and Attorneys' Fees..................... 27
10.4 Survival of Covenants................................... 27
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
10.5 Counterparts; Effectiveness............................. 27
10.6 Headings................................................ 28
10.7 Payment Due On A Day Other Than A Business Day.......... 28
10.8 Judicial Proceedings.................................... 28
10.9 Governing Law........................................... 28
10.10 Integration............................................. 28
10.11 Amendment and Waiver.................................... 28
10.12 Successors and Assigns.................................. 28
10.13 Severability of Provisions.............................. 29
10.14 Consent to Jurisdiction and Service of Process.......... 29
10.15 Indemnification......................................... 29
</TABLE>
(iii)
<PAGE>
LOAN AGREEMENT
--------------
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement"), dated as of
November 24, 1997, is between MELLON BANK (DE), N.A., a national banking
association (the "Bank"), and ASTROPOWER, INC., a Delaware corporation (the
"Borrower").
BACKGROUND
----------
A. The Bank is a national banking association with an office located
at 1735 Market Street, Philadelphia, Pennsylvania 19103.
B. The Borrower is a Delaware corporation with offices located at
Solar Park, Newark, Delaware 19716.
C. Prior to the date hereof, the Bank has provided to the Borrower a
line of credit and two term loan facilities pursuant to certain loan documents
including, without limitation, that certain Loan Agreement dated December 15,
1995, that certain Loan Agreement dated March 17, 1995, and that certain Loan
Agreement dated February 14, 1993 (collectively, and as amended from time to
time, the "Existing Loan Agreement").
D. The Borrower has requested the Bank to amend and restate the
Existing Loan Agreement to provide for an increase in Borrower's line of credit
and an increase and consolidation of the Borrower's two term loan facilities.
Under and subject to the terms of this Agreement, the Bank has agreed to this
request.
E. THIS AGREEMENT IS ISSUED IN ORDER TO AMEND, RESTATE AND EVIDENCE,
AND TO BE A SUBSTITUTE FOR, BUT NOT TO BE A PAYMENT, SATISFACTION, CANCELLATION
OR A NOVATION OF THE EXISTING LOAN AGREEMENT. THE SUBSTITUTION OF THIS AGREEMENT
FOR THE EXISTING LOAN AGREEMENT DOES NOT EXTINGUISH THE INDEBTEDNESS EVIDENCED
BY THE EXISTING LOAN AGREEMENT OR ANY PORTION THEREOF AND THE LIABILITIES OF THE
BORROWER THEREUNDER AND HEREUNDER ARE CONTINUOUS. EXCEPT TO THE EXTENT THE
PRINCIPAL AVAILABILITY UNDER THE BORROWER'S EXISTING LINE OF CREDIT AND TERM
LOAN FACILITIES IS INCREASED BY THE TERMS OF THIS AGREEMENT, THIS AGREEMENT DOES
NOT EVIDENCE ANY NEW ADVANCES OF CREDIT AND DOES NOT REFLECT ANY AGREEMENT BY
THE BANK FOR THE EXTENSION OF ANY ADDITIONAL CREDIT TO THE BORROWER.
ARTICLE 1.
-----------
DEFINITIONS
-----------
Terms used herein without definition that are defined in the Uniform
Commercial Code shall have the meanings ascribed to them therein, unless the
context requires otherwise. The following terms shall have the following
meanings in this Agreement:
"Account" shall have the meaning given to that term in the Uniform
Commercial
1
<PAGE>
Code and, in addition, shall include any right to payment for goods sold or
leased or services rendered which is evidenced by an instrument or chattel
paper.
"Affiliate" shall mean any Subsidiary of the Borrower and any Person
or entity that, now or hereafter, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common ownership or
control with the Borrower. For purposes of this definition, the terms "control,"
"controls" and "controlled" shall refer to the power to determine the management
or policies of a Person, whether resulting from an official position or capacity
with such Person, direct or indirect beneficial ownership of at least twenty
percent (20%) of the voting securities or other equity interests of such Person,
or otherwise.
"Agreement" shall mean this agreement, together with all exhibits,
amendments, modifications and supplements hereto as may be in effect from time
to time.
"Applicable Rate" shall mean: (i) for so long as neither of the
contingencies set forth in subparagraphs (ii) and (iii) hereof have occurred,
the Prime Rate plus one percent (1% per annum; (ii) if the Borrower realizes and
reports net income before taxes for its fiscal year ending as of December 31,
1997 of $500,000 or more, then as of the date of such reporting, the Prime Rate
plus three fourths of one percent ( 3/4%); or (iii) if the Borrower raises new
equity of at least $15,000,000 through an initial public offering, then as of
the date such new equity is received by the Company in full, the Prime Rate plus
one half of one percent ( 1/2%).
"Amended and Restated Line of Credit Note" shall have the meaning set
forth in Section 2.1 of this Agreement, together with all replacements,
amendments and renewals thereof.
"Amended and Restated Term Loan Note" shall have the meaning set forth
in Section 2.2 of this Agreement, together with all supplements, amendments and
renewals thereof.
"Assignment of Claims" shall mean that assignment by the Borrower to
the Bank, dated the date of this Agreement, in form and substance satisfactory
to the Bank, of claims of the Borrower upon the United States, as required
pursuant to Article III of this Agreement, together with all amendments,
modifications, exhibits and schedules thereto as may be in effect from time to
time.
"Bank" shall mean Mellon Bank (DE), N.A., together with its successors
and assigns.
"Borrower" shall mean AstroPower, Inc., a Delaware corporation,
together with its successors and assigns.
"Borrowing Base" shall mean, at any time, a dollar amount equal to the
sum of the following amounts as they exist at that time:
(a) eighty percent (80%) of all Qualified Accounts; and
(b) fifty percent (50%) of all Qualified Inventory valued in
accordance with GAAP.
"Business Day" shall mean any day upon which the Bank is open for
business at its
2
<PAGE>
main office in Philadelphia, Pennsylvania.
"Capital Lease" shall mean any lease of property which, in accordance
with GAAP, should be capitalized on the lessee's balance sheet.
"Capital Lease Obligation" shall mean the amount of the liability
which, according to GAAP, should be capitalized or disclosed with respect to a
Capital Lease.
"Closing" shall mean the execution and delivery to the Bank of all of
the documents and instruments required by the terms of this Agreement and the
closing of the transactions contemplated by this Agreement.
"Closing Date" shall mean the date on which the Closing takes place.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall have the meaning set forth in the Security
Agreement.
"Encumbrance" shall mean, as to any Person, any mortgage, lien,
pledge, adverse claim, charge, security interest or other encumbrance in or on,
or any interest or title of any vendor, lessor, lender to, or other secured
party of the Person under any conditional sale or other title retention
agreement or Capital Lease with respect to, any property or asset of the Person.
"Environmental Laws" shall mean the Federal Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S)(S) 9601,
et. seq., the Federal Resource Conservation and Recovery Act, 42 U.S.C. (S)(S)
- -- ---
6901 et. seq., the Hazardous Materials Transportation Act, 49 U.S.C. (S)(S)
-- ---
1801, et. seq., all other federal, state and local environmental or health laws
-- ===
applicable to the Borrower or its business, operations or assets now or
hereafter enacted, and all rules, regulations, orders and publications adopted
or promulgated pursuant thereto from time to time.
"ERISA" shall mean the federal Employee Retirement Income Security Act
of 1974, as amended.
"Event of Default" shall have the meaning set forth in Article VIII of
this Agreement.
"Financial Statements" shall have the meaning set forth in Section
4.4(a) of this Agreement.
"GAAP" shall mean generally accepted accounting principles, as in
effect at the time of application to the provisions hereof, and consistently
applied.
"Guaranty" shall mean any guaranty or agreement to be a surety or
other contingent liability (other than any endorsement for collection or deposit
in the ordinary course of business), direct or indirect, with respect to any
obligation of another Person.
"Hazardous Materials" shall mean all materials of any kind which are
flammable,
3
<PAGE>
explosive, toxic, radioactive or otherwise hazardous to animal or plant life or
the environment, including, without limitation, "hazardous wastes," "hazardous
substances" and "contaminants," as such terms are defined by Environmental Laws.
"Indebtedness" shall mean any obligation for borrowed money,
including, without limitation:
(a) any obligation owed for all or any part of the purchase
price of property or other assets or for the cost of property or other assets
constructed or of improvements thereto, other than accounts payable included in
current liabilities and incurred in respect of property purchased in the
ordinary course of business;
(b) any Capital Lease Obligation; and
(c) any reimbursement obligations and other obligations under
any letter of credit, currency swap agreement, interest rate swap, cap, collar
or floor agreement or other interest rate management devise, or any forward sale
or purchase agreement for foreign currencies.
"Intercreditor Agreement" shall mean that certain Intercreditor and
Lien Priority Agreement between the Bank and Corning Incorporated, dated August
19, 1997, together with all amendments, modifications, exhibits and schedules
thereto as may be in effect from time to time.
"Judgment" shall have the meaning set forth in Section 8.6 of this
Agreement.
"Landlord's Waivers" shall mean landlord's waivers, in form and
substance satisfactory to the Bank, by University of Delaware as owner(s) of
real property leased to the Borrower, as required pursuant to Article III of
this Agreement, together with all amendments, modifications, exhibits and
schedules thereto as may be in effect from time to time.
"Line of Credit" shall mean the line of credit from the Bank to the
Borrower established pursuant to Section 2.1 of this Agreement.
"Line of Credit Commitment" shall have the meaning set forth in
Section 2.1 of this Agreement.
"Line of Credit Loans" shall mean the loans made by the Bank to the
Borrower pursuant to the Line of Credit.
"Loan Documents" shall mean this Agreement, the Security Agreement,
the Notes, and all agreements, amendments, certificates, financing statements,
schedules, reports, notices, and exhibits now, prior to the date hereof or
hereafter executed or delivered in connection with any of the foregoing, as may
be in effect from time to time.
"Loans" shall mean the Line of Credit Loans and the Term Loan.
"Net Income" shall mean, for any period, the net income (before the
deduction of federal and state income taxes) of the Borrower, determined in
accordance with GAAP,
4
<PAGE>
excluding:
(a) the proceeds of any insurance policy;
(b) any gain or loss arising from:
(1) the sale or other disposition of any assets (other than
Current Assets);
(2) any write-up of assets; or
(3) the acquisition of outstanding securities representing
Indebtedness of the Borrower;
(c) any amount representing any interest in the undistributed
earnings of any Person;
(d) any earnings, prior to the date of acquisition, of any
Person acquired in any manner;
(e) any earnings of a successor to or transferee of the assets
of the Borrower prior to becoming such successor or transferee;
(f) any deferred credit (or amortization of a deferred credit)
arising from the acquisition of any Person; and
(g) any other item constituting an extraordinary gain or loss
under GAAP.
"Notes" shall mean the Amended and Restated Term Loan Note and the
Amended and Restated Line of Credit Note, and all replacements, amendments,
extensions and renewals thereof.
"Obligations" shall mean the obligations of the Borrower:
(a) To pay the principal, interest, commitment fees and any
other liabilities of the Borrower to the Bank under this Agreement and the other
Loan Documents in accordance with the terms thereof;
(b) To satisfy all of the other direct or indirect liabilities
of the Borrower to the Bank, whether hereunder or otherwise, whether now
existing or hereafter incurred, whether or not evidenced by any note or other
instrument, matured or unmatured, direct, absolute or contingent, joint or
several, including any extensions, modifications, renewals thereof and
substitutions therefor;
(c) To repay the Bank all amounts advanced by the Bank hereunder
or otherwise on behalf of the Borrower, including, but without limitation,
advances for principal or interest payments to prior secured parties, mortgagors
or lienors, or for taxes, levies, insurance, rent, wages, repairs to or
maintenance or storage of any Collateral; and
5
<PAGE>
(d) To reimburse the Bank, on demand, for all of the Bank's
expenses and costs, including the reasonable fees and expenses of its counsel,
in connection with the negotiation, preparation, administration, amendment,
modification, or enforcement of this Agreement and the documents required
hereunder, including all amounts payable under Section 10.3 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, court or governmental or political subdivision or agency thereof.
"Prime Rate" shall mean the floating annual rate of interest that is
designated from time to time by the Bank as the "Prime Rate" and is used by the
Bank as a reference based with respect to interest rates charged to borrowers.
The determination and statement of the Prime Rate shall not in any way preclude
the Bank from making loans to other borrowers at rates which are higher or lower
than the Prime Rate.
"Qualified Account" shall mean each Account which meets all of the
following criteria:
(a) The Account arose from a bona fide outright sale of goods by
the Borrower, or for services performed by the Borrower, under an enforceable
contract, within the United States for a Person located within the United States
(or elsewhere if accompanied by an irrevocable letter of credit reasonably
acceptable to the Bank issued in favor of the Borrower at the request of such
Person), and such goods have been shipped to the appropriate account debtor, or
the sale has otherwise been consummated, or the services have been performed for
the appropriate account debtor in accordance with such contract;
(b) The title of the Borrower to the Account, and, except as to
the account debtor, to any goods to be sold or leased in connection with the
Account, is absolute and is not subject to any prior assignment or Encumbrance;
(c) The amount of the Account shown on the books of the Borrower
and on any invoice or statement delivered to the Bank is owing to the Borrower
and no partial payment has been made thereon by any Person;
(d) The Account is not a contra account and is not subject to
any claim of reduction, counterclaim, set-off, recoupment, or any claim for
credits, allowances or adjustments by the account debtor because of returned,
inferior or damaged goods or unsatisfactory services, or for any other reason,
except for customary discounts allowed for prompt payment;
(e) The Account is not an account that the Bank, in its
discretion, has reasonably and in good faith determined does not constitute a
Qualified Account in whole or in part, as described in a notice of such
determination given by the Bank to the Borrower ;
(f) The account debtor has not returned or refused to accept or
retain any of the goods or services from the sale or furnishing of which the
Account arose;
(g) The Account is due and payable not more than sixty (60) days
from the
6
<PAGE>
date of the invoice therefor;
(h) The age of the Account, calculated from the date of the
invoice therefor, is not more than ninety (90) days;
(i) Not more than fifty percent (50%) of all Accounts payable to
the Borrower by the account debtor are older than ninety (90) days from the
invoice date.
(j) The Account does not arise out of a contract with, or order
from, an account debtor that, by its terms, forbids or makes the assignment of
that Account to the Bank void or unenforceable;
(k) The Borrower has not received any note, trade acceptance,
draft or other instrument or chattel paper with respect to or in payment of the
Account, and, if any such instrument is received, the Borrower will immediately
notify the Bank and at the latter's request, endorse or assign and deliver the
same to the Bank;
(l) The Borrower has not received any notice of the dissolution,
termination of existence, insolvency, business failure, appointment of a
receiver for any part of the property of, assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy or the commencement of
any proceeding under any bankruptcy or insolvency laws by or against the account
debtor; and
(m) The account debtor is not an Affiliate of the Borrower.
"Qualified Inventory" shall mean inventory of the Borrower which meets
all of the following criteria:
(a) The inventory consists of either raw materials or finished
goods and does not include any work-in-process;
(b) The inventory is readily saleable in a bona fide arm's
length transaction, or is usable, in the ordinary course of business of the
Borrower;
(c) The title of the Borrower to the inventory is absolute and
is not subject to any prior assignment or Encumbrance, except the security
interest of the Bank; and
(d) If the inventory is located on leased premises, a landlord's
waiver satisfactory in form and substance to the Bank shall have been delivered
to the Bank for such premises.
"Security Agreement" shall mean that certain Amended and Restated
Security Agreement between the Borrower as debtor and the Bank as secured party,
dated the same date as this Agreement, in form and substance satisfactory to the
Bank, by which the Borrower shall reaffirm and grant security interests in
certain of its assets to the Bank, as required pursuant to Article III hereof,
together with all amendments, modifications, exhibits, and schedules thereto as
may be in effect from time to time.
7
<PAGE>
"Subsidiary" shall mean, as to any designated corporation, any
corporation, the outstanding shares of which having sufficient voting power (not
depending on the happening of a contingency) to elect at least a majority of the
members of its board of directors, are at the time owned by the designated
corporation.
"Term Loan" shall mean the loan made by the Bank to the Borrower
pursuant to Section 2.2 hereof.
"Termination Date" shall have the meaning set forth in Section 2.1 of
this Agreement.
"Uniform Commercial Code" shall mean the Uniform Commercial Code of
Delaware as codified at 6 Del. C. (S) 1-102 et seq., as in effect on the date of
-- ---
this Agreement.
ARTICLE 2.
-----------
CREDIT ACCOMMODATIONS
---------------------
2.1 The Line of Credit. The Bank shall make available to the
------------------
Borrower, commencing on the Closing Date, a Line of Credit in the maximum
principal amount of $600,000 (the "Line of Credit Commitment"), upon the terms
and conditions set forth herein.
(a) Generally. At any time and from time to time during the
---------
period commencing on the Closing Date and ending on the earlier to occur of (i)
at the Banks option, the occurrence of an Event of Default hereunder, or (ii)
March 31, 1999 (as the case may be, the "Termination Date"), upon the request of
the Borrower, the Bank shall provide to the Borrower a loan or loans in
multiples of One Thousand Dollars ($1,000), which shall be used by the Borrower
for working capital. The Borrower may use the Line of Credit during the period
referred to in the preceding sentence by borrowing, repaying and reborrowing in
accordance with the terms of this Agreement. The aggregate outstanding principal
under the Line of Credit at any time shall not exceed the lesser of (i) the Line
of Credit Commitment or (ii) the Borrowing Base as at that time. If, at any
time, the aggregate outstanding principal under the Line of Credit exceeds the
Borrowing Base, then, without any requirement of demand or notice from the Bank,
the Borrower shall immediately pay to the Bank the amount of such excess. Upon
the Termination Date, unless the same has been extended by written agreement
between the Bank and the Borrower, the Bank's commitment to make Line of Credit
Loans shall terminate, all Line of Credit Loans shall immediately mature and all
Obligations under the Line of Credit Loans shall be immediately due and payable
in full.
(b) [INTENTIONALLY LEFT BLANK]
(c) Interest. Interest shall accrue on all loans outstanding
--------
under the Line of Credit at an annual rate equal at all times to the Applicable
Rate. Interest on the aggregate
8
<PAGE>
outstanding principal under the Line of Credit shall be payable monthly on the
first day of each month commencing with the month immediately following that in
which the first advance under the Line of Credit is made, and shall change
simultaneously and automatically upon any change in the Prime Rate.
(d) Line of Credit Note. The obligations of the Borrower to
-------------------
repay the aggregate outstanding principal under the Line of Credit and to pay
accrued interest thereon shall be evidenced by an amended and restated
promissory note, in form and substance satisfactory to the Bank, to be executed
and delivered to the Bank concurrently with the execution and delivery of this
Agreement (the "Line of Credit Note").
2.2 Term Loan.
---------
(a) Generally. The Bank shall make available to the Borrower on
---------
the Closing Date a term loan (the "Term Loan") in the amount of $737,000, for
the purpose of consolidating the balances on the Borrower's existing term loan
facilities and funding the purchase of certain equipment as approved in writing
by the Bank. The Borrower shall repay the outstanding principal of the Term Loan
in consecutive, monthly installments of $17,500 on the first day of each month
beginning December 1, 1997 with the full amount of any outstanding principal,
interest and costs due on the Termination Date.
(b) Interest. Interest shall accrue on the outstanding principal
--------
of the Term Loan at the Applicable Rate and shall be payable monthly on the
first day of each month beginning December 1, 1997.
(c) Term Loan Note. The obligations of the Borrower to repay the
--------------
aggregate outstanding principal under the Term Loan and to pay accrued interest
thereon shall be evidenced by an amended and restated promissory note, in form
and substance satisfactory to the Bank, to be executed and delivered to the Bank
concurrently with the execution and delivery of this Agreement (the "Term Loan
Note").
2.3 Payments and Computations. All amounts payable by the Borrower to
-------------------------
the Bank under this Agreement or the Notes shall be paid directly to the Bank in
immediately available funds at the address of the Bank set forth in Section 10.2
hereof or at such other address of which the Bank shall give notice to the
Borrower pursuant to Section 10.2 hereof. The Bank is authorized to charge any
account of the Borrower at the Bank for any payment due by the Borrower under
this Agreement or any of the Notes. All computations of interest hereunder shall
be made by the Bank on the basis of a year of 360 days for the actual number of
days elapsed. All payments under each of the Notes shall be applied first to the
payment of interest due and payable thereunder and then to the reduction of the
outstanding principal balance thereof.
2.4 Borrowing. The Borrower shall notify the Bank of each proposed
---------
borrowing under the Line of Credit not later than 2:30 p.m., Philadelphia,
Pennsylvania time on the day of the proposed borrowing.
2.5 Prepayment and Repayment. The Borrower may make payments and
------------------------
prepayments of the Loans in whole or in part at any time and from time to time
without penalty or premium upon notification to the Bank not later than 2:30
p.m. Philadelphia, Pennsylvania time on
9
<PAGE>
the date of the proposed payment or prepayment. All prepayments of the
outstanding principal of the Term Loan shall be applied to installments of
principal due thereunder in the inverse order of their maturity.
2.6 Requirements of Law. In the event that after the date hereof, any
-------------------
change in any law, regulation or treaty or in the interpretation or application
thereof or compliance by the Bank with any request or directive (whether or not
having the force of law) from any central bank or other governmental authority,
agency or instrumentality:
(a) subjects or shall subject the Bank to any tax of any kind
whatsoever with respect to this Agreement, the loans made hereunder or the
issuance or maintenance of the Letters of Credit hereunder, or changes the basis
of taxation of payments to the Bank of principal, commitment fees, interest or
any other amount payable hereunder (except for changes in the rate of tax on the
overall net income of the Bank);
(b) imposes, modifies or holds or shall impose, modify or hold
applicable any reserve, special deposit, compulsory loan or similar requirement
against assets held by, or deposits or other liabilities in or for the account
of, advances or loans by, or other credit extended by, or any other acquisition
of funds by, any office of the Bank, which reserve, special deposit, compulsory
loan or similar requirement is not otherwise included in determination of the
interest rate hereunder;
(c) imposes or shall impose on the Bank any other condition; and
the result of any of the foregoing is to, directly or indirectly, increase the
cost to the Bank of making, renewing or maintaining advances or extensions of
credit or issuing or maintaining Letters of Credit or to reduce any amount
receivable thereunder then, in any such case, the Borrower shall promptly pay
the Bank, upon its demand, any additional amounts necessary to compensate the
Bank for such additional cost or reduced amount receivable. If the Bank becomes
entitled to claim any additional amounts pursuant to this subsection, it shall
promptly notify the Borrower of the event by reason of which it has become so
entitled. The good faith determination as to any additional amounts payable
pursuant to the foregoing sentence by the Bank shall be conclusive in the
absence of manifest error.
ARTICLE 3.
----------
SECURITY
--------
3.1 Security Documents. As security for the prompt payment,
------------------
performance, satisfaction and discharge when due of all the Obligations, the
Borrower shall execute and deliver or shall cause to be executed and delivered
to the Bank, concurrently with the execution of this Agreement, the Security
Agreement.
3.2 Additional Documents. The Borrower shall execute and deliver
--------------------
and/or cause to be executed and delivered, concurrently with the execution of
this Agreement, the Landlord's Waivers.
ARTICLE 4.
----------
10
<PAGE>
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
----------------------------------------------
In order to induce the Bank to execute and deliver this Agreement and
to make the Loans available to the Borrower, the Borrower represents and
warrants to the Bank that, as of the date hereof:
4.1 Good Standing of the Borrower; Authorization. The Borrower is
--------------------------------------------
duly incorporated, organized and existing and in good standing in the State of
Delaware and is duly qualified as a foreign corporation and authorized to do
business in all other jurisdictions wherein the nature of its business or
property makes such qualification necessary, and has the corporate power to own
its properties and to carry on its business as now conducted. The execution,
delivery and performance of this Agreement, and the Loan Documents have been
duly authorized by all necessary corporate proceedings on the part of the
Borrower.
4.2 Compliance with Laws and Other Agreements. The Borrower is in
-----------------------------------------
compliance with all laws, rules, regulations, judgments, decrees, orders,
agreements and requirements which affect in any material way the Borrower, its
assets or the operation of its business and has not received, and has no
knowledge of, any order or notice of any governmental investigation or of any
violation or claim of violation of any law, regulation, judgment, decree, order,
agreement, or other governmental requirement.
4.3 No Conflict; Governmental Approvals. The execution, delivery, and
-----------------------------------
performance of this Agreement and each of the Loan Documents will not (i)
conflict with, violate, constitute a default under, or result in a breach of any
provision of any applicable law, rule, regulation, judgment, decree, order,
instrument or other agreement, or (ii) conflict with or result in a breach of
any provision of the certificate of incorporation or by-laws of the Borrower. No
authorization, permit, consent or approval of or other action by, and no filing,
registration or declaration with, any governmental authority or regulatory body
is required to be obtained or made by the Borrower for the due execution,
delivery and performance of this Agreement or any of the Loan Documents, except
such as have been duly obtained or made prior to the Closing Date and are in
full force and effect as of the Closing Date (copies of which have been
delivered to the Bank on or before the Closing Date).
4.4 Financial and Other Information Regarding Borrower.
--------------------------------------------------
(a) The Borrower has delivered to the Bank true, correct and
complete copies of the balance sheets of the Borrower as of December 31, 1996,
and related statements of income for the period then ended, together with notes
thereto and the unqualified opinion thereon, dated as of December 31, 1996. The
Borrower has also delivered to the Bank true, correct and complete copies of the
balance sheets of the Borrower as of September 30, 1997, and related statements
of income for the period then ended. Those financial statements ("Financial
Statements") present fairly the financial position of the Borrower as of the
designated date, and the results of the operations of the Borrower for the
period then ended in conformity with GAAP.
(b) The Borrower has no Indebtedness other than as shown in the
most recent Financial Statements.
11
<PAGE>
(c) The Borrower has no "investment" (as such term is defined
under GAAP), whether by stock purchase, capital contribution, loan, advance,
purchase of property or otherwise, in any Person, other than as shown in the
most recent Financial Statements.
4.5 Taxes. The Borrower is not delinquent in payment of any income,
-----
property or other tax, except for any delinquency in the payment of a tax which
is contested in good faith by the Borrower and for which appropriate reserves
have been established in accordance with GAAP.
4.6 Encumbrances and Guaranties.
---------------------------
(a) All properties and assets of the Borrower are owned by the
Borrower free and clear of all Encumbrances except (i) those for taxes or other
government charges either not yet delinquent or the nonpayment of which is
permitted by Section 4.5 of this Agreement; (ii) those not arising in connection
with Indebtedness that do not materially impair the use or value of the
properties or assets of the Borrower in the conduct of its businesses; (iii)
Encumbrances whose release and termination is evidenced by the Borrower's
delivery to the Bank of appropriate documents on the Closing Date; (iv) the Loan
Documents and Encumbrances otherwise permitted under the Security Agreement and
the Mortgages; and (v) Encumbrances disclosed on Schedule 4.6 hereof.
(b) The Borrower is not obligated under any Guaranty.
4.7 Material Adverse Changes. Since September 30, 1997, there has not
------------------------
been any material adverse change in the business, operations, properties or
financial position of the Borrower. The Borrower does not know of any fact
(other than matters of a general economic or political nature) which materially
adversely affects, or, so far as the Borrower can now reasonably foresee, will
materially adversely affect, the business, operations, properties or financial
position of the Borrower or the performance by the Borrower of its obligations
under this Agreement and the other Loan Documents.
4.8 Margin Securities. The assets of the Borrower do not include any
-----------------
"margin securities" within the meaning of Regulations G or U of the Board of
Governors of the Federal Reserve System (12 C.F.R. 207, 221), and the Borrower
does not have any present intention of acquiring any margin security.
4.9 ERISA. The provisions of each employee benefit plan as defined in
-----
Section 3(3) of ERISA ("Plan") maintained by the Borrower complies with all
applicable requirements of ERISA and of the Code, and with all applicable
rulings and regulations issued under the provisions of ERISA and the Code
setting forth those requirements. No reportable event, as defined in Section
4043 of ERISA, has occurred with respect to any Plan; no Plan to which Section
4021 of ERISA applies has been terminated; no Plan has incurred any liability to
PBGC as provided in Section 4062, 4063 and 4064 of ERISA; no Plan has been
involved in any prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code; and there are no unfunded liabilities with
respect to any Plan which are not disclosed in the Financial Statements.
4.10 Pending Litigation. There are no actions, suits, proceedings or
------------------
investigations
12
<PAGE>
pending, or, to the knowledge of the Borrower, threatened against or affecting
the Borrower before any court, arbitrator or administrative or governmental body
which, in the aggregate, might adversely affect any action taken or to be taken
by the Borrower under this Agreement and the other Loan Documents or which, in
the aggregate, might materially adversely affect the business, operations,
properties or financial position of the Borrower, or the ability of the Borrower
to perform its obligations under this Agreement and the other Loan Documents.
4.11 Valid, Binding and Enforceable. This Agreement and the Loan
------------------------------
Documents have been duly and validly executed and delivered by the parties
thereto (other than the Bank) and constitute the valid and legally binding
obligations of such parties enforceable in accordance with their respective
terms, except as enforcement of this Agreement and the other Loan Documents may
be limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights and except as
enforcement is subject to general equitable principles.
4.12 Priority of Security Interests. The Security Agreement, upon the
------------------------------
filing of financing statements in the appropriate governmental offices and/or in
light of the financing statements already on file with such offices, will create
valid first perfected security interests in the personal property of the
Borrower described therein as collateral for all the Obligations subject to no
prior Encumbrances except as set forth on Schedule 4.12 attached hereto and by
reference made a part hereof.
4.13 Environmental Matters.
---------------------
(a) The Borrower has performed all of its obligations under, has
obtained all necessary approvals, permits, authorizations and other consents
required by, and is not in material violation of, any Environmental Laws.
(b) The Borrower has not received any notice, citation, summons,
directive, order or other communication, written or oral, from, and the Borrower
has no knowledge of the filing or giving of any such notice, citation, summons,
directive, order or other communication by, any governmental or quasi-
governmental authority or agency or any other Person concerning the presence,
generation, treatment, storage, transportation, transfer, disposal, release or
other handling of any Hazardous Materials within, on, from, related to, or
affecting any real property owned or occupied by the Borrower.
(c) To the best of the Borrower's knowledge, after reasonable
inquiry, no real property owned or occupied by the Borrower has ever been used,
either by the Borrower or any of its predecessors in interest, to generate,
treat, store, transport, transfer, dispose of, release or otherwise handle any
Hazardous Material in violation of any applicable Environmental Laws.
(d) To the best of the Borrower's knowledge, after due
inspection, there are no Hazardous Materials within, on or under any real
property owned or occupied by the Borrower in violation of any applicable
Environmental Laws.
4.14 No Untrue Statements. Neither this Agreement, the Loan Documents
--------------------
nor any other document, certificate or statement furnished or to be furnished by
the Borrower or by any other party to the Bank in connection herewith contains,
or at the time of delivery will contain,
13
<PAGE>
any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements contained herein and
therein not misleading.
ARTICLE 5.
----------
CONDITIONS PRECEDENT TO THE BANK'S OBLIGATIONS
----------------------------------------------
The Bank's obligations hereunder are conditioned upon the satisfaction
by the Borrower of the following conditions precedent:
5.1 Documents to be Delivered by the Borrower at Closing. The
----------------------------------------------------
Borrower shall deliver or cause to be delivered to the Bank at the Closing the
following:
(a) This Agreement duly executed by the Borrower;
(b) The Notes duly executed by the Borrower;
(c) The Security Agreement duly executed by the Borrower,
together with such Uniform Commercial Code financing statements and other
documents as the Bank may reasonably require to be executed by the Borrower;
(d) Evidence of the Borrower's having complied with those
covenants regarding insurance as are contained in this Agreement and the other
Loan Documents;
(e) A certificate of the Secretary or an Assistant Secretary of
the Borrower dated the Closing Date including (i) resolutions duly adopted by
the Borrower authorizing the transactions under the Loan Documents; (ii) a copy
of the by-laws of the Borrower; (iii) evidence of the incumbency and signature
of the officers executing on its behalf any of the Loan Documents and any other
document to be delivered pursuant to any such documents, together with evidence
of the incumbency of such Secretary or Assistant Secretary; (iv) a copy,
certified by the Delaware Secretary of State, as of the most recent date
practicable, of the Borrower's Articles and Certificate of Incorporation,
together with the certification of the Secretary or Assistant Secretary of the
Borrower as of the Closing Date that such Articles and Certificate of
Incorporation have not been amended since the date of the aforesaid
certification by the Secretary of State; and (v) certificates of authority or
good standing for the Borrower from its jurisdiction of incorporation and any
other jurisdiction where the Borrower is qualified to do business;
(f) A copy of each and every authorization, permit, consent, and
approval of and other action by, and notice to and filing with, every
governmental authority and regulatory body which is required to be obtained or
made by the Borrower for the due execution, delivery and performance of this
Agreement and the other Loan Documents; and
(g) The opinion of Opton, Handler, Feiler, & Landau dated as of
Closing Date, in form and substance reasonably satisfactory to the Bank and its
counsel.
5.2 Conditions Precedent to Making Line of Credit Loans. The Bank
---------------------------------------------------
shall not be obligated to make any Line of Credit Loans hereunder unless:
14
<PAGE>
(a) As of the date of the proposed advance, no Event of Default has
occurred and is continuing and no event has occurred and is continuing which,
with the giving of notice or lapse of time, or both, would constitute an Event
of Default;
(b) The representations and warranties contained in Article IV are
true and correct on the date of the proposed advance, except that the
representations and warranties in Section 4.4 shall refer to the financial
statements most recently supplied to the Bank pursuant to Section 6.2 of this
Agreement; and
(c) No material adverse change has occurred in the financial condition
of the Borrower since the date hereof; and
(d) The Borrower has delivered to the Bank, upon the Bank's request, a
certificate executed by the chief executive officer of the Borrower confirming
the statements made in paragraphs (a), (b), and (c) above.
ARTICLE 6.
-----------
AFFIRMATIVE COVENANTS OF THE BORROWER
-------------------------------------
The Borrower hereby covenants and agrees that from the date hereof and
until satisfaction in full of the Obligations, unless the Bank shall otherwise
consent in writing, the Borrower shall do the following:
6.1 Use of Proceeds. Use the proceeds of the borrowings hereunder only for
---------------
the purposes specified in Article 2 of this Agreement.
6.2 Financial Statements. Furnish to the Bank:
--------------------
(a) within one hundred twenty (120) days after the end of each fiscal
year, financial statements of the Borrower, including a balance sheet, statement
of income, statement of cash flows and such other financial statements of the
Borrower in such detail as the Bank may reasonably request. Such financial
statements shall present fairly the financial condition of the Borrower as of
the close of such year and the results of its operations and its cash flows
during such year, in accordance with GAAP, and shall be audited and accompanied
by the opinion, satisfactory in form and substance to the Bank, of an
independent public accountant acceptable to the Bank, and a certificate signed
by such accountant to the effect that such accountant does not know of any Event
of Default specified in Article VIII hereof, or of the occurrence and
continuance of any event which, with the giving of notice or lapse of time, or
both, would constitute such an Event of Default, or, if such accountant shall
have obtained knowledge of any such Event of Default or other event, specifying
the nature thereof;
(b) within thirty days after the end of each month, a balance sheet,
statement of income, statement of cash flows, accounts payable aging, accounts
receivable aging and report (including summary of domestic, foreign, and U.S.
Government receivables), inventory report (including all major categories of
inventory) and such other financial statements and information in such detail as
the Bank may reasonably request, which shall present fairly the financial
position of the Borrower as of the end of such month and the results of its
operations
15
<PAGE>
and a statement of cash flows during such month, in accordance with GAAP, as
well as a covenant compliance certificate in form satisfactory to the Bank all
as certified by the chief financial officer of the Borrower;
(c) within thirty (30) days after the end of each month, a certificate
in form satisfactory to the Bank executed by the chief financial officer or the
controller of the Borrower as to the amounts of the Qualified Accounts,
Qualified Inventory, Borrowing Base, outstanding principal of Line of Credit
Loans and availability under the Line of Credit as of the end of that month.
(d) on each Monday until the Obligations are paid in full or the
Borrower has completed its initial public offering raising $15,000,000 at a
minimum (the "AstroPower IPO"), a copy of the Borrower's projected rolling
weekly Cash Receipts and Disbursements Schedule ("CRDS") in form and substance
satisfactory to the Bank for the succeeding two months ending;
(e) on each Monday until the Obligations are paid in full or
completion of the AstroPower IPO, the Borrower's actual CRDS performance for the
immediately preceding week ending Friday, showing actual performance for such
week as compared with the projected performance for such week, as well as a
rolling CRDS as projected for the succeeding eight (8) weeks; and
(f) Promptly, from time to time, copies of all annual reports and
other securities reports and filings made by the Borrower with the Securities
and Exchange Commission on any comparable body of a foreign securities exchange.
6.3 Ordinary Course of Business; Records. Conduct its business only in
------------------------------------
the ordinary course and keep accurate and complete books and records of its
assets, liabilities and operations consistent with sound business practices and
in accordance with GAAP.
6.4 Information for the Bank. Make available during normal business hours
------------------------
for inspection by the Bank or its designated representatives any of its books
and records when reasonably requested by the Bank to do so, and furnish the Bank
any information reasonably requested regarding its operations, business affairs
and financial condition within a reasonable time after the Bank gives notice of
its request therefor. In particular, and without limiting the foregoing, the
Borrower shall permit, during normal business hours, representatives of the
Bank's Audit Department to make such periodic inspections of the Borrower's
books, records and assets as such representatives deem necessary and proper.
6.5 Insurance. Carry at all times in financially sound and reputable
---------
insurers: (a) all workers' compensation or similar insurance as may be required
under the laws of any jurisdiction; (b) public liability insurance against
claims for personal injury, death or property damage suffered upon, in or about
any premises occupied by it or occurring as a result of the ownership,
maintenance or operation by it of any automobile, truck or other vehicle or as a
result of the use of products manufactured, constructed or sold by it, or
services rendered by it; (c) business interruption insurance covering risk of
loss as a result of the cessation for all or any part of one year of any
substantial part of the business conducted by it; (d) hazard insurance against
such other hazards as are usually insured against by business entities of
established reputation engaged
16
<PAGE>
in like businesses and similarly situated, including, without limitation, fire
(flood, if applicable) and extended coverage; and (e) such other insurance as
the Bank may from time to time reasonably require, and pay all premiums on the
policies for all such insurance when and as they become due and take all other
actions necessary to maintain such policies in full force and effect at all
times. The insurance specified in Subsections (b), (c) and (d) shall be
maintained in such amounts (and with co-insurance and deductibles) as such
insurance is usually carried by business entities of established reputation
engaged in the same or similar business and similarly situated. The Borrower
shall from time to time, upon request by the Bank, promptly furnish or cause to
be furnished to the Bank evidence, in form and substance satisfactory to the
Bank, of the maintenance of all insurance required to be maintained hereby,
including, without limitation, such originals or copies as the Bank may request
of policies, certificates of insurance, riders and endorsements relating to such
insurance and proof of premium payments. The Borrower shall cause each hazard
insurance policy to provide, and the insurer issuing each such policy to certify
to the Bank, that (a) if such insurance be proposed to be canceled or materially
changed for any reason whatsoever, such insurer will promptly notify the Bank
and such cancellation or change shall not be effective for 30 days after receipt
by the Bank of such notice, unless the effect of such change is to extend or
increase coverage under the policy; (b) the Bank shall be named as lender loss
payee with respect to personal property and mortgagee with respect to real
property; and (c) the Bank will have the right, at its election, to remedy any
default in the payment of premiums within 30 days of notice from the insurer of
such default. The foregoing covenants regarding insurance are in addition to,
and not intended to supersede, those covenants regarding insurance set forth in
the Security Agreement. In the event and to the extent of any conflict between
the provisions of this Agreement and the provisions of the Security Agreement
regarding the insuring of Collateral, the provisions of the Security Agreement
with respect thereto shall govern.
6.6 Maintenance. Maintain its equipment, real property and other
-----------
properties in good condition and repair (normal wear and tear excepted) and pay
and discharge the cost of repairs thereto or maintenance thereof.
6.7 Taxes. Pay all taxes, assessments, charges and levies imposed upon it
-----
or on any of its property, or which it is required to withhold and pay over, and
provide evidence of payment thereto to the Bank if the Bank so requests, except
where contested in good faith by lawful and appropriate proceedings and where
adequate reserves therefor have been set aside on its books; provided, however,
that the Borrower shall pay all such taxes, assessments, charges and levies
forthwith whenever foreclosure on any lien which attaches or security therefor
appears imminent.
6.8 Leases. Pay all rent or other sums required by every lease to which
------
the Borrower is a party as the same becomes due and payable, perform all its
obligations as tenant or lessee thereunder except where contested in good faith
by lawful and appropriate proceedings and where adequate reserves therefor have
been set aside; and keep all such leases at all times in full force and effect
during the terms thereof.
6.9 Corporate Existence; Certain Rights; Laws. Do all things necessary to
-----------------------------------------
preserve and keep in full force and effect in each jurisdiction in which it
conducts business the business existence, licenses, permits, rights, patents,
trademarks, trade names and franchises of the Borrower and comply with all
present and future laws, ordinances, rules, regulations judgments, orders and
decrees which affect in any material way the Borrower, its assets or the
operation of its business.
17
<PAGE>
6.10 Notice of Litigation or Other Proceedings. Give immediate notice to
-----------------------------------------
the Bank of (i) the existence of any dispute, (ii) the institution of any
litigation, administrative proceeding or governmental investigation involving
the Borrower or (iii) the entry of any judgment, decree or order against or
involving the Borrower, any of which might materially and adversely affect the
operation, financial condition, property or business of the Borrower or affect
the enforceability of this Agreement or any of the other Loan Documents.
6.11 Indebtedness. Pay or cause to be paid when due (or within applicable
------------
grace periods) all Indebtedness of the Borrower.
6.12 Notice of Events of Default. Give immediate notice to the Bank if
---------------------------
the Borrower becomes aware of the occurrence of any Event of Default, or of any
fact, condition or event which with the giving of notice or lapse of time, or
both, would be an Event of Default, or of the failure of the Borrower to observe
or perform any of the conditions or covenants to be observed or performed by it
under this Agreement or any of the other loan Documents.
6.13 ERISA. Maintain each Plan in compliance with all applicable
-----
requirements of ERISA and of the Code and with all applicable rulings and
regulations issued under the provisions of ERISA and of the Code. As promptly as
practicable (but in any event not later than ten days) after the Borrower
receives from the PBGC a notice of intent to terminate any Plan or to appoint a
trustee to administer any Plan, after the Borrower has notified the PBGC that
any reportable event, as defined in Section 4043 of ERISA, with respect to any
Plan has occurred, or after the Borrower has provided a notice of intent to
terminate to each affected party, as defined for purposes of Section 4041(a)(2)
of ERISA, with respect to any Plan, a certificate of the chief executive officer
of the Borrower shall be furnished to the Bank setting forth the details with
respect to the events resulting in such reportable event, as the case may be,
and the action which the Borrower proposes to take with respect thereto,
together with a copy of the notice of intent to terminate or to appoint a
trustee from the PBGC, of the notice of such reportable event or of the
Borrower's notice of intent to terminate, as the case may be.
6.14 Deposit Accounts. Use the Bank as its sole depository institution
----------------
unless otherwise agreed in writing by the Bank; and notify the Bank, in writing
and on a continuing basis, of all deposit accounts and certificates of deposit
(including the numbers thereof) maintained with or purchased from other banks
and other financial institutions.
6.15 Management. Furnish to Bank within five (5) days of any election or
----------
appointment of officers or directors, written notice of any change in the
persons who from time to time become officers and directors of Borrower and
retain executive management personnel at all times satisfactory to the Bank, it
being understood that management, which consists of Thomas Stiner and Allen
Barnett as of the date hereof, is satisfactory.
6.16 Financial Covenants. Observe the financial covenants set forth on
-------------------
Schedule 6.16 attached hereto and made a part hereof.
6.17 Compliance with Environmental Laws. Comply fully with all
----------------------------------
Environmental Laws and not use any property which it owns or occupies to
generate, treat, store, transport, transfer, dispose of, release or otherwise
handle any Hazardous Material, except in compliance with all Environmental Laws.
18
<PAGE>
6.18 Further Actions. Cooperate and join with the Bank, at its own
---------------
expense, in taking all such further actions as the Bank, in its sole judgment,
shall deem necessary to effectuate the provisions of the Loan Documents and to
perfect or continue the perfected status of all Encumbrances granted to the Bank
pursuant to the Loan Documents, including, without limitation, the execution,
delivery and filing of financing statements, amendments thereto and continuation
statements, the delivery of chattel paper, documents or instruments to the Bank,
and the notation of Encumbrances in favor of the Bank on certificates of title.
ARTICLE 7.
----------
NEGATIVE COVENANTS
------------------
The Borrower hereby covenants and agrees that from the Closing Date until
satisfaction in full of the Obligations, it will not do any one or more of the
following without first obtaining the written consent of the Bank:
7.1 Fundamental Corporate Changes.
-----------------------------
(a) Change its name, enter into or effect any merger, consolidation,
share exchange, division, conversion, reclassification, recapitalization,
reorganization or other transaction of like effect, or dissolve;
(b) Sell, transfer, lease or otherwise dispose of all or (except in
the ordinary course of business) any material part of its assets or any
significant product line or process;
(c) Have any Subsidiary.
7.2 Indebtedness. Incur, create, assume or have any Indebtedness except:
------------
(a) The Loans; and
(b) Indebtedness as disclosed in the Intercreditor Agreement.
7.3 Encumbrances. Create or allow any Encumbrances to be on or otherwise
------------
affect any of its property or assets except:
(a) Encumbrances in favor of the Bank;
(b) Encumbrances for taxes, assessments and other governmental
charges incurred in the ordinary course of business which are not yet due and
payable;
(c) Pledges or deposits made in the ordinary course of business to
secure payment of workmen's compensation or to participate in any fund in
connection with workmen's compensation, unemployment insurance or other social
security obligations;
(d) Good faith pledges or deposits made in the ordinary course of
business to secure performance of tenders, contracts (other than for the
repayment of Indebtedness) or leases or to secure statutory obligations or
surety, appeal, indemnity, performance or other similar
19
<PAGE>
bonds required in the ordinary course of business;
(e) Liens of mechanics, materialmen, warehousemen, carriers or other
similar liens, securing obligations incurred in the ordinary course of business
that are not yet due and payable;
(f) Encumbrances securing Indebtedness permitted under Section 7.2
(b), provided that (i) no other covenants of this Agreement are thereby violated
and (ii) no equipment other than the equipment so acquired secures such
Indebtedness;
(g) Encumbrances, if any, otherwise expressly permitted by the
Security Agreement or the Mortgage;
(h) Encumbrances disclosed in the Financial Statements; and
(i) Encumbrances disclosed in the Intercreditor Agreement.
7.4 Guaranties. Directly or indirectly make any Guaranty.
----------
7.5 Sales and Lease-Backs. Sell, transfer or otherwise dispose of any
---------------------
property, real or personal, now owned or hereafter acquired, with the intention
of directly or indirectly taking back a lease on such property.
7.6 Loans, Investments. Purchase, invest in, or make any loan in the
------------------
nature of an investment in the stocks, bonds, notes or other securities or
evidence of Indebtedness of any person, or make any loan or advance to or for
the benefit of any Person except for (i) short-term obligations of the Treasury
of the United States of America; (ii) certificates of deposit issued by banks
with shareholders' equity of at least $100,000,000; (iii) repurchase agreements
not exceeding 29 days in duration issued by banks with shareholders' equity of
at least $100,000,000; (iv) notes and other instruments generally known as
"commercial paper" which arise out of current transactions, which have
maturities at the time of issuance thereof not exceeding nine months and which
have, at the time of such purchase, investment or other acquisition, the highest
credit rating of Standard & Poor's Corporation or Moody's Investors Service,
Inc.
7.7 Change in Business. Discontinue any substantial part, or change the
------------------
nature of, the business of the Borrower, or enter into any new business
unrelated to the present business conducted by the Borrower.
7.8 Sale or Discount of Receivables. Sell any notes receivable or
-------------------------------
accounts receivable, with or without recourse.
7.9 Prepayment of Indebtedness. Make any voluntary prepayments of
--------------------------
Indebtedness other than the Loans.
7.10 ERISA.
-----
(a) Terminate any Plan maintained by the Borrower to which Section
4021 of ERISA applies;
20
<PAGE>
(b) Allow the value of the benefits guaranteed under Title IV of
ERISA to exceed the value of assets allocable to such benefits;
(c) Incur a withdrawal liability within the meaning of Section 4201
of ERISA.
7.11 Restricted Payments. Declare or pay any dividend, or make any
-------------------
distributions of cash or property, to holders of any shares of its capital
stock, or, directly or indirectly, redeem or otherwise acquire any such shares
or any option, warrant or right to acquire any such shares.
7.12 Compliance with Federal Reserve Board Regulations. (i) Use any of the
-------------------------------------------------
proceeds of the Loans, directly or indirectly, for the purposes of purchasing or
carrying any "margin security" within the meaning of Regulations G or U of the
Board of Governors of the Federal Reserve System (12 C.F.R. 207, 221), (ii) use
any of the proceeds of the Loans, directly or indirectly, for the purpose of
purchasing, carrying or trading in any securities under such circumstances as to
involve the Borrower in a violation of Regulation X of such Board (12 C.F.R.
224), or (iii) take or permit to be taken any other action which would result in
the Loans or the consummation of any of the other transactions contemplated
hereby being violative of such regulations or any other regulation of such
Board.
ARTICLE 8.
----------
EVENTS OF DEFAULT
-----------------
An event of default ("Event of Default") under this Agreement shall be
deemed to exist if any one or more of the following events occurs and is
continuing, whatever the reason therefor:
8.1 Borrower's Failure to Pay. The Borrower fails to pay any amount of
-------------------------
principal interest, fees or other sums as and when due under this Agreement or
any of the Loan Documents, or any other Obligations, whether upon stated
maturity, acceleration, or otherwise.
8.2 Breach of Covenants or Conditions. The Borrower fails to perform or
---------------------------------
observe any term, covenant, agreement or condition in this Agreement or any of
the other Loan Documents or is in violation of or non-compliance with any
provision of this Agreement or any of the Loan Documents, and has not remedied
and fully cured such non-performance, non-observance, violation of or non-
compliance within twenty one (21) days after the Bank has given written notice
thereof to the Borrower; provided, however, that during such twenty one (21) day
period the Bank's obligations to make further Loans to the Borrower shall be
suspended.
8.3 Defaults in Other Agreements. The Borrower fails to perform or
----------------------------
observe any term, covenant, agreement or condition contained in, or there shall
occur any default under or as defined in, any other agreement applicable to the
Borrower or by which the Borrower is bound involving a material liability of the
Borrower which shall not be remedied within the period of time (if any) within
which such other agreement permits such default to be remedied, unless such
default is waived by the other party thereto or excused as a matter of law.
8.4 Agreements Invalid. The validity, binding nature of, or
------------------
enforceability of any
21
<PAGE>
material term or provision of any of the Loan Documents is disputed by, on
behalf of, or in the right or name of the Borrower or any material term or
provision of any such Loan Document is found or declared to be invalid,
avoidable, or non-enforceable by any court of competent jurisdiction.
8.5 False Warranties; Breach of Representations. Any warranty or
-------------------------------------------
representation made by the Borrower in this Agreement or any other Loan Document
or in any certificate or other writing delivered under or pursuant to this
Agreement or any other Loan Document, or in connection with any provision of
this Agreement or related to the transactions contemplated hereby shall prove to
have been false or incorrect or breached in any material respect on the date as
of which made.
8.6 Judgments. A final judgment or judgments is entered, or an order or
---------
orders of any judicial authority or governmental entity is issued against the
Borrower (such judgment(s) and order(s) hereinafter collectively referred to as
"Judgment") (i) for payment of money, which Judgment, in the aggregate, exceeds
Fifty Thousand Dollars ($50,000.00) outstanding at any one time; or (ii) for
injunctive or declaratory relief which would have a material adverse effect on
the ability of the Borrower to conduct its business, and such Judgment is not
discharged or execution thereon or enforcement thereof stayed pending appeal,
within thirty days after entry or issuance thereof, or, in the event of such a
stay, such Judgment is not discharged within thirty days after such stay
expires.
8.7 Bankruptcy or Insolvency of the Borrower
----------------------------------------
(a) The Borrower becomes insolvent, or generally fails to pay, or is
generally unable to pay, or admits in writing its inability to pay, its debts as
they become due or applies for, consents to, or acquiesces in, the appointment
of a trustee, receiver or other custodian for the Borrower or a substantial part
of its property, or makes a general assignment for the benefit of creditors.
(b) The Borrower commences any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any state or federal bankruptcy
or insolvency law, or any dissolution or liquidation proceeding.
(c) Any bankruptcy, reorganization, debt arrangement, or other case
or proceeding under any state or federal bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is involuntarily commenced against or in
respect of the Borrower, or an order for relief is entered in any such
proceeding.
(d) A trustee, receiver, or other custodian is appointed for the
Borrower or a substantial part of the Borrower's property.
ARTICLE 9.
----------
REMEDIES
--------
9.1 Further Advances; Acceleration; Setoff.
--------------------------------------
22
<PAGE>
(a) Upon the occurrence of any one or more Events of Default, the
Bank may, in its sole discretion, refuse to make any further advances or Loans
to the Borrower;
(b) Automatically upon the occurrence of any Event of Default
described in Section 8.7 of this Agreement, and in the sole discretion of the
Bank upon the occurrence of any other Event of Default, the unpaid principal
balance of all Loans, all interest and fees accrued and unpaid thereon, and all
other amounts and Obligations payable by the Borrower under this Agreement and
the other Loan Documents shall immediately become due and payable in full, all
without protest, presentment, demand, or further notice of any kind to the
Borrower, all of which are expressly waived by the Borrower;
(c) If any of the Obligations shall be due and payable or any one or
more Events of Default shall have occurred, the Bank shall have the right, in
addition to all other rights and remedies available to it, without notice to the
Borrower, to apply toward and set-off against and apply to the then unpaid
balance of the Notes and the other Obligations any items or funds held by the
Bank, any and all deposits (whether general or special, time or demand, matured
or unmatured, fixed or contingent, liquidated or unliquidated) now or hereafter
maintained by the Borrower for its own account with the Bank, and any other
indebtedness at any time held or owing by the Bank to or for the credit or the
account of the Borrower. For such purpose the Bank shall have, and the Borrower
hereby grants to the Bank, a first lien on all such deposits. The Bank is hereby
authorized to charge any such account or indebtedness for any amounts due to the
Bank. Such right of set-off shall exist whether or not the Bank shall have made
any demand under this Agreement, the Notes or any other Loan Document and
whether or not the Notes and the other Obligations are matured or unmatured. The
Borrower hereby confirms the Bank's lien on such accounts and right of set-off,
and nothing in this Agreement shall be deemed any waiver or prohibition of such
lien and right of set-off.
9.2 Further Remedies; Confession of Judgment.
----------------------------------------
(a) Upon the occurrence of any one or more Events of Default, the
Bank may proceed to protect and enforce its rights under this Agreement and the
other Loan Documents by exercising such remedies as are available to the Bank in
respect thereof under applicable law, either by suit in equity or by action at
law, or both, whether for specific performance of any provision contained in
this Agreement or any of the other Loan Documents or in aid of the exercise of
any power granted in this Agreement or any of the other Loan Documents.
(b) THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE BANK,
BY ITS ATTORNEY, OR BY THE CLERK OF ANY COURT OF RECORD IN ANY JURISDICTION
WHERE PERMITTED BY LAW, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY
TIME THEREAFTER, TO APPEAR FOR THE BORROWER AND CONFESS AND ENTER JUDGMENT
AGAINST IT IN FAVOR OF THE BANK IN ANY JURISDICTION IN WHICH THE BORROWER OR ANY
OF ITS PROPERTY IS LOCATED FOR THE AMOUNT OF ALL OBLIGATIONS, TOGETHER WITH
COSTS OF SUIT AND WITH ACTUAL COLLECTION COSTS (INCLUDING REASONABLE ATTORNEYS'
FEES), WITH OR WITHOUT DECLARATION, WITHOUT STAY OF EXECUTION AND WITH RELEASE
OF ALL ERRORS AND THE RIGHT TO ISSUE EXECUTION FORTHWITH, AND FOR DOING SO
23
<PAGE>
THIS AGREEMENT OR A COPY VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT.
THE BORROWER HEREBY WAIVES AND RELEASES ALL RELIEF FROM ANY AND ALL
APPRAISEMENT, STAY OR EXEMPTION LAW OF ANY STATE NOW IN FORCE OR HEREAFTER
ENACTED. THIS AUTHORITY AND POWER SHALL NOT BE EXHAUSTED BY THE EXERCISE
THEREOF, AND SHALL CONTINUE UNTIL THE OBLIGATIONS ARE FULLY PAID, PERFORMED,
DISCHARGED AND SATISFIED.
BEING FULLY AWARE OF ITS RIGHTS TO PRIOR NOTICE AND HEARING ON THE VALIDITY
OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST IT BY THE BANK UNDER THIS AGREEMENT
BEFORE JUDGMENT CAN BE ENTERED AND BEFORE ASSETS OF THE BORROWER CAN BE
GARNISHED AND ATTACHED, THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THESE RIGHTS AND EXPRESSLY AGREES AND CONSENTS TO THE BANK,
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, ENTERING
JUDGMENT AGAINST THE BORROWER BY CONFESSION AND ATTACHING AND GARNISHING THE
BANK ACCOUNTS AND OTHER ASSETS OF THE BORROWER, WITHOUT PRIOR NOTICE OR
OPPORTUNITY FOR A HEARING. THE BORROWER ACKNOWLEDGES THAT IT HAS HAD THE
ASSISTANCE OF LEGAL COUNSEL IN THE REVIEW AND EXECUTION OF THIS AGREEMENT AND
FURTHER ACKNOWLEDGES THAT THE MEANING AND EFFECT OF THE FOREGOING PROVISIONS
CONCERNING CONFESSION OF JUDGMENT HAVE BEEN FULLY EXPLAINED TO THE BORROWER BY
SUCH COUNSEL.
ARTICLE 10.
-----------
MISCELLANEOUS
-------------
10.1 Remedies Cumulative; No Waiver. The rights, powers and remedies of
------------------------------
the Bank provided in this Agreement and the other Loan Documents are cumulative
and not exclusive of any right, power or remedy provided by law or equity, and
no failure or delay on the part of the Bank in the exercise of any right, power,
or remedy shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or remedy preclude other or further exercise
thereof, or the exercise of any other right, power or remedy.
10.2 Notices. Every notice and communication under this Agreement or any
-------
of the other Loan Documents shall be in writing and shall be given by either (i)
hand-delivery, (ii) first class mail (postage prepaid), (iii) reliable overnight
commercial courier (charges prepaid), or (iv) telecopy or other means of
electronic transmission, if confirmed promptly by any of the methods specified
in clauses (i), (ii) and (iii) of this sentence, to the following addresses:
To the Borrower:
AstroPower, Inc.
Solar Park
Newark, DE 19716-2000
Attention: Thomas J. Stiner, Vice President
Telecopy: 302-368-6474
24
<PAGE>
With a copy to:
Peter Landau, Esquire
Opton, Handler, Feiler & Landau
52 Vanderbilt Avenue
New York, NY 10017
Telecopy: (212) 972-2219
To the Bank:
Mellon Bank, N.A.
1735 Market Street
7th Floor
Philadelphia, PA 19103
Attention: Liam Brickley, Vice President
Telecopier No.: (215) 553-4560
With a copy to:
Duane, Morris & Heckscher LLP
One Liberty Place, 41st Floor
Philadelphia, PA 19103
Attention: James J. Holman, Esquire
Telecopier Number: 215-979-1020
Notice given by telecopy or other means of electronic transmission shall be
deemed to have been given and received when sent. Notice by overnight courier
shall be deemed to have been given and received on the date scheduled for
delivery. Notice by mail shall be deemed to have been given and received three
(3) calendar days after the date first deposited in the United States Mail.
Notice by hand delivery shall be deemed to have been given and received upon
delivery. A party may change its address by giving written notice to the other
party as specified herein.
10.3 Costs, Expenses and Attorneys' Fees. Whether or not the transactions
-----------------------------------
contemplated by this Agreement and the other Loan Documents are fully
consummated, the Borrower shall promptly pay (or reimburse, as the Bank may
elect) all costs and expenses which the Bank has incurred or may hereafter incur
in connection with the negotiation, preparation,
25
<PAGE>
reproduction, interpretation and enforcement of this Agreement and the other
Loan Documents, the collection of all amounts due hereunder and thereunder, and
any amendment, modification, consent or waiver which may be hereafter requested
by the Borrower or otherwise required. Such costs and expenses shall include,
without limitation, the fees and disbursements of counsel to the Bank, the costs
of appraisal fees, searches of public records, costs of filing and recording
documents with public offices, and similar costs and expenses incurred by the
Bank. Upon the occurrence of an Event of Default, such costs shall also include
the fees of any accountants, consultants or other professionals retained by the
Bank. The Borrower's reimbursement obligations under this Section shall survive
any termination of this Agreement.
10.4 Survival of Covenants. This Agreement and all covenants, agreements,
---------------------
representations and warranties made herein and in any certificates delivered
pursuant hereto shall survive the making of the Loans and the execution and
delivery of the Notes and, subject to the provisions of 10.15 hereof, shall
continue in full force and effect until all of the Obligations have been fully
paid, performed, satisfied and discharged.
10.5 Counterparts; Effectiveness. This Agreement may be executed in any
---------------------------
number of counterparts and by the different parties on separate counterparts.
Each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement. This
Agreement shall be deemed to have been executed and delivered when the Bank has
received counterparts hereof executed by all parties listed on the signature
page(s) hereto.
10.6 Headings. The headings of sections have been included herein for
--------
convenience only and shall not be considered in interpreting this Agreement.
10.7 Payment Due On A Day Other Than A Business Day. If any payment due or
----------------------------------------------
action to be taken under this Agreement or any Loan Document falls due or is
required to be taken on a day which is not a Business Day, such payment or
action shall be made or taken on the next succeeding Business Day and such
extended time shall be included in the computation of interest.
10.8 Judicial Proceedings. Each party to this Agreement agrees that any
--------------------
suit, action or proceeding, whether claim or counterclaim, brought or instituted
by any party hereto or any successor or assign of any party, on or with respect
to this Agreement or any of the other Loan Documents or the dealings of the
parties with respect hereto, or thereto, shall be tried only by a court and not
by a jury. EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. Further, each
party waives any right it may have to claim or recover, in any such suit, action
or proceeding, any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. THE BORROWER ACKNOWLEDGES
AND AGREES THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT
AND THAT THE BANK WOULD NOT EXTEND CREDIT TO THE BORROWER IF THE WAIVERS SET
FORTH IN THIS SECTION WERE NOT A PART OF THIS AGREEMENT.
10.9 Governing Law. This Agreement shall be construed in accordance with
-------------
and governed by the internal laws of the State of Delaware.
26
<PAGE>
10.10 Integration. This Agreement and the other Loan Documents constitute
-----------
the sole agreement of the parties with respect to the subject matter hereof and
thereof and supersede all oral negotiations and prior writings with respect to
the subject matter hereof and thereof.
10.11 Amendment and Waiver. No amendment of this Agreement, and no waiver
--------------------
of any one or more of the provisions hereof shall be effective unless set forth
in writing and signed by the parties hereto.
10.12 Successors and Assigns.
----------------------
(a) Generally. This Agreement (i) shall be binding upon the Borrower
---------
and the Bank and their respective successors and assigns, and (ii) shall inure
to the benefit of the Borrower and the Bank and its respective successors and
assigns, provided, however, that the Borrower may not assign its rights
hereunder or any interest herein without the prior written consent of the Bank,
and any such assignment or attempted assignment by the Borrower shall be void
and of no effect with respect to the Bank.
(b) Participations. The Bank may from time to time sell or otherwise
--------------
grant participations in the Loans and the Notes, and the holder of any such
participation, if the participation agreement so provides, (i) shall, with
respect to its participation, be entitled to all of the rights of the Bank and
(ii) may exercise any and all rights of setoff or banker's lien with respect
thereto, in each case as fully as though the Borrower were directly indebted to
the holder of such participation in the amount of such participation. The Bank
may disclose to prospective participants such information regarding the
Borrower's affairs as the Bank possesses. The Bank shall give notice to the
Borrower of the grant of such participations; however, the failure to give such
notice shall not affect any of the Bank's rights hereunder.
10.13 Severability of Provisions. Any provision in this Agreement that is
--------------------------
held to be inoperative, unenforceable, voidable, or invalid in any jurisdiction
shall, as to that jurisdiction, be ineffective, unenforceable, void or invalid
without affecting the remaining provisions, and to this end the provisions of
this Agreement are declared to be severable.
10.14 Consent to Jurisdiction and Service of Process. The Borrower
----------------------------------------------
irrevocably appoints each and every officer of the Borrower as its attorneys
upon whom may be served, by regular or certified mail at the address set forth
in Section 10.2 hereof, any notice, process or pleading in any action or
proceeding against it arising out of or in connection with this Agreement or any
of the other Loan Documents; and the Borrower hereby (i) consents that any
action or proceeding against it be commenced and maintained in any court within
the State of Delaware or in the United States District Court for the District of
Delaware by service of process on any such officer; (ii) agrees that the courts
of the State of Delaware and the United States District Court for the District
of Delaware shall have jurisdiction with respect to the subject matter hereof
and the person of the Borrower and the Collateral, and (iii) waives any
objection that such Borrower may now or hereafter have as to the venue of any
such suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. Notwithstanding the foregoing, the Bank, in its absolute
discretion may also initiate proceedings in the courts of any other jurisdiction
in which the Borrower may be found or in which any of its properties or the
Collateral may be located.
27
<PAGE>
10.15 Indemnification
---------------
(a) If, after receipt of any payment of all or any part of the
Obligations, the Bank is compelled to surrender such payment to any Person or
entity for any reason (including, without limitation, a determination that such
payment is void or voidable as a preference or fraudulent conveyance, an
impermissible setoff, or a diversion of trust funds), then this Agreement and
the other Loan Documents shall continue in full force and effect, and the
Borrower shall be liable for, and shall indemnify, defend and hold harmless the
Bank with respect to the full amount so surrendered.
(b) The Borrower shall indemnify, defend and hold harmless the Bank
with respect to any and all claims, expenses, demands, losses, costs, fines or
liabilities of any kind, including reasonable attorneys' fees and costs, arising
from or in any way related to (i) acts or conduct of the Borrower under,
pursuant to or related to this Agreement and the other Loan Documents, (ii)
Borrower's breach or violation of any representation, warranty, covenant or
undertaking contained in this Agreement or the other Loan Documents, and (iii)
Borrower's failure to comply with any or all laws, statutes, ordinances,
governmental rules, regulations or standards, whether federal, state, or local,
or court or administrative orders or decrees, including without limitation those
resulting from any Hazardous Materials or dangerous environmental condition
within, on, from, related to or affecting any real property owned or occupied by
the Borrower, unless resulting from the acts or conduct of the Bank constituting
gross negligence or willful misconduct.
(c) The provisions of this section shall survive the termination of
this Agreement and the other Loan Documents and shall be and remain effective
notwithstanding the payment of the Obligations, the cancellation of any of the
Notes, the release of any Encumbrance securing the Obligations or any other
action which the Bank may have taken in reliance upon its receipt of such
payment. Any cancellation of any of the Notes, release of any Encumbrance or
other such action shall be deemed to have been conditioned upon any payment of
the Obligations having become final and irrevocable.
28
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their duly authorized officers on the date first above written.
MELLON BANK (DE),
NATIONAL ASSOCIATION
By:_______________________________
Liam Brickley
Vice President
Mellon Bank (DE), N.A.
ATTEST: ASTROPOWER, INC.
By:_______________________________
Secretary Name:_____________________________
Title:____________________________
29
<PAGE>
Schedule 6.16
FINANCIAL COVENANTS
-------------------
This Schedule is a part of the Amended and Restated Loan Agreement dated
November 24, 1997 by and between Mellon Bank (DE), N.A. and AstroPower, Inc.
Until such time as the Borrower has received net equity proceeds of not less
than $15,000,000 from an initial public offering of its common stock (the
"AstroPower IPO"):
A. Tangible Net Worth. The Borrower shall have a Tangible Net Worth at
------------------
the end of each calendar quarter of not less than:
(i) $3,250,000 for the quarter ending December 31, 1997;
(ii) $3,000,000 for the quarter ending March 31, 1998;
(iii) $2,850,000 for the quarter ending June 30, 1998;
(iv) $2,850,000 for the quarter ending September 30, 1998; and
(v) $2,950,000 for the quarter ending December 31, 1998 and each
quarter thereafter.
B. Ratio of Liabilities to Tangible Net Worth. The Borrower shall have a
-------------------------------------------
ratio of Total Liabilities to Tangible Net Worth at the end of each calendar
quarter of not more than:
(i) 3.25:1 for the quarter ending December 31, 1997;
(ii) 3.5:1 for the quarter ending March 31, 1998;
(iii) 3.75:1 for the quarter ending June 30, 1998;
(iv) 3.75:1 for the quarter ending September 30, 1998; and
(v) 3.5:1 for the quarter ending December 31, 1998 and each
quarter thereafter.
C. Cash Flow Coverage. As of the end of each fiscal quarter, the
-------------------
Borrower shall have a ratio of Cash Flow for the four quarters then-ended to
Debt Service for the four quarters then-ended of not less than 1.20.
Following the AstroPower IPO the foregoing financial covenants shall be reset as
follows:
A. Tangible Net Worth. The Borrower shall have a Tangible Net Worth at
------------------
all times not less than $18,000,000.
B. Ratio of Liabilities to Tangible Net Worth. The Borrower shall have a
-------------------------------------------
ratio of Liabilities to Tangible Net Worth at all times equal to .70:1
C. Cash Flow Coverage. As of the end of each fiscal quarter, the
-------------------
Borrower shall have a ratio of Cash Flow for the four quarters then-ended to
Debt Service for the four quarters
30
<PAGE>
then-ended of not less than 1.20.
For purposes of this Schedule, all capitalized terms used herein and not
otherwise defined shall have the meanings given to them, respectively, in the
Loan Agreement, and the following terms shall have the following meanings:
"Cash Flow" shall mean for any four quarter period the sum of the
Borrower's Net Income: (i) before funded losses attributable to development of
the Corning/Silicon film plant project for such four quarter period; (ii) after
income taxes and dividends for such four quarter period; (iii) plus depreciation
and other non-cash expenses for such period; and (iv) plus interest paid in cash
for such four quarter period.
"Debt Service" shall mean the sum of all principal payments and cash
interest payments due or to become due during any period on Long Term
Indebtedness.
"Stockholders' Equity" shall mean, at any time, stockholders' equity as
determined in accordance with GAAP as applied to closely-held companies.
"Tangible Net Worth" shall mean, at any time, the aggregate Stockholders'
Equity, less all intangible assets of the Borrower, including, without
limitation, organization costs, securities issuance costs, unamortized debt
discount and expense, goodwill, excess of purchase costs over net assets
acquired, patents, trademarks, trade names, copyrights, trade secrets, knowhow,
licenses, franchises, capitalized research and development expenses, amounts
owing from officers and/or Affiliates and any amount reflected as treasury
stock.
"Total Liabilities" shall mean, at any time, all liabilities which, in
accordance with GAAP, shall be classified as liabilities of the Borrower.
31
<PAGE>
EXHIBIT 10.7
AMENDED AND RESTATED SECURITY AGREEMENT
---------------------------------------
This AMENDED AND RESTATED SECURITY AGREEMENT is made and entered into as of
this 24th day of November 1997 by and among ASTROPOWER, INC., a Delaware
corporation (the "Borrower") and MELLON BANK (DE), N.A., a national banking
association (the "Secured Party").
BACKGROUND
----------
1. The Secured Party and the Borrower are parties to that certain Amended
and Restated Loan Agreement dated as of the date hereof (as it may be amended
or modified from time to time, the "Loan Agreement") pursuant to which the
Secured Party agreed to make available to the Borrower various loans and credit
facilities upon the terms and conditions specified in the Loan Agreement. The
Loan Agreement and all agreements and documents executed in connection with the
Borrower's loans from the Secured Party shall be referred to as the "Existing
Loan Documents."
2. The obligations of the Borrower to the Secured Party under the Existing
Loan Documents are secured pursuant to, inter alia, (i) a Note and Security
----- ----
Agreement by the Borrower in favor of the Secured Party dated as of December 15,
1995; (ii) a Note and Security Agreement by the Borrower in favor of the
Secured Party dated as of May 22, 1996; and (iii) a Note and Security Agreement
by the Borrower in favor of the Secured Party dated as of February 4, 1993
(collectively, and as amended from time to time, the "Original Security
Agreement") and various UCC Financing Statements which have been duly recorded
in the appropriate offices.
3. The Borrower and the Secured Party have agreed to amend and restate in
their entirety certain of the Existing Loan Documents and amend certain other
Existing Loan Documents pursuant to the terms and conditions of the Loan
Agreement.
4. As a condition to entering into the Loan Agreement, the Secured Party
has required that the Borrower enter into this Amended and Restated Security
Agreement.
5. Capitalized terms which are used herein without definition shall have
the meanings ascribed to them in the Loan Agreement. Other terms used herein
without definition that are defined in the Uniform Commercial Code, as enacted
in Delaware and in effect on the date hereof (the "Uniform Commercial Code")
shall have the meanings ascribed to them therein, unless the context requires
otherwise.
6. THIS SECURITY AGREEMENT IS ISSUED IN ORDER TO AMEND, RESTATE AND
EVIDENCE AND TO BE A SUBSTITUTE FOR THE EXISTING SECURITY AGREEMENT, BUT IS NOT
INTENDED TO MODIFY OR ALTER IN ANY
- 1 -
<PAGE>
WAY THE SECURITY AND COLLATERAL PROVISIONS OF THE EXISTING SECURITY AGREEMENT
NOR THE PRIORITY OF ANY SECURITY INTERESTS HELD BY THE SECURED PARTY AS OF THE
DATE HEREOF.
NOW, THEREFORE, incorporating the Background Section herein and intending
to be legally bound, the Borrower and the Secured Party hereby agree as follows:
Section 1. Creation of Security Interest. The Borrower hereby grants to
-----------------------------
the Secured Party a lien and security interest in and to the property
hereinafter described, whether now owned or hereafter acquired or arising and
wherever located ("Collateral"):
All tangible and intangible personal property of the Borrower,
including but not limited to:
(1) all accounts, accounts receivable, rights under contracts, chattel
paper, instruments, and all obligations due the Borrower for goods sold or to be
sold, consigned or leased or to be leased, or services rendered or to be
rendered ("Accounts");
(2) all inventory, whether raw materials, work-in-process, finished
goods, parts or supplies or otherwise; all goods, merchandise and other property
held for sale or lease or to be furnished under any contract of service; all
documents of title covering any goods which are or are to become inventory and
any such goods which are leased or consigned to others and all returned,
reclaimed or repossessed goods sold, consigned, leased or otherwise furnished by
the Borrower to others ("Inventory");
(3) all leases and rental agreements for personal property between the
Borrower as lessor (whether by origination or derivation) and any and all
persons or parties as lessee(s), and all rentals, purchase option amounts, and
other sums due thereunder; and all inventory, equipment, goods and property
subject to such leases and rental agreements and all accessions, parts and tools
attached thereto or used therewith and all of the Borrower's residual or
reversionary rights therein;
(4) all machinery, equipment, furniture, fixtures, tools, motor
vehicles, and all accessories, parts and equipment now or hereafter attached
thereto or used in connection therewith, whether or not the same shall be deemed
affixed to real property, and all other tangible personal property
("Equipment");
(5) all general intangibles, which term shall have the meaning given
to it in the Uniform Commercial Code and shall additionally include but not be
limited to all tax refunds, but shall specifically exclude any and all
intellectual property and proprietary rights, patents, copyrights and
trademarks;
(6) all the property listed on any Schedule of Collateral attached to
this
- 2 -
<PAGE>
Security Agreement and any other such schedule hereafter made a schedule to this
Agreement;
(7) all additions, replacements, attachments, accretions, accessions,
components and substitutions to or for any Inventory or Equipment;
(8) all property of the Borrower, including without limitation,
monies, securities, instruments, chattel paper and documents, which at any time
the Secured Party shall have or have the right to have in its possession, or
which is in transit to it (pursuant to the terms of a letter of credit or
otherwise) and, independent of and in addition to the Secured Party's rights of
setoff (which the Borrower acknowledges), the balance of any account or any
amount which may be owing from time to time by the Secured Party to the
Borrower;
(9) all books and records evidencing or relating to the foregoing,
including, without limitation, billing records of every kind and description,
customer lists, data storage and processing media, software and related
material, including computer programs, computer tapes, cards, disks and
printouts, and including any of the foregoing which are in the possession of any
affiliate or any computer service bureau;
(10) all proceeds, which term shall have the meaning given to it in
the Uniform Commercial Code and shall additionally include but not be limited
to, whatever is received upon the use, lease, sale, exchange, collection or
other utilization or any disposition of any of the collateral described in
subparagraphs (a) through (i) above, whether cash or noncash, and including
without limitation, rental or lease payments, accounts, chattel paper,
instruments, documents, contract rights, general intangibles, equipment,
inventory and insurance proceeds; and all such proceeds of the foregoing
("Proceeds").
To the extent the Borrower has granted a security interest to the Secured
Party in any or all of the Collateral prior to the date of this Security
Agreement, either pursuant to the Original Security Agreement or otherwise, this
Security Agreement shall be deemed to be a reaffirmation of the previously
granted security interest(s). The Borrower acknowledges that this Security
Agreement does not extinguish the liens and security interests created under the
Original Security Agreement and the Borrower reaffirms the previously granted
security interests thereunder. It is the intention of the Borrower and the
Secured Party that all existing security interests will remain continuously
perfected.
Section 2. Secured Obligations. The security interest created herein is
-------------------
given as security for the prompt payment, performance, satisfaction and
discharge of the following obligations ("Obligations") of the Borrower:
(1) To pay the principal, interest, commitment fees and any other
liabilities of the Borrower to the Secured Party under the Loan Agreement and
the other Loan Documents in accordance with the terms thereof;
- 3 -
<PAGE>
(2) To satisfy all of the other liabilities of the Borrower to the
Secured Party, whether hereunder or otherwise, whether now existing or hereafter
incurred, whether or not evidenced by any Note or other instrument, matured or
unmatured, direct, absolute or contingent, joint or several, including any
extensions, modifications, renewals thereof and substitutions therefor;
(3) To repay the Secured Party all amounts advanced by the Secured
Party hereunder or otherwise on behalf of the Borrower, including, but without
limitation, advances for principal or interest payments to prior secured
parties, mortgagors or lienors, or for taxes, levies, insurance, rent, wages,
repairs to or maintenance or storage of any Collateral; and
(4) To reimburse the Secured Party, on demand, for all of the Secured
Party's expenses and costs, including the reasonable fees and expenses of its
counsel, in connection with the negotiation, preparation, administration,
amendment, modification, or enforcement of the Loan Agreement and the other Loan
Documents.
Section 3. Representations and Warranties. The Borrower, as of the date
------------------------------
hereof and at the time of each advance or extension of credit under the Loan
Agreement, represents and warrants as follows:
3.1 Good Title to Collateral. The Borrower has good and marketable
------------------------
title to the Collateral free and clear of all liens and encumbrances other than
the security interests granted to the Secured Party hereunder and those liens
and encumbrances set forth in the Intercreditor Agreement.
3.2 Location of Books and Records. The locations of the offices
-----------------------------
where the Borrower maintains its books and records concerning the Collateral are
as set forth in Exhibit A or at the location(s) hereafter disclosed to the
Secured Party pursuant to Section 5.10 hereof.
3.3 Chief Executive Office. The chief executive offices of the
----------------------
Borrower are at the address set forth in Exhibit A or at the location(s)
hereafter disclosed to the Secured Party pursuant to Section 5.10 hereof
3.4 Location of Inventory and Equipment. All Inventory and Equipment
-----------------------------------
of the Borrower is located at one or more of the addresses set forth in Exhibit
A or at the location(s) hereafter disclosed to the Secured Party pursuant to
Section 5.10 hereof.
3.5 Other Representations. Each representation, warranty or other
---------------------
statement by the Borrower in, or in connection with, any of the Loan Documents
is true and correct and states all material facts necessary to make it not
misleading.
Section 4. Collection, Disposition and Use of Collateral.
---------------------------------------------
- 4 -
<PAGE>
4.1 [INTENTIONALLY LEFT BLANK]
4.2 Inventory. So long as there has been no default hereunder, the
---------
Borrower shall be permitted to process and sell its Inventory, but only to the
extent that such processing and sale are conducted in the ordinary course of the
Borrower's business.
4.3 Equipment. So long as there has been no default hereunder, the
---------
Borrower shall be permitted to use its Equipment in the ordinary course of its
business. No sale, lease or other disposition of any item of equipment valued
at more than $50,000 shall be permitted, except in accordance with such terms
and conditions as the Secured Party shall have expressly approved in writing and
except for the sale or other disposition of obsolete Equipment which is no
longer used or useful in the Borrower's business.
Section 5. Covenants and Agreements of the Borrower.
----------------------------------------
5.1 Maintenance and Inspection of Books and Records. The Borrower
-----------------------------------------------
shall maintain complete and accurate books and records and shall make all
necessary entries therein to
reflect the costs, values and locations of its Inventory and Equipment and the
transactions and documents giving rise to its Accounts and all payments, credits
and adjustments thereto. The Borrower shall keep the Secured Party fully
informed as to the location of all such books and records and shall permit the
Secured Party and its authorized agents to have full, complete and unrestricted
access thereto at any reasonable time and to inspect, audit and make copies of
all books and records, data storage and processing media, software, printouts,
journals, orders, receipts, invoices, correspondence and other documents and
written or printed matter related to any of the Collateral. The Secured Party's
rights hereunder shall be enforceable at law or in equity, and the Borrower
consents to the entry of judicial orders or injunctions enforcing specific
performance of such obligations hereunder.
5.2 Confirmation of Accounts. The Borrower agrees that the Secured
------------------------
Party shall at all times have the right to confirm orders and to verify any or
all of the Borrower's Accounts in the Secured Party's name, or in any fictitious
name used by the Secured Party for verifications, or through any public
accountants.
5.3 Delivery of Accounts Documentation. At such intervals as the
----------------------------------
Secured Party shall require, the Borrower shall deliver to the Secured Party
copies of purchase orders, invoices, contracts, shipping and delivery receipts
and any other document or instrument which evidences or gives rise to an
Account.
5.4 Physical Inspection of Inventory and Equipment. The Borrower
----------------------------------------------
shall permit the Secured Party and its authorized agents to inspect any or all
of the Borrower's Inventory and Equipment at all reasonable times.
- 5 -
<PAGE>
5.5 Notice of the Secured Party's Interests. If requested by the
---------------------------------------
Secured Party, the Borrower shall give notice of the Secured Party's security
interests in the Collateral to any third person with whom the Borrower has any
actual or prospective contractual relationship or other business dealings.
5.6 Delivery of Certain Accounts and Documents to the Secured Party.
---------------------------------------------------------------
Immediately upon receipt of any instrument, chattel paper, document of title
(including bills of lading and warehouse receipts), the Borrower shall deliver
such Collateral to the Secured Party and shall execute any form of assignment
requested by the Secured Party with respect thereto.
5.7 Accounts Agings. The Borrower shall furnish the Secured Party
---------------
with agings of its Accounts in such form and detail and at such intervals as the
Secured Party may from time to time require.
5.8 Government Accounts. The Borrower shall immediately provide
-------------------
written notice to the Secured Party of any and all Accounts which arise out of
contracts with the United States or any department, agency or instrumentality
thereof, and shall execute and deliver to the Secured Party an assignment of
claims for such Accounts and cooperate with the Secured Party in taking any
other steps required, in the Secured Party's judgment, to perfect or continue
the perfected status of the Secured Party's security interest in such Accounts
and proceeds thereof under the Federal Assignment of Claims Act.
5.9 Insurance of Collateral. The Borrower shall keep its Inventory
-----------------------
and Equipment insured against such perils, in such amounts and with such
insurance companies as required under the Loan Agreement. All insurance
policies shall name the Secured Party as lender loss payee and shall provide for
not less than thirty (30) days' advance notice in writing to the Secured Party
of any cancellation thereof. The Secured Party shall have the right (but shall
be under no obligation) to pay any of the premiums on such insurance. Any
premiums paid by the Secured Party shall, if the Secured Party so elects, be
considered an advance at the highest rate of interest provided in the Loan
Agreement, and all such accrued interest shall be payable on demand. Any credit
insurance covering Accounts shall name the Secured Party as loss payee. The
Borrower expressly authorizes its insurance carriers to pay proceeds of all
insurance policies covering any or all of the Collateral directly to the Secured
Party.
5.10 New Locations of Collateral and Books and Records. The Borrower
-------------------------------------------------
shall immediately notify the Secured Party of any change in the location of its
chief executive office, of any new or additional address where its books and
records concerning the Collateral are located and of any new locations of
Inventory or Equipment not specified in Sections 3.02, 3.03 or 3.04 of this
Security Agreement, and if any such location is on leased or mortgaged premises,
promptly furnish the Secured Party with landlord's or mortgagee's waivers in
form and substance satisfactory to the Secured Party.
5.11 Perfection of the Secured Party's Interests. The Borrower
-------------------------------------------
agrees to cooperate and join, at its expense, with the Secured Party in taking
such steps as are necessary, in
- 6 -
<PAGE>
the Secured Party's judgment, to perfect or continue the perfected status of the
security interests granted hereunder, including, without limitation, the
execution and delivery of any financing statements, amendments thereto and
continuation statements, the delivery of chattel paper, documents or instruments
to the Secured Party, the obtaining of landlords' and mortgagees' waivers
required by the Secured Party, the notation of encumbrances in favor of the
Secured Party on certificates of title, and the execution and filing of any
collateral assignments and any other instruments requested by the Secured Party
to perfect its security interest in any and all of the Borrower's general
intangibles. The Secured Party is expressly authorized to file financing
statements without the Borrower's signature.
5.12 Maintenance of Inventory and Equipment. The Borrower shall care
--------------------------------------
for and preserve the Inventory and Equipment in good condition and repair, and
will pay the cost of all replacement parts, repairs to and maintenance of the
Equipment. The Borrower will keep complete and accurate maintenance records
with respect to its Equipment.
5.13 Notification of Adverse Change in Collateral. The Borrower
--------------------------------------------
agrees immediately to notify the Secured Party if (a) any account debtor refuses
to retain or returns any goods, the sale or delivery of which gave rise to an
Account; (b) any Account has arisen pursuant to a sale under terms which differ
materially from those customarily offered by the Borrower; or (c) any event
occurs or is discovered which would cause a Qualified Account or any Qualified
Inventory to lose its qualified status or which would cause any material
diminution in the value of any significant item or type of Collateral.
5.14 Reimbursement and Indemnification. The Borrower agrees to
---------------------------------
reimburse the Secured Party on demand for out-of-pocket expenses incurred in
connection with the Secured Party's exercise of its rights under this Security
Agreement. The Borrower agrees to indemnify the Secured Party and hold it
harmless against any costs, expenses, losses, damages and liabilities (including
reasonable attorney's fees) incurred in connection with this Security Agreement,
other than as a direct result of the Secured Party's gross negligence or willful
misconduct.
Section 6. Power of Attorney. The Borrower hereby appoints the Secured
-----------------
Party as its lawful attorney-in-fact to do, at the Secured Party's option, and
at the Borrower's expense and liability, all acts and things which the Secured
Party may deem necessary or desirable to effectuate its rights under this
Security Agreement, including without limitation, (a) file financing statements
and otherwise perfect any security interest granted hereby, (b) correspond and
negotiate directly with insurance carriers, (c) upon the occurrence of a default
hereunder, receive, open and dispose of in any reasonable manner all mail
addressed to the Borrower and notify Postal Service authorities to change the
address for mail addressed to the Borrower to an address designated by the
Secured Party, (d) upon the occurrence of a default hereunder, communicate with
account debtors and other third parties for the purpose of protecting or
preserving the Collateral, and (e) upon the occurrence of a default hereunder,
in the Borrower's or the Secured Party's name, to demand, collect, receive, and
receipt for, compound, compromise, settle and give acquittance for, and
prosecute and discontinue or dismiss, with or without prejudice, any suit or
proceeding
- 7 -
<PAGE>
respecting any of the Collateral.
Section 7. Default. The occurrence of any one or more of the following
-------
shall be a default hereunder:
7.1 Default Under Loan Agreement. The occurrence of an Event of
----------------------------
Default under the Loan Agreement or any of the Loan Documents.
7.2 Failure to Observe Covenants. The failure of the Borrower to
----------------------------
keep, observe or perform any provisions of this Security Agreement.
7.3 Representations, Warranties. If any representation, warranty or
---------------------------
certificate furnished by the Borrower under or in connection with this Security
Agreement shall, at any time, be materially false or incorrect.
Section 8. Secured Party's Rights Upon Default. Upon the occurrence of a
-----------------------------------
default hereunder, or at any time thereafter, the Secured Party may immediately
and without notice do any or all of the following, which rights and remedies are
cumulative, may be exercised from time to time, and are in addition to any
rights and remedies available to the Secured Party under the Loan Agreement or
any other Loan Document:
8.1 Uniform Commercial Code Rights. Exercise any and all of the
-------------------------------
rights and remedies of a secured party under the Uniform Commercial Code,
including the right to require the Borrower to assemble the Collateral and make
it available to the Secured Party at a place reasonably convenient to the
parties.
8.2 Operation of Collateral. Operate, utilize, recondition and/or
------------------------
refurbish (at the Secured Party's sole option and discretion and in any manner)
any of the Collateral which is Equipment, for the purpose of enhancing or
preserving the value thereof or the value of any other Collateral.
8.3 Notification of Account Debtors. Notify the account debtors for
-------------------------------
any of the Accounts that such Accounts have been assigned to the Secured Party
and that payments are to be made directly to the Secured Party, or to such post
office box as the Secured Party may direct. The Borrower shall not compromise,
discharge, extend the time for payment or otherwise grant any indulgence or
allowance with respect to any Account without the prior written consent of the
Secured Party.
8.4 Sale of Collateral. Upon five (5) calendar days' prior written
-------------------
notice to the Borrower, which the Borrower hereby acknowledges to be sufficient,
commercially reasonable and proper, sell, lease or otherwise dispose of any or
all of the Collateral at any time and from time to time at public or private
sale, with or without advertisement thereof and apply the proceeds of any such
sale first to the Secured Party's expenses in preparing the Collateral for sale
- 8 -
<PAGE>
(including reasonable attorneys' fees) and second to the complete satisfaction
of the Obligations. The Borrower waives the benefit of any marshalling doctrine
with respect to the Secured Party's exercise of its rights hereunder. The
Borrower grants a royalty-free license to the Secured Party for all patents,
service marks, trademarks, tradenames, copyrights, computer programs and other
intellectual property and proprietary rights sufficient to permit Secured Party
to exercise all rights granted to Secured Party under this Section.
Section 9. Notices. Any written notices required or permitted by this
-------
Security Agreement shall be effective if delivered in accordance with Section
10.2 of the Loan Agreement.
Section 10. Miscellaneous.
-------------
10.1 No Waiver. No delay or omission by the Secured Party in
----------
exercising any right or remedy hereunder shall operate as a waiver thereof or of
any other right or remedy, and no single or partial exercise thereof shall
preclude any further exercise thereof or the exercise of any other right or
remedy.
10.2 Preservation of Rights. The Secured Party shall have no
----------------------
obligation or responsibility to take any steps to enforce or preserve rights
against any parties to any Account and such obligation and responsibility shall
be those of the Borrower exclusively.
10.3 Successors. The provisions of this Security Agreement shall
-----------
inure to the benefit of and be binding upon the Secured Party and the Borrower
and their respective successors and assigns, provided that the Borrower's
obligations hereunder may not be assigned without the written consent of the
Secured Party.
10.4 Amendments. No modification, rescission, waiver, release or
-----------
amendment of any provisions of this Security Agreement shall be effective unless
set forth in a written agreement signed by the Borrower and an authorized
officer of the Secured Party.
10.5 Governing Law. This Security Agreement shall be construed under
--------------
the internal laws of the State of Delaware without reference to conflict of laws
principles.
10.6 Severability. If any provision of this Security Agreement shall
-------------
be held invalid or unenforceable under applicable law in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of such provision in any other jurisdiction or the validity or enforceability of
any other provision of this Security Agreement that can be given effect without
such invalid or unenforceable provision.
10.7 Judicial Proceedings. Each party to this Agreement agrees that
--------------------
any suit, action or proceeding, whether claim or counterclaim, brought or
instituted by any party hereto or any successor or assign of any party, on or
with respect to this Agreement or the dealings of the parties with respect
hereto, shall be tried only by a court and not by a jury. EACH PARTY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT
- 9 -
<PAGE>
TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. Further, each party
waives any right it may have to claim or recover, in any such suit, action or
proceeding, any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. THE BORROWER ACKNOWLEDGES
AND AGREES THAT THIS PARAGRAPH IS A SPECIFIC AND MATERIAL ASPECT OF THIS
AGREEMENT AND THAT THE SECURED PARTY WOULD NOT EXTEND CREDIT TO THE BORROWER IF
THE WAIVERS SET FORTH IN THIS PARAGRAPH WERE NOT A PART OF THIS AGREEMENT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 10 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be executed and delivered by their authorized officers the day and year first
above written.
Attest: ASTROPOWER, INC.
By:
- ----------------------- --------------------------
Name:
------------------------
Title:
-----------------------
MELLON BANK (DE), N.A.
By:
--------------------------
Liam Brickley
Vice President
- 11 -
<PAGE>
EXHIBIT A
---------
Location of books and records:
Solar Park
Newark, DE 19716-2000
Location of chief executive office:
Solar Park
Newark, DE 19716-2000
Location of Inventory and Equipment:
Solar Park
Newark, DE 19716-2000
- 12 -
<PAGE>
Exhibit 10.8
AMENDED AND RESTATED LINE OF CREDIT NOTE
----------------------------------------
$600,000 Newark, Delaware
November 24, 1997
FOR VALUE RECEIVED, ASTROPOWER, INC., a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of MELLON BANK (DE), N.A. (the
"Bank") on or before the Termination Date, the principal amount of SIX HUNDRED
THOUSAND DOLLARS ($600,000) or, if less, the aggregate outstanding principal
under the Line of Credit Loans extended pursuant to that certain Amended and
Restated Loan Agreement dated November 24, 1997 by and between the Borrower and
the Bank (as amended from time to time through the date hereof, the "Loan
Agreement"). Terms capitalized but not defined herein shall have the meanings
given to them in Loan Agreement. Reference is made to the Loan Agreement and
the other Loan Documents for a statement of the terms and conditions under which
the loans evidenced hereby have been made, are secured, and may be prepaid or
accelerated.
BACKGROUND
----------
This Amended and Restated Revolving Credit Note (the "Note") arises out of
the transactions described in the Loan Agreement. Prior to execution of this
Note, the Borrower executed, inter alia, that certain Note and Security
Agreement dated December 15, 1996 (as amended prior to the date hereof, the
"Existing Note").
The circumstances giving rise to this Note are set forth in the Background
section of the Loan Agreement which, together with the rest of the Loan
Documents, is incorporated herein by reference as if set forth in full.
THIS NOTE IS ISSUED IN ORDER TO AMEND, RESTATE AND EVIDENCE AND TO BE A
SUBSTITUTE FOR, BUT NOT TO BE A PAYMENT, SATISFACTION, CANCELLATION OR A
NOVATION OF, THE PAYMENT PROVISIONS (BUT NOT THE SECURITY/COLLATERAL PROVISIONS)
OF THE EXISTING NOTE. THE SUBSTITUTION OF THIS NOTE FOR THE EXISTING NOTE DOES
NOT EXTINGUISH THE INDEBTEDNESS EVIDENCED BY THE EXISTING NOTE OR ANY PORTION
THEREOF AND THE LIABILITIES OF THE BORROWER THEREUNDER AND HEREUNDER ARE
CONTINUOUS. THIS NOTE DOES NOT EVIDENCE ANY NEW ADVANCES OF CREDIT OR REFLECT
ANY AGREEMENT BY THE BANK FOR THE EXTENSION OF ANY ADDITIONAL CREDIT TO THE
BORROWER EXCEPT AS SPECIFICALLY SET FORTH IN THE LOAN AGREEMENT. THIS NOTE IS
NOT INTENDED TO MODIFY OR ALTER IN ANY WAY THE SECURITY AND COLLATERAL
PROVISIONS OF THE EXISTING NOTE NOR IS IT INTENDED IN ANY WAY TO ALTER THE
PRIORITY OF ANY SECURITY INTEREST HELD BY THE BANK.
ADDITIONAL TERMS
----------------
<PAGE>
Until maturity (whether by acceleration or otherwise) interest shall accrue
on the outstanding principal balance of the Note in accordance with the rates
set forth in Article II of the Credit Agreement. Interest shall be calculated
on the basis of a 360-day year, counting the actual number of days elapsed.
Subsequent to maturity or the occurrence of any Event of Default, interest shall
accrue at an annual rate which shall be two percent (2%) above the rate of
interest otherwise payable under the Loan Agreement. Accrued interest shall be
payable monthly on the first day of each month commencing with the month
immediately following date hereof and if not paid when due, shall be added to
principal.
All amounts payable by the Borrower to the Bank hereunder shall be paid
directly to the Bank at its offices 1735 Market Street, Philadelphia,
Pennsylvania (or at such other address of which the Bank shall give notice to
the Borrower in accordance with the Loan Agreement) in immediately available
funds. The Bank may, and the Borrower specifically authorizes the Bank to debit
the Borrower's accounts at the Bank, such amounts as are required to pay
interest, principal and/or all other amounts due hereunder as and when such
amounts become due hereunder.
THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE BANK, BY ITS
ATTORNEY, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT OR AT ANY TIME THEREAFTER,
TO APPEAR FOR THE BORROWER AND, WITHOUT DECLARATION OR STAY OF EXECUTION,
CONFESS AND ENTER JUDGMENT AGAINST THE BORROWER IN FAVOR OF THE BANK IN ANY
JURISDICTION IN WHICH THE BORROWER IS LOCATED. SUCH JUDGMENT SHALL BE FOR ALL
OBLIGATIONS TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL COLLECTION FEES
(INCLUDING ATTORNEYS' FEES) WITH RELEASE OF ALL ERRORS AND THE RIGHT TO ISSUE
EXECUTION FORTHWITH. THE BORROWER HEREBY KNOWINGLY, WILLINGLY, AND
INTENTIONALLY WAIVES AND RELEASES ALL RELIEF FROM ANY AND ALL APPRAISEMENT,
STAY, OR EXEMPTION LAW OF ANY STATE NOW IN FORCE OR HEREINAFTER ENACTED. IF A
COPY OF THIS NOTE VERIFIED BY AFFIDAVIT OF THE BANK OR A PERSON ON BEHALF OF THE
BANK SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE
ORIGINAL NOTE AS A WARRANT OF ATTORNEY. THIS AUTHORITY AND POWER TO APPEAR FOR
AND CONFESS AND ENTER JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY
THE SINGLE EXERCISE THEREOF AND SHALL CONTINUE UNTIL THE OBLIGATIONS ARE FULLY
PAID, PERFORMED, DISCHARGED AND SATISFIED. THE BORROWER HEREBY WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS NOTE WITH ITS LEGAL COUNSEL, INCLUDING,
WITHOUT LIMITATION, THE PROVISIONS CONTAINED IN THIS CONFESSION OF JUDGMENT
SECTION. THE BORROWER FURTHER ACKNOWLEDGES THAT THE MEANING AND EFFECT OF THIS
CONFESSION OF JUDGMENT HAVE BEEN EXPLAINED TO IT BY ITS LEGAL COUNSEL.
The Borrower hereby waives the requirements of demand, presentment,
protest, notice of protest and dishonor and all other demands or notices of any
kind in connection with the delivery, acceptance, performance, default, dishonor
or enforcement of this Note.
- 2 -
<PAGE>
The construction, interpretation and enforcement of this Note shall be
governed by the internal laws of the State of Delaware without reference to
conflicts of laws principles.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
- 3 -
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the Borrower
has caused this Note to be executed by its duly authorized officer as of the day
and year first above written.
AstroPower, Inc.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
- 4 -
<PAGE>
Exhibit 10.9
AMENDED AND RESTATED TERM LOAN NOTE
-----------------------------------
$737,000 Newark, Delaware
November 24, 1997
FOR VALUE RECEIVED, ASTROPOWER, INC., a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of MELLON BANK (DE), N.A. (the
"Bank") on or before the Termination Date, the principal amount of SEVEN HUNDRED
THIRTY SEVEN THOUSAND DOLLARS ($737,000) in consecutive, monthly principal
installments in the amount of $17,500 plus interest, each payable on the first
day of each month beginning December 1, 1997, and a final installment consisting
of the entire unpaid principal balance hereof, together with all accrued but
unpaid interest hereon, due and payable on the earlier to occur of: (i) March
31, 1999; or (ii) at the option of the Bank, the occurrence of an Event of
Default . Terms capitalized but not defined herein shall have the meanings given
to them in Amended and Restated Loan Agreement dated November 24, 1997 by and
between the Borrower and the Bank (as amended from time to time through the date
hereof, the "Loan Agreement"). Reference is made to the Loan Agreement and the
other Loan Documents for a statement of the terms and conditions under which the
loans evidenced hereby have been made, are secured, and may be prepaid or
accelerated.
BACKGROUND
----------
This Amended and Restated Revolving Credit Note (the "Note") arises out of
the transactions described in the Loan Agreement. Prior to execution of this
Note, the Borrower executed, inter alia, that certain Note and Security
Agreement dated May 22, 1996 and that certain Note and Security Agreement dated
February 4, 1993 (collectively, and as amended prior to the date hereof, the
"Existing Note").
The circumstances giving rise to this Note are set forth in the Background
section of the Loan Agreement which, together with the rest of the Loan
Documents, is incorporated herein by reference as if set forth in full.
THIS NOTE IS ISSUED IN ORDER TO AMEND, RESTATE AND EVIDENCE AND TO BE A
SUBSTITUTE FOR, BUT NOT TO BE A PAYMENT, SATISFACTION, CANCELLATION OR A
NOVATION OF, THE PAYMENT PROVISIONS (BUT NOT THE SECURITY/COLLATERAL PROVISIONS)
OF THE EXISTING NOTE. THE SUBSTITUTION OF THIS NOTE FOR THE EXISTING NOTE DOES
NOT EXTINGUISH THE INDEBTEDNESS EVIDENCED BY THE EXISTING NOTE OR ANY PORTION
THEREOF AND THE LIABILITIES OF THE BORROWER THEREUNDER AND HEREUNDER ARE
CONTINUOUS. THIS NOTE DOES NOT EVIDENCE ANY NEW ADVANCES OF CREDIT OR REFLECT
ANY AGREEMENT BY THE BANK FOR THE EXTENSION OF ANY ADDITIONAL CREDIT TO THE
BORROWER EXCEPT AS SPECIFICALLY SET FORTH IN THE LOAN AGREEMENT. THIS NOTE IS
NOT
<PAGE>
INTENDED TO MODIFY OR ALTER IN ANY WAY THE SECURITY AND COLLATERAL PROVISIONS OF
THE EXISTING NOTE NOR IS IT INTENDED IN ANY WAY TO ALTER THE PRIORITY OF ANY
SECURITY INTEREST HELD BY THE BANK.
ADDITIONAL TERMS
----------------
Until maturity (whether by acceleration or otherwise) interest shall accrue
on the outstanding principal balance of the Note in accordance with the rates
set forth in Article II of the Credit Agreement. Interest shall be calculated
on the basis of a 360-day year, counting the actual number of days elapsed.
Subsequent to maturity or the occurrence of any Event of Default, interest shall
accrue at an annual rate which shall be two percent (2%) above the rate of
interest otherwise payable under the Loan Agreement. Accrued interest shall be
payable monthly on the first day of each month commencing with the month
immediately following date hereof and if not paid when due, shall be added to
principal.
All amounts payable by the Borrower to the Bank hereunder shall be paid
directly to the Bank at its offices 1735 Market Street, Philadelphia,
Pennsylvania (or at such other address of which the Bank shall give notice to
the Borrower in accordance with the Loan Agreement) in immediately available
funds. The Bank may, and the Borrower specifically authorizes the Bank to debit
the Borrower's accounts at the Bank, such amounts as are required to pay
interest, principal and/or all other amounts due hereunder as and when such
amounts become due hereunder.
THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE BANK, BY ITS
ATTORNEY, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT OR AT ANY TIME THEREAFTER,
TO APPEAR FOR THE BORROWER AND, WITHOUT DECLARATION OR STAY OF EXECUTION,
CONFESS AND ENTER JUDGMENT AGAINST THE BORROWER IN FAVOR OF THE BANK IN ANY
JURISDICTION IN WHICH THE BORROWER IS LOCATED. SUCH JUDGMENT SHALL BE FOR ALL
OBLIGATIONS TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL COLLECTION FEES
(INCLUDING ATTORNEYS' FEES) WITH RELEASE OF ALL ERRORS AND THE RIGHT TO ISSUE
EXECUTION FORTHWITH. THE BORROWER HEREBY KNOWINGLY, WILLINGLY, AND
INTENTIONALLY WAIVES AND RELEASES ALL RELIEF FROM ANY AND ALL APPRAISEMENT,
STAY, OR EXEMPTION LAW OF ANY STATE NOW IN FORCE OR HEREINAFTER ENACTED. IF A
COPY OF THIS NOTE VERIFIED BY AFFIDAVIT OF THE BANK OR A PERSON ON BEHALF OF THE
BANK SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE
ORIGINAL NOTE AS A WARRANT OF ATTORNEY. THIS AUTHORITY AND POWER TO APPEAR FOR
AND CONFESS AND ENTER JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY
THE SINGLE EXERCISE THEREOF AND SHALL CONTINUE UNTIL THE OBLIGATIONS ARE FULLY
PAID, PERFORMED, DISCHARGED AND SATISFIED. THE BORROWER HEREBY WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS NOTE WITH ITS LEGAL COUNSEL, INCLUDING,
WITHOUT LIMITATION, THE PROVISIONS
- 2 -
<PAGE>
CONTAINED IN THIS CONFESSION OF JUDGMENT SECTION. THE BORROWER FURTHER
ACKNOWLEDGES THAT THE MEANING AND EFFECT OF THIS CONFESSION OF JUDGMENT HAVE
BEEN EXPLAINED TO IT BY ITS LEGAL COUNSEL.
The Borrower hereby waives the requirements of demand, presentment,
protest, notice of protest and dishonor and all other demands or notices of any
kind in connection with the delivery, acceptance, performance, default, dishonor
or enforcement of this Note.
The construction, interpretation and enforcement of this Note shall be
governed by the internal laws of the State of Delaware without reference to
conflicts of laws principles.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
- 3 -
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the Borrower
has caused this Note to be executed by its duly authorized officer as of the day
and year first above written.
AstroPower, Inc.
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
- 4 -
<PAGE>
EXHIBIT 10.10
BUSINESS LOAN AGREEMENT
================================================================================
BORROWER: ASTROPOWER, INC. LENDER: ARTISANS'BANK
ONE SOLAR PARK COMMERCIAL BANKING DEPARTMENT
NEWARK, DE 19716 223 WEST NINTH STREET
P. 0. BOX 908
WILMINGTON, DE 19899
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THIS BUSINESS LOAN AGREEMENT BETWEEN ASTROPOWER, INC. ("BORROWER") AND
ARTISANS' BANK ("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS AND
CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS
APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER FINANCIAL
ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR
SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL
ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS
FROM LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS THE
"LOAN" AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES THAT:
(A) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING UPON
BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS
AGREEMENT; (B)) THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY LENDER AT
ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE JUDGMENT AND DISCRETION; AND (C)
ALL SUCH LOANS SHALL BE AND SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND
CONDITIONS OF THIS AGREEMENT.
TERM. This Agreement shall be effective as of January 10, 1996, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used
In this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
BORROWER. The word "Borrower" means AstroPower, Inc.. The word "Borrower"
also includes, as applicable, all subsidiaries and affiliates of Borrower as
provided below in the paragraph titled "Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow' mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
COLLATERAL. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
GRANTOR. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all Borrowers
granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties In connection
with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without limitation
all Loans, together with all other obligations, debts and liabilities of
Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or any one or more of them; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be liable
individually or jointly with others; whether Borrower may be obligated as a
guarantor, surety, or otherwise; whether recovery upon such Indebtedness may
be or hereafter may become barred by any statute of limitations; and whether
such Indebtedness may be or hereafter may become otherwise unenforceable.
LENDER. The word "Lender" means Artisans' Bank, its successors and assigns.
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
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LOAN. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender: (b) liens for
taxes, assessments, or similar charges either not yet due or being contested
in good faith; (c) liens of materialmen, mechanics, warehousemen, or
carriers, or other like liens arising in the ordinary course of business and
securing obligations which are not yet delinquent; (d) purchase money liens
or purchase money security interests upon or in any property acquired or
held by Borrower in the ordinary course of business to secure indebtedness
outstanding on the date of this Agreement or permitted to be incurred under
the paragraph of this Agreement titled "Indebtedness and Liens"; (e) liens
and security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (f) those liens and
security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of Borrower's
assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements. understandings
or other agreements, whether created by law, contract, or otherwise,
evidencing, governing, representing, or creating a Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust. factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement to
indebtedness owed by Borrower to Lender in form and substance acceptable to
Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks, patents,
copyrights, organizational expenses, and similar intangible items, but
including leaseholds and leasehold improvements) less total Debt.
WORKING CAPITAL. The words 'Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions
set forth in this Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interests; (d) evidence of
insurance as required below; and (e) any other documents required under this
Agreement or by Lender or its counsel, including without limitation any
guaranties described below.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents, and such other authorizations and other documents and
instruments as Lender or its counsel, in their sole discretion, may require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth
in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Delaware and is
validly existing and in good standing in all states in which Borrower is
doing business. Borrower has the full power and authority to own its
properties and to transact the businesses in which it is presently engaged or
presently proposes to engage. Borrower also is duly qualified as a foreign
corporation and is in good standing in all states in which the failure to so
qualify would have a material adverse effect on its businesses or financial
condition.
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AUTHORIZATION. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not conflict
with, result in a violation of, or constitute a default under (a) any
provision of its articles of incorporation or organization, or bylaws, or
any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower
in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not presently
due and payable, Borrower owns and has good title to all of Borrower's
properties free and clear of all Security Interests, and has not executed any
security documents or financing statements relating to such properties. All
of Borrower's properties are titled in Borrower's legal name, and Borrower
has not used. or filed a financing statement under, any other name for at
least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or
other applicable state or Federal laws, rules, or regulations adopted
pursuant to any of the foregoing. Except as disclosed to and acknowledged by
Lender in writing, Borrower represents and warrants that: (a) During the
period of Borrower's ownership of the properties, there has been no use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any person on, under, about or
from any of the properties. (b) Borrower has no knowledge of, or reason to
believe that there has been (i) any use, generation, manufacture, storage,
treatment, disposal, release, or threatened release of any hazardous waste or
substance on, under, about or from the properties by any prior owners or
occupants of any of the properties, or (ii) any actual or threatened
litigation or claims of any kind by any person relating to such matters. (c)
Neither Borrower nor any tenant, contractor, agent or other authorized user
of any of the properties shall use, generate, manufacture, store, treat,
dispose of, or release any hazardous waste or substance on, under, about or
from any of the properties; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws, regulations,
and ordinances, including without limitation those laws, regulations and
ordinances described above. Borrower authorizes Lender and its agents to
enter upon the properties to make such inspections and tests as Lender may
deem appropriate to determine compliance of the properties with this section
of the Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be construed
to create any responsibility or liability on the part of Lender to Borrower
or to any other person. The representations and warranties contained herein
are based on Borrower's due diligence in investigating the properties for
hazardous waste and hazardous substances. Borrower hereby (a) releases and
waives any future claims against Lender for indemnity or contribution in the
event Borrower becomes liable for cleanup or other costs under any such laws,
and (b) agrees to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which Lender
may directly or indirectly sustain or suffer resulting from a breach of this
section of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release occurring prior
to Borrower's ownership or interest in the properties, whether or not the
same was or should have been known to Borrower. The provisions of this
section of the Agreement, including the obligation to indemnify, shall
survive the payment of the Indebtedness and the termination or expiration of
this Agreement and shall not be affected by Lender's acquisition of any
interest in any of the properties, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which may
materially adversely affect Borrower's financial condition or properties,
other than litigation, claims, or other events, if any, that have been
disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith in
the ordinary course of business and for which adequate reserves have been
provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or affecting
any of the Collateral directly or indirectly securing repayment of Borrower's
Loan and Note, that would be prior or that may in any way be superior to
Lender's Security Interests and rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to any
such plan, (ii) Borrower has not withdrawn from any such plan or initiated
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steps to do so, (iii) no steps have been taken to terminate any such plan,
and (jv) there are no unfunded liabilities other than those previously
disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business, or
Borrower's Chief executive office, if Borrower has more than one place of
business, is located at One Solar Park, Newark, DE 19716. Unless Borrower
has designated otherwise in writing this location is also the office or
offices where Borrower keeps its records concerning the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Borrower to Lender will be, true and
accurate in every material respect on the date as of which such information
is dated or certified; and none of such information is or will be incomplete
by omitting to state any material fact necessary to make such information not
misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees
that Lender, without independent investigation, is relying upon the above
representations and warranties in making the above referenced Loan to
Borrower. Borrower further agrees that the foregoing representations' and
warranties shall be continuing in nature and shall remain in full force and
effect until such time as Borrower's Indebtedness shall be paid in full, or
until this Agreement shall be terminated in the manner provided above,
whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guararitor which could materially
affect the financial condition of Borrower or the financial condition of any
Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis, and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but In no
event later than one hundred twenty (120) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to Lender, and, as soon
as available, but in no event later than thirty (30) days after the and of
each month, Borrower's balance sheet and profit and loss statement for the
period ended, prepared and certified as correct to the best knowledge and
belief by Borrower's chief financial officer or other officer or person
acceptable to Lender. All financial reports required to be provided under
this Agreement shall be prepared in accordance with generally accepted
accounting principles, applied on a consistent basis, and certified by
Borrower as being true and correct.
ADDITIONAL INFORMATION. Furnish such additional Information and statements,
lists of assets and liabilities, agings of receivables and payables,
Inventory schedules, budgets, forecasts, tax returns, and other reports with
respect to Borrower's financial condition and business operations as Lender
may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and
ratios:
NET WORTH RATIO. Maintain a ratio of Total Liabilities to Tangible Net Worth
of less than 2.25 to 1.00:Except as provided above, all computations made to
determine compliance with the requirements contained in this paragraph shall
be made in accordance with generally accepted accounting principles, applied
on a consistent basis, and certified by Borrower as being true and correct.
INSURANCE. Maintain fire and other risk insurance, public liability
Insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon
request of Lender, will deliver to Lender from time to time the policies
or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be canceled or diminished without at
least ten (10) days' prior written notice to Lender. Each insurance
policy also shall include an endorsement providing that coverage in favor
of Lender will not be impaired in any way by any act. omission or default
of Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security Interest for the
Loans, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the name
of the Insurer; (b) the risks insured: (c) the amount of the policy; (d) the
properties insured; (a) the then current property values on the basis of
which insurance has been obtained. and the manner of determining those
values; and (f) the expiration date of the policy. In addition, upon request
of Lender (however not more often than annually), Borrower will have an
independent appraiser satisfactory to Lender determine, as applicable, the
actual cash value or replacement cost of any Collateral. The cost of such
appraisal shall be paid by Borrower.
GUARANTIES. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans In favor of Lender, on Lender's forms, and In the
amount and by the guarantor named below:
GUARANTOR AMOUNT
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Allen Barnett 100.000% of $750,000.00
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OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any other
party and notify Lender immediately in writing of any default in connection
with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its Indebtedness
and obligations, including without limitation all assessments, taxes,
governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the date on
which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon any of Borrower's properties, income, or
profits. Provided however, Borrower will not be required to pay and
discharge any such assessment, tax, charge, levy, lien or claim so long as
(a) the legality of the same shall be contested in good faith by appropriate
proceedings. and (b) Borrower shall have established on its books adequate
reserves with respect to such contested assessment, tax, charge, levy, lien,
or claim in accordance with generally accepted accounting practices.
Borrower, upon demand of Lender, will furnish to Lender evidence of payment
of the assessments, taxes, charges, levies. liens and claims and will
authorize the appropriate governmental official to deliver to Lender at any
time a written statement of any assessments, taxes, charges, levies, liens
and claims against Borrower's properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth In this Agreement and in the Related Documents in a timely manner,
and promptly notify Lender it Borrower learns of the occurrence of any event
which constitutes an Event of Default under this Agreement or under any of
the Related Documents.
OPERATIONS. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable federal,
state and municipal laws, ordinances, rules and regulations respecting its
properties, charters, businesses and operations, including without
limitation, compliance with the Americans With Disabilities Act and with all
minimum funding standards and other requirements of ERISA and other laws
applicable to Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books. accounts, and records
and to make copies arid memoranda of Borrower's books. accounts, and records.
It Borrower now or at any time hereafter maintains any records (including
without limitation computer generated records and computer software programs
for the generation of such records) in the possession of a third party,
Borrower, upon request of Lender, shall notify such party to permit Lender
free access to such records at all reasonable times and to provide Lender
with copies of any records it may request, all at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds with
a certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the representations
and warranties set forth in this Agreement are true and correct as of the
date of the certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects
with all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless
such environmental activity is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal, state or local
governmental authorities; shall furnish to Lender promptly and in any event
within thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any Intentional or
unintentional action or omission on Borrower's part in connection with any
environmental activity whether or not there is damage to the environment
and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
Instruments, documents and other agreements as Lender or Its attorneys may
reasonably request to evidence and secure the Loans and to perfect all
Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender;
INDEBTEDNESS. Except for trade debt incurred in the normal course of
business and Indebtedness to Lender contemplated by this Agreement, create,
incur or assume indebtedness for borrowed money, including capital leases.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock (other than dividends payable in its stock), provided,
however that notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from the payment of
dividends, if Borrower is a "Subchapter S Corporation" (as defined in the
Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends
on its stock to its shareholders from time to time in amounts necessary to
enable the shareholders to pay income taxes and make estimated income tax
payments to satisfy their liabilities under federal and state law which arise
solely from their status as Shareholders of a Subchapter S Corporation
because of their ownership of shares of stock of Borrower, or (d) purchase or
retire any of Borrower's outstanding shares or alter or amend Borrower's
capital structure.
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CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agrp-2ment, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is In default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender: (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; or (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender.
RIGHT TO CURE. Advent International Corporation, Arete Ventures, Inc., Material
Ventures Associates L.P. and Ventures West Management Ill. Ltd. as venture
capital firms investing in Borrower, will be provided the option to cure an
Event of Default of Borrower, within 30 days of notification by Bank to both
AstroPower, Inc. and the venture capital firms, that an Event of Default has
occurred.
ADDITIONAL TERMS AND CONDITIONS. Borrower agrees that the equipment
financed under this Loan Agreement represents a purchase money interest.
FINANCIAL REPORTING. Borrower agrees to provide to Lender the following: -
Monthly internally prepared balance sheet and income statements. -Fiscal year
end audited statements within one hundred twenty days (1 20) from fiscal year
end. -Guarantor to provide annual tax returns within one hundred twenty (1 20)
days from calendar year end.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due on
the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition contained
in this Agreement or in any of the Related Documents, or failure of Borrower
to comply with or to perform any other term, obligation, covenant or
condition contained in any other agreement between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at any
time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be In full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and
for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver for
any part of Borrower's property, any assignment for the benefit of creditors,
any type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate and, at Lender's
option, all Indebtedness immediately will become due and payable, all without
notice of any kind to Borrower, except that in the case of an Event of Default
of the type described in the "Insolvency" subsection above, such acceleration
shall be automatic and not optional. In addition, Lender shall have all the
rights and remedies provided in the Related Documents or available at law, in
equity, or otherwise. Except as may be prohibited by applicable law, all of
Lender's rights and remedies shall be cumulative and may be exercised singularly
or concurrently. Election by Lender to pursue any
6
<PAGE>
remedy shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Borrower or of any
Grantor shall not affect Lender's right to declare a default and to exercise its
rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or parties
sought to be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of Delaware. If there Is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of New Castle
County, the State of Delaware Subject to the provisions on arbitration, this
Agreement shall be governed by and construed In accordance with the laws of
the State of Delaware.
ARBITRATION. Lender and Borrower agree that all disputes, claims and
controversies between them, whether individual, joint, or class In nature,
arising from this Agreement or otherwise, including without limitation
contract and tort disputes, shall be arbitrated pursuant to the Rules of the
American Arbitration Association, upon request of either party. No act to
take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or
mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any Collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator
shall have the right or the power to enjoin or restrain any act of any party.
Judgment upon any award rendered by any arbitrator may be entered in any
court having jurisdiction. Nothing in this Agreement shall preclude any
party from seeking equitable relief from a court of competent jurisdiction.
The statute of limitations, estoppel, waiver, laches, and similar doctrines
which would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action for
these purposes. The Federal Arbitration Act shall apply to the construction,
interpretation, and enforcement of this arbitration provision.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale
or transfer, whether now or later, of one or more participation interests in
the Loans to one or more purchasers, whether related or unrelated to Lender.
Lender may provide, without any limitation whatsoever, to any one or more
purchasers, or potential purchasers, any information or knowledge Lender may
have about Borrower or about any other matter relating to the Loan, and
Borrower hereby waives any rights to privacy it may have with respect to such
matters. Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchasers of any
such participation interests will be considered as the absolute owners of
such interests in the Loans and will have all the rights granted under the
participation agreement or agreements governing the sale of such
participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower's obligation under the
Loans irrespective of the failure or insolvency of any holder of any interest
in the Loans. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any
personal claims or defenses that Borrower may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation reasonable attorneys' fees, incurred
in connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant to
this Agreement. Lender may pay someone else to help collect the Loans and to
enforce this Agreement, and Borrower will pay that amount. This includes,
subject to any limits under applicable law, Lender's reasonable attorneys'
fees and Lender's legal expenses, whether or not there is a lawsuit,
including reasonable attorneys' fees for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and
any anticipated post-judgment collection services. Borrower also will pay
any court costs, in addition to all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimilie, and shall be effective when
actually delivered or when deposited with a nationally recognized overnight
courier or deposited In the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address shown
above. Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the
purpose of the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one Borrower, notice to
any Borrower will constitute notice to all Borrowers. For notice purposes,
Borrower will keep Lender informed at all times of Borrower's current
address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
7
<PAGE>
Agreement be construed to require Lender to make any Loan or other financial
accommodation to any subsidiary or affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given In writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of any Grantor as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is required,
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
JANUARY 10, 1997.
BORROWER:
ASTROPOWER, INC.
BY: /S/ THOMAS J. STINER, VICE PRESIDENT, CONTROLLER AND TREASURER (SEAL)
---------------------------------------------------------------
ATTEST:
By: /S/ ROBERT B. HALL (CORPORATE SEAL)
------------------
Secretary or Assistant Secretary
LENDER:
ARTISANS' BANK
By: /S/ JAMES A LADIO, V.P.
----------------------
Authorized Officer
8
<PAGE>
EXHIBIT 10.11
PROMISSORY NOTE IV-1
================================================================================
BORROWER: ASTROPOWER, INC. LENDER: Artisans' Bank
ONE SOLAR PARK COMMERCIAL BANKING DEPARTMENT
NEWARK, DE 19716 223 WEST NINTH STREET
P. 0. BOX 908
WILMINGTON, DE 19899
================================================================================
<TABLE>
<S> <C> <C>
PRINCIPAL AMOUNT: $750,000.00 INITIAL RATE: 9.750% DATE OF NOTE: JANUARY 10, 1997
</TABLE>
PROMISE TO PAY. FOR VALUE RECEIVED (GOOD AND VALUABLE CONSIDERATION):
ASTROPOWER, INC. ("BORROWER") PROMISES TO PAY TO ARTISANS'BANK ("LENDER"), OR
ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF
SEVEN HUNDRED FIFTY THOUSAND & 00/100 DOLLARS ($750,000.00), TOGETHER WITH
INTEREST ON THE UNPAID PRINCIPAL BALANCE FROM JANUARY 10, 1997, UNTIL PAID IN
FULL.
PAYMENT. SUBJECT TO ANY PAYMENT CHANGES RESULTING FROM CHANGES IN THE INDEX,
BORROWER WILL PAY THIS LOAN IN ACCORDANCE WITH THE FOLLOWING PAYMENT SCHEDULE:
MONTHLY PRINCIPAL PAYMENTS OF $10,000.00 PLUS ACCRUED INTEREST BEGINNING
FEBRUARY 10, 1997 AND THEREAFTER ON THE TENTH (10TH) OF EACH SUBSEQUENT
MONTH UNTIL MATURITY. ALL OUTSTANDING PRINCIPAL AND INTEREST, IF NOT SOONER
PAID, DUE AND PAYABLE ON JANUARY 10, 1999.
Interest on this Note is computed on a 365/365 simple interest basis; that is,
by applying the ratio of the annual interest rate over the number of days in a
year (366 during leap years), multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding.
Borrower will pay Lender at a address shown above or at such other place
as Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to any unpaid collection costs
and any late charges, then to any unpaid interest, and any remaining amount to
principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is Lender's Prime Rate (the
"Index"). This is the rate Lender charges, or would charge, on 90-day a
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Borrower's request. Borrower understands
that Lender may make loans based on other rates as well. The interest rate
change will not occur more often than each day. THE INDEX CURRENTLY IS 8.250%
PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF
THIS NOTE WILL BE AT A RATE OF 1.500 PERCENTAGE POINTS OVER THE INDEX, RESULTING
IN A CURRENT RATE OF 9.750% PER ANNUM. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law. Whenever increases occur in the interest rate. Lender, at its option, may
do one or more of the following: (a) increase Borrower's payments to ensure
Borrower's loan will pay off by its original final maturity date, (a)) increase
Borrower's payments to cover accruing interest, (c) Increase the number of
Borrower's payments, and (a) continue Borrower's payments at the same amount and
increase Borrower's final payment.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
under the payment schedule. Rather, they will reduce the principal balance due
and may result in Borrower making fewer payments.
LATE CHARGE. IF a payment is 15 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT.
DEFAULT. Borrower will be in default it any of the following happens: (a)
Borrower falls to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender. or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement. in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (a) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (a) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(a) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued UNPAID interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, or if this Note is
not paid at final maturity, Lender, AT its option, may add any unpaid accrued
interest to principal and such sum will bear interest therefrom until paid, at
the rate provided in this NOTE. Lender may hire or pay someone else to help
collect this Note it Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law. Lender's
reasonable attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services. If
not prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. THIS NOTE HAS BEEN DELIVERED TO
LENDER AND ACCEPTED BY LENDER IN THE STATE OF DELAWARE. IF THERE IS A LAWSUIT,
BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE
COURTS OF NEW CASTLE COUNTY, THE STATE OF DELAWARE SUBJECT TO THE PROVISIONS ON
ARBITRATION, THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED In ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE.
CONFESSION OF JUDGMENT. Borrower hereby irrevocably authorizes and empowers any
attorney-at-law to appear in any court of record and to confess judgment against
Borrower for the unpaid amount of this Note as evidenced by an affidavit signed
by an officer of Lender setting forth the amount then due, plus attorneys' fees
as provided in this Note, plus costs of suit, and to release all errors, and
waive all rights of appeal. If a copy of this Note, verified by an affidavit.
shall have been filed in the proceeding, it will not be necessary to file the
original as a warrant of attorney. Borrower a the right to any stay of
execution and the benefit of all exemption laws now or hereafter in effect. No
single exercise of the foregoing, warrant and power to confess judgment will be
deemed to exhaust the power, whether or not any such exercise shall be held by
any court to be Invalid, voidable, or void; but the power will continue
undiminished and may be exercised from time to time as Lender may elect until
all amounts owing on this Note have been paid In full.
1
<PAGE>
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest In and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), Including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
ARBITRATION. LENDER AN BORROWER AGREE THAT ALL DISPUTES, CLAIMS AND
CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JONT, OR CLASS IN NATURE,
ARISING FROM THIS NOTE OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND
TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to take a dispose
of any collateral securing this Note shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation obtaining injunctive relief or a temporary
restraining order; invoking as power of sale under any deed of trust or
mortgage; obtaining a writ or attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property without judicial process pursuant to Article 9 of the
Uniform Commercial Code. Any disputes, claims, or controversies concerning the
lawfulness of reasonableness of any act, or exercise of any right, concerning
any collateral securing this Note, including any claim to rescind, reform, or
otherwise modify any agreement relating to the collateral securing this Note,
shall also be arbitrated, provided however that no arbitrator shall have the
right or the power to enjoin or restrain any act of any party. Judgment upon any
award rendered by any arbitrator may be entered in any court having
jurisdiction. Nothing in this Note shall preclude any party from seeking
equitable relief from a court of competent jurisdiction. The statute of
limitations, estoppel, waiver, laches, and similar doctrines which would
otherwise be applicable in a action brought by a party shall be applicable in
any arbitration proceeding, and the commencement of an arbitration proceeding
shall be deemed the commencement of an action for these purposes. a Federal
Arbitration Act shall apply to the construction, interpretation, and enforcement
of this arbitration provision.
ADDENDUM TO NOTE. An exhibit, titled "Addendum to Note," is attached to this
Note and by this reference is made a part of this Note just as if all the
provisions, terms and conditions of the Exhibit had been fully set forth in this
Note.
================================================================================
01-10-1997 PROMISSORY NOTE PAGE 2
(CONTINUED)
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
ASTROPOWER, INC.
BY: /S/ THOMAS J. STINER
- ---------------------------------------------------------------(SEAL)
THOMAS J. STINER, VICE PRESIDENT, CONTROLLER AND TREASURER
ATTEST:
BY: /S/ ROBERT B. HALL
--------------------------------------------------------- (CORPORATE SEAL)
Secretary or Assistant Secretary
===============================================================================
2
<PAGE>
EXHIBIT 10.12
COMMERCIAL SECURITY AGREEMENT
================================================================================
BORROWER: ASTROPOWER, INC. LENDER: ARTISANS' BANK
ONE SOLAR PARK COMMERCIAL BANKING DEPARTMENT
NEWARK, DE 19716 223 WEST NINTH STREET
P. 0. BOX 908
WILMINGTON, DE 19899
================================================================================
THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN ASTROPOWER, INC.
(REFERRED TO BELOW AS "GRANTOR"); AND ARTISANS' BANK (REFERRED TO BELOW AS
"LENDER"). FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER A SECURITY
INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES THAT LENDER
SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO THE COLLATERAL,
IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
COLLATERAL. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
ALL EQUIPMENT, TOGETHER WITH THE FOLLOWING SPECIFICALLY DESCRIBED
PROPERTY: SPECIFIC EQUIPMENT DESCRIBED MORE FULLY ON THE ATTACHED SCHEDULE
"A"
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising. and
wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions for
any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral
section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described
in this Collateral section.
(e) All records and data relating to any OF the property described in this
Collateral section, whether in the form OF a writing, photograph,
microfilm, microfiche, or electronic media, together with all of Grantor's
right, title, and interest in and to all computer software required to
utilize, create, maintain, and process any such records or data on
electronic media.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
GRANTOR. The word "Grantor" means AstroPower, Inc., its successors and
assigns
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all OF the guarantors, sureties, and accommodation parties in connection
with the Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents.
LENDER. The word "Lender" means Artisans' Bank, its successors and assigns.
NOTE. The word "Note" means the note or credit agreement dated January 10,
1997, in the principal amount of $750,000.00 from AstroPower, Inc. to
Lender, together with all renewals of, extensions of, modifications of,
refinancing of, consolidations of and substitutions for the note or credit
agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security
interest in and hereby assigns, conveys, delivers, pledges, and transfers all of
Grantor's right, title and interest in and to Grantor's accounts with Lender
(whether checking,
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savings, or some other account), including all accounts held jointly with
someone else and all accounts Grantor may open in the future, excluding,
however, all IRA and Keogh accounts, and all trust accounts for which the grant
of a security interest would be prohibited by law. Grantor authorizes Lender, to
the extent permitted by applicable law, to charge or setoff all Indebtedness
against any and all such accounts, and, at Lender's option, to administratively
freeze all such accounts to allow Lender to protect Lender's charge and setoff
rights provided in this paragraph.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement.
Lender may at any time, and without further authorization from Grantor, file
a carbon, photographic or other reproduction of any financing statement or
of this Agreement for use as a financing statement. Grantor will reimburse
Lender for all expenses for the perfection and the continuation of the
perfection of Lender's security interest in the Collateral. Grantor promptly
will notify Lender before any change in Grantor's name including any change
to the assumed business names of Grantor.
NO VIOLATION. The execution and delivery of this Agreement will not violate
any law or agreement governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear
to be on the Collateral.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or, to the extent
the Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such
other locations as are acceptable to Lender. Except in the ordinary course
of its business, including the sales of inventory, Grantor shall not remove
the Collateral from its existing locations without the prior written consent
of Lender. To the extent that the Collateral consists of vehicles, or other
titled property, Grantor shall not take or permit any action which would
require application for certificates of title for the vehicles outside the
State of Delaware, without the prior written consent of Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
Grantor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance, or
charge, other than the security interest provided for in this Agreement,
without the prior written consent of Lender. This includes security
interests even if junior in right to the security interests granted under
this Agreement. Unless waived by Lender, all proceeds from any disposition
of the Collateral (for whatever reason) shall be held in trust for Lender
and shall not be commingled with any other funds; provided however, this
requirement shall not constitute consent by Lender to any sale or other
disposition. Upon receipt, Grantor shall immediately deliver any such
proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's
rights in the Collateral against the claims and demands of all other
persons.
COLLATERAL SCHEDULES AND LOCATIONS. Insofar as the Collateral consists of
equipment, Grantor shall deliver to Lender, as often as Lender shall
require, such lists, descriptions, and designations of such Collateral as
Lender may require to identify the nature, extent, and location of such
Collateral. Such information shall be submitted for Grantor and each of its
subsidiaries or related companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not commit or
permit damage to or destruction of the Collateral or any part of the
Collateral. Lender and its designated representatives and agents shall have
the right at all reasonable times to examine, inspect, and audit the
Collateral wherever located. Grantor shall immediately notify Lender of all
cases involving the return, rejection, repossession, loss or damage of or to
any Collateral; of any request for credit or adjustment or of any other
dispute arising with respect to the Collateral; and generally of all
happenings and events affecting the Collateral or the value or the amount of
the Collateral.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness, or
upon any of the other Related Documents. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and so
long as Lender's interest in the Collateral is not jeopardized in Lender's
sole opinion. If the Collateral is subjected to a lien which is not
discharged within fifteen (15) days, Grantor shall deposit with Lender cash,
a sufficient corporate surety bond or other security satisfactory to Lender
in an amount adequate to provide for the discharge of the lien plus any
interest, costs, reasonable attorneys' fees or other charges that could
accrue as a result of foreclosure or sale of the Collateral. In any contest
Grantor shall defend itself and Lender and shall satisfy any final adverse
judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the
contest proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the
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Collateral. Grantor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral, in
Lender's opinion, is not jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used for the generation, manufacture, storage,
transportation. treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the
Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to
any of the foregoing. The terms "hazardous waste" and "hazardous substance"
shall also include, without limitation, petroleum and petroleum by-products
or any fraction thereof and asbestos. The representations and warranties
contained herein are based on Grantor's due diligence in investigating the
Collateral for hazardous wastes and substances. Grantor hereby (a) releases
and waives any future claims against Lender for indemnity or contribution in
the event Grantor becomes liable for cleanup or other costs under any such
laws, and (b) agrees to Indemnify and hold harmless Lender against any and
all claims and losses resulting from a breach of this provision of this
Agreement. This obligation to indemnify shall survive the payment of the
Indebtedness and the satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
risks insurance, including without limitation tire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver to
Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverage will not be
canceled or diminished without at least tan (10) days' prior written notice
to Lender and not including any disclaimer of the insurer's liability for
failure to give such a notice. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired
in any way by any act, omission or default of Grantor or any other person.
In connection with all policies covering assets in which Lender holds or is
offered a security interest, Grantor will provide Lender with such loss
payable or other endorsements as Lender may require. If Grantor at any time
fails to obtain or maintain any insurance as required under this Agreement,
Lender may (but shall not be obligated to) obtain such insurance as Lender
deems appropriate, including if it so chooses "single interest insurance,"
which will cover only Lender's interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
Indebtedness, and shall pay the balance to Grantor. Any proceeds which have
not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before payment is due, the reserve funds are insufficient,
Grantor shall upon demand pay any deficiency to Lender. The reserve funds
shall be held by Lender as a general deposit and shall constitute a non-
interest-bearing account which Lender may satisfy by payment of the
insurance premiums required to be paid by Grantor as they become due. Lender
does not hold the reserve funds in trust for Grantor, and Lender is not the
agent of Grantor for payment of the insurance premiums required to be paid
by Grantor. The responsibility for the payment of premiums shall remain
Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as
Lender may reasonably request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
property insured; (a) the then current value on the basis of which insurance
has been obtained and the manner of determining that value; and (f) the
expiration date of the policy. In addition, Grantor shall upon request by
Lender (however not more often than annually) have an independent appraiser
satisfactory to Lender determine, as applicable, the cash value or
replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of
the tangible personal property and beneficial use of all the Collateral and may
use it in any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's security interest in such Collateral. If
Lender at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action for
that purpose as Grantor shall request or as Lender, in Lender's sole discretion,
shall deem appropriate under the circumstances, but failure to honor any request
by Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (I) the term of any applicable insurance policy or (II) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due
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and payable at the Note's maturity. This Agreement also will secure payment of
these amounts. Such right shall be in addition to all other rights and remedies
to which Lender may be entitled upon the occurrence of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due on
the Indebtedness.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in any
of the Related Documents or in any other agreement between Lender and
Grantor.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's- property, or Borrower's or any
Grantor's ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement, the Note
or the Related Documents is false or misleading in any material respect,
either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any
time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
Insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method. by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the Indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or such Guarantor dies or becomes
incompetent.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Delaware Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness,
Including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all or
any portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble
the Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of
Grantor to take possession of and remove the Collateral. If the Collateral
contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer,
or otherwise deal with the Collateral or proceeds thereof in its own name or
that of Grantor. Lender may sell the Collateral at public auction or private
sale. Unless the Collateral threatens to decline speedily In value or is of
a type customarily sold on a recognized market, Lender will give Grantor
reasonable notice of the time after which any private sale or any other
intended disposition of the Collateral is to be made. The requirements of
reasonable notice shall be met it such notice is given at least ton (10) days
before the time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the expenses of
retaking, holding, insuring, preparing for sale and selling the Collateral,
shall become a part of the Indebtedness secured by this Agreement and shall
be payable on demand, with interest at the Note rate from date of expenditure
until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right, (b))
the receiver may be an employee of Lender and may serve without bond, and (c)
all fees of the receiver and his or her attorney shall become part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any Collateral
into its own name or that of its nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel
paper, chooses in action, or similar property, Lender may demand, collect,
receipt for, settle, compromise. adjust, sue for, foreclose, or realize on
the Collateral as Lender may determine, whether or not Indebtedness or
Collateral is then due. For these purposes, Lender may, on behalf of and in
the name of Grantor, receive, open and dispose of mail addressed to Grantor;
change any address to which mail and payments are to be sent; and endorse
notes, checks, drafts, money orders, documents of title, instruments and
items pertaining to payment, shipment, or storage of any Collateral. To
facilitate collection, Lender may notify account debtors and obligors on any
Collateral to make payments directly to Lender.
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OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining an
the Indebtedness due to Lender after application of all amounts received from
the exercise of the rights provided in this Agreement. Grantor shall be
liable for a deficiency even if the transaction described in this subsection
is a sale of accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies of
a secured creditor under the provisions of the Uniform Commercial Code, as
may be amended from time to time. In addition, Lender shall have and may
exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced
by this Agreement or the Related Documents or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor's failure to
perform, shall not affect Lender's right to declare a default and to exercise
its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or parties
sought to be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of Delaware. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of New Castle
County, State of Delaware. Subject to the provisions on arbitration, this
Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware.
ARBITRATION. LENDER AND GRANTOR AGREE THAT ALL DISPUTES, CLAIMS AND
CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE,
ARISING FROM THIS AGREEMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION
CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE
AMERICAN ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to
take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or
mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any Collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator
shall have the right or the power to enjoin or restrain any act of any party.
Judgment upon any award rendered by any arbitrator may be entered in any
court having jurisdiction. Nothing in this Agreement shall preclude any
party from seeking equitable relief from a court of competent jurisdiction.
The statute of limitations, estoppel. waiver, laches, and similar doctrines
which would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action for
these purposes. The Federal Arbitration Act shall apply to the construction,
interpretation, and enforcement of this arbitration provision.
ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including reasonable attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement.
Lender may pay someone else to help enforce this Agreement, and Grantor shall
pay the costs and expenses of such enforcement. Costs and expenses include
Lender's reasonable attorneys' fees and legal expenses whether or not there
is a lawsuit, including reasonable attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate any
automatic stay or injunction.), appeals, and any anticipated post -judgment
collection services. Grantor also shall pay all court costs and such
additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimilie, and shall be effective when
actually delivered or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address shown
above. Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the
purpose of the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one Grantor, notice to any
Grantor will constitute notice to all Grantors. For notice purposes, Grantor
will keep Lender informed at all times of Grantor's current address(es).
POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing
or payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment
for the Collateral; (c) to settle or compromise any and all claims arising
under the Collateral, and, in the place and stead of Grantor, to execute and
deliver its release and settlement for the claim; and (d) to file any claim
or claims or to take any action or institute or take part in any proceedings,
either in its own name or in the name of Grantor, or otherwise, which in the
discretion of Lender may seem to be necessary or advisable. This power is
given as security for the Indebtedness, and the authority hereby conferred is
and shall be irrevocable and shall remain in full force and effect until
renounced by Lender.
SEVERABILITY. It a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and inure
to the benefit of the parties. their successors and assigns.
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WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Grantor, shall
constitute a waiver of any of Lender's rights or of any of Grantor's
obligations as to any future transactions. Whenever the consent of Lender
is required under this Agreement, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may
be granted or withheld in the sole discretion of Lender.
SCHEDULE "A" COLLATERAL EQUIPMENT LISTING. An exhibit. titled "Schedule "A'
Collateral Equipment Listing," is attached to this Agreement and by this
reference is made a part of this Agreement just as if all the provisions,
terms and conditions of the Exhibit had been fully set forth in this
Agreement.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
JANUARY 10, 1997.
GRANTOR:
ASTROPOWER, INC.
BY: /S/ THOMAS J. STINER (SEAL)
----------------------------
Thomas J. Stiner, Vice President, Controller and Treasurer
ATTEST:
/s/ ROBERT B. HALL
- --------------------------------
Secretary or Assistant Secretary (CORPORATE SEAL)
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EXHIBIT 10.13
COMMERCIAL GUARANTY
================================================================================
BORROWER: ASTROPOWER, INC. LENDER: ARTISANS'BANK
ONE SOLAR PARK COMMERCIAL BANKING DEPARTMENT
NEWARK, DE 19716 223 WEST NINTH STREET
P. 0. BOX 908
WILMINGTON, DE 19899
GUARANTOR: ALLEN BARNETT
2 POLARIS DRIVE
NEWARK, DE 19711
================================================================================
AMOUNT OF GUARANTY. THE PRINCIPAL AMOUNT OF THIS GUARANTY IS 100.000% OF ALL
AMOUNTS DUE FROM BORROWER TO LENDER AS PROVIDED BELOW, HOWEVER IN NO EVENT TO
EXCEED SEVEN HUNDRED FIFTY THOUSAND & 00/100 DOLLARS ($750,000.00).
GUARANTY. FOR GOOD AND VALUABLE CONSIDERATION, ALLEN BARNETT ("GUARANTOR")
ABSOLUTELY AND UNCONDITIONALLY GUARANTEES AND PROMISES TO PAY TO ARTISANS' BANK
("LENDER") OR ITS ORDER, IN LEGAL TENDER OF THE UNITED STATES OF AMERICA,
100.000% OF THE INDEBTEDNESS (AS THAT TERM IS DEFINED BELOW) OF ASTROPOWER,
INC. ("BORROWER") TO LENDER ON THE TERMS AND CONDITIONS SET FORTH IN THIS
GUARANTY. GUARANTOR AGREES THAT LENDER, IN ITS SOLE DISCRETION, MAY DETERMINE
WHICH PORTION OF BORROWER'S INDEBTEDNESS TO LENDER IS COVERED BY GUARANTOR'S
PERCENTAGE GUARANTY.
DEFINITIONS. The following words shall have the following meanings when used
in this Guaranty:
Borrower. The word "Borrower" means AstroPower, Inc..
GUARANTOR. The word "Guarantor" means Allen Barnett.
GUARANTY. The word "Guaranty" means this Guaranty made by Guarantor for the
benefit of Lender dated January 10, 1997.
INDEBTEDNESS. The word "Indebtedness" means the Note, including (a) all
principal, (b) all interest, (c) all late charges, (d) all loan fees and loan
charges, and (e) all collection costs and expenses relating to the Note or to
any collateral for the Note. Collection costs and expenses include without
limitation all of Lender's reasonable attorneys' fees and Lender's legal
expenses, whether or not suit is instituted, and reasonable attorneys' fees
and legal expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated post-
judgment collection services.
LENDER. The word "Lender" means Artisans' Bank, its successors and assigns.
NOTE. The word "Note" means the promissory note or credit agreement dated
January 10, 1997, in the original principal amount OF $750,000.00 from
Borrower to Lender, together with all renewals of, extensions of,
modifications of, refinancing of, consolidations of, and substitutions for
the promissory note or agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
MAXIMUM LIABILITY. THE MAXIMUM LIABILITY OF GUARANTOR UNDER THIS GUARANTY SHALL
NOT EXCEED AT ANY ONE TIME THE SUM OF THE PRINCIPAL AMOUNT OF $750,000.00, PLUS
ALL INTEREST THEREON, PLUS ALL OF LENDER'S COSTS, EXPENSES, AND ATTORNEYS' FEES
INCURRED IN CONNECTION WITH OR RELATING TO (A) THE COLLECTION OF THE
INDEBTEDNESS, (B) THE COLLECTION AND SALE OF ANY COLLATERAL FOR THE
INDEBTEDNESS OR THIS GUARANTY, OR (C) THE ENFORCEMENT OF THIS GUARANTY.
ATTORNEYS' FEES INCLUDE, WITHOUT LIMITATION, ATTORNEYS' FEES WHETHER OR NOT
THERE IS A LAWSUIT, AND IF THERE IS A LAWSUIT, ANY FEES AND COSTS FOR TRIAL AND
APPEALS.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all guaranties
shall be cumulative. This Guaranty shall not (unless specifically provided
below to the contrary) affect or invalidate any such other guaranties. The
liability of Guarantor will be the aggregate liability of Guarantor under the
terms of this Guaranty and any such other unterminated guaranties.
NATURE OF GUARANTY. Guarantor intends to guarantee at all times the performance
and prompt payment when due, whether at maturity or earlier by reason of
acceleration or otherwise, of all Indebtedness within the limits set forth in
the preceding section of this Guaranty.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor
or to Borrower, and will continue in full force until all Indebtedness shall
have been fully and finally paid and satisfied and all other obligations of
Guarantor under this Guaranty shall have been performed in full. Release of any
other guarantor or termination of any other guaranty of the Indebtedness shall
not affect the liability of Guarantor under this Guaranty. A revocation
received by Lender from any one or more Guarantors shall not affect the
liability of any remaining Guarantors under this Guaranty.
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, WITHOUT
NOTICE OR DEMAND AND WITHOUT LESSENING GUARANTOR'S LIABILITY UNDER THIS
GUARANTY, FROM TIME TO TIME: (A) TO MAKE ONE OR MORE ADDITIONAL SECURED OR
UNSECURED LOANS TO BORROWER, TO LEASE EQUIPMENT OR OTHER GOODS TO BORROWER, OR
OTHERWISE TO EXTEND ADDITIONAL CREDIT TO BORROWER; (B) TO ALTER, COMPROMISE,
RENEW, EXTEND, ACCELERATE, OR OTHERWISE CHANGE ONE OR MORE TIMES THE TIME FOR
PAYMENT OR
1
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OTHER TERMS OF THE INDEBTEDNESS OR ANY PART OF THE INDEBTEDNESS, INCLUDING
INCREASES AND DECREASES OF THE RATE OF INTEREST ON THE INDEBTEDNESS; EXTENSIONS
MAY BE REPEATED AND MAY BE FOR LONGER THAN THE ORIGINAL LOAN TERM; (C) TO TAKE
AND HOLD SECURITY FOR THE PAYMENT OF THIS GUARANTY OR THE INDEBTEDNESS, AND
EXCHANGE, ENFORCE, WAIVE, SUBORDINATE, FALL OR DECIDE NOT TO PERFECT, AND
RELEASE ANY SUCH SECURITY, WITH OR WITHOUT THE SUBSTITUTION OF NEW COLLATERAL;
(D) TO RELEASE, SUBSTITUTE, AGREE NOT TO SUE, OR DEAL WITH ANY ONE OR MORE OF
BORROWER'S SURETIES, ENDORSERS, OR OTHER GUARANTORS ON ANY TERMS OR IN ANY
MANNER LENDER MAY CHOOSE; (E) TO DETERMINE HOW, WHEN AND WHAT APPLICATION OF
PAYMENTS AND CREDITS SHALL BE MADE ON THE INDEBTEDNESS; (F) TO APPLY SUCH
SECURITY AND DIRECT THE ORDER OR MANNER OF SALE THEREOF, INCLUDING WITHOUT
LIMITATION, ANY NONJUDICIAL SALE PERMITTED BY THE TERMS OF THE CONTROLLING
SECURITY AGREEMENT OR DEED OF TRUST, AS LENDER IN ITS DISCRETION MAY DETERMINE;
(9) TO SELL, TRANSFER, ASSIGN, OR GRANT PARTICIPATION'S IN ALL OR ANY PART OF
THE INDEBTEDNESS; AND (H) TO ASSIGN OR TRANSFER THIS GUARANTY IN WHOLE OR IN
PART.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants
to Lender that (a) no representations or agreements of any kind have been made
to Guarantor which would limit or qualify in any way the terms of this
Guaranty; (b) this Guaranty is executed at Borrower's request and not at the
request of Lender; (c) Guarantor has full power, right and authority to enter
into this Guaranty; (d) the provisions of this Guaranty do not conflict with or
result in a default under any agreement or other instrument binding upon
Guarantor and do not result in a violation of any law, regulation, court decree
or order applicable to Guarantor; (e) Guarantor has not and will not, without
the prior written consent of Lender, sell, lease, assign, encumber,
hypothecate, transfer, or otherwise dispose of all or substantially all of
Guarantor's assets, or any interest therein; (f) upon Lender's request,
Guarantor will provide to Lender financial and credit information in form
acceptable to Lender, and all such financial information which currently has
been, and all future financial information which will be provided to Lender is
and will be true and correct in all material respects and fairly present the
financial condition of Guarantor as of the dates the financial information is
provided; (g) no material adverse change has occurred in Guarantor's financial
condition since the date of the most recent financial statements provided to
Lender and no event has occurred which may materially adversely affect
Guarantor's financial rendition: (h) no litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid taxes)
against Guarantor is pending or threatened; (I) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (j)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition.
Guarantor agrees to keep adequately informed from such means of any facts,
events, or circumstances which might in any way affect Guarantor's risks under
this Guaranty, and Guarantor further agrees that, absent a request for
information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any collateral held by
Lender from Borrower, any other guarantor, or any other person; (a) to give
notice of the terms, time, and place of any public or private sale of personal
property security held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (f) to pursue any other
remedy within Lender's power; or (g) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower,
by subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor" of Borrower within the meaning of 1 U.S.C. section 547(b), or any
successor provision of the Federal bankruptcy laws.
Guarantor also waives any and all rights or defenses arising by reason of (a)
any "one action" or "anti-deficiency" law or any other law which may prevent
Lender from bringing any action, including a claim for deficiency, against
Guarantor, before or after Lender's commencement or completion of any
foreclosure action, either judicially or by exercise of a power of sale; (b)
any election of remedies by Lender which destroys or otherwise adversely
affects Guarantor's subrogation rights or Guarantor's rights to proceed against
Borrower for reimbursement, including without limitation. any loss of rights
Guarantor may suffer by reason of any law limiting, qualifying, or discharging
the Indebtedness; (c) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment in full in legal
tender, of the Indebtedness; (d) any right to claim discharge of the
Indebtedness on the basis of unjustified impairment of any collateral for the
Indebtedness; (a) any statute of limitations, if at any time any action or suit
brought by Lender against Guarantor is commenced there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable
statute of limitations; or (f) any defenses given to guarantors at law or in
equity other than actual payment and performance of the Indebtedness. If
payment is made by Borrower, whether voluntarily or otherwise, or by any third
party, on the Indebtedness and thereafter Lender is forced to remit the amount
of that payment to Borrower's trustee In bankruptcy or to any similar person
under any federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of enforcement of this
Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of
setoff, counterclaim, counter demand, recoupment or similar right, whether such
claim, demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and
agrees that each of the waivers set forth above is made with Guarantor's full
knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by
law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender
by law, Lender shall have. with respect to Guarantor's obligations to Lender
under this Guaranty and to
2
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the extent permitted by law, a contractual possessory security interest in and
a right of setoff against, and Guarantor hereby assigns, conveys, delivers,
pledges, and transfers to Lender all of Guarantor's right, title and interest
in and to, all deposits, moneys, securities and other property of Guarantor now
or hereafter in the possession of or on deposit with Lender, whether held in a
general or special account or deposit, whether held jointly with someone else,
or whether held for safekeeping or otherwise, excluding however all IRA, Keogh,
and trust accounts. Every such security interest and right of setoff may be
exercised without demand upon or notice to Guarantor. No security interest or
right of setoff shall be deemed to have been waived by any act or conduct on
the part of Lender or by any neglect to exercise such right of setoff or to
enforce such security interest or by any delay in so doing. Every right of
setoff and security interest shall continue in full force and effect until such
right of setoff or security interest is specifically waived or released by an
instrument in writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets
of Borrower, through bankruptcy, by an assignment for the benefit of creditors,
by voluntary liquidation, or otherwise, the assets of Borrower applicable to
the payment of the claims of both Lender and Guarantor shall be paid to Lender
and shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions
as Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
CONFESSION OF JUDGMENT. Guarantor hereby irrevocably authorizes and empowers
any attorney-at-law to appear in any court of record and to confess judgment
against Guarantor for the unpaid amount of this Guaranty as evidenced by an
affidavit signed by an officer of Lender setting forth the amount then due,
plus attorneys' fees as provided in this Guaranty, plus costs of suit, and to
release all errors, and waive all rights of appeal. If a copy of this Guaranty,
verified by an affidavit, shall have been filed in the proceeding, it will not
be necessary to file the original as a warrant of attorney. Guarantor waives
the right to any stay of execution and the benefit of all exemption laws now or
hereafter in effect. No single exercise of the foregoing warrant and power to
confess judgment will be deemed to exhaust the power, whether or not any such
exercise shall be held by any court to be invalid, voidable, or void; but the
power will continue undiminished and may be exercised from time to time as
Lender may elect until all amounts owing on this Guaranty have been paid in
full.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
AMENDMENTS. This Guaranty, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Guaranty. No alteration of or amendment to this Guaranty shall
be effective unless given in writing and signed by the party or parties
sought to be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Guaranty has been delivered to Lender and accepted by
Lender in the State of Delaware. If there is a lawsuit, Guarantor agrees
upon Lender's request to submit to the jurisdiction of the courts of New
Castle County, State of Delaware. Subject to the provisions on arbitration,
this Guaranty shall be governed by and construed in accordance with the laws
of the State of Delaware.
ARBITRATION. LENDER AND GUARANTOR AGREE THAT AIL DISPUTES, CLAIMS AND
CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE,
ARISING FROM THIS GUARANTY OR OTHERWISE, INCLUDING WITHOUT LIMITATION
CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE
AMERICAN ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to
take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or
mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any Collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator
shall have the right or the power to enjoin or restrain any act of any party.
Judgment upon any award rendered by any arbitrator may be entered in any
court having jurisdiction. Nothing in this Guaranty shall preclude any party
from seeking equitable relief from a court of competent jurisdiction. The
statute of limitations, estoppel, waiver, [aches, and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action for
these purposes. The Federal Arbitration Act shall apply to the construction,
interpretation, and enforcement of this arbitration provision.
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including reasonable attorneys' fees and
Lender's legal expenses, incurred in connection with the enforcement of this
Guaranty. Lender may pay someone else to help enforce this Guaranty, and
Guarantor shall pay the costs and expenses of such enforcement. Costs and
expenses include Lender's reasonable attorneys' fees and legal expenses
whether or not there is a lawsuit, including reasonable attorneys' fees and
legal expenses for bankruptcy proceedings (and including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated post-
judgment collection services. Guarantor also shall pay all court costs and
such additional fees as may be directed by the court.
NOTICES. All notices required to be given by either party to the other under
this Guaranty shall be in writing, may be sent by telefacsimilie, and shall
be effective when actually delivered or when deposited with a nationally
recognized overnight courier, or when deposited in the United States mail,
first class postage prepaid, addressed to the party to whom the notice is to
be given at
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the address shown above or to such other addresses as either party may
designate to the other in writing. If there is more than one Guarantor,
notice to any Guarantor will constitute notice to all Guarantors. For notice
purposes, Guarantor agrees to keep Lender informed at all times of
Guarantor's current address.
INTERPRETATION. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction so
require; and where there is more than one Borrower named in this Guaranty or
when this Guaranty is executed by more than one Guarantor, the words
"Borrower" and "Guarantor" respectively shall mean all and any one or more of
them. The words "Guarantor," "Borrower," and "Lender" include the heirs,
successors, assigns, and transferees of each of them. Caption headings in
this Guaranty are for convenience purposes only and are not to be used to
interpret or define the provisions of this Guaranty. If a court of competent
jurisdiction finds any provision of this Guaranty to be invalid or
unenforceable as to any person or circumstance, such finding shall not render
that provision invalid or unenforceable as to any other persons or
circumstances, and all provisions of this Guaranty in all other respects
shall remain valid and enforceable. If any one or more of Borrower or
Guarantor are corporations or partnerships, it is not necessary for Lender to
inquire into the powers of Borrower or Guarantor or of the officers,
directors, partners, or agents acting or purporting to act on their behalf,
and any Indebtedness made or created in reliance upon the professed exercise
of such powers shall be guaranteed under this Guaranty.
WAIVER. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a
provision of this Guaranty shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Guaranty. No prior waiver by Lender, nor any
course of dealing between Lender and Guarantor, shall constitute a waiver of
any of Lender's rights or of any of Guarantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Guaranty, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS
THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF
THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED
IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO
FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE.
THIS GUARANTY IS DATED JANUARY 10, 1997.
GUARANTOR:
X /S/ Allen Barnett (SEAL)
- ---------------------------------
SIGNED, SEALED AND DELIVERED IN THE PRESENCE OF:
X /S/ James A. Ladio
- ---------------------------------
UNOFFICIAL WITNESS
NOTARY PUBLIC, /S/ PATRICIA ANN CARRICO
------------------------
(NOTARY SEAL)
MY COMMISSION EXPIRES: 2/6/98
------
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<PAGE>
EXHIBIT 10.14
OPERATING AGREEMENT
FOR
GPU SOLAR, L.L.C.
THIS OPERATING AGREEMENT is made and entered into as of _________, 1997 by
GPU International, Inc., a Delaware corporation ("GPUI"), and AstroPower, Inc.,
a Delaware corporation ("API") (referred to as the "Members" and individually as
a "Member").
In consideration of the mutual covenants contained herein, the parties
hereto agree as follows:
ARTICLE I
THE LIMITED LIABILITY COMPANY
-----------------------------
1.1 Formation. The Members hereby form a limited liability company (the
---------
"Company") subject to the provisions of the New Jersey Limited Liability Company
Act as currently in effect (the "Act").
1.2 Filing. In connection with the execution of this Operating Agreement,
------
the Members shall cause a Certificate of Formation that complies with the
requirements of the Act to be properly filed with the New Jersey Secretary of
State, and shall execute such further documents (including amendments to the
Certificate of Formation) and take such further action as is appropriate to
comply with the requirements of law for the formation or operation of a limited
liability company in all states where the Company may conduct its business.
1.3 Name. The name of the Company shall be GPU Solar, L.L.C.
----
1.4 Registered Office, Registered Agent. The location of the registered
-----------------------------------
office of the Company shall be c/o GPU International, Inc., One Upper Pond Road,
Parsippany, NJ 07054 and thereafter at such other location as the Members may
designate. The Company's registered agent at such address shall be James R.
Torpey, Jr.
1.5 Events of Dissolution. The Company shall continue until December 31,
---------------------
2026, unless sooner dissolved pursuant to Section 11.11(b) or by:
(a) the affirmative vote of Members holding a majority of the
Allocable Percentages;
<PAGE>
(b) any event which makes it unlawful for the business of the Company to
be carried on by the Members;
(c) the bankruptcy or dissolution of a Member or the occurrence of any
other event that terminates the continued membership of a Member in the Company;
(d) the sale of all or substantially all of the Company's assets and the
cessation of its business activities; or
(e) any other event causing a dissolution of a limited liability company
under the Act.
1.6 Continuance of the Company. Notwithstanding the provisions of Section
--------------------------
1.5, if, upon the occurrence of an event described in Section 1.5(c), there are
at least two remaining Members, the remaining Members shall have the right to
continue the business of the Company by so electing in writing within 90 days
after the occurrence of such event. If the remaining Members do not elect to
continue the business of the Company, the Company's affairs shall be wound up as
provided in Article VIII.
1.7 Background; Purpose.
--------------------
(a) GPUI has expertise concerning the production, transmission,
distribution and sale of electric energy.
(b) API is engaged in the business of designing, engineering,
manufacturing and assembling photovoltaic ("PV") systems for the production of
electric energy.
(c) GPUI has entered into a Team-Up Program Agreement (the "UPVG
Agreement"), dated as of March 31, 1997, with the Utility Photovoltaic Group,
Inc. ("UPVG") pursuant to which GPUI has been awarded a grant from UPVG in
connection with UPVG's Cooperative Agreement with the United States Department
of Energy, under which UPVG has agreed to assist in the commercialization of PV
systems.
(d) The UPVG Agreement sets forth a Statement of Work (the "SOW") to
be performed by GPUI in connection with the development of commercial
applications for PV systems.
(e) The Members have arranged for the Company to be formed for the
purpose of acting as a subcontractor and/or supplier to GPUI for purposes of
performing the SOW contemplated by the UPVG Agreement, and to engage in such
other business(es) as may be mutually agreed between the Members.
(f) It is contemplated that the Company will not have any employees
and that therefore the bulk of the services to enable the Company to carry out
its commitments in performing the SOW will be provided by or through API or
other subcontractors,
-2-
<PAGE>
which will also supply material to the Company in connection therewith.
(g) Concurrently herewith the Members and the Company are entering
into a Performance Agreement (the "Performance Agreement") pursuant to which the
Company is agreeing to perform the SOW and API is agreeing to render services
and supply material to the Company in connection therewith.
(h) The Company shall be authorized to take such actions and to
transact such business in furtherance of the foregoing objectives as may be
taken and transacted by limited liability companies formed under New Jersey law,
including, but not limited to, transactions with affiliates or related entities,
including, but not limited to, buying from or selling to, borrowing from or
lending to, or leasing property from or to, such affiliates or related entities.
1.8 Principal Place of Business. The location of the principal place of
---------------------------
business of the Company shall be c/o GPU International, Inc., One Upper Pond
Road, Parsippany, NJ 07054, or at such other place as the Managers from time to
time may select.
1.9 The Members. The name and present mailing address of each Member is as
-----------
follows:
Name Address
- ---- -------
GPU International, Inc. One Upper Pond Road
Parsippany, NJ 07054
AstroPower, Inc. Solar Park
Newark, DE 19716-2000
1.10 New Members. Except as expressly provided by this Operating
-----------
Agreement or the Act, new Members may be admitted only upon such terms and
conditions as may be mutually agreed between the Members.
1.11 Voting Rights. Except as expressly provided by this Operating
-------------
Agreement or the Act, with respect to all matters submitted to a vote of the
Members, the decision of Members holding a majority of the Allocable Percentages
shall be determinative.
ARTICLE II
CAPITAL CONTRIBUTIONS
---------------------
2.1 Initial Contributions. Each of the Members initially shall contribute
---------------------
to the Company's capital $50 in cash (the "Initial Contribution").
-3-
<PAGE>
2.2 Additional Contributions. No Member shall be obligated to make any
------------------------
additional contribution ("Additional Contribution") to the Company's capital.
In the event that any Member makes such Additional Contribution, such
contribution shall not affect any Member's Allocable Percentage and shall be
repaid only as provided herein.
2.3 No Interest. Neither the Initial Contributions nor any Additional
-----------
Contribution shall bear interest unless otherwise unanimously agreed by the
Members.
ARTICLE III
PROFITS, LOSSES AND DISTRIBUTIONS
---------------------------------
3.1 Profits and Losses; Allocable Percentages. Subject to the provisions
-----------------------------------------
of Section 6.1, the Company's "Net Profits" or "Net Losses" shall be determined
on an annual basis, as provided in Section 3.3, and shall be allocated among the
Members in accordance with their Allocable Percentages. The "Allocable
Percentage" of each Member is 50%.
3.2 Distributions. Subject to the provisions of Section 6.2 and provided
-------------
the Company is not then in the process of liquidation, at such times as the
Managers shall determine, the Managers shall distribute Available Funds to the
Members in proportion to their Allocable Percentages; provided, however, that in
the event any Member has made an Additional Contribution, such Additional
Contribution shall be repaid from Available Funds, together with any applicable
interest, prior to making any other distributions to the Members. For this
purpose, "Available Funds" means the Company's cash and other liquid assets in
excess of the amount that, in the Managers' reasonable judgment, the Company
should retain as reserves.
3.3 Accounting. For each fiscal year, "Net Profits" and "Net Losses"
----------
shall be determined by the Company's accountants, after consultation with the
Managers, in accordance with the methods and elections used for federal income
tax purposes, which methods and elections shall be satisfactory to the Managers.
The Company's fiscal year shall be the calendar year.
ARTICLE IV
MANAGEMENT
----------
4.1 Liability. In accordance with Section 42:2B-23 of the Act, no Member
---------
or person serving as one of the Managers or bearing a title as an officer of the
Company shall be obligated personally with respect to any debt, obligation or
liability of the Company by reason of being a Member, or serving as one of the
Managers, or acting as an officer, agent or otherwise on behalf of the Company.
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4.2 Managers.
--------
(a) Pursuant to Section 42:2B-27 of the Act, the business of the
Company shall be managed by a committee of Managers (the "Managers") comprised
of four persons to be elected by the Members, two to be designated by GPUI and
two to be designated by API. It is presently contemplated that GPUI will
designate James R. Torpey, Jr. and Gina Collins and that API will designate
Peter Aschenbrenner and Dr. George Roland as their respective initial Managers.
Each of the Members agrees that for so long as it continues to be a Member of
the Company, it will vote and take such other action as may be necessary to
elect as Managers the persons so designated by GPUI and API, respectively, from
time to time. Except as expressly provided by this Operating Agreement or the
Act, the Managers shall act by the vote of a majority of the persons then
serving as Managers.
(b) In order to facilitate the transaction of business by the
Company, the Members agree that the following persons shall be assigned the
titles set forth opposite their respective names and shall have such authority
as is generally conferred on the corresponding officers of a New Jersey
corporation:
Name Office
---- ------
James R. Torpey, Jr. President
Peter Aschenbrenner Secretary
(c) All substantive business decisions and decisions relating to
matters outside of the routine ordinary course of business of the Company,
including, without limitation, decisions as to the projects and activities to be
undertaken by the Company, and the terms of any such undertaking, shall be made
only by unanimous action of the Managers. Without limiting the generality of the
foregoing, and except as otherwise specifically contemplated herein or in the
Performance Agreement, the Company will not, without unanimous approval of the
Managers, take any of the following actions:
(i) Open bank accounts or designate authorized signatories
thereof;
(ii) Create, incur, assume or suffer to exist any mortgage,
lien, security interest or other charge or encumbrance upon or with respect to
any of its property or rights, whether now owned or hereafter acquired, or
assign any right to receive income, services or property, except liens (i) for
taxes, assessments, or governmental charges or levies on property of the Company
if same shall not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate proceedings, or
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(ii) imposed by law, such as carriers', warehousemen's and mechanics' liens and
other similar liens arising in the ordinary course of business;
(iii) Create, incur, assume or suffer to exist any indebtedness
for borrowed money or for the deferred purchase price of assets or property or
for the lease of any assets or property;
(iv) Assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any debt or obligation of any other
person or entity, except for guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business;
(v) Make any advances or loans to, or any investments in, any
person or entity;
(vi) Declare or pay any distributions in respect of an interest
in the Company or effect any redemption or other acquisition of any such
interest;
(vii) Merge or consolidate with, or acquire all or substantially
all of the assets or stock of, any other entity, or sell, lease or otherwise
dispose of any substantial portion of its assets in any single transaction or
series of transactions, whether or not related, except for sales of inventory in
the ordinary course of business;
(viii) Hire and fire employees, consultants or other agents of
the Company or fix the terms of retention and compensation thereof;
(ix) Adopt or amend any business plan or budget for the
Company;
(x) Admit any new Members or issue any interest in the Company
or any options, warrants or rights to acquire such an interest or any securities
convertible into or exchangeable for such an interest;
(xi) Amend the Certificate of Formation of the Company or this
Operating Agreement;
(xii) Make or commit to make any substantial capital or other
expenditures, including, without limitation, long-term or capital leases; or
(xiii) Enter into any other agreements or commitments obligating
the Company in any substantial respect to pay moneys or to perform services or
provide goods.
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<PAGE>
(d) Responsibility and authority for specified day-to-day operational
matters may be delegated to such persons and on such terms as the Managers may
unanimously determine.
(e) The provisions of this Section 4.2 shall terminate from and after
the date that each of GPUI and API no longer holds a 50% Allocable Percentage.
4.3 Time Devoted to Business. It is understood and agreed that each of
------------------------
the Managers and the persons designated as President and Secretary are active in
the business of GPUI or API, as the case may be, and shall devote only such time
to the Corporation's business as they, in their sole and absolute discretion,
deem necessary and appropriate. The Managers and every Member shall at all
times be free to engage for his, her or its own account in all aspects of any
other business or investment, whether similar or dissimilar to the business of
the Company, and neither the Company nor any other Member shall have any claim
or right to the assets or profits related to such other business or investment.
4.4 Information Relating to Company. Upon reasonable request, the
-------------------------------
Managers shall provide information regarding the Company or its activities to
any Member. Each Member or its authorized representative shall have reasonable
access to and may inspect and copy all books, records and materials in any
Manager's possession regarding the Company or its activities.
4.5 Exculpation; Indemnification. The Managers and the persons designated
----------------------------
as President and Secretary shall not be liable to the Company, or any Member
thereof, for any act or omission related to the Company or its operations which
act or omission was undertaken in good faith. The Company shall, to the full
extent permitted by law, defend and indemnify each of the Managers and Members
and each person bearing a title as an officer of the Company from and against
any and all losses, claims, damages and liabilities (including reasonable
attorneys' fees) arising out of or in connection with their activities as
Managers, Members, officers, employees and/or agents of the Company and shall
pay all amounts required to be paid by them pursuant to court order or in
settlement of any action brought or threatened to be brought against them in
respect of any such activity; provided, however, that this provision shall not
impose any liability on any Member to make any Additional Contributions to the
Company on behalf of any indemnified party with respect to such indemnity.
4.6 Records at Principal Place of Business. The Managers shall cause the
--------------------------------------
Company to keep at its principal place of business the following:
(a) a current list in alphabetical order of the full name and last
known address of each Member;
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<PAGE>
(b) a copy of the Certificate of Formation and all certificates of
amendment thereto, as filed, together with executed copies of any powers of
attorney pursuant to which any certificate of amendment has been executed; and
(c) complete and accurate books and records of the Company.
ARTICLE V
REPRESENTATIONS
---------------
5.1 Investment Representation. Each of the Members acknowledges that the
-------------------------
interest in the Company which it is acquiring pursuant to this Operating
Agreement has not been registered under the Securities Act of 1933 or any state
securities laws. Each of the Members hereby represents that it is acquiring
such interest for investment and not with a view to the distribution thereof or
of any interest therein and agrees that no sale or other disposition thereof
shall be made except in accordance with this Operating Agreement and in
compliance with applicable securities laws. The certificates, if any,
representing such interest may bear an appropriate legend giving notice of the
foregoing restriction on transfer of the interest.
ARTICLE VI
CAPITAL ACCOUNTS
----------------
6.1 Capital Accounts. A separate Capital Account will be maintained for
----------------
each Member. The initial Capital Account of each Member shall be such Member's
Initial Contribution.
(a) Each Member's Capital Account will be increased by:
(i) The amount of any Additional Contributions;
(ii) Allocations of Net Profits; and
(iii) Allocations of items of income described in Section
(S)705(a)(1)(B) of the Internal Revenue Code of 1986,
as amended ("IRC (S)").
(b) Each Member's Capital Account will be decreased by:
(i) Distributions of Available Funds or other property;
(ii) Allocations of Net Losses; and
(iii) Allocations of expenditures described in IRC
(S)705(a)(2)(B).
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<PAGE>
(c) Notwithstanding the provisions of Sections 3.1 and 6.1(a) and
(b), in the event the applicable Treasury Regulations promulgated under IRC (S)
704 require the Company to allocate Net Losses or a specific item of deduction
or loss ("Loss Item") to a Member in a manner other than such Member's Allocable
Percentage, then for all purposes, including the determination of Capital
Accounts, such Loss Item shall be allocated to the Member in accordance with
such Regulations and thereafter if such Regulations require that any item of Net
Profits or income or gain ("Income Item") related to such Loss Item be allocated
by the Company to such Member to reflect the prior allocation of such Loss Item
to such Member, then for all purposes, including the determination of Capital
Accounts, such Income Item shall be allocated to such Member as required
thereunder.
(d) In the event of a sale or exchange of an interest in the Company,
the Capital Account of the transferor shall become the Capital Account of the
transferee in accordance with Treas. Reg. (S)1.704-1(b)(2)(iv).
(e) Upon liquidation of the Company, liquidating distributions will
be made in accordance with the positive Capital Account balances of the Members,
as determined after taking into account all Capital Account adjustments for the
Company's fiscal year during which the liquidation occurs. Liquidation proceeds
shall be paid as promptly as possible and shall be subject to offset, if the
distributee or the distributee's transferor, has violated the provisions of this
Operating Agreement, to the extent of any damage incurred by the Company as a
result of such breach.
(f) No Member shall have any liability to restore any portion of a
deficit balance in such Member's Capital Account.
(g) The Members are hereby authorized to amend this Operating
Agreement to ensure that all accounting and tax matters and all other matters
relating to the allocation of any item of income, gain, loss or deduction or
relating to the Members' Capital Accounts shall comply with applicable
provisions of the Internal Revenue Code of 1986 and the Treasury Regulations
promulgated thereunder and shall be consistent with the methods and elections
used for federal income tax purposes.
6.2 Withdrawal or Reduction of Members' Contributions to Capital. No
------------------------------------------------------------
Member shall be entitled to receive any part of such Member's Initial or
Additional Contribution until all liabilities of the Company (except liabilities
to Members on account of their capital contributions) have been paid or the
Company has sufficient assets to pay such liabilities.
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<PAGE>
6.3 Transfers During Year. In the event that a Member transfers part or
---------------------
all of such Member's interest in the Company in accordance with the provisions
of Article VII during the calendar year, Net Profits, Net Losses and all other
items between the transferor and transferee shall be allocated on a pro rata
--------
basis, using the relative portion of the Company's fiscal year ending on the
date of the transfer and the portion of the fiscal year following the date of
transfer.
6.4 Reports. The Managers shall prepare annual financial reports and
-------
shall prepare and send to each Member a statement of such Member's distributive
share of the Company's income and expense for federal income tax reporting
purposes.
ARTICLE VII
TRANSFER OF A MEMBER'S INTEREST
-------------------------------
7.1 Transfer Restrictions and Procedures.
------------------------------------
(a) Unless the Members unanimously agree otherwise, prior to
completion of the SOW and fulfillment of the Company's obligations to GPUI under
the Performance Agreement, neither Member may sell, assign, transfer, pledge,
encumber or in any other manner dispose of all or any portion of the interest in
the Company which it owns except by operation of law. Any such sale, assignment,
transfer, pledge, encumbrance or other disposition, including any attempt
thereat, shall be null and void.
(b) If, at any time after completion of the SOW and fulfillment of
the Company's obligations to GPUI under the Performance Agreement, either Member
(the "Selling Member") shall desire to transfer or dispose of some or all of its
interest in the Company, it shall, before soliciting any third party offers
therefor, give written notice of its intention to do so to the Company and the
other Member. The Company shall then have the option (exercisable by written
notice within 30 days after receipt of the Selling Member's notice) to purchase
either (i) the interest in the Company the Selling Member shall desire to
dispose of as stated in such notice (the "Offered Interest") or (ii) the entire
interest in the Company owned by the Selling Member, at a price to be mutually
agreed upon. If within such 30-day period, the Company does not exercise its
option as to the entire interest subject to such option, the other Member shall
have the option (exercisable by written notice within 35 days after receipt of
the Selling Member's notice) to purchase the interest as to which the Company
has not exercised its option, at a price to be mutually agreed upon.
(c) If the Company and the other Member do not exercise their
respective options as set forth in Section 7.1(b) so as to purchase the entire
Offered Interest, or if the parties cannot reach mutual agreement as to the
price for such interest, the Selling Member shall have the right, at any time
within 60
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<PAGE>
days after the expiration of the last such option period, to submit to the
Company and the other Member a bona fide third party offer for the purchase of
---- ----
the Offered Interest (the "Offer") and the Company, initially, and then the
other Member, shall have the option (exercisable by written notice to the
Selling Member within 20 and 30 days, respectively, after receipt of the Offer
from the Selling Member) to purchase the Offered Interest at the price and on
the terms set forth in the Offer. If the Company and the other Member do not
exercise their respective options as set forth in this Section 7.1(c) so as to
purchase the entire Offered Interest, the Selling Member shall have the right,
at any time within 90 days after the expiration of the last such option period,
to dispose of the Offered Interest at the price and on the terms set forth in
the Offer; provided, however, that the purchaser or transferee of any interest
-------- -------
first becomes a party to and bound by the terms of this Operating Agreement by
executing a counterpart thereof; but if any such disposition is not made within
such 90-day period such interest shall again be subject to the provisions of
this Section 7.1.
(d) The closing of any purchase and sale of an interest in the
Company in accordance with the foregoing provisions shall be held at the
principal office of the Company or at such other place as may be agreed upon, on
a date and at a time designated by the purchaser, but not later than 30 days
after written notice of such purchase is given to the Selling Member. At such
closing, the full purchase price shall be paid to the Selling Member by
certified or bank check and the Selling Member shall deliver to the purchaser
the certificates, if any, representing the interest to be sold with all
necessary stock transfer tax stamps attached, which certificates, if any, at
such time will be duly endorsed in blank for transfer.
(e) All certificates, if any, representing an interest in the Company
shall have stamped on their front and back an appropriate legend setting forth
the substance of the foregoing restrictions.
7.2 Authority of Managers. Upon the terms set forth in this Article VII,
---------------------
the Managers are authorized (a) to admit substitute Members; (b) to exercise the
power of attorney granted in Article IX to amend this Operating Agreement or the
Certificate of Formation to reflect such substitution; and (c) to file any such
amendment with the appropriate authorities.
ARTICLE VIII
DISSOLUTION AND TERMINATION
---------------------------
8.1 Final Accounting. In case of the Company's dissolution, a proper
----------------
accounting shall be made from the date of the last previous accounting to the
date of final distribution.
8.2 Liquidation. Upon the Company's dissolution and the failure of the
-----------
remaining Members to continue the Company as
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<PAGE>
provided in Section 1.6, Members holding a majority of the Allocable Percentages
shall select a person to act as liquidator to wind up the Company. The
liquidator shall have full power and authority to sell, assign and encumber any
or all of the Company's assets and to wind up and liquidate the Company's
affairs in an orderly and prudent manner. The liquidator shall distribute all
proceeds from liquidation to the Members in accordance with Section 6.1(e).
8.3 Distribution in Kind. If the liquidator shall determine that all or a
--------------------
portion of the Company's assets should be distributed in kind to the Members,
the liquidator shall distribute such assets to them in accordance with Section
6.1(e).
8.4 Cancellation of Certificate. Upon the completion of the distribution
---------------------------
of Company assets, the Company shall be terminated and the Managers (or
liquidator) shall cause the Company to execute and file a Certificate of
Cancellation and take such other actions as may be necessary to terminate the
Company.
ARTICLE IX
POWERS OF ATTORNEY
------------------
9.1 Appointment of Managers. Each Member by its execution hereof does
-----------------------
irrevocably constitute and appoint the Managers, acting collectively and
unanimously, as such Member's true and lawful attorney, in its name, place and
stead to file a Certificate of Formation with the appropriate authorities and to
execute, acknowledge, swear to and file (a) all amendments to this Operating
Agreement or to the Certificate of Formation required by law or authorized or
required by the provisions of this Operating Agreement or the Certificate of
Formation; (b) all certificates and other instruments necessary to qualify or
continue the Company as a limited liability company wherein the Members have
limited liability in the states where the Company may be doing business; and (c)
all conveyances and other instruments necessary to effect the Company's
dissolution and termination. The Managers, acting collectively and unanimously,
are further authorized to substitute one or more of them, or one or more other
persons, to act as such true and lawful attorney in the place and stead of the
Managers.
9.2 Irrevocable. The powers of attorney granted herein shall be deemed to
-----------
be coupled with an interest and shall be irrevocable. In the event of any
conflict between this Operating Agreement and any instruments filed by such
attorney pursuant to the power of attorney granted in this Article IX, this
Operating Agreement shall control.
ARTICLE X
DISPUTES
--------
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<PAGE>
10.1 Arbitration. Any dispute or controversy arising under or in
-----------
connection with this Operating Agreement, including, without limitation, a
dispute resulting in a management deadlock or other circumstances involving the
management of the Company which materially impede the Company's ability to carry
on its business, shall be settled by arbitration to be held in or about Morris
County, New Jersey in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrators' award
in any court having jurisdiction, and the parties consent to the exclusive
jurisdiction of the New Jersey courts for this purpose. Any process or other
papers under this provision may be served outside New Jersey by registered mail,
return receipt requested, or by personal service, provided a reasonable time for
appearance or response is allowed.
ARTICLE XI
GENERAL PROVISIONS
------------------
11.1 Assignment. No rights under this Operating Agreement shall be
----------
assignable, but this Operating Agreement shall be binding upon and inure to the
benefit of the successors to the business of the Company and the permitted
successors of the Members.
11.2 Applicable Law. This Operating Agreement shall be governed by and
--------------
construed in accordance with the law of the State of New Jersey applicable to
agreements made and to be performed therein.
11.3 Notices. All offers, notices and other communications hereunder
-------
shall be in writing and shall be deemed given when delivered personally or by
recognized overnight courier or when mailed by certified mail, return receipt
requested, to the parties at their respective addresses set forth in Section 1.9
(or at such other address for a party as shall be specified by notice given
pursuant hereto).
11.4 Separability. The invalidity or unenforceability of any term or
------------
provision of this Operating Agreement shall not affect the validity or
enforceability of the remaining terms or provisions hereof, which shall remain
in full force and effect.
11.5 Enforcement. The parties recognize that irreparable damage will
-----------
result in the event that this Operating Agreement shall not be specifically
enforced. If any dispute arises hereunder, including, without limitation, a
dispute concerning the disposition of an interest in the Company hereunder, the
parties hereto agree that an injunction may be issued in respect thereof and, in
particular, restraining such disposition, pending the determination of such
controversy, and that no bond or other security shall be required in connection
therewith. If any dispute arises hereunder, such right shall be enforceable in a
court of equity by a decree of specific
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<PAGE>
performance. Such remedy shall, however, not be exclusive and shall be in
addition to any other remedy which the parties may have.
11.6 Definitions. As used in this Agreement:
-----------
(a) The word "interest" shall mean any interest in the Company of any
class now owned or hereafter acquired by the Members, irrespective of the time
and manner of such acquisition.
(b) The word "transfer" shall include the making of any sale,
exchange, assignment, gift, disposition by will or intestacy, pledge or other
encumbrance or security interest, and any other transfer or disposition
whatsoever, whether voluntary or involuntary, affecting title to or right to
possession of any interest in the Company.
11.7 Counterparts. This Operating 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 constitute one and the same instrument.
11.8 Headings. The headings of this Operating Agreement are intended
--------
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Operating Agreement.
11.9 Waiver. No waiver of any breach of any provision of this Operating
------
Agreement shall constitute a waiver of any other breach of that or of any other
provision hereof.
11.10 Entire Agreement; Modification. This writing, together with the
------------------------------
Performance Agreement, is the entire agreement of the parties hereto, and may be
changed or modified only by a writing executed by all of the parties.
11.11 Termination.
-----------
(a) This Operating Agreement shall terminate as expressly provided
elsewhere herein and shall terminate with respect to any Member when such Member
ceases to own an interest in the Company and shall otherwise terminate upon
dissolution and liquidation of the Company or upon unanimous agreement of the
Members.
(b) Without limiting the generality of the foregoing, upon
termination of the Performance Agreement the Company shall be dissolved and
liquidated and this Operating Agreement shall terminate unless the Members
unanimously agree otherwise.
IN WITNESS WHEREOF, the Members acknowledge under penalties of perjury that
the matters and facts set forth in this
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<PAGE>
Operating Agreement are true and that they have signed this Operating Agreement
on the respective dates set forth below to be effective as of the date first
above written.
MEMBERS:
GPU INTERNATIONAL, INC.
By:____________________
Name:
Title:
ASTROPOWER, INC.
By:____________________
Name:
Title:
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<PAGE>
EXHIBIT 10.15
PERFORMANCE AGREEMENT
---------------------
AGREEMENT dated as of the __ day of ____________, 1997, by and among GPU
International, Inc., a Delaware corporation having its principal office and
place of business at One Upper Pond Road, Parsippany, New Jersey 07054 ("GPUI"),
AstroPower, Inc., a Delaware corporation having its principal office and place
of business at Solar Park, Newark, Delaware 19716-2000 ("API"), and GPU Solar,
L.L.C., a limited liability company formed under the laws of New Jersey having
its principal office and place of business c/o GPU International, Inc., One
Upper Pond Road, Parsippany, New Jersey 07054 (the "Company").
W I T N E S S E T H:
WHEREAS, GPUI has expertise concerning the production, transmission,
distribution and sale of electric energy;
WHEREAS, API is engaged in the business of designing, engineering,
manufacturing and assembling photovoltaic ("PV") panels for the production of
electric energy;
WHEREAS, GPUI has entered into a Team-Up Program Agreement (the "UPVG
Agreement"), dated as of March 31, 1997, with the Utility Photovoltaic Group,
Inc. ("UPVG") pursuant to which GPUI has been awarded a grant from UPVG in
connection with UPVG's Cooperative Agreement with the United States Department
of Energy (the "DOE"), under which UPVG has agreed to assist in the
commercialization of PV systems;
WHEREAS, the UPVG Agreement sets forth a Statement of Work (the "SOW") to be
performed by GPUI which contemplates the production and sale of 72 kW of PV
systems (the "PV Systems");
WHEREAS, GPUI and API have arranged for the Company to be incorporated for the
purpose, among other things, of undertaking the activities contemplated in the
SOW, and in connection therewith have entered into a Shareholders Agreement of
even date herewith (the "Shareholders Agreement");
WHEREAS, it is contemplated that the Company will not have any employees and
that therefore the bulk of the services to enable the Company to carry out its
commitments in performing the SOW will be provided by or through API, which will
also supply materials to the Company in connection therewith, or by contractors
to GPUI;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, it is agreed as follows:
<PAGE>
1. Company to Perform SOW.
----------------------
The Company hereby agrees to perform the SOW set forth in the
UPVG Agreement on behalf of GPUI in a first class, professional manner, so as to
permit GPUI to meet all of its obligations under the UPVG Agreement and qualify
for the payments from UPVG provided for therein.
2. Budget and Funding.
------------------
2.1 Exhibit A hereto is a budget (the "Budget") (i) setting forth
anticipated cash requirements of the Company in carrying out its obligations
hereunder, and (ii) setting forth a schedule of anticipated reimbursement
payments from UPVG to GPUI under the UPVG Agreement.
2.2 The Company shall open a bank account (the "Account") at an
institution mutually agreed upon by the parties hereto. Withdrawals from the
Account shall require approvals from a designated representative of each of GPUI
and API; provided that checks will require the signature only of the designated
representative of GPUI.
2.3 GPUI shall deposit funds in the Account from time to time
sufficient to enable the Company to make the disbursements at the times
contemplated by the Budget. If the cash requirements of the Company from time to
time exceed those set forth in the Budget, or reimbursement payments from UPVG
to GPUI from time to time are less than those set forth in the Budget, GPUI need
not make further deposits in the Account unless and until the parties hereto
mutually agree as to the actions to be taken to address any such discrepancy.
3. Obligations of API.
------------------
3.1 API shall make available to the Company the personnel
reasonably required by the Company to enable it to perform the SOW and otherwise
fulfill its obligations hereunder. Such API personnel shall, among other things,
provide services to the Company in connection with specified administrative
matters.
3.2 API will produce and sell to the Company panels meeting the
specifications set forth on Exhibit B hereto for the PV Systems to be sold by
the Company as part of the SOW, for which the Company shall pay API $3.40 per
peak rated watt of panel power. The parties acknowledge that such price will
not be in excess of API's then lowest price for comparable panels sold to any
other distributor or reseller, and that such price reflects a 15% discount (the
"Discount") from API's standard distributor price for such panels.
3.3 Upon installation of each completed PV System, API will
arrange for monitoring systems meeting standards mutually agreed upon by API and
GPUI to be installed at the location of such
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<PAGE>
installation. The Company shall reimburse API for the cost of such monitoring
systems to the extent paid to unaffiliated suppliers to API or to persons not
employed by API or, alternatively, the Company may pay such third party costs
directly.
3.4 API will contract for suppliers to furnish materials to the
Company for the PV "balance of system" components and will assemble, crate and
ship the PV Systems to the Marketing Intermediaries (as defined in Section 5.3)
on behalf of the Company and otherwise oversee production thereof.
3.5 No material change in the design of, or marketing program
for, the PV Systems may be effected without the approval of all of the parties
hereto.
4. Compensation to API.
-------------------
4.1 In addition to the payments for panels pursuant to Section
3.2 and the payments in connection with monitoring systems pursuant to Section
3.3, the Company shall reimburse API for the cost of the services rendered
pursuant to Section 3.4 to the extent paid to unaffiliated suppliers to API or
to persons not in the employ of API or, alternatively, the Company may pay such
third party costs directly.
4.2 Except as otherwise expressly set forth herein, API will not
receive separate compensation for services rendered hereunder during the term of
this Agreement. API shall provide a monthly accounting of the internal expenses
accrued in respect of the services rendered to the Company hereunder, in a form
acceptable to GPUI and UPVG. Promptly after completion of the SOW and
fulfillment of the obligations of the Company and API hereunder (such date being
herein referred to as the "Completion Date") or upon earlier termination of this
Agreement, as the case may be, the total internal expenses of API as set forth
in such monthly accountings (the "API Internal Expenses") shall be utilized in
the "true up" calculation contemplated by Section 8.
5. Additional Obligations of GPUI.
------------------------------
5.1 GPUI shall make available to the Company the personnel
reasonably required to provide services to the Company in connection with
accounting and specified administrative matters.
5.2 GPUI will administer the UPVG Agreement and interface with
UPVG and/or the DOE as necessary and appropriate to facilitate receipt of the
reimbursement payments to be made thereunder.
5.3 GPUI will retain, pay and monitor the services of a marketing
consultant (the "Consultant"). The Consultant will monitor, oversee and
administer the Company's marketing program and its relationships with, and the
activities of, various marketing firms (the "Marketing Intermediaries"). The
Marketing
-3-
<PAGE>
Intermediaries will purchase and/or market the PV Systems produced by the
Company and will be responsible for selling and shipping the PV Systems to end-
users, and for installation and permitting, all to be reflected in an agreement
between the Company and each Marketing Intermediary in a form approved by GPUI
and API. Notwithstanding the foregoing, no firm may be included as a Marketing
Intermediary without the concurrence of both GPUI and API, and all of the
parties hereto shall have equal access to, and rights in, all reports and other
information provided by the Consultant.
6. Compensation to GPUI.
--------------------
Except as otherwise expressly set forth herein, GPUI will not
receive separate compensation for services rendered hereunder during the term of
this Agreement. GPUI shall provide a monthly accounting of the internal expenses
accrued in respect of the services rendered to the Company hereunder, in a form
acceptable to API and UPVG. Promptly after the Completion Date or upon earlier
termination of this Agreement, as the case may be, the total internal expenses
of GPUI as set forth in such monthly accountings (the "GPUI Internal Expenses")
shall be utilized in the "true up" calculation contemplated by Section 8.
7. Federal Regulations and Other Requirements.
------------------------------------------
7.1 API and the Company shall maintain books and records in form
and substance sufficient to enable GPUI to prepare and submit requisite reports
under the UPVG Agreement and otherwise comply with the various "cost principle"
and other record-keeping and accounting criteria and requirements set forth in
the UPVG Agreement to support applications for reimbursement payments from UPVG.
7.2 API and the Company shall comply with the terms and
requirements of applicable Federal regulations listed on Exhibit C hereto, as
the same may be in effect from time to time.
7.3 The Federal regulations listed on Exhibit D hereto shall be
included in all agreements with Marketing Intermediaries.
8. Final "True Up".
---------------
Promptly after the Completion Date, any funds remaining in the
Account will be refunded to GPUI, and GPUI and API shall "true up" their
respective contributions to the Company to ensure that each has contributed 50%
of the Aggregate Expenses (as defined in (c) below) attributable to the
performance of the SOW hereunder. Such "true up" shall be undertaken pursuant to
the procedures set forth below :
(a) GPUI's total contribution (the "GPUI Contribution")
shall equal the sum of (i) GPUI's net aggregate
-4-
<PAGE>
deposits in the Account, taking into account any UPVG reimbursement payments
made to GPUI and the refund to GPUI of any funds from the Account, (ii) GPUI's
payments to the Consultant, (iii) the amount of the GPUI Internal Expenses,
which shall not exceed the amount thereof provided for in the Budget without the
consent of API and (iv) an amount equal to 1% per month multiplied by the
average over such month of the aggregate amount deposited by GPUI in the Account
from the date hereof through the last day of such month, for each month from the
initial such deposit in the Account to the making of the payment provided for in
(c) below (with appropriate adjustments for partial months or reimbursements, if
any, to GPUI from the Account), such that GPUI will be credited under this
clause (iv) for a return of 1% per month on all amounts deposited in the
Account;
(b) API's total contribution (the "API Contribution") shall
equal the sum of (i) the aggregate Discount on panels sold by API to the Company
and (ii) the amount of the API Internal Expenses, which shall not exceed the
amount thereof provided for in the Budget without the consent of GPUI; and
(c) The sum of the GPUI Contribution and the API
Contribution (the "Aggregate Expenses") is to be shared equally by GPUI and API.
If the GPUI Contribution exceeds 50% of the Aggregate Expenses (the "50%
Share"), then API shall promptly pay to GPUI an amount equal to the difference
between the GPUI Contribution and the 50% Share. If the API Contribution exceeds
the 50% Share, then GPUI shall promptly pay to API an amount equal to the
difference between the API Contribution and the 50% Share.
9. Confidentiality.
---------------
The terms of the Confidentiality Agreement set forth in Exhibit E
hereto are incorporated herein by reference.
10. Competition.
-----------
Prior to termination of this Agreement and dissolution and
liquidation of the Company, neither of the Shareholders will, in any manner,
engage or become interested in (as owner, stockholder, partner, director,
officer, employee, consultant or otherwise) any business which involves the
development and/or marketing of PV systems employing packaged inverter/battery
technology for or to residential customers in the United States. Ownership of up
to 2% of the stock of a publicly owned company which engages in such business
shall not be considered a violation of the provisions of this Section 10.
-5-
<PAGE>
11. Publicity
---------
No party will issue, or participate in the issuance of, any
public announcement concerning this Agreement, the UPVG Agreement or the
relationship among the parties without the approval of the other parties, except
as may be required by law, and in such latter circumstances, the issuing party
will provide the other parties as much notice as possible, and consult with the
other parties, regarding the content of the announcement.
12. Termination.
-----------
12.1 This Agreement may be terminated by any party at any time on
30 days prior written notice to the other parties hereto.
12.2 If this Agreement is terminated prior to the Completion
Date, GPUI and API will "true up" their respective expenses through the date of
termination pursuant to the provisions of Section 8, mutatis mutandis, and no
party may thereafter market PV systems or components developed by or for the
Company to or through any Marketing Intermediary for a period of one year
following the date of termination.
12.3 Except as specifically set forth in Section 12.2, upon
termination of this Agreement, whether before or after the Completion Date, all
parties hereto shall be permitted to engage in any aspect of the PV business and
to produce and market PV systems anywhere in the world, whether or not in
competition with any other party hereto and whether or not involving the
development and/or marketing of PV systems for or to residential customers in
the United States.
12.4 Notwithstanding anything to the contrary elsewhere in this
Agreement, including, without limitation, Section 9 hereof and Exhibit E hereto,
but subject to Section 12.2, upon termination of this Agreement, whether before
or after the Completion Date, all parties shall be permitted to use and exploit
all PV Information (as defined in Exhibit E) in the furtherance of their
respective businesses, whether or not in competition with any other party hereto
and whether or not involving the development and/or marketing of PV systems for
or to residential customers in the United States.
13. Intellectual Property.
---------------------
13.1 GPUI and API shall have equal access to, and rights in, any
and all patents, trade secrets, know how or other proprietary data
("Intellectual Property") developed by or for the Company during the term of
this Agreement and, subject to Sections 10 and 12.2, either shall be entitled to
use and exploit such Intellectual Property directly or through one or more
affiliates without any obligation to compensate the other or the Company.
-6-
<PAGE>
13.2 Notwithstanding the foregoing, if GPUI or API shall
sublicense the rights to any Intellectual Property in return for payment of a
royalty by the sublicensee, any net royalty payments actually received therefor
shall be shared equally between GPUI and API. In furtherance of the foregoing
obligation, in the event of any such sublicense, the sublicensor shall, within
30 days after the end of each calendar quarter, account to the non-sublicensing
party for all royalties received during such quarter and pay to such non-
sublicensing party the 50% share thereof to which it is entitled. The non-
sublicensing party shall have the right, on reasonable notice during normal
business hours, to inspect the books of the sublicensor solely for the purpose
of ensuing compliance with this Section 13.2.
14. Indemnification.
---------------
Each of the parties hereto shall indemnify each of the other
parties hereto, and their respective officers, directors, employees and agents,
from and against any and all losses, claims, damages and liabilities (including
reasonable attorneys' fees) arising out of or relating to a breach by such
indemnifying party of its obligations hereunder and shall pay all amounts
required to be paid by any such indemnified party pursuant to court order or in
settlement of any action brought or threatened to be brought against it in
respect thereof. Without limiting the generality of the foregoing, each of the
Company and API shall indemnify GPUI, and its officers, directors, employees and
agents, as aforesaid from and against any and all losses, claims, damages and
liabilities (including reasonable attorneys' fees) arising out of or relating to
the failure of the Company or API, as the case may be, to comply with its
obligations under Section 7.
15. Arbitration.
-----------
Any dispute or controversy arising under or in connection with
this Agreement shall be settled by arbitration to be held in or about Morris
County, New Jersey in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrators' award in
any court having jurisdiction, and the parties consent to the exclusive
jurisdiction of the New Jersey courts for this purpose. Any process or other
papers under this provision may be served outside New Jersey by registered mail,
return receipt requested, or by personal service, provided a reasonable time for
appearance or response is allowed.
16. Assignment.
----------
No rights under this Agreement shall be assignable, but this
Agreement shall be binding upon and inure to the benefit of the successors to
the respective businesses of the parties hereto.
-7-
<PAGE>
17. Applicable Law.
--------------
This Agreement shall be governed by and construed in accordance
with the law of the State of New Jersey applicable to agreements made and to be
performed therein.
18. Notices.
-------
All offers, notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally or by recognized
overnight courier or when mailed by certified mail, return receipt requested, to
the parties at their respective addresses given above (or at such other address
for a party as shall be specified by notice given pursuant hereto).
19. Separability.
------------
The invalidity or unenforceability of any term or provision of
this Agreement shall not affect the validity or enforceability of the remaining
terms or provisions hereof, which shall remain in full force and effect.
20. Enforcement.
-----------
The parties recognize that irreparable damage will result in the
event that this Agreement shall not be specifically enforced. If any dispute
arises hereunder, the parties hereto agree that an injunction may be issued in
respect thereof, pending the determination of such controversy, and that no bond
or other security shall be required in connection therewith. If any dispute
arises hereunder, such right shall be enforceable in a court of equity by a
decree of specific performance. Such remedy shall, however, not be exclusive and
shall be in addition to any other remedy which the parties may have.
21. 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
constitute one and the same instrument.
22. Headings.
--------
The headings of this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
23. Waiver.
------
No waiver of any breach of any provision of this Agreement shall
constitute a waiver of any other breach of that or of any other provision
hereof.
-8-
<PAGE>
24. Entire Agreement; Modification.
------------------------------
This writing, together with the Shareholders Agreement, is the
entire agreement of the parties hereto, and may be changed or modified only by a
writing executed by all of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
GPU INTERNATIONAL, INC.
By:____________________
Name:
Title:
ASTROPOWER, INC.
By:____________________
Name:
Title:
GPU SOLAR, L.L.C.
By:_______________________________
Name:
Title:
-9-
<PAGE>
EXHIBIT E
CONFIDENTIALITY AGREEMENT
1. During the term of this Agreement, the parties may receive from each other
proprietary and confidential information relating to (i) the technology
applicable to, and the market for, PV systems and related cost and other
data with respect to PV systems ("PV Information") or (ii) other more
general aspects of the parties' respective businesses not directly
relating to PV systems ("General Information"), which each desires to
share in confidence with the others. The party providing General
Information in each case is called the "Provider"; the parties receiving
the General Information is called the "Recipient".
2. Prior to the termination of this Agreement and dissolution of the Company,
the parties shall retain all PV Information in confidence and shall not
use the PV Information for any purpose other than as contemplated by this
Agreement and shall not disclose the PV Information to any other person or
entity, except their respective Boards of Directors, affiliates,
employees, consultants, advisors and counsel with a need to know, all of
whom shall be advised of the confidential nature thereof; provided that
nothing herein shall limit the parties' rights to use the PV Information
pursuant to Section 12.4 after termination of this Agreement.
3. All General Information shall be designated as such in writing by the
disclosing party, whether by letter or by the use of an appropriate
proprietary stamp or legend, prior to or at the time any such General
Information is disclosed to the other parties. In the event General
Information is orally disclosed by one party to the others, it shall also
be covered by this confidentiality obligation if the disclosing party
notifies the other parties of its confidential nature and, within ten days
after such disclosure, delivers to the other parties a written document or
documents identifying such General Information and referencing the place
and date of such oral disclosure and the names of the representatives of
the other parties to whom such disclosure was made.
4. All General Information disclosed under this Agreement by the Provider
shall be used by the Recipient only for the purposes contemplated by this
Agreement and, during the term of this Agreement and for a period of three
years thereafter, the Recipient shall not disclose General Information
received from the Provider to any other person or entity, except to its
Board of Directors, affiliates, employees, consultants, advisors and
counsel with a need to know, all of whom shall be advised of the
confidential nature thereof. Upon request of
<PAGE>
the Provider, the Recipient shall return any documents received from the
Provider containing the General Information of the Provider, and all
copies thereof.
5. The obligations of the Recipient hereunder shall not apply to any General
Information of the Provider which (i) was in the public domain at the time
it was disclosed; (ii) enters the public domain other than by breach of
this Agreement by the Recipient; (iii) is known to the Recipient at the
time of its disclosure to the Recipient by the Provider; (iv) is disclosed
to the Recipient by a third party who has the right to do so; (v) is
developed by the Recipient independently of any disclosure by the Provider
hereunder; (vi) is disclosed by the Provider to a third party without the
restrictions and obligations imposed upon the Recipient by this Agreement;
(vii) is not identified as material considered proprietary at the time it
is provided; (viii) is required by law or regulation to be disclosed, but
only to the extent and for the purposes of such required disclosure; or
(ix) is disclosed in response to a valid order of a court or other
governmental body of the United States or any political subdivisions
thereof, but only to the extent of and for the purposes of such order, and
only if the Recipient first notifies the Provider of the order to permit
the Provider to seek an appropriate protective order.
6. No patent, copyright, trademark or other proprietary right is licensed,
granted or otherwise transferred by this Agreement except for the right to
use PV Information and General Information in accordance with this
Agreement. No warranties of any kind are given with respect to the PV
Information and General Information disclosed under this Agreement or any
use thereof, except that the Provider warrants that it has the authority
to make the disclosures contemplated hereunder.
7. Each party shall use the same care to prevent disclosure of the PV
Information and the General Information as such party uses to safeguard
its own most valuable proprietary information but in no event less than a
reasonable degree of care for such information.
- 2 -
<PAGE>
EXHIBIT 10.16
EXECUTION VERSION
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (the "Agreement") is made and entered into as
of August 19, 1997, by and among AstroPower, Inc., a Delaware corporation (the
"Company"), and Corning Incorporated, a New York corporation (the "Investor").
WHEREAS, Investor wishes to purchase a note from the Company with the right
to convert the note into common stock of the Company; and
WHEREAS, the Company wishes to issue a note to the Investor and to grant a
right of first refusal to the Investor in respect of additional financings,
other corporate transactions, and licenses or sales of the Company's Silicon-
Film(TM) technology;
NOW, THEREFORE, in consideration of the premises and the mutual rights and
obligations expressed herein the parties hereto agree as follows:
1. Purchase and Sale of Note
-------------------------
Note. The Company agrees to sell to the Investor and, subject to the
----
terms and conditions set forth herein, the Investor agrees to purchase from the
Company a Secured 7% Convertible Promissory Note (the "Note") in the principal
amount of Five Million Dollars ($5,000,000.00) for the consideration of Five
Million Dollars ($5,000,000.00), payable as set forth in Section 2. The Note
shall be for a four (4) year term, bearing interest at 7% per annum, payable in
kind and will be convertible into common stock ("Common Stock") of the Company
at a conversion price per share equal to the lesser of (a) Six and 00/100
dollars ($6.00) or (b) seventy-five percent (75%) of the price per share
received by the Company or its shareholders in respect of an initial public
offering of Common Stock on or prior to the date of the conversion of the Note,
in each case subject to adjustment as provided in the Note. The Note shall
provide that the full principal amount and accrued interest thereon may be
repaid in full without penalty at any time after the date which is two (2) years
from the date of issuance, upon giving sixty (60) days prior notice and
opportunity to the Investor to convert the Note into Common Stock as provided
herein. In the event that the Note shall remain due and payable after the stated
term, the Company shall grant to Investor a non-exclusive license to use all of
the Company's Silicon-Film(TM) intellectual property under fair market terms and
conditions as then shall be negotiated; provided, however, that in no event
shall the obligation of the Company hereunder to grant such license negate or
otherwise limit any legal rights available to Investor as a result of nonpayment
of the Note. The form of the Note is set forth in Exhibit "A" attached hereto.
2. Closing
-------
Page 1 of 13
<PAGE>
The closing of the purchase and sale of the Note (the "Closing") will take
place by mail or as the Parties may otherwise agree. At Closing, the Company
will deliver to the Investor the Note upon payment of Five Million Dollars
($5,000,000.00). The Closing will be held on or before August 26, 1997, unless
the parties otherwise agree.
3. Future Participation Rights
---------------------------
3A. The Company shall notify Corning in reasonable detail of (i) any
subsequent needs for equity or other financing involving instruments convertible
into equity of the Company, (ii) any plans or proposals in respect of a
Corporate Transaction (as hereinafter defined) or (iii) any plans or proposals
to sell or license any intellectual property relating to the Company's Silicon-
Film(TM) technology. Corning shall have thirty (30) days from the date of
receipt of such notice to express its intent to participate or not participate
in such transaction.
3B. In the event that Corning expresses an intent to participate in
such transaction, Corning's notice shall provide the Company with all reasonably
relevant details of such participation, including relevant dollar amounts in
respect of which Corning intends to participate and the general terms upon which
it shall participate. The parties will use all reasonable efforts to consummate
the closing of such transaction within as short a period of time as is
reasonably practicable, and in any event, with respect to transactions referred
to in Section 3A(i), within 45 days, and with respect to transactions referred
to in Section 3A(iii), within 60 days..
3C. In the event that Corning declines to participate in such
transaction, the Company shall be free for a period of one (1) year after the
date of its notice to Corning, as provided for in Section 3A, to consummate such
a transaction or transaction(s) with third parties under terms no more favorable
to such third parties as the Company had proposed to Corning. Notwithstanding
anything to the contrary in this Agreement, the Company shall be free at any
time to approach Corning with proposals for additional transactions.
3D. Notwithstanding anything to the contrary herein, the Investor
shall not have future participation rights as provided in this Part 3: (i)
within the period commencing on the date hereof and ending on the date two (2)
years subsequent to the date hereof if such transaction is (A) an initial public
offering of the Company's Common Stock or (B) an issuance or issuances for cash
of an aggregate of less than five percent (5%) of the Company's outstanding
capital stock to a person or persons (including a "group" as defined in Section
13 of the Securities Act of 1933, as amended (the "Securities Act"), and related
rules and regulations) that individually or as a "group", as a result of such
issuance(s), would beneficially own (as defined in Section 13 of the Securities
Act and related rules and regulations) less than five percent (5%) of the
Company's then outstanding capital stock; and (ii) at any time after the full
principal amount of the Note and all accrued interest thereon has been paid in
full or the Notes have been fully converted as provided herein and therein.
3E. For purposes of this Part 3, the term "Corporate Transaction"
shall include any merger, consolidation or similar transaction involving the
Company, or any sale or other disposition of a material portion of the capital
stock of the Company or its assets or business
Page 2 of 13
<PAGE>
(whether acquired in whole or in part or directly or indirectly) through
purchase, merger (other than a merger in which the Company is the surviving
entity), consolidation or otherwise (other than sales of inventory or immaterial
portions of the Company's assets in the ordinary course).
4. Covenants
---------
The Company covenants and agrees with the Investor as follows:
4A. Financial Statements and Other Information. The Company will
------------------------------------------
deliver to Investor so long as such Investor holds the Note, any other Notes
issued in payment of accrued interest thereon (sometimes referred to herein
collectively with the Note as the "Notes") or any shares of Common Stock issued
upon conversion one or more Notes, copies of all financial statements delivered
to the Company by the Company's auditors and all reports, if any, required to be
filed by the Company pursuant to sections 13 and 14 of the Securities Exchange
Act of 1934.
4B. Investor Information Meetings. For so long as the Investor holds
-----------------------------
Notes convertible in the aggregate into shares of Common Stock representing at
least one percent (1%) of the total shares of Common Stock outstanding or holds
shares of Common Stock and Notes convertible into Common Stock representing in
the aggregate at least one percent (1%) of the total shares of Common Stock
outstanding, the Company shall hold meetings with representatives of the
Investor at reasonable intervals from time to time to discuss the business and
prospects of the Company.
4C. Reservation of Common Stock. The Company will at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of issuance upon the conversion of the Notes, such number
of shares of Common Stock as are issuable upon the conversion of the Notes. All
shares of Common Stock which are so issuable will, when issued, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges. The Company will take all such actions as may be necessary to assure
that all such shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed.
4D. Ranking of Note. The Company's obligations under the Note will
---------------
rankreserve at least pari passu in priority of payment and in all other respects
---- -----
with all other secured loans, debts or obligations of the Company entered into
after the date hereof. The Company shall not, while any amount of the Note
remains outstanding, offer to borrow funds from any third party on terms more
favorable to the third party lender than those extended to Investor for the Note
with respect to security for the Note, financial covenants or negative pledges
of the Company in favor of such third party, repayment terms, or other
significant matters, without offering such terms to Investor in writing.
4E. Use of Proceeds. The Company shall apply the full amount
---------------
received by the Company from the Investor towards the engineering, design,
lease, construction or expansion of facilities and purchase of equipment and
related tooling or working capital devoted to the
Page 3 of 13
<PAGE>
manufacture of product or products derived from or otherwise substantially
relating to the Company's Silicon-Film(TM) technology (collectively, the
"Assets").
4F. Security Interest. The Company shall grant to the Investor a
-----------------
first perfected security interest in all Assets pursuant to a Security Agreement
to be executed and delivered at the Closing, substantially in the form set forth
in Exhibit "B" attached hereto. The Company shall take all actions and do all
things reasonably necessary to assist the Investor in perfecting the security
interest referred to herein, including the execution of appropriate financing
documents prepared for filing with jurisdictions selected by the Investor.
5. Representations and Warranties
------------------------------
5A. Representations by Company. The Company represents, warrants and
--------------------------
agrees as follows:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is in
good standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted by it require such
qualification. The Company has the requisite corporate power and authority to
carry on its business as it is now being conducted.
(ii) The authorized capital stock of the Company as of the date
hereof consists of (A) 20,000,000 shares of $.01 per share par value Common
Stock, of which 4,942,874 shares are issued and outstanding, and none of which
are held in treasury; (B) 1,775,000 shares of $.01 per share par value Series A
Convertible Preferred Stock, of which 1,746,164 shares are issued and
outstanding, and none of which are held in treasury; and (C) 1,000,000 shares of
$.01 per share par value Series B Convertible Preferred Stock, of which 448,545
shares are issued and outstanding, and none of which are held in treasury. All
of the outstanding shares of Common Stock and Preferred Stock have been duly
authorized and are validly issued, fully paid and nonassessable. There are no
reservations for outstanding options, warrants and agreements to purchase any
capital stock of the Company, other than as set forth on Schedule A hereto.
(iii) The Notes when issued in compliance with the provisions of
this Agreement, will be duly authorized and validly issued. The issuance of the
Notes will not be subject to any preemptive rights or rights of first refusal
created by the Company. The shares of Common Stock issuable upon conversion of
the Notes have been duly and validly authorized and reserved. The shares of
Common Stock issuable upon conversion of the Note will not be subject to any
preemptive rights or rights of first refusal created by the Company, and upon
conversion and cancellation of the Notes will be duly authorized, validly
issued, fully paid and nonassessable.
(iv) The Company has the requisite corporate power and
authority and has taken all corporate action necessary in order to authorize,
execute and deliver the Agreements and to consummate the transactions
contemplated hereby and to perform the acts contemplated on its part hereunder.
The Agreements are valid and legally binding agreements of the Company
enforceable against the Company in accordance with their terms.
Page 4 of 13
<PAGE>
(v) The Company's Common Stock is not registered or required
to be registered with the U.S. Securities and Exchange Commission or any
applicable state securities board, and the issuance of the Note and the
conversion of the Note into Common Stock as herein and therein contemplated will
not require registration under the Securities Act of 1933 or under any state
blue sky law.
(vi) No notices, reports or other filings are required to be
made by the Company with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by the Company from, any
governmental or regulatory authority, agency, commission, court or other entity,
domestic or foreign ("Governmental Entity"), or with or from any third party
other than such as have been made or obtained, in connection with the execution
and delivery of the Agreements by the Company, the consummation by the Company
of the transactions contemplated by the Agreements and the performance of the
acts contemplated on the part of the Company hereunder or thereunder.
(vii) The execution and delivery of the Agreements by the
Company do not, and the consummation by the Company of the transactions
contemplated hereby and the performance of the acts contemplated on the part of
the Company hereunder will not, constitute or result in (A) a breach or
violation of, or a default under, the Certificate of Incorporation or By-Laws of
the Company, or (B) a breach, violation or event triggering a right of
termination of, or a default under, or the acceleration of or the creation of a
lien, pledge, security interest or other encumbrance on assets (with or without
the giving of notice or the lapse of time or both) pursuant to any provisions
of, any agreement, lease of real or personal property, contract, note, mortgage,
indenture, arrangement or other obligation ("Contracts") of the Company or any
law, rule, ordinance or regulation, agreement, instrument or judgment, decree,
order or award to which the Company is subject or any governmental or non-
governmental authorization, consent, approval, registration, franchise, license
or permit under which the Company conducts its business.
(viii) No investment banker, broker or finder is entitled to any
financial advisory, brokerage or finder's fee or other similar payment from the
Company based on agreements, arrangements or undertakings made by the Company or
any of its directors, officers or employees in connection with the transactions
and acts contemplated in the Agreements.
(ix) The Financial Statements of the Company for the periods
ending December 31, 1996 and 1995 (the "Financial Statements"), are complete and
correct, are in accordance with the books and records of the Company and present
fairly the financial condition and results of operations of the Company, as at
the dates and for the periods indicated, and have been prepared in accordance
with generally accepted accounting principles consistently applied.
(x) The Company has no liabilities of any type, which in the
aggregate exceed $10,000, whether absolute or contingent, which are not fully
reflected in the Financial Statements, and since the date thereof has not
incurred or otherwise become subject to any such liabilities or obligations
except in the ordinary course of business.
(xi) There is no action, suit, proceeding or investigation
pending, or, to the best of the Company's knowledge, any basis therefor or
threat thereof, against the Company
Page 5 of 13
<PAGE>
which questions the validity of any of the Agreements or the right of the
Company to enter into the Agreements, or which might result, either individually
or in the aggregate, in any material adverse change in the assets, condition
(financial or otherwise), business or prospects of the Company.
(xii) (A) The Company has not made, and has no intention of
making, an assignment for the benefit of creditors and has not admitted, and has
no intention of admitting, its inability to pay its debts generally as they
become due; no order, judgment or decree has been entered or is anticipated to
be entered adjudicating the Company bankrupt or insolvent; and
(B) The Company has not petitioned or applied to any
tribunal for the appointment of a trustee, receiver or liquidator of the Company
or of any substantial part of the assets of the Company; no proceeding has been
commenced under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction; and,
to the knowledge of the Company, no such petitions, applications or proceedings
are contemplated.
(xiii) In furnishing information to Investor for purposes of the
Agreements, it has not made any untrue statements of a material fact to Investor
or omitted to provide any material facts necessary to make such statements not
misleading to Investor in light of the circumstances under which they were made.
5B. Representations by Investor.
---------------------------
The Investor represents, warrants and agrees as follows:
(i) Investor is purchasing the Note for its own account for
the purpose of investment and not with a view toward the redistribution or
resale of any part thereof. Investor has no present arrangement, understanding
or agreement for transferring or disposing of the Note;
(ii) Investor is aware that the purchase of the Note represents
a speculative investment;
(iii) Before executing this Agreement, representatives of
Investor were furnished all information with respect to the Company that they
requested and representatives of Investor were given the opportunity to ask
Company executives all questions that such representatives had and to inspect
the Company's operations;
(iv) Investor confirms that it is an "Accredited Investor," as
such term is defined in Rule 501 of Regulation D promulgated under the
Securities Act;
(v) Investor confirms that it is able to bear the economic
risk inherent in its investment and understands that there currently is no, and
that there may not ever be any, private or public market for the Notes in the
event that Investor needs to liquidate its investment;
(vi) Investor agrees that it will not offer or sell the Notes
or any of the shares of Common Stock into which the Notes will be convertible
unless the Notes or such shares
Page 6 of 13
<PAGE>
of Common Stock are registered under the Securities Act and under all applicable
state securities laws, unless Investor has established to the reasonable
satisfaction of the Company that no such registration is required;
(vii) Investor agrees that appropriate restrictive endorsements
will be placed on the instrument evidencing the Notes and on the certificate(s)
evidencing the shares of Common Stock into which the Notes are convertible to
reflect the foregoing and that the Company will give appropriate stop transfer
instructions to the person in charge of the transfer of its securities,
including the Notes and the Common Stock; and
(viii) No investment banker, broker or finder is entitled to any
financial advisory, brokerage or finder's fee or other similar payment from
either the Investor or the Company based on agreements, arrangements or
undertakings made by the Investor or any of its directors, officers or employees
in connection with the transactions and acts contemplated hereby.
6. Registration Rights
-------------------
6A. In the event that Investor desires to sell or prepare for sale
the Common Stock issued or issuable upon conversion of the Notes and may not,
according to the opinion of counsel to the Investor, sell within the desired
period of time under the provisions of Rule 144 or another exemption from
registration under the Securities Act, upon a date six (6) months after the
registration of the Company's Common Stock with the U.S. Securities and Exchange
Commission, and at all times thereafter through and including the date that is
one year subsequent to the later of (i) the date of such registration of the
Company's Common Stock with the U.S. Securities and Exchange Commission, (ii)
the date that the full principal amount of the Notes and all accrued interest
thereon is paid in full or (iii) the date that the Notes are fully converted
into Common Stock of the Company, the Investor shall have the following demand
registration rights:
(i) The Investor shall have the right, by written notice to
the Company, to require the Company to use its best reasonable efforts to file
within thirty (30) days thereafter a registration statement for all shares of
Common Stock issued or issuable upon conversion of the Notes owned by the
Investor (also "Demand Covered Shares") as required by the Securities Act for
sale or disposition of such Common Stock.
(ii) The Company shall be entitled to defer filing any such
registration statement for a period of up to ninety (90) days after such notice
upon a good faith determination by the Company's management that the filing of a
registration statement at such time would be detrimental to the Company due to
the pendency of a material acquisition or financing or for other reasonable
cause. Investor may request that the Company withdraw any such registration
statement at any time prior to its effectiveness; provided that, any such
withdrawn registration statement shall be treated as a completed registration
fulfilling the obligations of the Company pursuant to this section unless the
Investor shall reimburse the Company for all of the Company's costs and expenses
incurred in connection with such withdrawn registration within thirty days
following the request to withdraw.
Page 7 of 13
<PAGE>
(iii) The Investor may elect to have conversion of the Notes
contingent upon a registration statement hereunder being declared effective.
(iv) In the event a registration statement has not been
declared effective within one hundred fifty (150) days of demand because of the
lack of good faith efforts by the Company, then for each thirty (30) day period
thereafter until a registration statement becomes effective, the Company shall
be required to issue to Investor an additional five percent (5%) of the shares
issuable upon conversion of such Notes.
6B. The Investor shall also have "piggyback" registration rights. If
the Company proposes to sell shares of Common Stock for its own account and to
register the sale of such shares under the Securities Act, or if the Company
proposes to register the sale of shares of Common Stock to be sold for the
account of any other shareholder, it shall give written notice of such proposed
registration to Investor as promptly as possible and shall use its reasonable
efforts to include in the offering all shares of Common Stock issued or issuable
upon conversion of the Notes ("Piggyback Covered Shares" and together with
Demand Covered Shares, "Covered Shares") then owned by Investor as Investor
shall request, within twenty-five (25) days after the giving of such notice.
Such offering of Investor's shares shall be upon the same terms (including
method of distribution) as the securities being sold by the Company or any
selling shareholder pursuant to any such offering; provided, however, that the
Company shall not be required to give notice to Investor or include such shares
in any such registration if the proposed registration is (A) a registration of a
stock option or compensation plan or of Common Stock issued or issuable pursuant
to any such plan, (B) a registration of Common Stock proposed to be issued in
exchange for securities or assets of, or in connection with a merger or
consolidation with, another corporation, or (C) to be on a form of registration
statement for which the Piggyback Covered Shares are not eligible.
6C. In connection with a registration of Covered Shares undertaken by
the Company pursuant to this Part 6, the Company shall:
(i) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement current and to
comply with the provisions of the Securities Act with respect to the sale of all
Covered Shares covered by such registration statement for at least 180 days
after the effective date thereof;
(ii) provide Investor a reasonable opportunity to review prior
to filing any registration statement filed by the Company in connection with a
registration in which Investor is participating, any amendments or supplements
to such registration statement and any prospectus used in connection therewith;
(iii) furnish to Investor such number of conformed copies of
such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
included in such registration statement, in conformity with the requirements of
the Securities Act, and such other documents in
Page 8 of 13
<PAGE>
each case as Investor may reasonably request in order to facilitate the sale of
the Covered Shares covered by such registration statement;
(iv) use its best efforts to register or qualify the Covered
Shares covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as Investor shall reasonably request, and do
any and all other acts and things which may be reasonably necessary or advisable
to enable Investor to consummate the sale in such jurisdictions of such shares;
provided that the Company shall not for any such purpose be required to register
or qualify the covered shares covered by such registration statement in any
jurisdiction in which the Common Stock is not then qualified for public trading,
to qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this section be obligated to be
so qualified, to subject itself to taxation in any such jurisdiction or to
consent to general service of process in any such jurisdiction;
(v) notify Investor at any time when a prospectus relating to
the Covered Shares covered by such registration statement is required to be
delivered under the Securities Act, of the Company's becoming aware that the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and at the request of
Investor promptly prepare and furnish to Investor a reasonable number of copies
of a prospectus supplemented or amended so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing;
(vi) use its best efforts to cause all of the Covered Shares
included in such registration statement to be listed on each securities exchange
on which securities of the same class issued by the Company are then listed or,
if there shall then be no such listing, to be accepted for quotation on NASDAQ;
(vii) provide a transfer agent and registrar for the Covered
Shares covered by such registration statement not later than the effective date
of such registration statement; and
6D. For as long as Investor shall continue to hold any Covered
Shares, the Company shall use reasonable efforts to file, on a timely basis, all
annual, quarterly and other reports, if any, required to be filed by it under
Sections 13 and 15(d) of the Exchange Act, and the rules and regulations of the
Commission thereunder, as amended from time to time. In the event of any
proposed sale of Covered Shares by Investor pursuant to Rule 144 (or any
successor rule) under the Securities Act, the Company shall cooperate with
Investor so as to enable such sales to be made in accordance with applicable
laws, rules and regulations, the requirements of the Company's transfer agents,
and the reasonable requirements of the broker through which the sales are
proposed to be executed.
Page 9 of 13
<PAGE>
6E. The costs and expenses of any registration effected pursuant to
this Part 6 shall be allocated as provided in this Section 6E:
(i) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with this Part 6, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
transfer agents' and registrars' fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense the Company's accountants,
including the cost of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company);
(ii) "Selling Expenses" shall mean all underwriting discounts
and selling commissions and other fees applicable to the sale not included in
the definition of Registration Expenses and all fees and disbursements of
counsel for any holder;
(iii) In connection with any registration pursuant to Section
6A, the Company shall pay all Registration Expenses and Investor shall pay all
Selling Expenses;
(iv) In connection with any registration initiated by the
Company in which Investor participates pursuant to Section 6B, the Company or
other person initiating the registration shall pay all Registration Expenses,
and Investor shall pay all Selling Expenses attributable to the inclusion in the
offering of the Covered Shares being sold by Investor.
6F. In the case of the registration effected by the Company pursuant
to this part, the Company agrees to indemnify and hold harmless Investor, each
underwriter of the Covered Shares so registered and each person who controls any
such underwriter within the meaning of Section 15 of the Securities Act, against
any and all losses, claims, damages or liabilities to which they or any of them
may become subject under the Securities Act or any other statute or common law,
including any amount paid in settlement of any litigation, commenced or
threatened, if such settlement is effected with the written consent of the
Company, and to reimburse them for any legal or other expenses incurred by them
in connection with investigating any claims and defending any actions, insofar
as any such losses, claims, damages, liabilities or actions arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the registration statement relating to the sale of the Covered
Shares, or any post-effective amendment thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, if used prior to the effective date of such registration
statement, or contained in the final prospectus (as amended or supplemented if
the Company shall have filed with the Commission any amendment thereof or
supplement thereto) if used within the period during which the Company is
required to keep the registration statement to which such prospectus relates
current, or the omission or alleged omission to state therein (if so used) a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the indemnification agreement contained in this section shall not (x) apply
to such losses, claims, damages, liabilities or actions arising out of, or based
upon, any such untrue statement or alleged untrue statement, or any such
Page 10 of 13
<PAGE>
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with information furnished in writing to the Company by
Investor or such underwriter for use in connection with the preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, or any amendment or supplement thereto, or (y)
inure to the benefit of any underwriter or any person controlling such
underwriter, if such underwriter failed to send or give a copy of the final
prospectus to the person asserting the claim at or prior to the delivery of
certificates representing Covered Shares or of written confirmation of the sale
of Covered Shares to such person and if the untrue statement or omission
concerned had been corrected in such final prospectus.
6G. In the case of a registration effected by the Company pursuant to
this part, Investor and each underwriter of the Covered Shares to be registered
shall agree in the same manner and to the same extent as set forth above to
indemnify and hold harmless the Company, each person who controls the Company,
the directors of the Company and those of its officers who shall have signed any
such registration statement, with respect to any untrue statement or alleged
untrue statement in, or omission or alleged omission from, such registration
statement or any post-effective amendment thereto or any preliminary prospectus
or final prospectus (as amended or as supplemented, if amended or supplemented
as aforesaid) contained in such registration statement, if such statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Company by Investor or any such underwriter, respectively, for
use in connection with the preparation of such registration statement or any
preliminary prospectus or final prospectus contained in such registration
statement or any such amendment or supplement thereto.
6H. Each indemnified party shall, with reasonable promptness after
its receipt of written notice of the commencement of any action against such
indemnified party in respect of which indemnity may be sought from an
indemnifying party on account of an indemnity agreement contained in this part,
notify the indemnifying party in writing of the commencement thereof. In case
any such action shall be brought against any indemnified party and it shall so
notify an indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this part for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnity agreements
in this part shall be in addition to any liabilities that the indemnifying
parties may have pursuant to law.
6I. If the indemnification provided for in this part shall be
unavailable to or insufficient to hold harmless an indemnified party under
sections 6F and 6G above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then the
indemnifying parties shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportions as are appropriate to reflect to
the relative benefits received by the respective indemnifying parties from the
offering of the Covered Shares. If, however, the allocation
Page 11 of 13
<PAGE>
provided by the immediately preceding sentence is not permitted by applicable
law, or if the indemnified party failed to give the notice required under
section 6H above, then each indemnifying party shall contribute to such amount
paid by or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the indemnifying parties in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative benefits received by the indemnifying parties shall be deemed to be in
the same proportion as the net proceeds to any such party bear to the total net
proceeds from the offering before deducting expenses. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the respective indemnifying
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Notwithstanding
anything herein to the contrary, in no event shall Investor's liability pursuant
to this Part 6 be greater than the amount received by Corning from the offering
and sale of shares under this Part 6.
7. Miscellaneous
-------------
7A. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not
7B. Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
7C. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
7D. Descriptive Headings. The descriptive headings of this
--------------------
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
7E. Governing Law; Venue. This Agreement shall be interpreted in
--------------------
accordance with the substantive laws of the State of New York, without regard to
conflict of law principles that may lead to a contrary result. It is the
intention of the parties that proper venue for any action, suit or proceeding
arising pursuant to this Agreement or in connection with the transactions
contemplated herein shall be in New York State. Each party agrees that any
such action, suit or proceeding shall be brought before a state or federal court
sitting in the Western District of New York and waives any objection to venue in
such court. Each party waives the right to demand a jury in any action, suit or
proceeding arising pursuant to this Agreement.
Page 12 of 13
<PAGE>
7F. Notices. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given either when delivered
personally or three (3) business days after having been mailed by certified or
registered mail, return receipt requested and postage prepaid, to the recipient.
Such notices, demands and other communications will be sent to the Investor and
to the Company at the address indicated below:
IF TO THE COMPANY:
AstroPower, Inc.
Solar Park
Newark, DE 19716-2000
Attention: President
IF TO THE INVESTOR:
Corning Incorporated
Attn: General Counsel
One Riverfront Plaza
Corning, New York 14831
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
ASTROPOWER, INC. CORNING INCORPORATED
By: ____________________________ By: ________________________________________
Allen M. Barnett
President Printed Name: ______________________________
Its: _______________________________________
By: ________________________________________
Printed Name: ______________________________
Its_______________________________________
Page 13 of 13
<PAGE>
EXHIBIT 10.17
EXECUTION VERSION
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made by and between AstroPower, Inc., a Delaware
corporation (the "Company"), and Corning Incorporated, a New York corporation
("Corning").
1. Creation of Security Interest. The Company, to secure the payment
-----------------------------
of the indebtedness hereinafter referred to, and in consideration of good
and valuable consideration paid by Corning to the Company, the receipt of
which is hereby acknowledged, does hereby create in favor of Corning, its
successors and assigns a security interest in all of the physical plant,
leasehold interests and improvements, equipment, machinery, tooling, other
physical assets and working capital of the Company wherever located and
acquired or leased for the use described in Section 3 below with proceeds
received by the Company from the issuance of the Note to Corning. Such
plant, equipment, machinery, tooling and other physical assets and all
additions and accessions thereto, are hereinafter collectively referred to
as the Goods.
2. Obligation to Pay. The Company shall pay to Corning, its
-----------------
successors and assigns, the sum of Five Million Dollars ($5,000,000) as
evidenced by its Secured 7% Convertible Promissory Note (the "Note") dated
as of the date hereof, together with interest from such date at the rate
specified therein.
3. Use of Collateral. The Goods will be used exclusively for the
-----------------
manufacture of product or products derived from or otherwise substantially
relating to the Company's Silicon-Film(TM) technology, unless Corning gives
its written consent to another use.
4. Removal of Goods. The Goods will be kept at the Company's
----------------
principal place of business at Newark, Delaware, or at places of business
in the United States relating to the manufacture of product or products
derived from or otherwise substantially relating to the Company's Silicon-
Film(TM) technology. The location of the Goods shall be provided in writing
to Corning within a reasonable time of locating such Goods at such location
and shall not be removed therefrom without the written consent of Corning.
Removal of any or all of the Goods by the Company, or its agents, servants
or employees, shall be deemed a willful taking and an unlawful conversion
under this Security Agreement, and shall constitute a default hereunder,
and all sums owing and secured hereby, whether or not due, shall thereupon
become immediately due and payable.
5. Repairs and Taxes. The Company shall at its own expense, from
-----------------
time to time, replace and repair all parts of the Goods as may be broken,
worn or
<PAGE>
-2-
damaged, and shall keep the Goods in every respect in good working order
and repair.
6. Insurance. The Company shall keep the Goods fully insured against
---------
loss and damage by fire and theft , and the insurance proceeds covering the
Goods shall be made payable to Corning to the extent of any principal and
interest outstanding under the Note.
7. Default. Misrepresentation or misstatement in connection with,
-------
noncompliance with, or nonperformance of any of the Company's obligations
or agreements as hereinabove set forth shall constitute a default
hereunder. If any such default shall occur, or if any default shall be
made in the payment of any sum owing and secured hereby or any part or
installment thereof, or if the Goods or any part thereof shall be seized or
levied upon under any process, or if the Goods or any part thereof shall be
removed or attempted to be removed from the Company's place of business, as
hereinabove set forth, or if the Company shall fail to keep the Goods in
good condition and repair and replace all such parts as may be broken, worn
or damaged, or if the Company shall sell, assign, create a security
interest in, or transfer its right, title and interest in and to, the Goods
or its right of possession thereto or any part thereof, or if an event of
default under the Promissory Note shall occur and be continuing, then
Corning may exercise its rights of enforcement under the Uniform Commercial
Code in force in the State of New York at the date of such default. In
addition to those rights, at Corning's discretion, all the moneys to be
paid hereunder and/or under the Note, whether or not then due, shall
immediately become due and payable, notwithstanding the terms hereof, and
then it shall be lawful for Corning, and the Company does hereby authorize
and empower Corning, with the aid and assistance of any person or persons,
with or without legal process, to enter such place or places where the
Goods are or may be placed, and to take exclusive possession thereof, and
to sell them either in bulk or parcels at public or private sale upon the
premises above mentioned or at such other place as Corning may determine or
designate and to such person or persons (including Corning), or to take and
carry the Goods away and to sell and dispose of the same at public or
private sale either in bulk or parcels, and at the same time to sell and
dispose of all the right, title and interest of the Company in and to the
Goods in the absolute discretion of Corning, and out of the moneys arising
therefrom to retain and to pay Corning any and all sums then owing to
Corning as above set forth, plus all costs, fees, charges and expenses
incurred in connection with the taking, maintaining, storage and disposing
of the Goods, rendering the excess (if any) to the Company or its
successors or assigns, and the Company hereby stipulates to be bound by the
result of such sales as shall be made in accordance herewith. If for any
reason such property shall fail to satisfy all of the foregoing items, the
Company shall pay Corning the deficiency. Until there shall be a default
in any payment or in the performance of any term, covenant or condition
hereof or of the Note, the Company is to remain and continue in the
<PAGE>
-3-
quiet and peaceable possession of the Goods and the full and free enjoyment
of the same.
The Company shall be entitled to five (5) days' advance notice of the
date, time and place of any sale or other disposition of the Goods
hereunder and shall be entitled to be a bidder and to purchase the same for
no more than the balance owing plus costs of sale, including any attorney
fees and other costs incurred in connection with such sale.
8. Waiver by the Company. If Corning shall at any time obtain
---------------------
possession, either with or without legal process, or be entitled to
possession of the Goods, then and in that event, it shall not be necessary
for Corning to remove the Goods but the Company will permit Corning, and
hereby authorizes and empowers Corning, to keep the goods in the place of
business of the Company and to remove any locks thereon and put its own
locks on such premises or on any other premises where the Goods may be
located until five (5) days after the sale of the Goods. The Company waives
any and all claims of any nature, kind or description which it has, or may
claim to have, against Corning or its representatives, by reason of taking
possession or selling the Goods.
9. Waiver of Breach. The acceptance by Corning of any payments after
----------------
maturity, or the acceptance of a partial payment, or the waiver of any
breach or default shall not constitute a waiver of any other or subsequent
breach or default or prevent Corning from immediately pursuing any or all
of its remedies hereunder.
IN WITNESS WHEREOF, the Company and Corning have caused this Security
Agreement to be duly executed and delivered as of August ____, 1997.
ASTROPOWER, INC.
By:________________________
Name:______________________
Title:_____________________
CORNING INCORPORATED
By:________________________
Name:______________________
Title:_____________________
By:________________________
Name:______________________
Title:_____________________
<PAGE>
EXHIBIT 10.18
EXECUTION VERSION
SECURED 7% CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE ("BLUE SKY
LAWS"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR DELIVERY TO THE COMPANY OF EVIDENCE
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT AN EXEMPTION FROM
REGISTRATION THEREUNDER IS AVAILABLE.
Dated August ___, 1997 $5,000,000.00
FOR VALUE RECEIVED, AstroPower, Inc., a Delaware corporation (the
"Company"), hereby promises to pay to the order of Corning Incorporated, a New
York corporation ("Corning" or the "original holder"), the principal sum of Five
Million Dollars ($5,000,000.00) together with interest thereon calculated from
the date hereof, in accordance with the provisions of this Note.
This Note is the 7% Convertible Promissory Note (the "Note") issued
pursuant to a Note Purchase Agreement dated as of August 19, 1997, between the
Company and Corning (the "Purchase Agreement"). The Purchase Agreement contains
terms governing the rights and obligations of the holder of this Note, and all
provisions of the Purchase Agreement are incorporated herein by reference.
Unless otherwise indicated herein, capitalized terms used in this Note have the
same meanings as set forth in the Purchase Agreement.
This Note is secured by and entitled to the benefits of that certain
Security Agreement dated as of the date hereof (the "Security Agreement")
between the Company and Corning, to which reference is hereby made for the
nature and extent of the security afforded thereby and the rights of Corning in
respect of such security.
Part 1. Payment of Interest
-------------------
lA. Rate of Interest. Interest shall accrue at the rate of seven
----------------
percent (7%) per annum on the unpaid principal amount of this Note outstanding
from time to time. Interest shall be paid in cash or, at the option of the
Company, in additional Notes having terms identical to this Note, except in
respect of principal amount, dated as of the Payment Date (as defined below)
with respect to which such interest is payable and having a principal amount
equal to the amount of interest accrued and unpaid as of that Payment Date.
lB. Payment Dates. On February 19, 1997, and on each subsequent
-------------
August 19th and February 19th (each of which dates shall be a "Payment Date"),
all unpaid interest that has
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7% Convertible Promissory Note
Page 2 of 7
accrued on the unpaid principal amount of this Note on and prior to such Payment
Date or on any overdue interest on this Note shall become due and payable.
lC. Payment upon Maturity or Prepayment. All accrued interest that
-----------------------------------
has not theretofore been paid shall be paid in full on the date on which the
entire principal amount outstanding under this Note is paid, whether upon
maturity or upon prepayment. In the event that any portion less than the entire
outstanding principal amount of this Note is prepaid pursuant to paragraph 2B,
the accrued interest applicable to such portion prepaid shall be paid as of the
effective date of such partial prepayment.
lD. Saving Clause. All agreements and transactions between the
-------------
Company and the holder of this Note, whether now existing or hereafter arising,
whether contained herein or in any other instrument, and whether written or
oral, are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of the maturity hereof,
prepayment, demand for prepayment or otherwise, shall the amount contracted for,
charged or received by the holder of this Note from the Company for the use,
forbearance or detention of the principal indebtedness or interest hereof, which
remains unpaid from time to time, exceed the maximum amount permissible under
applicable law, it particularly being the intention of the parties hereto to
conform strictly to the applicable law of usury. Any interest payable hereunder
or under any other instrument relating to the indebtedness evidenced hereby that
is in excess of the legal maximum, shall, in the event of acceleration of
maturity, prepayment, demand for prepayment or otherwise, be automatically, as
of the date of such acceleration, prepayment, demand or otherwise, applied to a
reduction of the principal indebtedness hereof and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of such
principal, such excess shall be refunded to the Company. To the extent not
prohibited by law, determination of the legal maximum rate of interest shall at
all times be made by amortizing, prorating, allocating and spreading in equal
parts during the period of the full stated term of the indebtedness, all
interest at any time contracted for, charged or received from the Company in
connection with the indebtedness, so that the actual rate of interest on account
of such indebtedness is uniform throughout the term hereof.
Part 2. Payment of Principal
--------------------
2A. Payment upon Maturity. The entire unpaid principal amount hereof
---------------------
shall be due and payable on August 18, 2001.
2B. Prepayment. The Company may prepay all or any part of this Note
----------
at any time after August 18, 1999, in One Hundred Thousand Dollar ($100,000)
increments. The Company shall give not less than sixty (60) days prior
written notice of its intention to prepay any part of this Note.
Part 3. Registration of Transfer
------------------------
The Company shall keep at its principal office a register for the
registration of Notes, which shall contain the name and address of the
registered holder (herein referred to as the
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7% Convertible Promissory Note
Page 3 of 7
holder) of the Note and the principal and interest of the Note. No transfer of
the Note or any right to receive payments under the Note shall be permitted
unless made upon the Company's register. Upon the surrender of any Note or
Notes at such place, the Company shall, at the request of the holder of such
Note, execute and deliver (at the Company's expense) a new Note or Notes in
exchange therefor representing in the aggregate the principal amount represented
by the surrendered Note. Each such new Note shall be registered in such name
and shall represent such principal amount of Note as is requested by the holder
of the surrendered Note and shall be substantially identical in form to the
surrendered Note, and interest shall accrue on such new Note from the date to
which interest has been fully paid on such Note represented by the surrendered
Note; provided that, if any Note is to be registered in the name of a person or
persons other than the holder of the Note, there has been compliance with all
laws applicable to such change of registered holder, including but not limited
to federal and state securities laws.
Part 4. Replacement
-----------
Upon receipt of evidence reasonably satisfactory to the Company of the
ownership and the loss, theft, destruction or mutilation of any Note, and in the
case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Company, or, in the case of any such mutilation
upon surrender of such Note, the Company shall (at its expense) execute and
deliver in lieu of such Note, a new Note of like kind representing the principal
amount of Note represented by such lost, stolen, destroyed or mutilated Note and
dated the date of such lost, stolen, destroyed or mutilated Note, and interest
shall accrue on the Note represented by such new Note from the date to which
interest has been fully paid on such lost, stolen, destroyed or mutilated Note.
Part 5. Cancellation
------------
After all principal and accrued interest at any time owed on this Note
has been paid in full, this Note shall be surrendered to the Company for
cancellation and shall not be reissued.
Part 6. Waiver of Notice, etc.
---------------------
The Company hereby waives presentment, demand, notice, protest and all
other demands and notice in connection with the delivery, acceptance,
performance and enforcement of this Note, and assents to extension of the time
of payment or forbearance or other indulgence without notice.
Part 7. Events of Default
-----------------
7A. Events of Default. Each of the following shall constitute an Event
-----------------
of Default:
(i) the Company fails to pay when due the full amount of any
principal or interest on this Note whether at maturity or by acceleration or
otherwise;
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7% Convertible Promissory Note
Page 4 of 7
(ii) the Company makes an assignment for the benefit of creditors
or admits in writing its inability to pay its debts generally as they become
due; or an order, judgment or decree is entered adjudicating the Company
bankrupt or insolvent; or the Company petitions or applies to any tribunal for
the appointment of a trustee, receiver or liquidator of the Company or of any
substantial part of the assets of the Company, or commences any proceeding under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction; or any such petition or
application is filed, or any such proceeding is commenced against the Company
and either the Company takes any action indicating its approval thereof, consent
thereto, or acquiescence therein or such petition, application or proceeding is
not dismissed within ninety (90) days;
(iii) the sale by the Company of a material part of the business
or assets of the Company other than in the ordinary course of business;
(iv) the taking, closing or nationalization of a material part of
the business or assets of the Company by governmental or legal action. A
"material part of the business or assets of the Company" means more than one-
third of the total assets of the Company as set forth in its most recent audited
consolidated financial statements ;
(v) any representation or warranty of the Company set forth in
the Purchase Agreement is shown to be, or becomes materially false or untrue as
of the date of this Note;
(vi) the Company shall violate any of the terms of the Security
Agreement.
7B. Remedies. Upon the occurrence and continuance of any Event or
--------
Events of default, the holders of a majority of the combined aggregate principal
amount outstanding under this Note and any Notes issued in payment of accrued
interest on Notes may, by written notice to the Company, declare all or any part
of the unpaid principal amount of the Notes then outstanding to be forthwith due
and payable, and thereupon such unpaid principal amount or part thereof,
together with interest accrued thereon, shall become so due and payable without
presentation, presentment, protest, notice of intent to accelerate, notice of
acceleration, or further demand or notice of any kind, all of which are hereby
expressly waived, and such holder or holders may proceed to enforce payment of
such amount or part thereof in such manner as it or they may elect. The Company
hereby waives to the extent not prohibited by applicable law which cannot itself
be waived (i) all presentments, demands for performance, notices of
nonperformance (except to the extent required by the provisions hereof), (ii)
any requirement of diligence or promptness on the part of any holder of Notes in
the enforcement of its rights under the provisions of this Note, and (iii) any
and all notices of every kind and description which may be required to be given
by any statute or rule of law.
Part 8. Conversion
----------
8A. Conversion Procedure.
--------------------
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7% Convertible Promissory Note
Page 5 of 7
(i) The holder of this Note may convert all or any portion of
the outstanding principal amount hereof (plus accrued but unpaid interest on
such principal amount or portion thereof) held by such holder into a number of
shares of the Company's Common Stock computed by dividing the principal amount
of this Note (plus accrued but unpaid interest thereon) to be converted by the
"Conversion Price" (as defined below in Part 8B).
(ii) Each conversion will be deemed to have been effected as of
the close of business on the date on which the instrument representing this Note
has been surrendered at the principal office of the Company. At such time as
such conversion has been effected, the rights of the holder of this Note as such
holder will cease and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock are to be issued upon
such conversion will be deemed to have become the holder or holders of record of
the shares of Common Stock represented thereby.
(iii) As soon as possible after a conversion has been effected
(but in any event within three (3) business days in the case of subparagraph (a)
below), the Company will deliver to the converting holder:
(a) a certificate representing the number of shares of
Common Stock issuable by reason of such conversion in such name or names and
such denomination or denominations as the converting holder has specified
(provided that, in the event that the name specified by the converting holder is
other than that of the converting holder, the Company has received evidence
satisfactory to Company counsel that the transfer of Common Stock from the
converting holder to the person specified may be accomplished without violation
of applicable law);
(b) a replacement Note having terms identical to those of
this Note other than the principal amount, which shall be equal to portion of
the principal amount of the original Note not converted; and
(c) the amount payable under subparagraph (vi) below with
respect to fractional shares of Common Stock otherwise issuable upon such
conversion.
(iv) The issuance of certificates for shares of Common Stock upon
conversion of this Note will be made without charge to the holder of such Note
for any issuance tax in respect thereof or other cost incurred by the Company in
connection with such conversion and the related issuance of shares of Common
Stock. Upon conversion of this Note, the Company will take all such actions as
are necessary in order to insure that the Common Stock issuable with respect to
such conversion will be validly issued, fully paid and nonassessable.
(v) The Company will not close its books against the transfer of
this Note or of Common Stock issued or issuable upon conversion of this Note in
any manner which interferes with the timely conversion of this Note.
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7% Convertible Promissory Note
Page 6 of 7
(vi) If any fractional interest in a share of Common Stock would,
except for the provisions of this subparagraph (vi), be deliverable upon any
conversion of this Note, the Company, in lieu of delivering the fractional share
therefor, may at its option pay a cash adjustment for such fractional share
equal to such fraction times the fair market value per share of the Common Stock
at the close of business on the date of conversion, as determined in good faith
by the board of directors of the Company.
(vii) The provisions of this part 8 shall be subject to the
limitations imposed by section 2B hereof.
8B. Conversion Price. The Conversion Price shall be equal to the
----------------
lesser of (a) Six and 00/100 dollars ($6.00) or (b) seventy-five percent (75%)
of the price per share received by the Company or its shareholders in respect of
an initial public offering of Common Stock on or prior to the conversion of the
Note. In order to prevent dilution of the conversion rights granted under this
part 8, the Conversion Price will be subject to adjustment from time to time
pursuant to this part 8.
8C. Subdivision or Combination of Common Stock. If the Company at
------------------------------------------
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
will be proportionately reduced, and if the Company at any time combines (by
reverse stock split or otherwise) its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination will be proportionately increased.
8D. Reorganization, Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------------
Any reorganization, reclassification, consolidation, merger or sale of all or
substantially all of the Company's assets to another Person which is effected in
such a way that holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation), stock, securities or amounts with respect to or
in exchange for Common Stock is referred to herein as an "Organic Change."
Prior to the consummation of any Organic Change, the Company will make
appropriate provisions (in form and substance satisfactory to the holders of a
majority of the outstanding principal amount of Notes then outstanding) to
insure that each of the holders of Notes will thereafter (for so long as such
holders have the right to convert the Notes as provided in this part 8) have the
right to receive, in lieu of or in addition to the shares of Common Stock
immediately theretofore issuable upon the conversion of such holder's Notes,
such shares of stock, securities or assets as such holder would have received in
connection with such Organic Change if such holder had converted his Notes
immediately prior to such Organic Change. In any such case, the Company will
make appropriate provisions (in form and substance satisfactory to the holders
of a majority of the outstanding principal amount of Notes then outstanding) to
insure that the provisions of this part 8 will thereafter (for so long as such
holders have the right to convert the Notes as provided in this part 8) be
applicable to the Notes.
8E. Notices. Until the maturity of this Note:
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7% Convertible Promissory Note
Page 7 of 7
(i) Promptly upon any adjustment of the Conversion Price, the
Company will give written notice thereof to the holder of this Note.
(ii) The Company will give written notice to the holder of this
Note at least twenty (20) days prior to the date on which the Company closes its
books or takes a record (a) with respect to any dividend or distribution upon
Common Stock, (b) with respect to any pro rata subscription offer to holders of
Common Stock or (c) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
(iii) The Company will also give written notice to the holder of
this Note at least thirty (30) days prior to the date on which any Organic
Change will take place.
Part 9. Amendment and Waiver
--------------------
No amendment, modification or waiver shall be binding or effective
with respect to any provision of this Note without the prior written consent of
the holders of at least sixty-seven percent (67%) of the combined aggregate
principal amount of this Note and any additional Notes issued in payment of
accrued interest then outstanding.
Part 10. Notices
-------
Except as otherwise expressly provided, all notices referred to herein
will be in writing and will be delivered by registered or certified mail, return
receipt requested, postage prepaid and will be deemed to have been given when so
mailed (i) to the Company, at its principal executive offices and (ii) to any
holder of this Note, at such holder's address as it appears in the Note register
maintained pursuant to part 3 hereof (unless otherwise indicated by any such
holder).
IN WITNESS WHEREOF, the Company has executed and delivered this Note on
the date first above written.
ASTROPOWER, INC.
By:_______________________________
Allen M. Barnett
President
<PAGE>
EXHIBIT 10.19
EXECUTION VERSION
RESEARCH AND DEVELOPMENT UMBRELLA AGREEMENT
This RESEARCH AND DEVELOPMENT UMBRELLA AGREEMENT is dated as of August 19,
1997, between CORNING INCORPORATED, a New York corporation ("Corning"), and
ASTROPOWER, INC., a Delaware corporation ("AstroPower").
W I T N E S S E T H:
WHEREAS, AstroPower designs, manufactures and markets proprietary advanced
polycrystalline silicon photovoltaic products; and
WHEREAS, Corning creates leading-edge technologies and produces advanced
materials for the scientific and environmental markets; and
WHEREAS, the parties have entered into a Note Purchase and Option
Agreement, dated as of August 19, 1997 (the "Note Purchase Agreement") ; and
WHEREAS, pursuant to the Note Purchase Agreement, Corning has loaned or
will loan to AstroPower $5,000,000 in consideration of AstroPower issuing to
Corning a 7% Convertible Promissory Note of equivalent face value (the "7%
Convertible Note").
WHEREAS, the parties believe that it would be in the best interests of each
other to jointly conduct and coordinate certain projects that may involve
research, development and transfers of technology relating to the design,
development and manufacture of polycrystalline silicon photovoltaic products
(the "Projects"); and
WHEREAS, the parties desire to enter into this Research and Development
Umbrella Agreement to define certain terms and conditions relating to the joint
conduct and coordination of such Projects (this Research and Development
Umbrella Agreement, including any and all Project Annexes (as hereinafter
defined) that may be attached hereto from time to time, is referred to herein as
the "Agreement").
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and undertakings contained herein, and subject to and on the terms and
conditions set forth herein, the parties agree as follows:
1. Projects. (a) From time to time AstroPower shall develop and present
--------
to Corning various Projects. With respect to each such Project, AstroPower shall
present a written proposal to Corning defining the technical and business goals
of such Project, the tasks involved and the milestones identified for successful
completion of such Project, the suggested involvement and contributions of each
of AstroPower and Corning, and the period during which the Project shall be
completed (each a "Project Period"). Corning shall review such Project proposal
and decide
<PAGE>
whether it is in the best interests of Corning to participate. Within a
reasonable time after AstroPower has presented to Corning such Project proposal,
Corning shall notify AstroPower whether it elects to participate or not, the
terms on which it shall participate and any suggestions that Corning may have
towards the successful conduct and completion of such Project. Any such Project
on which the parties elect to jointly participate shall be governed by the terms
and conditions of this Agreement, but shall be more particularly defined in an
Annex to be attached hereto, substantially in the form attached hereto as
Exhibit A (each a "Project Annex"), that includes a definition and goals of such
project, a definition of the involvement and contributions of each of the
parties, a schedule of performance, milestones, payment details, and such other
terms and conditions as the parties shall mutually agree. These Project Annexes
shall be executed and dated by an authorized officer of each party and shall for
all purposes hereof and thereof be an integral part of this Agreement.
(b) Periodically, representatives of Corning and AstroPower will meet to
identify new areas for cooperation and assistance that may lead to new Projects
and to review progress on any existing Projects, including the monitoring of
costs and expenses related to particular Projects.
2. Project Committees. (a) Each Project shall be governed by a
------------------
committee (each a "Project Committee") consisting of two managers, one
designated by Corning and one designated by AstroPower. The initial Project
Committee members shall be defined in the respective Project Annex. Each member
of such Project Committee shall serve at the pleasure of the party which
designated that Project Committee member and in the event of a vacancy, a
replacement shall be named prior to the next scheduled Project Committee meeting
by the party entitled to fill said position.
(b) The functions, authority and tasks of each such Project Committee
shall be: to provide overall technical, commercial and financial guidance and
control over the respective Project; to designate a Project Leader (as defined
in Section 3); to initiate, approve (or disapprove) of significant changes to
the schedule of performance; to review, amend, disapprove or approve any
significant changes proposed by the Project Leader which relate to tasks or
activities assigned or being performed under the Project; to review and audit
whether Project milestones and schedules are being met by each party as agreed;
to redirect resources where required in order to meet Project milestones and
schedules; to analyze how and to what extent technology can be implemented and
utilized in products; to ensure that tests are conducted to use and test such
products prior to the end of respective Project Period; and to decide whether
any patent application(s) (domestic or foreign) should be filed on any
invention(s) created during the course of a Project, the subject matter and
jurisdiction of any patent such applications, and whether any such patent
applications shall be filed, prosecuted and paid for jointly or by an individual
party.
(c) Each Project Committee shall meet as often as necessary to ensure the
successful oversight and completion of the Project, but in any case not less
frequently than quarterly during the term of the respective Project Period.
Such meetings shall be at mutually agreed upon times and at equally convenient
locations. The host party shall bear the expenses of providing the meeting
facilities, but each party shall bear all other cost related to its attendance.
2
<PAGE>
(d) Except as otherwise agreed herein, all decisions of a Project
Committee shall be by unanimous vote.
3. Project Leader; Employees. (a) Each Project Committee shall, by
-------------------------
unanimous vote, designate a project leader who shall, unless otherwise agreed
unanimously by such Project Committee, be an employee of Corning (the "Project
Leader"), and who shall have the task and responsibility to manage and
administer the Project during the Project Period. Any removal or replacement of
the individual serving as Project Leader shall be subject to the prior approval
of, and be in the discretion of, such Project Committee. The Project Leader
shall be responsible for and shall report to the Project Committee regarding all
significant matters arising in the course of, or affecting his coordination of,
the activities to be conducted under, and implementation of the Project in
accordance with, this Agreement and the respective Project Annex.
(b) The Project Leader shall have sufficient authority to carry out his or
her responsibility to administer his assigned Project and meet the schedule of
performance to completion, including the authority to require that either or
both parties make available or delegate certain personnel of each who have the
expertise or experience necessary to perform the scheduled activities under the
Project. Such Project Leader shall also have the authority to make changes in
the Project schedules as may be beneficial and necessary from time to time (but
only if any such change does not materially change the overall Project schedule
of performance, milestones, scope, goals, or timing). Any changes made by the
Project Leader which are of a magnitude so as to constitute a significant
revision or change of the overall Project schedule of performance, milestones,
scope, goals or timing shall require the Project Committee's prior written
approval. The Project Leader shall report to the Project Committee as often as
necessary to successfully accomplish the Project in accordance with the Project
schedule of performance, but in any case not less frequently than quarterly.
The research and technical personnel of either party assigned to work on the
Project by the party shall be subject to the direction of the Project Leader
with respect to Project tasks assigned or assumed and being performed by such
party.
(c) Each party agrees that as deemed necessary by the Project Leader and
for the success of the Project, each person assigned tasks or performing work
under this Agreement and the respective Project Annex will, whenever reasonably
possible, either work solely on the Project during the period he has been
assigned to the Project or be allowed sufficient hours and facilities so as to
accomplish his tasks with respect to the Project in a timely manner and in
accordance with the schedules and milestones of the Project.
(d) Each party agrees to require its employees to observe all
confidentiality, security, and safety rules and regulations in effect at the
other party's site as a condition of their admittance to and presence at the
other party's site.
(e) Nothing in this Agreement shall entail an obligation restricting or
limiting in any way the assignment or reassignment of AstroPower employees
within AstroPower, or Corning
3
<PAGE>
employees within the group of companies affiliated with Corning, including (by
way of clarification) the Project Leader.
4. Confidential Information. (a) Corning and AstroPower recognize that in
------------------------
order to carry out the intent of this Agreement and any particular Project
Annex, the exchange of certain commercial and technical information will be
required and that such commercial and technical information may constitute
proprietary information of the party furnishing the same. "Confidential
Information" shall mean all information received by one party from the other
party pursuant to this Agreement or a Project Annex relating to a Project,
whether furnished in writing or orally or visually. Such information which is
provided in written, encoded, graphic or other tangible form shall be deemed to
be Confidential Information only if it is clearly so marked as being
confidential or proprietary.
(b) Until the expiration of five (5) years after the termination or
expiration of this Agreement (including by reason of any early termination), all
Confidential Information (i) shall be maintained in confidence by the receiving
party, (ii) shall not, unless required by law or after prior written consent of
the disclosing party, be disclosed to any third party, other than directors,
employees, representatives, agents and affiliates of the receiving party, or
consultants that are bound by confidentiality obligations consistent herewith,
and having a reasonable need for access to such information in order to fulfill
such party's obligations under this Agreement, and (iii) shall be protected with
the same degree of care as the receiving party normally uses in the protection
of its own confidential and proprietary information, but in any event with no
less than reasonable care.
(c) The restrictions herein provided shall not apply with respect to any
Confidential Information which:
(i) is already known by the receiving party at the time of receipt
from the disclosing party as shown by such party's documents dated prior to
such date of receipt;
(ii) is or becomes a part of the public domain without breach of
this Agreement by the receiving party;
(iii) is obtained by the receiving party from a third party under
conditions permitting its disclosure to others;
(iv) is independently developed by the receiving party without
reference to any Confidential Information; or
(v) is disclosed pursuant to valid order or demand of a court or
other governmental body, provided that the receiving party shall have first
given notice to the disclosing party and been allowed to make an effort to
obtain a protective order or agreement requiring that the Confidential
Information be used only for the governmental purposes for which the order
or demand was issued.
4
<PAGE>
(d) Following the period of confidentiality under this Section 4, no
obligation is assumed by, or is to be implied against, either receiving party
with respect to disclosure of any Confidential Information received hereunder.
(e) The receiving party shall limit disclosure of Confidential Information
only to those employees of the receiving party who have a need to know such
Confidential Information.
(f) Prior to receiving Confidential Information, all employees of the
receiving party having access to Confidential Information shall sign (if they
have not already signed agreements (including labor or employment contracts))
individual confidential information non-disclosure agreements with their
respective employer, agreeing to maintain in confidence any and all confidential
information received as a result of their employment. Each party agrees to
enforce such confidential information non-disclosure agreements with respect to
the Confidential Information received from the other party.
5. Intellectual Property Rights in Background Technology. Subject to
-----------------------------------------------------
obligations to third parties existing as of the date of each Project Annex, each
party hereby grants to the other party a nonexclusive, royalty-free, revocable
license to use any and all know-how, processes, computer programs, technical
data, prototypes, inventions, discoveries, techniques, improvements,
modifications, technical information and all patents, patent applications,
copyrights, trade secrets and proprietary rights related thereto that exist
prior to the date of any Project Annex, but only to the extent necessary for
such other party to perform its obligations (including performance through
additional related parties as a particular Project Committee may determine)
under this Agreement. The licenses granted under this paragraph shall
automatically terminate at the end of the respective Project Period for which
such license is necessary or, in any case, no later than the expiration or
termination of this Agreement.
6. Project Technology. (a) "Project Technology" shall mean any and all
------------------
know-how, processes, computer programs, technical data, prototypes, inventions,
discoveries, techniques, improvements, modifications, technical information and
all patents, patent applications, copyrights, trade secrets and proprietary
rights related thereto which, in whole or in part, are conceived by either or
both of the parties in connection with a Project.
(b) Project Technology that is conceived by either party during the term
of this Agreement in the course of work on a Project shall be owned exclusively
and controlled by the party that conceived such Project Technology. Project
Technology that is jointly conceived by the parties during the term of this
Agreement in the course of work on a Project shall be jointly owned by the
parties and each party shall have the right to: (i) unilaterally practice such
Project Technology in or outside the field of photovoltaic energy Cells, Modules
and Arrays (the "Field) without consideration to, or approval from, the other
party; and (ii) license such party's rights in such Project Technology (A)
without consideration to, or consent from, the other party if such licensee is
not a competitor (and may not reasonably be considered a potential competitor)
of such other party or (B) with the prior written consent of the other party if
such licensee is a competitor (or may reasonably be considered a potential
competitor) of such other party.
5
<PAGE>
(c) AstroPower may not at any time (except as specifically provided
herein) grant, assign, or transfer any right, title, or interest in or under
Project Technology owned exclusively by Corning, including any licenses in whole
or in part, directly or indirectly, to any third party without the prior written
consent and approval of Corning.
(d) Corning may not at any time (except as specifically provided herein)
grant, assign, or transfer any right, title, or interest in or under Project
Technology owned exclusively by AstroPower, including any licenses in whole or
in part, directly or indirectly, to any third party without the prior written
consent and approval of AstroPower.
(e) Corning hereby grants to AstroPower a non-exclusive and royalty free
worldwide license in respect of Project Technology owned by Corning or jointly
owned by Corning and AstroPower to make, have made, use, offer to sell or sell
products within the Field. AstroPower hereby grants to Corning a non-exclusive
and royalty free worldwide license in respect of Project Technology owned by
AstroPower or jointly owned by AstroPower and Corning to make, have made, use,
offer to sell or sell products within the Field. Under each such license:
(i) the licensee shall have the right to modify or enhance the
licensed Project Technology, but the licensor shall receive a royalty
free non-exclusive license to use such modifications or enhancements
conceived during the term of this Agreement;
(ii) the licensee shall have no right to sublicense the licensed
Project Technology; and
(iii) any and all licensed Project Technology shall be treated as
Confidential Information in accordance with the terms hereof, except
as disclosed by patents thereon.
The parties shall enter into a license agreement regarding the licensed Project
Technology including the terms set forth herein and any other appropriate terms
and conditions mutually agreed upon by the parties. As appropriate, the
licensor shall provide to the licensee technical assistance, on terms and
conditions to be agreed to between the parties, to implement the use of the
licensed Project Technology. For purposes of this Agreement, "Cell" shall mean
a photovoltaic device capable of converting light and other forms of radiation
into electricity; "Module" shall mean a photovoltaic device for generating
electricity that is packaged for electrical interface with other electrical
equipment; and "Array" shall mean a collection of modules that are mechanically
interconnected and packaged for electrical interface with other electrical
equipment.
(f) In the event that certain licensed Project Technology (other than
patents and patent applications) shall become part of the public domain without
breach of this Agreement by the licensee thereof, the licenses referred to in
paragraph (e) of this Section 6 in respect of such
6
<PAGE>
Project Technology shall terminate and each party shall be free to use and apply
such Project Technology without restriction.
(g) In the event that a Project Committee decides to file a joint patent
application in respect of Project Technology, Corning shall have the right of
first refusal to file and prosecute such patent application for and on behalf of
both parties. In the event that a Project Committee decides not to file a joint
patent application in respect of Project Technology, or if the members of such
Project Committee cannot agree within a reasonable time to file such patent
application, the inventing party may initiate and prosecute application(s) for
patent(s) arising in connection with a Project, in any jurisdiction, and shall
have sole ownership and control in respect of any such applications and patents;
provided, however, that if any inventing party shall fail or refuse to initiate
- -------- -------
or prosecute within a reasonable time or shall discontinue prosecution of the
same in any jurisdiction, the other party may elect to initiate or prosecute the
same. Both parties shall share all expenses incurred in applying for,
prosecuting, and securing joint patents (provided the relevant Project Committee
has approved such expenditures) and both parties shall be named as and shall be
joint and equal owners thereof. Both parties shall share equally all
maintenance and any other fees and costs relating to the maintenance of such
jointly owned patents.
(h) In the event of any third party infringement of any patents,
copyrights, trade secrets, or registration rights hereunder which are jointly
owned by the parties, both parties (or either party in the event that the other
party elects not to participate) may elect in its or their discretion to
initiate and conduct appropriate action or legal proceedings; provided, however,
-------- -------
that (i) in the event that both parties hereto participate in such action or
proceedings, any and all sums recovered as a result of such action or
proceedings shall first be used to reimburse such party or parties costs and
expenses incurred to recover the same, and any sums remaining or obligations
owed thereafter shall be shared equally between the parties and (ii) in the
event that only one party hereto elects to participate in such action or
proceedings, such party shall bear all costs and expenses associated therewith
and shall retain all sums recovered and shall be solely responsible for all
obligations owed as result of such action or proceedings.
7. Results of Projects. (a) Each Project Leader shall cause to be
-------------------
delivered to each member of the relevant Project Committee prior to each
quarterly meeting a technical and commercial report containing the following:
(i) a complete detailed description of all activities of the Project
undertaken by each party (and by any third party) during that quarter and
results, including a description of any material technology developments
and any areas in respect of which patent filings should be considered;
(ii) a report of any material commercial transactions undertaken in
connection with the Project; such report shall include a report on amounts
paid out or approved for payment by the Project Leader for services
performed during such quarter pursuant to the schedule of performance or
otherwise; amounts due and
7
<PAGE>
payable by the parties as adjustments or otherwise and unpaid; any monies
received and the sources and reasons for such.
(b) Each party shall be required to keep accurate technical records with
respect to all activities undertaken pursuant to this Agreement (including with
respect to third party contracts). Such records shall be maintained at the site
where the work was done of the respective party. Each party shall have access
to the records of the other party during normal business hours, from time to
time, upon written request of the other party, but in no event less than
quarterly each year.
(c) Not later than three (3) months after the end of each Project Period
(or from time to time during each Project Period, if feasible, and subject to
any analyses and assessments by the relevant Project Committee), the parties
shall finalize their analyses and assessments and analyze which Project
Technology can be exploited and utilized to manufacture products, and the
possible markets for such products. During or at the end of each Project Period
the parties shall use their best efforts to produce or market all of the
proprietary information embodied in the corresponding Project results.
8. Payments. (a) Corning shall receive payment for participation in any
--------
Project on a monthly basis, in the amounts and on the dates specified in the
corresponding Project Annex. Corning compensation shall be in the form of
options ("Options") to purchase AstroPower common stock ("Common Stock").
(b) All Options shall be issued on the relevant payment dates as set forth
in the respective Project Annexes. All Options issued shall have a term of three
(3) years from the issue date, be valued in terms of Options per man-year of
Corning contribution and bear an exercise price as follows:
<TABLE>
<CAPTION>
Issue Date Options per
--------------------------------- -----------
Subsequent to On or prior to Exercise Price man-year
------------- -------------- -------------- --------
<S> <C> <C> <C>
August 19, 1997 August 18, 1998 $ 6.00 66,667
August 19, 1998 August 18, 1999 $ 8.00 40,000
August 19, 1999 August 18, 2000 $10.00 28,571
</TABLE>
(c) On the relevant payment dates as defined in each Project Annex,
AstroPower shall deliver to Corning an agreement or certificate(s) representing
that number of options set forth in such Project Annex or, if no specific number
is set forth, that number of options calculated by multiplying man-years of
Corning contribution by the Options per man-year deemed to apply according to
the provisions of Section 8(b). Each such agreement or certificate shall
confirm or extend the applicability to such Options of the representations,
warranties and covenants of the parties made in respect of the options granted
under the Note Purchase Agreement.
(d) Performance hereunder, including the issuance to Corning of options or
the exercise of such options into Common Stock, shall in no way modify,
supersede or prejudice the rights and
8
<PAGE>
obligations of the parties under the Note Purchase Agreement, or the 7%
Convertible Note or any agreements related thereto.
9. Registration Rights. In respect of any shares of Common Stock issued
-------------------
upon conversion of any options issued hereunder, Corning shall have the
registration rights provided under the provisions of Part 6 of the Note Purchase
Agreement, which provisions are hereby incorporated by reference herein,
provided, however, that (a) in such provisions where there is reference to a
"Note" or the "purchase of" a Note or a similar reference to a Note, such
provision and the construction thereof shall, for purposes of this Agreement, be
interpreted as applying to the Options granted hereunder and (b) Corning shall
exercise such rights only in combination with the exercise thereunder in respect
of the Notes issued thereunder or, in the alternative, no more frequently than
once during any twelve (12) month period.
10. Costs. Except as otherwise expressly provided herein or in a Project
-----
Annex, each of Corning and AstroPower shall perform its respective obligations
under this Agreement at its own costs without charge to the other.
11. Conflict of Law. This Agreement shall be subject to and governed by
---------------
the substantive laws of the State of New York without regard to any conflict of
laws principles that would lead to a different result.
12. Publicity. No public releases or advertisements by either Corning or
---------
AstroPower relating to the subject of this Agreement shall be made without the
agreement of both parties except to the extent that either party is advised by
its counsel that disclosure of such subject is required by law.
13. Notices. All notices required to be given hereunder shall be in
-------
writing and shall be given by first class mail, postage prepaid, addressed to
the parties as follows:
To Corning: Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Attn:
cc: Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Attn.: General Counsel
To AstroPower: AstroPower, Inc.
Solar Park
Newark, DE 19716-2000
9
<PAGE>
ATTN.: PRESIDENT
Either party shall have the right to change the address to which notices are to
be sent by the giving of not less than ten (10) days written notice to the other
party.
14. Relationship. The relationship of the parties hereto shall be that of
------------
independent contractors and nothing herein contained shall be deemed to create
any relationship of agency, partnership or joint venturers.
15. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties regarding the Projects and supersedes any and all other
prior agreements and understandings whether written, verbal or implied, relating
to the subject matter hereof. No changes, alterations, or modifications to this
Agreement shall be effective unless in writing and signed by the parties hereto.
16. Term and Termination. The term of this Agreement shall commence as of
--------------------
the date hereof and extend through the date that is the earlier of (i) three
years from the date hereof or (ii) the date on which all amounts payable
(hereunder or otherwise) from AstroPower to Corning shall have been paid in full
and Corning no longer holds any shares of the common stock of AstroPower or
instruments convertible into such common stock. Notwithstanding the foregoing
sentence, this Agreement may be terminated by either party at any time and may
be extended upon the mutual written consent of the parties. Upon any
termination of this Agreement, the provisions of Sections 4, 8, 9, 11, 12, 13,
14, 15, 18 and 19 shall survive as provided therein, or if no date is provided
therein then indefinitely.
17. Other Development Activities. Either party hereto, subject to its
----------------------------
obligations hereunder in connection with the other party's confidential
information, may pursue development activity, with others or independently,
provided such activity does not otherwise violate or materially interfere with a
party's obligations hereunder.
18. Disclaimer. It is understood and agreed that (i) each party makes no
----------
representation or warranty of any kind (whether express or implied, written or
oral, or otherwise) as to the participation or continued participation by such
party in any Project or the results or success of any Project undertaken
hereunder, and (ii) each party shall not be responsible or liable in any way for
any failure to meet any levels of expectation or accomplishment with respect to
goals that the parties jointly or severally may consider desirable.
19. Indemnification. Corning shall not be liable for any third party
---------------
claims or charges related to or arising out of:
(a) the infringement or alleged infringement of proprietary rights,
including but not limited to any infringement or alleged infringement of
patents, patent applications,
10
<PAGE>
copyrights, mask work rights, or trade secret or know-how rights, related
to the performance of work in connection with a Project or Projects or the
design, development, manufacture, production, distribution, sale, use,
misuse, handling, storage or disposal of products or services arising from
or related to a Project or Projects; or
(b) the performance of work in connection with a Project or Projects
or the design, development, manufacture, production, distribution, sale,
use, misuse, handling, storage or disposal of products or services arising
out of or related to a Project or Projects, including in any case, but not
limited to, any direct, indirect, special or consequential damages such as
the loss of capital, use, production, profits, or claims of AstroPower
customers.
AstroPower agrees to defend, indemnify and hold harmless Corning and Corning's
affiliates, directors, employees and agents (the "Indemnified Parties") against
all claims, suits, costs, damages, judgments and/or penalties incurred, claimed
or sustained by third parties, whether for infringement, personal injury,
property damage or otherwise, arising out of or related to the performance of
work in connection with a Project or Projects or the design, development,
manufacture, production, distribution, sale, use, misuse, handling, storage or
disposal of products or services arising from or related to a Project or
Projects, except to the extent that such claims, suits, costs, damages,
judgments and/or penalties are third-party claims relating to the practice by
Corning of Project Technology owned by Corning.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
CORNING INCORPORATED
By __________________________
ASTROPOWER, INC.
By __________________________
11
<PAGE>
Annex A
Form of
PROJECT ANNEX
1. The Project. The definition and goals of the Project; the involvement
-----------
and contributions of the parties; and the schedule of performance, the
milestones and the Project Period in respect of the Project each shall be as
described in sections ___ through ___ of the Project Proposal attached hereto as
Exhibit 1, which such sections ____ through ___ of such Project Proposal are
hereby incorporated by reference herein.
2. The Project Committee. The initial Project Committee members shall be
___________________, who is hereby so designated by Corning, and
_____________________, who is hereby so designated by AstroPower.
3. Payments. Payments to Corning shall be as follow:
--------
Date Payment Amount
---- --------------
Accepted and agreed this ___ day of __________, ____.
CORNING INCORPORATED ASTROPOWER, INC.
By_______________________________ By________________________________
Name:______________________________ Name:_____________________________
Title:_____________________________ Title:____________________________
Date:______________________________ Date:_____________________________
12
<PAGE>
EXHIBIT 10.20
PROMISSORY NOTE
$291,272.61
July 31, 1989
FOR VALUE RECEIVED, ASTROPOWER, INC. a Delaware corporation (the
"Maker"), does hereby promise to pay to the order of ASTROSYSTEMS, INC., a
Delaware corporation (the "Payee"), at Six Nevada Drive, Lake Success, New York
or at such other place as the holder of this Note shall specify in writing to
the Maker, the principal sum of Two Hundred Ninety-One Thousand Two Hundred
Seventy-Two and 61/100 Dollars ($291,272.61) payable, with interest on the
unpaid principal balance at the rate of nine and one-one hundredth percent
(9.01%) per annum, in ten (10) installments, the first of which is $115,772.61
and is payable on October 31, 1989 and the balance of which is payable in nine
(9) equal quarterly installments of Nineteen Thousand Five Hundred Dollars
($19,500) commencing on October 31, 1989 and continuing on the last day of each
subsequent calendar quarter through January 31, 1992. Accrued interest on the
unpaid principal balance of this Note shall be payable with each principal
payment.
The Maker may prepay the principal amount of this Note in whole, or in
part, from time to time, without premium or penalty, provided that the Maker pay
all interest accrued with regard to the principal prepaid to the date of
prepayment.
If the Maker shall (i) fail to make any payment due hereunder, (ii)
apply for, or consent to, the appointment of a receiver, trustee or liquidator
of itself or of its property, (iii) admit in writing its inability to pay its
debts as they mature, (iv) make a general assignment for the benefit of
creditors, (v) be adjudicated a bankrupt or insolvent, (vi) file a voluntary
petition in bankruptcy or a petition or an answer seeking reorganization, or an
arrangement with creditors,, (vii) take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute or file an answer admitting the material allegations of a petition
filed against it in any proceeding under any such law, or (viii) have entered
against it a court order approving a petition filed against it under the Federal
Bankruptcy Act, then and in each and every such event, the Payee may, by written
notice to the Maker, declare the entire unpaid principal amount of this Note
then outstanding plus accrued interest to be forthwith due and payable whereupon
the same shall become forthwith due and payable. Notwithstanding anything
herein to the contrary, upon and effective with the date of any such notice by
the Payee, the interest rate hereunder on the unpaid principal balance shall be
increased to the lesser of twenty four percent (24%) per annum or the highest
rate permitted by law in the State of New York.
Upon default hereunder, the Payee shall be entitled to costs of
collection, plus reasonable attorneys' fees, in addition
<PAGE>
to the unpaid principal amount of, and accrued interest on, this Note.
The Maker hereby waives presentment, demand, protest and notice of
dishonor of this Note and any and all rights of setoff against the holder of
this Note.
This Note shall be governed by, and construed and enforced in all
respects in accordance with, the laws of the State of New York, excluding choice
of law rules thereof. This Note shall not be modified or rescinded except by an
instrument in writing signed by the Maker and acknowledged in writing by the
Payee
IN WITNESS WHEREOF, the Maker has duly executed this Note as of the
day and year first above written.
ASTROPOWER, INC.
By: /s/ Allen M. Barnett
--------------------
President
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
AstroPower, Inc.:
The audits referred to in our report dated December 5, 1997, included the
related financial statement schedule for the nine-month period ended September
30, 1997 and each of the years in the three-year period ended December 31,
1996, included in the registration statement. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based on our
audits. In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
We consent to the use of our reports included herein and to the references
to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
_____________________________________
Wilmington, Delaware
December 16, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 24,930 5,131,691
<SECURITIES> 0 0
<RECEIVABLES> 2,060,772 2,882,652
<ALLOWANCES> (47,836) (57,998)
<INVENTORY> 1,214,188 1,203,044
<CURRENT-ASSETS> 3,343,547 9,333,683
<PP&E> 6,856,396 7,230,466
<DEPRECIATION> (2,313,129) (2,712,177)
<TOTAL-ASSETS> 7,886,814 13,851,972
<CURRENT-LIABILITIES> 4,313,319 3,975,476
<BONDS> 527,811 5,797,317
5,798,725 5,798,725
3,289 3,364
<COMMON> 37,018 37,072
<OTHER-SE> (2,899,841) (2,380,807)
<TOTAL-LIABILITY-AND-EQUITY> 7,886,814 13,851,972
<SALES> 6,237,349 9,333,817
<TOTAL-REVENUES> 10,589,152 12,157,487
<CGS> 6,896,109 6,747,199
<TOTAL-COSTS> 12,771,396 11,476,684
<OTHER-EXPENSES> 11,959 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 168,782 217,340
<INCOME-PRETAX> (2,362,985) 463,463
<INCOME-TAX> 0 9,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,362,985) 454,463
<EPS-PRIMARY> (0.40) 0.08
<EPS-DILUTED> (0.40) 0.08
</TABLE>
