<PAGE>
As filed with the Securities and Exchange Commission on September 9, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
(302) 366-0400
(Name, address, including zip code (Name, address, including zip code
and telephone number, including area and telephone number, including area
code, of registrant's principal code, of agent for service)
executive office)
----------------
Copies to:
Peter Landau, Esq. Peter B. Tarr, Esq.
Opton Handler Feiler & Landau, LLP Hale and Dorr LLP
52 Vanderbilt Avenue 60 State Street
New York, New York 10017 Boston, Massachusetts 02109
(212) 599-1744 (617) 526-6000
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. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to be Aggregate Offering Aggregate Offering Amount of
to be Registered Registered Price Per Share Price(1) Registration Fee
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $0.01 par
value................. 3,162,500 Shares $14.625 $46,251,563 $12,858
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of registration
fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended,
based on the average of the high and low prices of the Common Stock as
reported on the Nasdaq National Market, on September 8, 1999.
The Registrant hereby amends this 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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. We cannot sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+prospectus is not an offer to sell these securities, and it is not soliciting +
+an offer to buy these securities in any state where an offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 9, 1999
PROSPECTUS
2,750,000 Shares
[LOGO OF ASTRO POWER APPEARS HERE]
Common Stock
Of the 2,750,000 shares of common stock being sold in this offering,
AstroPower, Inc. is selling 2,025,000 shares and the selling stockholders are
selling 725,000 shares. We will not receive any of the proceeds from the sale
of shares by the selling stockholders.
---------
Our common stock is quoted on the Nasdaq National Market under the symbol
"APWR." On September 8, 1999, the last reported sale price for our common stock
on the Nasdaq National Market was $14.625 per share. See "Price Range of Common
Stock."
---------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price.......................................... $ $
Underwriting discounts and commissions......................... $ $
Proceeds to AstroPower, before expenses........................ $ $
Proceeds to selling stockholders, before expenses.............. $ $
</TABLE>
We have granted the underwriters an option for a period of 30 days to
purchase up to 412,500 additional shares of common stock. The underwriters are
severally underwriting the shares being offered. The underwriters expect to
deliver the shares against payment on September , 1999.
---------
Investing in our common stock involves a high degree of risk.
See "Risk Factors" beginning on page 7.
---------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
Hambrecht & Quist
CIBC World Markets
FAC/Equities
September , 1999
<PAGE>
SOLAR ELECTRIC POWER APPLICATIONS
---------------------------------
[Graphic] [Graphic] [Graphic]
Residential customers Architects and Commercial businesses can
can generate clean solar builders utilize utilize solar electric
electric power on their solar cells in power to help promote
own roof, even during creative ways, a "green" image.
utility power outages. integrating power
generation into
conventional building
materials such as
roof-tiles and
facade panels.
ON-GRID
Solar cells
[Photos showing a variety are the core
of on-grid and off-grid component for
applications for solar a wide range
electric power] of applications.
OFF-GRID
Many telecommunications The scalability of solar
repeaters and cellular base electric power allows large
stations depend on the numbers of small electrical
reliability of solar electric systems to be
power. cost-effectively deployed.
[Graphic] [Graphic]
[Graphic] For the estimated 2 billion
people still without electricity,
solar electric power can be a direct
and cost-effective means to acquire
basic services such as lighting, TV,
and clean drinking water.
<PAGE>
ASTRO POWER
[Photo of Recyclable Recycled Wafers
Wafers] We recycle single-crystal silicon
wafers from the computer chip
industry. These wafers do not meet
the exacting specifications necessary
for producing integrated circuits,
but can be used to make high-quality
solar cells.
APex(TM) Wafers
Continuous sheets of polycrystalline silicon
are produced in our factory using AstroPower's
proprietary Silicon-Film(TM) process. This
process is conceptually similar to low-cost,
high-speed manufacturing techniques for
producing float glass and sheet steel.
[Photo of Continuous Sheet Production
Line using our proprietary
Silicon-Film(TM) process]
[Photo of Solar Cell]
Solar Cell Processing
Wafers are cut to the
desired size and processed
into finished solar cells
using similar production
equipment and processes.
<PAGE>
TECHNOLOGY
Module Assembly
Solar cells are connected together
and packaged into modules, which
are the power generation building
blocks for all solar electric power
systems. Modules produce direct
current (DC) electricity when
exposed to sunlight.
[Photo of Module Assembly]
[Photo of electric outlet]
Solar Electric Power
Solar electric power is
typically stored in batteries
for consumption by off-grid
users, or converted into
alternating current (AC) for
used in on-grid homes and
buildings.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................................................. 3
Risk Factors....................................................... 7
Forward-Looking Statements......................................... 18
How We Intend to Use the Proceeds from the Offering................ 19
Price Range of Common Stock........................................ 19
Dividend Policy.................................................... 20
Capitalization..................................................... 20
Selected Financial Data............................................ 21
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 22
Business........................................................... 30
Management......................................................... 47
Certain Transactions............................................... 55
Principal and Selling Stockholders................................. 55
Description of Capital Stock....................................... 58
Underwriting....................................................... 60
Legal Matters...................................................... 62
Experts............................................................ 62
Where You Can Find More Information About Us....................... 62
Index to Financial Statements...................................... 63
</TABLE>
------------
Silicon-Film(TM) and APex(TM) are our trademarks. All other
brand names and trademarks appearing in this prospectus are the
property of their respective holders.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, including "Risk Factors" and our financial statements,
before making an investment decision.
Our Company
We develop, manufacture, market and sell a range of solar electric power
products, including solar cells, modules and panels, for the global
marketplace. Solar cells are semiconductor devices which convert sunlight into
electricity and form the building block for all solar electric power products.
Historically, our products have been used to generate electricity for users not
connected to the utility grid. Such applications include electrification of
rural homes and villages, and power supply for equipment in the communications
and transportation industries. More recently, our products are also being used
by customers already connected to the utility grid as a clean, renewable source
of alternative or supplemental electricity. We are expanding our joint venture
agreement with GPU International, Inc. to generate and sell wholesale solar
electric power.
The electricity industries in the United States, Europe and Japan are
currently experiencing significant structural change. Industry deregulation is
promoting customer choice of electric power provider and introducing retail
competition. Additionally, while Europe and Japan have traditionally supported
clean, renewable energy policies, state governments in the United States are
now introducing legislation and implementing various economic incentives to
stimulate the use of renewable sources of electricity, including solar power.
We believe increased retail competition and the introduction of various
economic incentives in domestic and international markets will continue to
stimulate providers to differentiate their power offerings and to include solar
electric power among their power options.
According to PV Energy Systems, an independent solar energy research firm,
the solar electric power industry shipped an estimated 153 megawatts of power
capacity in 1998, which represented approximately $2.0 billion in equipment
sales. Since 1994, industry shipments have increased at a compound annual
growth rate of 22%, which has been driven by continued worldwide demand in the
off-grid segment and accelerated growth for on-grid applications. During this
period, on-grid shipments have grown at a compound annual growth rate of 65% as
consumers are choosing to install solar systems or purchase solar electric
power. We believe that the continued global restructuring of the electric power
industry will continue to drive growth in the on-grid solar electric power
market.
While solar electric power is often the most cost-effective source of
electric power in selected applications off the utility grid, the broad
utilization of solar electric power on the utility grid has been limited by
production costs. We have optimized several stages in the solar cell
manufacturing process to progressively reduce production costs while increasing
mechanical and electrical yields:
. Silicon water sourcing. Our proprietary manufacturing process utilizes
recycled semiconductor wafers that allow us to reduce silicon wafer
cost.
. Equipment and process engineering. Our proprietary equipment and
processes allow us to increase our manufacturing productivity and
ultimately to generate a higher level of power output per production
asset than our competitors. For example, our Silicon-Film(TM) technology
allows us to produce large area silicon sheets in minutes.
. Product design. Our large solar cell design features allow us to
generate more power per solar cell.
3
<PAGE>
Our focus on silicon wafer sourcing, equipment and process engineering and
product design has allowed us to reduce our production cost per watt and thus
to improve our product gross margins.
Our goal is to become the leading global solar electric power technology
company. To achieve this, we intend to:
Maintain our manufacturing and technology advantage. We intend to continue
to enhance our manufacturing processes and technologies and to introduce
innovative solar electric power products in order to optimize our production
cost per watt.
Rapidly expand manufacturing capacity. We intend to expand our manufacturing
capacity to approximately 25 megawatts by the end of the year 2000 and to
approximately 75 megawatts over the next four years. We intend to capitalize on
our manufacturing expertise and replicable expansion methodology to increase
our manufacturing capacity. Since the beginning of 1998 we have increased our
manufacturing output by approximately 135%, from a rate of 5.5 megawatts per
year for the first quarter of 1998 to a rate of 12.9 megawatts per year for the
second quarter of 1999.
Capitalize on deregulation in the on-grid market. We believe that the
deregulation of the energy industry is creating a favorable environment to
market residential rooftop solar systems to domestic on-grid customers. We
intend to target states that are implementing favorable legislation,
introducing economic incentives and promoting consumer choice. We recently
opened an office in Concord, California to focus on on-grid systems sales.
Expand relationships with module assemblers. In international markets, local
module assemblers are often best positioned to deliver customized solutions and
to compete for local business. We intend to expand our relationships with
selected module assemblers and to offer additional products and services,
including factory design, equipment selection, process training and quality
assurance. We believe this strategy will allow us to broaden our international
reach and to penetrate new markets. We recently agreed to form a joint venture
with Atersa, S.A., a leading Spanish module assembler and systems integrator,
to provide these services.
Pursue strategic relationships. We intend to continue to pursue strategic
relationships to introduce new technologies and products, enter new geographic
markets, attract new customers and pursue additional revenue opportunities.
These relationships may take various forms, including cooperative marketing
agreements, joint ventures and strategic alliances. Through our GPU Solar joint
venture, we are developing capabilities to generate solar electric power in the
United States.
We were incorporated in Delaware in 1989 as a successor to a business that
was organized in 1983. Our executive offices are located at Solar Park, Newark,
Delaware 19716-2000, and our telephone number at that address is (302) 366-
0400. Our website is located at http://www.astropower.com. Information
contained on our website is not part of this prospectus.
4
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by us........ 2,025,000 shares
Common stock offered by the
selling stockholders............. 725,000 shares
Common stock to be outstanding
after the offering............... 10,741,871 shares
Use of proceeds................... Expansion of manufacturing capacity,
working capital and other general corporate
purposes, including possible acquisitions.
Nasdaq National Market Symbol..... APWR
</TABLE>
------------
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of June 30, 1999 and does not
include the following:
. 2,182,473 shares of common stock subject to options issued at a weighted
average exercise price of $7.60 per share under our 1989 and 1999 Stock
Option Plans and 1998 Directors Stock Option Plan
. 260,012 shares of common stock reserved for issuance under our 1989 and
1999 Stock Options Plans and 1998 Directors Stock Option Plan
Please see "Capitalization" for a more complete discussion regarding the
outstanding shares of common stock and options to purchase common stock and
related matters.
Unless otherwise indicated, all information in this prospectus assumes that
the underwriters will not exercise their option to purchase additional shares
in this offering.
5
<PAGE>
Summary Financial Information
The following summary financial information should be read in conjunction
with our financial statements and their related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this prospectus. The statement of operations data for the years
ended December 31, 1996, 1997 and 1998 are derived from, and are qualified by
reference to, the audited financial statements included in this prospectus. The
statement of operations data for the years ended December 31, 1994 and 1995
have been derived from audited financial statements not included in this
prospectus. The statement of operations data for the six month periods ended
June 30, 1998 and 1999 and the balance sheet data at June 30, 1999 labeled
"Actual" are derived from, and qualified by reference to, our unaudited interim
financial statements included in this prospectus.
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
-------------------------------------- --------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------- ------- ------- ------ -------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Product sales.............. $3,434 $5,356 $ 6,237 $13,095 $20,206 $8,895 $13,550
Research contracts......... 3,676 4,589 4,346 3,512 2,953 1,421 1,579
------ ------ ------- ------- ------- ------ -------
Total revenues........... 7,110 9,945 10,583 16,607 23,159 10,316 15,129
Gross profit................. 1,857 2,433 1,107 4,756 5,920 2,647 4,019
Income (loss) from
operations.................. 88 206 (2,188) 923 1,081 404 987
Net income (loss)............ $ 17 $ 98 $(2,363) $ 652 $ 2,412 $ 520 $ 731
====== ====== ======= ======= ======= ====== =======
Net income (loss) per share--
basic....................... $ 0.01 $ 0.03 $ (0.64) $ 0.18 $ 0.30 $ 0.07 $ 0.09
Net income (loss) per share--
diluted..................... $ 0.01 $ 0.02 $ (0.64) $ 0.13 $ 0.28 $ 0.07 $ 0.08
Weighted average shares
outstanding--basic 3,673 3,697 3,700 3,710 7,956 7,336 8,640
Weighted average shares
outstanding--diluted 5,356 5,362 3,700 6,220 9,572 7,336 9,543
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
-------------------
(unaudited)
(in thousands)
As
Actual Adjusted(1)
------- -----------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................. $ 2,150 $29,737
Working capital........................................... 15,145 42,732
Total assets.............................................. 30,317 57,904
Total stockholders' equity................................ 24,725 52,312
</TABLE>
- --------------------
(1) The "As Adjusted" column gives effect to the receipt of the estimated net
proceeds from the sale of 2,025,000 shares of common stock offered by us in
this offering at an assumed public offering price of $14.625 per share,
after deducting underwriting discounts and commissions and estimated
offering expenses payable by us.
6
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could materially harm our business, results of operations and
financial condition and could result in a complete loss of your investment.
We must manage our manufacturing operations to meet changing capacity
requirements.
We currently manufacture all of our products at our Solar Park and Pencader
facilities in Newark, Delaware. Our Solar Park and Pencader facilities each
have solar cell fabrication lines. Our module assembly operation is located at
Pencader, and Silicon-Film(TM) wafers are manufactured at Solar Park. Our
facilities have a combined production capacity of 15 megawatts. We are
currently experiencing manufacturing capacity constraints and are in the
process of expanding our manufacturing capacity at these locations.
We plan to increase our production capacity to approximately 25 megawatts by
the end of the year 2000 and to approximately 75 megawatts over the next four
years by upgrading our equipment, adding selected pieces of new equipment and
improving productivity. We also plan to relocate the Solar Park solar cell
fabrication line to newly leased space at Pencader.
The successful completion of these expansion projects is subject to
significant risks, including the following:
. cost overruns and delays
. timely delivery of equipment
. hiring and training additional employees
. equipment breakdowns
. lower product quality
The failure to achieve increased levels of productivity could materially and
adversely affect our business, results of operations and financial condition.
We are dependent on the acceptance of our Silicon-Film(TM) products in the
solar electric power market.
We believe we can produce our Silicon-Film(TM) solar cells at a lower cost
per watt than other currently available competing solar cell 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. We believe that the
anticipated lower cost per watt of solar cells produced by the Silicon-Film(TM)
process will provide us with cost advantages over current technologies. Our
ability to sell Silicon-Film(TM) products at a lower price per watt than
conventional solar cells and the market acceptance of our Silicon-Film(TM)
products may be affected by:
. our inability to produce Silicon-Film(TM) at projected costs
. a more rapid decline in prices for competing solar cells than is
currently anticipated
. the lower energy conversion efficiency and power of Silicon-Film(TM)
compared to some competing products
. the size, appearance and quality of Silicon-Film(TM) solar cells
. the acceptance of module products and systems assembled by manufacturers
over which we have no control
7
<PAGE>
The failure of our Silicon-Film(TM) products to achieve market acceptance,
price advantage or both could materially and adversely affect our business,
results of operations and financial condition.
We need to effectively manage our growth.
During 1998 and 1999, we grew rapidly, expanding our manufacturing capacity
by a factor of two and a half and nearly doubling our workforce. This growth
has placed and continues to place a strain upon our senior management team and
other resources. We have grown from 163 employees as of December 31, 1997 to
305 employees as of August 31, 1999. We currently plan to further expand our
manufacturing facility in phases. We plan to expand our sales and marketing
organizations in addition to increasing the number of manufacturing employees
and adding to our operating and financial management team. Our ability to
compete effectively and manage future growth, if any, will require us to
continue to implement and improve operational, financial and management
information systems on a timely basis and to attract, hire, train efficiently
and effectively and retain additional technical, managerial, financial, sales
and marketing and support personnel. We are implementing a new financial
accounting system which we expect to be in place by September 30, 1999. Any
failure to implement and improve our operational, financial and management
systems or to attract, hire, train or retain employees could have a material
adverse effect on our business, results of operations and financial condition.
Our success depends on protection of our intellectual property.
The success and competitiveness of our products depend in part upon our
ability to protect our current and future technology and manufacturing
processes through a combination of patent, trademark, trade secret and unfair
competition laws.
Patent applications in the United States are maintained in secrecy until
patents issue, and the publication of discoveries in the scientific literature
tends to lag behind actual discoveries. Therefore, we cannot be certain that we
were the first creator of inventions covered by pending patent applications or
the first to file patent applications on such inventions. Patent applications
filed in foreign countries are subject to laws, rules and procedures which
differ from those of the United States. We cannot ensure the following:
. patents will issue from pending or future applications
. our existing patents or any new patents will be sufficient in scope or
strength to provide meaningful protection or any commercial advantage to
us
. foreign intellectual property laws will protect our intellectual property
. others will not independently develop similar products, duplicate our
products or design around any patents issued to us
We enter into confidentiality and non-disclosure of intellectual property
agreements with our employees, consultants and certain vendors and generally
control access to and distribution of our proprietary information.
Notwithstanding these precautions, it may be possible for a third party to copy
or otherwise obtain and use our proprietary information without authorization
or to develop similar information independently.
Policing unauthorized use of intellectual property is difficult. The laws of
other countries may afford little or no effective protection of our technology.
We cannot assure you that the steps taken by us will prevent misappropriation
of our technology or that agreements entered into for that purpose will be
enforceable. In addition, litigation may be necessary in the future to enforce
our intellectual property rights, to protect our trade secrets and to determine
the validity and scope of the proprietary rights of others. Litigation may
result in substantial costs and diversion of resources, either of which could
have a material and adverse effect on our business, results of operations and
financial condition.
8
<PAGE>
Our industry is highly competitive.
The markets for our products are intensely competitive and characterized by
changing technology. We currently experience competition from numerous
companies in each of the markets in which we participate. Our competition
consists of major electrical, oil and chemical companies, specialized
electronics firms, universities, research institutions in the United States,
Germany, Japan, Australia and other parts of Asia and Europe, and foreign
government-sponsored companies. Many of our competitors are more established,
benefit from greater market recognition and have substantially greater
financial, development, manufacturing and marketing resources than we have.
There are a variety of competing technologies currently under development,
any one of which could achieve manufacturing costs per watt lower than our
Silicon-Film(TM) technology.
We believe the principal competitive factors in the market for solar
electric power components are:
. price per watt
. long-term stability and reliability
. product performance (primarily conversion efficiency)
. ease of handling and installation
. product quality
. reputation
. environmental factors
The growth of the solar electric power market is uncertain.
The market for solar electric power products has grown steadily in the past.
PV Energy Systems, an independent solar energy market research firm, reports
that the shipment volume of solar electric power products has grown at a
compound annual rate of approximately 22% since 1994. Our strategy of
significantly increasing manufacturing capacity is based in part on the
assumption of continuing market growth. In the event that the market for solar
electric power does not experience continuing growth, or that the particular
market segments and geographic sales regions where we sell the majority of our
products do not continue to grow, this factor could have a material adverse
effect on our business, results of operations and financial condition.
We may require additional financing.
We believe that the proceeds of this offering, our cash reserves, other
existing sources of capital, cash generated from operations and existing lines
of credit will be adequate to fund our operations, including the scale up of
production capacity to approximately 25 megawatts by the end of the year 2000
and to approximately 75 megawatts over the next four years. In the event we
accelerate our manufacturing expansion plans we may need to seek additional
financing. Our inability to obtain the necessary capital or financing to fund
future expansions could materially and adversely affect our business, results
of operations and financial condition. Additional financing may not be
available when needed or may not be available on terms acceptable to us. If
additional funds are raised by issuing equity securities, stockholders may
incur dilution. If adequate funds are not available, we may be required to
delay, scale back or eliminate one or more of our development programs or
otherwise limit the development, manufacture or sale of Silicon-Film(TM) solar
cells, which could materially and adversely affect our business, results of
operations and financial condition.
9
<PAGE>
There are risks associated with international sales.
International sales accounted for approximately 78.4% and 73.9% of our
product sales for the year ended December 31, 1998 and the six months ended
June 30, 1999, respectively. We expect that international sales will continue
to represent a significant portion of our product sales. International sales
are subject to a number of risks, including the following:
. changes in foreign government regulations and technical standards
. difficulty of protecting intellectual property
. export license requirements, tariffs, taxes and other trade barriers
. requirements or preferences of foreign nations for domestic products
. fluctuations in currency exchange rates relative to the U.S. dollar
. difficulties in collecting accounts receivable
. extended accounts receivable cycles
. political and economic instability
. potentially adverse tax consequences
We cannot be certain we will be able to maintain our international sales at
current levels. If our international sales were to decline significantly, our
business, results of operations and financial condition could be materially
adversely affected.
We are dependent on a small number of customers.
Historically, it has been our strategy to market our products to a limited
number of significant customers. We have no long-term volume purchase
commitments from any of our significant customers.
Our five largest customers accounted for, in the aggregate, approximately
68.4%, 65.6% and 66.8% of our product sales in 1997, 1998 and for the six
months ended June 30, 1999, respectively. Our product sales accounted for
approximately 78.9%, 87.2% and 89.6% of total revenues in 1997, 1998 and for
the six months ended June 30, 1999, respectively. The remainder of our total
revenues for these periods was derived from government-related research and
development contracts.
We anticipate that sales of our products to a limited number of key
customers will continue to account for a significant portion of our total
revenues. Consequently, any one of the following events may have a material
adverse effect on our business, results of operations and financial condition:
. reduction, delay or cancellation of orders from one or more of our
significant customers
. development by one or more of our significant customers of other sources
of supply
. selection by one or more of our significant customers of devices
manufactured by one of our competitors for inclusion in future product
generations
. loss of one or more of our significant customers or a disruption in our
sales and distribution channels
. failure of one of our significant customers to make timely payment of our
invoices
We cannot be certain that we will retain our current customers, that we will
be able to recruit additional or replacement customers or that our current
customers will make timely payment of our invoices. At June 30, 1999, we had
approximately $1.6 million outstanding for more than 90 days from two
customers. If we were to lose one or more significant customers to a
competitor, our business, results of operations and financial condition could
be materially adversely affected.
10
<PAGE>
The loss of one or more of our customers could adversely affect our business.
Our marketing strategy has been to sell our products primarily to marketing
intermediaries selected to provide access to certain important market segments
and regions around the world. Our customers are generally not end users of our
products but are usually distributors, module assemblers or system integrators
who either resell our products to other customers or package our products into
systems for resale to end users. These marketing intermediaries are not under
our control. Therefore, we have no control over the ability of our customers to
market and sell to end users. In addition, we have no control over the
financial performance of our customers, which may affect the ability of these
customers to purchase and pay for our products.
We cannot be certain that our current customers will continue to place
orders with us, that orders by existing customers will continue at the levels
of previous periods, that existing customers will pay our invoices or that we
will be able to obtain orders from new customers. A disruption in our
relationships with our current customers may have a material adverse effect on
our business, results of operations and financial condition.
We are dependent on the 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 other alternative forms of off-grid
power generation. We estimate 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. We believe that the availability of financing, such as
loans and lease arrangements, could have a significant effect on the rate of
growth of off-grid solar electric power. Our 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 our
business, results of operations and financial condition.
We are dependent on the availability of government subsidies and economic
incentives for on-grid applications.
Approximately 24% of the market for solar electric power is for on-grid
applications, according to PV Energy Systems. Today, the cost of solar electric
power 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 on-grid applications and to reduce
dependency on other forms of energy. On-grid 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. The growth of the
market for solar electric power products depends in part on government programs
for solar electric power subsidies and consumer incentives. Any reduction or
elimination of government subsidies may have a material adverse effect on our
business, results of operations and financial condition.
We are dependent on key suppliers of silicon wafers and other raw materials.
We manufacture all of our products using materials procured from third-party
suppliers. We purchase and recycle silicon wafers from the semiconductor
industry for use in our single crystal solar cell manufacturing process and
have generally been successful in obtaining sufficient quantities of quality
wafers from a variety of sources. Other required raw materials, including
silicon, are available in adequate quantities
11
<PAGE>
from multiple sources, although for economic and quality control reasons we
utilize single sources of supply for certain materials. Increased demand for
silicon wafers and improvements in recycling by the semiconductor industry
could reduce the supply of silicon wafers and increase their cost to us.
If we are unable to obtain a sufficient supply of raw materials from our
current sources, we could experience difficulties in obtaining alternative
sources quickly or in altering product design to use alternative materials.
Resulting delays or reductions in product shipments could damage customer
relationships. Furthermore, a significant increase in the price of one or more
of these materials could have a material adverse effect on our business,
results of operations and financial condition.
We have had prior losses and have an accumulated deficit.
We had marginal net income for each of the years ended December 31, 1994 and
1995 and a net loss of $2.4 million for the year ended December 31, 1996. For
the years ended December 31, 1997 and 1998 and the six months ended June 30,
1999, we realized net income of $652,000, $2.4 million and $731,000,
respectively, and our accumulated deficit at the end of these periods was $4.9
million, $2.5 million and $1.8 million, respectively. Still, we cannot be
certain that we can sustain these growth rates or that we will remain
profitable on a quarterly or annual basis in the future. For more information,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Our future operating results are likely to fluctuate.
Our quarterly and annual operating revenues, expenses and operating results
may fluctuate due to a variety of factors, many of which are beyond our
control, including:
. the timing of orders from, and shipments to, significant customers
. the timing of new product introductions by us or our competitors
. delays in the planned Silicon-Film(TM) manufacturing expansion
. variations in the mix of products sold by us or our competitors
. the timely payment of our invoices
. possible decreases in average selling prices of our products in response
to competitive pressures
. market acceptance of new and enhanced versions of our products
. the availability and cost of key raw materials
. requirements for cost sharing on government contracts
. fluctuations in general economic conditions
. negotiation of final government contract overhead rates
Due to all of the foregoing factors, we do not believe that period-to-period
comparisons of our historical results of operations are indications of future
performance. Furthermore, it is possible that in some future quarters our
results of operations may fall below the expectations of securities analysts
and investors. In such event, the price of our stock on the Nasdaq National
Market will likely be materially and adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for a
more detailed analysis of our period-to-period results.
We may be unable to find appropriate strategic alliances.
We have leveraged, and plan to continue to leverage, our resources in
manufacturing technology, marketing and sales of solar electric power products
through collaborative agreements with corporate partners and customers. Such
strategic alliances may include cooperative agreements for sharing of
12
<PAGE>
information, cooperative marketing agreements, or other business relationships
such as equity investments or joint ventures. We have developed several
strategic alliances to assist in commercializing our Silicon-Film(TM)
technology.
Our current alliances with GPU International and Atersa are intended to
facilitate our entry into the grid-connected supply of bulk quantities of solar
electric power and to expand our relationships with module assemblers
worldwide, respectively.
The terms of such alliances may require us and our partners to share
revenues and expenses from certain activities or for us to grant to our
partners licenses to manufacture, market and sell products based upon our
Silicon-Film(TM) technology. Our current alliances provide for cost sharing and
technology sharing with respect to jointly developed technologies. Such terms
could be part of any future strategic alliance and could materially impact our
business, results of operations and financial condition.
We may be unable to find appropriate future strategic alliances in markets
in which we have little experience, which could prevent us from bringing our
products to these markets in a timely manner, or at all. If we do not enter
into effective alliances, our products may not achieve this significant market
penetration which could materially adversely affect our business, results of
operations and financial condition.
We must keep pace with technological changes.
The markets for our solar electric power products are characterized by
changing technology. While we believe we have developed a new technology for
solar electric power applications, our future success will depend in large part
on our ability to keep pace with advancing solar electric power technology.
In addition to our Silicon-Film(TM) technology, we believe that there are 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 bulk (ingot based), ribbon and
thin film crystalline silicon. Any of these competing technologies could
achieve manufacturing costs less than the manufacturing costs expected to be
achieved by Silicon-Film(TM) products being developed by us. There is the risk
that our development efforts will be rendered obsolete by technological
advances of others or that other materials will prove more advantageous for the
commercialization of solar electric power products. We believe that to remain
competitive in the future, we will need to invest significant financial
resources in research and development. Our failure to develop and introduce new
products in a timely fashion could materially adversely affect our business,
results of operations and financial condition.
Our contracts with federal and state governments subject us to certain risks
including termination and audit.
We intend to continue our policy of selectively pursuing contract research
programs funded by various agencies of the United States government and state
governments to complement and enhance our own resources.
The percentage of our total revenues derived from government-related
contracts was approximately 21.1%, 12.8% and 10.4% for 1997 and 1998 and for
the six months ended June 30, 1999, respectively. Contracts involving the
United States government are subject to various risks, including the risk of
termination at the convenience of the government. To date, the government has
not terminated any of our contracts. Other risks include potential disclosure
of our 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 a 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.
13
<PAGE>
There is no certainty that the United States government will continue its
commitment to programs to which our development projects are applicable or that
we can compete successfully to obtain funding available pursuant to these
programs. A reduction or discontinuance of the government's commitment to these
programs or of our participation in these programs could have a material
adverse effect on our business, results of operations and financial condition.
Substantially all of our revenues from government contracts, including overhead
rates, are subject to audit under various federal statutes.
Although we have received final written acceptance of our overhead rates
through 1993, we have been advised that the Defense Contract Audit Agency is
disputing certain elements of those rates as well as those overhead rates for
1994 and 1995. The dispute is centered on the effect of our manufacturing
operations on our government contract overhead rates during the years of
transition from a contract research and development organization to commercial
manufacturing. The overhead rates for 1996 have been submitted, but have not
yet been audited. We have revised our methodology for determining overhead
rates for 1997 and 1998. We believe that adjustments resulting from restitution
of this dispute, if any, would not have a material adverse effect on our
business and financial condition, but may impact future results of operations.
There are risks associated with our use of hazardous materials.
We use, generate and discharge toxic, volatile or otherwise hazardous
chemicals and wastes in our research and development and manufacturing
activities. Therefore, we are subject to a variety of federal, state and local
government regulations related to the storage, use and disposal of these
materials. Failure to comply with present or future regulations could result in
an imposition of fines on us, suspension of production or a cessation of
operations. We are not aware of any environmental investigation, proceeding or
action by federal or state agencies involving any of our facilities. However,
under certain federal and state statutes and regulations, a government agency
may seek recovery and response costs from both operators and owners of property
where releases of hazardous substances were committed by previous occupants of
the property or have occurred or are ongoing. If we fail to control the use of,
or to restrict adequately the discharge of, hazardous substances, we could be
subject to substantial financial liabilities which could have a material
adverse effect on our business, results of operations and financial condition.
We are dependent on key personnel.
Due to the nature of our business, we are highly dependent on the continued
service of, and on the ability to attract and retain, qualified engineering,
technical, manufacturing, sales, marketing and senior management personnel. The
competition for such personnel is intense. The loss of any key employees or
principal members of management could have a material adverse effect on our
business and operating results. In addition, if we are unable to hire
additional qualified personnel as needed, we may not be able to adequately
manage and implement our plans for expansion and growth. We may not be able to
continue to attract and retain the qualified personnel necessary for the
development of our business.
None of our personnel is covered by an employment contract other than Allen
M. Barnett, our President and Chief Executive Officer, and any other officer or
employee of our company can terminate his or her relationship with us at any
time. None of our employees is subject to non-competition agreements which
would survive termination of employment. We do not have "key person" insurance
coverage for the loss of any of our employees other than a $500,000 insurance
policy on the life of Dr. Barnett.
Our stock price is volatile.
The market for securities of high technology companies, including ours, has
been highly volatile. The market price of our common stock has fluctuated
between $5.875 and $18.50 from February 13, 1998 to
14
<PAGE>
September 8, 1999, and the last sale price was $14.625 on September 8, 1999. It
is likely that the price of our common stock will continue to fluctuate widely
in the future. Factors affecting the trading price of our common stock include:
. responses to quarter-to-quarter variations in operating results
. announcements of technological innovations or new products by us or our
competitors
. failure to meet securities analysts' estimates
. changes in financial estimates by securities analysts
. conditions, trends or announcements in the solar electric power industry
. announcements of significant acquisitions, strategic alliances, joint
ventures or capital commitments by us or our competitors
. additions or departures of key personnel
. sales of common stock
. accounting pronouncements or changes in accounting rules that affect our
financial statements
. other factors and events beyond our control
In addition, the stock market in general, and the market for technology-
related stocks in particular, has experienced extreme volatility that often has
been unrelated to the operating performance of particular companies. These
broad market and industry fluctuations may adversely affect the trading price
of our common stock, regardless of our actual operating performance.
Investors may be unable to resell their shares of our common stock at or
above the offering price. In the past, companies that have experienced
volatility in the market price of their stock have been the object of
securities class action litigation. If we were the subject of securities class
action litigation, it could result in substantial costs, a diversion of
management's attention and resources and a material adverse effect on our
business and financial condition.
We may acquire other companies, product lines or technology.
We may pursue acquisitions that could provide new technologies, products or
businesses. Future acquisitions may involve the use of significant amounts of
cash, potentially dilutive issuances of equity securities, incurrence of debt
or amortization of expenses related to goodwill and other intangible assets.
In addition, acquisitions involve numerous risks, including:
. difficulties in the assimilation of the operations, technologies,
products and personnel of the acquired company
. the diversion of management's attention from other business concerns
. risks of entering markets in which we have no or limited prior experience
. the potential loss of key employees of ours or of the acquired company
We currently have no commitments with respect to any acquisition. In the
event that such an acquisition does occur and we are unable to successfully
integrate businesses, products, technologies or personnel that we acquire, our
business, results of operations and financial condition could be materially
adversely affected.
15
<PAGE>
Our management will have broad discretion over the use of proceeds of the
offering.
We intend to use a significant portion of the net proceeds from the sale of
common stock for the expansion of our manufacturing capacity, the purchase of
components and the development of new products. However, our management will
have the discretion to allocate the net proceeds to uses that stockholders may
not deem desirable. We may not be able to generate a significant return on any
investment of the proceeds.
We face risks relating to the Year 2000 Issues.
"Year 2000 Issues" refer generally to the problems that some software may
have in determining the correct century for the year. For example, software
with date-sensitive functions that is not Year 2000 compliant may not be able
to determine whether "00" means 1900 or 2000, which may result in failures or
the creation of erroneous results.
We have defined Year 2000 compliant as the ability to:
. correctly handle the date information needed for the December 31, 1999 to
January 1, 2000 date change
. function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a new
century, assuming correct configuration
. respond to two-digit date input in a way that resolves the ambiguity as
to century in a disclosed, defined and predetermined manner
. store and provide output of date information in ways that are unambiguous
as to century if the date elements in interfaces and data storage specify
the century
. recognize the year 2000 as a leap year
We have developed and are currently executing a comprehensive risk-based
plan designed to make our computer systems and facilities Year 2000 ready. The
plan covers four stages: (i) inventory, (ii) assessment, (iii) remediation and
(iv) testing and certification. The inventory, assessment and remediation
processes were substantially completed by June 30, 1999. Testing and
certification of these systems and applications are targeted for completion by
September 30, 1999.
If we are unable to achieve Year 2000 compliance for our major systems, the
Year 2000 could have a material adverse impact on our business, results of
operations and financial condition.
We are currently requesting information concerning Year 2000 compliance
status from our customers and suppliers. Our current or future customers and
suppliers may incur significant expenses to achieve Year 2000 compliance. If
our customers are not Year 2000 compliant, they may experience material costs
to remedy problems, and face litigation. Customers may delay purchases of our
products, and suppliers may not be able to provide raw materials. Year 2000
issues could reduce or eliminate the budgets that current or potential
customers could have for purchases of our products and services. As a result,
our business, financial condition and results of operations could be materially
adversely affected.
Certain current stockholders own a large portion of our voting stock.
Following the closing of this offering, our officers, directors and
affiliated entities together will beneficially own approximately 17.3% of our
outstanding common stock (16.7% if the underwriters' over-allotment option is
exercised in full). As a result, these stockholders may be able to
substantially influence all matters requiring stockholder approval and thereby,
our management and affairs. Matters that typically require stockholder approval
include:
. election of directors
16
<PAGE>
. merger or consolidation
. sale of all or substantially all of our assets
This concentration of ownership may delay, deter or prevent acts that would
result in a change of control, which in turn could reduce the market price of
our common stock.
Anti-takeover provisions in our charter documents and Delaware law could
prevent or delay a change in control of our company.
Certain provisions of our amended and restated certificate of incorporation
and by-laws may discourage, delay or prevent a merger or acquisition that
stockholders may consider favorable, which could reduce the market price of our
common stock. Such provisions include:
. authorizing the issuance of "blank check" preferred stock
. providing for a classified board of directors with staggered, three-year
terms
. providing that directors may only be removed for cause by the affirmative
vote of 80% of the stockholders
. limiting the persons who may call special meetings of stockholders
. prohibiting stockholder action by written consent
. establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings
Delaware law may also discourage, delay or prevent someone from acquiring or
merging with us.
You will suffer dilution in the value of your shares.
Investors in this offering will incur immediate and substantial dilution in
the net tangible book value per share of our common stock.
We do not expect to pay cash dividends.
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for use in the operation and
expansion of our business. The terms of our bank debt agreements prohibit us
from paying cash dividends without the consent of the lender. Therefore, we do
not expect to pay any cash dividends in the foreseeable future.
17
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties, which may include statements about our:
. business strategy
. expansion of our manufacturing capabilities
. plans for hiring additional personnel
. plans for entering into collaborative agreements
. anticipated sources of funds, including the proceeds from this offering,
to fund our operations for the four years following the date of this
prospectus
. plans, objectives, expectations and intentions contained in this
prospectus that are not historical facts
When used in this prospectus, the words "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates" and similar expressions are generally
intended to identify forward-looking statements. Because these forward-looking
statements involve risks and uncertainties, actual results could differ
materially from those expressed or implied by these forward-looking statements
for a number of reasons, including those discussed under "Risk Factors" and
elsewhere in this prospectus. We assume no obligation to update any forward-
looking statements.
18
<PAGE>
HOW WE INTEND TO USE THE PROCEEDS FROM THIS OFFERING
We estimate that we will receive net proceeds of $27.6 million from the sale
of the 2,025,000 shares of common stock offered by us at an assumed public
offering price of $14.625 per share, after deducting the underwriting discounts
and commissions and estimated offering expenses payable by us. Our estimated
net proceeds will be $33.3 million if the underwriters exercise their option to
purchase additional shares from us in this offering. We will not receive any
proceeds from the sale of shares of common stock by the selling stockholders.
We currently intend to use approximately $19.0 million of the net proceeds
of the offering for the expansion of manufacturing capacity, including the
purchase of equipment, fit-up costs and training expenses. We intend to use the
remaining net proceeds from this offering for working capital and other general
corporate purposes. In addition, in the ordinary course of business we may
evaluate potential acquisitions of, or joint ventures with, complementary
businesses, products and technologies. Although we have no current commitments
or agreements with respect to any acquisition, other than our agreements with
GPU International and Atersa, we might in the future use a portion of the
remaining proceeds to pay for acquisitions.
Pending these uses, the net proceeds of this offering will be invested in
short-term, investment-grade, interest-bearing investments or accounts.
The amount we actually spend for these purposes may vary significantly and
will depend on a number of factors, including future revenue and cash generated
by operations and the other factors described under "Risk Factors." Therefore,
we will have broad discretion in the way we use the net proceeds.
PRICE RANGE OF COMMON STOCK
Our common stock began trading on the Nasdaq National Market on February 13,
1998 under the symbol "APWR." The following table sets forth for the indicated
periods, the high and low sales prices per share of our common stock as
reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
1998
First Quarter (from February 13, 1998)......................... $10.88 $ 6.00
Second Quarter................................................. 10.25 7.63
Third Quarter.................................................. 9.75 6.13
Fourth Quarter................................................. 9.88 5.88
1999
First Quarter.................................................. $14.25 $ 8.50
Second Quarter................................................. 18.50 10.88
Third Quarter (through September 8, 1999)...................... 17.25 12.88
</TABLE>
On September 8, 1999, the last reported sale price of our common stock on
the Nasdaq National Market was $14.625 per share. As of June 30, 1999, there
were approximately 322 stockholders of record of our common stock.
19
<PAGE>
DIVIDEND POLICY
We have never declared nor paid any cash dividends on shares of our stock,
and we do not anticipate that we will do so in the foreseeable future. We
currently intend to retain future earnings, if any, to finance our growth and
do not anticipate paying any cash dividends in the foreseeable future. The
terms of our bank debt agreements prohibit us from paying cash dividends
without the consent of the lender.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
. on an actual basis
. as adjusted to give effect to the receipt of the estimated net proceeds
from the sale of 2,025,000 shares of common stock in this offering at an
assumed public offering price of $14.625 per share after deducting
underwriting discounts and commissions and estimated offering expenses
payable by us.
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of June 30, 1999 and does not
include the following:
. 2,182,473 shares of common stock subject to options at a weighted
average exercise price of $7.60 per share granted under our 1989 and
1999 Stock Option Plans and 1998 Directors Stock Option Plan
. 260,012 shares of common stock reserved for issuance under our 1989 and
1999 Stock Option Plans and 1998 Directors Stock Option Plan
This information is qualified by, and should be read in conjunction with,
our financial statements and the notes thereto included in this prospectus.
<TABLE>
<CAPTION>
June 30, 1999
--------------------
($ in thousands)
Actual As Adjusted
------- -----------
<S> <C> <C>
Long-term debt............................................ $ -- $ --
------- -------
Stockholders' equity:
Preferred stock, $0.01 par value: 5,000,000 shares
authorized; none issued;............................... -- --
Common stock, $0.01 par value: 25,000,000 shares
authorized; 8,716,871 shares issued and outstanding,
actual; 10,741,871 shares issued and outstanding, as
adjusted............................................... 87 107
Additional paid-in capital.............................. 26,637 54,204
Unearned compensation................................... (197) (197)
Accumulated deficit..................................... (1,802) (1,802)
------- -------
Total stockholders' equity.............................. 24,725 52,312
------- -------
Total capitalization.................................. $24,725 $52,312
======= =======
</TABLE>
20
<PAGE>
SELECTED FINANCIAL DATA
The following summary financial information should be read in conjunction
with our financial statements and their related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this prospectus. The statement of operations data for the years
ended December 31, 1996, 1997 and 1998 and the balance sheet data as of
December 31, 1997 and 1998 are derived from, and are qualified by reference to
the audited financial statements included in this prospectus. The statement of
operations data for the years ended December 31, 1994 and 1995 and the balance
sheet data as of December 31, 1994, 1995 and 1996 have been derived from
audited financial statements not included in this prospectus. The statement of
operations data for the six month periods ended June 30, 1998 and 1999 and the
balance sheet data at June 30, 1999 are derived from, and qualified by
reference to, our unaudited interim financial statements included in this
prospectus.
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
---------------------------------------- ----------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------- ------- ------- ------- -------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Product sales.......... $3,434 $5,356 $ 6,237 $13,095 $20,206 $ 8,895 $13,550
Research contracts..... 3,676 4,589 4,346 3,512 2,953 1,421 1,579
------ ------ ------- ------- ------- ------- -------
Total revenues........ 7,110 9,945 10,583 16,607 23,159 10,316 15,129
Cost of revenues:
Product sales.......... 2,954 4,483 6,896 9,311 14,942 6,531 9,973
Research contracts..... 2,299 3,029 2,580 2,540 2,297 1,138 1,137
------ ------ ------- ------- ------- ------- -------
Total cost of
revenues............. 5,253 7,512 9,476 11,851 17,239 7,669 11,110
------ ------ ------- ------- ------- ------- -------
Gross profit.......... 1,857 2,433 1,107 4,756 5,920 2,647 4,019
Operating expenses:
Product development
expenses.............. 220 314 776 1,007 1,392 609 1,046
General and
administrative
expenses.............. 1,172 1,469 1,859 1,972 2,496 1,184 1,393
Selling expenses....... 377 444 660 854 951 451 593
------ ------ ------- ------- ------- ------- -------
Total operating
expenses............. 1,769 2,227 3,295 3,833 4,839 2,244 3,032
------ ------ ------- ------- ------- ------- -------
Income (loss) from
operations........... 88 206 (2,188) 923 1,081 403 987
Other expense (income):
Interest expense....... 42 115 169 369 252 197 1
Other expense
(income).............. 29 (7) 6 (118) (598) (339) (58)
------ ------ ------- ------- ------- ------- -------
Income (loss) before
income taxes.......... 17 98 (2,363) 672 1427 545 1,044
Income tax expense
(benefit)............. -- -- -- 20 (985) 25 313
------ ------ ------- ------- ------- ------- -------
Net income (loss)...... $ 17 $ 98 $(2,363) $ 652 $ 2,412 $ 520 $ 731
====== ====== ======= ======= ======= ======= =======
Net income (loss) per
share--basic.......... $ 0.01 $ 0.03 $ (0.64) $ 0.18 $ 0.30 $ 0.07 $ 0.09
Net income (loss) per
share--diluted........ $ 0.01 $ 0.02 $ (0.64) $ 0.13 $ 0.28 $ 0.07 $ 0.08
Weighted average shares
outstanding--basic.... 3,673 3,697 3,700 3,710 7,956 7,336 8,640
Weighted average shares
outstanding--diluted.. 5,356 5,362 3,700 6,220 9,572 7,336 9,543
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------- June 30,
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents........... $ 77 $ 29 $ 25 $ 4,908 $ 6,545 $ 2,150
Working capital
(deficiency).......... 1,309 1,420 (970) 5,608 14,839 15,145
Total assets........... 7,148 8,615 7,887 15,115 28,366 30,317
Total debt............. 514 1,463 1,483 6,593 -- --
Total stockholders'
equity (deficit)...... (1,308) (1,077) (2,860) (2,039) 23,263 24,725
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with our financial
statements and the related notes appearing at the end of this prospectus. Our
discussion contains forward-looking statements based upon current expectations
that involve risks and uncertainties, such as our plans, objectives,
expectations and intentions. Actual results and the timing of events could
differ materially from those anticipated in these forward-looking statements as
a result of a number of factors, including those set forth under "Risk
Factors," "Business" and elsewhere in this prospectus.
Overview
We develop, manufacture, market and sell a range of solar electric power
products, including solar cells, modules and panels, for the global
marketplace. Solar cells are semiconductor devices which convert sunlight into
electricity and form the building block for all solar electric power products.
Our products are used to generate electricity for users not connected to the
utility grid. Such applications include electrification of rural homes and
villages, and power supply for equipment in the communications and
transportation industries. Our products are also used by customers already
connected to the utility grid as a clean, renewable source of alternative or
supplemental electricity. Additionally, we are expanding our joint venture
agreement with GPU International to generate and sell wholesale solar electric
power.
We currently generate product revenues from the sale of solar cells,
modules, and panels. Although we are continuing a significant expansion of our
Silicon-Film(TM) manufacturing capacity, the predominant source of our product
revenues to date has been recycled wafer products. We recognize product sales
revenue 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 semiconductor industry, and other factors. Product sales
represented 89.6% of total revenues for the six months ended June 30, 1999 and
87.2% of total revenues for the year ended December 31, 1998. In addition, we
also generate revenue from contracts with various federal government agencies
to conduct research on advanced Silicon-Film(TM) products and optoelectronic
devices. Generally, these contracts last from six months to three years. We
recognize research contract revenue at the time costs benefiting the contracts
are incurred, which approximates the percentage of completion method.
Solar cells that we manufacture are sold to original equipment manufacturers
that assemble the solar cells into modules. Additionally, we assemble and sell
modules to distributors and value-added resellers. The sale of a module results
in substantially more revenue to us than the sale of solar cells due to the
value of the additional materials, labor and overhead added during the module
assembly process. Accordingly, our 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. The gross margin percentages for modules are generally
less than those of solar cells and as a result, changes in the mix of solar
cells and modules sold may affect total product gross margin.
For the six months ended June 30, 1999, approximately 73.9% of our product
revenues was generated by sales to customers located outside the United States.
We believe that international sales will continue to account for a significant
portion of our 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 our results of operations.
Substantially all of our revenues from government contracts are subject to
audit under various federal statutes. Although we have received final written
acceptance of our overhead rates through 1993, the Defense Contract Audit
Agency is now disputing certain elements of those submissions as well as the
overhead rates for 1994 and 1995. The dispute is centered on the effect of our
manufacturing operations on
22
<PAGE>
our government contract overhead rates during the years of transition from a
contract research and development organization to commercial manufacturing. The
overhead rates for 1996 have been submitted, but have not yet been audited.
This dispute does not affect our overhead rates for 1997, 1998 and 1999,
inasmuch as we revised our methodology for determining overhead rates. We
believe that adjustments to revenue, if any, will not have a material adverse
effect on our business and financial condition, but may impact results of
operations.
We have joint ventures with GPU International and Atersa, and we intend to
seek additional joint ventures with other parties. The terms of these joint
ventures may not permit us to consolidate the financial results of the ventures
with our financial statements. In these circumstances, we will record our
proportionate share of the earnings or loss of the venture using the equity
method of accounting and will present such earnings or loss as a separate
component of our statement of income.
Results of Operations
The following table sets forth selected financial data as a percentage of
total revenues for the periods indicated:
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31, June 30,
-------------------- ------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales............................. 58.9% 78.9% 87.2% 86.2% 89.6%
Research contracts........................ 41.1 21.1 12.8 13.8 10.4
----- ----- ----- ----- -----
Total revenues.......................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of revenues:
Product sales............................. 65.1 56.1 64.5 63.3 65.9
Research contracts........................ 24.4 15.3 9.9 11.0 7.5
----- ----- ----- ----- -----
Total cost of revenues.................. 89.5 71.4 74.4 74.3 73.4
----- ----- ----- ----- -----
Gross profit............................ 10.5 28.6 25.6 25.7 26.6
Operating expenses:
Product development expenses.............. 7.3 6.1 6.0 5.9 6.9
General and administrative expenses....... 17.7 11.9 10.8 11.5 9.2
Selling expenses.......................... 6.2 5.1 4.1 4.4 3.9
----- ----- ----- ----- -----
Total operating expenses................ 31.2 23.1 20.9 21.8 20.0
----- ----- ----- ----- -----
Income (loss) from operations........... (20.7) 5.5 4.7 3.9 6.6
Other expense (income)...................... 1.6 1.5 (1.5) (1.4) (0.3)
----- ----- ----- ----- -----
Income (loss) before income taxes........... (22.3) 4.0 6.2 5.3 6.9
Income tax expense (benefit)................ -- 0.1 (4.2) 0.2 2.1
----- ----- ----- ----- -----
Net income (loss)........................... (22.3)% 3.9% 10.4% 5.1% 4.8%
===== ===== ===== ===== =====
</TABLE>
Comparison of Six Months Ended June 30, 1998 and 1999
Revenues. Our total revenues were $15.1 million for the six months ended
June 30, 1999, an increase of $4.8 million, or 46.7%, from the same period in
1998. Product sales were $13.6 million for the six months ended June 30, 1999,
an increase of $4.7 million, or 52.3%, from the same period in 1998. Our
increase in product sales was due to ongoing strong demand for our products and
improvements in manufacturing productivity and increases in capacity at both
our manufacturing plants. Contract revenues were $1.6 million for the six
months ended June 30, 1999, an increase of $158,000, or 11.1%, from the same
period in 1998. The increase is a result of incremental funding in the first
quarter of 1999 on our government contracts for the development of Silicon-
Film(TM).
23
<PAGE>
Gross profit. Our gross profit was $4.0 million for the six months ended
June 30, 1999, an increase of $1.4 million, or 51.8%, from the same period in
1998. Gross profit on product revenues for the six months ended June 30, 1999
was $3.6 million, an increase of $1.2 million, or 51.3%, from the same period
in 1998. Our gross margin on product revenues was 26.4% for the six months
ended June 30, 1999. In the similar 1998 period, the gross margin on product
revenues was 26.6%. Our 1999 gross margin on product revenues was affected in
the first quarter as a result of manufacturing productivity issues that arose
in the fourth quarter of 1998 and continued into 1999. The 1998 gross margin on
product revenues was affected by startup costs pertaining to our second
manufacturing facility. Our gross profit on research contracts for the six
months ended June 30, 1999 was $442,000, an increase of $159,000, or 56.1%,
from the same period in 1998. Our increase in gross profit on research
contracts was due to the higher level of funding on the government contracts
and to higher effective government contract overhead rates.
Product development expenses. Our product development expenses for the six
months ended June 30, 1999 were $1.0 million, up $437,000, or 71.8%, from the
same period in 1998. The increase is due to a higher level of development
activity due in part to the incremental government funding in the first quarter
of 1999 and the contribution of our resources to supplement this funding in the
six months ended June 30, 1999.
General and administrative expenses. Our general and administrative expenses
for the six months ended June 30, 1999 were $1.4 million, an increase of
$209,000, or 17.6%, from the similar 1998 period. The increase is primarily due
to higher levels of salaries as a result of additional positions to support our
growth, professional fees and insurance expenses, offset by a reduced level of
employee bonus expense. Certain of these increased expenses were incurred as a
result of our transition to being a public company through the initial public
offering of our common stock, which was completed in February 1998.
Selling expenses. Our selling expenses for the six months ended June 30,
1999 were $593,000, an increase of $142,000, or 31.5%, from the similar 1998
period. The increase is due to higher salary costs as a result of additions to
the sales and marketing staff, and higher travel costs, offset by a lower level
of employee bonus expense.
Interest expense. Our interest expense for the six months ended June 30,
1999 was $1,000, as compared with $198,000 in the similar 1998 period. The
decline is due to the paydown of debt in 1998.
Interest income. Our interest income for the six months ended June 30, 1999
was $58,000, as compared with $338,000 in the similar 1998 period. The
reduction was due to lower cash balances available for investment, as a result
of the use of cash for the funding of working capital, capital equipment, debt
reduction and the purchase of the assignment of wafer supply contracts
discussed in "Liquidity and Capital Resources" below.
Income taxes. Income taxes for the six months ended June 30, 1999 were
$313,000, as compared with $25,000 in the similar 1998 period. Our 1998 tax
provision was limited to alternative minimum tax. In the fourth quarter of
1998, we eliminated the valuation allowance pertaining to the remaining net
operating loss carryforward. As a result, our effective tax rate in 1999 has
increased to 30% from 4.6% in the similar 1998 period.
Comparison of Years Ended December 31, 1997 and 1988
Revenues. Our total revenues for the year ended December 31, 1998 were $23.2
million, an increase of $6.6 million, or 39.5%, from $16.6 million for the year
ended December 31, 1997. Product sales for the year ended December 31, 1998
were $20.2 million, an increase of $7.1 million, or 54.3%, from $13.1 million
for the year ended December 31, 1997. Our increase in product sales was due to
increased levels of production from the addition of a second manufacturing
facility in the first half of 1998 as well as improvements in manufacturing
technology and manufacturing productivity, allowing us to satisfy a greater
percentage of backlog orders. Research contract revenue for the year ended
December 31, 1998 was $3.0
24
<PAGE>
million, a decline of $559,000, or 15.9%, from $3.5 million for the year ended
December 31, 1997. The decline in research contract revenue, which was
expected, was primarily attributable to continued reduction of our contract
overhead rates as a result of the ongoing transformation from a government
contractor to a manufacturing company.
Gross profit. Our gross profit for the year ended December 31, 1998 was $5.9
million, an increase of $1.2 million, or 24.5%, from $4.8 million for the year
ended December 31, 1997. Gross profit on product revenues for the year ended
December 31, 1998 was $5.3 million, an increase of $1.5 million, or 39.5%, from
$3.8 million for the year ended December 31, 1997. Gross profit margin on
product revenues for the year ended December 31, 1998 was 26.1%, as compared to
28.9% for the year ended December 31, 1997. The change in product gross margin
was affected by our expansion into a second manufacturing facility. During the
first half of 1998, we incurred start-up costs such as the hiring and training
of new employees and facility operating costs, but generated little revenue to
offset such costs. In the second half of 1998, the quantities of product
manufacturing increased and generated revenues, but the gross margins remained
below those of our other manufacturing facility. We expect further improvement
in our product gross margins in 1999 as the production levels in the Solar Park
facility continue to increase. Product gross margins in the fourth quarter were
also affected by disruptions to the manufacturing process caused by the
installation of new manufacturing equipment, the qualification of new vendors
and the large numbers of new employees required to be hired and trained. These
issues are expected to continue to negatively affect our financial results for
the first half of 1999.
Gross profit on research contract revenues for the year ended December 31,
1998 was $656,000, a decrease of $316,000, or 32.5%, from $972,000 for the year
ended December 31, 1997. Gross profit margin on research contracts revenue for
the year ended December 31, 1998 was 22.2% as compared to 27.7% for the year
ended December 31, 1997. The decrease in gross profit and gross profit margin
was attributable to a reduction in our contract overhead rates as a result of
our ongoing transition to a manufacturing company, which reduces the amount of
overhead expenses that we previously allocated and billed to government
contracts.
Product development expenses. Our product development expenses for the year
ended December 31, 1998 were $1.4 million, an increase of $385,000, or 38.3%,
from $1.0 million for the year ended December 31, 1997. The increase in product
development expenses was attributable to increased levels of engineering and
manufacturing support dedicated to the development of our Silicon-Film(TM)
production process.
General and administrative expenses. Our general and administrative expenses
for the year ended December 31, 1998 were $2.5 million, an increase of
$524,000, or 26.6%, from $2.0 million in 1997. The increase was due to
increased salary expense due to additional positions to support our growth and
the costs of being a public company (legal and accounting fees, liability
insurance, printing, stockholders communications) but were offset by a lower
level of bonuses.
Selling expenses. Our selling expenses for the year ended December 31, 1998
were $951,000, an increase of $97,000, or 11.4%, from $854,000 for the year
ended December 31, 1997. The increase in selling expenses was due to increased
salary, advertising and travel expenses offset by the elimination of sales
commissions paid to third parties.
Interest expense. Interest expense for the year ended December 31, 1998 was
$252,000, a decrease of $117,000, or 31.7%, from $369,000 for the year ended
December 31, 1997. The decline in interest expense was attributable to a
reduction in our level of indebtedness, including the repayment of bank debt in
March 1998 and the repayment of the $5.0 million convertible promissory note in
October 1998.
Interest income. Interest income, principally net interest income, for the
year ended December 31, 1998 was $599,000, as compared with interest income of
$114,000 for the year ended December 31, 1997. The increase was attributable to
increased cash balances and related levels of interest income as a result of
the proceeds of our initial public offering.
25
<PAGE>
Income taxes. We recorded an income tax benefit of $985,000 for the year
ended December 31, 1998, as compared with an expense of $20,000 for the year
ended December 31, 1997. The 1998 benefit represents the change in the
valuation allowance pertaining to our net operating loss carry forwards. The
1997 expense represents our alternative minimum tax liability.
Comparison of Years Ended December 31, 1996 and 1997
Revenues. Total revenues for the year ended December 31, 1997 were $16.6
million, an increase of $6.0 million, or 56.9%, from $10.6 million for the year
ended December 31, 1996. Product sales for the year ended December 31, 1997
were $13.1 million, an increase of $6.9 million, or 109.9%, from $6.2 million
for the year ended December 31, 1996. The increase in product sales was
attributable to increased levels of production as a result of improvements in
manufacturing technology and manufacturing productivity, allowing us to satisfy
a greater percentage of backlog orders. Research contract revenue for the year
ended December 31, 1997 was $3.5 million, a decline of $834,000, or 19.2%, from
$4.3 million for the year ended December 31, 1996. The decline in research
contract revenue was primarily attributable to a reduction in our contract
overhead rates as a result of the ongoing transformation from a government
contractor to a manufacturing company.
Gross profit. Gross profit for the year ended December 31, 1997 was $4.8
million, an increase of $3.6 million, or 330%, from $1.1 million for the year
ended December 31, 1996. Gross profit on product revenues for the year ended
December 31, 1997 was $3.8 million, an increase of $4.4 million from negative
gross profit of $659,000 for the year ended December 31, 1996. Gross profit
margin on product revenues for the year ended December 31, 1997 was 28.9%, as
compared to (10.6%) for the year ended December 31, 1996. During 1996 we
significantly increased our staffing and overhead in our manufacturing
operation but did not experience a proportionate increase in manufacturing
output. For several months, our manufacturing costs exceeded the revenues
generated from the sales of such products. In addition, during the year ended
December 31, 1996, we reevaluated our ability to process certain of the silicon
wafers in our inventory, and determined that a downward adjustment in their
carrying value of $220,000 was appropriate. During 1997, we began to realize
the benefits of the costs incurred in 1996, as production capacity and output
increased significantly. As a result, we were able to realize the significant
increases in revenue noted above without a commensurate increase in costs.
Gross profit on research contract revenues for the year ended December 31, 1997
was $972,000, a decrease of $794,000, or 44.1%, from $1.8 million for the year
ended December 31, 1996. Gross profit margin on research contracts revenue for
the year ended December 31, 1997 was 27.7% as compared to 40.6% for the year
ended December 31, 1996. The decrease in gross profit and gross profit margin
was attributable to a reduction in our contract overhead rates as a result of
the ongoing transition to a manufacturing company, which reduces the amount of
overhead expenses that were previously allocated to government contracts.
Product development expenses. Our product development expenses for the year
ended December 31, 1997 were $1.0 million, an increase of $231,000, or 29.8%,
from $776,000 for the year ended December 31, 1996. The increase in product
development expenses was attributable to increased levels of engineering and
manufacturing support dedicated to the acceleration of Silicon-Film(TM)
production.
General and administrative expenses. Our general and administrative expenses
for the year ended December 31, 1997 were $2.0 million, an increase of
$113,000, or 6.1%, from $1.9 million in 1996. Reduced personnel expenses and a
reduction in the provision for bad debt expense were offset by an increase in
employee benefit costs due to increased company contributions to employee
retirement and bonus plans and increased compensation expense of stock options.
Selling expenses. Our selling expenses for the year ended December 31, 1997
were $854,000, an increase of $194,000, or 29.3%, from $660,000 for the year
ended December 31, 1996. The increase in selling expenses was due to increased
salary and benefit expenses to employees as well as increased sales commissions
paid to third-parties, reflecting a higher level of sales to certain customers.
26
<PAGE>
Interest expense. Interest expense for the year ended December 31, 1997 was
$369,000, an increase of $200,000, or 118.8%, from $169,000 for the year ended
December 31, 1996. The increase in interest expenses was attributable to higher
levels of debt outstanding as well as higher interest rates provided for in the
forbearance agreements with our primary lender. The increased debt levels
resulted from our issuance of the $5.0 million promissory note to Corning, as
well as a $1.0 million advance from a customer.
Other income. Other income for the year ended December 31, 1997 was
$118,000, as compared with expense of $6,000 for the year ended December 31,
1996. The increase in other income was due 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 year ended December 31, 1997 was
$20,000, as compared with $0 for the year ended December 31, 1996. The 1997
expense represents our alternative minimum tax liability.
Selected Quarterly Operating Results
The following table presents certain historical statement of operations data
for our six most recent quarters ended June 30, 1999. Actual results of
operations data are presented for all periods. In management's opinion, this
unaudited information has been prepared on the same basis as the audited annual
financial statements and includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the unaudited
information for the quarters presented. You should read this information in
conjunction with the financial statements, including the notes thereto,
included elsewhere in this prospectus. The results of operations for any
quarter are not necessarily indicative of results that we might achieve for any
subsequent periods.
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------
Sep Jun
Mar 31, Jun 30, 30, Dec 31, Mar 31, 30,
1998 1998 1998 1998 1999 1999
------- ------- ------ ------- ------- ------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales................ $4,224 $4,671 $5,248 $6,063 $6,301 $7,250
Research contracts........... 705 716 911 621 838 740
------ ------ ------ ------ ------ ------
Total revenues............. 4,929 5,387 6,159 6,684 7,139 7,990
Cost of revenues:
Product sales................ 3,052 3,478 3,836 4,576 4,687 5,286
Research contracts........... 556 582 696 463 615 522
------ ------ ------ ------ ------ ------
Total cost of revenues..... 3,608 4,060 4,532 5,039 5,302 5,808
------ ------ ------ ------ ------ ------
Gross profit............... 1,321 1,327 1,627 1,645 1,837 2,182
Operating expenses:
Product development
expenses.................... 310 299 341 442 556 489
General and administrative
expenses.................... 520 664 692 620 654 739
Selling expenses............. 186 266 277 223 260 334
------ ------ ------ ------ ------ ------
Total operating expenses... 1,016 1,229 1,310 1,285 1,470 1,562
------ ------ ------ ------ ------ ------
Income from operations..... 305 98 317 360 367 620
Other expense (income):
Interest expense............. 114 83 86 -- -- --
Interest income.............. (135) (203) (181) (111) (42) (16)
------ ------ ------ ------ ------ ------
Income before income taxes..... 326 218 412 471 409 636
Income tax expense (benefit)... 15 10 19 (1,029) 123 191
------ ------ ------ ------ ------ ------
Net income..................... $ 311 $ 208 $ 393 $1,500 $ 286 $ 445
====== ====== ====== ====== ====== ======
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Percentage of Total Revenues
-----------------------------------------------
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30,
1998 1998 1998 1998 1999 1999
------- ------- ------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales................ 85.7% 86.7% 85.2% 90.7% 88.3% 90.7%
Research contracts........... 14.3 13.3 14.8 9.3 11.7 9.3
----- ----- ----- ----- ----- -----
Total revenues............. 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- -----
Cost of revenues:
Product sales................ 61.9 64.6 62.3 68.5 65.7 66.2
Research contracts........... 11.3 10.8 11.3 6.9 8.6 6.5
----- ----- ----- ----- ----- -----
Total cost of revenues..... 73.2 75.4 73.6 75.4 74.3 72.7
----- ----- ----- ----- ----- -----
Gross profit............... 26.8 24.6 26.4 24.6 25.7 27.3
Operating expenses:
Product development
expenses.................... 6.3 5.6 5.5 6.6 7.8 6.1
General and administrative
expenses.................... 10.5 12.3 11.2 9.3 9.2 9.2
Selling expenses............. 3.8 4.9 4.5 3.3 3.6 4.2
----- ----- ----- ----- ----- -----
Total operating expenses .. 20.6 22.8 21.3 19.2 20.6 19.5
----- ----- ----- ----- ----- -----
Income from operations..... 6.2 1.8 5.2 5.4 5.1 7.8
Other expense (income):
Interest expense............. 2.3 1.5 1.4 -- -- --
Interest income.............. (2.7) (3.8) (2.9) (1.6) (0.6) (0.2)
----- ----- ----- ----- ----- -----
Income before income taxes..... 6.6 4.1 6.7 7.0 5.7 8.0
Income tax expense (benefit)... 0.3 0.2 0.3 (15.4) 1.7 2.4
----- ----- ----- ----- ----- -----
Net income .................... 6.3% 3.9% 6.4% 22.4% 4.0% 5.6%
===== ===== ===== ===== ===== =====
</TABLE>
We believe that period to period comparisons of our operating results will
not necessarily be meaningful, and you should not rely on them as an indication
of future performance. It is possible that in some future periods our operating
results may be below the expectations of public market analysts and investors.
In such event, the trading price of our common stock may decline.
Liquidity and Capital Resources
At June 30, 1999, we had cash of $2.1 million, as compared with $6.5 million
at December 31, 1998 and $4.9 million at the end of 1997. Cash used in
operating activities of $3.6 million for the six months ended June 30, 1999 was
due to increases in accounts receivable and inventory balances and to payments
totaling $700,000 for the assignment to us of wafer supply contracts. We will
be making additional payments for these contracts totaling $200,000 over the
remainder of 1999. We purchased the assignment of these contracts in order to
have more direct access to the wafer manufacturers, which has given us better
control over incoming wafers. Cash used in operating activities of $3.1 million
for the year ended December 31, 1998 was due principally to increases in
accounts receivable and inventory.
Cash used by investing activities of $1.5 million for the six months ended
June 30, 1999 related to our capital equipment expenditures to increase our
manufacturing capacity. Total 1999 expenditures are expected to total
approximately $2.5 million. In 1998, cash used in investing activities was $5.5
million and principally was due to capital expenditures relating to the fit-up
of our Pencader plant.
Net cash provided from financing activities of $682,000 for the six months
ended June 30, 1999 was due to proceeds from the exercise of stock options. For
1998, net cash provided from financing activities was $10.2 million, and was
principally comprised of $16.6 million in proceeds from our initial public
offering and reduction in debt balances of $6.6 million.
28
<PAGE>
Our sources of liquidity as of June 30, 1999 consist principally of cash of
$2.1 million, and available bank credit lines of $4 million. Any borrowings
under our bank facilities will be secured by accounts receivable, inventory and
machinery and equipment.
We expect that the proceeds of this offering, our available cash balance,
projected cash generated from operations and available bank credit lines will
be sufficient to fund our activities over the next four years.
Income Taxes
Net operating loss carryforwards totaling approximately $4.1 million are
available through 2012 to reduce federal and state taxable income as of
December 31, 1998. During 1998 we made the determination that it is more likely
than not that the tax benefit of the net operating loss carryforwards will be
realized and accordingly eliminated the valuation allowance for financing
reporting purposes.
Impact of Recently Issued Accounting Standards
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS
133). SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. The statement is not
expected to affect us because we do not hold any derivative instruments or
conduct any hedging activities.
In June 1999, the FASB issued Statement of Financial Accounting Standards
No. 137, Accounting for Derivative Instruments and Hedging Activities--Deferral
of the effective date of FASB Statement No. 133 (SFAS 137). SFAS 137 delays the
implementation of SFAS No. 133 until the year 2001.
Year 2000 Readiness
Our current data processing systems and certain embedded processing systems
are not Year 2000 compliant. We have developed and are currently executing a
comprehensive risk-based plan designed to make our computer systems, those
certain embedded processing systems, applications and facilities Year 2000
ready. Our plan covers four stages including (i) inventory, (ii) assessment,
(iii) remediation and (iv) testing and certification. At year end 1997, we had
substantially completed the inventory stage for our owned systems and
applications. The assessment and remediation processes are currently underway
and we are utilizing both internal and external resources to reprogram, or
replace where necessary, and test the software for Year 2000 modifications. The
remediation process has been largely completed by June 30, 1999. Testing and
certification of these systems and applications are targeted for completion by
September 30, 1999.
Our ongoing transformation from a government research and development
organization to a manufacturing company has necessitated system enhancements to
accommodate this growth. We are therefore addressing the Year 2000 issue
through these planned system augmentations. Total Year 2000 costs for our owned
systems and applications were approximately $250,000 in 1998 and currently
estimated to be approximately $250,000 in 1999, which we expect to fund through
operating cash flows. A majority of these costs are currently believed to be
incremental costs that will not recur in the Year 2000 or thereafter.
We are initiating communications with our critical third-party
relationships, consisting of both customers and suppliers, to determine the
extent to which we may be vulnerable to such parties' failure to resolve their
own Year 2000 issues. Where practicable, we will assess and attempt to mitigate
our risks with respect to the failure of these entities to be Year 2000 ready
through the development of appropriate contingency plans. The effect, if any,
on our results of operations from the failure of any of these parties to be
Year 2000 ready, is not presently reasonably estimable.
Effects of Inflation and Exchange Rates
We have not been materially affected by inflation or changes in foreign
exchange rates. We have agreed to enter into a joint venture with Atersa. Since
the financial statements of the joint venture will be denominated in a foreign
currency, we may be affected by foreign exchange rates in the future.
29
<PAGE>
BUSINESS
Overview
We develop, manufacture, market and sell a range of solar electric power
products, including solar cells, modules and panels, for the global
marketplace. Solar cells are semiconductor devices which convert sunlight into
electricity and form the building block for all solar electric power products.
Historically, our products have been used to generate electricity for users not
connected to the utility grid. Such applications include electrification of
rural homes and villages, and power supply for equipment in the communications
and transportation industries. More recently, our products are also being used
by customers already connected to the utility grid as a clean, renewable source
of alternative or supplemental electricity. We are expanding our joint venture
agreement with GPU International, Inc. to generate and sell wholesale solar
electric power.
The electricity industries in the United States, Europe and Japan are
currently experiencing significant structural change. Industry deregulation is
promoting customer choice of electric power provider and introducing retail
competition. Additionally, while Europe and Japan have traditionally supported
clean, renewable energy policies, state governments in the United States are
now introducing legislation and implementing various economic incentives to
stimulate the use of renewable sources of electricity, including solar power.
We believe increased retail competition and the introduction of various
economic incentives in domestic and international markets will continue to
stimulate providers to differentiate their power offerings and to include solar
electric power among their power options.
According to PV Energy Systems, an independent solar energy research firm,
the solar electric power industry shipped an estimated 153 megawatts of power
capacity in 1998, which represented approximately $2.0 billion in equipment
sales. Since 1994, industry shipments have increased at a compound annual
growth rate of 22%, which has been driven by continued worldwide demand in the
off-grid segment and accelerated growth for on-grid applications. During this
period, on-grid shipments have grown at a compound annual growth rate of 65% as
consumers are choosing to install solar systems or purchase solar electric
power. We believe that the continued global restructuring of the electric power
industry will continue to drive growth in the on-grid solar electric power
market.
While solar electric power is often the most cost-effective source of
electric power in selected applications off the utility grid, the broad
utilization of solar electric power on the utility grid has been limited by
production costs. We have optimized several stages in the solar cell
manufacturing process to progressively reduce production costs while increasing
mechanical and electrical yields.
. Silicon wafer sourcing. Our proprietary manufacturing process utilizes
recycled semiconductor wafers that allow us to reduce silicon wafer
cost.
. Equipment and process engineering. Our proprietary equipment and
processes allow us to increase our manufacturing productivity and
ultimately to generate a higher level of power output per production
asset than our competitors. For example, our Silicon-Film(TM) technology
allows us to produce large area silicon sheets in minutes.
. Product design. Our large solar cell design features allow us to
generate more power per solar cell.
Our focus on silicon wafer sourcing, equipment and process engineering and
product design has allowed us to reduce our production cost per watt and thus
to improve our product gross margins.
The Electricity Industry
The electric power industry comprises one of the world's largest industrial
segments, with annual electricity revenues of approximately $1 trillion, of
which approximately $200 billion is spent annually on power generation and
delivery equipment. More than 90% of this equipment is utilized for centralized
power plants where electricity is generated at a large scale and distributed
through a network of conducting cables to end users.
30
<PAGE>
The source and corresponding price of electricity vary based on the
geographic location of a user and the level of existing electricity
infrastructure. Generally, customers in urban and suburban locations are served
by a central utility network and are considered on-grid customers. In contrast,
customers or applications in rural or underdeveloped areas are generally
provided electricity through various distributed, off-grid sources of
electricity, including solar power.
Structural Change of the Electricity Industry
The electricity industry is currently undergoing significant changes to its
basic structure and operating models. In particular, governments in the United
States and around the world are changing the model of vertically integrated
electric utility monopolies in favor of a deregulated, competitive industry
structure. Furthermore, new power generation technologies have expanded users'
options for procuring electricity. These developments are expected to lead to:
. Increased competition. In the United States, certain states are planning
a phased introduction of competition, starting with competition among
wholesale electricity generators, following with the establishment of
independent common-carrier bulk transmission systems and finally leading
to the introduction of true retail competition at the end-user level. At
the final stage of this process, we expect that individual customers
will have as much choice over their electricity provider as they do over
their long-distance telephone service provider.
. New entrants. As competition within the electricity business increases,
a number of new companies will emerge and focus on various elements of
electricity delivery, such as power generation and retail marketing. In
response to this shift, we expect existing electricity providers, as
well as new electricity service companies, to develop and promote a
broader array of products and services such as solar electric power as a
means of segmenting customer demand and defining differentiated brand
positioning.
. Increased customer choice of products and services. In the deregulated
environment, customers will have more direct control over the selection
of providers and the means of power generation. Consumers have already
shown a preference for clean, environmentally friendly renewable energy
sources such as solar electric power. We expect this trend to continue
as deregulation progresses.
. Economic incentives. Governments are implementing legislation and
introducing various subsidies and set-asides in order to accelerate the
commercialization of renewable energy sources such as solar electric
power. Specific state laws, subsidy programs and other variables such as
sunlight availability can have a significant combined impact on the cost
effectiveness of on-grid solar electric power.
Deregulation of the electricity industry is occurring globally, and the
rules which govern this process differ significantly among countries. In the
United States, deregulation is proceeding on a state-by-state basis. Currently,
there are four states that have passed legislation and opened their retail
electricity markets to competition (California, Massachusetts, Pennsylvania and
Rhode Island), and an additional 17 states have formal deregulation procedures
underway.
As part of the deregulation process, governments in Europe, Japan and the
United States are implementing legislation and introducing various economic
incentives. Renewable energy sources benefit from the following types of
governmental assistance:
. portfolio standards mandating the use of renewable energy sources
. direct purchase subsidies to end users to offset up-front capital costs
. net metering laws which allow end users to sell electricity back into
the grid at full retail prices
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In Europe and Japan, we estimate that these programs have stimulated the
installation of more than 38,000 solar electric power residential systems from
1995 through 1998. In California, which was the first state to fully deregulate
its electricity industry, the legislature set aside $54 million in 1998 for
solar electric power programs, including a five-year direct subsidy program for
homeowners who purchase solar electric power systems.
The combination of some or all of these types of governmental assistance
provides a cost-effective market opportunity for solar electric power. We refer
to the states in which we believe solar electric power is most cost-effective
as "top tier" states. Those states in which we believe solar electric power is
currently cost-effective but may be more so in the future as deregulation
progresses we refer to as "second tier" states. Substantive deregulation has
not yet occurred in the remaining states. These tiers are illustrated in the
following chart.
[Maps of continental United States plus Alaska and Hawaii showing
Top Tier and Second Tier states.]
The Solar Electric Power Industry
A number of new technologies have emerged which can generate electricity in
a distributed or point-of-use fashion. Solar electric power is the only method
of distributed generation that utilizes a renewable energy source. Solar
electric power is highly scalable and reliable, unlike a conventional utility
grid that depends critically on economies of large scale and which is subject
to power delivery constraints or outages during periods of high demand.
Distributed generation can be more cost effective than conventional "central
station" generation in the following cases:
. users live far from urban centers
. only a small amount of electricity is required
. the capacity of the existing power delivery infrastructure prevents
incremental load growth
We also believe that the environmental aspects of the power business will
become increasingly important and that public concern about air pollution and
global warming will be gradually transformed into policies and legislation
favorable to renewable energy sources.
Solar electric power is used in three major market segments:
. On-grid. In this application, solar electric power is used as an
environmentally preferred source of alternative or supplemental
electricity for customers already connected to the utility grid.
Primarily concentrated in Europe, Japan and the United States, this
application has represented the fastest-growing segment of the solar
electric power market for the last three years.
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. Rural electrification. Many of the estimated two billion people still
without electricity live in geographic areas not conducive to
electrification by means of the utility grid. For these people, solar
electric power can be a cost effective and rapid way in which to acquire
electrical service.
. Telecommunications. Solar electric power is used for a wide variety of
applications related to the telecommunications and transportation
industries. Examples of these applications include: cellular telephone
base stations, fiber-optic and radio repeaters, telemetry and data
acquisition systems, traffic information signs, warning displays and
emergency call boxes.
PV Energy Systems, an independent solar energy research firm, estimated 1998
worldwide solar electric power industry shipments at 153 megawatts which
represents approximately $2.0 billion in equipment sales. Since 1994, industry
shipments have increased at a compound annual growth rate of 22%. During this
period, the fastest-growing solar electric power market segment has been for
on-grid applications, where consumers already connected to the utility grid are
choosing solar electric power as an alternative to conventional on-grid
sources. Since 1994, on-grid shipments have grown at a compound annual growth
rate of 65%. While off-grid shipments still account for the majority of
industry shipments, on-grid shipments accounted for 24% of the total market in
1998. We believe that growth in the on-grid market segment is being driven by
customer preference for non-polluting, carbon-free electric power technologies
and by the worldwide trend toward deregulation within the electric utility
industry.
The chart below highlights the growth and market share of worldwide, on-grid
and off-grid solar electric power shipments.
[Bar chart showing on-grid and off-grid industry-wide
solar electric power shipments in megawatts per year
for 1994 through 1998]
PV Energy Systems predicts that solar electric power shipments will continue
to increase at a compound annual growth rate of 24% through 2005, and that on-
grid shipments and off-grid shipments will grow at compound annual rates of 39%
and 15%, respectively.
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<PAGE>
The Solar Electric Power Challenge
Solar electric power is often the most cost-effective source of electric
power in selected applications off the utility grid. While governmental
assistance and enhanced consumer choice have accelerated the use of solar
electric power for on-grid applications, the utilization of solar electric
power for widespread, multiple applications on the utility grid has been
limited by production costs. The ability to reduce the cost of solar electric
power is driven by three primary factors:
. Materials sourcing. Reducing raw materials cost must be achieved without
compromising product reliability.
. Equipment and process engineering. Increased process throughput must be
achieved while maintaining or improving product performance.
. Product design. Optimizing product design must be achieved to capture
economies of scale and lower production cost per kilowatt hour.
Most of the solar electric power technologies that have been commercialized
to date have not adequately reduced costs while maintaining the requisite
levels of performance and reliability. These technologies fall into two basic
classes--technologies based on ingots of crystalline silicon and technologies
based on thin films of semiconductors other than crystalline silicon. The
manufacture of ingot-based silicon wafers requires expensive equipment,
consumes large amounts of electricity, wastes a significant fraction of the
starting material and takes several days to complete. Although thin films
appear to offer the potential for reduced cost, low efficiency, poor stability
and high capital costs have hampered the commercialization of thin-film solar
electric power technologies to date.
Our Technology Solution
We have developed an innovative and proprietary set of technologies and
processes for the manufacture of the core building block for solar electric
power generation, solar cells. We have optimized several stages in the solar
cell manufacturing process to progressively reduce production costs while
increasing mechanical and electrical yields. We have also introduced several
solar cell design features that allow us to generate more power per solar cell
which ultimately reduces the cost per kilowatt hour. Our manufacturing and
product approaches address the primary challenges in solar cell production.
These include:
. Silicon wafer sourcing. We have developed two proprietary manufacturing
processes that allow us to effectively reduce silicon wafer cost. Our
recycled wafer technology utilizes scrap silicon wafers from the
semiconductor industry for the production of solar cells. Our Silicon-
Film(TM) technology does not require high-purity silicon and produces
large area silicon sheets in a fraction of the time of traditional
ingot-based wafer manufacturing. Both of our processes are based on
crystalline silicon and build on this material's long history of
performance and reliability.
. Equipment and process engineering. We have designed a range of
proprietary equipment and processes that allow us to increase our
manufacturing productivity and to generate a higher level of power
output per production asset. For example, our Silicon-Film(TM)
technology is a continuous, high-speed production process that produces
silicon wafers in minutes. In contrast, traditional ingot-based silicon
wafer manufacturing requires expensive wafer formation and sawing
equipment and takes several days to produce the same quantity of solar
power.
. Product design. Our technology will allow us to produce solar cells in
sizes up to 12p, with corresponding power output of up to 10 watts per
solar cell. This is approximately three times more powerful than the
largest solar cell currently available. More powerful solar cells reduce
the cost per watt for module assembly and installation, because the
fixed costs of these operations can be amortized over more watts. Our
next-generation Silicon-Film(TM) solar cell, currently under
development, also incorporates integrated circuit design concepts that
further increase functionality and reduce cost.
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<PAGE>
Our focus on silicon wafer sourcing, equipment and process engineering and
product design has allowed us to significantly reduce our production cost per
watt and has provided us with significant operating leverage to grow our
business.
Strategy
Our goal is to become the leading global solar electric power technology
company. To achieve this, we intend to:
Maintain our manufacturing and technology advantage
We intend to continue to enhance our manufacturing processes and
technologies and to introduce innovative solar based products. We intend to
leverage our recycled semiconductor wafer and Silicon-Film(TM) technology
platform in order to reduce further solar cell manufacturing costs and increase
market share. We have consistently introduced new products to provide our
customers with improved levels of functionality, price and performance and to
access new market opportunities. We plan to build on this history of innovation
through the continued introduction of new products, including solar cells,
modules, systems and solar electric power.
Rapidly expand manufacturing capacity
We intend to capitalize on our manufacturing expertise and replicable method
of expanding manufacturing capacity. Since the beginning of 1998 we have
increased our manufacturing output by approximately 135%, from a rate of 5.5
megawatts per year for the first quarter of 1998 to a rate of 12.9 megawatts
per year for the second quarter of 1999. We plan to use a portion of the net
proceeds from this offering to further expand our manufacturing capacity.
Capitalize on deregulation in the on-grid market
We believe that the deregulation of the energy industry is creating a
favorable environment to market residential rooftop solar systems to domestic
on-grid customers. We intend to target states that are implementing favorable
legislation, introducing economic incentives and promoting consumer choice. We
recently opened an office in Concord, California to focus on on-grid systems
sales.
Expand relationships with module assemblers
In international markets, local module assemblers are often best positioned
to deliver customized solutions and to compete for local business. We intend to
expand our relationships with selected module assemblers and to offer
additional products and services, including factory design, equipment
selection, process training and quality assurance. We believe this strategy
will allow us to broaden our international reach and to penetrate new markets.
We recently agreed to form a joint venture with Atersa, S.A., a leading Spanish
module assembler and systems integrator, to provide these services.
Pursue strategic relationships
We intend to continue to pursue strategic relationships to introduce new
technologies and products, enter new geographic markets, attract new customers
and pursue additional revenue opportunities. These relationships may take
various forms, including cooperative marketing agreements, joint ventures and
strategic alliances. Through our GPU Solar joint venture, we are developing
capabilities to generate solar electric power in the United States.
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<PAGE>
Products
We currently sell, or plan to sell in the near future, five classes of
products: solar cells, modules, panels, systems and solar electricity.
. Solar cells are semiconductor devices that convert sunlight directly
into electricity by means of a solid-state process known as the
photovoltaic effect.
. Modules are assemblies of solar cells connected together and
encapsulated in a weatherproof package.
. Panels are assemblies of several modules wired together in our factory
and mounted on a common support structure. Panels are typically used to
reduce field assembly cost in systems where hundreds or thousands of
individual modules are required.
. Systems typically include a group of modules or panels, an optional
battery and electronic equipment for power conditioning and control. Our
systems are designed for use on residential rooftops.
. Solar electricity. We have a joint venture with GPU International
through which we intend to produce and sell wholesale solar electricity
under long-term purchase agreements.
Solar cells. Solar cells are the core component inside every solar electric
power system. We sell most of the solar cells we produce to independent module
assembly companies. These customers assemble our solar cells into modules and
sell the modules under their own brand name for a variety of local market
applications. We believe that our solar cells are preferred by module assembly
company customers over other manufacturers' solar cells for several reasons:
. our solar cells are significantly thicker than most solar cells, leading
to lower rates of breakage during soldering and packaging
. our solar cells have specially prepared contacts for ease of soldering
. our solar cells are the largest and most powerful solar cells on the
market today
One of our key strategies has been to capture economies of scale by
continuously increasing the size of our solar cells. With our recycled
semiconductor wafer process, utilizing single crystal silicon wafers, we
capitalized on the movement of the computer chip industry to larger wafer
sizes. In 1993, we were one of the first companies to introduce a 5p square
single crystal solar cell, which has gradually replaced the earlier 4p solar
cell as the industry standard. In 1995, we were the first company to introduce
a 6p square single crystal solar cell, and we are still one of only two
companies offering a product of this size. In 1998, we introduced our first
solar cell made using our Silicon-Film(TM) technology which we branded under
the name APex(TM). This solar cell is identical in size and layout to our 6p
single crystal solar cell, which makes it easy for customers already tooled up
for this size to add an APex(TM) module to their product line.
We plan to continue to exploit the economies of scale inherent in the
processing and packaging of large solar cells in order to reduce costs further
and to differentiate us from our competitors. Before the end of 1999, we plan
to introduce a 4-watt single crystal solar cell that will be approximately 25%
more powerful than any other solar cell currently on the market. We also plan
to capitalize on the unique large area capability of our Silicon-Film(TM)
technology to introduce 8p and 12p square APex(TM) solar cells rated for 4.5
watts and 10 watts, respectively.
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<PAGE>
Our Product Evolution
<TABLE>
<CAPTION>
Product Power Introduction
Name Dimensions Cell Type (Watts) Date
-------- ---------- -------------- ------- ------------
<S> <C> <C> <C> <C>
AP-104* 4p square Single Crystal 1.3 1991
AP-105 5p square Single Crystal 2.1 1993
AP-106 6p square Single Crystal 3.2 1995
AP-225 6p square APex(TM) 2.5 1998
AP-108** 8p round Single Crystal 4.0 1999
AP-400 8p square APex(TM) 4.5 2001
AP-800 12p square APex(TM) 10.0 2002
</TABLE>
*This product was replaced by the subsequent products.
**This product is planned to be introduced by year end.
Modules. Modules are assemblies of solar cells that can be electrically
interconnected to achieve virtually any combination of required electricity
output. We manufacture modules with power ratings ranging from 30 to 130 watts.
Modules at the lower end of this power range are typically used individually to
provide small quantities of energy for non-electrified homes or for a variety
of small industrial applications in the telecommunications industry. Higher
power modules are typically used in larger arrays. Most of our module sales are
at the higher power ratings. These modules capitalize on our ability to make
larger and more powerful cells than our competitors.
Panels. For systems requiring hundreds or thousands of individual modules,
we sell fully assembled panels. Panels are assemblies of high-power unframed
modules adhesively bonded to a common support structure and electrically
interconnected and tested in our factory. Panels are typically shipped to the
job site in reusable shipping racks. The advantage of this product is that we
perform much of the electrical and mechanical integration in our factory under
controlled conditions, thus lowering our customer's on-site labor costs and
reducing the probability of wiring errors. We believe that we are the only
solar electric power company to offer fully assembled panels as a standard
product.
Systems. Over the past 18 months, we have developed a range of standardized
systems that we sell to homeowners. These systems are all designed to operate
in parallel with the utility grid and typically generate between 50% and 100%
of a home's yearly electricity needs. Solar electric power not consumed on the
premises is sold back into the utility grid. From January 1 through July 31,
1999, GPU Solar sold 63 of these systems. The majority of these systems also
includes a small storage battery, which allows the systems to be used during a
grid outage. We are finding significant customer interest in backup or
emergency power. We believe that this interest reflects broad concern by
customers about the reliability of the electricity network and about year 2000
problems in the near term.
Solar electricity. Through GPU Solar, we plan to construct, own, and
operate solar electric power plants. Our intent is to sell electricity on a
wholesale basis to power marketing companies for resale to end customers. In
this case, our product will be electricity, which we plan to sell under multi-
year power purchase contracts.
Contract Research and Development
We selectively pursue 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 our long-term development
strategy under conditions that permit us to retain the technology developed. We
have received substantial third-party funding from various agencies of the U.S.
government. Total sums expended for research, development and manufacturing
engineering in the years ended
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<PAGE>
December 31, 1996, 1997 and 1998 and the six months ended June 30, 1999 were
$3.3 million, $3.5 million, $3.7 million, and $2.2 million, respectively. Of
those amounts, approximately $2.6 million, $2.5 million, $2.3 million, and $1.1
million, respectively, were externally funded and are a component of contract
revenue.
Manufacturing
We currently manufacture our products in two facilities in Newark, Delaware,
one located in Solar Park and the other in nearby Pencader Corporate Center.
Since the beginning of 1998 we have increased our manufacturing output by
approximately 135%, from a rate of 5.5 megawatts per year for the first quarter
of 1998 to a rate of 12.9 megawatts per year for the second quarter of 1999.
This increase in production output was due to the addition of our new Pencader
manufacturing facility, which our manufacturing group brought on line in April
1998.
[Bar chart showing annualized historical manufacturing quarterly
output (in megawatts per year) at each of our two facilities for
1998 and the first two quarters of 1999.]
Historical Manufacturing Output (Megawatts per year rate)
We intend to expand our manufacturing capacity to approximately 25 megawatts
by the end of the year 2000 and to approximately 75 megawatts over the next
four years. We believe that our recent experience of building and operating our
Pencader plant has allowed us to develop a formal, replicable model for
capacity expansion and that this process reduces the risks associated with
further capacity expansion. Some of the key elements contributing to this low
risk approach are:
. utilization of previously proven processes and equipment
. increases in solar cell size which allow for greater power output with
existing production processes
. flexible manufacturing which enables us to run multiple product
configurations through the same line
The manufacturing facilities include a full complement of equipment for
wafer, solar cell and module manufacturing and are continually upgraded to
improve capacity and product quality. Included in both facilities are equipment
to condition wafers by mechanical and chemical means, furnaces for diffusion,
printing and firing equipment for applying electrical contacts to solar cells,
equipment for applying anti-reflection coatings on solar cells and solar cell
testers. Our Pencader facility contains equipment for assembling and testing
modules.
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The research and development portion of the Solar Park 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 compound semiconductor and furnaces for
diffusion, oxidation, alloying, and heat treatment, photolithography equipment,
vacuum (thermal, e-beam and magnetron sputtering) deposition for metals and
anti-reflection coatings, plating baths for obtaining low resistance contacts
and standard process evaluation equipment including a scanning electron
microscope with energy dispersive spectroscopy capability.
Sales and Marketing
We pursue both a direct and indirect sales and marketing strategy according
to the dynamics of each targeted market. We currently sell solar cells and
modules in selected international on-grid, rural and telecommunications markets
through our direct sales force. We sell complete systems and intend to sell
solar electricity in selected on-grid markets through our indirect partners,
including value added resellers, distributors, independent agents and
contractors. We currently have relationships with several indirect channel
partners which allow us to penetrate selected global markets efficiently.
Direct sales to certain customer classes and applications affords us a higher
level of control and increased participation in downstream margin
opportunities, while our cooperation with indirect partners gives us coverage
of certain international markets which would be difficult or impossible for us
to access directly. The table below explains the relationship between market
segments, product types, customer types, sales channels and applications as
they relate to our business.
Our Sales and Marketing Strategy
<TABLE>
<CAPTION>
On-Grid Off-Grid
----------------------------------------- -----------------------------------------
Market Rural
Segment Buildings Solar Power Plants Telecommunications Electrification
------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Products .Solar Cells . Wholesale Solar .Modules .Solar Cells
.Modules Electric Power .Modules
.Complete Systems Generated with our
Technology
Customer . Residential and .Power Marketers . Original Equipment . Module Assemblers
Commercial .Traditional Manufacturers and and Systems
Building Owners, Utilities Systems Integrators
Distributors and Integrators
Module Assemblers
Sales Channel . Direct Sales, .Joint Ventures . Direct Sales, .Direct Sales
Internet Sales, Agents,
Home Builders and Distributors and
Electricians Value Added
Resellers
Applications . Solar electric . Wholesale solar . Repeater stations . Solar home systems
power systems to electricity from .Monitoring and often located in
provide a solar electric telemetry systems developing
supplemental, power plants which for highways, countries to
clear power source is typically sold railroads and provide basic
that can also be to power marketers pipelines services such as
resold back into through long-term .Emergency call light, radio,
the utility grid. purchase boxes on highways television and
.Roof panels for agreements. .Portable warning communications
single family .Blended signs used at .Wireless pay
homes electricity highway telephones
.Roof panels or products construction sites .Pumps for
exterior panels drinking water
for commercial .Schools and
buildings health clinics
.Vacation cabins
</TABLE>
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<PAGE>
The domestic on-grid market. We believe that the deregulation of the energy
industry provides a favorable climate for marketing solar electric power and
solar systems to domestic on-grid customers. In order to focus our marketing
efforts, we have developed a methodology to identify promising near-term target
markets. Factors which we consider in this methodology include:
. the addition of renewable energy sources to portfolio standards
. the existence and extent of direct subsidies or tax benefits for solar
electric power systems
. the existence of net-metering laws
. local retail electricity prices
. the quality of the regional sunlight resource
We recently opened an office in Concord, California to focus on on-grid
sales. We plan to increase our direct marketing efforts to promote our sales to
homeowners in targeted regions, and we are developing a web-based on-line
shopping tool to allow customers to choose and purchase the system that meets
their requirements.
The international on-grid market. The international on-grid market has
developed more rapidly than the domestic on-grid market, particularly in Europe
and Japan. We serve the international on-grid market primarily through the sale
of solar cells, which are assembled into modules and panels by our module
assembly customers. These products are incorporated into systems and sold
directly to homeowners and building owners or sold through intermediaries such
as local electricians and homebuilders. Several of our customers have also
established subsidiaries to build, own and operate solar electric power plants
and to sell the electricity from these power plants to power marketers and end
customers.
Our on-grid module assembly customers have typically established strong
brand identity within their regional market and have in some cases developed
unique products that incorporate solar cells into building materials such as
roof tiles and curtain-wall glazing systems. These building integrated-products
are growing in popularity in Europe.
We believe that customers in Europe and Japan are strongly motivated by
environmental concerns and that their governments will continue to support
renewable energy sources. Therefore, we believe that the international on-grid
market will continue to comprise a major fraction of our product revenue for
the foreseeable future.
The rural electrification market. This market segment addresses a large
number of people throughout the world who are not yet served with electric
power. Within this market segment, we typically sell modules directly to
original equipment manufacturers who assemble their own complete systems and to
systems integrators who design and build systems for end users.
The telecommunications market. This market segment includes a wide variety
of telecommunications and related industrial applications. Within this market
segment, we typically sell modules to module assemblers who manufacture and
sell completed modules and to value added resellers and systems integrators who
design and build systems for end users.
Customers
We use a customer acquisition and growth strategy aimed at acquiring new key
customers while growing volume with existing customers. First, we target new
customers who provide access to high growth market segments while maintaining
geographical diversity. Often we enter into a new supply relationship with such
a customer as a secondary product supplier. Once a successful supply
relationship has been established, our objective is to become the primary
product supplier to each new key customer and to grow volume within each
account.
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<PAGE>
Sales to our ten largest product customers accounted for approximately
46.0%, 68.0%, 73.0% and 76.2% of total revenues in fiscal 1996, 1997, 1998 and
the six months ended June 30, 1999, respectively. During 1996, sales to Tata BP
Solar, an Indian joint venture of British Petroleum Co. and the Tata Group,
accounted for 12.9% of our total revenues. During 1997, sales to Solar Fabrik,
an independent module assembler based in Germany, Golden Genesis Company, a
systems integrator located in Arizona, and Atersa, accounted for 17.0%, 12.6%
and 12.0% of our total revenues, respectively. During 1998, sales to Atersa and
Solar Fabrik accounted for 17.6% and 14.3% of our total revenues, respectively.
During the six months ended June 30, 1999, sales to Solar Fabrik and Atersa
accounted for 28.2% and 12.4% of our total revenues, respectively. No other
product customers represented 10% or more of our total revenues for any such
periods. We expect that sales of our products to a limited number of customers
will continue to result in a high concentration of sales for the foreseeable
future and that the loss of certain of these customers could have a material
adverse effect on our business, results of operations and financial condition.
A large percentage of our product sales are to international customers. For
the year ended December 31, 1998 and the six months ended June 30, 1999, the
approximate geographic breakdown of product sales is shown in the table below:
Regional Product Sales Distribution
<TABLE>
<CAPTION>
Year Ended Six Months Ended
Region December 31, 1998 June 30, 1999
------ ----------------- ----------------
<S> <C> <C>
North America 21.6% 26.1%
Europe 62.7% 61.6%
Africa 9.1% 2.4%
Asia 6.6% 9.9%
</TABLE>
We anticipate that international customers will continue to account for the
majority of product sales for the foreseeable future.
Strategic Alliances
GPU Solar. We are expanding the scope of GPU Solar, Inc., our joint venture
with GPU International. This venture was originally formed in July 1997 to
market residential rooftop systems. GPU International and we are planning to
jointly cooperate in the development of products and services that address the
significant business opportunities resulting from electric industry
restructuring. We both believe that electricity restructuring will create an
increasing market for clean solar electric power and will develop projects to
sell solar power into this market. Solar electricity will be sold by GPU Solar,
and we believe that this product will appeal to customers who are interested in
solar electric power, but who may not choose to or be able to install a solar
electric power system on their home. In states with retail electricity choice
programs, such customers may choose to purchase their electricity from a
supplier who offers solar electric power. GPU Solar plans to:
. identify sites where we can build solar electric power plants of between
100 kilowatts and several megawatts of capacity. These sites could
include commercial factory rooftops, parking structures or undeveloped
land.
. construct power plants based on our panels.
. enter into long-term power purchase agreements with power marketers to
buy electricity generated by the plant. The typical term for such
agreements is expected to be 15 to 20 years.
. operate the power plants using subcontracted operating and maintenance
services. Because solar electric power systems use no fuel and have no
moving parts, ongoing regular operating and maintenance service
requirements are minimal.
41
<PAGE>
On July 14, 1999, GPU Solar signed its first power purchase agreement with
Green Mountain Energy Resources, one of the leading national environmentally
friendly power marketers. The contract calls for Green Mountain Energy
Resources to take the entire electrical output of a 132 kilowatt power plant
located in Northern California for the next 15 years and to pay a flat rate of
$.30 per kilowatt hour produced during this period. Construction on this plant
is currently underway, and the plant is scheduled to be completed by September
30, 1999. It is currently expected that our commitment for the construction
cost of this plant will be limited to approximately $300,000.
Atersa. In July 1999, we and Atersa, one of our ten largest product
customers, agreed in principle to form a joint venture for the purpose of
manufacturing and supplying solar cells to module assemblers worldwide for the
off-grid market segment. Significant government subsidies are available to fund
the project, and Atersa has identified approximately $3 million in low cost
loans and grants to fund plant construction, fit-up and start-up costs. We and
Atersa have each contributed $250,000 towards the proposed venture. We
currently expect that any additional commitment would be limited to
approximately $250,000, although we can give no assurance that the transaction
will be completed and a definitive agreement will be executed in the time
period and form currently contemplated, if at all.
Atersa manufactures modules based exclusively on our solar cells, integrates
these modules into systems and markets systems primarily in Europe, Africa and
Latin America. As one of the leading systems integrators, Atersa has developed
significant expertise in designing, bidding, winning and implementing off-grid
projects and programs. Atersa also designs, manufactures and sells module
manufacturing equipment and components.
Quality Assurance
We intend to maintain our reputation as a manufacturer and supplier of
quality products and to continuously improve the quality of our products and
services. Quality testing starts with the wafer, is continued at a 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 us to achieve international and
domestic product certifications for many of its modules. In June 1996, the
Commission of European Communities issued Qualification Certificates for
environmental stability and performance for our standard modules types AP-1106,
AP-1206, AP-6105, and AP-7105. In August 1997, we received the Underwriters
Laboratory (UL) listing for Silicon-Film(TM) module products which confirms
that representative samples of these products have been evaluated by UL and
meet applicable UL standards and requirements. We intend to submit all new
module products for such approval.
Competition
The market for solar electric power components and systems is intensely
competitive. We believe that this market will continue to be intensely
competitive, particularly if products with significant cost and performance
attributes are developed. We also believe that while a single technology,
crystalline silicon, has been dominant throughout the industry's approximately
20 year history, this market will be characterized by future technological
change.
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 BP Solarex, Siemens Solar Industries,
Kyocera Corporation, Sanyo Electric Co., Sharp Corp., Shell Solar Energy B.V.,
42
<PAGE>
ASE GmbH and Canon. All of these companies have significantly greater resources
to devote to the research, development, manufacturing and marketing than we do.
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 technologies could theoretically achieve
manufacturing costs per watt lower than the Silicon-Film(TM) technology
developed by us.
We believe that the principal competitive factors in the market for solar
electric power components are the following:
. price per watt
. product reliability, quality and reputation
. product performance, primarily conversion efficiency
. ease of handling and installation
In addition to direct competition from other solar electric power
manufacturers, the wholesale market for solar electric power competes with
other environmentally friendly sources of power such as wind and geothermal
energy.
Patents and Proprietary Technology
Our success and ability to compete are significantly dependent on our
proprietary technology. Our policy is to protect our technologies by filing
patent applications with respect to technology considered important to business
development. We also rely upon unpatented know-how, continuing technological
innovation and the pursuit of licensing opportunities in order to develop and
maintain our competitive position. We have been awarded fourteen U.S. patents
in the field of photovoltaics and had two patent applications pending as of
August 31, 1999. Ten of the fourteen U.S. patents that have been issued and one
of the applications that are pending relate to the Silicon-Film(TM) product
design and manufacturing process. Of the remaining four patents that have been
issued, three protect the design of high performance solar cells using compound
semiconductors, and one protects the design of an optical sensor using a
compound semiconductor that provides for sensor operation at temperatures much
higher than can be employed with conventional elemental materials. The
remaining pending application covers the utilization of a unique device design
and manufacturing process that enhances the optical efficiency of opto-
electronic devices.
We decide on a case-by-case basis whether and in what countries we will file
foreign counterparts of a U.S. patent application. International counterparts
of four issued patents have been filed under the Patent Cooperation Treaty. We
will continue to file other U.S. and international patent applications to
protect technology we consider important in providing a market advantage for
our products. We believe that our patents offer us 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, we rely on the law of unfair competition
and trade secrets to protect our proprietary rights, including our proprietary
rights in our Silicon-Film(TM) technology. We consider several elements of the
Silicon-Film(TM) manufacturing process to be trade secrets. We attempt to
protect our trade secrets and other proprietary information through non-
disclosure agreements with our customers and suppliers and limit the
dissemination of information to a need-to-know basis. Although we seek to
protect our proprietary information, it is possible that others will
independently either develop the same or similar information or obtain access
to information that we believe is proprietary.
43
<PAGE>
All of our employees and consultants are required to sign confidential
information non-disclosure agreements upon the commencement of their employment
with us. Our non-disclosure agreements provide that all confidential
information developed or made known to the individual during the course of the
individual's relationship with us is to be kept confidential and not disclosed
to third parties except in specific circumstances. These agreements also
provide that all inventions made by the individual shall be our exclusive
property. However, these agreements may not provide meaningful protection for
our trade secrets or adequate remedies in the event of unauthorized use or
disclosure of such information.
Silicon-Film(TM) and APex(TM) are our trademarks.
Environmental Regulations
We use, generate and discharge toxic, volatile or otherwise hazardous
chemicals and wastes in our research and development and manufacturing
activities. Therefore, we are subject to a variety of federal, state and local
governmental regulations related to the storage, use and disposal of these
materials. We believe we have all the permits necessary to conduct our
business. However, failure to comply with present or future regulations could
result in fines being imposed on us, suspension of production or a cessation of
operations. We believe that we have properly handled our hazardous materials
and wastes and have not contributed to any contamination at any of our
premises. We are not aware of any environmental investigation, proceeding or
action by federal or state agencies involving our 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 us to control the use of, or to restrict adequately the discharge
of, hazardous substances could subject us to substantial financial liabilities
and could have a material adverse effect on our business, result of operations
and financial condition.
Employees
As of August 31, 1999, we had 305 full time employees, of whom 39 were
engaged in research and development, 233 in manufacturing, 10 in sales and
marketing and 23 in administration. None of our employees are covered by
collective bargaining agreements. We have experienced no work stoppages and
believe that our employee relations are good.
Eighteen of our management and professional employees have advanced degrees,
including four Ph.D.s. To date, we have been able to attract the scientific,
engineering, technical and other personnel required by our business. Such
experienced professionals are in demand, and we 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.
Facilities
From July 1991 through January 1998, all of our administrative, research and
manufacturing facilities were located in a 40,000 square foot building built by
and leased from University of Delaware, Newark, Delaware. The initial term of
the lease expires in June 2011. However, we may exercise an option to cancel
the lease beginning in July 2000. The annual cash rental payment for 1998 was
$209,200 and increases approximately 6% each year.
In January 1998, we entered into a lease with Liberty Property Limited
Partnership for a 60,300 square foot facility to house our Pencader plant. This
facility is part of a 130,000 square foot building located in Newark, Delaware,
which is approximately six miles from our present facility. The term of the
lease is 10 years with two five year renewal options. In January 1999, we
entered into an agreement for an additional 20,100 square feet in this
facility. The commencement date for the amended lease was June 15, 1999. The
existing lease for this facility was extended by one year to become coterminous
with the new lease.
44
<PAGE>
The annual rental payment for the first year of the amended lease for 80,400
square feet is $381,900 and increases an average of approximately 2% each year.
In addition, we are responsible for our share of annual operating expenses of
the building presently estimated at $82,800. The lease also provides for rights
of first refusal by us to lease additional space in the building if it becomes
available and to purchase the entire building if the owner decides to sell it.
In June 1999, our subsidiary, AstroPowerWest, LLC, entered into a lease with
Allied Investments for a 3,000 square foot facility in Concord, California for
office and warehouse space. The term of the lease is for three years commencing
July 1, 1999 at an annual rent of $28,728 and increases approximately 2.5% each
year.
Legal Proceedings
We are not a party to any material litigation.
45
<PAGE>
MANAGEMENT
Executive Officers and Directors
Our executive officers and directors, and their respective ages and
positions as of August 31, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Allen M. Barnett........ 59 President, Chief Executive Officer and Director
Peter C. Aschenbrenner.. 44 Vice President, Marketing and Sales
Louis C. DiNetta........ 49 Vice President, Advanced Optoelectronic Products
Robert B. Hall.......... 58 Vice President and Chief Scientist
Richard K. McDowell..... 59 Vice President, Manufacturing
Thomas J. Stiner........ 44 Vice President, Secretary and Chief Financial Officer
George S. Reichenbach
(1).................... 69 Director
Charles R. Schaller
(1).................... 63 Director
Clare E. Nordquist (1)
(2).................... 63 Director
Gilbert H. Steinberg (1)
(2).................... 68 Director
George W. Roland........ 59 Director
</TABLE>
- ---------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Allen M. Barnett is a founder of AstroPower and has served as our President
and Chief Executive Officer and as a member of our board of directors since we
incorporated 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.
Peter C. Aschenbrenner has served as our Vice President, Marketing and Sales
since 1995 and as our Director of Marketing from 1994 to 1995. From 1991 to
1994 Mr. Aschenbrenner served in a number of capacities with Siemens Solar
Industries, LP, 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 Co-Managing Director of Photovoltaic Electric GmbH, a
joint venture between Siemens AG and Arco Solar, Inc. He served in various
positions with Arco Solar from 1978 to 1988. Mr. Aschenbrenner received a B.A.
in Product Design from Stanford University.
Louis C. DiNetta has served as our 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.
46
<PAGE>
Robert B. Hall has served as our 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. 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.
Richard K. McDowell has served as our Vice President, Manufacturing since
1998 after joining us in 1996. Most of his career was spent with Unisys
Corporation in various management positions. His last assignment was Director
of Operations, Plant Manager--Huntsville. Mr. McDowell received a B.S. in
Physics from Lasalle College.
Thomas J. Stiner has served as our Secretary since August 1999, as our Chief
Financial Officer since 1997 and as a Vice President since 1995. From 1993 to
1997, Mr. Stiner served as our Controller and Treasurer. From 1984 to 1993 Mr.
Stiner served as a Senior Manager at KPMG LLP. Mr. Stiner is a Certified Public
Accountant and received a B.S. in Business Administration from Bloomsburg
University.
George S. Reichenbach has served as a member of our board of directors since
1989. Dr. Reichenbach was a Managing Director of Advent International
Corporation, a venture capital firm, from 1987 to 1998 and continues to serve
as a consultant to them. He 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. In
1956 he joined the Norton Company, a manufacturer of industrial products,
initially as Director of Research and Development and subsequently was
Corporate Vice President in charge of several of Norton's worldwide businesses.
Dr. Reichenbach received a B.S. in Mechanical Engineering from Yale University
and a Sc.D. in Mechanical Engineering from the Massachusetts Institute of
Technology.
Charles R. Schaller has served as a member of our board of directors since
1989 and as our Secretary from 1989 to 1998. 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 founding
Chairman and a director 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 member of our board of directors 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 manufacturer and distributor of ceramic powders and shapes,
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 H. Steinberg has served as a member of our board of directors since
1989. Mr. Steinberg is Vice President and Chief Financial Officer of
Astrosystems, Inc. In February 1996 its shareholders approved a plan of
liquidation. Mr. Steinberg is one of Astrosystems' officers supervising the
liquidation. 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.
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<PAGE>
George W. Roland has served as a member of our board of directors since 1997
and served as President and Chief Executive Officer of our Solar Power Business
from 1996 to December 31, 1998 at which time he retired as an officer and
employee. Dr. Roland currently is a consultant and private investor. From 1995
to 1996, Dr. Roland served as Vice President and General Manager of our Solar
Power Business. From 1993 to June 1995, Dr. Roland served as President of
Siemens Solar Industries, LP, 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 14 U.S.
patents.
Our board of directors is divided into three classes, with the members of
each class serving for a staggered three-year term. Our board currently
consists of two Class I directors, two Class II directors and two Class III
directors. At each annual meeting of stockholders, a class of directors will be
elected for a three-year term to succeed the directors of the same class whose
terms are then expiring. The term of the Class I directors (Messrs. Nordquist
and Schaller) expires at the annual meeting of stockholders to be held in 2002.
The term of the Class II directors (Drs. Reichenbach and Roland) expires at the
annual meeting of stockholders to be held in 2000. The term of the Class III
directors (Messrs. Steinberg and Barnett) expires at the annual meeting of
stockholders to be held in 2001.
Each officer serves at the discretion of our board of directors and holds
office until his successor is elected and qualified or until his earlier
resignation of removal. Prior to March 31, 2000, Dr. Barnett, our President and
Chief Executive Officer, can only be removed by a vote of two-thirds of the
members of the board of directors with Dr. Barnett not eligible to vote.
Committees of the Board of Directors
Our board of directors has established an audit committee and a compensation
committee. The audit committee is composed of Messrs. Nordquist and Steinberg.
The audit committee recommends the selection of our independent public
accountants, reviews the scope and results of the audit and other services
performed by our independent accountants and reviews our accounting practices
and systems of internal accounting controls. The compensation committee is
composed of Messrs. Nordquist, Reichenbach, Schaller and Steinberg. The
compensation committee makes recommendations concerning salaries and incentive
compensation for our executive officers and administers our employee benefit
plans.
Compensation of Directors
We reimburse all of our directors for their out-of-pocket expenses incurred
to attend board of directors and committee meetings. In addition, we pay each
of our directors who is not our employee $1,000 per board meeting attended in
person, $250 per meeting attended telephonically and $250 for each committee
meeting attended. Directors who are also our employees receive no additional
compensation for serving as directors.
In May 1998 we adopted the 1998 Non-Employee Directors Stock Option Plan.
Under the terms of this plan, directors who are not our employees are eligible
to receive nonstatutory options to purchase shares of our common stock. A total
of 160,000 shares of our common stock may be issued upon the exercise of
options granted under the plan. Each non-employee director was granted, or will
be granted upon election to the board, an option to purchase 20,000 shares
which vest in four equal, annual installments beginning on the date of grant.
The exercise price per share of such options is equal to the closing price per
share of our common stock as reported on the Nasdaq National Market on the date
of grant.
In May 1998 Messrs. Nordquist, Reichenbach, Schaller and Steinberg each
received an option to purchase 20,000 shares of common stock with an exercise
price of $10.25 per share. In January 1999 Dr. Roland received an option to
purchase 20,000 shares of common stock with an exercise price of $9.375 per
share.
48
<PAGE>
Executive Compensation
The following table sets forth information concerning the compensation paid
or accrued for the years ended December 31, 1996, 1997 and 1998 to:
. our Chief Executive Officer
. our four other executive officers whose total salary, bonus and other
compensation exceeded $100,000 for the years ended December 31, 1996,
1997 and 1998
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
--------------------------- ------------
Securities
Name and Principal Underlying All Other
Position Year Salary ($) Bonus ($) Options (#) Compensation ($)(1)
- ------------------ ---- ---------- --------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Allen M. Barnett...... 1998 $189,446(2) $ -- (2) 170,000 $5,000
President and Chief
Executive 1997 191,458(2) 50,000(2) 203,250 4,750
Officer 1996 225,819(2) 25,275(2) 21,000 2,375
George W. Roland...... 1998 119,365 27,033 50,000 4,883
President and Chief
Executive 1997 151,840 50,000 -- 4,750
Officer, Solar Power
Business(3) 1996 139,034 15,000 187,500 2,375
Peter C.
Aschenbrenner........ 1998 124,996 -- 40,000 3,177(4)
Vice President,
Marketing 1997 116,449 20,000 19,875 1,353(4)
and Sales 1996 106,779 7,000 -- 1,416(4)
Thomas J. Stiner...... 1998 106,395 -- 40,000 5,000
Vice President,
Secretary and 1997 88,670 25,000 22,500 4,750
Chief Financial
Officer 1996 80,800 20,000 7,500 2,375
Robert B. Hall........ 1998 96,661 -- 15,000 5,000
Vice President and
Chief
Scientist
</TABLE>
- ---------------------
(1) Includes matching contributions under our 401(k) Plan.
(2) Dr. Barnett elected to postpone receipt of salary payments of $23,945 and
$79,047 for the years ended December 31, 1997 and 1996, respectively, as
well as all bonus amounts for the year ended December 31, 1996. These
amounts are included in the above table. At December 31, 1997 we owed Dr.
Barnett an additional $427,215 relating to the postponement of portions of
his salary, bonus and other compensation for the period July 1990 to
December 31, 1995. On December 15, 1997, we agreed that one-third of this
amount would 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. Accordingly we
paid Dr. Barnett $184,786 in 1998 pursuant to such agreement. This amount
is not included in the above table.
(3) Dr. Roland retired as an officer and employee effective December 31, 1998.
(4) Includes $1,200 annual expense allowance for all years.
49
<PAGE>
Option Grants in 1998 and Year-End Option Values
The following table contains information concerning grants of options to
purchase shares of common stock during the year ended December 31, 1998 to each
of our executive officers named in the Summary Compensation Table above:
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Realizable Value
Percentage at Assumed Annual
of Total Rates of Stock
Number of Options Price
Securities Granted to Appreciation for
Underlying Employees Exercise Option Term (3)
Options in Fiscal Price Expiration -----------------
Name Granted (1) Year ($/share) (2) Date 5%($) 10%($)
- ---- ----------- ---------- ------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Allen M. Barnett........ 50,000 6.94% $ 8.00 3/26/08 $251,558 $637,497
120,000 16.64% 10.00 8/20/08 70,538 823,119
George W. Roland........ 50,000 6.94% 8.00 3/26/08 251,558 637,497
Peter C. Aschenbrenner.. 40,000 5.55% 8.00 3/26/08 201,200 509,998
Thomas J. Stiner........ 40,000 5.55% 8.00 3/26/08 201,200 509,998
Robert B. Hall.......... 15,000 2.08% 8.00 3/26/08 75,450 191,249
</TABLE>
- ---------------------
(1) Options awarded under the 1989 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.
(2) All options were granted with an exercise price equal to or greater than
the fair market value of the common stock as determined on the date of
grant.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the 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 our estimate of our
future common stock price growth. 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. Actual gains, if any, will depend on
the future performance of our common stock.
The following table sets forth, for each of our executive officers named in
the Summary Compensation Table above, information regarding the exercise of
stock options during the fiscal year ended December 31, 1998 and the year-end
value of unexercised options.
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Values
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Shares Options at Fiscal Year- In-the-money Options at
Acquired End Fiscal Year End (1)
on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Allen M. Barnett........ -- $ -- 200,250 320,000 $1,220,753 $726,500
George W. Roland........ 10,000 54,250 222,500 65,000 1,252,675 165,950
Peter C. Aschenbrenner.. 5,000 23,150 37,468 54,907 210,945 149,126
Thomas J. Stiner........ 800 3,504 53,575 60,625 301,627 181,319
Robert B. Hall.......... -- -- 9,750 26,250 76,393 87,788
</TABLE>
- ---------------------
(1) Calculated on the basis of the fair market value of our common stock at
December 31, 1998 of $9.625 per share, minus the per share exercise price,
multiplied by the number of shares underlying the option.
50
<PAGE>
Employee Benefit Plans
1989 Stock Option Plan
Our 1989 Stock Option Plan was adopted in December 1989. The 1989 plan
authorizes the issuance of up to 1,920,000 shares of our common stock. As of
June 30, 1999, options to purchase an aggregate of 1,642,873 shares at a
weighted average exercise price of $6.25 per share were outstanding. No
additional options may be granted under the 1989 plan which will expire in
December 1999.
The 1989 plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code and nonstatutory stock
options. Our officers, employees, directors, consultants and advisors are
eligible to receive awards under the 1989 plan. No employee may receive any
award for more than 500,000 shares in any calendar year.
Optionees receive the rights to purchase a specified number of shares of
common stock at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. We may grant
options at an exercise price greater than or equal to the fair market value of
our common stock on the date of grant or not less than 110% of the fair market
value in the case of incentive stock options granted to optionees holding more
than 10% of the voting power of the company. Optionees may generally pay the
exercise price of their options by cash, check or surrender to us of shares of
common stock. Options granted under the 1989 plan generally vest in four equal
annual installments beginning on the first anniversary of the date of grant.
Options do not become exercisable until they have vested. Termination or other
changes in employment status may affect the exercise period.
Our board of directors administers the 1989 plan and has the authority to
adopt, amend and repeal the administrative rules, guidelines and practices
relating to the plan and to interpret its provisions. Our board of directors
has delegated authority to administer the 1989 plan to the compensation
committee, including the granting of options to our executive officers. The
committee has the authority to accelerate the date on which options may be
exercised. In the event of a merger, liquidation, consolidation or other
acquisition event, the committee is authorized to make appropriate and
proportionate changes to the then outstanding options.
1999 Stock Option Plan
Our 1999 Stock Option Plan was adopted by our board of directors in April
1999 and was approved by our stockholders in June 1999. The 1999 plan
authorizes the issuance of up to 600,000 shares of our common stock. As of June
30, 1999, options to purchase an aggregate of 439,600 shares at a weighted
average exercise price of $12.09 per share were outstanding.
The 1999 plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code and nonstatutory stock
options. Our officers, directors, employees and consultants, and certain
employees and consultants of our majority-owned affiliated companies, are
eligible to receive awards under the 1999 plan.
Optionees receive the rights to purchase a specified number of shares of
common stock at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. We may grant
options at an exercise price greater than or equal to the fair market value of
our common stock on the date of grant or not less than 110% of the fair market
value in the case of incentive stock options granted to optionees holding more
than 10% of the voting power of the company. Fair market value for purposes of
the 1999 plan is the closing market price of our common stock as reported on
the Nasdaq National Market on the relevant date. Optionees may generally pay
the exercise price of their options by cash, check or surrender to us of shares
of common stock. Generally, no portion of an incentive stock option may vest
within twelve months of the date of grant.
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<PAGE>
Our compensation committee administers the 1999 plan. The committee has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the plan and to interpret its provisions. Our
compensation committee selects the recipients of awards and determines the
number of shares of common stock covered by the options and the dates upon
which such options become exercisable and terminate, subject to certain
provisions of the 1999 plan. Incentive stock options must terminate within ten
years of the date of grant. Nonstatutory options must terminate within fifteen
years of the date of grant. The compensation committee has the right to alter
the terms of any option when granted or while outstanding pursuant to the terms
of the 1999 plan except the option price.
All options automatically become exercisable in full in the event of a
change in control (as defined in the 1999 plan), death or disability of the
optionee or as decided by the compensation committee. Upon retirement options
held at least one year become exercisable in full. If an optionee's employment
with us is terminated for any reason, except death, disability or retirement,
the optionee has three months in which to exercise an option (but only to the
extent exercisable immediately after termination) unless the option by its
terms expires earlier. Termination or other changes in employment status may
affect the exercise period.
Compensatory Stock Plan
Prior to the adoption of the 1989 plan, we had a compensatory stock plan for
the issuance of shares to employees and consultants. At December 31, 1998, the
only remaining obligation under this plan was the reservation of 39,999 shares
for issuance to a former consultant.
401(K) Plan
We have adopted an employee savings and retirement plan qualified under
Section 401(k) of the Internal Revenue Code and covering all of our employees.
Pursuant to this plan, employees may reduce their current compensation by up to
the lessor of 15% of eligible compensation or the statutorily prescribed annual
limited ($10,000 in 1998) and have the amount of such reduction contributed to
the plan. We may, but are not required to, make matching or additional
contributions to the plan in amounts to be determined by the board of
directors.
Employment Arrangements
On April 1, 1997, Allen M. Barnett entered into an employment agreement with
us to serve as our President and Chief Executive Officer. This agreement
provides Dr. Barnett with an annual base salary of $175,000. The initial term
of the agreement ends on March 31, 2000. Prior to that date, we can only
terminate his employment by a vote of two-thirds of the members of the board of
directors with Dr. Barnett not eligible to vote. After March 31, 2000, the
agreement will continue in effect for an indefinite period until either we or
Dr. Barnett elect to terminate the agreement by written notice to the other
party at least six months prior to the effective date of termination. Other
compensation provided in the agreement included an annual bonus based upon our
financial performance and the grant of an option to purchase 187,500 shares of
common stock at an exercise price of $5.33 per share. The option vests in five
equal, annual installments, beginning on the first anniversary of the date of
grant. In 1998 we amended the agreement to eliminate the annual bonus and
instead granted Dr. Barnett an option to purchase 120,000 shares of common
stock at an exercise price of $10.00 per share. This option vests in four,
equal annual installments, beginning on the first anniversary of the date of
grant. We also provide Dr. Barnett with a monthly stipend for the use of an
automobile and repay all of his out-of-pocket expenses incurred in the
performance of his employment obligations.
Should we terminate Dr. Barnett's employment before March 31, 2000, we must
pay Dr. Barnett his base salary for the lesser of one year or the remaining
term of his employment. Should Dr. Barnett die or become disabled during the
term of his employment, we must pay him or his estate his base salary for the
lesser of two years or the remaining term of his employment plus all other
compensation due in that period.
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<PAGE>
Should we terminate Dr. Barnett's employment upon a change of control of us, we
must pay Dr. Barnett a lump sum equal to one year's base salary and all base
salary and other compensation due for the remaining term of his employment.
Additionally, all remaining invested stock options would vest immediately.
On May 1, 1996, George W. Roland entered into an employment agreement with
us to serve as President and Chief Executive Officer of our Solar Power
Business. The agreement provided Dr. Roland with an annual base salary of
$155,000. Other compensation included an annual bonus based on our financial
performance and the grant of an option to purchase 187,500 shares of common
stock at an exercise price of $4.00 per share. The option vested in full upon,
and is exercisable for a period of seven years from, the completion of our
initial public offering of common stock in February 1998. In June 1995, in
connection with his initial employment with us, we granted Dr. Roland an option
to purchase 60,000 shares of common stock at an exercise price of $4.00 per
share. Dr. Roland retired as an officer and employee effective as of December
31, 1998, but remains a member of our board of directors.
Our employment agreements with Drs. Barnett and Roland and our employment
arrangements with other executive officers and significant employees impose
customary confidentiality obligations and provide for the assignment to us of
all rights to any technology developed by the employee during the time of his
or her employment.
Compensation Committee Interlocks and Insider Participation
Except with respect to their compensation arrangements, Drs. Barnett and
Roland participated in executive compensation deliberations and recommendations
of the board of directors. During the year ended December 31, 1998, no
executive officer served on the board of directors or compensation committee of
another company that had an executive officer serving on our board of directors
or compensation committee.
53
<PAGE>
CERTAIN TRANSACTIONS
At December 31, 1997, we owed Allen M. Barnett, our President and Chief
Executive Officer, $555,482 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, we agreed that one-third of this amount would 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. Accordingly we paid Dr. Barnett $184,786 in
1998 pursuant to such agreement.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of
common stock as of June 30, 1999 and as adjusted to reflect the sale of the
shares of common stock in this offering by:
. each person or entity who is known by us to own beneficially more than
five percent of our common stock including our Chief Executive Officer
. our four next most highly compensated executive officers after our Chief
Executive Officer for the year ended December 31, 1998
. each of our directors
. all directors and executive officers as a group
. all other selling stockholders
The beneficial ownership is calculated based on 8,716,871 shares of our
common stock outstanding as of June 30, 1999 and 10,741,871 shares outstanding
immediately following the completion of this offering. Beneficial ownership is
determined in accordance with the rules and regulations of the Securities and
Exchange Commission and includes shares over which the indicated beneficial
owner exercises voting and/or investment power. In computing the number of
shares beneficially owned by a person and the percentage ownership of that
person, shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of the date of this
prospectus are deemed outstanding. These shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person. Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, each stockholder named in the table has
sole voting and investment power with respect to the shares set forth opposite
such stockholders' name. The address of each of the executive officers and
directors is care of AstroPower, Inc., Solar Park, Newark, Delaware 19716-2000.
54
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned Number of Shares Beneficially Owned
Before the Offering (1) Shares After the Offering (1)
------------------------------ Being -------------------------------
Name of Beneficial Owner Number Percentage Offered Number Percentage
- ------------------------ --------------- -------------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Allen M. Barnett (2).... 1,482,331 16.5% 61,250 1,421,081 12.9%
Wellington Management
Company, LLP (3)....... 833,000 9.6% -- 833,000 7.8%
75 State Street
Boston, MA 02109
Astrosystems, Inc....... 588,750 6.8% 588,750 -- --
1220 Market Street,
Suite 603
Wilmington, DE 19801
The Dow Chemical
Company................ 560,832 6.4% -- 560,832 5.2%
2030 Dow Center
Midland, MI 48674
Greenville Capital
Management Inc. (4).... 542,612 6.2% -- 542,612 5.1%
P.O. Box 220
Rockland, DE 19732
FMR Corporation (5)..... 426,000 5.0% -- 426,000 4.0%
82 Devonshire Street
Boston, MA 02109
Peter C. Aschenbrenner
(6).................... 49,204 ** -- 49,204 **
Robert B. Hall (7)...... 82,049 ** -- 82,049 **
Thomas J. Stiner (8).... 67,508 ** -- 67,508 **
Richard K. McDowell
(9).................... 5,150 ** -- 5,150 **
Clare E. Nordquist
(10)................... 10,000 ** -- 10,000 **
George S. Reichenbach
(11)................... 10,000 ** -- 10,000 **
George W. Roland (12)... 182,500 2.1% 25,000 157,500 1.4%
Charles R. Schaller
(13)................... 15,250 ** -- 15,250 **
Gilbert H. Steinberg
(14)................... 598,750 6.9% 588,750 10,000 **
All directors and
executive officers as a
group (eleven persons)
(15)................... 2,534,117 27.0% 675,000 1,859,117 17.3%
University of Delaware.. 156,260 1.8% 50,000 106,260 1.0%
112 Hullihen Hall
Newark, DE 19716
</TABLE>
- ---------------------
** Represents less than 1 percent of our outstanding common stock.
(1) Applicable percentage of ownership is based on 8,716,871 shares of our
common stock outstanding as of June 30, 1999 and treats as outstanding all
shares issuable on exercise of options exercisable within 60 days of the
date hereof held by beneficial owners that are included in the first
column.
(2) Includes 1,181,364 shares held by a family trust of which Dr. Barnett is a
beneficiary and also 280,250 shares subject to options exercisable within
60 days from the date hereof. Dr. Barnett disclaims beneficial ownership
of the shares held by the trust except to the extent of his pecuniary
interest therein.
(3) The following information has been obtained from Schedule 13G dated
December 31, 1998 filed by Wellington Management Company LLP pursuant to
the Exchange Act.
The persons filing the Schedule 13G were Wellington Management Company LLP
("WMC") a limited liability partnership organized under the laws of the
Commonwealth of Massachusetts. WMC, a Parent Holding Company, is an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940. The identity and the classification of the relevant
subsidiary are: Wellington Trust Company, NA, 75 State Street, Boston, MA
02109, a wholly-owned subsidiary of WMC and a bank as defined in Section
39a)(6) of the Securities Exchange Act of 1934.
The securities as to which the Schedule was filed by WMC, in its capacity
as investment adviser, are owned of record by clients of WMC. WMC has
shared power to vote or to direct the vote with respect to 713,000 shares
and shared power to dispose or to direct the disposition with respect to
833,000 shares.
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<PAGE>
(4) The following information has been obtained from Schedule 13G dated
January 21, 1999 filed by Greenville Capital Management, Inc., pursuant to
the Exchange Act.
The persons filing the Schedule 13G were Greenville Capital Management,
Inc., a corporation organized under the laws of the State of Delaware.
Greenville is an investment adviser registered under Section 203 of the
Investment Advisors Act of 1940. Greenville has sole power to dispose of
or to direct the disposition of these shares.
(5) The following information has been obtained from Schedule 13G dated June
1, 1999, filed by FMR Corporation pursuant to the Exchange Act.
The persons filing the Schedule 13G were FMR Corporation, Fidelity
Management & Research Company, Edward C. Johnson, III and Abigail P.
Johnson.
Fidelity Management & Research Company ("Fidelity"), 82 Devonshire Street,
Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, is the beneficial owner of 200,000 shares or 2.343% of our
outstanding common stock as a result of acting as investment adviser to
various investment companies (the "funds") registered under Section 8 of
the Investment Company Act of 1940.
Edward C. Johnson 3d, FMR Corp., through its control of Fidelity, and the
funds collectively each has sole power to dispose of the 200,000 shares
owned by the funds. Neither FMR Corp., nor Edward C. Johnson 3d, Chairman
of FMR Corp., has the sole power to vote or direct the voting of the
shares owned directly by the funds, which power resides with the funds'
Board of Trustees. Fidelity carries out the voting of the shares under
written guidelines established by the funds' Board of Trustees.
Fidelity Management Trust Company, 82 Devonshire Street, Boston,
Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and a bank as
defined in Section 3(a)(6) of the Securities Exchange Act of 1934, is the
beneficial owner of 111,700 shares or 1.309% of our outstanding common
stock as a result of its serving as investment manager of the
institutional account(s). Edward C. Johnson 3d and FMR Corp., through its
control of Fidelity Management Trust Company, each have sole dispositive
power over 111,700 shares and sole power to vote or to direct the voting
of 111,700 shares.
Fidelity International Limited ("FIL"), Pembroke Hall, 42 Crowlane,
Hamilton, Bermuda, and various foreign-based subsidiaries provide
investment advisory and management services to a number of non-U.S.
investment companies (the "international funds") and certain institutional
investors. FIL is the beneficial owner of 115,170 shares or 1.349% of our
outstanding common stock. FIL has sole dispositive power 115,170 shares
owned by the international funds. FIL has sole power to vote or direct the
voting of 115,170 shares of common stock held by the international funds
as reported above.
(6) Includes 49,204 shares subject to options exercisable within 60 days from
the date hereof.
(7) Includes 13,800 shares subject to options exercisable within 60 days from
the date hereof.
(8) Includes 67,508 shares subject to options exercisable within 60 days from
the date hereof.
(9) Includes 5,000 shares subject to options exercisable within 60 days from
the date hereof.
(10) Includes 10,000 shares subject to options exercisable within 60 days from
the date hereof.
(11) Includes 10,000 shares subject to options exercisable within 60 days from
the date hereof.
(12) Includes 182,500 shares subject to options exercisable within 60 days from
the date hereof.
(13) Includes 10,000 shares subject to options exercisable within 60 days from
the date hereof.
(14) Includes 10,000 shares subject to options exercisable within 60 days from
the date hereof and 588,750 shares held by Astrosystems, Inc. Mr.
Steinberg, a member of our board of directors, 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.
(15) Includes an aggregate of 662,887 shares held by all directors and officers
that are subject to options exercisable within 60 days from the date
hereof. See Notes (6) through (14) above.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue up to 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. Upon consummation of this offering, no shares of preferred stock and
10,741,871 shares of common stock will be outstanding. The following
description of our capital stock is based upon, and is qualified in its
entirety by reference to, our amended and restated certificate of incorporation
and amended and restated by-laws.
Common Stock
As of June 30, 1999, there were 8,716,871 shares of common stock outstanding
that were held of record by approximately 322 stockholders. As of that same
date, there were also outstanding options to purchase an aggregate of 2,182,473
shares of common stock at a weighted average exercise price of $7.60 per share.
Holders of our common stock are entitled to one vote per share of each share
held on all matters submitted to a vote of stockholders. We do not have
cumulative voting rights in the election of directors, and accordingly, holders
of a majority of the shares 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 our common
stock are entitled to receive proportionately such dividends as may be declared
by our board of directors out of funds legally available. In the event of our
liquidation, dissolution or winding up, holders of our common stock are
entitled to share proportionately in our available assets, after payments of
all debts and other liabilities. Holders of our common stock have no
preemptive, subscription, redemption or conversion rights. Our outstanding
shares of our common stock are, and the shares of our common stock offered
hereby, will, upon completion of the offering, be, validly issued, fully paid
and non-assessable. The rights, preferences and privileges of holders of our
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 we may designate and
issue in the future.
Preferred Stock
Under the terms of our amended and restated certificate of incorporation,
our board of directors is authorized to issue shares of preferred stock in one
or more series without stockholder approval. Our board of directors has the
discretion to determine the rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, of each series of preferred stock.
The purpose of authorizing our board of directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. 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 could discourage a third party from acquiring,
a majority of our outstanding voting stock. We have no present plans to issue
any shares of preferred stock.
Delaware Law and our Charter and By-law Provisions
We are 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. Our amended and
restated certificate of incorporation contains provisions enabling us to avoid
the statute's restrictions if the stockholders holding a majority of our voting
stock
57
<PAGE>
approve an amendment to our amended and restated certificate of incorporation
and amended and restated by-laws. These provisions may make it more difficult
for a third party to acquire, or discourage acquisition bids for us.
Our amended and restated certificate of incorporation classifies our board
of directors into three classes, with directors of each class serving for a
staggered three-year period. Our amended and restated certificate of
incorporation also provides 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 our common stock entitled to vote for such directors.
Under our amended and restated certificate of incorporation only our board of
directors, but not our stockholders, has the authority to fill vacancies and
newly created directorships on the board of directors. In addition, our amended
and restated certificate of incorporation provides that any action required or
permitted to be taken by our stockholders must be effected at an annual or
special meeting of stockholders and not by any consent in writing by our
stockholders. Only the board of directors may call special meetings of our
stockholders. Such provisions may 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.
Our 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.
Our 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 our stockholders to collect monetary damages from directors. We
believe that these provisions will assist us in attracting or retaining
qualified individuals to serve as directors.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company, its address is 40 Wall Street, New York, New York
10005, and its telephone number at this address is (212-936-5100).
Listing
Our common stock is traded on the Nasdaq National Market under the trading
symbol "APWR."
58
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives, Hambrecht & Quist LLC,
CIBC World Markets Corp. and FAC/Equities, a division of First Albany
Corporation, have severally agreed to purchase from AstroPower and the selling
stockholders the following respective number of shares of our common stock.
<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
Hambrecht & Quist LLC............................................
CIBC World Markets Corp..........................................
FAC/Equities, a division of First Albany Corporation.............
---------
Total.......................................................... 2,750,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in our business and the receipt of certain
certificates, opinions and letters from us, our counsel and independent
auditors. The nature of the underwriters' obligation is such that they are
committed to purchase all shares of common stock offered in this offering if
any of such shares are purchased.
The underwriters propose to offer the shares of common stock directly to the
public at the public offering price set forth on the cover page of this
prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The underwriters may allow and such dealers may reallow a
concession not in excess of $ per share to certain other dealers. After the
public offering of the shares, the offering price and other selling terms may
be changed by the representatives of the underwriters.
We have granted to the underwriters an option, exercisable no later than 30
days after the date of this prospectus, to purchase up to 412,500 additional
shares of common stock at the public offering price, less the underwriting
discount set forth on the cover page of this prospectus. To the extent that the
underwriters exercise this option, each underwriter will have a firm commitment
to purchase approximately the same percentage of the additional shares that the
number of shares of common stock to be purchased by such underwriter shown in
the above table bears to the total number of shares of common stock offered in
this offering. We will be obligated, pursuant to the option, to sell shares to
the underwriters to the extent the option is exercised. The underwriters may
exercise the option only to cover over-allotments made in connection with the
sale of common stock offered in this prospectus.
The following table summarizes the per share and total underwriting
discounts and commissions that we and the selling stockholders will pay to the
underwriters in connection with this offering:
<TABLE>
<CAPTION>
Total
-------------------
Without With
Per Over- Over-
Share allotment allotment
----- --------- ---------
<S> <C> <C> <C>
Underwriting discounts and commissions payable by
us................................................. $ $ $
Underwriting discounts and commissions payable by
selling stockholders............................... $ $ $
</TABLE>
The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
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<PAGE>
We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended, and to contribute to payments the underwriters may be
required to make in respect thereof.
Our executive officers and directors and the selling shareholders have
agreed that, with certain exceptions, they will not directly or indirectly,
without the prior written consent of Hambrecht & Quist LLC, sell, offer,
contract to sell, transfer the economic risk of ownership in, make any short
sale, pledge or otherwise dispose of any shares of our common stock or any
securities convertible into or exchangeable or exercisable for or any rights to
purchase or acquire our common stock during the 90-day period following the
effective date of the registration statement relating to this prospectus. We
have agreed that we will not, without the prior written consent of Hambrecht &
Quist LLC, offer, sell or otherwise dispose of any shares of common stock or
options to acquire shares of common stock or securities exchangeable for or
convertible into shares of common stock during the 90-day period following the
date of this prospectus, except that we may issue shares upon the exercise of
options granted prior to the date hereof, and may grant additional options
under our stock option plans, provided that, without the prior written consent
of Hambrecht & Quist LLC, the additional options shall not be exercisable
during that period. Hambrecht & Quist LLC may consent to the termination of
this agreement at any time or from time to time without notice.
In general, the rules of the Securities and Exchange Commission will
prohibit the underwriters from making a market in our common stock during the
"cooling off" period immediately preceding the commencement of sales in this
offering. The SEC has, however, adopted exemptions from these rules that permit
passive market marking under certain conditions. These rules permit an
underwriter to continue to make a market subject to the conditions, among
others, that its bid not exceed the highest bid by a market maker not connected
with the offering and that its net purchases on any one trading day not exceed
prescribed limits. Pursuant to these exemptions, certain underwriters, selling
group members (if any) or their respective affiliates intend to engage in
passive market making in our common stock during the cooling off period.
Certain persons participating in this offering may over-allot or effect
transactions that stabilize, maintain or otherwise affect the market price of
our common stock at levels above those which might otherwise prevail in the
open market, including by entering stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or effecting of any purchase, for the purpose of pegging,
fixing or maintaining the price of the common stock. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created
in connection with the offering. A penalty bid means an arrangement that
permits the underwriters to reclaim a selling concession from a syndicate
member in connection with the offering when shares of common stock sold by the
syndicate member are purchased in syndicate covering transactions. Such
transactions may be effected on the Nasdaq National Market, in the over-the-
counter market or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.
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<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby is being passed
upon for us 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 Hale and Dorr LLP, Boston, Massachusetts. A partner of Opton
Handler Feiler & Landau, LLP owns 100,000 shares of our common stock.
EXPERTS
Our financial statements and schedule as of December 31, 1997 and 1998 and
for each of the years in the three-year period ended December 31, 1998 have
been included herein and in the Registration Statement in reliance upon the
report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
WHERE CAN YOU FIND MORE INFORMATION ABOUT US
We have filed with the Securities and Exchange Commission in Washington,
D.C. a registration statement on Form S-1 under the Securities Act with respect
to the shares of common stock offered in this prospectus. This prospectus does
not contain all the information set forth in the registration statement and the
exhibits and schedules thereto. For further information about us and our common
stock, we refer you to the registration statement and to the exhibits and
schedules filed with it. Statements contained in this prospectus as to the
contents of any contract or other document referred to are not necessarily
complete; we refer you to those copies of contracts or other documents that
have been filed as exhibits to the registration statement, and statements
relating to such documents are qualified in all respects by such reference.
Anyone may inspect a copy of the registration statement without charge at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain copies of all or any portion of the registration statement by
writing to the SEC's Public Reference Room, 450 Fifth Street, N.W., Washington,
D.C. 20549, and paying prescribed fees. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0300. In
addition, the SEC maintains a Web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
companies such as ours that file electronically with the SEC.
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and therefore we file reports, proxy statements and
other information with the SEC. You can inspect and copy the reports, proxy
statements and other information that we file at the public reference
facilities maintained by the SEC at the Public Reference Room, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices located
at 7 World Trade Center, Suite 1300, New York, New York, 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You can also obtain copies
of such material from the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The SEC also makes
electronic filings publicly available on its Web site within 24 hours of
acceptance. Our common stock is quoted on the Nasdaq National Market under the
trading symbol "APWR." Reports, proxy and information statements and other
information about us may be inspected at the National Association of Securities
Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
61
<PAGE>
ASTROPOWER, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of KPMG LLP, Independent Auditors................................... F-1
Balance Sheets............................................................. F-2
Statements of Operations................................................... F-4
Statements of Stockholders' Equity (Deficit)............................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
62
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
AstroPower, Inc.
We have audited the accompanying balance sheets of AstroPower, Inc. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity (deficit), and cash flows for each of the years in the
three-year period ended December 31, 1998. 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
December 31, 1997 and 1998, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1998,
in conformity with generally accepted accounting principles.
/s/KPMG LLP
Wilmington, DE
February 22, 1999
F-1
<PAGE>
ASTROPOWER, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------ June 30,
1997 1998 1999
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (including
restricted cash of $4,788,519 at
December 31, 1997)................... $ 4,908,177 $ 6,545,095 $ 2,149,598
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $72,962 in 1997, $70,695
in 1998 and $88,596 in 1999
(unaudited)......................... 3,326,200 6,531,144 8,685,613
Employee receivables................. 10,191 84,121 86,277
Other, including amounts due from
stockholder......................... 25,681 32,113 18,663
Inventories........................... 1,602,321 3,596,676 6,299,388
Prepaid expenses...................... 350,471 159,948 1,008,079
Deferred tax asset.................... -- 1,796,338 1,483,096
----------- ----------- -----------
Total current assets.............. 10,223,041 18,745,435 19,730,714
Property and equipment:
Machinery and equipment.............. 6,856,031 10,448,628 11,459,615
Furniture and fixtures............... 152,617 334,186 419,210
Leasehold improvements............... 205,298 917,698 967,568
Construction in progress............. 536,370 1,575,163 1,912,058
----------- ----------- -----------
7,750,316 13,275,675 14,758,451
Less accumulated depreciation and
amortization......................... (2,858,195) (3,654,796) (4,171,783)
----------- ----------- -----------
4,892,121 9,620,879 10,586,668
----------- ----------- -----------
Total assets...................... $15,115,162 $28,366,314 $30,317,382
=========== =========== ===========
</TABLE>
F-2
<PAGE>
ASTROPOWER, INC.
BALANCE SHEETS--(Continued)
<TABLE>
<CAPTION>
December 31,
------------------------ June 30,
1997 1998 1999
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable...................... $ 2,314,495 $ 2,629,068 $ 3,490,597
Note payable -- stockholder........... 58,000 -- --
Note payable -- bank.................. 203,357 -- --
Current maturities of long-term debt.. 55,000 -- --
Accrued payroll and payroll taxes
(includes $185,161 in 1997, $185,910
in 1998 and $186,834 in 1999
(unaudited) due to the Company's
President and Chief Executive
Officer)............................. 978,256 963,243 856,933
Accrued expenses...................... 394,564 313,640 234,042
Advance from customer................. 610,891 -- 3,646
----------- ----------- -----------
Total current liabilities......... 4,614,563 3,905,951 4,585,218
Other liabilities:
Long-term debt, excluding current
maturities........................... 6,277,174 -- --
Deferred tax liability................ -- 801,452 801,452
Deferred compensation and other
(including amounts due to officers
and a stockholder)................... 463,900 396,027 205,525
----------- ----------- -----------
6,741,074 1,197,479 1,006,977
----------- ----------- -----------
Total liabilities................. 11,355,637 5,103,430 5,592,195
----------- ----------- -----------
Redeemable convertible preferred stock:
Series A Convertible Preferred Stock,
1,331,250 shares authorized in 1997;
1,309,626 shares issued and
outstanding in 1997, $.01 per share
par value, liquidation preference of
$8,808,188, redeemable, 8% dividend
rate, non-cumulative................. 5,798,725 -- --
Commitments and contingencies
Stockholders' equity (deficit):
Series B Convertible Preferred Stock,
750,000 shares authorized; in 1997;
336,409 shares issued and outstanding
in 1997, $.01 per share par value, 8%
dividend rate, non-cumulative........ 3,364 -- --
Common Stock, 25,000,000 shares
authorized; 3,769,772 in 1997,
8,572,455 in 1998 and 8,716,871 in
1999 (unaudited) shares issued and
outstanding, $.01 per share par
value................................ 37,698 85,725 87,169
Additional paid-in capital............ 3,288,017 25,956,474 26,637,422
Note receivable....................... (79,125) -- --
Unearned compensation................. (343,743) (245,718) (196,706)
Accumulated deficit................... (4,945,411) (2,533,597) (1,802,698)
----------- ----------- -----------
Total stockholders' equity
(deficit)........................ (2,039,200) 23,262,884 24,725,187
----------- ----------- -----------
Total liabilities and
stockholders' equity (deficit)... $15,115,162 $28,366,314 $30,317,382
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ASTROPOWER, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------------------- -----------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ---------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales......... $ 6,237,349 $13,094,871 $20,205,913 $8,894,825 $13,550,281
Research contracts.... 4,346,118 3,511,898 2,953,196 1,421,102 1,578,840
----------- ----------- ----------- ---------- -----------
Total revenues...... 10,583,467 16,606,769 23,159,109 10,315,927 15,129,121
Cost of revenues:
Product sales......... 6,896,109 9,311,140 14,942,121 6,530,910 9,973,474
Research contracts.... 2,579,994 2,539,915 2,296,895 1,137,925 1,136,912
----------- ----------- ----------- ---------- -----------
Total cost of
revenues........... 9,476,103 11,851,055 17,239,016 7,668,835 11,110,386
----------- ----------- ----------- ---------- -----------
Gross profit........ 1,107,364 4,755,714 5,920,093 2,647,092 4,018,735
Operating expenses:
Product development
expenses............. 775,963 1,006,979 1,392,251 608,543 1,045,759
General and
administrative
expenses............. 1,858,862 1,972,144 2,495,838 1,183,655 1,392,242
Selling expenses...... 660,468 853,812 951,249 451,173 593,461
----------- ----------- ----------- ---------- -----------
Total operating
expenses........... 3,295,293 3,832,935 4,839,338 2,243,371 3,031,462
----------- ----------- ----------- ---------- -----------
Income (loss) from
operations......... (2,187,929) 922,779 1,080,755 403,721 987,273
Other expense (income):
Interest expense...... 168,782 369,233 252,200 197,589 785
Interest income....... (5,685) (113,730) (598,624) (338,387) (57,653)
Other expense
(income)............. 11,959 (4,550) (3) -- --
----------- ----------- ----------- ---------- -----------
Total other expense
(income)........... 175,056 250,953 (346,427) (140,798) (56,868)
Income (loss) before
income taxes........... (2,362,985) 671,826 1,427,182 544,519 1,044,141
Income tax expense
(benefit).............. -- 20,000 (984,632) 25,000 313,242
----------- ----------- ----------- ---------- -----------
Net income (loss)....... $(2,362,985) $ 651,826 $ 2,411,814 $ 519,519 $ 730,899
=========== =========== =========== ========== ===========
Net income (loss) data:
Net income (loss) per
share-- basic........ $ (0.64) $ 0.18 $ 0.30 $ 0.07 $ 0.09
=========== =========== =========== ========== ===========
Net income (loss) per
share-- diluted...... $ (0.64) $ 0.13 $ 0.28 $ 0.07 $ 0.08
=========== =========== =========== ========== ===========
Weighted average
shares outstanding--
basic................ 3,699,702 3,710,258 7,956,221 7,336,169 8,639,821
=========== =========== =========== ========== ===========
Weighted average
shares outstanding--
diluted.............. 3,699,702 6,220,161 9,572,194 7,336,169 9,543,149
=========== =========== =========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ASTROPOWER, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
---------------- ----------------- Paid-in Note Unearned Accumulated
Shares Amount Shares Amount Capital Receivable Compensation Deficit Total
-------- ------ --------- ------- ----------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1996................ 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............. -- -- 67,997 680 113,471 (79,125) -- -- 35,026
Stock options
granted............ -- -- -- -- 417,225 -- (417,225) --
Amortization of
unearned
compensation....... -- -- -- -- -- -- 73,482 -- 73,482
Net income.......... -- -- -- -- -- -- -- 651,826 651,826
-------- ------ --------- ------- ----------- -------- --------- ----------- ------------
Balance, December 31,
1997................ 336,409 $3,364 3,769,772 $37,698 $ 3,288,017 $(79,125) $(343,743) $(4,945,411) $ (2,039,200)
Conversion of Series
A Convertible
Preferred Stock.... -- -- 1,309,626 13,096 5,785,629 -- -- -- 5,798,725
Conversion of Series
B Convertible
Preferred Stock.... (336,409) (3,364) 336,409 3,364 -- -- -- --
Common Stock
issued............. -- -- 3,156,648 31,567 16,781,488 -- -- 16,813,055
Amortization of
unearned
compensation....... -- -- -- -- -- -- 98,025 -- 98,025
Stock options
granted............ -- -- -- -- 101,340 -- 101,340
Repayment of note
receivable......... -- -- -- -- -- 79,125 -- -- 79,125
Net income.......... -- -- -- -- -- -- 2,411,814 2,411,814
-------- ------ --------- ------- ----------- -------- --------- ----------- ------------
Balance, December 31,
1998................ -- $ -- 8,572,455 $85,725 $25,956,474 $ -- $(245,718) $(2,533,597) $ 23,262,884
Common Stock
issued............. -- -- 144,416 1,444 680,948 -- -- -- 682,392
Amortization of
unearned
compensation....... -- -- -- -- -- -- 49,012 -- 49,012
Net income.......... -- -- -- -- -- -- -- 730,899 730,899
-------- ------ --------- ------- ----------- -------- --------- ----------- ------------
Balance, June 30,
1999 (unaudited).... -- $ -- 8,716,871 $87,169 $26,637,422 $ -- ($196,706) ($1,802,698) $24,725,187
======== ====== ========= ======= =========== ======== ========= =========== ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ASTROPOWER, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)....... $(2,362,985) $ 651,826 $ 2,411,814 $ 519,519 $ 730,899
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Deferred income
taxes................ -- -- (994,886) -- 313,242
Depreciation and
amortization......... 474,569 545,066 796,601 328,244 516,987
Common stock issued
for services......... -- 18,500 -- -- --
Stock options issued
for services......... -- -- 50,670 -- --
Amortization of
unearned
compensation......... -- 73,482 98,025 93,022 49,012
Changes in working
capital items:
Accounts
receivable......... 278,164 (1,313,264) (3,285,306) (1,629,210) (2,154,469)
Inventories......... 921,855 (388,133) (1,994,355) (1,407,492) (2,702,712)
Prepaid expenses.... 5,587 (291,201) 190,523 47,744 (848,131)
Accounts payable and
accrued expenses... 595,790 719,000 233,649 (266,066) 781,931
Accrued payroll and
payroll taxes...... 330,684 313,736 (15,013) (61,608) (291,096)
Advance from
customer........... 111,260 277,355 (610,891) (289,135) 3,646
Other............... 12,143 (16,562) (16,822) 64,001 5,578
----------- ----------- ----------- ----------- -----------
Net cash provided by
(used in) operating
activities............. 367,067 589,805 (3,135,991) (2,600,981) (3,595,113)
Cash flows from
investing activities:
Capital expenditures.. (970,431) (893,920) (5,474,689) (3,646,848) (1,482,776)
----------- ----------- ----------- ----------- -----------
Net cash used in invest-
ing activities......... (970,431) (893,920) (5,474,689) (3,646,848) (1,482,776)
----------- ----------- ----------- ----------- -----------
Cash flows from
financing activities:
Proceeds from issuance
of long-term debt.... 202,097 6,033,076 -- -- --
Net borrowings
(repayments) from
line of credit....... 175,000 (327,843) (203,357) (203,357) --
Repayment of long-term
debt................. (358,200) (594,396) (6,390,174) (1,393,174) --
Proceeds from issuance
of common stock...... 4,875 16,525 229,049 118,859 682,392
Proceeds from issuance
of common stock--
initial public
offering............. -- -- 16,612,080 16,612,080 --
Proceeds from issuance
of preferred stock... 575,505 90,000 -- -- --
Repurchase of
preferred stock...... -- (30,000) -- -- --
----------- ----------- ----------- ----------- -----------
Net cash provided by
financing activities... 599,277 5,187,362 10,247,598 15,134,408 682,392
----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents............ (4,087) 4,883,247 1,636,918 8,886,579 (4,395,497)
Cash and cash
equivalents at
beginning of period.... 29,017 24,930 4,908,177 4,908,177 6,545,095
----------- ----------- ----------- ----------- -----------
Cash and cash
equivalents at end of
period................. $ 24,930 $ 4,908,177 $ 6,545,095 $13,794,756 $ 2,149,598
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE:
Interest paid....... $ 129,555 $ 160,544 $ 597,190 $ 326,993 $ --
Taxes paid.......... -- -- 31,000 24,000 51,600
</TABLE>
Other noncash financing and investing activities:
During 1997, the Company issued 34,213 shares of common stock in exchange
for a 6% promissory note in the amount of $79,125, with a maturity of August
15, 1998.
On February 19, 1998, the Company converted all shares of Series A and
Series B Convertible Preferred Stock into 2,194,709 shares of common stock on a
one-for-one basis.
During 1998, the Company issued stock options for 119,000 shares of common
stock to Corning Incorporated.
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 operates in only one business segment, as substantially all of
its combined revenues, net income (loss) and assets are derived from the
development, manufacturing, marketing and sale of PV solar cells, modules and
panels for generating solar electric power. Solar cells are semiconductor
devices that convert sunlight directly into electricity. Solar electric power
is used in on-grid applications by existing electric utility customers to
provide a clean, renewable source of alternative or supplementary electric
power. Solar electric power is also used off the electric utility grid for many
applications in the communications and transportation industries and in remote
villages and homes. 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 12.
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.
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 December 31, 1997 and 1998 were
$4,776,886 and $8,175,354 respectively, representing self-constructed assets.
In costing the equipment, the Company uses a full cost approach whereby direct
material, direct labor and related overhead costs are capitalized. The total
labor and overhead costs of self-constructed assets capitalized for the years
ended December 31, 1996 and 1997 and 1998 were $303,677, $176,397, and $828,009
respectively.
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
F-7
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(1) Summary of Significant Accounting Policies (continued)
Revenue Recognition (continued)
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-Film(TM) 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.
(2) Interim Financial Information (Unaudited)
The interim financial statements of the Company for the six months ended
June 30, 1998 and 1999, included herein, have been prepared by the Company,
without audit, pursuant to the rules and regulations of the SEC. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principals have been
condensed or omitted pursuant to the rules and regulations relating to interim
financial statements.
(3) Inventories
A summary of inventories is as follows:
<TABLE>
<CAPTION>
December 31,
--------------------- June 30,
1997 1998 1999
---------- ---------- -----------
(unaudited)
<S> <C> <C> <C>
Raw materials.............................. $1,199,738 $2,995,166 $4,310,905
Work-in-process............................ 210,380 138,927 179,808
Finished goods............................. 192,203 462,583 1,808,675
---------- ---------- ----------
$1,602,321 $3,596,676 $6,299,388
========== ========== ==========
</TABLE>
F-8
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(4) Debt
A summary of the Company's long-term debt follows:
<TABLE>
<CAPTION>
December 31,
------------------ June 30,
1997 1998 1999
---------- ------ -----------
(unaudited)
<S> <C> <C> <C>
Bank term loans--primary lender; initial
interest to be prime plus 1%; 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....................... $ 702,000 $ -- $ --
Bank term loan, with interest at prime plus
1.5% 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, 2000, at
which time the balance is due................. 630,174 -- --
7% convertible promissory note due August 19,
2001, collateralized by certain physical
assets, as described in Note 13............... 5,000,000 -- --
---------- ------ ------
6,332,174 -- --
Less current maturities........................ (55,000) -- --
---------- ------ ------
$6,277,174 $ -- $ --
========== ====== ======
</TABLE>
On March 19, 1998 the Company repaid the amounts outstanding under its bank
term loans amounting to $1,277,173. Accordingly, $275,000 representing the
remaining 1998 payments under these term loans were excluded from current
maturities as of December 31, 1997.
During 1998, the Company entered into a $1 million line of credit agreement
with a financial institution, secured by accounts receivable and bearing
interest at the prime rate. Also during 1998, the Company entered into a $3
million revolving line of credit facility with a financial institution.
Security for the facility, which bears interest at the prime rate, is accounts
receivable, inventory and property and equipment. These facilities expire in
September 2001. There were no borrowings against these facilities at
December 31, 1998 or June 30, 1999 (unaudited).
F-9
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(5) Income Taxes
No income tax provision was recorded for the year ended December 31, 1996.
An income tax provision (benefit) of $20,000 and ($984,632) was recorded for
the years ended December 31, 1997 and 1998. Income tax expense (benefit)
differed from the amounts computed by applying the U.S. federal income tax rate
of 34% to pretax income (loss) as a result of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1996 1997 1998
--------- -------- ----------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit).... $(803,415) $228,421 $ 485,242
Utilization of net operating loss
carryforwards............................... -- (17,685) (205,266)
State income tax expense (benefit), net of
federal..................................... -- 20,761 (80,651)
Change in valuation allowance................ 770,392 135,928 (1,809,315)
Change in tax rates.......................... -- -- 242,107
Tax liability in excess (less than) in excess
provision................................... 33,023 (347,425) 185,579
Other........................................ -- -- 197,672
--------- -------- ----------
Actual tax expense (benefit)................. $ -- $ 20,000 $ (984,632)
========= ======== ==========
Income tax expense (benefit) for the years 1996, 1997 and 1998 consists of:
<CAPTION>
1996 1997 1998
--------- -------- ----------
<S> <C> <C> <C>
Current:
Federal.................................... $ -- $ 20,000 $ 10,254
State...................................... -- -- --
Deferred:
Federal.................................... -- -- (872,688)
State...................................... -- -- (122,198)
--------- -------- ----------
Total tax expense (benefit).................. $ -- $ 20,000 $ (984,632)
========= ======== ==========
</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,
----------------------------------
1996 1997 1998
----------- ---------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Deferred revenue......................... $ 133,000 $ 242,780 $ --
Advances from customer and accrued
expenses................................ 161,958 323,698 417,159
Federal and state net operating loss
carry forward........................... 1,750,000 2,021,628 1,301,454
Other.................................... -- -- 77,725
----------- ---------- ---------
Total gross deferred tax assets.......... 2,044,958 2,588,106 1,796,338
Less valuation allowance................. (1,673,387) (1,809,315) --
----------- ---------- ---------
Net deferred tax assets ................... 371,571 778,791 1,796,338
Deferred tax liabilities:
Plant and equipment, due to differences
in depreciation methods and basis....... (371,571) (778,791) (801,452)
----------- ---------- ---------
Net deferred amount........................ $ -- $ -- $ 994,886
=========== ========== =========
</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
December 31, 1998, the Company has net operating loss carryforwards for federal
income tax purposes of approximately $4.1 million which are available to offset
future federal and state taxable income, if any, through 2012.
(6) 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). In January 1998, the Company entered into an operating
lease agreement for a 60,300 square foot facility for its manufacturing
expansion. In January 1999, the Company entered into an agreement for an
additional 20,000 square feet in its second manufacturing facility. 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 agreements for both facilities (including the additional January 1999
Lease):
<TABLE>
<CAPTION>
Annual Rent Expected
Expense Cash Payments
----------- -------------
<S> <C> <C>
December 31, 1999.................................. $ 735,020 $ 645,291
December 31, 2000.................................. 664,764 582,326
December 31, 2001.................................. 535,884 476,752
December 31, 2002.................................. 535,884 484,875
December 31, 2003 and thereafter................... 2,947,362 2,422,317
</TABLE>
In addition, the Company has agreed to fund anticipated renovations to the
facility leased from the University 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,
1996, 1997 and 1998 amounted to approximately $219,000, $242,000 and $596,000,
respectively.
(7) Related Parties
At December 31, 1997 and 1998, the Company owed its President and Chief
Executive Officer $555,482 and $370,696, 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.
(8) 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
F-11
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(8) Employee Benefit Plan (continued)
ended December 31, 1996, 1997 and 1998 was $66,800, $145,000 and $150,000,
respectively. The Company does not provide any postemployment benefits.
(9) Capital Stock
At December 31, 1997, the Company had outstanding 1,309,623 shares of Series
A Redeemable Convertible Preferred Stock (Series A) and 336,409 shares of
Series B Convertible Preferred Stock (Series B). The Series A stockholders
could, at their option, request that the Company redeem the Series A stock on
or after May 15, 1994. At December 31, 1997 and 1996, the value of the Series A
Redeemable Preferred Stock has been accreted to its redemption value of
$5,798,725.
On February 19, 1998, the Company completed an initial public offering of
its common stock, raising net proceeds to the Company of $14.5 million, and
converted all the then outstanding shares of Series A and Series B Preferred
Stock into Common Stock so that no shares of Preferred Stock are currently
outstanding. Contemporaneous with the initial public offering, the Company
amended and restated its Certificate of Incorporation to provide for, among
other things, an increase in the number of authorized shares of Common Stock
from 15,000,000 to 25,000,000; authority to issue up to 5,000,000 shares of one
or more series of preferred stock and authorized the Board of Directors 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;
and to effect a reverse stock split in the form of three shares for every four
shares outstanding. All share and per share information in the accompanying
financial statements have been retroactively adjusted to give effect to the
reverse stock split. On March 19, 1998, the Company received additional net
proceeds of $2,259,900, pursuant to the exercise of the over-allotment option
granted to the underwriters as part of the initial public offering.
(10) Employee Stock Option Plan
1989 Stock Option Plan
The Company adopted a Stock Option Plan ("the 1989 Plan") in 1989 under
which a total of 1,920,000 shares are currently reserved for issuance to
employees including officers and directors who are employees or consultants.
Options granted pursuant to the 1989 Plan may be either incentive stock options
or non-qualified stock options. The 1989 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 1989 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 1989 Plan are determined by the Board of Directors,
but in no event may such term exceed ten years. Incentive stock options
generally vest over a four-year period, with vesting occurring 25% per year on
the anniversary date of the option award.
1999 Stock Option Plan (unaudited)
The Board of Directors of the Company adopted the 1999 Stock Option Plan on
April 16, 1999 ("the 1999 Plan"), under which a total of 600,000 shares are
currently reserved for issuance. The 1999 Plan was approved by shareholders on
June 16, 1999. The principal provisions of the 1999 Plan are similar to those
F-12
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(10) Employee Stock Option Plan (continued)
1999 Stock Option Plan (unaudited) (continued)
described above for the 1989 Plan, except that options may be transferred under
certain limited circumstances.
Stock option transactions during the years ended December 31, 1996, 1997 and
1998 and the six months ended June 30, 1999 under the 1989 and 1999 Plans are
summarized below:
<TABLE>
<CAPTION>
Exercise Weighted
Price Range - Average
Shares Per Share Exercise Price
--------- ------------- --------------
<S> <C> <C> <C>
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.............................. 546,233 $ 3.12-$5.33 4.65
Exercised............................ (63,352) $ 0.33-$4.00 1.51
Cancelled............................ (22,847) $ 0.67-$4.00 3.89
---------
Balance, December 31, 1997............. 1,088,946 4.00
Granted.............................. 720,975 $6.00-$10.00 8.57
Exercised............................ (45,730) $0.33-$10.00 3.28
Cancelled............................ (35,570) $4.00-$10.00 6.41
---------
Balance, December 31, 1998............. 1,282,621 5.88
Granted.............................. 553,233 $9.38-$17.88 11.74
Exercised............................ (113,596) $ 0.33-$9.13 3.91
Cancelled............................ (85,785) $4.00-$15.63 7.30
--------- ------
Balance, June 30, 1999 (unaudited)..... 2,082,473 $ 7.48
========= ======
</TABLE>
In 1998 the Company adopted the 1998 Non-Employee Directors' Stock Option
Plan ("Directors' Plan"), under which a total of 160,000 shares are current
reserved for issuance to non-employee directors. A committee of the Board of
Directors administers the Directors' Plan. The Directors' Plan provides that
the purchase price under the option shall be the fair market value of the
shares of common stock on the date of grant. During the year ended December 31,
1998, a total of 80,000 stock options were granted under the Directors' Plan at
an exercise price of $10.25 per share. Of these shares, 20,000 were immediately
vested, and the balance vests in equal shares on the first, second and third
anniversary of the grant, provided that the director remains a director on that
date.
The weighted average remaining contractual life for options outstanding at
December 31, 1998 is 7.88 years.
F-13
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(10) Employee Stock Option Plan (continued)
1999 Stock Option Plan (unaudited) (continued)
The following is a summary of stock options exercisable under all of the
Company's stock option plans as of December 31, 1996, 1997 and 1998 and June
30, 1999:
<TABLE>
<CAPTION>
Exercise Price Weighted
Range per Average
Shares Share Exercise Price
------- -------------- --------------
<S> <C> <C> <C>
December 31, 1996...................... 357,825 $ 0.33-$4.00 $2.88
December 31, 1997...................... 416,476 $ 0.33-$4.00 $3.39
December 31, 1998...................... 713,125 $0.33-$10.25 $3.93
June 30, 1999 (unaudited).............. 909,913 $0.33-$17.88 $5.22
</TABLE>
Prior to the adoption of the plans, the Company had a compensatory stock
plan for the issuance of shares to employees and consultants. At December 31,
1998, 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.
The Company applies APB Opinion 25 and related interpretations in accounting
for stock options issued to employees. During the year ended December 31, 1997,
unearned compensation expense with respect to stock options granted at less
than fair market value at the date of grant was $417,225, which is being
amortized to expense over the periods that the options vest (4-5 years). The
amount amortized to expense during the years ended December 31, 1997 and 1998
was $73,482 and $98,025 respectively. The unamortized amount of unearned
compensation is classified as a contra equity account in stockholders' equity
(deficit).
FASB Statement 123 requires the disclosure of certain proforma information
regarding net income and net income per share. This information is required to
be determined as if the Company had accounted for its stock option plans under
the fair value method of that statement. The fair value of options granted in
1998 reported below has been estimated at the date of grant, using a Black-
Scholes option pricing model with the following assumptions:
<TABLE>
<S> <C>
Expected life (in years).............................................. 5.0
Risk-free interest rate............................................... 5.5%
Volatility............................................................ .50
Assumed dividend yield................................................ 0.0%
</TABLE>
The Company's relatively limited period of time as a public company makes
the determination of volatility difficult. For purposes of the FAS 123
calculation, the estimated volatility was determined by reviewing the
volatility of publicly traded technology companies with similar
characteristics.
As a private entity at December 31, 1996 and 1997, the Company used the
minimum value method for "valuing options" and an interest rate of 6.5%.
F-14
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(10) Employee Stock Option Plan (continued)
1999 Stock Option Plan (unaudited) (continued)
For purposes of proforma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The
Company's proforma information follows (in thousands, except for per share
information):
<TABLE>
<CAPTION>
1996 1997 1998
------- ---- ------
<S> <C> <C> <C>
Net income (loss) as reported.......................... $(2,363) $652 $2,412
Proforma net income (loss)............................. $(2,433) $464 $1,131
Proforma basic net income (loss) per share............. $ (.66) $.13 $ .14
Proforma diluted net income (loss) per share........... $ (.66) $.07 $ .12
</TABLE>
(11) Government Contracts
During the years ended December 31, 1996, 1997 and 1998, 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 contract 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, 1996, 1997 and 1998.
Substantially all of the Company's revenues from government contracts are
subject to audit under various federal statutes. Although the Company has
received final written acceptance of its overhead rates through 1993, it has
been advised that the Defense Contract Audit Agency is disputing certain
elements of those submissions as well as those overhead rates for 1994 and
1995. The dispute is centered on the effect of the Company's manufacturing
operations on its government contract overhead rates during the years of
transition from a contract research and development organization to commercial
manufacturing. The overhead rates for 1996 have been submitted, but have not
yet been audited. The Company has revised its methodology for determining
overhead rates for 1997 and 1998. It is management's opinion that adjustments
to revenue, if any, will not have a material adverse effect on the Company's
business and financial condition, but may impact future results of operations.
Certain of the Company's contracts contain retainage provisions. At December
31, 1997 and 1998, retainage amounts included in accounts receivable were
approximately $167,000 and $174,000, respectively. The Company estimates that
approximately 30% of the retainage amounts at December 31, 1998 will be
collected during 1999. At December 31, 1997 and 1998, unbilled accounts
receivable were approximately $211,000.
F-15
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(12) 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>
Six Months
Year Ended December 31, Ended
--------------------------- June 30,
1996 1997 1998 1999
------- ------- ------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Customer A............................ 41% 21% 13% 10%
Customer B............................ -- 12% 18% 12%
Customer C............................ 12% 17% 14% 28%
Customer D............................ -- 13% -- --
Customer E............................ 13% -- -- --
</TABLE>
Customer A represents the federal government. Included in the December 31,
1998 amount is a total of 15 contracts $2,953,196 administered by six agencies
of the U.S. Government, with contract revenues ranging from .1% to 13% of total
revenues.
During the year ended December 31, 1998, the five largest product sales
customers accounted for approximately 57% of revenues and 66% of product sales.
At December 31, 1998 approximately 73% of accounts receivable were due from the
Company's six largest customers, of which 16% represented amounts due from
agencies of the U.S. government representing Customer A and 57% represented
amounts due from the Company's five largest product sales customers in 1998.
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
condition.
(13) Geographic Distribution of Product Revenues
Total product revenues are summarized as a percentage by geographic area as
follows:
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended
--------------------------- June 30,
1996 1997 1998 1999
------- ------- ------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Domestic........................... 14% 27% 22% 26%
Export:
Europe........................... 49% 56% 63% 62%
Asia............................. 30% 12% 6% 10%
Africa........................... 7% 5% 9% 2%
</TABLE>
All of the Company's research contract revenues are within the United
States.
(14) 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 would provide research, development, engineering and
manufacturing assistance to the Company for a three year period in exchange for
options to purchase shares of the Company's common stock. As part of the R&D
Agreement, the Company received $5.0 million in cash in exchange for its 7%
note, due on August 19, 2001 and granted options for the purchase of 119,000
shares of common stock in exchange for future consulting services.
F-16
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
On October 9, 1998 the Company repaid its four-year $5 million convertible
note to Corning. The repayment terminated Corning's right to convert the note
into approximately 1,111,111 shares of AstroPower Common Stock and also
terminated the R&D agreement, and other agreements relating to new technology,
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.
In connection with the repayment, options to purchase 119,000 shares of
Common Stock were cancelled. The fair value of the consulting services rendered
through the date of cancellation was approximately $101,000, of which $50,000
was charged to expense and $51,000 to property and equipment.
GPU Solar, Inc.
In July 1997, the Company entered into a joint venture with GPU
International, Inc. to form GPU Solar, Inc. 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 was specified services and reduced pricing on sales to the joint
venture.
(15) 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%, was credited to the customer during 1997 and 1998.
The customer had 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 December 31, 1997 and
1998 was $610,756 and $0, respectively.
(16) Net Income (Loss) Per Share
Basic net income per share is based on the weighted average number of common
shares outstanding. Diluted net income per share is based on the weighted
average number of common shares outstanding and potentially dilutive shares.
The dilutive effect of employee stock options is included in the computation of
Diluted net income per share.
F-17
<PAGE>
ASTROPOWER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
The following table presents the computation of basic and diluted income
(loss) per share:
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------------------
1996 1997 1998
------------------------- ------------------------ ------------------------
Income (Loss) Average Income Average Income Average
Available to Common Available to Common Available to Common
Common Shares Common Shares Common Shares
Stockholders Outstanding Stockholders Outstanding Stockholders Outstanding
------------- ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Basic................... $(2,362,985) 3,699,702 $651,826 3,710,258 $2,411,814 7,956,221
Dilutive Effect:
Stock Options........... -- -- -- 344,786 -- 536,609
Convertible Debt........ -- -- 157,377 518,460 239,314 885,448
Convertible Preferred
Stock.................. -- -- -- 1,646,657 -- 193,916
----------- --------- -------- --------- ---------- ---------
Diluted................. $(2,362,985) 3,699,702 $809,203 6,220,161 $2,651,128 9,572,194
=========== ========= ======== ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------------------------
June 30, 1998 June 30, 1999
------------------------ ------------------------
(unaudited)
-------------------------------------------------
Income Average Income Average
Available to Common Available to Common
Common Shares Common Shares
Stockholders Outstanding Stockholders Outstanding
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Basic................... $519,519 7,336,169 $730,899 8,639,821
Dilutive Effect:
Stock Options........... -- -- -- 903,328
Convertible Debt........ -- -- -- --
Convertible Preferred
Stock.................. -- -- -- --
-------- --------- -------- ---------
Diluted................. $519,519 7,336,169 $730,899 9,543,149
======== ========= ======== =========
</TABLE>
F-18
<PAGE>
ELECTRICITY INDUSTRY DEREGULATION
---------------------------------
HISTORICAL STRUCTURE
Historically, the electricity industry has been dominated by vertically
integrated government regulated monopolies. Under this business model,
electricity is typically generated in large-scale centralized power plants that
can cost billions or dollars and can take more than a decade to plan and
construct. In this regulated environment, customers have had little direct
influence on business decisions, and have seen little differentiation of
products and services.
[Diagram of Historical Power Deliver Structure]
EMERGING MODEL
The electricity industry is now being deregulated in many countries, and a new
business model is emerging from this process. Two key trends are:
. Modular, distributed, power generation: New technologies allow power plants
to be built faster, in smaller sizes, and closer to the point of use. These
technologies also allow customers to generate their own electricity as an
alternative to buying power from the utility.
. Competition and customer choice: In many cases, power marketers now compete
for their customers' business. This leads to increased differentiation of
products and services, new entrants, and new marketing approaches.
[Diagram of Emerging Power Delivery Structure]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,750,000 Shares
[LOGO OF ASTROPOWER APPEARS HERE]
Common Stock
--------------
PROSPECTUS
--------------
Hambrecht & Quist
CIBC World Markets
FAC/Equities
--------------
September , 1999
--------------
You should rely only on information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We and the selling stockholders are offering to
sell, and seeking offers to buy, shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or of any sale of our common stock.
No action is being taken in any jurisdiction outside the United States to
permit a public offering of our common stock or possession or distribution of
this prospectus in that jurisdiction. Persons who come into possession of this
prospectus in jurisdictions outside the United States are required to inform
themselves about and to observe any restrictions as to this offering and the
distribution of this prospectus applicable to that jurisdiction.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
SEC Registration Fee*................................................. $ 12,858
Accounting Fees....................................................... $ 60,000
Legal Fees............................................................ $100,000
Printing, Engraving and Mailing....................................... $150,000
Transfer agent and registrar's fees................................... $ 10,000
Blue Sky fees and expenses............................................ $ 10,000
Miscellaneous expenses................................................ $ 57,142
--------
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 insure 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 Amended and Restated By-Laws, Amended
and Restated 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 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.
II-1
<PAGE>
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 of $4,700.
In the period November 1, 1997 through September 8, 1998, the Company issued
an aggregate of 7,948 shares of its Common Stock to 16 employees upon exercise
of stock options granted pursuant to the Company's 1989 Stock Option Plan for
an aggregate of $8,482.
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 were filed on December 18,
1997 with a Registration Statement on Form S-1, and amendments thereto,
Commission File No. 333-42591 and are incorporated herein by reference:
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 Form of Amended and Restated Certificate of Incorporation of the
Registrant, effective on February 6, 1998.
3.2 Form of Amended and Restated By-Laws of the Registrant, effective on
February 6, 1998.
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 1999 Stock Option Plan.***
10.3 1998 Non-Employee Directors Stock Option Plan.****
10.4 Lease for premises at Solar Park, Newark, Delaware dated July 1, 1991
between the Company and the University of Delaware.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.5 Employment Agreement between the Company and Dr. Allen M. Barnett
dated April 1, 1997.
10.6 Employment Agreement between the Company and Dr. George W. Roland
dated May 1, 1997.
10.7 1997 Bonus Plan for Drs. Barnett and Roland.
10.8 Amended and Restated Loan Agreement between the Company and Mellon
Bank (DE), N.A. dated November 24, 1997.
10.9 Amended and Restated Security Agreement between the Company and
Mellon Bank (DE), N.A. dated November 24, 1997.
10.10 Amended and Restated Line of Credit Note between the Company and
Mellon Bank (DE), N.A. dated November 24, 1997.
10.11 Amended and Restated Term Loan Note between the Company and Mellon
Bank (DE), N.A. dated November 24, 1997.
10.12 Business Loan Agreement between the Company and Artisans' Savings
Bank dated January 10, 1997.
10.13 Promissory Note between the Company and Artisans' Savings Bank dated
January 10, 1997.
10.14 Commercial Security Agreement between the Company and Artisans'
Savings Bank dated January 10, 1997.
10.15 Commercial Guaranty between Allen M. Barnett and Artisans' Savings
Bank dated January 10, 1997.
10.16 Operating Agreement between the Company and GPU International dated
July 1, 1997.
10.17 Performance Agreement between the Company and GPU International dated
July 1, 1997.
10.18 Note Purchase Agreement between the Company and Corning Inc. dated
August 19,1997.
10.19 Security Agreement between the Company and Corning Inc. dated August
19, 1997.
10.20 Promissory Note between the Company and Corning Inc. dated August 19,
1997.
10.21 Research and Development Umbrella Agreement between the Company and
Corning Inc. dated August 19, 1997.
10.22 Promissory note to Astrosystems, Inc.
10.23 Letter Agreement between the Company and Corning Inc. dated October
9, 1998.*
10.24 Lease for premises at 231 Lake Drive, Newark, Delaware dated January
16, 1998 between the Company and Liberty Property Limited
Partnership.
10.25 First Amendment to lease for premises at 231 Lake Drive, Newark,
Delaware dated January 26, 1999 between the Company and Liberty
Property Limited Partnership.*
10.26 Second Amendment to lease for premises at 231 Lake Drive, Newark,
Delaware dated June 28, 1999 between the Company and RREEF America
Reit II Corp. E.*
10.27 Lease for premises in Concord, California dated June 18, 1999 between
AstroPowerWest, LLC and Allied Investments.*
10.28 Guaranty of lease for premises in Concord, California dated June 18,
1999 by the Company in favor of Allied Investments.*
10.29 Commercial Security Agreement between the Company and Wilmington
Trust Company dated September 21, 1998.*
10.30 Business Loan Agreement dated September 21, 1998 between the Company
and Wilmington Trust Company.*
10.31 Promissory Note between the Company and Wilmington Trust Company
dated September 21, 1998.*
10.32 Business Loan Agreement dated November 4, 1998 between the Company
and Wilmington Trust Company.*
10.33 Promissory Note between the Company and Wilmington Trust Company
dated November 4, 1998.*
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
23.1 Consent of KPMG LLP*
23.2 Consent of Opton Handler Feiler & Landau, LLP (contained in Exhibit 5.1)
</TABLE>
- ---------------------
*Filed herewith.
**To be supplied by amendment.
*** Filed on April 30, 1999 as an exhibit to the definitive proxy statement for
the Registrant's 1999 annual meeting of stockholders held on June 16, 1999.
**** Filed on May 20, 1998 as an exhibit to the definitive proxy statement for
the Registrant's 1998 annual meeting of stockholder held on June 18, 1998.
(16)(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
Other schedules are omitted because of the absence of condition 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
(1) 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.
(2) 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 Amended
and Restated By-Laws, Amended and Restated 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
September 9, 1999.
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:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Allen M. Barnett President, Chief Executive September 9, 1999
______________________________________ Officer and Director
Allen M. Barnett
/s/ Thomas J. Stiner Vice President, Secretary, September 9, 1999
______________________________________ Chief Financial Officer &
Thomas J. Stiner Principal Accounting
Officer
/s/ Clare E. Nordquist Director September 9, 1999
______________________________________
Clare E. Nordquist
/s/ George S. Reichenbach Director September 9, 1999
______________________________________
George S. Reichenbach
/s/ George W. Roland Director September 9, 1999
______________________________________
George W. Roland
/s/ Charles R. Schaller Director September 9, 1999
______________________________________
Charles R. Schaller
/s/ Gilbert H. Steinberg Director September 9, 1999
______________________________________
Gilbert H. Steinberg
</TABLE>
II-5
<PAGE>
Schedule II--Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Charged to Charged Deductions-
Beginning costs and to other Accounts Ending
Period Ended Description balance expenses accounts written-off Balance
- ------------ -------------------------------- ---------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dec. 31, 1998........... Allowance for bad debts (72,962) (30,000) 32,267 (70,695)
Dec. 31, 1997........... Allowance for bad debts (47,836) (52,052) 26,926 (72,962)
Dec. 31, 1996........... Allowance for bad debts (44,683) (87,680) 84,527 (47,836)
<CAPTION>
Charged to Charged Deductions-
Beginning costs and to other Accounts Ending
Period Ended Description balance expenses accounts written-off Balance
- ------------ -------------------------------- ---------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dec. 31, 1998........... Deferred tax valuation allowance (1,809,315) 1,809,315 --
Dec. 31, 1997........... Deferred tax valuation allowance (1,673,387) (135,928) (1,809,315)
Dec. 31, 1996........... Deferred tax valuation allowance (902,995) (770,392) (1,673,387)
</TABLE>
II-6
<PAGE>
EXHIBIT 1.1
AstroPower, Inc.
_________Shares/1/
Common Stock
UNDERWRITING AGREEMENT
----------------------
________ __, 1999
Hambrecht & Quist LLC
CIBC World Markets Corp.
FAC/Equities, a division of First Albany Corporation
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
AstroPower, Inc., a Delaware corporation (herein called the Company),
proposes to issue and sell ____ shares of its authorized but unissued Common
Stock, $.01 par value (herein called the Common Stock), and the stockholders of
the Company named in Schedule II hereto (herein collectively called the Selling
Securityholders) propose to sell an aggregate of ______ shares of Common Stock
of the Company (said ____ shares of Common Stock being herein called the
Underwritten Stock). The Company proposes to grant to the Underwriters (as
hereinafter defined) an option to purchase up to ___ additional shares of Common
Stock (herein called the Option Stock and with the Underwritten Stock herein
collectively called the Stock). The Common Stock is more fully described in the
Registration Statement and the Prospectus hereinafter mentioned.
The Company and the Selling Securityholders severally hereby confirm the
agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent
and warrant that you have been authorized by each of the other Underwriters to
enter into this Agreement on its behalf and to act for it in the manner herein
provided.
1. Registration Statement. The Company has filed with the Securities and
Exchange Commission (herein called the Commission) a registration statement on
Form S-1 (No. 333-_____), including the related preliminary prospectus, for the
registration under the Securities Act of 1933, as amended (herein called the
Securities Act), of the Stock. Copies of such registration statement and of each
amendment thereto, if any, including the related preliminary prospectus (meeting
the requirements of Rule 430A of the rules and regulations of the Commission)
heretofore filed by the Company with the Commission have been delivered to you.
- ---------------------
/1/ Plus an option to purchase from the Company up to __________ additional
shares to cover over-allotments.
<PAGE>
The term Registration Statement as used in this agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, in the form in which it became effective, and any
registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto after
the effective date of such registration statement (herein called the Effective
Date), shall also mean (from and after the effectiveness of such amendment) such
registration statement as so amended (including any Rule 462(b) registration
statement). The term Prospectus as used in this Agreement shall mean the
prospectus relating to the Stock first filed with the Commission pursuant to
Rule 424(b) and Rule 430A (or if no such filing is required, as included in the
Registration Statement) and, in the event of any supplement or amendment to such
prospectus after the Effective Date, shall also mean (from and after the filing
with the Commission of such supplement or the effectiveness of such amendment)
such prospectus as so supplemented or amended. The term Preliminary Prospectus
as used in this Agreement shall mean each preliminary prospectus included in
such registration statement prior to the time it becomes effective.
The Registration Statement has been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. The Company has caused to be delivered
to you copies of each Preliminary Prospectus and has consented to the use of
such copies for the purposes permitted by the Securities Act.
2. Representations and Warranties of the Company and the Selling
Securityholders.
(a) Each of the Company and the Selling Securityholders hereby represents
and warrants as follows:
(i) Each of the Company and its subsidiary has been duly incorporated or
organized and is validly existing as a corporation or a limited liability
company, as the case may be, in good standing under the laws of the jurisdiction
of its incorporation or organization, has full corporate or limited liability
company power and authority to own or lease its properties and conduct its
business as described in the Registration Statement and the Prospectus and as
being conducted, and is duly qualified as a foreign corporation and in good
standing in all jurisdictions in which the character of the property owned or
leased or the nature of the business transacted by it makes qualification
necessary (except where the failure to be so qualified would not have a material
adverse effect on the business, properties, financial condition or results of
operations of the Company and its subsidiary, taken as a whole).
(ii) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any materially
adverse change in the business, properties, financial condition or results of
operations of the Company and its subsidiary, taken as a whole, whether or not
arising from transactions in the ordinary course of business, other than as set
forth in the Registration Statement and the Prospectus, and since such dates,
except in the ordinary course of business, neither the Company nor its
subsidiary has entered into any material transaction not referred to in the
Registration Statement and the Prospectus.
(iii) The Registration Statement and the Prospectus comply, and on the
Closing Date (as hereinafter defined) and any later date on which Option Stock
is to be purchased, the Prospectus will comply, in all material respects, with
the provisions of the Securities Act and the Securities Exchange Act of 1934, as
amended (herein called the Exchange Act), and the rules and regulations of the
Commission thereunder; on the
<PAGE>
Effective Date, the Registration Statement did not contain any untrue statement
of a material fact and did not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date the Prospectus did not and, on the
Closing Date and any later date on which Option Stock is to be purchased, will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that none of the representations and warranties in this subparagraph (iii) shall
apply to statements in, or omissions from, the Registration Statement or the
Prospectus made in reliance upon and in conformity with information herein or
otherwise furnished in writing to the Company by or on behalf of the
Underwriters for use in the Registration Statement or the Prospectus.
(iv) The Stock is duly and validly authorized, is (or, in the case of
shares of the Stock to be sold by the Company, will be, when issued and sold to
the Underwriters as provided herein) duly and validly issued, fully paid and
nonassessable and conforms to the description thereof in the Prospectus. No
further approval or authority of the stockholders or the Board of Directors of
the Company will be required for the transfer and sale of the Stock to be sold
by the Selling Securityholders or the issuance and sale of the Stock as
contemplated herein.
(v) The Stock to be sold by the Selling Securityholders is listed and
duly admitted to trading on the Nasdaq National Market, and prior to the Closing
Date the Stock to be issued and sold by the Company will be authorized for
listing by the Nasdaq National Market upon official notice of issuance.
(vi) The Company owns or has sufficient rights to all patents, patent
applications and, to the Company's knowledge, other proprietary intellectual
property rights (herein called Intellectual Property) necessary to the conduct
of the Company's business as now conducted, and as proposed to be conducted as
described in the Prospectus, without any conflict with the rights of others. To
the knowledge of the Company, it has conducted its business without infringement
or claim of infringement of any Intellectual Property of others and the Company
has not received any notice from any other person pertaining to or challenging
the right of the Company to use any Intellectual property or any trademarks or
trade names owned or used by or licensed to the Company. The Company has duly
and properly filed the patent applications referred to in the Prospectus under
the caption "Business -- Patents and Proprietary Technology", and, to the
knowledge of the Company, there is no infringement or claim of infringement by
others of any Intellectual Property of the Company.
(b) Each of the Selling Securityholders hereby represents and warrants as
follows:
(i) Such Selling Securityholder has good and marketable title to all the
shares of Stock to be sold by such Selling Securityholder hereunder, free and
clear of all liens, encumbrances, equities, security interests and claims
whatsoever, with full right and authority to deliver the same hereunder,
subject, in the case of each Selling Securityholder, to the rights of [Peter
Landau], as Custodian (herein called the Custodian), and that upon the delivery
of and payment for such shares of the Stock hereunder, the several Underwriters
will receive good and marketable title thereto, free and clear of all liens,
encumbrances, equities, security interests and claims whatsoever.
(ii) Certificates in negotiable form for the shares of the Stock to be
sold by such Selling Securityholder have been placed in custody under a Custody
Agreement for delivery under this Agreement with the Custodian; such Selling
Securityholder specifically agrees that the shares of the Stock represented by
the certificates so held in
<PAGE>
custody for such Selling Securityholder are subject to the interests of the
several Underwriters and the Company, that the arrangements made by such Selling
Securityholder for such custody, including the Power of Attorney provided for in
such Custody Agreement, are to that extent irrevocable, and that the obligations
of such Selling Securityholder shall not be terminated by any act of such
Selling Securityholder or by operation of law, whether by the death or
incapacity of such Selling Securityholder (or, in the case of a Selling
Securityholder that is not an individual, the dissolution or liquidation of such
Selling Securityholder) or the occurrence of any other event; if any such death,
incapacity, dissolution, liquidation or other such event should occur before the
delivery of such shares of the Stock hereunder, certificates for such shares of
the Stock shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity, dissolution,
liquidation or other event had not occurred, regardless of whether the Custodian
shall have received notice of such death, incapacity, dissolution, liquidation
or other event.
(iii) Such Selling Securityholder has reviewed the Registration Statement
and Prospectus and, although such Selling Securityholder has not independently
verified the accuracy or completeness of all the information contained therein,
nothing has come to the attention of such Selling Securityholder that would lead
such Selling Securityholder to believe that on the Effective Date, the
Registration Statement contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and, on the Effective Date
the Prospectus contained and, on the Closing Date, contains any untrue statement
of a material fact or omitted or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
3. Purchase of the Stock by the Underwriters.
(a) On the basis of the representations and warranties and subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
________ shares of the Underwritten Stock to the several Underwriters, each
Selling Securityholder agrees to sell to the several Underwriters the number of
shares of the Underwritten Stock set forth in Schedule II opposite the name of
such Selling Securityholder, and each of the Underwriters agrees to purchase
from the Company and the Selling Securityholders the respective aggregate number
of shares of Underwritten Stock set forth opposite its name in Schedule I. The
price at which such shares of Underwritten Stock shall be sold by the Company
and the Selling Securityholders and purchased by the several Underwriters shall
be $___ per share. The obligation of each Underwriter to the Company and each
of the Selling Securityholders shall be to purchase from the Company and the
Selling Securityholders that number of shares of the Underwritten Stock which
represents the same proportion of the total number of shares of the Underwritten
Stock to be sold by each of the Company and the Selling Securityholders pursuant
to this Agreement as the number of shares of the Underwritten Stock set forth
opposite the name of such Underwriter in Schedule I hereto represents of the
total number of shares of the Underwritten Stock to be purchased by all
Underwriters pursuant to this Agreement, as adjusted by you in such manner as
you deem advisable to avoid fractional shares. In making this Agreement, each
Underwriter is contracting severally and not jointly; except as provided in
paragraphs (b) and (c) of this Section 3, the agreement of each Underwriter is
to purchase only the respective number of shares of the Underwritten Stock
specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 8 or 9 hereof) to purchase and pay for
the number of shares of the Stock agreed to be purchased by such Underwriter or
Underwriters, the Company or the Selling Securityholders shall immediately give
notice thereof to you, and the non-defaulting Underwriters shall have
<PAGE>
the right within 24 hours after the receipt by you of such notice to purchase,
or procure one or more other Underwriters to purchase, in such proportions as
may be agreed upon between you and such purchasing Underwriter or Underwriters
and upon the terms herein set forth, all or any part of the shares of the Stock
which such defaulting Underwriter or Underwriters agreed to purchase. If the
non-defaulting Underwriters fail so to make such arrangements with respect to
all such shares and portion, the number of shares of the Stock which each non-
defaulting Underwriter is otherwise obligated to purchase under this Agreement
shall be automatically increased on a pro rata basis to absorb the remaining
shares and portion which the defaulting Underwriter or Underwriters agreed to
purchase; provided, however, that the non-defaulting Underwriters shall not be
obligated to purchase the shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate number of such shares of the
Stock exceeds 10% of the total number of shares of the Stock which all
Underwriters agreed to purchase hereunder. If the total number of shares of the
Stock which the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with the two preceding sentences, the
Company and the Selling Securityholders shall have the right, within 24 hours
next succeeding the 24 hour period above referred to, to make arrangements with
other underwriters or purchasers satisfactory to you for purchase of such shares
and portion on the terms herein set forth. In any such case, either you or the
Company and the Selling Securityholders shall have the right to postpone the
Closing Date determined as provided in Section 5 hereof for not more than seven
business days after the date originally fixed as the Closing Date pursuant to
said Section 5 in order that any necessary changes in the Registration
Statement, the Prospectus or any other documents or arrangements may be made. If
neither the non-defaulting Underwriters nor the Company and the Selling
Securityholders shall make arrangements within the 24 hour periods stated above
for the purchase of all the shares of the Stock which the defaulting Underwriter
or Underwriters agreed to purchase hereunder, this Agreement shall be terminated
without further act or deed and without any liability on the part of the Company
or the Selling Securityholders to any non-defaulting Underwriter and without any
liability on the part of any non-defaulting Underwriter to the Company or the
Selling Securityholders. Nothing in this paragraph (b), and no action taken
hereunder, shall relieve any defaulting Underwriter from liability in respect of
any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants herein
contained, and subject to the terms and conditions herein set forth, the Company
grants an option to the several Underwriters to purchase, severally and not
jointly, up to ______ shares in the aggregate of the Option Stock from the
Company at the same price per share as the Underwriters shall pay for the
Underwritten Stock. Said option may be exercised only to cover over-allotments
in the sale of the Underwritten Stock by the Underwriters and may be exercised
in whole or in part at any time (but not more than once) on or before the
thirtieth day after the date of this Agreement upon written or telegraphic
notice by you to the Company setting forth the aggregate number of shares of the
Option Stock as to which the several Underwriters are exercising the option.
Delivery of certificates for the shares of Option Stock, and payment therefor,
shall be made as provided in Section 5 hereof. The number of shares of the
Option Stock to be purchased by each Underwriter shall be the same percentage of
the total number of shares of the Option Stock to be purchased by the several
Underwriters as such Underwriter is purchasing of the Underwritten Stock, as
adjusted by you in such manner as you deem advisable to avoid fractional shares.
4. Offering by Underwriters.
(a) The terms of the initial public offering by the Underwriters of the
Stock to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.
<PAGE>
(b) The information set forth in the last paragraph on the front cover page
and under "Underwriting" in the Registration Statement, any Preliminary
Prospectus and the Prospectus relating to the Stock filed by the Company
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriters to the Company for inclusion in the
Registration Statement, any Preliminary Prospectus, and the Prospectus, and you
on behalf of the respective Underwriters represent and warrant to the Company
that the statements made therein are correct.
5. Delivery of and Payment for the Stock.
(a) Delivery of certificates for the shares of the Underwritten Stock and
the Option Stock (if the option granted by Section 3(c) hereof shall have been
exercised not later than 7:00 A.M., San Francisco time, on the date two business
days preceding the Closing Date), and payment therefor, shall be made at the
office of __________________________, __________, at 7:00 a.m., San Francisco
time, on the fourth business day after the date of this Agreement, or at such
time on such other day, not later than seven full business days after such
fourth business day, as shall be agreed upon in writing by the Company, the
Selling Securityholders and you. The date and hour of such delivery and payment
(which may be postponed as provided in Section 3(b) hereof) are herein called
the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be exercised after
7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Option Stock, and
payment therefor, shall be made at the office of _________________________,
_________________, at 7:00 a.m., San Francisco time, on the third business day
after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be made to the
Company or its order, and payment for the Stock purchased from the Selling
Securityholders shall be made to the Custodian, for the account of the Selling
Securityholders, in each case by one or more certified or official bank check or
checks in same day funds. Such payment shall be made upon delivery of
certificates for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor signed by you. Certificates for the Stock
to be delivered to you shall be registered in such name or names and shall be in
such denominations as you may request at least one business day before the
Closing Date, in the case of Underwritten Stock, and at least one business day
prior to the purchase thereof, in the case of the Option Stock. Such
certificates will be made available to the Underwriters for inspection, checking
and packaging at the offices of Lewco Securities Corporation, 2 Broadway, New
York, New York 10004 on the business day prior to the Closing Date or, in the
case of the Option Stock, by 3:00 p.m., New York time, on the business day
preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholders for shares to be purchased by any Underwriter
whose check shall not have been received by you on the Closing Date or any later
date on which Option Stock is purchased for the account of such Underwriter.
Any such payment by you shall not relieve such Underwriter from any of its
obligations hereunder.
6. Further Agreements of the Company and the Selling Securityholders.
Each of the Company and the Selling Securityholders respectively covenants and
agrees as follows:
- -----------------------
/2/ This assumes that the transaction will be priced after the close of
market and that T+4 will apply to the transaction. If the pricing took place
before or during market hours (which will generally not be the case), the
closing would be three business days after pricing.
<PAGE>
(a) The Company will (i) prepare and timely file with the Commission under
Rule 424(b) a Prospectus containing information previously omitted at the time
of effectiveness of the Registration Statement in reliance on Rule 430A and (ii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you shall have reasonably objected in writing or which
is not in compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify each Underwriter in the event of (i)
the request by the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Stock for sale in any jurisdiction, or (v) the receipt by it of notice of the
initiation or threatening of any proceeding for such purpose. The Company and
the Selling Securityholders will make every reasonable effort to prevent the
issuance of such a stop order and, if such an order shall at any time be issued,
to obtain the withdrawal thereof at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you a
signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each post-
effective amendment, if any, to the Registration Statement (together with, in
each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the Prospectus
and of any amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of counsel
for the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the Stock,
the Company will forthwith prepare and file with the Commission a supplement to
the Prospectus or an amended prospectus so that the Prospectus as so
supplemented or amended will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time such Prospectus
is delivered to such purchaser, not misleading. If, after the initial public
offering of the Stock by the Underwriters and during such period, the
Underwriters shall propose to vary the terms of offering thereof by reason of
changes in general market conditions or otherwise, you will advise the Company
in writing of the proposed variation, and, if in the opinion either of counsel
for the Company or of counsel for the Underwriters such proposed variation
requires that the Prospectus be supplemented or amended, the Company will
forthwith prepare and file with the Commission a supplement to the
<PAGE>
Prospectus or an amended prospectus setting forth such variation. The Company
authorizes the Underwriters and all dealers to whom any of the Stock may be sold
by the several Underwriters to use the Prospectus, as from time to time amended
or supplemented, in connection with the sale of the Stock in accordance with the
applicable provisions of the Securities Act and the applicable rules and
regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the
qualifition of the Stock for offer and sale under the securities or blue sky
laws of such jurisdictions as you may designate and, during the period in which
a prospectus is required by law to be delivered by an Underwriter or dealer, in
keeping such qualifications in good standing under said securities or blue sky
laws; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. The Company will, from time to
time, prepare and file such statements, reports, and other documents as are or
may be required to continue such qualifications in effect for so long a period
as you may reasonably request for distribution of the Stock.
(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with the
Commission.
(h) Not later than the 45th day following the end of the fiscal quarter
first occurring after the first anniversary of the Effective Date, the Company
will make generally available to its security holders an earnings statement in
accordance with Section 11(a) of the Securities Act and Rule 158 thereunder.
(i) The Company and the Selling Securityholders jointly and severally agree
to pay all costs and expenses incident to the performance of their obligations
under this Agreement, including all costs and expenses incident to (i) the
preparation, printing and filing with the Commission and the National
Association of Securities Dealers, Inc. (herein called NASD) of the Registration
Statement, any Preliminary Prospectus and the Prospectus, (ii) the furnishing to
the Underwriters of copies of any Preliminary Prospectus and of the several
documents required by paragraph (c) of this Section 6 to be so furnished, (iii)
the printing of this Agreement and related documents delivered to the
Underwriters, (iv) the preparation, printing and filing of all supplements and
amendments to the Prospectus referred to in paragraph (d) of this Section 6, (v)
the furnishing to you and the Underwriters of the reports and information
referred to in paragraph (g) of this Section 6 and (vi) the printing and
issuance of stock certificates, including the transfer agent's fees. The Selling
Securityholders will pay any transfer taxes incident to the transfer to the
Underwriters of the shares the Stock being sold by the Selling Securityholders.
(j) The Company and the Selling Securityholders jointly and severally agree
to reimburse you, for the account of the several Underwriters, for blue sky fees
and related disbursements (including counsel fees and disbursements and cost of
printing memoranda for the Underwriters) paid by or for the account of the
Underwriters or their
<PAGE>
counsel in qualifying the Stock under state securities or blue sky laws and in
the review of the offering by the NASD.
(k) The provisions of paragraphs (i) and (j) of this Section are intended
to relieve the Underwriters from the payment of the expenses and costs which the
Company and the Selling Securityholders hereby agree to pay and shall not affect
any agreement which the Company and the Selling Securityholders may make, or may
have made, for the sharing of any such expenses and costs.
(l) The Company and each of the Selling Securityholders hereby agrees that,
without the prior written consent of Hambrecht & Quist LLC on behalf of the
Underwriters, the Company or such Selling Securityholder, as the case may be,
will not, for a period of 90 days following the commencement of the public
offering of the Stock by the Underwriters (herein called the Lock-up Period),
directly or indirectly, (i) offer to sell, contract to sell or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to (herein
collectively called a Disposition) any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock (herein collectively called
Securities), now owned or hereafter acquired directly by the undersigned or with
respect to which the undersigned has or hereafter acquires the power of
disposition, otherwise than (A) as a bona fide gift or gifts, provided the donee
or donees thereof agree to be bound by such agreement or (B) as a distribution
to limited partners or shareholders of the undersigned, provided that the
distributees thereof agree in writing to be bound by the terms of such agreement
or (ii) engage in any hedging or other transaction which is designed to or
reasonably expected to lead to or result in a Disposition of Securities during
the Lock-Up Period even if such Securities would be disposed of by someone other
than the undersigned. Such prohibited hedging or other transactions would
include without limitation any short sale (whether or not against the box) or
any purchase, sale or grant of any right (including without limitation any put
or call option) with respect to any Securities or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. The foregoing two
sentences shall not apply to (x) the Stock to be sold to the Underwriters
pursuant to this Agreement, (y) shares of Common Stock issued by the Company
upon the exercise of options granted under the stock option plans of the Company
(herein called the Option Plans), all as described in footnote (_) to the table
under the caption "Capitalization" in the Preliminary Prospectus, and (z)
options to purchase Common Stock granted under the Option Plans.
7. Indemnification and Contribution.
(a) Subject to the provisions of paragraph (f) of this Section 7, the
Company and the Selling Securityholders jointly and severally agree to indemnify
and hold harmless each Underwriter and each person (including each partner or
officer thereof) who controls any Underwriter within the meaning of Section 15
of the Securities Act from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Exchange Act, or the common law
or otherwise, and the Company and the Selling Securityholders jointly and
severally agree to reimburse each such Underwriter and controlling person for
any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment
<PAGE>
thereto (including any Rule 462(b) registration statement), 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 or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that (1) the indemnity agreements of the Company and the Selling Securityholders
contained in this paragraph (a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission was made in
reliance upon and in conformity with information furnished as herein stated or
otherwise furnished in writing to the Company by or on behalf of any Underwriter
for use in any Preliminary Prospectus or the Registration Statement or the
Prospectus or any such amendment thereof or supplement thereto and (2) the
indemnity agreement contained in this paragraph (a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Stock which is the subject thereof (or to the benefit of
any person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with paragraph (c) of Section 6 hereof. The indemnity agreements of
the Company and the Selling Securityholders contained in this paragraph (a) and
the representations and warranties of the Company and the Selling
Securityholders contained in Section 2 hereof shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its officers who signs the Registration Statement on his own
behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act, and the Selling Securityholders from and against any
and all losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement) 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 the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment thereof or supplement thereto) or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, if such statement or omission was made in reliance upon
and in conformity with information furnished as herein stated or otherwise
furnished in writing to the Company by or on behalf of such indemnifying
Underwriter for use in the Registration Statement or the Prospectus or any such
amendment thereof or supplement thereto. The indemnity agreement of each
Underwriter contained in this paragraph (b) shall remain operative and in full
force and
<PAGE>
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Stock.
(c) Each party indemnified under the provision of paragraphs (a) and (b) of
this Section 7 agrees that, upon the service of a summons or other initial legal
process upon it in any action or suit instituted against it or upon its receipt
of written notification of the commencement of any investigation or inquiry of,
or proceeding against, it in respect of which indemnity may be sought on account
of any indemnity agreement contained in such paragraphs, it will promptly give
written notice (herein called the Notice) of such service or notification to the
party or parties from whom indemnification may be sought hereunder. No
indemnification provided for in such paragraphs shall be available to any party
who shall fail so to give the Notice if the party to whom such Notice was not
given was unaware of the action, suit, investigation, inquiry or proceeding to
which the Notice would have related and was prejudiced by the failure to give
the Notice, but the omission so to notify such indemnifying party or parties of
any such service or notification shall not relieve such indemnifying party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in the
defense of any action, suit or proceeding against, or investigation or inquiry
of, an indemnified party. Any indemnifying party shall be entitled, if it so
elects within a reasonable time after receipt of the Notice by giving written
notice (herein called the Notice of Defense) to the indemnified party, to assume
(alone or in conjunction with any other indemnifying party or parties) the
entire defense of such action, suit, investigation, inquiry or proceeding, in
which event such defense shall be conducted, at the expense of the indemnifying
party or parties, by counsel chosen by such indemnifying party or parties and
reasonably satisfactory to the indemnified party or parties; provided, however,
that (i) if the indemnified party or parties reasonably determine that there may
be a conflict between the positions of the indemnifying party or parties and of
the indemnified party or parties in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses
available to such indemnified party or parties different from or in addition to
those available to the indemnifying party or parties, then counsel for the
indemnified party or parties shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interests of the indemnified party or parties and (ii) in any event, the
indemnified party or parties shall be entitled to have counsel chosen by such
indemnified party or parties participate in, but not conduct, the defense. If,
within a reasonable time after receipt of the Notice, an indemnifying party
gives a Notice of Defense and the counsel chosen by the indemnifying party or
parties is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under paragraphs (a) through
(c) of this Section 7 for any legal or other expenses subsequently incurred by
the indemnified party or parties in connection with the defense of the action,
suit, investigation, inquiry or proceeding, except that (A) the indemnifying
party or parties shall bear the legal and other expenses incurred in connection
with the conduct of the defense as referred to in clause (i) of the proviso to
the preceding sentence and (B) the indemnifying party or parties shall bear such
other expenses as it or they have authorized to be incurred by the indemnified
party or parties. If, within a reasonable time after receipt of the Notice, no
Notice of Defense has been given, the indemnifying party or parties shall be
responsible for any legal or other expenses incurred by the indemnified party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under paragraph (a) or (b) of
this Section 7, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in paragraph (a) or (b) of this Section 7 (i) in such proportion as
is appropriate to reflect the relative benefits received by each indemnifying
party from the offering of the Stock or (ii) if the allocation provided by
clause (i) above is not permitted by
<PAGE>
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
each indemnifying party in connection with the statements or omissions that
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 Company and the Selling Securityholders on the one hand
and the Underwriters on the other shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Stock received by
the Company and the Selling Securityholders and the total underwriting discount
received by the Underwriters, as set forth in the table on the cover page of the
Prospectus, bear to the aggregate public offering price of the Stock. 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 each
indemnifying party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission.
The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (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 in the first sentence of this paragraph (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation,
preparing to defend or defending against any action or claim which is the
subject of this paragraph (d). Notwithstanding the provisions of this paragraph
(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Stock purchased by such Underwriter. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this paragraph (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(e) Neither the Company nor the Selling Securityholders will, without the
prior written consent of each Underwriter, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not such Underwriter or any person who controls such Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is
a party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of such Underwriter and
each such controlling person from all liability arising out of such claim,
action, suit or proceeding.
(f) The liability of each Selling Securityholder under such Selling
Securityholder's representations and warranties contained in Section 2 hereof
and under the indemnity and reimbursement agreements contained in the provisions
of this Section 7 and Section 11 hereof shall be limited to an amount equal to
the initial public offering price of the stock sold by such Selling
Securityholder to the Underwriters. The Company and the Selling Securityholders
may agree, as among themselves and without limiting the rights of the
Underwriters under this
<PAGE>
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
8. Termination. This Agreement may be terminated by you at any time prior
to the Closing Date by giving written notice to the Company and the Selling
Securityholders if after the date of this Agreement trading in the Common Stock
shall have been suspended, or if there shall have occurred (i) the engagement in
hostilities or an escalation of major hostilities by the United States or the
declaration of war or a national emergency by the United States on or after the
date hereof, (ii) any outbreak of hostilities or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, calamity, crisis or change in economic or political conditions
in the financial markets of the United States would, in the Underwriters'
reasonable judgment, make the offering or delivery of the Stock impracticable,
(iii) suspension of trading in securities generally or a material adverse
decline in value of securities generally on the New York Stock Exchange, the
American Stock Exchange, or The Nasdaq Stock Market, or limitations on prices
(other than limitations on hours or numbers of days of trading) for securities
on either such exchange or system, (iv) the enactment, publication, decree or
other promulgation of any federal or state statute, regulation, rule or order
of, or commencement of any proceeding or investigation by, any court,
legislative body, agency or other governmental authority which in the
Underwriters' reasonable opinion materially and adversely affects or will
materially or adversely affect the business or operations of the Company, (v)
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
Underwriters' reasonable opinion has a material adverse effect on the securities
markets in the United States. If this Agreement shall be terminated pursuant to
this Section 8, there shall be no liability of the Company or the Selling
Securityholders to the Underwriters and no liability of the Underwriters to the
Company or the Selling Securityholders; provided, however, that in the event of
any such termination the Company and the Selling Securityholders agree to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses referred
to in paragraphs (i) and (j) of Section 6 hereof.
9. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company and by the Selling Securityholders of all their
respective obligations to be performed hereunder at or prior to the Closing Date
or any later date on which Option Stock is to be purchased, as the case may be,
and to the following further conditions:
(a) The Registration Statement shall have become effective; and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock hereunder and the
validity and form of the certificates representing the Stock, all corporate
proceedings and other legal matters incident to the foregoing, and the form of
the Registration Statement and of the Prospectus (except as to the financial
statements contained therein), shall have been approved at or prior to the
Closing Date by Hale and Dorr LLP, counsel for the Underwriters.
(c) You shall have received from Opton Handler Feiler & Landau, LLP,
counsel for the company and the Selling Securityholders, an opinion covering the
matters set forth in Annex A hereto, and from Christopher A. Gallo, Esq., patent
counsel for the Company, an opinion, the form of which shall have been approved
at or prior to the Closing Date by Hale and Dorr LLP, counsel for the
Underwriters, each addressed to the Underwriters and dated the Closing Date, and
if Option Stock is
<PAGE>
purchased at any date after the Closing Date, additional opinions from each such
counsel, addressed to the Underwriters and dated such later date, confirming
that the statements expressed as of the Closing Date in such opinions remain
valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company and its subsidiary, taken as a
whole, whether or not arising from transactions in the ordinary course of
business, and, since such dates, except in the ordinary course of business,
neither the Company nor its subsidiary has entered into any material transaction
not referred to in the Registration Statement in the form in which it originally
became effective and the Prospectus contained therein, (iv) neither the Company
nor its subsidiary has any material contingent obligations which are not
disclosed in the Registration Statement and the Prospectus, (v) there are not
any pending or known threatened legal proceedings to which the Company or its
subsidiary is a party or of which property of the Company or its subsidiary is
the subject which are material and which are not disclosed in the Registration
Statement and the Prospectus, (vi) there are not any franchises, contracts,
leases or other documents which are required to be filed as exhibits to the
Registration Statement which have not been filed as required, (vii) the
representations and warranties of the Company herein are true and correct in all
material respects as of the Closing Date or any later date on which Option Stock
is to be purchased, as the case may be, and (viii) there has not been any
material change in the market for securities in general or in political,
financial or economic conditions from those reasonably foreseeable as to render
it impracticable in your reasonable judgment to make a public offering of the
Stock, or a material adverse change in market levels for securities in general
(or those of companies in particular) or financial or economic conditions which
render it inadvisable to proceed.
(e) You shall have received on the Closing Date and on any later date on
which Option Stock is purchased a certificate, dated the Closing Date or such
later date, as the case may be, and signed by the President and the Chief
Financial Officer of the Company, stating that the respective signers of said
certificate have carefully examined the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein and
any supplements or amendments thereto, and that the statements included in
clauses (i) through (vii) of paragraph (d) of this Section 9 are true and
correct.
(f) You shall have received from KPMG LLP, a letter or letters, addressed
to the Underwriters and dated the Closing Date and any later date on which
Option Stock is purchased, delivered according to Statement of Auditing
Standards No. 72 and Statement of Auditing Standards No. 86 (or any successor
bulletins), confirming that they are independent public accountants with respect
to the Company within the meaning of the Securities Act and the applicable
published rules and regulations thereunder and based upon the procedures
described in their letter delivered to you concurrently with the execution of
this Agreement (herein called the Original Letter), but carried out to a date
not more than three business days prior to the Closing Date or
<PAGE>
such later date on which Option Stock is purchased (i) confirming, to the extent
true, that the statements and conclusions set forth in the Original Letter are
accurate as of the Closing Date or such later date, as the case may be, and (ii)
setting forth any revisions and additions to the statements and conclusions set
forth in the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of the Original Letter or
to reflect the availability of more recent financial statements, data or
information. The letters shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company or its subsidiary which, in your sole judgment, makes it impractical
or inadvisable to proceed with the public offering of the Stock or the purchase
of the Option Stock as contemplated by the Prospectus.
(g) You shall have been furnished evidence in usual written or telegraphic
form from the appropriate authorities of the several jurisdictions, or other
evidence satisfactory to you, of the qualification referred to in paragraph (f)
of Section 6 hereof.
(h) On or prior to the Closing Date, you shall have received from all
directors, officers, and certain beneficial holders of more than 5% of the
outstanding Common Stock stockholders agreements, in form reasonably
satisfactory to Hambrecht & Quist LLC, stating that without the prior written
consent of Hambrecht & Quist LLC on behalf of the Underwriters, such person or
entity will not, for a period of 90 days following the commencement of the
public offering of the Stock by the Underwriters, directly or indirectly, (i)
offer to sell, contract to sell or otherwise sell, dispose of, loan, pledge or
grant any rights with respect to any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock, now owned or hereafter acquired
directly by the undersigned or with respect to which the undersigned has or
hereafter acquires the power of disposition, otherwise than (A) as a bona fide
gift or gifts, provided the donee or donees thereof agree to be bound by such
agreement or (B) as a distribution to limited partners or shareholders of the
undersigned, provided that the distributees thereof agree in writing to be bound
by the terms of such agreement or (ii) engage in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
a Disposition of Securities during the Lock-Up Period even if such Securities
would be disposed of by someone other than the undersigned. Such prohibited
hedging or other transactions would include without limitation any short sale
(whether or not against the box) or any purchase, sale or grant of any right
(including without limitation any put or call option) with respect to any
Securities or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from Securities.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Hale and Dorr LLP, counsel for the Underwriters, shall
be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and to the Selling Securityholders. Any such termination shall be
without liability of the Company or the Selling Securityholders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Securityholders; provided, however, that (i) in the event of such
termination, the Company and the Selling Securityholders agree to indemnify and
hold harmless the Underwriters from all costs or expenses incident to the
performance of the obligations of the Company and the Selling Securityholders
under this Agreement, including all costs and expenses referred to in paragraphs
(i) and (j) of Section 6 hereof, and (ii) if this Agreement is terminated by you
because of any refusal, inability or failure on the part of the Company or the
Selling Securityholders to perform any agreement herein, to fulfill any of the
conditions herein,
<PAGE>
or to comply with any provision hereof other than by reason of a default by any
of the Underwriters, the Company will reimburse the Underwriters severally upon
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the transactions contemplated hereby.
10. Conditions of the Obligation of the Company and the Selling
Securityholders. The obligation of the Company and the Selling Securityholders
to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by the Company and the Selling
Securityholders by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Securityholders to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Securityholders; provided, however, that in the event of any such termination
the Company and the Selling Securityholders jointly and severally agree to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses referred
to in paragraphs (i) and (j) of Section 6 hereof.
11. Reimbursement of Certain Expenses. In addition to their other
obligations under Section 7 of this Agreement (and subject, in the case of a
Selling Securityholder, to the provisions of paragraph (f) of Section 7), the
Company and the Selling Securityholders hereby jointly and severally agree 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
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 11 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
12. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of the Company, the Selling Securityholders and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, the Selling Securityholders and the
several Underwriters) indemnified under the provisions of said Section 7, and
their respective personal representatives, successors and assigns. Nothing in
this Agreement is intended or shall be construed to give to any other person,
firm or corporation any legal or equitable remedy or claim under or in respect
of this Agreement or any provision herein contained. The term "successors and
assigns" as herein used shall not include any purchaser, as such purchaser, of
any of the Stock from any of the several Underwriters.
13. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Hambrecht & Quist LLC, One Bush Street,
San Francisco, California 94104, with a copy to Peter B. Tarr, Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109; and if to the Company, shall
be mailed, telegraphed or delivered to it at its office, Solar Park, Newark,
Delaware 19716-2000, Attention: Dr. Allen M. Barnett, with a copy to Peter
Landau, Opton, Handler, Feiler & Landau, LLP, 52 Vanderbilt Avenue, Suite 514,
New York, New York 10017; and if to the Selling Securityholders, shall be
mailed, telegraphed or delivered to the Selling Securityholders in care of the
Company at Solar Park, Newark, Delaware 19716-2000, with a copy to Peter Landau,
Opton, Handler, Feiler & Landau, LLP, 52 Vanderbilt
<PAGE>
Avenue, Suite 514, New York, New York 10017. All notices given by telegraph
shall be promptly confirmed by letter.
14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or the Selling Securityholders or their respective directors or
officers, and (c) delivery and payment for the Stock under this Agreement;
provided, however, that if this Agreement is terminated prior to the Closing
- -------- -------
Date, the provisions of paragraph (l) of Section 6 hereof shall be of no further
force or effect.
<PAGE>
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California.
Please sign and return to the Company and to the Selling Securityholders in
care of the Company the enclosed duplicates of this letter, whereupon this
letter will become a binding agreement among the Company, the Selling
Securityholders and the several Underwriters in accordance with its terms.
Very truly yours,
ASTROPOWER, INC.
By __________________________
Allen M. Barnett
President and CEO
SELLING SECURITYHOLDERS:
[List Names]
By __________________________
[Attorney-in-Fact]
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
Hambrecht & Quist LLC
CIBC World Markets Corp.
FAC/Equities, a division of First Albany Corporation
By Hambrecht & Quist LLC
By __________________________
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
<PAGE>
SCHEDULE I
UNDERWRITERS
Number of
Shares
to be
Underwriters Purchased
- ------------ ---------
Hambrecht & Quist LLC . . . . . . . . . . . . . . . . . . .
CIBC World Markets Corp. . . . . . . . . . . . . . . . . .
FAC/Equities, a division of First Albany Corporation . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
SCHEDULE II
SELLING SECURITYHOLDERS
Name [and Address] Number of Shares
of Selling Securityholders to be Sold
-------------------------- ----------
Total. . . . . . . . . . . . . . . . . . . . . .
<PAGE>
ANNEX A
Matters to be Covered in the Opinion of Opton Handler Feiler & Landau, LLP
Counsel for the Company
and the Selling Securityholders
(i) Each of the Company and its subsidiary has been duly incorporated or
organized and is validly existing as a corporation or limited liability company,
as the case may be, in good standing under the laws of the jurisdiction of its
incorporation or organization, is duly qualified as a foreign corporation and in
good standing in each state of the United States of America in which its
ownership or leasing of property requires such qualification, and has full
corporate or limited liability company power and authority to own or lease its
properties and conduct its business as described in the Registration Statement;
all the limited liability company membership interests of the subsidiary of the
Company have been validly issued in accordance with its organizational and
operational documents, and are owned by the Company free and clear of all liens,
encumbrances and security interests, and to the best of such counsel's
knowledge, no options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into ownership
interests in such subsidiary are outstanding;
(ii) the authorized capital stock of the Company consists of 5,000,000
shares of Preferred Stock, of which there are no shares outstanding, and
25,000,000 shares of Common Stock, $.01 par value, of which there are
outstanding ________ shares (including the Underwritten Stock plus the number of
shares of Option Stock issued on the date hereof); proper corporate proceedings
have been taken validly to authorize such authorized capital stock; all of the
outstanding shares of such capital stock (including the Underwritten Stock and
the shares of Option Stock issued, if any) have been duly and validly issued and
are fully paid and nonassessable; any Option Stock purchased after the Closing
Date, when issued and delivered to and paid for by the Underwriters as provided
in the Underwriting Agreement, will have been duly and validly issued and be
fully paid and nonassessable; and no preemptive rights of, or rights of refusal
in favor of, stockholders exist with respect to the Stock, or the issue and sale
thereof, pursuant to the Certificate of Incorporation or Bylaws of the Company
and, to the knowledge of such counsel, there are no contractual preemptive
rights that have not been waived, rights of first refusal or rights of co-sale
which exist with respect to the Stock being sold by the Selling Securityholders
or the issue and sale of the Stock;
(iii) the Registration Statement has become effective under the Securities
Act and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or suspending or preventing the use
of the Prospectus is in effect and no proceedings for that purpose have been
instituted or are pending or contemplated by the Commission;
(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act, the Exchange Act
and with the rules and regulations of the Commission thereunder;
(v) such counsel have no reason to believe that the Registration Statement
(except as to the financial statements and schedules and other financial and
statistical data contained or incorporated by reference therein, as to which
such counsel need not express any opinion or belief) at the Effective Date
contained any untrue statement of a
<PAGE>
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 (except as to the financial statements and schedules and other
financial and statistical data contained or incorporated by reference therein,
as to which such counsel need not express any opinion or belief) as of its date
or at the Closing Date (or any later date on which Option Stock is purchased),
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(vi) the information required to be set forth in the Registration
Statement in answer to Items 9, 10 (insofar as it relates to such counsel) and
11(c) of Form S-1 is to the best of such counsel's knowledge accurately and
adequately set forth therein in all material respects or no response is required
with respect to such Items the description of the Company's stock option plans
and the options granted and which may be granted thereunder and the options
granted otherwise than under such plans set forth in the Prospectus accurately
and fairly presents the information required to be shown with respect to said
plans and options to the extent required by the Securities Act and the rules and
regulations of the Commission thereunder;
(vii) such counsel do not know of any franchises, contracts, leases,
documents or legal proceedings, pending or threatened, which in the opinion of
such counsel are of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement, which are not described and filed as required;
(viii) the Underwriting Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms;
(ix) the Underwriting Agreement has been duly executed and delivered by or
on behalf of the Selling Securityholders and the Custody Agreement between the
Selling Securityholders and [Peter Landau], as Custodian, and the Power of
Attorney referred to in such Custody Agreement have been duly executed and
delivered by the several Selling Securityholders and each of these agreements
constitutes a valid and binding obligation of each of the Selling
Securityholders, enforceable against each of the Selling Securityholders in
accordance with their respective terms;
(x) the issue and sale by the Company of the shares of Stock sold by the
Company as contemplated by the Underwriting Agreement will not conflict with, or
result in a breach of, the Certificate of Incorporation or Bylaws of the Company
or its subsidiary or any agreement or instrument known to such counsel to which
the Company or its subsidiary is a party or any applicable law or regulation, or
so far as is known to such counsel, any order, writ, injunction or decree, of
any jurisdiction, court or governmental instrumentality;
(xi) all holders of securities of the Company having rights to the
registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement;
(xii) good and marketable title to the shares of Stock sold by the Selling
Securityholders under the Underwriting Agreement, free and clear of all liens,
encumbrances, equities, security interests and claims, has been transferred to
the Underwriters who have severally purchased such shares of Stock under the
<PAGE>
Underwriting Agreement, assuming for the purpose of this opinion that the
Underwriters purchased the same in good faith without notice of any adverse
claims; and
(xiii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated in the Underwriting Agreement, except such as have been obtained
under the Securities Act and such as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the Stock by
the Underwriters.
____________________________________
Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States or of the State of Delaware, upon
opinions of local counsel satisfactory in form and scope to counsel for the
Underwriters. Copies of any opinions so relied upon shall be delivered to the
Representatives and to counsel for the Underwriters and the foregoing opinion
shall also state that counsel knows of no reason the Underwriters are not
entitled to rely upon the opinions of such local counsel.
<PAGE>
EXHIBIT 5.1
OPTON HANDLER FEILER & LANDAU, LLP
ATTORNEYS AT LAW
52 VANDERBILT AVENUE
NEW YORK, N.Y. 10017-3808
------
TEL. (212) 599-1744
FAX: (212) 972-2219
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: AstroPower, Inc.
Registration Statement on Form S-1 filed September 9, 1999
----------------------------------------------------------
Gentlemen:
We refer to the Registration Statement on Form S-1, (the "Registration
Statement") filed by AstroPower, Inc., a Delaware corporation (the "Company"),
with the Securities and Exchange Commission (the "Commission") on September 9,
1999, relating to the issuance by the Company of a maximum of 2,437,500 shares
of Common Stock, par value $.01 per share (the "Common Stock").
We have reviewed the Amended and Restated Certificate of Incorporation
and Amended and Restated By-Laws of the Company, records of certain of the
Company's corporate proceedings as reflected in the Company's minute books and
have examined such authorities and statutes as we have deemed relevant to the
opinion set forth hereinafter.
Based upon the foregoing, it is our opinion that:
(a) the maximum of 2,437,500 shares of Common Stock proposed to be
issued by the Company will, when issued pursuant to, and in the
manner contemplated by the Registration Statement, be legally
issued, fully paid and non-assessable.
(b) all of the Company's issued and outstanding shares of Common
Stock are legally issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the prospectus which forms a part thereof.
Respectfully submitted,
Opton Handler Feiler & Landau, LLP
/s/ Peter Landau
PL:oa
<PAGE>
EXHIBIT 10.23
Legal Department
Corning Incorporated
Corning, New York 14831
607-974-9000
fax 607-974-6135
October 6, 1998
AstroPower, Inc.
Solar Park
Newark, DE 19716-2000
Attention: President
Dear Sirs:
This letter confirms our agreement as to the following:
1. AstroPower, Inc. ("AstroPower") shall repay to Corning Incorporated
("Corning") Five Million Dollars ($5,000,000.00), constituting the full
principal amount outstanding under the Secured 7% Convertible Promissory Note,
dated August 19, 1997 (the "Note"), issued by AstroPower to Corning.
2. AstroPower shall remit the full amount of such payment by wire transfer
of immediately available funds to the account of Corning on or before the
close of business on October 9, 1998.
3. Contingent upon receipt by Corning of the above mentioned funds, Corning
waives the prepayment provisions of Section 2B of the Note.
4. Contingent upon receipt by Corning of the above mentioned funds, Corning
waives all rights to interest accrued on the Note after August 16, 1998.
5. The Note Purchase Agreement, dated August 19, 1997 (the "Note Purchase
Agreement"), between Corning and AstroPower and the Security Agreement, dated
August 19, 1997 (the "Security Agreement"), between Corning and AstroPower and
the Intercreditor and Lien Priority Agreement, dated August 19, 1997 (the
"Intercreditor Agreement"), between Corning, AstroPower and Mellon Bank, DE,
N.A. and the letter agreement, dated August 21, 1997 (the "Letter Agreement"),
between Corning, AstroPower and Artisans Bank shall each be terminated,
effective upon receipt by Corning of the above mentioned funds.
6. The Research and Development Umbrella Agreement, dated August 19, 1997
(the "R&D Agreement"), between Corning and AstroPower is hereby terminated,
except for the confidentiality provisions of Section 4(b) thereof which shall
terminate as provided therein.
7. All options on AstroPower capital stock heretofore granted to Corning
(the "Options") shall be cancelled, effective upon receipt by Corning of the
above mentioned funds.
8. The arrangements contemplated herein shall constitute full satisfaction
of all rights and obligations, and each of Corning and AstroPower hereby
release and agree to hold harmless the other from all obligations, claims,
causes of action, liabilities, expenses or other damages that have arisen or
that may arise, under each of the Note, the Note Purchase Agreement, the
Security Agreement, the Intercreditor Agreement, the Letter Agreement, the R&D
Agreement and the Options, and each of Corning and AstroPower waive all rights
thereunder and agree not to assert any claims or causes of action in respect
thereof.
<PAGE>
Please confirm your agreement with the above by countersigning one original
copy of this letter and returning it to the attention of Marcus P. Efthimiou,
Esq., Corning Incorporated, One Riverfront Plaza, Corning, New York 14831.
CORNING INCORPORATED
/s/ Corning Incorporated
By: ______________________________
Agreed:
ASTROPOWER, INC.
/s/ AstroPower, Inc.
By: _________________________________
October 9, 1998
Date: _______________________________
<PAGE>
EXHIBIT 10.25
k
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT is made this day of January, 1999, by and between
LIBERTY PROPERTY LIMITED PARTNERSHIP, a Pennsylvania limited partnership
("Landlord") and ASTROPOWER, INC., a Delaware corporation ("Tenant").
BACKGROUND
A. Landlord and Tenant entered into a Lease Agreement dated January 19,
1998 (the "Lease"), covering premises at 231 Lake
Drive, Newark, Delaware, as more fully described in the Lease.
B. Tenant desires to increase the amount of space leased and Landlord has
agreed to such increase subject to the provisions of this First
Amendment. Accordingly, Landlord and Tenant desire to amend the Lease.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and covenants contained herein and in the Lease, and intending to be
legally bound hereby, agree that, effective. on the date Landlord tenders
possession of the Additional Space (as defined below) to Tenant free of the
tenancy of Winstar Wireless, Inc. ("Winstar") (the "Effective Date"), the Lease
is amended as follows:
1. Section l(a) defining "PREMISES" is amended by deleting the reference
to "60,300" approximate rentable square feet and inserting "80,400" in
its place. The Premises, including the 20,100 additional square feet
(the "Additional Space") being leased pursuant to this Amendment, is
shown on attached Exhibit "A-1".
2. Section 1(a) defining "TERM" is amended to change the Term to the
number of months between June 1, 1998 and the Expiration Date and to
change the Expiration Date to the date which is the 10th anniversary of
the Effective Date or, if the Effective Date is not the first day of a
calendar month, 10 years from the first day of the first calendar month
after the Effective Date.
3. Section 1 (d)(I) defining "MINIMUM ANNUAL RENT" is deleted in its
entirety and the following is submitted therefore:
<TABLE>
<CAPTION>
Period Annual Monthly
------ ------ -------
<S> <C> <C> <C>
*Effective Date - 5/31/99 $375,264.00 $31,272.00
6/1/99 - 5/31/00 $381,900.00 $31,825.00
6/1/00 - 5/31/01 $389,124.00 $32,427.00
6/1/01 - 5/31/02 $397,380.00 $33,115.00
6/1/01 - 5/31/03 $405,408.00 $33,784.00
6/1/01 - 5/31/04 $413,460.00 $34,455.00
6/1/01 - 5/31/05 $419,494.00 $34,957.00
6/1/01 - 5/31/06 $426,120.00 $35,510.00
6/1/06 - 6/31/07 $432,756.00 $36,063.00
6/1/07 - 5/31/08 $441,396.00 $36,783.00
6/1/08 - Expiration Date $448,428.00 $37,369.00
</TABLE>
*Assumes Effective Date is prior to 6/1/99. If Effective Date is on or after
6/l/99, the next line of the chart applies and the Effective Date will be deemed
inserted in lieu of 6/1/99.
4. Section 1(d)(ii) defining "ANNUAL OPERATING EXPENSES" is deleted in its
entirety and the following is substituted therefor:
<PAGE>
(ii) Estimated "ANNUAL OPERATING EXPENSES": $82,1312.00 (Eighty-Two
Thousand Eight Hundred Twelve and 00/100 Dollars), payable in monthly
installments of $6,901 (Six Thousand Nine Hundred One and 00/100 Dollars),
subject to adjustment (7(a)).
5. Section 1(e) defining "PROPORTIONATE SHARE" is amended by deleting the
reference to "46.100%" and inserting "61.47%" in its place.
6. Section 7(a) entitled "OPERATION OY PROPERTY: PAYMENT OF OPERATING
EXPENSES" is amended by deleting the third sentence in its entirety and
substituting the following; "The amount of the Annual Operating
Expenses set forth in Section l(d)represents Tenant's Proportionate
Share of the estimated operating expenses during the calendar year of
the Term in which the rentable square feet of the Premises was
increased to include the Additional space on an annualized basis; from
time to time Landlord may adjust such estimated amount if the estimated
operating expenses increased."
7. Tenant agrees to occupy the Additional Space in its present "as is"
condition and acknowledges that Landlord has made no representation
with respect thereto. It is understood and agreed that Landlord is
under no duty to make repairs, alterations, or decorations to the
Additional Space, except that prior to the Effective Date, Landlord
shall (a) throughly clean and re-key the Additional Space, (b) install
building standard tenant identification signs, and (c) check all
electrical, plumbing and HVAC systems in the Additional Space for
proper operation and maintenance.
8. At Landlord's request, Tenant shall confirm the Effective Date by
executing an additional space commencement certificate in the form
attached as Exhibit "B-1".
9. The obligations of Landlord under this First Amendment are conditioned
upon the termination of the existing lease with Winstar (the "Winstar
Lease") on the Additional Space on terms and conditions satisfactory to
Landlord and the vacation of the Additional Space by Winstar.
10. The parties agree that they have dealt with no brokers in connection
with this First Amendment, except for McConnell Real Estate, whose
commission shall be paid by Landlord pursuant to separate agreement.
Each party agrees to indemnify and hold the other harmless from any and
all claims for commissions or fees in connection with the Additional
Space and this First Amendment from any other real estate brokers or
agents with whom they may have dealt.
11. Tenant acknowledges and agrees that the Lease is in full force and
effect and Tenant has no claims or offsets against rent due or to
become due hereunder.
12. Except as expressly modified herein, the terms and conditions of the
Lease shall remain unchanged and in full force and effect. All attached
exhibits referred to herein are made a part of this First Amendment and
the Lease.
13. This First Amendment shall be binding upon and inure to the benefit of
the parties and their respective successors and permitted assigns.
2
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the day and year first above written.
LANDLORD:
LIBERTY PROPERTY LIMITED PARTNERSHIP
By:
----------------------------------
Liberty Property Trust, Sole
General Partner
By:
----------------------------------
Name:
Title
TENANT:
ASTROPOWER, INC.
By:
----------------------------------
Name: Thomas J. Stiner
Title: VP & CFO
Attest:
---------------------------
Name: Robert B. Hall
Title: V.P.
3
<PAGE>
EXHIBIT "B-1"
-------------
ADDITIONAL SPACE COMMENCEMENT CERTIFICATE
The undersigned, as duly authorized officers and/or representatives of
LIBERTY PROPERTY LIMITED PARTNERSHIP ("Landlord") and ASTROPOWER, INC.
("Tenant"), hereby agree as follows with respect to the Lease Agreement dated
January 19, 1998 (the "Lease") between them for premises located at 231 Lake
Drive, Newark, Delaware (the "Premises").
1. Date of First Amendment of Lease Agreement:
, 19
----------------------------------- ----
2. Effective Date that Additional Space (defined in above Amendment) is
part of Premises: ,19
-------------------- -----------------
3. Expiration Date: ,19
-------------------- -----------------
The parties agree that they have dealt with no brokers in connection
with this First Amendment, except for ______________________, whose commission
shall be paid by Landlord pursuant to separate agreement. Each party agrees to
indemnify and hold the other harmless from any and all claims for commissions or
fees in connection with the Additional Space and this First Amendment from any
other real estate brokers or agents with whom they may have dealt .
4. Rent and operating expenses due on or before the Effective Date for the
period from the Effective Date until the first day of the next calendar
month (Not applicable if the Effective Date is the first day of the
calendar month):
Apportioned Minimum Rent: $
------------------------
Apportioned Operating Expenses: $
------------------------
TOTAL: $
------------------------
Thereafter regular monthly payments due in the following amounts until
adjusted in accordance with the Lease:
5. Tenant certifies that, as of the date hereof, (a) the Lease is in full
force and effect and has not been amended, (b) Tenant has no offsets or
defenses against any provision of the Lease and (c) Landlord has
substantially completed any improvements to be performed by Landlord in
accordance with the Lease, excepting the Punch List items set forth an
the Schedule
1
<PAGE>
attached hereto and initialed by Landlord and Tenant, if any.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the day and year first above written.
LANDLORD:
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: Liberty Property Trust, Sole
General Partner
By:
--------------------------------
Name:
Title
TENANT:
ASTROPOWER, INC.
By:
---------------------------------
Name: Thomas J. Stiner
Title: VP & CFO
Attest:
-----------------------------
Name: Robert B. Hall
Title: V.P.
2
<PAGE>
EXHIBIT 10.26
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE ("Amendment") is entered into as of the
day of June, 1999, by and between RREEF AMERICA REIT II CORP. E., a Maryland
corporation ("Landlord"), and ASTROPOWER, INC., a Delaware corporation
("Tenant").
1. Recitals. This Amendment is made with reference to the following facts and
--------
objectives:
(a) Liberty Property Limited Partnership ("Liberty") leased to Tenant,
and Tenant rented from Liberty, certain premises consisting of approximately
60,300 square feet, Suite 3 ("Premises"), in the building commonly known as 231
Lake Street, Newark Delaware (the "Building"), pursuant to Lease Agreement dated
June 19, 1998, as amended by First Amendment to Lease Agreement dated January
26, 1999 (the "First Amendment"; said Lease and First Amendment. as amended
hereby, collectively, the 'Lease").
(b) The Premises was increased to a total of 80,400 square feet
pursuant to the First Amendment, by adding the 20,100 square foot "Additional
Space" to the original Premises.
(c) Landlord acquired the Building by purchase on April 15, 1999 from
Liberty and, in connection therewith, was assigned all of Liberty's interest in
the Lease.
(d) Tenant has taken possession of the Additional Space, and Landlord
and Tenant now desire to further amend the Lease in order to clarify the term
rent schedule of the Lease as amended.
(e) All terms defined in the Lease retain their meaning herein, unless
specified herein to the contrary,
(f) Now, therefore, in consideration of the premises herein contained
and the detriments to be suffered by each of the parties, the parties hereby
agree as follows:
2. Effective Date and Term. The Effective Date, as defined in the First
-----------------------
Amendment, is agreed to be June 16, 1999. Accordingly, pursuant to paragraph 2
of the First Amendment, the Expiration Date will be June 30, 2009.
3. Rent Schedule. Paragraph 3 of the First Amendment is hereby deleted. The
--------------
minimum rent schedule for the Lease term as extended shall be as follows:
Period Annual Rent Monthly Rent
------ ----------- ------------
6/16/99 - 6/30/99* $375,264.00 $31,272.00
- -----------------------------------------------------------------------
7/1/1999 - 6/30/2000 $381,900.00 $31,825.00
- -----------------------------------------------------------------------
7/1/2000 - 6/30/2001 $389,124.00 $32,427.00
- -----------------------------------------------------------------------
7/1/2001 - 6/30/2002 $397,380.00 $33,115.00
- -----------------------------------------------------------------------
7/1/2002 - 6/30/2003 $405,408.00 $33,784.00
- -----------------------------------------------------------------------
7/1/2003 - 6/30/2004 $413,460.00 $34,455.00
- -----------------------------------------------------------------------
7/1/2004 - 6/30/2005 $419,484.00 $34,957.00
- -----------------------------------------------------------------------
7/1/2005 - 6/30/2006 $426,120.00 $35,510.00
- -----------------------------------------------------------------------
7/1/2006 - 6/30/2007 $432,756.00 $36.063.00
- -----------------------------------------------------------------------
7/1/2007 - 6/30/2008 $441,396.00 $36,783.00
- -----------------------------------------------------------------------
7/1/2008 - 6/30/2009 $448,428.00 $37,369.00
- -----------------------------------------------------------------------
*prorated for partial month
4. Limitation Of Landlord's Liability. Redress for any claim against Landlord
under the Lease as amended hereby shall be limited to and enforceable only
against and to the extent of Landlord's interest in the Building. The
obligations of Landlord under this Lease are not intended to and shall not
be personally binding on, nor shall any resort be had to the private
properties of, any of its trustees or board of directors and officers, as
the case may be, its investment manager, the general partners thereof, or
any beneficiaries, stockholders, employees, or agents of Landlord or the
investment manager.
IN WITNESS WHEREOF, the parties hereto have executed Amendment as of the day
and year first written above.
LANDLORD: TENANT:
RREEF AMERICA REIT 11 CORP. E, a ASTROPOWER, INC., a Delaware corporation
Maryland corporation
By:
-------------------------------
RREEF Management Company, a
Delaware corporation
By: By:
------------------------------ --------------------------------------
Barbara J. Gillentine
Vice President - Asset
Management Title:
-----------------------------------
Dated: , 1999 Dated: , 1999
---------------------- -----------------------------
<PAGE>
EXHIBIT 10.27
COMMERCIAL LEASE
----------------
Dated: June 18 , 1999
---------------
BETWEEN: AstroPower West, LLC, a California
----------------------------------
Limited Liability Company
-----------------------------------------------
(Lessee)
-----------------------------------------------
AND: Allied Investments, a California General
-----------------------------------------------
Partnership
-----------------------------------------------
(Lessor)
-----------------------------------------------
A
<PAGE>
TABLE OF CONTENTS
Page
1. PARTIES 1
2. PREMISES 1
3. TERM 1
4. DELAY IN POSSESSION 2
5. EARLY POSSESSION 2
6. MONTHLY RENT 2
7. LATE CHARGES 2-3
8. BAD CHECK CHARGE 3-4
9. SECURITY DEPOSIT 4
10. PERSONAL PROPERTY TAXES 4
11. UTILITY AND ALLIED SERVICES 5
12. PUBLIC LIABILITY AND PROPERTY DAMAGE
INSURANCE COSTS 5
13. INTEREST ON DELINQUENT RENT, PERSONAL PROPERTY
TAXES AND PUBLIC LIABILITY AND PROPERTY DAMAGE
INSURANCE COSTS 5
14. USE OF PREMISES 5-6
15. CONDITION OF PREMISES 6
16. REPAIRS AND MAINTENANCE 6-7
17. ALTERATIONS AND ADDITIONS 7-8
18. LESSOR'S ACCESS 8-9
19. SIGNS 9
20. COVENANT AGAINST ASSIGNMENT AND SUBLETTING 9
21. EXEMPTION OF LESSOR FROM LIABILITY 9
22. INDEMNITY 9-10
23. BUILDING RULES 10
24. EARTHQUAKE AND WATER DAMAGE 10
25. SECURITY MEASURES 10
26. COMPLIANCE WITH ALL LAWS AND REGULATIONS - NUISANCES 10
27. LESSEE NOT TO SUFFER LIENS 11
28. PUBLIC LIABILITY, PROPERTY DAMAGE, PLATE, DOOR AND
WINDOW GLASS AND WORKMEN'S COMPENSATION INSURANCE
TO BE MAINTAINED BY LESSEE 11
29. FIRE, CASUALTY AND EXTENDED COVERAGE INSURANCE 12
30. DAMAGE OR DESTRUCTION - OBLIGATIONS TO RESTORE, ETC. 12-13
31. SURRENDER UPON TERMINATION 13
32. HOLDING OVER 14
33. DEFAULT 14-15-16
34. CONDEMNATION 16-17
35. NOTICES 17
36. SALE OF PREMISES 17
37. SUBORDINATION 18
38. PERSONAL PROPERTY LEFT ON PREMISES AT
LEASE TERMINATION 18
B
<PAGE>
Page
----
39. BREACH OF SECURITY 18
40. ATTORNEY'S FEES 19
41. OPTION TO EXTEND TERM OF LEASE 19
42. COMMON AREA EXPENSES 19-20
43. REAL PROPERTY TAXES AND ASSESSMENTS AND
INSURANCE PREMIUM INCREASES 20
44. MISCELLANEOUS PROVISIONS 20-21-22
C
<PAGE>
LEASE
-----
SEE ATTACHED CORRECTED PAGE
1. PARTIES
-------
This lease is made this 18th day of June, 1999 , between Allied
-------- ----------------- ------
Investments, a California General Partnership, hereinafter called "Lessor" and
----------------------------------------------
AstroPowerWest, LLC a California Limited Liability Company, hereinafter called
-----------------------------------------------------------
"Lessee".
2. PREMISES
--------
Lessor, for and in consideration of the rents, covenants and agreements
hereinafter contained on the part and on behalf of the Lessee to be paid, kept
and performed, does hereby lease and demise unto said Lessee, and said Lessee
does hereby hire and rent from said Lessor, the following described premises
situated in the City of Concord County of Contra Costa, State of California,
------- -------------
commonly known as 5036 Commercial Circle, Suite B, Concord, CA 94520 and more
---------------------------------------------------
particularly described as follows:
A portion of the above described concrete tilt-up building consisting of
approximately 1200 square feet of office space and 1792 square feet of
---- ----
warehouse space for a total of 2992 square feet, including 4 designated
---- --
parking spaces in the front of said building, n/a designated parking spaces
----
at the rear of the said building, n/a designated parking spaces at the side of
----
the building and an undesignated number of common parking spaces for invitees
of all tenants of AstroPower, Inc., in the common area, all as more
------------------
particularly described in Exhibit "A" attached hereto and made a part hereof.
The common area in front, in the rear and at the side of the building is not
available for parking other than as set forth above nor for the accumulation
or storage of merchandise, equipment, loading pallets, trash, debris or garbage
containers for Lessee nor may the common area be used for the loading or
unloading of vehicles or equipment unless otherwise permitted expressly
herein..
Lessee is not allowed at any time to wash, maintain or repair cars, trucks or
any other types of vehicles inside building or outside the building including
the parking lot and common area.
3. TERM
----
The term of this Lease shall be for 36 months commencing July 1, 1999, and
-- -------------
ending June 30, 2002, unless sooner terminated pursuant to any provisions
--------------
hereof.
4. DELAY IN POSSESSION
-------------------
Notwithstanding said commencement date, if for any reason Lessor cannot deliver
possession of the premises to Lessee on said date, Lessor shall not be subject
to any liability therefore, nor shall such failure affect the validity of this
Lease or the obligations of Lessee hereunder or extend the term hereof, but in
such case, Lessee shall not be obligated to pay rent until possession of the
premises is tendered to Lessee, provided, however, that if Lessor shall not
have delivered possession of the premises within sixty (60) days from said
commencement date, Lessee may, at Lessee's option, by notice in writing to
Lessor within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor
within said ten (10) day period, Lessee's right to cancel this lease hereunder
shall terminate and be of no further force or effect.
5. EARLY POSSESSION
----------------
If Lessee Occupies the premises prior to said commencement date, such occupancy
shall be subject to all provisions hereof. Such occupancy shall not advance
the termination date, and Lessee shall pay rent for such period at the initial
monthly rates set forth below.
6. MONTHLY RENT
------------
Lessee shall pay to Lessor as monthly rent, without deduction, setoff, prior
notice or demand, except as hereinafter provided, the sum of Two Thousand Three
------------------
Hundred Ninety-Four and No/100 Dollars ($2,394.00) per month for the first 12
-------------------------------------- ---------
months of the Lease term. All rents shall be paid on the first day of each
month of the Lease term, commencing July 1, 1999 and continuing during the
------------
term. Starting with the 13th month and for each and all succeeding 12 month
----
periods thereafter, rent shall be increased by*. All rents shall be paid to
Lessor at the address to which notices to Lessor are given in accordance with
Paragraph 35, below. Rent for any period during the term hereof which is for
less than one month shall be a prorata portion of the monthly installment.
1
<PAGE>
7. LATE CHARGES
------------
Lessee hereby acknowledges that late payment by Lessee to Lessor of rent and
other sums due hereunder will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the premises. Accordingly, if any installment of rent or
any other sum due from Lessee shall not be received by Lessor or Lessor's
designee within ten (10) days after such amount shall be due then without any
requirement for notice to Lessee, Lessee shall pay to Lessor a late charge (of
$144.00 Dollars which may be treated as additional rent) (equal to 6% of such
-------
overdue amount which may be treated as additional rent). The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor
* Per the following Rent Schedule:
Month Monthly Rent
----- ------------
1-12 = $2,394.00
13-24 = $2,453.00
25-36 = $2,513.00
Will incur by reason of late payment by Lessee. Acceptance of such late
charge by Lessor shall in no event constitute a waiver, of Lessee's Default
with respect to such overdue amounts nor prevent Lessor from exercising any of
the other rights and remedies granted hereunder. The ten (10) days, period is
not a grace period. Lessor may make written demand for any rent unpaid on
----
the second day of the month. The late charge shall be in addition to all
other remedies available to Lessor. In the event that a late charge is
payable hereunder, whether or not collected, for three (3) consecutive
installments of rent then rent shall, in the discretion of Lessor, become due
and payable upon written advance notice to Lessee quarterly in advance rather
than monthly notwithstanding any other provision of this Lease to the contrary.
8. BAD CHECK CHARGE
----------------
In the event rent Is tendered by check which is, for any reason, dishonored by
the maker's financial institution, Lessee shall pay to Lessor $ 100.00 as
---------
reimbursement to Lessor for administrative expense in processing such
dishonored check. This charge shall be deemed additional rent and shall be in
addition to all other remedies available to Lessor.
9. SECURITY DEPOSITS
-----------------
Lessor acknowledges receipt of Security Deposit in the amount $ 2,600-00, as
----------
security for the full and faithful performance by the Lessee of the terms,
conditions and covenants or this Lease. Lessee and Lessor agree that the
following disposition shall apply to the Security Deposit.
(a) If the monthly rent shall from time to time increase during the term or any
extension of the term of this Lease, Lessee shall thereupon deposit with
Lessor additional Security Deposit so that the total Security Deposit is
equal to the then current rent.
(b) Lessor can maintain the Security Deposit separate and apart from Lessor's
general funds or can co-mingle the Security Deposit with Lessor's general
and other funds.
(c) Lessor shall not be required to pay Lessee interest on the Security
Deposit.
(d) Lessor's obligation with respect to the Security Deposit are those of a
debtor and not a trustee.
(e) If at any time during the term hereof Lessee shall be in default. in the
payment of rent or any portion thereof, or of any sums expressly
constituting additional rent, Lessor may appropriate and apply any portion
of the Security Deposit as may be necessary to the payment of overdue
rent or other sums expressly constituting additional rent.
(f) If at any time during the term hereof Lessee should fail to repair any
damage to the premises leased or any part of the common portions of the
complex caused by such Lessor or his agent, employees, invitees or other
visitors through lack of ordinary care for a period of greater than 30 days
after written demand to make such repairs is served on Lessee by Lessor,
then Lessor may appropriate and apply any portion of the Security Deposit
as may be reasonably necessary to fund the repair.
(g) If on termination of this Lease for any reason Lessee does not leave the
premises in as good condition as when received by Lessee from Lessor,
reasonable wear and tear expected, then Lessor may appropriate and apply
any portion of the Security Deposit as may be reasonably necessary to put
the premises in such condition.
(h) If on termination of the Lease or incident to any actions to enforce the
agreements, terms and conditions of this Lease, it becomes necessary for
Lessor to obtain the services of attorneys, sheriffs, or moving and storage
firms to secure full possession of the premises or other legal proceedings,
Lessor may appropriate and apply any portion of the Security Deposit as may
be reasonably necessary to fund such services. None of the above shall
prevent or limit Lessor from bringing suit to recover any and all funds for
such costs which may exceed the amount of the Security Deposit.
2
<PAGE>
(i) Lessee agrees to restore the Security Deposit to its original amount should
resort to funds be required by Lessor during the period of this Lease.
Refusal to restore such amount within 15 days after written demand shall be
cause for termination of this Lease.
(j) Lessor agrees to hold such Security Deposit for Lessee, free from the claim
of any creditor of Lessee except a trustee in bankruptcy.
(k) Should Lessor transfer his interest under the Lease in any manner, he or
his agent shall do one of the following acts, either of which shall relieve
him of further liability with respect to such depsoit:
1. Transfer the portion of such deposit remaining after any lawful
deductions, as above, to his successor in interest, and thereafter
notify the Lessee by registered mail at the address under this Lease or
such transfer, and of the transferee's name and address. On receipt of
such remaining deposit, the successor is interest of Lessor shall have
all rights and obligations of Lessor holding such deposit with respect
to such deposit.
2. Return the portion of such deposit remaining after any lawful
deductions as above have been made.
(l) The security Deposit shall not be treated by Lessee as in lieu of payment
of the last month's rent.
10. PERSONAL PROPERTY TAXES
-----------------------
Lessee shall pay, before delinquency, all taxes, assessments, license fees,
and other charges that are levied and assessed on Lessee's personal property
installed or located in and on the premises that becomes payable during the
term hereof. On demand by Lessor, Lessee shall furnish Lessor with
satisfactory evidence of such payment. If any of Lessee's said personal
property shall be assessed with Lessor's real property, Lessee shall pay
Lessor the taxes attributable to Lessee within ten (10) days after receipt of
a written statement setting forth the taxes applicable to Lessee's property.
Such payment shall be deemed additional rent, payable as such on the next date
upon which rent becomes due.
11. UTILITY AND ALLIED SERVICES
---------------------------
Lessee shall promptly pay for all heat, electric light and power, telephone,
gas, water, garbage, cable-vision and all other services of whatsoever kind or
nature furnished to or used or consumed in or about the demised premises by
Lessee during the term hereof.
12. PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE COSTS
----------------------------------------------------
Lessee shall promptly pay all premiums or other costs and expenses for
maintaining public liability and property damage insurance as required under
the provisions of paragraph 28 hereof.
--
13. INTEREST ON DELINQUENT RENT, PERSONAL PROPERTY TAXES AND PUBLIC LIABILITY
-------------------------------------------------------------------------
AND PROPERTY DAMAGE INSURANCE COSTS
-----------------------------------
Any rent, personal property taxes and Insurance charges owing by Lessee
hereunder not paid when the same shall become due, shall bear interest from
the date the same becomes due until paid at the rate of ten percent (10%) per
annum.
14. USE OF PREMISES
---------------
The demised premises are leased to Lessee for the sole and exclusive purpose of
administrative offices, storage, distribution, testing, light manufacturing,
----------------------------------------------------------------------------
and assembly of solar electric power systems. Lessee agrees not to use or
---------------------------------------------
permit said demised premises to be used for any other purpose or purposes.
Lessee shall not do, bring or keep anything in or about the premises that will
cause a cancellation of any insurance covering the building in which the
premises are located.
If the rate of insurance carried by Lessor is increased as a result of Lessee's
use, Lessee shall pay to Lessor within ten (10) days before the date Lessor is
obligated to pay an increased premium on the insurance, or within (10) days
after Lessor delivers to Lessee a certified statement from Lessor's insurance
carrier stating that the rate increase was caused solely by an activity of
Lessee in the premises, whichever date is later, a sum equal to the difference
between the original premium and the increased premium. Such payment shall be
deemed additional rent, payable as such on the next date upon which rent
becomes due.
Lessee agrees not to use or permit to be used, stored, transported to, or
maintained on, for however briefly, any "hazardous waste" or "hazardous
substance" as defined in accordance with the California Health and Safety Code
and/or any federal statute as well as any state or federal judicial decision
without complying with all applicable Federal, State and Local laws or
ordinances pertaining to the storage, use or disposal including, but not
limited to, obtaining proper permits, Lessor shall have the right upon
reasonable notice and cause to re-enter the premises for the purpose of
performing contamination tests.
If Lessee's storage, use or disposal of toxic materials on the property results
in contamination of the soil or surface or ground water in excess of the
minimum standards set by governmental agencies having jurisdiction, Lessee
agrees to cleanup the contamination and
3
<PAGE>
indemnify, defend and hold the Lessor and brokers harmless from and against any
claims, suits, causes of action, costs, fees, including attorneys' fees,
arising from or connected with any such contamination. However, this does not
extend to contamination by other tenants.
Lessee shall immediately notify, in writing, Lessor of any release or
threatened release of any hazardous substance on or beneath the premises upon
the discovery by Lessee or upon the discovery of facts giving Lessee reasonable
cause to believe such release or threatened release has or will occur. The
provisions of Health and Safety Code Section 25359.7 are incorporated herein
and made a part hereof.
Lessee may not, under any circumstances, store or maintain anything outside nor
have anything touching or leaning against the building of which the premises
are a part including, but not limited to, equipment, merchandise, products,
vehicles, dumpsters, pallets and supplies.
15. CONDITION OF PREMISES
---------------------
(a) Lessor shall deliver the premises to Lessee clean and free of
debris on Lease commencement date (unless Lessee is already in
possession) and Lessor further warrants to Lessee that the plumbing,
electrical system, lighting, air-conditioning, heating and loading
doors in the premises shall be in good operating condition on the lease
commencement date. In the event that it is determined that this
warranty has been violated then it shall be the obligation of Lessor,
after receipt of written notice from Lessee setting forth with
specificity the nature or the violation to promptly at Lessor's sole
cost rectify such violation. Lessee's failure to give such written
notice to Lessor within thirty (30) days after the Lease commencement
date shall cause the conclusive presumption that Lessor has complied
with all of Lessor's obligations hereunder. The warrants contained in
this paragraph shall be of no force or effect if prior to the date of
this Lease Lessee was the occupant of the premises.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts the
premises "as is" in their condition existing as of the Lease
commencement date or the date that Lessee takes possession of the
premises, whichever is earlier, subject to all applicable zoning,
municipal, county and state laws, ordinances and regulations governing
and regulating the use of the premises, and any covenants or
restrictions of record and accepts this lease subject thereto and to
all matters disclosed thereby and by any exhibits attached hereto.
Lessee acknowledges that neither Lessor nor Lessor's agent has made any
representation or warranty as to the present or future suitability of
the premises for the conduct of Lessee's business.
16. REPAIRS AND MAINTENANCE
-----------------------
(a) Lessee acknowledges that it has inspected the demised premises and
knows the condition thereof and that said premises are in a good and
tenantable condition and state of repair. The Lessor shall keep and
maintain the foundation, exterior roof, exterior walls and fire
sprinkler system of the building in which the demised premises are
situated in good order and repair, except as to any damages done
thereto by reason of any negligence, willful act or omission of Lessee,
its agents, servants, employees and contractors. Lessor shall not,
however, be obligated to pain such exterior nor shall Lessor be
required to maintain the interior surface of exterior walls, windows,
doors or plate glass. Lessor shall have no obligation to make repairs
under this paragraph until a reasonable time after receipt of written
notice of the need for such repairs. Lessee expressly waives the
benefits of any statute now or hereafter in effect which would
otherwise afford Lessee the right to make repairs at Lessor's expense
or to terminate this Lease because of Lessor's failure to keep the
premises in good order, condition and repair.
(b) The Lessee at its cost shall maintain and keep in good condition,
order and repair all of the premises, inside and outside, except the
exterior walls, roof, foundation and fire sprinkler system, including
without limitation, all doors, lights, plate glass and other door and
window glass, plumbing and electrical systems including junction
boxes/power panel and the adjacent common area. Lessee shall also
maintain any air-conditioning and heating system serving the premises,
including no less than semi-annual filter servicing, such maintenance
to be performed only by a licensed air-conditioning and heating service
company with all such maintenance to be in full compliance with the
manufacturer's requirements. Lessee shall procure and maintain at
Lessee's expense an air-conditioning and heating system maintenance
contract to be approved by Lessor. If Lessee fails to perform Lessee's
obligations under this paragraph or under any other paragraph of this
Lease, Lessor may at Lessor's option enter upon the premises after (10)
days prior written notice to Lessee (except in the case of emergency,
in which case no notice shall be required), perform such obligations on
Lessee's behalf and put the premises in good order, condition and
repair, and the cost thereof together with interest thereon at the
maximum rate then allowable by law shall be due and payable as
additional rent to Lessor together with Lessee's next rental
installment. On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the premises to Lessor in the same
condition as received, ordinary wear and tear excepted, clean and free
of debris. Lessee shall repair any damage to the premises occasioned
by the installation or removal of its trade fixtures, furnishings and
equipment. Notwithstanding anything to the contrary otherwise stated
in this Lease, Lessee shall leave the air lines, junction box/power
panels, electrical distribution systems, lighting fixtures, space
heaters, air-conditioning, and plumbing on the premises in good
operating condition.
(c) Lessee, specifically, at its own cost, shall maintain and keep in
good condition, order and repair, the roll up doors on the premises
regardless of the cause of any problems with such doors, except if
caused by Lessor or Lessor's agents.
17. ALTERATIONS AND ADDITIONS
-------------------------
4
<PAGE>
(a) Lessee shall not, without Lessor's prior written consent, make any
alterations, improvements, additions or utility installations in, on or
about the premises, except for nonstructural alterations not exceeding
$2,500.00 in cumulative costs during the term of this Lease. In any
event, whether or not in excess of $2,500.00 in cumulative cost, Lessee
shall make no change or alteration in the exterior of the premises nor
the exterior of the building(s) on the premises without Lessor's prior
written consent. As used in this paragraph the term "Utility
Installation" shall mean carpeting, window coverings, air lines,
junction box/power panels, electrical distribution systems, lighting
fixtures, space heaters, air-conditioning and plumbing. Lessor may
require that Lessee remove any or all of said alterations,
improvements, additions or Utility Installations at the expiration of
the term, and restore the premises to their prior condition. Lessor
may require Lessee to provide Lessor at Lessee's sale cost and expense
a lien and completion bond in an amount equal to one and one-half times
the estimated cost of such improvements to insure Lessor against any
liability for mechanic's and materialmen's liens and to insure
completion of the work. Should Lessee make any alterations,
improvements, additions or Utility Installations without the prior
approval of Lessor, Lessor may require that Lessee remove any or all of
the same. Lessee may not tint windows or damage or puncture metal
window frames by drilling and/or piercing, etc. Lessor's consent to a
proposed alteration shall not be unreasonably withheld or delayed.
(b) Any alterations, improvements, additions or Utility Installations in
or about the premises that Lessee shall desire to make and which
requires the consent of the Lessor shall be presented to Lessor in
written form with proposed detailed plans. If Lessor shall give its
consent, the consent shall be deemed conditioned upon Lessee acquiring
a permit to do so from appropriate governmental agencies, the
furnishings of a copy thereof to Lessor prior to the commencement of
the work and the compliance by Lessee of all conditions of said permit
in a prompt and expeditious manner.
(c) Lessee shall pay when due all claims for labor or materials furnished
or alleged to have been furnished to or for Lessee at or for use in the
premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to
the commencement of any work in the premises and Lessor shall have the
right to post notices of non-responsibility in or on the premises as
provided by law. If Lessee shall, in good faith, content the validity
of any such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and
satisfy any such adverse judgement that may be rendered thereon before
the enforcement thereof against the Lessor or the premises upon the
condition that if Lessor shall require, Lessee shall furnish to Lessor
a surety bond satisfactory to Lessor in an amount equal to such
contested lien claim or demand indemnifying Lessor against liability
for the same and holding the premises free from the effect of such lien
or claim. In addition, Lessor may require Lessee to pay Lessor's
attorney's fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.
(d) Unless Lessor requires their removal as set forth above, all
alterations, improvements, additions and Utility Installations (whether
or not such Utility Installations constitute trade fixtures of Lessee)
which may be made on the premises shall become the property of Lessor
and remain upon and be surrendered with the premises at the expiration
of the term. Notwithstanding the provisions of this paragraph,
Lessee's machinery and equipment other than that which is affixed to
the premises so that it cannot be removed without material damage to
the premises shall remain the property of Lessor and may be removed by
Lessee subject to the provisions of this Lease.
(e) If Lessee wished to install window coverings at the front office
portion of the building of which the premises are a part which are
visible from outside the building, such window coverings shall be mini-
blinds only and shall match the color of the window frame.
(f) Lessee may not fasten, bolt or affix any signs to any portion of the
building which the premises are a part including, but not limited to,
any door within said building.
18. LESSOR'S ACCESS
---------------
(a) Lessor and Lessor's agents shall have the right to enter the premises
without notice in case of an emergency, upon court order or when Lessee
has abandoned or surrendered the premises. Lessor and Lessor's agents
shall have the right to enter the premises upon reasonable notice, with
entrance during normal business hours from 8:00am to 6:00pm, Monday
through Saturday, holidays excepted, to make necessary or agreed
repairs, decorations, alterations or improvements, supply necessary or
agreed services or exhibit the premises to prospective or actual
purchasers, mortgagees, tenants, workmen or contractors, or for the
purpose of inspecting the premises for compliance with the lease.
Twenty-four hours shall be presumed to be reasonable notice.
(b) Lessor may at any time place on or about the premises any ordinary
"For Sale" signs and Lessor may at any time during the last 120 days of
the term hereof place on or about the premises any ordinary "For Lease"
signs, all without rebate of rent or liability to Lessee.
19. SIGNS
-----
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Lessee shall not place any sign upon the building and or premises without
Lessor's prior written consent. Lessee may place a white lettered sign of a
removable print on glass front door only.
20. COVENANT AGAINST ASSIGNMENT AND SUBLETTING
------------------------------------------
Lessee agrees not to assign, transfer, mortgage or hypothecate this Lease in
whole or in part or any interest therein nor to sublease or sublet the herein
demised premises or any part or portion thereof, either voluntarily or by
operation of law without Lessor's prior written consent, which consent will
not be unreasonably withheld or delayed. The acceptance of rent by Lessor
from Lessee or from any other person or entity after a purported assignment
or subletting shall not be deemed a waiver by Lessor of any provision herein.
In the event Lessee shall assign, transfer or hypothecate this Lease or any
interest therein, or in the event the Lessee shall sublet the whole of any
part of the herein demised premises, or in the event that any interest in the
Lease shall be affected or transferred by operation of law, or by any
proceedings against the Lessee in attachment, execution, judgement, voluntary
or involuntary proceedings in bankruptcy, or insolvency of Lessee, or
moratorium proceedings in bankruptcy, or otherwise, then at the option of the
Lessor, his successors and assigns, this Lease shall immediately terminate.
21. EXEMPTION OF LESSOR FROM LIABILITY
----------------------------------
Lessee hereby agrees that Lessor shall not be liable for injury to Lessee's
business or any loss of income therefrom or for damage to the equipment,
goods, wares, merchandise or other property of Lessee, Lessee's employees,
invitees, customers, or any other person in or about the premises, nor shall
Lessor be liable for injury to the person of Lessee, Lessee's employees,
agents or contractors whether such damage or injury is caused by or results
from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air-conditioning or lighting fixtures, or from any other cause,
whether the said damage or injury results from conditions arising upon the
premises or upon other portions of the building of which the premises are a
part or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damage arising from any act or
neglect of any other tenant, if any, of the building in which the premises are
located.
22. INDEMNITY
---------
Lessee shall indemnify and hold harmless Lessor from and against any and all
claims arising from Lessee's use of the premises, or from the conduct of
Lessee's business or from any activity, work or things done, permitted or
suffered by Lessee in or about the premises or elsewhere and shall further
indemnify and hold harmless Lessor from and against any and all claims arising
from any breach or default in the performance of any obligation on Lessee's
part to be performed under the terms of this Lease, or arising from any
negligence of the Lessee, or any of Lessee's agents, contractors, or
employees, and from and against all costs, attorney's fees, expenses and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon and in case any such claim, Lessee upon notice from
Lessor shall defend the same at Lessee's expense by counsel satisfactory to
Lessor, Lessee, as a material part of the consideration to Lessor, hereby
assumes all risk of damage to property or injury to persons, in, upon, or
about the premises arising from the negligence or willful misconduct of
Lessee, Lessee's agents, employees, guests and invitees, and Lessee hereby
waives all claims in respect thereof against Lessor.
23. BUILDING RULES
--------------
Lessee agrees that it will abide by, keep and observe any reasonable rules and
regulations which Lessor may make from time to time for the management,
safety, care and cleanliness of the building and grounds of which the demised
premises are a part, the parking of vehicles and the preservation of good
order therein as well as for the convenience of other occupants and tenants of
the building. The violations of any such rules and regulations shall be
deemed a material breach of this Lease by Lessee.
24. EARTHQUAKE AND WATER DAMAGE
---------------------------
It is understood and agreed that the Lessor shall not be held liable for any
damages to any equipment, goods, property, or effects in, or upon, the herein
demised premises during the term of this Lease caused by earthquake or by
water from any source whatsoever, provided, however, that if Lessee shall
notify Lessor that the roof is leaking or causing water damage and if Lessor
shall fail to promptly repair or cause said roof to be repaired, the foregoing
provision exonerating the Lessor from liability to Lessee for water damage
shall not apply.
25. SECURITY MEASURES
-----------------
Lessee hereby acknowledges that the rental payable to Lessor hereunder does
not include the cost of guard service or other security measures, and that
Lessor shall have no obligation whatsoever to provide same. Lessee assumes
all responsibility for the protection of Lessee, its agents and invitees from
acts of third parties.
26. COMPLIANCE WITH ALL LAWS AND REGULATIONS - NUISANCES
----------------------------------------------------
Lessee shall not maintain or suffer or permit to be maintained on the demised
premises any nuisances nor permit the demised premises to be used in whole or
in part, during the term of this Lease, for any purpose or use in violation of
any laws, ordinances, rules or regulations of any public authority applicable
thereto; and Lessee agrees at all times during the term hereof, to keep and
maintain the demised premises in a clean, tidy and sanitary manner and
condition and in compliance with any and all statutes, laws, rules,
regulations and ordinances applicable thereto.
27. LESSEE NOT TO SUFFER LIENS
--------------------------
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Lessee agrees not to permit or suffer any lien to attach encumber the demised
premises or any part or portion thereof during the term hereof.
28. PUBLIC LIABILITY, PROPERTY DAMAGE, PLATE, DOOR AND WINDOW GLASS AND
------------------------------------------------------------------------
WORKER'S COMPENSATION INSURANCE TO BE MAINTAINED BY LESSEE
----------------------------------------------------------
Lessee shall at Its own cost and expense take out, maintain, keep In full force
and effect throughout the term hereof, in a reputable insurance company or
companies authorized to engage in such business in the State of California, (or
in the State Worker's Compensation Insurance Fund as to workmen's compensation
insurance) the following insurance:
(a) Policy of Public Liability and Property Damage Insurance with a single
combined liability limit of not less than $1,000,000 and property
damage limits of not less than $ 300,000 insuring against all liability
of Lessee and its authorized representatives arising out of and in
connection with Lessee's use or occupancy of the leasehold premises.
All public liability insurance and property damage insurance shall
insure performance by Lessee of the indemnity provisions of Paragraph
22. Both parties shall be named as additional insureds, and the policy
shall contain cross-liability endorsements. Not more frequently than
each year throughout the term and any extended term hereof, if in the
considered opinion of Lessor's insurance broker the amount or such
coverage is not adequate, Lessee shall increase the coverage to such
amount as Lessor's insurance broker shall deem adequate. Coverage
hereunder shall include, but not necessarily be limited to
premises/operations liability coverage, personal injury liability
coverage, contractual liability coverage, and broad form property
damage liability coverage.
(b) Glass Insurance - Jointly insuring Lesser and Lessee against all loss
or damage to plate, window, skylights and door glass, and specifying
covering for replacement of all stained glass leaded windows on the
premises, if any.
(c) Worker's Compensation Insurance insuring the Lessee as employer against
liability for injury or death to employees of Lessee.
All such policies shall be nonassessable and shall contain language, to the
extent obtainable, to the effect that: (i) any loss be payable notwithstanding
any act or negligence of Lessor that might otherwise result in the forfeiture
of the insurance; (ii) the insurer waives the right of subrogation against
Lessor and against Lessor's agents and representative; (iii) the policies are
primary and noncontributing with any insurance that may be carried by Lessor;
and (iv) they cannot be cancelled or materially changed except after ten (10)
days' written notice by the insurer to the Lessor or Lessor's designated
representative. Lessee shall furnish Lessor with copies of all such required
insurance policies promptly upon receipt of them or with certificates
evidencing such insurance. Lessee agrees that if for any reason such insurance
is not in full force and effect, then, in such event, Lessor may obtain the
necessary insurance, pay the premium thereon and the repayment thereof shall be
deemed additional rent payable as such on the next date upon which rent becomes
due.
(d) Lessee shall, prior to opening business in the premises, furnish from
the insurers providing the above-referred to coverage, certificates of
such coverage evidencing the existence and amounts of such insurance.
29. FIRE, CASUABTY AND EXTENDED COVERAGE INSURANCE
-----------------------------------------------
(a) Lessee's Obligations To Insure Its Fixtures And Equipment. On the
----------------------------------------------------------
commencement of and throughout the team hereof Lessee shall take out
and maintain on all of its trade fixtures, appliances and equipment in
and on the premises, a policy or policies of fire insurance with
standard extended coverage and vandalism and malicious mischief
endorsements to the extent of at least ninety percent (90%) of their
full replacement value. In the event of loss or damage, the proceeds
from any such policy or policies shall be used by Lessee for the
replacement of the Lessee's personal property and/or the repair or
replacement of the Lessee's trade fixtures. machinery and equipment so
Insured, In the event this Lease is to continue In existence under the
provision of Paragraph 29, otherwise if said lease is terminated, to be
paid to Lessee.
(b) Waiver of Subrogation. Lessee hereby releases and relieves and
----------------------
waives its entire right of recovery against the Lessor for loss or
damage arising out of or incident to the perils insured against tinder
paragraph (a) above which perils occur in, on or about the premises,
whether due to the negligence of Lessor or Lessee or their agents,
employees, contractors and/or invitees. Lessee shall, upon obtaining
the policies of insurance hereunder, give notice to the insurance
carrier or carriers that the foregoing waiver of subrogation is
contained in this Lease.
30. DAMAGE OR DESTRUCTION - OBLIGATIONS TO RESTORE, ETC.
---------------------------------------------------
(a) Loss Due to Risk Covered by Insurance. In the event of damage or
-------------------------------------
destruction of the premises by an insured fire or casualty loss, Lessor
shall forthwith repair, rebuild and/or restore the same, provided such
repairs, rebuilding and/or restoration can be made and completed within
ninety (90) calendar days from the date construction of repairs,
rebuilding and/or restoration begins, and can be done under the then
laws and regulations of state, federal, county or municipal
authorities, but such damage or destruction shall in no way annul or
void this Lease, except that Lessee shall be entitled to an abatement
of or a proportionate reduction, as the case may be, of the monthly
rental while such repairs, rebuilding and/or reconstruction are being
made, such proportionate reduction to be based on the extent to which
the damage or destruction shall interfere with Lessee's business and
operations on the premises. If such repairs, rebuilding and/or
restoration cannot be made in the period of time stated above or cannot
be done under the then laws and regulations, Lessee may by written
notice to Lessor given within thirty (30) days of after receipt of
notice of such occurrence forthwith terminate this Lease and if Lessee
fails to
7
<PAGE>
terminate, then Lessor may, at his option within forty-five (45) days
after such occurrence, by written notice to Lessee, either terminate
this Lease or make the repairs or restoration within a reasonable time,
in which latter event this Lease shall continue in full force and
effect with the monthly rental and other sums due hereunder
proportionately reduced as provided in this paragraph. If Lessor
undertakes to repair or restore the premises, Lessee shall make
available to Lessor for such purpose any insurance proceeds received by
Lessee for damage or destruction to leasehold improvements made by
Lessee to the premises and Lessor's work shall restore the leasehold
improvements to the extent that there are insurance proceeds available
for such purpose. Lessor shall not be required to restore Lessee's
trade fixtures and personal property, such excluded items being the
sole responsibility of Lessee to restore.
(b) Loss Due to Risk Not Covered by Insurance. If the premises shall be
damaged or destroyed by a risk not covered and insured against by fire
and casualty insurance, Lessor shall forthwith and with due diligence
repair, rebuild and/or restore the same unless the then cost of such
repairs and/or reconstruction shall amount to five percent (5) or more
of the then replacement value of the building and/or improvement
damaged or destroyed, in which latter event Lessor shall have the
option (giving notice thereof to Lessee within fifteen (15) days after
ascertaining the repairs, rebuilding and/or restoration costs and
replacement value) whether to terminate this Lease or to proceed with
the reconstruction, provided, however, should Lessor elect to terminate
this Lease, Lessee shall have the option within fifteen (15) days after
Lessor's notice to terminate this Lease, to elect to pay to Lessor at
the time Lessee notifies Lessor of its election herein the difference
between five percent (5%) of the then replacement value of the building
and/or improvements damaged or destroyed and the actual cost to Lessor
in repairing, rebuilding and/or restoring the building and other
improvements, in which event Lessor shall forthwith commence said
repairs, rebuilding and reconstruction. It is agreed that the amount
payable by Lessor under these provisions shall be the only monies to be
paid by Lessor with respect to such work of restoration, and shall not
be payable by Lessor until Lessee shall have paid to Lessor its
required contribution to the costs and expenses thereof. If Lessor
elects to terminate this Lease, and if Lessee does not elect to
contribute toward the cost of reconstruction within the time and manner
provided herein, this Lease shall forthwith terminate and the parties
shall be relieved of further liability hereunder.
(c) Waiver of Civil Code Sections. In respect to any damage or
-----------------------------
destruction to the premises under the terms of this paragraph, the
provisions of Section 1932, Subdivision 2, and of Section 1933,
Subdivision 4 of the Civil Code of the State of California are waived
by Lessee.
(d) Loss During Last Part of Term. In the event damage or destruction to
-----------------------------
the premises shall occur during the last six (6) months of the term of
this Lease or of any extended term, Lessor or Lessee may terminate this
Lease by notice to the other given not more than fifteen (15) days
after the damage or destruction, provided, however, in the event the
damage or destruction shall occur during the last six (6) months of the
term, and if Lessee is given by the terms hereof an option to extend
this Lease and exercises said option within fifteen (15) days following
the damage or destruction, then Lessor shall repair, rebuild and/or
restore the premises as provided in subparagraphs (a) and (b) of this
paragraph. Should this Lease not be terminated as provided in this
subparagraph, then this Lease shall continue in full force and effect.
31. SURRENDER UPON TERMINATION
--------------------------
At the expiration of the term of this Lease, or upon the earlier termination
thereof for any reason, the Lessee shall quit and surrender said leased
premises and personal property to the Lessor in as good state and condition as
said premises and personal property are in when possession thereof is given to
the Lessee, reasonable wear and tear and damage by the elements excepted, and
the Lessor shall thereupon have the right to enter upon and take possession of
said premises and said leased personal property.
If Lessee has an option to extend the Lease term, exercises the same, and
holds over after the expiration of said extended term, then Lessee''
possession shall also be deemed merely a month to month tenancy at a monthly
rental equal to the rent in effect just prior to expiration of the extended
term increased by twenty percent (20%).
32. HOLDING OVER
------------
Should the Lessee hold over said demised premises with Lessor's consent after
this Lease is terminated, or upon the expiration of the term thereof, such
holding over shall be deemed merely a tenancy from month to month and at a
monthly rental equal to the rental in effect just prior to expiration of the
Lease term increased by twenty percent (20%), payable monthly in advance, but
otherwise on the same terms and conditions as herein provided.
If Lessee has an option to extend the Lease term, exercises the same, and
holds over after the expiration of said extended term, then Lessee's
possession shall also be deemed merely a month to month tenancy at a monthly
rental equal to the rent in effect just prior to expiration of the extended
term increased by twenty percent (20%).
33. DEFAULT
-------
(a) Lessee's Default. The occurrence of any of the following shall
----------------
constitute a default by Lessee:
8
<PAGE>
1. Failure to pay rent or any other payment required of Lessee when due, if the
failure continues for three (3) days after notice has been given to Lessee.
2. Abandonment and vacation of the premises (failure to occupy and operate the
premises for seven (7) consecutive days shall be deemed an abandonment and
vacation.)
3. Failure to perform any other provisions of this Lease if the failure to
perform is not cured within ten (10) days after notice has been given to
Lessee. If the default cannot reasonably be cured within ten (10) days,
Lessee shall not be in default of this Lease if Lessee commences to cure the
default within the 10-day period and diligently and in good faith continues
to cure the default.
4. The discovery by Lessor that any financial statement given to Lessor by
Lessee, any assignee of Lessee, any subtenant of Lessee, any successor in
interest of Lessee or any guarantor of Lessee's obligation hereunder, and
any of them was materially false.
5. The filing of a petition in bankruptcy by any guarantor of Lessee's
obligations hereunder and the failure within ten days after written notice
from Lessor to Lessee to provide the substitute guarantor of Lessee's
obligation hereunder satisfactory to Lessor.
Notices given under this paragraph shall specify the alleged default and
shall demand that Lessee perform the provisions of this Lease or pay the
rent that is in arrears, as the case may be, within the applicable period of
time, or quit the premises. No such notice shall be deemed a forfeiture or a
termination of this Lease unless Lessor so elects in the notice.
(b) Lessor's Remedies. Lessor shall have the following remedies if Lessee
-----------------
commits a default. These remedies are not exclusive; they are cumulative in
addition to any remedies now or later allowed by law.
1. Lessor can continue this Lease in full force and effect, and the Lease will
continue in effect as long as Lessor does not terminate Lessee's right to
possession, and Lessor shall have the right to collect rent when due. During
the period Lessee is in default, Lessor can enter the premises and relet
them, or any part of them, to third parties for Lessee's account. Lessee
shall be liable immediately to Lessor for all costs Lessor incurs in
reletting the premises, including without limitations, broker's commissions,
expense of remodeling the premises required by the reletting, and like cost.
Reletting can be for a period shorter or longer than the remaining term of
this Lease. Lessee shall pay to Lessor the rent due under this Lease on the
dates the rent is due, less the rent Lessor receives from any reletting. No
act by Lessor allowed by this paragraph shall terminate this Lease unless
Lessor notifies Lessee that Lessor elects to terminate this Lease. After
Lessee's default and for as long as Lessor does not terminate Lessee's right
to possession of the premises, if Lessee obtains Lessor's consent, Lessee
shall have the right to assign or sublet its interest in this Lease, but
Lessee shall not be released from liability. Lessor's consent to a proposed
assignment or subletting shall not be unreasonably withheld.
2. Lessor can terminate Lessee's right to possession of the premises at any
time. No act by Lessor other than giving notice to Lessee shall terminate
this Lease. Acts of maintenance, efforts to relet the premises, or the
appointment of a receiver on Lessor's initiative to protect Lessor's
interest under this Lease shall not constitute a termination of Lessee's
right to possession. On termination, Lessor has the right to recover from
Lessee:
(i) The worth, at the time of the award, of the unpaid rent that had been
earned at the time of termination of this Lease;
(ii) The worth, at the time of the award, of the amount by which the unpaid
rent that would have been earned after the date of termination of this
Lease until the time of award exceeds the amount of the loss of rent that
Lessee proves could have been reasonably avoided.
(iii) Any other amount, and court costs, necessary to compensate Lessor for all
detriment proximately caused by Lessee's default.
"The worth, at the time of the award," as used in (i) and (ii) of this
paragraph, is to be computed by allowing interest at a maximum rate an
individual is permitted by law to charge.
(c) Appointment of Receiver. If Lessee is in default of this Lease, Lessor
-----------------------
shall have the right to have a received appointed to collect rent and
conduct Lessee's business. Neither the filing of a petition for the
appointment of a receiver nor the appointment itself shall constitute an
election by Lessor to terminate this Lease.
(d) Lessor's Right to Cure Lessee's Default. Lessor, at any time after Lessee
---------------------------------------
commits a default, can cure the default at Lessee's cost. If Lessor at any
time, by reason of Lessee's default, pays any sum or does any act that
requires the payment of any sum, the sum paid by Lessor shall be due
immediately from Lessee to Lessor at the time the sum is paid, and if paid
at a later date shall bear interest at a maximum rate an individual is
permitted by law to charge from the date the sum is paid by Lessor until
Lessor is reimbursed by Lessee. The sum, together with interest on it, shall
be an additional rent.
(e) Limitation of Lessor's Liability. If Lessor is in default of this Lease,
--------------------------------
and as a consequence Lessee recovers a money judgement against Lessor, the
judgement shall be satisfied only out of the proceeds of sale received on
execution of the judgement and levy against the right, title and interest of
Lessor in the building, other improvements, and land of which the premises
are a part, and
9
<PAGE>
out of rent or other income from such real property receivable by Lessor or
out of the consideration received by Lessor from the sale or other
disposition of all or any part of Lessor's right, title and interest in the
building, other improvements, and land of which the premises are a part, and
neither Lessor nor any of the partners comprising the partnership designated
as Lessor shall be personally liable for any deficiency.
34. CONDEMNATION
------------
(a) Effective Total Condemnation.
----------------------------
1. In the event that there shall be a total taking of the leased premises
during the Lease term, or any extension thereof, under the power of eminent
domain, the leasehold estate hereby created shall cease and terminate as of
the date actual physical possession of the leased premises is taken by the
condemnor.
2. All compensation and damages awarded for such total taking shall belong to
and be the sole property of Lessor, and Lessee shall have no claim thereto
and hereby irrevocably assigns and transfers to Lessor any right they might
have to compensation or damages to which they may become entitled; provided,
however, that Lessee shall be entitled to receive any award made for the
taking of or damage to Lessee's trade fixtures and any improvements made by
Lessee to the leased premises which Lessee would have had, but for the
condemnation, the right to remove on expiration or sooner termination of
this Lease.
3. On termination of this Lease by a total taking of the leased premises under
the power of eminent domain, all rentals and other charges payable by Lessee
to or on behalf of Lessor under the provisions of this Lease shall be paid
up to the date on which actual physical possession of the leased premises
shall be taken by the condemnor, and the parties hereto shall thereafter be
released from any further liability in relation thereto.
(b) Effective Partial Condemnation.
1. In the event that there shall be a partial taking of the leased premises
during the Lease term or any extension thereof under the power of eminent
domain, this Lease shall terminate as to the portion of the leased premises
so taken on the date when actual physical possession of said portion is
taken by the condemnor, but this Lease shall, at Lessor's option, continue
in force and effect as to the remainder of the leased premises provided the
remainder is suitable for Lessee's business purposes, and provided further
that the rental payable by Lessee for the balance of said term shall be
abated in the ratio that the square footage of floor space of the leased
premises taken bears to the total floor space of the leased premises
occupied by Lessee at the time of such taking.
2. On such partial condemnation as in tis subsection provided, all
compensation and damages awarded for such partial taking shall belong to and
be the sole property of Lessor, and Lessee shall have no claim thereto and
hereby irrevocably assigns and transfers to Lessor any right they may have
to compensation or damages for property condemned; provided, however, that
Lessee shall be entitled to receive any award made for the taking of or
damage to ssee's trade fixtures and any improvements made by Lessee to the
leased premises which Lessee would have, but for the condemnation, the right
to remove on expiration or sooner termination of this Lease.
3. On termination of this Lease in whole or in part as herein provided, all
rentals and other charges payable by Lessee to or on behalf of Lessor
hereunder shall be paid up to the date on which actual physical possession
shall be taken by the condemnor and in the event that the Lease is totally
terminated, the parties hereto shall thereafter be released from all further
liability in relation thereto, and in the event that the Lease is only
partially terminated, Lessee shall thereafter be liable only for that
portion of rent required for the balance of the Lease term as in this
subsection provided.
35. NOTICES
-------
In the event that any notice is to be given under this Lease by either
party hereto to the other, either expressly required to be given in writing,
or such notice as such party may desire to give, such notice may be given by
either personally delivering the same to the other or by mailing such notice
by certified or registered mail with return receipt requested thereon, in a
sealed envelope with all postage and certification charges thereon prepaid,
addressed as follows:
If to Lessor: Allied Investments
1033 Detroit Avenue
Concord, CA 94518
(925) 685-9070
or to such other address as Lessor may hereafter notify Lessee in writing.
If to Lessee: AstroPowerWest, LLC
5036 Commercial Circle
Suite B
Concord, CA 94520
10
<PAGE>
or to such other address as Lessee may hereafter notify Lessor in writing.
The deposit of such notice in a United States Post Office as herein provided,
postage prepaid, shall constitute said notice, and the time of performance of
any act or obligation required to be made after said notice under the terms of
this Lease, shall commence to run from the date of the deposit of said notice
in a United States Post Office in the State of California.
36. SALE OF PREMISES
----------------
If Lessor sells or transfers all or any portion of the building, other
improvements, and land on which the premises are situated, Lessor on
consummation of the sale or transfer, shall be released from any liability
thereafter accruing under this Lease if Lessor's successor has assumed in
writing, for the benefit of Lessee, Lessor's obligations under this Lease.
37. SUBORDINATION
-------------
(a) This Lease, at Lessor's option, shall be subordinate to any ground lease,
mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the real property of which the premises are a part
and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions
thereof. Notwithstanding such subordination, Lessee's right to quiet
possession of the premises shall not be disturbed. If Lessee is not in
default and so long as Lessee shall pay the rent and observe and perform
all of the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgagee, trustee or ground
lessor shall elect to have this Lease prior to the lien of its mortgage,
deed of trust or ground lease, and shall given written notice thereof to
Lessee, this Lease shall be deemed prior to such mortgage, deed of trust,
or ground lease, whether this Lease is dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's
failure to execute such documents within 10 days after written demand shall
constitute a material default by Lessee hereunder, or, at Lessor's option,
Lessor shall execute such documents on behalf of Lessee as Lessee's
attorney-in-fact. Lessee does hereby make, constitute and irrevocably
appoint Lessor as Lessee's attorney-in-fact and in Lessee's name, place and
stead, to execute such documents in accordance with this paragraph.
38. PERSONAL PROPERTY LEFT ON PREMISES AT LEASE TERMINATION
-------------------------------------------------------
On expiration of the term of this Lease, or upon the earlier termination
thereof for any reason, Lessor can elect to retain or dispose of in any
manner, any of Lessee's personal property or equipment that Lessee does not
remove from the premises by giving at least five (5) days notice to Lessee.
Title to any such personal property that Lessor elects to retain or dispose of
shall vest in Lessor. Lessee waives any and all claims against Lessor for any
damage to Lessee resulting from Lessor's retention or disposition of such
personal property items. Lessee shall be liable to Lessor for all of Lessor''
costs and expenses for storing, removing, and disposing of any of Lessee''
personal property left on the premises. Lessor shall be entitled to charge
reasonable rental for the storage of any personal property and equipment left
on the premises by Lessee whether claimed to be the property of Lessee or
others.
39. BREACH OF SECURITY
------------------
Lessee shall be solely and exclusively responsible for the security of the
premises and shall be solely and exclusively liable to Lessor for any and all
damages resulting from any breach of security including property damage and
personal liability, whether caused by burglary, robbery or such other breaches
of security and specifically including any damage due to any break-ins through
the roof. Lessee further agrees to waive any rights against Lessor by way of
subrogation on behalf of Lessee's insurance carrier in the vent of any such
security breach, such waiver to extend to Lessor's insurance carrier.
40. ATTORNEY'S FEES
---------------
In case any action shall be brought by either the Lessor or the Lessee against
the other, under any of the terms, provisions and obligations of this Lease,
or for the breach of enforcement thereof or for the declaration of any rights
hereunder, the prevailing party shall be entitled to recover such legal fees
as the court may determine to be reasonable and proper in said action.
41. COMMON AREA EXPENSES
--------------------
Lessor will provide the premises with parking space intended for the
non-exclusive use of customers of Lessee (other than employees of Lessee),
which parking space will also be made available non-exclusively for similar
use by customers of tenants of other premises which Lessor owns in the center,
which such parking area will be marked or painted with lines to designate
parking areas and passageways. Lessor will also maintain certain outdoor
lights to illuminate the common area at night.
42. REAL PROPERTY TAXES AND ASSESSMENTS AND INSURANCE PREMIUM INCREASES
-------------------------------------------------------------------
Lessee shall pay all increases in real property taxes and assessments levied
and assessed against the land, building and other
11
<PAGE>
improvements on the premises which are in excess of the real property taxes
and assessments on the premises for the fiscal year 1999/2000. Lessee's
payment shall be in proportion to Lessee's space leased compared to the total
square footage of the building assessed. Lessee shall pay all general and
special assessments levied and assessed against the land, building and other
improvements on the premises if any such general or special assessments are
levied and assessed against the property during the term of the Lease in
proportion to Lessee's space leased compared to the total square footage of
the building assessed. Such taxes and assessments shall include but need not
be limited to annual sewer taxes assessed by the City of Concord.
Lessee shall pay all increases in insurance premiums billed to Lessor for
fire, extended coverage, loss of rents and liability insurance policies held
by Lessor in proportion to Lessee's space leased compared to the total square
footage of the building assessed, over the existing premium amount.
Lessee's such proportionate share is currently 2.72%.
The amounts provided for in this paragraph shall be paid by Lessee within
thirty (30) days after written notice thereof from Lessor.
43. MISCELLANEOUS PROVISIONS
------------------------
(a) Paragraph Headings. The paragraph and subparagraph headings of this Lease
------------------
are not a part of this Lease and shall have no effect upon the construction
or interpretation of any part of this Lease.
(b) Integrated Agreement: Modification. This Lease contains all of the
-----------------------------------
agreements and conditions made between the parties hereto and may not be
modified orally or in any other manner than by an agreement in writing
signed by all of the parties to this Lease or their respective successors
in interest.
(c) Time of Essence. Time is of the essence of each term and provision of this
----------------
Lease.
(d) All Required Payments Are Additional Rent. Except as otherwise expressly
------------------------------------------
stated, each payment required to be made by Lessee shall be in addition to
and not in substitution for other payments to be made by Lessee and all
such payments shall be deemed to be additional rental.
(e) Separability. The invalidity or illegality of any provision shall not
-------------
affect the remainder of this Lease.
(f) Duration of Obligations. Unless otherwise stated in particular provisions
------------------------
of this Lease, an obligation resulting from the Lease or from the
relationship created by the Lease, is coterminous with the Lease, except
that defaults occurring during the term of this Lease are actionable until
the expiration of the period of limitations.
(g) Joint and Several Liability. In the event two or more persons or entities
----------------------------
execute this Lease as "Lessee", then the obligation of each such person
shall be joint and several.
(h) Guarantor. In the event that there is a guarantor of this Lease, said
------------
guarantor shall have the same obligations as Lessee under this Lease. In
the event that guarantor files a petition in bankruptcy in any court,
Lessor, in Lessor's sole discretion, may terminate this Lease unless
Lessee, within ten days after notification from Lessor, provides a new
guarantor satisfactory to Lessor.
(i) Covenants or Conditions. All the agreements in this Lease upon the part of
------------------------
Lessee, whether technically covenants or conditions, shall be deemed
conditions for the purpose hereof.
(j) Authority. If Lessee is a corporation, trust or general or limited
---------
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution
of this Lease, deliver to Lessor evidence of such authority satisfactory to
Lessor.
(k) Waivers. No waiver by Lessor of any provision hereof shall be deemed a
-------
waiver of any other provision hereof or of any subsequent breach by Lessee
of the same or any other provision. Lessor's consent to or approval of any
act shall not be deemed to render unnecessary to obtaining of Lessor's
consent to or approval of any subsequent act by Lessee. The acceptance of
rent hereunder by Lessor shall not be a waiver of any preceding breach by
Lessee of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
(l) Words. Whenever the singular is used in this Lease, the same shall include
-----
the plural when required by the context, and the masculine gender shall
include the feminine and neuter genders and the word "person" shall include
corporation, firm and association. If there is more than one Lessor, the
obligations of this Lease shall be joint and several.
(m) California Law. This Lease shall be governed and interpreted solely by the
--------------
laws of the State of California.
12
<PAGE>
(n) Heirs, etc. This Lease shall be binding upon the successors,
----------
administrators and assigns of the respective parties hereto.
(o) Exhibits. All exhibits, if any, that are attached to this Lease are hereby
--------
incorporated into the body of this Lease.
(p) No Real Estate Brokers or Finder's Fees. Each party represents that it has
---------------------------------------
not had any dealings with any real estate broker, finder, or other person
with respect to this Lease in any manner other than Dave Granger of CRS,
Commercial Real Estate Services, who will be paid by Lessor. Each party
shall hold harmless the other party from all damages resulting from any
claims that may be asserted against the other party by any broker, finder
or other person with whom the other party has or purportedly has dealt.
44. OPTION TO RELOCATE TO NORTH POINT III
-------------------------------------
In the event Lessor constructs North Point III (a three building complex with
dock high loading), Lessee shall be given the Option to Relocate to this new
project upon completion of construction. Lessee shall be required to sign a
minimum five (5) year lease on the new premises. Rental terms and tenant
improvements shall be mutually agreed upon prior to execution of a "Lease
Amendment". In the event Lessee and Lessor can not agree upon a Rental Rate
Schedule and/or Tenant Improvements, Lessee shall be bound to the terms and
conditions of this Lease.
45. Lessor to install new building standard carpet in office area prior to
lease commencement.
IT WITNESS WHEREOF the Lessor and Lessee have hereunto executed this Lease in
triplicate the day and year first above written.
ASTROPOWERWEST, LLC, A CALIFORNIA
LIMITED LIABILITY COMPANY
BY ITS: Members
------------------------------------
Thomas J. Stiner
AstroPower, Inc.
BY:
---------------------------------
Allen M. Barnett
President & CEO
13
<PAGE>
EXHIBIT 10.28
GUARANTY OF LEASE
In order to induce Allied Investments ("Landlord"), to enter into that
------------------
certain Commercial Lease dated as of June 18, 1999 (the "Lease") with
---------- -------------
AstroPowerWest, LLC ("Lessee") for the lease by Lessee of certain premises
- -------------------
located in that building commonly known and addressed 5036 Commercial Circle,
-----------------------
Suite B, Concord, CA, and for other good and valuable consideration, the receipt
- ---------------------
whereof is hereby acknowledged, AstroPower, Inc. ("Guarantor") hereby
----------------
unconditionally and without limitation guarantees payment and performance by
Lessee of its obligations under the Lease and makes the following
indemnification and agreements with and in favor of Landlord.
1. Obligations. Guarantor hereby covenants and agrees with Landlord,
------------
notwithstanding any modification or alteration of said Lease entered into by
and between Lessor and Lessee, (i) to make the due and punctual payment of
all rent, monies and charges expressed to be payable under the Lease during
the term thereof and all renewals thereof, whether for principal, interest
or otherwise; (ii) to effect prompt and complete performance of all and each
of the terms, covenants, conditions and provisions in the Lease contained,
including the "Rules and Regulations" is therein provided, on the part of
Lessee to be kept, observed and performed during the period of the term and
any renewals thereof, and (iii) to protect, defend, indemnify and save
harmless Lessor from any loss, costs or damages (including legal fees and
expenses for counsel of Landlord's choice) arising out of any failure to pay
the aforesaid rent, monies, charges or indebtedness or the failure to
perform any of the terms, covenants, conditions and provisions. Guarantor
hereby acknowledges that it has a copy of and is familiar with each and
every document executed and delivered to Lessor by Lessee including, without
limitation, the Lease.
2. Rights. In the event of any breach, default or failure of Lessee to pay any
-------
sum or perform any obligation under the Lease, Guarantor, shall immediately
pay to Landlord, any and all such amounts as may be due and owing from
Lessee to Lessor by reason of Lessee's failure to perform. Lessor shall have
the right to enforce this indemnity regardless of the acceptance of
additional security from Lessee and regardless of the release or discharge
for Lessee by Lessor or by others, or by operation of any law. In addition
to the obligations of Guarantor set forth above, Guarantor agrees to pay to
Lessor any and all damages and expenses incurred by Lessor as a direct and
proximate result of Lessee'' failure to perform. Guarantor further agrees to
pay to Lessor interest on any and all sums due and owing Landlord, by reason
of Lessee's failure to pay same, at the rate per annum provided in the
Lease.
3. Waivers. Guarantor hereby expressly waives any right of setoff or
--------
compensation against amounts due under this Guaranty and waives notice of
the acceptance of this indemnity and all notice of nonperformance,
nonpayment or non-observance on the part of Lessee of the terms, covenants,
conditions and provisions of the Lease. In addition, Guarantor hereby waives
all rights and defenses to:
(1) All defenses by reason of any disability of Lessee, or based on the
termination of Lessee's liability from any cause, or on any statute of
limitations respecting obligations accruing under the Lease or this
Guaranty;
(2) Any and all rights it may have now or in the future to require or
demand that Lessor pursue any right or remedy Lessor may have against
Lessee or any other third party.
(3) Any and all rights it may have to enforce any remedies available to the
Lessor now or in the future against Lessee;
(4) Any and all rights to participate in any security held by Lessor now or
in the future.
(5) The right to require Lessor to (i) proceed against Lessee, (ii) proceed
against or exhaust any security which Lessor now holds or may hold in
the future from Lessee, (iii) pursue any other right or remedy
available to Landlord, or (iv) have the property of Lessee first
applied to the discharge of any of the obligations under this guaranty.
(6) Until all of Lessee's obligations under the Lease to Lessor have been
discharged in full, Guarantor waives any right of subrogation it now
has, or may hereafter have, against Lessee.
(7) Any defense as a surety, including without limitation, sections 2819
(alteration of the obligation without the surety's consent), 2825
(discharge of the debtor), 2809 (guarantor's obligation may not be
larger than the principal's obligation), 2810 (a guarantor's liability
ceases if the principal is not liable), 2846 (equity of exoneration) of
the California Civil Code;
(8) Any duty or obligation of Lessor to disclose to Guarantor any facts
Lessor may now or hereafter know about Lessee, regardless or whether
Lessor has reason to believe that any such facts materially increase
the risk beyond that which Guarantor intends to assume or has reason to
believe that such facts are unknown to Guarantor or has a reasonable
opportunity to communicate such facts to Guarantor, it being under and
agreed that Guarantor is fully responsible for being and keeping
informed of the financial condition of Lessee and of any and all
circumstances bearing on the risk of nonperformance of any Obligation;
and
(9) Any defense based upon an election of remedies by Landlord, including
any election which destroys or impairs any right of subrogation,
reimbursement or contribution which Guarantor may have or any rights or
benefits under any provisions of California law in any way qualifying,
conditioning or limiting the obligations of Guarantor based on any
steps or procedures that landlords should take before proceeding
against Guarantor.
- ------------------------------ ----------------------------
Lessor's Initials Lessee's Initials
<PAGE>
4. Effect of Modifications, Extensions or Alterations of the Lease. Without
----------------------------------------------------------------
limiting the generality of the foregoing, the liability of Guarantor under
this Guaranty shall not be deemed to have been waived, released, discharged,
impaired or affected by reason of (a) any waiver or failure to enforce any
of the obligations of the Lessee under the Lease, or (b) assignment of the
Lease, or the subletting of the leased premises by the Lessee (with or
without in each case the consent of the Landlord), or (c) the expiration or
other termination of the term, or (d) the release or discharge of the Lessee
in any receivership, bankruptcy, winding-up or other creditors' proceedings
or the rejection, disaffirmance or disclaimer of the Lease by any party in
any action or proceeding, and shall continue with respect to the periods
prior thereto and thereafter, for and with respect to the term originally
contemplated and expressed in the Lease or any renewals or extensions
thereof. Guarantor further understands and agrees that the obligations of
Guarantor under this guarantee shall in no way be affected by any extension,
modification or alteration of the Lease, or Lessee's obligation under the
Lease and each of its provisions, and any such extension, modification or
alteration of the Lease, any and all of which may be done without the prior
consent or approval of Guarantor and shall in no way release or discharge
Guarantor from any obligations accruing under this guaranty. The term
"Lease" shall include all amendments, modifications, alterations and
exclusions of the Lease. The liability of the Guarantor shall not be
affected by any repossession of the leased premises by Landlord, provided,
however, that the net payments received by Lessor after deducting all costs
and expenses of repossession and/or reletting the same, shall be credited
from time to time by Lessor to the account of Guarantor and Guarantor shall
pay any balance owing to Lessor from time to time, immediately upon
ascertainment.
5. Payment and Performance. This Guaranty shall be one of payment and
------------------------
performance and not of collection.
6. Nature of Guaranty. The liability of Guarantor hereunder is direct,
-------------------
immediate, absolute, continuing, unconditional, primary and unlimited.
Notwithstanding the use of the word "indemnity" or "guaranty" in this
Guaranty and without limiting the foregoing, Guarantor shall be bound by
this Guaranty in the same manner as though Guarantor were the Lessee named
in the Lease.
7. Successors and Assigns. All of the terms, agreements and conditions of this
-----------------------
Guaranty shall extend to and be binding upon Guarantor, his heirs,
executors, administrators, successors, and assigns, and shall inure to the
benefit of and may be enforced by Landlord, its successors and assigns, and
the holder of any mortgage of which the lease may be subject and subordinate
from time to time.
8. Assignment by Landlord. Lessor may, without notice, assign this Guaranty in
-----------------------
whole or in part and no assignment or transfer of the Lease shall operate to
extinguish or diminish the liability of the Guarantor hereunder.
9. Subordination. Any indebtedness of the Lessee now or hereafter held by
----------------
Guarantor is hereby subordinated to the indebtedness of the Lessee to the
Landlord; and any indebtedness of the Lessee to the Guarantor, if the Lessor
so requests, shall be collected, enforced and received by Guarantor as
trustee for the Lessor on account of the indebtedness of the Lessee to the
Lessor without affecting the liability of Guarantor under this Guaranty.
10. Authority. It is not necessary for the Lessor to inquire into the powers
-----------
of the Lessee or of the partners or agents acting or purporting to act on
its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
11. Waiver of Jury Trial. As a further inducement of Lessor to enter into the
---------------------
Lease and in consideration thereof, Lessor and Guarantor hereby express
waive the right to a trial by jury for any action or proceeding brought by
either Lessor or Guarantor against the other on any matter whatsoever
arising out of, under, or by virtue of any of the terms, covenants,
conditions, provisions or arrangements of the Lease or of this Guaranty.
12. Insolvency. In the event of any action or proceeding at law or in equity
------------
between Lessor and Guarantor (including an action or proceeding between
Lessor and the trustee debtor in possession while Guarantor is a debtor in
a proceeding under the Bankruptcy Code (Title 11 of the United States Code
or any successor statue to such Code) to enforce any provision of this
Guaranty or to protect or establish any right or remedy of either Lessor or
Guarantor hereunder, the unsuccessful party to such action or proceeding
shall pay to the prevailing party all costs and expenses, including,
without limitation, attorneys' fees and expenses, incurred in such action
or proceeding and in any appeal in connection therewith by such prevailing
party, whether or not such action, proceeding or appeal is prosecuted to
judgement or other final determination, together with all costs of
enforcement and/or collection of any judgement or other relief. The term
"prevailing party" shall include, without limitation, a party who obtains
legal counsel or brings an action against the other by reason of the
other's breach or default and obtains substantially the relief sought,
whether by compromise, settlement or judgement. If such prevailing party
shall recover judgement in any such action, proceeding or appeal, such
costs, expenses and attorneys' and paralegals' fees shall be included in
and as part of such judgement, together with all costs of enforcement
and/or collection of any judgement or other relief.
13. Miscellaneous. Each provision of this Guaranty shall be enforceable to the
--------------
extent not prohibited by law. If any provision or its application to any
person or circumstance shall be invalid or unenforceable the remaining
provisions, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable,
shall not be affected. This Guaranty may not be modified or terminated
except as expressly provided herein or except by a writing signed by Lessor
and Guarantor. Any such modification or termination made otherwise than as
expressly permitted by this paragraph shall be void. This Guaranty shall be
governed by and interpreted in accordance with the laws of the State of
California.
- ------------------------------ ----------------------------
Lessor's Initials Lessee's Initials
<PAGE>
14. Attorneys' Fees. Guarantor hereby agrees to be responsible for and to pay
----------------
all costs and expenses, including, without limitation, reasonable
attorneys' fees and expenses incurred by Lessor in connection with the
collection of all sums guaranteed hereunder and the defense or enforcement
of any other Landlord's rights hereunder, whether or not suit is filed, and
whether such collection be from Lessee or from Guarantor.
15. Cumulative Rights and Remedies. The extent of Guarantor's liability and
-------------------------------
all rights, powers and remedies of Lessor hereunder shall be cumulative and
not alternative and such rights, powers and remedies shall be in addition
to all rights, powers and remedies given to Lessor by law.
16. Joint and Several. If there is more than one party, person or entity
------------------
executing this Guaranty, the obligations of each Guarantor shall be joint
and several and are independent of Lessee's obligations. A separate action
may be brought or prosecuted against any Guarantor whether the action is
brought or prosecuted against any other Guarantor or Lessee, or all, or
whether any other Guarantor or Lessee, or all, are joined in this action.
IN WITNESS WHEREOF, this Guaranty of Lease has been executed as of ______,
1999.
GUARANTOR: AstroPower, Inc.
--------------------------
By:
------------------------------
Thomas J. Stiner, V.P. & CFO
<PAGE>
EXHIBIT 10.29
WILMINGTON TRUST
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$1,000,000.00 09-21-1998 10 938
- ------------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Borrower: ASTROPOWER, INC. Lender: WILMINGTON TRUST COMPANY
SOLAR PARK C/L W.H. MAJOR
NEWARK, DE 19716-2000 RODNEY SQUARE NORTH
1100 NORTH MARKET STREET
WILMINGTON, DE 19890
================================================================================
THIS COMMERCIAL SECURITY AGREEMENT Is entered Into between ASTROPOWER, INC.
(referred to below as "Grantor"); and WILMINGTON TRUST COMPANY (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
hereaflor arising, and wherever located:
All accounts and general Intangibles
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 accessions, accessories, 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 an 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 WILMINGTON TRUST COMPANY, its successors and
assigns.
Note. The word "Note" means ft note or credit agreement dated September 21,
1998, in the principal amount of $1,000,000.00 from ASTROPOWER, INC. to
Lender, together with all renewals of, extensions at, 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.
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.
This Is a continuing Security Agreement and will continue in effect even though
all or any part of the Indebtedness Is paid in full and even though for a period
of time Grantor may not be Indebted to Lender.
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. At
the time any account becomes subject to a security interest in favor of Lender,
the account shall be a good and valid account representing an undisputed, bona
fide indebtedness incurred by the account debtor, for merchandise held subject
to delivery instructions or theretofore shipped or delivered pursuant to a
contract of sale, or for services theretofore performed by Grantor with or for
the account debtor; there shall be no setoffs or counterclaims against any such
account; and no agreement under which any deductions or discounts may be claimed
shall have been made with the account debtor except those disclosed to Lender in
writing.
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 then those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend
<PAGE>
09-21-1998 COMMERCIAL SECURITY AGREEMENT Page 2
(Continued)
================================================================================
Lender's rights in the Collateral against the claims and demands of all other
persons.
Collateral Schedules and Locations. As often as Lender shall require, and
Insofar as the Collateral consists of accounts and general intangibles, Grantor
shall deliver to Lender schedules of such Collateral, including such Information
as Lender may require, including without limitation names and addresses of
account debtors and agings of accounts and general intangibles. 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 Lander 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 lion 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 affect, applicable to the ownership, production, disposition, or
use of the 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 indemnity and hold harmless
Lender against any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnity 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 fire, 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 coverages will not be cancelled or diminished without at least
twenty (20) 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 tinder
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 it 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-4nterest-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 an 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; (e)
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (t) 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 Lander determine, as
applicable, the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, 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 10 any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security Interest In
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. 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 cars. 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. AJI 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 (1) 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 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 Lander 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 Borrowers 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 an behalf of Grantor under this Agreement, the
<PAGE>
09-21-1998 COMMERCIAL SECURITY AGREEMENT Page 3
(Continued)
================================================================================
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 affect (including failure of any collateral
documents to create a valid and perfected security interest or lion) 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 DEFALLT. 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 an 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 if such notice is given at least ten (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,
choses in action, or similar property, Lender may demand, collect, receipt
for, settle, compromise, adjust, sue for, foreclose, or realize an 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.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on
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 the State of
Delaware. Lender and Grantor hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Grantor
against the other. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
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 riot 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.
Multiple Parties; Corporate Authority. All obligations of Grantor under this
Agreement shall be joint and several, and all references to Grantor shall mean
each and every Grantor. This means that each of the persons signing below is
responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be given
in writing, may be sent by telefacsimile (unless otherwise required by law),
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 addressees).
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 of 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. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or
<PAGE>
09-21-1998 COMMERCIAL SECURITY AGREEMENT Page 4
(Continued)
================================================================================
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.
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 an 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 Lenders debts 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.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER
21, 1998.
GRANTOR:
ASTROPOWER, INC.
By: (SEAL) By: (SEAL)
----------------------------- -----------------------------
THOMAS J. STINER, CFO/VICE PRESIDENT ALLEN M. BARNETT, PRESIDENT
LENDER:
WILMINGTON TRUST COMPANY
By:
----------------------------
Authorized Officer
Variable Rate. Line of Credit.
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.25C 1998 CFI ProServices, Inc.
All rights reserved. (DE-120 WHMASTRO.LN C19.OVL)
<PAGE>
EXHIBIT 10.30
WILMINGTON TRUST
BUSINESS LOAN AGREEMENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$1,000,000.00 09-21-1998 10 938
- ------------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Borrower: ASTROPOWER, INC. Lender: WILMINGTON TRUST COMPANY
SOLAR PARK C/L W.H. MAJOR
NEWARK, DE 19716-2000 RODNEY SQUARE NORTH
1100 NORTH MARKET STREET
WILMINGTON, DE 19890
- --------------------------------------------------------------------------------
THIS BUSINESS LOAN AGREEMENT between ASTROPOWER, INC. ("Borrower") and
WILMINGTON TRUST COMPANY ("Lender") Is made and executed an 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; lb)
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 September 21, 1998, 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.
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.
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 WILMINGTON TRUST COMPANY, its successors and
assigns.
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'; (a) 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, &dancing,
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. I
SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act
of 1986 as now or hereafter amended.
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 (a) any other documents required under this
Agreement or by Lender or its counsel.
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
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09-21-1998 BUSINESS LOAN AGREEMENT Page 2
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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 quality would
have a material adverse effect on its businesses or financial condition.
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 violaton 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 lb) 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 Borrowers
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
properues; 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, regulationsand 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 of a hazardous waste or substance on the properties. The
provisions of this section of the Agreement, including the obligation to
indemnity, 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 (1) 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
steps to do so, (111) no steps have been taken to terminate any such plan, and
(iv) 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, it Borrower has more than one place of
business, Is located at SOLAR PARK, NEWARK, DE 19716-2000. Unless Borrower has
designated otherwise in writing this location is also the office or offices
where Borrower keeps its records concerning the Collateral.
Year 2000. Borrower warrants and represents that all software utilized in the
conduct of Borrower's business will have appropriate capabilities and
compatiblity for operation to handle calendar dates falling on or after
January 1, 2000, and all Information pertaining to such calendar dates, in the
same manner and with the same functionality as the software does respecting
calendar dates falling on or before December 31, 1999. Further, Borrower
warrants and represents that the data-.related user interface junctions, data-
fields, and data-related program instructions and functions of the software
include the indication of the century.
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 extending Loan Advances 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 lb) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guarantor 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.
Additional Information. Furnish such additional Information and statements,
lists of assets and liabilities, aging 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.
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, coverage's 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
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09-21-1998 BUSINESS LOAN AGREEMENT Page 2
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stipulations that coverage's will not be cancelled or diminished without at
least twenty (20) 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 an 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.
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 if 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 and memoranda of Borrower's books, accounts, and records. If
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 an 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.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(c) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
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 and Liens. (a) 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, (b) except as allowed as a Permitted Lien, sell, transfer, mortgage,
assign, pledge, lease, grant a security Interest in, or encumber any of
Borrowers assets, or (c) sell with recourse any of Borrower's accounts, except
to Lender.
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 liabilites 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.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise
or entity, or (c) incur any obligation as surety or guarantor other than in
the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, 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 Barrower'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.
ANNUAL PAYOUT. To demonstrate the short-term nature of the line of credit, Bank
will require Borrower to maintain the line of credit at a zero balance for a
minimum of 30 consecutive days during the year.
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
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09-21-1998 BUSINESS LOAN AGREEMENT Page 4
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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 Borrowers 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 Linder, 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 (including any obligation to make
Loan Advances or disbursements), 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 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. Lender and Borrower hereby waive the right to
any jury trial In any action, proceeding, or counterclaim brought by either
Lender of Borrower against the other. This Agreement shall be governed by and
construed In accordance with the laws of the State of Delaware.
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.
Multiple Parties; Corporate Authority. All obligations of Borrower under this
Agreement shall be joint and several, and all references to Borrower shall
mean each and every Borrower. This means that each of the persons signing
below is responsible for all obligations in 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 telefacsimile (unless otherwise required by law),
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 addressees).
Severablilty. 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
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.
<PAGE>
09-21-1998 BUSINESS LOAN AGREEMENT Page 5
(Continued)
================================================================================
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
SEPTEMBER 21, 1998.
BORROWER:
ASTROPOWER, INC.
<TABLE>
<S> <C>
By: (SEAL) By: (SEAL)
------------------------------------ ---------------------------
THOMAS J. STINER, CFO/VICE PRESIDENT ALLEN M. BARNETT, PRESIDENT
</TABLE>
LENDER:
WILMINGTON TRUST COMPANY
By:
------------------------------------
Authorized Officer
================================================================================
Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver.
3.25C 1998 CFI ProServices, Inc. All rights reserved. (DE-120 WHMASTRO.LN
C19.OVL)
<PAGE>
EXHIBIT 10.31
WILMINGTON TRUST
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,000,000.00 09-21-1998 10 938
- ------------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular
loan or item.
- ------------------------------------------------------------------------------------------------------------------------------------
Borrower: ASTROPOWER, INC. Lender: WILMINGTON TRUST COMPANY
SOLAR PARK C/L W.H. MAJOR
NEWARK, DE 19716-2000 RODNEY SQUARE NORTH
1100 NORTH MARKET STREET
WILMINGTON, DE 19890
====================================================================================================================================
Principal Amount: $1,000,000-00 Initial Rate: 8.500% Date of Note: September 21, 1998
</TABLE>
PROMISE TO PAY. ASTROPOWER, INC. ("Borrower") promises to pay to WILMINGTON
TRUST COMPANY ("Lender"), or order, in lawful money of the United States of
America, on demand, the principal amount of One Million & 00/100 Dollars
($1,000,000.00) or so much as may be outstanding, together with Interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan immediately upon Lender's demand. In
addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning October 21, 199a, with all
subsequent Interest payments to be due on the same day of each month after that.
The annual interest rate for this Note is computed on a 365/360 basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's 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 accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
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 the WILMINGTON TRUST
COMPANY'S NATIONAL COMMERCIAL RATE (the "Index'). The Index is not necessarily
the lowest rate charged by Lender on its loans and is set by Lender in its sole
discretion. If the Index becomes unavailable during the term of this loan,
Lender may designate a substitute index after notifying Borrower. 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 8.500% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate equal to the Index, resulting
In an Initial rate of 8.500% per annum. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law.
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
of accrued unpaid interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a regularly scheduled interest payment is 15 days or more late,
Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled
payment or $5.00, whichever is greater. If Lender demands payment of this loan,
and Borrower does not pay the loan within 15 days after Lender's demand,
Borrower also will be charged either 5.000% of the unpaid portion of the sum of
the unpaid principal plus accrued unpaid interest or $5.00, whichever is
greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails 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. (d) 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. (e) 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.
(g) 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, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 2.000
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if 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. Lender and Borrower hereby
waive the right to any jury trial in any action, proceeding, or counterclaim
brought by either Lender or Borrower against the other. 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 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 Note have been paid in full.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized 09-21-1998
person. Lender may, but need not, require that all oral requests be confirmed in
writing. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: THOMAS J. STINER, CFO/VICE
PRESIDENT; and
<PAGE>
11-04-1999 PROMISSORY NOTE Page 2
(Continued)
================================================================================
PRESIDENT; and ALLEN M. BARNETT, PRESIDENT. Borrower agrees to be liable for all
sums either: (a) advanced in accordance with the instructions of an authorized
person or (b) credited to any of Borrower's accounts with Lender. The unpaid
principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (a) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantors
guarantee of this Note or any other loan with Lender; or (d) Borrower has
applied funds provided pursuant to this Note for purposes other than those
authorized by Lender.
ANNUAL PAYOUT. To demonstrate the short-term nature of the line of credit, Bank
will require Borrower to maintain the line of credit at a zero balance for a
minimum of 30 consecutive days during the year.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. 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 wribng, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
AJI 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.
THIS NOTE HAS BEEN SIGNED AND SEALED BY THE UNDERSIGNED.
BORROWER:
ASTROPOWER, INC.
By: (SEAL) By: (SEAL)
--------------------------- ---------------------------
THOMAS J. STINER, ALLEN M. BARNETT, PRESIDENT
CF/VICE PRESIDENT
================================================================================
Variable Rate. Line of Credit. LASERPRO,Reg.U.S.Pat.&T.M.Off.,Ver.3.25(C)
1998CFIProservices,inc. All rights reserved.[DE-D20WHMASTRO.LNC19.OVLI
<PAGE>
EXHIBIT 10.32
WILMINGTON TRUST
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$3,000,000.00 11-04-1998 10 938
- ------------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
- ------------------------------------------------------------------------------------------------------------------------------------
Borrower: ASTROPOWER, INC. Lender: WILMINGTON TRUST COMPANY
SOLAR PARK C/L W.H. MAJOR
NEWARK, DE 19716-2000 RODNEY SQUARE NORTH
1100 NORTH MARKET STREET
WILMINGTON, DE 19890
====================================================================================================================================
</TABLE>
THIS BUSINESS LOAN AGREEMENT between ASTROPOWER, INC. ("Borrower") and
WILMINGTON TRUST COMPANY ("Lender") Is made and executed an 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; lb)
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 September 21, 1998, 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.
Collateral. The word "Collateral" means and includeswithout 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.
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 WILMINGTON TRUST COMPANY, its successors
and assigns.
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'; (a) 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, &dancing, 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. I
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
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 (a) any other documents required under
this Agreement or by Lender or its counsel.
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
<PAGE>
11-04-1998 BUSINESS LOAN AGREEMENT Page 2
(Continued)
================================================================================
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 quality would have a material adverse effect on its
businesses or financial condition.
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 violaton 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 lb) 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
Borrowers 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 properues; 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, regulationsand 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 of a
hazardous waste or substance on the properties. The provisions of this
section of the Agreement, including the obligation to indemnity, 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 (1) 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 steps to do so, (111) no steps have been taken to terminate any
such plan, and (iv) 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, it Borrower has more than one place
of business, Is located at SOLAR PARK, NEWARK, DE 19716-2000. Unless
Borrower has designated otherwise in writing this location is also the
office or offices where Borrower keeps its records concerning the
Collateral.
Year 2000. Borrower warrants and represents that all softwareutilized in
the conduct of Borrower's business will have appropriate capabilities and
compatiblity for operation to handle calendar dates falling on or after
January 1, 2000, and all Information pertaining to such calendar dates, in
the same manner and with the same functionality as the software does
respecting calendar dates falling on or before December 31, 1999. Further,
Borrower warrants and represents that the data-.related user interface
junctions, data-fields, and data-related program instructions and functions
of the software include the indication of the century.
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 extending Loan Advances 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 lb) all existing and all threatened litigation,
claims, investigations, administrative proceedings or similar actions
affecting Borrower or any Guarantor 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.
Additional Information. Furnish such additional Information and statements,
lists of assets and liabilities, aging 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.
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, coverage's 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
<PAGE>
11-04-1998 BUSINESS LOAN AGREEMENT Page 2
(Continued)
================================================================================
stipulations that coverage's will not be cancelled or diminished without at
least twenty (20) 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 an 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.
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 if 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 and memoranda of Borrower's books, accounts, and
records. If 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 an 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.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(c) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
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 and Liens. (a) 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, (b) except as allowed as a Permitted Lien, sell,
transfer, mortgage, assign, pledge, lease, grant a security Interest in, or
encumber any of Borrowers assets, or (c) sell with recourse any of
Borrower's accounts, except to Lender.
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 liabilites 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.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, 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 Barrower'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.
COMMITMENT FEE. LOAN IS SUBJECT TO ANNUAL REVIEW AND A THREE (3) YEAR
COMMITMENT. COMMITMENT FEE OF .25% WILL BE CHARGED ANNUALLY BY BANK
DRAWS. EACH DRAW NOT TO EXCEED 60 MONTHS AMORTIZATION.
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.
<PAGE>
11-04-1998 BUSINESS LOAN AGREEMENT Page 4
(continued)
================================================================================
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 Borrowers 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
Linder, 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 (including any obligation to make
Loan Advances or disbursements), 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 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. Lender and Borrower hereby waive the
right to any jury trial In any action, proceeding, or counterclaim brought
by either Lender of Borrower against the other. This Agreement shall be
governed by and construed In accordance with the laws of the State of
Delaware.
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.
Multiple Parties; Corporate Authority. All obligations of Borrower under
this Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each of the persons
signing below is responsible for all obligations in 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 telefacsimile (unless otherwise required
by law), 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 addressees).
Severablilty. 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
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.
<PAGE>
11-04-1998 BUSINESS LOAN AGREEMENT Page 5
(Continued)
================================================================================
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
SEPTEMBER 21, 1998.
<TABLE>
<CAPTION>
BORROWER:
<S> <C>
ASTROPOWER, INC.
By: (SEAL) By: (SEAL)
------------------------------------------------ ---------------------------------------
Authorized Officer Authorized Officer
LENDER:
WILMINGTON TRUST COMPANY
By: ------------------------------------------------
Authorized Officer
====================================================================================================================================
Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.25C 1998 CFI ProServices, Inc. Allrights
reserved. (DE-120 WHMASTRO.LN C19.OVL)
</TABLE>
<PAGE>
EXHIBIT 10.33
WILMINGTON TRUST
PROMISSORY NOTE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$3,000,000.00 11-04-1998 10 938
- -----------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Borrower: ASTROPOWER, INC. Lender: WILMINGTON TRUST COMPANY
SOLAR PARK C/L W.H. MAJOR
NEWARK, DE 19716-2000 RODNEY SQUARE NORTH
1100 NORTH MARKET STREET
WILMINGTON, DE 19890
<TABLE>
____________________________________________________________________________________________________
<S> <C> <C>
Principal Amount: $3,000,000.00 Initial Rate: 8.000% Date of Note: November 4, 1998
</TABLE>
PROMISE TO PAY. ASTROPOWER, INC. ("Borrower") promises to pay to WILMINGTON
TRUST COMPANY ("Lender"), or order, in lawful money of the United States of
America, on demand, the principal amount of Three Million & 00/100 Dollars
($3,000,000.00) or so much as may be outstanding, together with interest an the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan immediately upon Lender's demand. In
addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning December 4, 1998, with all
subsequent Interest payments to be due on the same day of each month after that.
The annual interest rate for this Note is computed on a 365/360 basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's 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 accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
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 the WILMINGTON TRUST
COMPANY'S NATIONAL COMMERCIAL RATE (the "Index"). The Index is not necessarily
the lowest rate charged by Lender on its loans and is set by Lender in its sole
discretion. If the Index becomes unavailable during the term of this loan,
Lender may designate a substitute index after notifying Borrower. 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 8.000% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate equal to the Index, resulting
in an initial rate of 8.000% per annum. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law.
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
of accrued unpaid interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a regularly scheduled interest payment is 15 days or more late,
Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled
payment or $5.00, whichever is greater. If Lender demands payment of this loan,
and Borrower does not pay the loan within 15 days after Lender's demand,
Borrower also will be charged either 5.000% of the unpaid portion of the sum of
the unpaid principal plus accrued unpaid interest or $5.00, whichever is
greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails 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. (d) 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. (e) 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.
(g) 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, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 2.000
percentage points over the Index. The interest rate will not exceed the ma)dmum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if 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. Lender and Borrower hereby
waive the right to any jury trial in any action, proceeding, or counterclaim
brought by either Lender or Borrower against the other. 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. It 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 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 Note have been paid in full.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. The following party or
parties are authorized to request advances under the line of credit until Lender
receives from Borrower at Lender's address shown above written notice of
revocation of their authority: THOMAS J. STINER, CFO/VICE PRESIDENT; and
<PAGE>
11-04-1998 PROMISSORY NOTE Page 2
(Continued)
________________________________________________________________________________
ALLEN M. BARNETT, PRESIDENT. Borrower agrees to be liable for all sums either:
(a) advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this Note or
by Lender's internal records, including daily computer print--outs. Lender will
have no obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement ftt
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor ceases
doing business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; or (d) Borrower has applied funds provided pursuant
to this Note for purposes other than those authorized by Lender.
COMMITMENT FEE. LOAN IS SUBJECT TO ANNUAL REVIEW AND A THREE (3) YEAR
COMMITMENT. COMMITMENT FEE OF .25% WILL BE CHARGED ANNUALLY BY BANK.
DRAWS. EACH DRAW NOT TO EXCEED 60 MONTHS AMORTIZATION.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. 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 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.
THIS NOTE HAS BEEN SIGNED AND SEALED BY THE UNDERSIGNED.
BORROWER:
ASTROPOWER, INC.
X_______________________(SEAL) X_______________________(SEAL)
Authorized Officer Authorized Officer
________________________________________________________________________________
<PAGE>
EXHIBIT 23
Consent of Independent Public Accountants
The Board of Directors and Stockholders
AstroPower, Inc.:
The audits referred to in our report dated February 22, 1999, included the
related financial statement schedule as of December 31, 1998, and for each of
the years in the three-year period ended December 31, 1998, 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, such 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 reference
to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Wilmington, Delaware
September 9, 1999
