EXHIBIT 4
THE OPTION IDENTIFIED HEREIN AND ANY SHARES ISSUABLE UPON EXERCISE THEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER SUCH ACT, OR UNLESS TRMI HOLDINGS INC. ("TRMI-H") HAS RECEIVED AN OPINION
OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO TRMI-H AND ITS COUNSEL TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
OPTION AGREEMENT
This Option Agreement ("Agreement") is entered into by and among Ovonic
Battery Company, Inc. ("OBC"), Energy Conversion Devices, Inc. ("ECD") and TRMI
Holdings Inc. ("TRMI-H") as of December 2, 2004.
W I T N E S S E T H:
WHEREAS, TRMI-H is the owner of 4,376,633 shares (the "Shares") of the
outstanding common stock, par value $0.01 per share (the "Common Stock"), of ECD
under that certain Stock Purchase Agreement, dated May 1, 2000 (the "SPA")
between ECD and TRMI-H; and
WHEREAS, ECD, TRMI-H, ChevronTexaco Technology Ventures LLC, f/k/a
Texaco Energy Systems LLC, f/k/a Texaco Energy Systems Inc. ("CTTV"), OBC,
COBASYS LLC ("COBASYS") and Texaco Ovonic Hydrogen Systems LLC ("TOHS") are
parties to that certain Master Agreement dated as of December 2, 2004 (the
"Master Agreement"); and
WHEREAS, the execution and delivery of this Agreement by OBC, ECD and
TRMI-H is a condition precedent to the closing of the transactions contemplated
by the Master Agreement;
NOW THEREFORE, in consideration of the premises, OBC, ECD and TRMI-H
hereby agree as follows:
1. Grant of Option. In consideration of the contribution of
intellectual property and related market rights and amendments to the operating
agreement of COBASYS, TRMI-H hereby grants to OBC and its permitted assigns as
set forth in this Agreement, as optionee ("Optionee"), an irrevocable option
(the "Option") to purchase all, or any portion, of the Shares, at a purchase
price of per share (the "Exercise Price") equal to $4.55, and otherwise on the
terms and subject to the conditions set forth in this Agreement. The number of
shares of Common Stock subject to the Option and the Exercise Price shall be
subject to adjustment as provided in Section 10 below.
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2. Term. The Option shall be exercisable from the date of this
Agreement until November 1, 2005 (the "Termination Date").
3. Exercise of Option. (a) In order to exercise all or any portion of
the Option, Optionee shall deliver to TRMI-H a Notice of Option Exercise and
Stock Purchase Agreement substantially in the form attached hereto as Exhibit A
(the "Notice of Option Exercise") which shall in no case be for an amount less
than 250,000 shares of Common Stock. The Notice of Option Exercise shall be
delivered to TRMI-H in accordance with Section 10(b) of this Agreement no fewer
than three (3) and no more than ten (10) business days prior to the Closing Date
(as such term is defined in the Notice of Option Exercise). Any sale of Common
Stock pursuant to the Option shall be subject to the terms and conditions of
this Agreement and the Notice of Option Exercise. The parties hereby agree that
in the event the Optionee that delivers the Notice of Option Exercise to TRMI-H
is not OBC or an affiliate of OBC, at the Closing (as such term is defined in
the Notice of Option Exercise) (i) TRMI-H will deliver to ECD the stock
certificate(s) representing the shares of Common Stock subject to the Option and
(ii) ECD will deliver to Optionee one or more newly issued stock certificates
representing the Common Stock sold pursuant to the Notice of Option Exercise.
Unless the shares of Common Stock sold pursuant to the Notice of Option Exercise
are included in a registration statement that has been declared effective by the
Securities and Exchange Commission (the "Commission"), each such stock
certificate shall bear a legend in substantially the following form:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT, OR UNLESS THE ISSUER AND TRMI HOLDINGS INC. ("TRMI-H") HAVE
EACH RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO
EACH OF THE ISSUER AND TRMI-H AND THEIR RESPECTIVE COUNSEL TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) ECD agrees that in connection with any exercise of the Option by
any person other than OBC or an affiliate of OBC, it will grant such Optionee an
opportunity to ask questions and receive answers from ECD regarding the
business, properties, prospects and financial condition of ECD.
(c) To facilitate the exercise of the Option and/or the sale of any of
the Shares following the Termination Date, TRMI-H hereby requests a Stock
Registration (as such term is defined in the SPA) to permit the public sale of
the Shares from time to time following the effectiveness of the registration
statement, all as contemplated by Rule 415 of Regulation C promulgated by the
Commission. ECD hereby waives its rights under Section 4.3(f) of the SPA with
respect to any public sale of the Shares (including any sale pursuant to Rule
144 of the Commission). TRMI-H agrees that ECD may delay the filing of a
registration statement pursuant to the foregoing request until May 31, 2005.
TRMI-H further agrees that, to the extent permitted by the rules and regulations
of the Commission, the registration statement filed by
2
ECD pursuant to the foregoing request may include the Option as an additional
security registered thereunder and may register, or be amended to register, the
resale of the Shares by permitted assigns of the Option.
4. Agreement Not to Sell Common Stock. From the date of this Agreement
until the Termination Date, TRMI-H agrees that it shall not pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock,
or enter into any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of Common Stock,
whether any such transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise, except pursuant to the Option.
5. Conditions to Option Exercise. Optionee's right to exercise the
Option shall be subject to the condition precedent that Optionee shall deliver
or cause to be delivered to TRMI-H:
(a) in the event Optionee is OBC or an affiliate of OBC, an
opinion dated the Closing Date to the effect that such exercise by
Optionee is lawful and results in a valid and binding obligation of
Optionee, enforceable in accordance with its terms, such opinion to be
(i) in substantially the form set forth in Exhibit B and (ii) issued by
Xxxxx & XxXxxxxx LLP or other counsel reasonably satisfactory to TRMI-H
and Optionee; and
(b) in the event Optionee is not OBC or an affiliate of OBC, a
duly executed Representation Certificate substantially in the form
attached hereto as Exhibit C dated the Closing Date.
6. Failure to Exercise Option in Full Prior to Termination Date. In the
event that, by the Termination Date:
(a) the Option shall not have been exercised in full for all
the Shares;
(b) a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), to permit TRMI-H to make a public
offering of all of the shares of Common Stock held by it has not been
declared effective by the Commission and/or is not then in effect; and
(c) TRMI-H is otherwise unable to effect an immediate public
sale of the Shares in full without violation of any applicable law;
then, in such event, the provisions of Part 4 of the SPA shall be of no
further force or effect.
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7. Representations of ECD. ECD represents to TRMI-H:
(a) Organization. ECD is a corporation duly organized and
validly existing under the laws of the State of Delaware. ECD has the
full power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) Authority. The execution and delivery of this Agreement by
ECD, and the consummation of the transactions contemplated hereby, have
been duly authorized by all requisite action on the part of ECD.
(c) Enforceability. This Agreement constitutes the legal,
valid and binding obligation of ECD, enforceable against ECD in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights generally and to the principles of equity (whether
enforcement is sought in a proceeding in equity or at law).
(d) No Conflicts. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
by ECD will violate, require a consent, or cause a default under any
agreement to which ECD is a party. No consent, approval or filing with
any Governmental Body is required to authorize the execution and
delivery of this Agreement by ECD or ECD's performance of the terms of
this Agreement.
(e) Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or
Governmental Body pending or, to the knowledge of ECD, threatened,
against ECD that impedes or is likely to impede ECD's ability to
consummate the transactions contemplated by this Agreement.
8. Representations of OBC. OBC represents to TRMI-H:
(a) Organization. OBC is a corporation duly organized and
validly existing under the laws of the State of Delaware. OBC has the
full power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) Authority. The execution and delivery of this Agreement by
OBC, and the consummation of the transactions contemplated hereby, have
been duly authorized by all requisite action on the part of OBC.
(c) Enforceability. This Agreement constitutes the legal,
valid and binding obligation of OBC, enforceable against OBC in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights generally and to the principles of equity (whether
enforcement is sought in a proceeding in equity or at law).
4
(d) No Conflicts. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
by OBC will violate, require a consent, or cause a default under any
agreement to which OBC is a party. No consent, approval or filing with
any Governmental Body is required to authorize the execution and
delivery of this Agreement by OBC or OBC's performance of the terms of
this Agreement.
(e) Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or
Governmental Body pending or, to the knowledge of OBC, threatened,
against OBC that impedes or is likely to impede OBC's ability to
consummate the transactions contemplated by this Agreement.
9. Representations of TRMI-H. TRMI-H represents to ECD and OBC as
follows:
(a) Organization. TRMI-H is a corporation duly organized and
validly existing under the laws of the State of Delaware. TRMI-H has
the full power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) Authority. The execution and delivery of this Agreement by
TRMI-H and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite action on the part of
TRMI-H.
(c) Enforceability. This Agreement constitutes the legal,
valid and binding obligation of TRMI-H, enforceable against TRMI-H in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights generally and to the principles of equity (whether
enforcement is sought in a proceeding in equity or at law).
(d) No Conflicts. Neither the execution nor delivery of this
Agreement nor the consummation of the transactions contemplated hereby
by TRMI-H will violate, require a consent, or cause a default under any
agreement to which TRMI-H is a party. No consent, approval or filing
with any Governmental Body is required to authorize the execution and
delivery of this Agreement by TRMI-H or TRMI-H's performance of the
terms of this Agreement.
(e) Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or
Governmental Body pending or, to the knowledge of TRMI-H, threatened,
against TRMI-H that impedes or is likely to impede TRMI-H's ability to
consummate the transactions contemplated by this Agreement.
(f) Title to Shares. TRMI-H is the record owner and sole
beneficial owner of the Shares. TRMI-H holds the Shares free and clear
of any lien, pledge, security interest, option, right of first refusal
or other adverse claim (other than the Option, certain
5
restrictions on transfer and other obligations arising under the SPA
and restrictions on transfer of the Shares arising under the federal
and state securities laws).
10. Adjustment upon Changes in Capitalization, Merger or
Recapitalization.
(a) In the event of any change in the outstanding shares of
Common Stock by reason of a stock dividend, stock split, split-up,
merger, consolidation, recapitalization, combination, conversion,
exchange of shares, extraordinary or liquidating dividend or similar
transaction which would have the effect of diluting Optionee's rights
hereunder, the type and number of shares or securities purchasable upon
the exercise of the Option and the Exercise Price shall be adjusted
appropriately, and proper provision will be made in the agreements
governing such transaction, as shall fully preserve the economic
benefits provided hereunder to Optionee.
(b) Without limiting the foregoing, whenever the number of
shares of Common Stock purchasable upon exercise of the Option is
adjusted as provided in this Section 10, the Exercise Price shall be
adjusted by multiplying the Exercise Price by a fraction, the numerator
of which is equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which is equal to the
number of shares of Common Stock purchasable after the adjustment.
(c) In the event that ECD enters into an agreement (i) to
consolidate with or merge into any person and ECD will not be the
continuing or surviving corporation in such consolidation or merger,
(ii) to permit any person to consolidate with or merge into ECD and ECD
will not be the continuing or surviving corporation in such
consolidation or merger, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, then, and in each such
case, the agreement governing such transaction will make proper
provision so that the Option will, upon the consummation of such
transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or
other securities or property that Optionee would have received in
respect of the shares of Common Stock subject to the Option had the
Option been exercised immediately prior to such consolidation, merger,
sale or transfer or the record date therefor, as applicable, and will
make any other necessary adjustments. ECD shall take such steps in
connection with such consolidation, merger, liquidation or other such
transaction as may be reasonably necessary to assure that the
provisions hereof shall thereafter apply as nearly as possible to any
securities or property thereafter deliverable upon exercise of the
Option.
11. Miscellaneous.
(a) Further Assurances. Each party hereto at the reasonable
request of the other, shall execute and deliver, or shall cause to be
executed and delivered from time to time, such further certificates,
agreements or instruments of conveyance and transfer,
6
assumption, release and acquittance and shall take such other action as
the other party hereto may reasonably request to consummate or
implement the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, if requested by the Optionee
in connection with its exercise of the Option, TRMI-H shall deliver a
certificate to the Optionee, executed by a duly authorized officer,
confirming that the representations and warranties of TRMI-H set forth
in Section 9 of this Agreement are true and correct on and as of the
Closing Date (as such term is defined in the Notice of Option Exercise)
as though then made. Except as expressly provided in the preceding
sentence, TRMI-H shall not be obligated pursuant to this Agreement to
make any additional representations or warranties regarding the Shares,
the business of ECD or any other matter.
(b) Notices. Any notice, communication, request, instruction
or other document required or permitted hereunder shall be given in
writing and shall be deemed given as follows: (i) by personal delivery
when delivered personally, (ii) by overnight courier upon written
verification of receipt, (iii) by telecopy or facsimile transmission
when confirmed by telecopier or facsimile transmission, or (iv) by
certified or registered mail, return receipt requested, five (5) days
after deposit in the mail. All notices shall be delivered to the
address of the applicable party as set forth below:
ECD or OBC: Energy Conversion Devices Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
TRMI-H: TRMI Holdings Inc.
0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxxxxx X
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Corporate Counsel
Attention: Xxxxx X. Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Any party may, by written notice so delivered, change its address for
notice purposes hereunder.
(c) Choice of Law. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of Delaware,
without giving effect to principles of conflicts of law.
(d) Entire Agreement; Amendment. This Agreement, the Master
Agreement and the other Master Transaction Agreements (as defined in
the Master Agreement)
7
constitute the entire understanding among the parties with respect to
the subject matter hereof and thereof, superseding all negotiations,
prior discussions, representations and prior agreements and
understandings relating to such subject matter. No amendment of this
Agreement shall be binding unless agreed to in writing by all parties
to this Agreement and, in the event the Optionee is not OBC or an
affiliate of OBC and such amendment would have an adverse effect on the
Optionee's rights under the Option, Optionee.
(e) Successors and Assigns; Assignments; Third Party
Beneficiaries. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, and, except as otherwise prohibited,
their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder may
be assigned by any party without the prior written consent of the other
parties; provided that OBC may transfer its rights, interests and
obligations as Optionee hereunder (for the avoidance of doubt,
excluding any other rights, interests and obligations of OBC hereunder)
without the prior written consent of TRMI-H, subject to the
restrictions identified in the legend appearing on the first page of
this Agreement. Nothing in this Agreement shall or is intended to
confer upon any other person or entity any benefits, rights or
remedies.
(f) Severability. If any provision herein is contrary to any
lawful statute, rule, regulation, proclamation or other lawful mandate
whatsoever, whether or not listed, this Agreement shall be construed as
modified to the extent necessary to conform with such legal strictures.
The provisions of this Agreement are severable to the extent the
partial invalidity of one or more provisions will not affect the
validity of the Agreement as a whole so long as the economic or legal
substance of the transactions contemplated hereby is not affected in
any materially adverse manner as to any party hereto.
(g) Waiver. Any party may (i) extend the time for the
performance of any of the obligations or other acts of any other party
hereto or (ii) waive compliance with any of the agreements of any other
party or with any conditions to its own obligations. Any agreement on
the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such
party. Except as otherwise expressly provided herein, no failure to
exercise, delay in exercising, or single or partial exercise of any
right, power or remedy by any party, and no course of dealing between
the parties, shall constitute a waiver of any such right, power or
remedy. No waiver by a party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(h) Expenses. Except as otherwise provided herein, all costs
and expenses, including without limitation, fees and disbursements of
counsel, incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such costs and expenses.
8
(i) Counterparts. This Agreement may be executed in several
counterparts, and by different parties in separate counterparts, which
when taken together shall be deemed to constitute one and the same
instrument.
(j) Facsimile Signatures. This Agreement shall become
effective upon execution and delivery hereof by the parties hereto;
delivery of this Agreement may be made by facsimile to the parties with
original copies promptly to follow by overnight courier.
(k) Headings. The headings of the Sections, Schedules and
Exhibits of this Agreement are for guidance and convenience of
reference only and have no significance in the interpretation of this
Agreement or any Schedule or Exhibit hereto.
(l) Dispute Resolution. Any dispute, controversy or claim
relating to this Agreement shall be resolved exclusively in accordance
with the dispute resolution procedures set forth in Section 11(d) of
the Master Agreement.
(m) Status of Stock Purchase Agreement. The parties agree that
the provisions of the SPA shall continue in full force and effect from
and after the date of this Agreement; provided that (i) Section 4.3(f)
of the SPA has been partially waived by ECD as provided in Section 3(c)
of this Agreement and (ii) Part 4 of the SPA is subject to termination
as of the Termination Date under the circumstances described in Section
6(c) of this Agreement; provided further that, if the Option is
exercised in full on or before May 31, 2005, TRMI-H agrees that it
shall not, without the prior invitation of ECD, acquire ECD common
stock prior to January 1, 2008.
[SIGNATURE PAGE FOLLOWS]
9
EXECUTED on behalf of ECD, OBC, and TRMI-H as of the date
first above written.
ENERGY CONVERSION DEVICES, INC.
By: /s/ XXXXXX X. XXXXXXX
--------------------------------------
Xxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
OVONIC BATTERY COMPANY, INC.
By: /s/ XXXXXX X. XXXXXXX
--------------------------------------\
Xxxxxx X. Xxxxxxx
Chairman
TRMI HOLDINGS INC.
By: /s/ X.X. XXXXXX
--------------------------------------
X.X. Xxxxxx
Vice President
[SIGNATURE PAGE TO OPTION AGREEMENT]
EXHIBIT A
FORM OF NOTICE OF OPTION EXERCISE AND STOCK PURCHASE AGREEMENT
[LETTERHEAD OF OPTIONEE]
[Date]
TRMI Holdings Inc.
0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxxxxx X
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Corporate Counsel
Attention: Xxxxx X. Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Re: Notice of Option Exercise and Stock Purchase Agreement
This Notice of Option Exercise and Stock Purchase Agreement (this "Purchase
Agreement") is delivered pursuant to Section 3 of that certain Option Agreement
(the "Option Agreement") dated as of November __, 2004 among Ovonic Battery
Company, Inc. ("OBC"), Energy Conversion Devices, Inc. ("ECD") and TRMI Holdings
Inc. ("TRMI-H"). Capitalized terms used but not defined herein shall have the
respective meanings given them in the Option Agreement.
The undersigned Optionee hereby gives notice to TRMI-H that it elects to
exercise the Option and shall purchase [INSERT NUMBER OF SHARES] shares of
Common Stock subject to the Option (the "Securities") on [INSERT CLOSING DATE]
(the "Closing Date") on the terms and subject to the conditions set forth in the
Option Agreement and this Purchase Agreement.
The closing of the purchase and sale of the Securities (the "Closing") shall
take place at the offices of TRMI-H located at ____________________________ at
9:00 a.m. on the Closing Date.
In addition to any other deliveries required under the Option Agreement, at the
Closing, (a) Optionee shall deliver to TRMI-H the Exercise Price by wire
transfer of immediately available funds to TRMI-H's account number [number] at
[bank] (or such other account or accounts as TRMI-H shall have notified Optionee
in writing) and (b) TRMI-H shall deliver to Optionee the certificate or
certificates representing the Securities; provided that in the event Optionee is
not OBC or an affiliate of OBC, TRMI-H shall deliver such certificate or
certificates to ECD and ECD shall issue and deliver to Optionee a new stock
certificate in accordance with Section 3 of the Option Agreement.
Optionee acknowledges and agrees that the purchase and sale of the Securities
pursuant to the Option Agreement and this Purchase Agreement have not been and
will not be registered under the Securities Act of 1933, as amended (the
"Securities Act") and that the Securities may not be sold, transferred, or
otherwise disposed of without registration under the Securities Act or an
exemption from registration thereunder, and that in the absence of an effective
registration statement covering the Securities, or an available exemption from
registration under the Securities Act, the Securities must be held indefinitely.
Optionee further acknowledges that each certificate representing the Securities
shall be endorsed with a legend substantially in the form identified in Section
3 of the Option Agreement and agrees that it will comply with the transfer
restrictions set forth in such legend.(1)
IN WITNESS WHEREOF, OPTIONEE has executed this Notice of Option Exercise and
Stock Purchase Agreement as of the date first set forth above.
[NAME OF OPTIONEE]
By: ______________________________________
--------------------------
(1) Paragraph to be included if the offer and sale of the Shares are not covered
by a registration statement that has been declared effective by the Commission.
EXHIBIT B
FORM OF OPINION OF COUNSEL TO OPTIONEE
[Xxxxx & XxXxxxxx LLP Letterhead]
_______________, 200_
Board of Directors
Energy Conversion Devices, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxx 00000
Re: Exercise of Option Granted by TRMI Holdings Inc.
Ladies and Gentlemen:
Energy Conversion Devices, Inc. (the "Company"), Ovonic Battery
Company, Inc., a subsidiary of the Company ("OBC"), and TRMI Holdings Inc.
("TRMI-H") are parties to an Option Agreement dated as of December 2, 2004 (the
"Option Agreement") pursuant to which TRMI-H has granted OBC an option (the
"Option") to purchase 4,376,633 shares of the Company's Common Stock, par value
$.01 per share ("Common Stock").
We understand that OBC intends to exercise the Option as of the date of
this letter with respect to __________ shares of Common Stock. We further
understand that the aggregate exercise price payable in connection with OBC's
exercise of the Option is $_____________ in cash (the "Exercise Price").
In connection with the foregoing exercise of the Option, you have
requested our opinion that the payment of the Exercise Price upon the exercise
of the Option by OBC, if viewed as a stock purchase or redemption of Common
Stock by the Company, would not constitute an unlawful stock purchase or
redemption for which the directors of the Company would have personal liability
under the Delaware General Corporation Law (the "DGCL").
SUMMARY OF APPLICABLE PROVISIONS OF THE DGCL
Under Section 170 of the DGCL, the directors of a Delaware corporation
are permitted to declare and pay dividends only out of the corporation's
"surplus" or, if there is no surplus, then out of the net profits of the
corporation for the current and preceding fiscal year. Section 154 of the DGCL
defines "surplus" to mean the excess of the "net assets" of a corporation over
its "capital." "Net assets" is defined for this purpose to mean the amount by
which a corporation's total assets exceed its total liabilities. Capital and
surplus are disregarded in the calculation of net assets. For a corporation that
has authorized shares with a stated par value, the "capital" of the corporation
is in most cases equal to the aggregate par value of the corporation's issued
and outstanding shares.
The DGCL permits a corporation to purchase or redeem its own shares as
long as the purchase or redemption does not occur when the corporation's capital
is impaired and the transaction would not result in any impairment of capital. A
purchase or redemption is deemed to impair a corporation's capital if the value
of the consideration paid in the transaction exceeds the amount of the
corporation's surplus.
Under Section 174 of the DGCL, the directors of a Delaware corporation
may in certain cases incur personal liability with respect to violation of the
provisions of the DGCL prohibiting unlawful dividends, stock purchases and
redemptions.
OPTION EXERCISE TRANSACTION
Although the Option is exercisable for shares of the Company's Common
Stock, the Option was granted to and is being exercised by OBC. Accordingly, it
may be argued that the provisions of the DGCL relating to stock purchases and
redemptions are not applicable to the exercise of the Option. Because OBC is a
91.7 percent-owned subsidiary of the Company, however, you have requested that
our opinion that the transaction, if viewed as a purchase or redemption of
Common Stock by the Company, would be lawful under the provisions of the DGCL
discussed above.
ASSUMPTIONS
We have been provided with a schedule prepared by Xxxxx Xxxxxxxx LLP,
the Company's independent auditors, indicating that the Company's surplus as of
[end of preceding fiscal quarter] was $_____ million, calculated in accordance
with the DGCL based on the Company's [un]audited consolidated financial
statements as of that date prepared in accordance with generally accepted
accounting principles. A copy of the schedule is attached to this letter. We
have assumed that the information set forth in the attached schedule is accurate
and complete in all respects.
We have also received a certificate, executed on behalf the Company by
its Chief Financial Officer, stating, among other matters, that based on the
amount of the Company's
current total assets and total liabilities and the number of shares of the
Company's Common Stock currently outstanding, the Company's surplus on the date
of this letter is not less than $___________. A copy of the certificate is
attached to this letter. We have assumed that the information set forth in the
attached certificate is accurate and complete in all respects.
OPINION
Based on the foregoing, we are of the opinion that the exercise of the
Option and payment of the Exercise Price, if viewed as a purchase or redemption
of Common Stock by the Company, would not constitute an unlawful stock purchase
or redemption for which the directors of the Company would have personal
liability pursuant to the DGCL.
QUALIFICATIONS AND LIMITATIONS
In reaching our opinion set forth in this letter, we have relied only
upon our examination of the foregoing schedules and certificates and we have
made no independent verification of the financial calculations, valuations or
other factual matters set forth in such documents.
Our opinion set forth in this letter is limited to the DGCL referred to
in this letter and we express no opinion with respect to the effect or
application of any other laws, including the possible effect or application of
laws relating to bankruptcy, insolvency, fraudulent conveyance, fraudulent
transfer or other similar laws or judicial doctrines.
Our opinion set forth in this letter is limited to the application of
the specific provisions of the DGCL referred to in this letter to the Company
and we have not been requested to, and do not, express any opinion with respect
to any matters relating to OBC or with respect to the compliance by the
Company's directors with their fiduciary duties in connection with the
authorization of the Option Agreement, any related agreement or any of the
transactions contemplated thereby. Further, we have not been requested to, and
do not, express any opinion with respect to any agreement or transaction between
the Company, ChevronTexaco Corporation and their respective affiliates other
than our opinion with respect to the Option Agreement as set forth in this
letter.
This letter is limited to the matters stated herein, and no opinion is
implied or may be inferred beyond the matters expressly stated. The Company is
authorized to provide a copy of this letter to TRMI-H in connection with the
exercise of the Option, but TRMI-H and its affiliates are not authorized to rely
on this letter for any purpose. Without our prior written approval, this letter
may not be relied upon by any person or entity other than you, quoted in whole
or in part or otherwise referred to in any report or document, furnished to any
other person or entity (other than as expressly permitted pursuant to the
preceding sentence) or relied upon for any purpose other than in connection with
consummating the transactions described herein.
Very truly yours,
XXXXX & XxXXXXXX LLP
CHIDMS1/439663.5
EXHIBIT C
FORM OF REPRESENTATION CERTIFICATE
REPRESENTATION CERTIFICATE
This Representation Certificate is delivered in connection with the
exercise of the Option pursuant to that certain Option Agreement among Ovonic
Battery Company, Inc. ("OBC"), Energy Conversion Devices, Inc., a Delaware
corporation ("ECD"), and TRMI Holdings Inc., a Delaware corporation ("TRMI-H"),
dated as of November __, 2004 (the "Option Agreement") and that certain Notice
of Option Exercise and Stock Purchase Agreement dated as of ____________
delivered to TRMI-H by Optionee (the "Purchase Agreement"). Capitalized terms
used but not defined in this Representation Certificate shall have the
respective meanings given them in the Option Agreement.
The undersigned hereby represents and warrants to TRMI-H as follows:
1. Authorization; Binding Obligation. Optionee has full power and
authority to exercise the Option and to enter into the Purchase Agreement and
the Purchase Agreement when executed and delivered , will constitute a valid and
legally binding obligation of Optionee.
2. Purchase Entirely for Own Account. The Common Stock to be received
by Optionee upon exercise of the Option (the "Securities") will be acquired for
investment for Optionee's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof in violation of the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and Optionee has no present intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
Securities Act. By executing this Representation Certificate, Optionee further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities to the
extent the same would violate the Securities Act.(2)
3. Receipt of Information. Optionee believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Securities. Optionee further represents that it has had an
opportunity to ask questions and receive answers from ECD regarding the
business, properties, prospects and financial condition of ECD.
4. Investment Experience. Optionee acknowledges that it is able to fend
for itself, can bear the economic risk of its investment in the Securities, and
has such knowledge and
------------------------
(2) To be included if the sale of the Shares has not been registered under the
Securities Act.
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Securities. If other than an
individual, Optionee also represents it has not been organized for the purpose
of acquiring the Securities.
5. Accredited Investor. Optionee is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act, as presently in
effect.
6. Restricted Securities. Optionee understands that the Securities it
is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from TRMI-H in a transaction
not involving a public offering and that under such laws and applicable
regulations such securities may be resold only in certain limited circumstances
without registration under the Securities Act. Optionee represents that it is
familiar with Rule 144 under the Securities Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.(3)
7. Non-U.S. Optionees. If Optionee is not a United States person,
Optionee hereby represents that he or she has satisfied himself or herself as to
the full observance of the laws of his or her jurisdiction in connection with
any invitation to purchase the Option or the Securities or any use of the Option
Agreement, including (i) the legal requirements within his or her jurisdiction
for the purchase of the Securities, (ii) any foreign exchange restrictions
applicable to such purchase, (iii) any governmental or other consents that may
need to be obtained, and (iv) the income tax and other tax consequences, if any,
that may be relevant to the purchase, holding, sale, or transfer of the
Securities and further represents that Optionee's subscription and payment for,
and his or her continued beneficial ownership of the Securities, will not
violate any applicable securities or other laws of his or her jurisdiction.
[NAME OF OPTIONEE]
By: _________________________________
Name:
Title:
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(3) To be included if the sale of the Shares has not been registered under the
Securities Act.
