エドガーで原本を確認する
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2023
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-36481
ASPEN AEROGELS, INC.
(Exact name of registrant as specified in its charter)
Delaware |
|
04-3559972 |
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
30 Forbes Road, Building B Northborough, Massachusetts |
|
01532 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including area code: (508) 691-1111
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of exchange on which registered |
Common Stock, par value $0.00001 per share |
ASPN |
The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☒ |
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
☐ |
|
|
|
|
Emerging growth company |
|
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 31, 2023, the registrant had 70,256,926 shares of common stock outstanding.
ASPEN AEROGELS, INC.
INDEX TO FORM 10-Q
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
|
Item 1. |
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets (unaudited) as of September 30, 2023 and December 31, 2022 |
|
1 |
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
19 |
|
|
|
|
|
Item 3. |
|
|
35 |
|
|
|
|
|
|
Item 4. |
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 1. |
|
|
37 |
|
|
|
|
|
|
Item 1A. |
|
|
37 |
|
|
|
|
|
|
Item 2. |
|
|
39 |
|
|
|
|
|
|
Item 3. |
|
|
39 |
|
|
|
|
|
|
Item 4. |
|
|
39 |
|
|
|
|
|
|
Item 5. |
|
|
39 |
|
|
|
|
|
|
Item 6. |
|
|
40 |
|
|
|
|
|
|
|
41 |
|||
Trademarks, Trade Names and Service Marks
We own or have rights to use “Aspen Aerogels,” “Cryogel,” “Pyrogel,” “Spaceloft,” “PyroThin,” the Aspen Aerogels logo and other trademarks, service marks and trade names of Aspen Aerogels, Inc. appearing in this Quarterly Report on Form 10-Q. Solely for convenience, the trademarks, service marks and trade names referred to in this report are presented without the ® and TM symbols, but such references are not intended to indicate, in any way, that the owner thereof will not assert, to the fullest extent under applicable law, such owner’s rights to these trademarks, service marks and trade names. This report contains additional trademarks, service marks and trade names of other companies, which, to our knowledge, are the property of their respective owners.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
ASPEN AEROGELS, INC.
Consolidated Balance Sheets
(Unaudited)
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
(In thousands, except |
|
|||||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
94,643 |
|
|
$ |
281,335 |
|
Restricted cash |
|
|
320 |
|
|
|
1,226 |
|
Accounts receivable, net of allowances of $184 and $255 |
|
|
54,413 |
|
|
|
57,350 |
|
Inventories |
|
|
34,421 |
|
|
|
22,538 |
|
Prepaid expenses and other current assets |
|
|
16,568 |
|
|
|
7,236 |
|
Total current assets |
|
|
200,365 |
|
|
|
369,685 |
|
Property, plant and equipment, net |
|
|
385,026 |
|
|
|
259,223 |
|
Operating lease right-of-use assets |
|
|
17,400 |
|
|
|
11,990 |
|
Other long-term assets |
|
|
2,355 |
|
|
|
2,518 |
|
Total assets |
|
$ |
605,146 |
|
|
$ |
643,416 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
37,115 |
|
|
$ |
54,728 |
|
Accrued expenses |
|
|
16,694 |
|
|
|
16,003 |
|
Deferred revenue |
|
|
5,463 |
|
|
|
5,846 |
|
Operating lease liabilities |
|
|
1,986 |
|
|
|
2,368 |
|
Total current liabilities |
|
|
61,258 |
|
|
|
78,945 |
|
Convertible note - related party |
|
|
112,088 |
|
|
|
103,580 |
|
Operating lease liabilities long-term |
|
|
21,987 |
|
|
|
13,456 |
|
Total liabilities |
|
|
195,333 |
|
|
|
195,981 |
|
Commitments and contingencies (Note 9) |
|
|
|
|
|
|
||
Stockholders’ equity: |
|
|
|
|
|
|
||
Preferred stock, $0.00001 par value; 5,000,000 shares authorized, no shares issued and |
|
|
— |
|
|
|
— |
|
Common stock, $0.00001 par value; 250,000,000 shares authorized, 70,226,633 and |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
1,082,896 |
|
|
|
1,075,226 |
|
Accumulated deficit |
|
|
(673,083 |
) |
|
|
(627,791 |
) |
Total stockholders’ equity |
|
|
409,813 |
|
|
|
447,435 |
|
Total liabilities and stockholders’ equity |
|
$ |
605,146 |
|
|
$ |
643,416 |
|
See accompanying notes to unaudited consolidated financial statements.
1
ASPEN AEROGELS, INC.
Consolidated Statements of Operations
(Unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(In thousands, except |
|
|||||||||||||
Revenue |
|
$ |
60,755 |
|
|
$ |
36,706 |
|
|
$ |
154,499 |
|
|
$ |
120,753 |
|
Cost of revenue |
|
|
46,945 |
|
|
|
43,065 |
|
|
|
127,196 |
|
|
|
130,111 |
|
Gross profit (loss) |
|
|
13,810 |
|
|
|
(6,359 |
) |
|
|
27,303 |
|
|
|
(9,358 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
4,218 |
|
|
|
4,694 |
|
|
|
12,281 |
|
|
|
12,733 |
|
Sales and marketing |
|
|
8,386 |
|
|
|
7,293 |
|
|
|
24,226 |
|
|
|
20,944 |
|
General and administrative |
|
|
15,840 |
|
|
|
9,963 |
|
|
|
41,382 |
|
|
|
26,544 |
|
Total operating expenses |
|
|
28,444 |
|
|
|
21,950 |
|
|
|
77,889 |
|
|
|
60,221 |
|
Loss from operations |
|
|
(14,634 |
) |
|
|
(28,309 |
) |
|
|
(50,586 |
) |
|
|
(69,579 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, convertible note - related party |
|
|
(1,938 |
) |
|
|
(1,734 |
) |
|
|
(2,424 |
) |
|
|
(4,103 |
) |
Interest income, net |
|
|
1,313 |
|
|
|
448 |
|
|
|
5,532 |
|
|
|
553 |
|
Income from Employee Retention Credits |
|
|
2,186 |
|
|
|
— |
|
|
|
2,186 |
|
|
|
— |
|
Total other income (expense), net |
|
|
1,561 |
|
|
|
(1,286 |
) |
|
|
5,294 |
|
|
|
(3,550 |
) |
Net loss |
|
$ |
(13,073 |
) |
|
$ |
(29,595 |
) |
|
$ |
(45,292 |
) |
|
$ |
(73,129 |
) |
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted |
|
$ |
(0.19 |
) |
|
$ |
(0.75 |
) |
|
$ |
(0.65 |
) |
|
$ |
(2.03 |
) |
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted |
|
|
69,317,805 |
|
|
|
39,533,695 |
|
|
|
69,243,843 |
|
|
|
36,047,879 |
|
See accompanying notes to unaudited consolidated financial statements.
2
ASPEN AEROGELS, INC.
Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share data)
|
Preferred Stock |
|
Common Stock |
|
Additional |
|
Accumulated |
|
Total Stockholders' Equity |
|
|||||||||||||
|
Shares |
|
|
Value |
|
Shares |
|
|
Value |
|
|
|
|
|
|
|
|||||||
Balance at December 31, 2022 |
|
— |
|
|
$ |
— |
|
|
69,994,963 |
|
|
$ |
— |
|
$ |
1,075,226 |
|
$ |
(627,791 |
) |
$ |
447,435 |
|
Net loss |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(16,796 |
) |
|
(16,796 |
) |
Stock compensation expense |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
2,267 |
|
|
— |
|
|
2,267 |
|
Vesting of restricted stock units |
|
— |
|
|
|
— |
|
|
71,643 |
|
|
|
— |
|
|
(385 |
) |
|
— |
|
|
(385 |
) |
Proceeds from employee stock option exercises |
|
— |
|
|
|
— |
|
|
2,554 |
|
|
|
— |
|
|
21 |
|
|
— |
|
|
21 |
|
Balance at March 31, 2023 |
|
— |
|
|
$ |
— |
|
|
70,069,160 |
|
|
$ |
— |
|
$ |
1,077,129 |
|
$ |
(644,587 |
) |
$ |
432,542 |
|
Net loss |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(15,423 |
) |
|
(15,423 |
) |
Stock compensation expense |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
2,710 |
|
|
— |
|
|
2,710 |
|
Issuance of restricted stock |
|
— |
|
|
|
— |
|
|
44,928 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Vesting of restricted stock units |
|
— |
|
|
|
— |
|
|
2,464 |
|
|
|
— |
|
|
(8 |
) |
|
— |
|
|
(8 |
) |
Proceeds from employee stock option exercises |
|
— |
|
|
|
— |
|
|
41,591 |
|
|
|
— |
|
|
150 |
|
|
— |
|
|
150 |
|
Balance at June 30, 2023 |
|
— |
|
|
$ |
— |
|
|
70,158,143 |
|
|
$ |
— |
|
$ |
1,079,981 |
|
$ |
(660,010 |
) |
$ |
419,971 |
|
Net loss |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(13,073 |
) |
|
(13,073 |
) |
Stock compensation expense |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
2,789 |
|
|
— |
|
|
2,789 |
|
Vesting of restricted stock units |
|
— |
|
|
|
— |
|
|
2,662 |
|
|
|
— |
|
|
(9 |
) |
|
— |
|
|
(9 |
) |
Proceeds from employee stock option exercises |
|
— |
|
|
|
— |
|
|
65,828 |
|
|
|
— |
|
|
274 |
|
|
— |
|
|
274 |
|
Issuance costs from underwritten public offering |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
(139 |
) |
|
— |
|
|
(139 |
) |
Balance at September 30, 2023 |
|
— |
|
|
$ |
— |
|
|
70,226,633 |
|
|
$ |
— |
|
$ |
1,082,896 |
|
$ |
(673,083 |
) |
$ |
409,813 |
|
|
Preferred Stock |
|
Common Stock |
|
Additional |
|
Accumulated |
|
Total Stockholders' Equity |
|
|||||||||||||
|
Shares |
|
|
Value |
|
Shares |
|
|
Value |
|
|
|
|
|
|
|
|||||||
Balance at December 31, 2021 |
|
— |
|
|
$ |
— |
|
|
33,218,115 |
|
|
$ |
— |
|
$ |
673,461 |
|
$ |
(545,053 |
) |
$ |
128,408 |
|
Net loss |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(19,484 |
) |
|
(19,484 |
) |
Stock compensation expense |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
1,828 |
|
|
— |
|
|
1,828 |
|
Vesting of restricted stock units |
|
— |
|
|
|
— |
|
|
166,211 |
|
|
|
— |
|
|
(2,315 |
) |
|
— |
|
|
(2,315 |
) |
Proceeds from employee stock option exercises |
|
— |
|
|
|
— |
|
|
4,681 |
|
|
|
— |
|
|
38 |
|
|
— |
|
|
38 |
|
Proceeds from at-the-market offering, net of commissions of $729 and issuance costs of $318 |
|
— |
|
|
|
— |
|
|
737,288 |
|
|
|
— |
|
|
23,272 |
|
|
— |
|
|
23,272 |
|
Proceeds from private placement of common stock, net of fees and issuance costs of $136 |
|
— |
|
|
|
— |
|
|
1,791,986 |
|
|
|
— |
|
|
49,864 |
|
|
— |
|
|
49,864 |
|
Balance at March 31, 2022 |
|
— |
|
|
$ |
— |
|
|
35,918,281 |
|
|
$ |
— |
|
$ |
746,148 |
|
$ |
(564,537 |
) |
$ |
181,611 |
|
Net loss |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(24,050 |
) |
|
(24,050 |
) |
Stock compensation expense |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
2,295 |
|
|
— |
|
|
2,295 |
|
Issuance of restricted stock |
|
— |
|
|
|
— |
|
|
391,324 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Vesting of restricted stock units |
|
— |
|
|
|
— |
|
|
2,569 |
|
|
|
— |
|
|
(24 |
) |
|
— |
|
|
(24 |
) |
Proceeds from employee stock option exercises |
|
— |
|
|
|
— |
|
|
21,110 |
|
|
|
— |
|
|
136 |
|
|
— |
|
|
136 |
|
Proceeds from at-the-market offering, net of commissions of $149 and issuance costs of $28 |
|
— |
|
|
|
— |
|
|
145,000 |
|
|
|
— |
|
|
4,786 |
|
|
— |
|
|
4,786 |
|
Balance at June 30, 2022 |
|
— |
|
|
$ |
— |
|
|
36,478,284 |
|
|
$ |
— |
|
$ |
753,341 |
|
$ |
(588,587 |
) |
$ |
164,754 |
|
Net loss |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(29,595 |
) |
|
(29,595 |
) |
Stock compensation expense |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
2,590 |
|
|
— |
|
|
2,590 |
|
Issuance of restricted stock |
|
— |
|
|
|
— |
|
|
3,495 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Vesting of restricted stock units |
|
— |
|
|
|
— |
|
|
236 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Proceeds from at-the-market offering, net of commissions of $1,391 and issuance costs of $285 |
|
— |
|
|
|
— |
|
|
4,359,112 |
|
|
|
— |
|
|
44,657 |
|
|
— |
|
|
44,657 |
|
Balance at September 30, 2022 |
|
— |
|
|
$ |
— |
|
|
40,841,127 |
|
|
$ |
— |
|
$ |
800,588 |
|
$ |
(618,182 |
) |
$ |
182,406 |
|
See accompanying notes to unaudited consolidated financial statements.
3
ASPEN AEROGELS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(In thousands) |
|
|||||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
(45,292 |
) |
|
$ |
(73,129 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
10,757 |
|
|
|
6,692 |
|
Accretion of interest on convertible note - related party |
|
|
1,721 |
|
|
|
4,103 |
|
Amortization of convertible note issuance costs |
|
|
28 |
|
|
|
23 |
|
Amortization of debt discount due to modification of convertible note – related party |
|
|
675 |
|
|
|
— |
|
Provision for bad debt |
|
|
(89 |
) |
|
|
42 |
|
Stock-compensation expense |
|
|
7,766 |
|
|
|
6,713 |
|
Reduction in the carrying amount of operating lease right-of-use assets |
|
|
2,186 |
|
|
|
1,925 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
3,026 |
|
|
|
(6,733 |
) |
Inventories |
|
|
(11,883 |
) |
|
|
(8,613 |
) |
Prepaid expenses and other assets |
|
|
(6,771 |
) |
|
|
(3,055 |
) |
Accounts payable |
|
|
(420 |
) |
|
|
481 |
|
Accrued expenses |
|
|
691 |
|
|
|
1,918 |
|
Deferred revenue |
|
|
(383 |
) |
|
|
1,035 |
|
Operating lease liabilities |
|
|
(1,845 |
) |
|
|
(1,721 |
) |
Net cash used in operating activities |
|
|
(39,833 |
) |
|
|
(70,319 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
(147,669 |
) |
|
|
(119,348 |
) |
Net cash used in investing activities |
|
|
(147,669 |
) |
|
|
(119,348 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from issuance of convertible note - related party |
|
|
— |
|
|
|
100,000 |
|
Issuance costs from convertible note |
|
|
— |
|
|
|
(185 |
) |
Proceeds from employee stock option exercises |
|
|
445 |
|
|
|
174 |
|
Payments made for employee restricted stock tax withholdings |
|
|
(402 |
) |
|
|
(2,340 |
) |
Proceeds from at-the-market offering, net of commissions of $2,269 |
|
|
— |
|
|
|
73,348 |
|
Fees and issuance costs from at-the-market offering |
|
|
— |
|
|
|
(631 |
) |
Proceeds from private placement of common stock |
|
|
— |
|
|
|
50,000 |
|
Fees and issuance costs from private placement of common stock |
|
|
(139 |
) |
|
|
(137 |
) |
Repayment of prepayment liability |
|
|
— |
|
|
|
(4,728 |
) |
Net cash provided by (used in) financing activities |
|
|
(96 |
) |
|
|
215,501 |
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
|
(187,598 |
) |
|
|
25,834 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
282,561 |
|
|
|
76,564 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
94,963 |
|
|
$ |
102,398 |
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
||
Interest paid |
|
$ |
1 |
|
|
$ |
130 |
|
Income taxes paid |
|
$ |
— |
|
|
$ |
— |
|
Supplemental disclosures of non-cash activities: |
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
$ |
9,994 |
|
|
$ |
5,857 |
|
Capitalized interest |
|
$ |
6,084 |
|
|
$ |
1,277 |
|
Changes in accrued capital expenditures |
|
$ |
(17,193 |
) |
|
$ |
40,402 |
|
See accompanying notes to unaudited consolidated financial statements.
4
ASPEN AEROGELS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Description of Business and Basis of Presentation
Nature of Business
Aspen Aerogels, Inc. (the Company) is an aerogel technology company that designs, develops and manufactures innovative, high-performance aerogel insulation used primarily in the energy industrial and sustainable insulation materials markets. In addition, the Company has introduced a line of aerogel thermal barriers for use in battery packs in the electric vehicle market. The Company is also developing applications for its aerogel technology in the battery materials and a number of other high-potential markets.
The Company maintains its corporate offices in Northborough, Massachusetts. The Company has three wholly owned subsidiaries: Aspen Aerogels Rhode Island, LLC, Aspen Aerogels Germany, GmbH and Aspen Aerogels Georgia, LLC.
Liquidity
During the nine months ended September 30, 2023, the Company incurred a net loss of $45.3 million, used $39.8 million of cash in operations and used $147.7 million of cash for capital expenditures. The Company had unrestricted cash and cash equivalents of $94.6 million as of September 30, 2023.
On November 28, 2022, the Company entered into a loan agreement with (the GM Loan Agreement) General Motors Holdings LLC (GM), an entity affiliated with General Motors LLC, which provides for a multi-draw senior secured term loan (the GM Loan) in an aggregate principal amount of up to $100.0 million, available to the Company on a delayed draw basis beginning January 1, 2023 to September 30, 2023, subject to certain conditions precedent to funding. On September 28, 2023, the Company amended the GM Loan Agreement to extend the draw period for the delayed GM Loan to a period beginning on the date that is twelve months prior to the date agreed upon by the Company and GM for the start of production at an aerogel manufacturing facility in Bulloch County, Georgia (the Plant) and ending on March 31, 2024 (or any later date approved in writing by GM at its sole discretion); extend the maturity date of the GM Loan from March 31, 2025 to September 30, 2025; and add financial covenants measured starting from the fiscal quarter ending December 31, 2024 and at the end of each fiscal quarter thereafter.
The revised GM Loan Agreement also amended the conditions precedent to funding to require the Company to provide evidence that cash proceeds of one or more equity and/or debt financing arrangements of not less than $500.0 million in the aggregate have been contributed to and disbursed by the Company in the manner prescribed in a pre-determined project budget (subject to a permitted variance) to fund the construction of and equipment for the first phase of the Plant and require that 70% of the total cost in connection with the construction and operation of the Plant has been fully funded prior to such applicable borrowing under the GM Loan Agreement.
The Company is increasing investment in the research and development of next-generation aerogel products and manufacturing process technologies. In addition, the Company has developed a number of promising aerogel products and technologies for the electric vehicle market. The Company believes that the commercial potential for the Company’s products and technology in the electric vehicle market is significant. Accordingly, the Company is hiring additional personnel, incurring additional operating expenses, and incurring significant capital expenditures to expand silica aerogel manufacturing capacity, build an automated thermal barrier fabrication operation, enhance research and development laboratory facilities and equipment, and construct a battery materials facility, among other efforts.
The Company expects its existing cash balance will be sufficient to support current operating requirements, current research and development activities and the capital expenditures required to support the evolving commercial opportunity in the electric vehicle market and other strategic business initiatives. However, the Company plans to supplement its cash balance with equity financings, debt financings, equipment leasing, sale-leaseback transactions, customer prepayments, or government grant and loan programs to provide the additional capital necessary to purchase the capital equipment, construct the new facilities, establish the operations and complete the aerogel capacity expansions required to support these evolving commercial opportunities and strategic business initiatives.
5
Unaudited Interim Financial Information
The accompanying unaudited interim consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes in our Annual Report on Form 10-K for the year ended December 31, 2022 (the Annual Report), filed with the U.S. Securities and Exchange Commission on March 16, 2023.
In the opinion of the Company’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments that are of a normal recurring nature and necessary for the fair statement of the Company’s financial position as of September 30, 2023 and the results of its operations and stockholders’ equity for the three and nine months ended September 30, 2023 and 2022 and the cash flows for the nine-month periods then ended. The Company has evaluated subsequent events through the date of this filing.
The Company’s results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or any other period.
(2) Significant Accounting Policies
Principles of Consolidation
The accompanying condensed consolidated financial statements of the Company include the accounts of all its subsidiaries which are majority-owned, controlled by the Company or a variable interest entity (VIE) where the Company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company consolidates a VIE in accordance with ASC 810, Consolidation (ASC 810) when it is the primary beneficiary of such VIE. As primary beneficiary, the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE.
The Company evaluates the initial consolidation of each Consolidated VIE, which includes a determination of whether the VIE constitutes the definition of a business in accordance with ASC 805, Business Combinations (ASC 805), by considering if substantially all of the fair value of the gross assets within the VIE are concentrated in either a single identifiable asset or group of single identifiable assets. Upon consolidation, the Company recognizes the assets acquired, the liabilities assumed, and any third-party ownership of membership interests as non-controlling interest as of the consolidation or acquisition date, measured at their relative fair values.
In April 2022, the Company engaged Prodensa Servicios de Consultora to establish OPE Manufacturer Mexico S de RL de CV, a maquiladora located in Mexico with the express purposes of manufacturing thermal barrier PyroThin products and ultimately constructing an automated fabrication facility for PyroThin. OPE is currently owned by Prodensa, which charges a management fee though there is an option for OPE to be purchased by the Company after a period of 18 months. During the period between inception and the purchase option, OPE operations are consolidated within the Company's financial statements as of and for the nine months ended September 30, 2023.
Use of Estimates
The preparation of the consolidated financial statements requires the Company to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include allowances for doubtful accounts, sales returns and allowances, product warranty costs, inventory valuation, the carrying amount of property and equipment, right-of-use assets, lease liabilities, stock-based compensation, and deferred income taxes. The Company evaluates its estimates and assumptions on an on-going basis using historical experience and other factors, including current economic conditions, which are believed to be reasonable under the circumstances.
6
Management adjusts such estimates and assumptions when facts and circumstances warrant. Illiquid credit markets, volatile equity markets and declines in business investment can increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid instruments, which consist of money market accounts and high-quality debt securities issued by the U.S. government via cash sweep and investment accounts. Cash and cash equivalents are maintained primarily with major financial institutions in North America. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk.
In light of the failure of Silicon Valley Bank and other regional banks, the Company continues to establish commercial banking relationships with additional large financial institutions.
Restricted Cash
As of September 30, 2023, the Company had $0.3 million of restricted cash to support its outstanding letters of credit to secure obligations under certain commercial contracts and other obligations.
Concentration of Credit Risk
Financial instruments, which potentially expose the Company to concentrations of credit risk, consist principally of accounts receivable. The Company’s customers are primarily insulation distributors, insulation contractors, insulation fabricators and select energy and automotive end-users located throughout the world. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral to secure accounts receivable. The Company maintains an allowance for doubtful accounts based on its assessment of the collectability of accounts receivable. The Company reviews the allowance for doubtful accounts quarterly. During the nine months ended September 30, 2023, the Company recorded a reduction for estimated customer uncollectible accounts receivable of less than $0.1 million. During the nine months ended September 30, 2022, the Company recorded a reduction for estimated customer uncollectible accounts receivable of less than $0.1 million.
For the nine months ended September 30, 2023 and 2022, two customers represented 50% and 44% of total revenue, respectively.
At September 30, 2023, the Company had one customer which accounted for 61% of accounts receivable. At December 31, 2022, the Company had two customers which accounted for 44% and 10% of accounts receivable, respectively.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606). See note 3 for further details.
Leases
The Company accounts for its leases in accordance with Accounting Standards Update (ASU) 2016-02 (Topic 842). See note 10 for further details.
7
Stock-based Compensation
The Company grants share-based awards to its employees and non-employee directors under its equity incentive plans: the 2023 Equity Incentive Plan (the 2023 Equity Plan) and its predecessor, the 2014 Employee, Director, and Consultant Equity Incentive Plan (the 2014 Equity Plan). All share-based awards granted, including grants of stock options, restricted stock and restricted stock units (RSUs), are recognized in the statement of operations based on their fair value as of the date of grant. Expense is recognized on a straight-line basis over the requisite service period for all awards with service conditions. For performance-based awards, the grant date fair value is recognized as expense when the condition is probable of being achieved, and then on a graded basis over the requisite service period. The Company uses the Black-Scholes option-pricing model to determine the fair value of service-based option awards. The Black-Scholes model requires the use of a number of complex and subjective assumptions including fair value of the underlying security, the expected volatility of the underlying security, a risk-free interest rate and the expected term of the option.
The fair value of restricted stock and RSUs is determined using the closing price of the Company’s common stock on the date of grant. All shares of restricted stock are not transferable until vested. Restricted stock is typically issued to non-employee directors and typically vests over a one-year period from the date of issuance. RSUs are issued to employees and typically vest over a three-year period from the date of issuance. The fair value of restricted stock and RSUs upon which vesting is solely service-based is expensed ratably over the vesting period. If the service condition for shares of restricted stock is not met for any reason, the shares of unvested restricted stock will be forfeited and returned to the Company.
For stock options that contain a market condition, the Company uses the Monte-Carlo simulation option-pricing model to determine the fair value of the awards. In addition to the input assumptions used in the Black-Scholes model, the Monte-Carlo simulation option-pricing model factors the probability that the specific market condition may or may not be satisfied into the valuation. Stock-based compensation expense for awards with a market condition is recognized on a straight-line basis over the requisite service period for each such award.
During the nine months ended September 30, 2023, the Company granted 511,241 restricted common stock units (RSUs) with an aggregate grant date fair value of $4.5 million and non-qualified stock options (NSOs) to purchase 1,956,464 shares of common stock with an aggregate grant date fair value of $9.6 million to employees under its equity incentive plans. The RSUs and NSOs granted to employees will typically vest over a three-year period. During the nine months ended September 30, 2023, the Company also granted 44,928 shares of restricted common stock with a grant date fair value of $0.3 million and NSOs to purchase 46,272 shares of common stock with a grant date fair value of $0.2 million to its non-employee directors under the 2023 Equity Plan. The restricted common stock and NSOs granted to non-employee directors vest upon the earlier of the date that is the one-year anniversary of the grant date or the day prior to the Company’s annual meeting of stockholders to be held in 2024.
Stock-based compensation is included in cost of revenue or operating expenses, as applicable, and consists of the following:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(In thousands) |
|
|
(In thousands) |
|
||||||||||
Cost of product revenue |
|
$ |
93 |
|
|
$ |
270 |
|
|
$ |
420 |
|
|
$ |
656 |
|
Research and development expenses |
|
|
255 |
|
|
|
306 |
|
|
|
510 |
|
|
|
843 |
|
Sales and marketing expenses |
|
|
378 |
|
|
|
548 |
|
|
|
1,110 |
|
|
|
1,328 |
|
General and administrative expenses |
|
|
2,063 |
|
|
|
1,466 |
|
|
|
5,726 |
|
|
|
3,886 |
|
Total stock-based compensation |
|
$ |
2,789 |
|
|
$ |
2,590 |
|
|
$ |
7,766 |
|
|
$ |
6,713 |
|
The 2023 Equity Plan was approved by stockholders at the Company’s annual meeting of stockholders on June 1, 2023 as the successor to the 2014 Equity Plan, and no further awards may be made under the 2014 Equity Plan after that date. As of September 30, 2023, 6,030,483 shares of common stock were reserved for issuance upon the exercise or vesting of outstanding stock-based awards granted under the Company’s equity incentive plans. Any cancellations or forfeitures of awards outstanding under the 2023 Equity Plan, the 2014 Equity Plan or the 2001 Equity Incentive Plan, as amended (the 2001 Equity Plan) will result in the shares reserved for issuance pursuant to such awards becoming available for grant under the 2023 Equity Plan. As of September 30, 2023, the Company has either reserved in connection with statutory tax withholdings or issued a total of 4,956,866 shares under the Company’s equity incentive plans. As of September 30, 2023, there were 2,134,645 shares of common stock available for future grant under the 2023 Equity Plan.
8
Net Loss per Share
The Company calculates net loss per share of common stock based on the weighted-average number of shares of common stock outstanding during each period. Potential common stock equivalents are determined using the treasury stock method. The weighted-average number of shares of common stock included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options and RSUs. Common equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive.
Warranty
The Company provides warranties for its products and records the estimated cost within cost of revenue in the period that the related revenue is recorded.
The Company’s standard warranty period for energy industrial products extends to one year from the date of shipment. This standard warranty provides that the Company’s products will be free from defects in material and workmanship, and will, under normal use, conform to the specifications for the product.
The Company’s thermal barrier products provide quality and warranty provisions customary in the automotive industry.
The Company recorded warranty expense related to its thermal barrier products of $0.2 million during each of nine months ended September 30, 2023 and 2022.
Employee Retention Credits
In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Credit: a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the Employee Retention Credits. We qualified for the Employee Retention Credits in the third and fourth quarters of 2020 and the first quarter of 2021. In September 2023, we submitted filings for CARES Employee Retention Credits totaling $2.2 million that are reported in the accompanying condensed consolidated balance sheet within prepaid expenses and other current assets as of September 30, 2023, and in the accompanying statement of operations for the three and nine months ended September 30, 2023.
Recently Issued Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies. Recently issued standards typically do not require adoption until a future effective date. Prior to their effective date, the Company evaluates the pronouncements to determine the potential effects of adoption to its consolidated financial statements.
Standards Implemented Since December 31, 2022
The Company has not implemented any accounting standards that had a material impact on its consolidated financial statements during the nine months ended September 30, 2023.
Standards to be Implemented
The Company believes that the impact of recently issued accounting standards that are not yet effective will not have a material impact on its consolidated financial statements.
(3) Revenue from Contracts with Customers
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
9
To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identification of the contract with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the separate performance obligations in the contract; and (v) recognition of the revenue associated with performance obligations as they are satisfied. The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone-selling prices of the promised products or services underlying each performance obligation. The Company determines standalone-selling prices based on the price at which the performance obligation is sold separately. If the standalone-selling price is not observable through past transactions, the Company estimates the standalone-selling price considering available information such as market conditions and internally approved pricing guidelines related to the performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph ASC 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. The Company did not have any contracts outstanding at December 31, 2022 and did not enter into any contracts during the nine months ended September 30, 2023 that contained a significant financing component.
The Company records deferred revenue for product sales when (i) the Company has delivered products, but other revenue recognition criteria have not been satisfied, or (ii) payments have been received in advance of the completion of required performance obligations.
Energy Industrial
The Company generally enters into contracts containing one type of performance obligation. For a majority of the contracts, the Company recognizes revenue at a point in time when transfer of control of the products is passed to the customer, which is generally upon delivery according to contractual shipping terms within customer purchase orders. For a limited number of customer arrangements for customized products with no alternative use to the Company and an enforceable right to payment for progress completed to date, the Company recognizes revenue over time using units of production to measure progress toward satisfying the performance obligations. Units of production represent work performed as we do not generate significant work in process and thereby best depicts the transfer of control to the customer. Customer invoicing terms for contracts for which revenue is recognized under the over time methodology are typically based on certain milestones within the production and delivery schedule. The timing of revenue recognition is assessed on a contract-by-contract basis.
The Company also enters into rebate agreements with certain customers. These agreements may be considered an additional performance obligation of the Company or variable consideration within a contract. Rebates are recorded as a reduction of revenue in the period the related revenue is recognized. A corresponding liability is recorded as a component of deferred revenue on the consolidated balance sheets. These arrangements are primarily based on the customer attaining contractually specified sales volumes.
The Company estimates the amount of its sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related revenue is recognized. The Company currently estimates return liabilities using historical rates of return, current quarter credit sales, and specific items of exposure on a contract-by-contract basis. Sales return reserves were approximately $0.1 million at both September 30, 2023 and December 31, 2022.
Thermal Barriers
The Company supplies fabricated, multi-part thermal barriers for use in battery packs in the electric vehicle market. These thermal barriers are customized to meet customer specifications. Although thermal barrier products are customized with no alternative use to the Company, the Company does not always have an enforceable right to payment. Under the provisions of ASC 606, the Company recognizes revenue at a point in time when transfer of the control of the products is passed to the customer according to the terms of the contract. The timing of revenue recognition is assessed on a contract-by-contract basis.
10
Shipping and Handling Costs
Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in the cost of product revenue. The associated amount of revenue recognized includes the consideration to which the Company expects to be entitled to receive in exchange for incurring these shipping and handling costs.
Disaggregation of Revenue
In the following tables, revenue is disaggregated by primary geographical region and source of revenue:
|
|
Three Months Ended September 30, |
|
|||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
||||||||||||||||||
|
|
U.S. |
|
|
International |
|
|
Total |
|
|
U.S. |
|
|
International |
|
|
Total |
|
||||||
|
|
(In thousands) |
|
|||||||||||||||||||||
Geographical region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Asia |
|
$ |
— |
|
|
$ |
5,801 |
|
|
$ |
5,801 |
|
|
$ |
— |
|
|
$ |
7,296 |
|
|
$ |
7,296 |
|
Canada |
|
|
— |
|
|
|
633 |
|
|
|
633 |
|
|
|
— |
|
|
|
928 |
|
|
|
928 |
|
Europe |
|
|
— |
|
|
|
11,361 |
|
|
|
11,361 |
|
|
|
— |
|
|
|
4,281 |
|
|
|
4,281 |
|
Latin America |
|
|
— |
|
|
|
1,176 |
|
|
|
1,176 |
|
|
|
— |
|
|
|
84 |
|
|
|
84 |
|
U.S. |
|
|
41,784 |
|
|
|
— |
|
|
|
41,784 |
|
|
|
24,117 |
|
|
|
— |
|
|
|
24,117 |
|
Total revenue |
|
$ |
41,784 |
|
|
$ |
18,971 |
|
|
$ |
60,755 |
|
|
$ |
24,117 |
|
|
$ |
12,589 |
|
|
$ |
36,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Source of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Energy industrial |
|
$ |
12,249 |
|
|
$ |
15,663 |
|
|
$ |
27,912 |
|
|
$ |
13,510 |
|
|
$ |
11,242 |
|
|
$ |
24,752 |
|
Thermal barrier |
|
|
29,535 |
|
|
|
3,308 |
|
|
|
32,843 |
|
|
|
10,607 |
|
|
|
1,347 |
|
|
|
11,954 |
|
Total revenue |
|
$ |
41,784 |
|
|
$ |
18,971 |
|
|
$ |
60,755 |
|
|
$ |
24,117 |
|
|
$ |
12,589 |
|
|
$ |
36,706 |
|
|
|
Nine Months Ended September 30, |
|
|||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
||||||||||||||||||
|
|
U.S. |
|
|
International |
|
|
Total |
|
|
U.S. |
|
|
International |
|
|
Total |
|
||||||
|
|
(In thousands) |
|
|||||||||||||||||||||
Geographical region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Asia |
|
$ |
— |
|
|
$ |
27,522 |
|
|
$ |
27,522 |
|
|
$ |
— |
|
|
$ |
26,271 |
|
|
$ |
26,271 |
|
Canada |
|
|
— |
|
|
|
1,519 |
|
|
|
1,519 |
|
|
|
— |
|
|
|
3,240 |
|
|
|
3,240 |
|
Europe |
|
|
— |
|
|
|
26,735 |
|
|
|
26,735 |
|
|
|
— |
|
|
|
14,352 |
|
|
|
14,352 |
|
Latin America |
|
|
— |
|
|
|
5,065 |
|
|
|
5,065 |
|
|
|
— |
|
|
|
2,985 |
|
|
|
2,985 |
|
U.S. |
|
|
93,658 |
|
|
|
— |
|
|
|
93,658 |
|
|
|
73,905 |
|
|
|
— |
|
|
|
73,905 |
|
Total revenue |
|
$ |
93,658 |
|
|
$ |
60,841 |
|
|
$ |
154,499 |
|
|
$ |
73,905 |
|
|
$ |
46,848 |
|
|
$ |
120,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Source of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Energy industrial |
|
$ |
43,994 |
|
|
$ |
53,317 |
|
|
$ |
97,311 |
|
|
$ |
47,989 |
|
|
$ |
42,415 |
|
|
$ |
90,404 |
|
Thermal barrier |
|
|
49,664 |
|
|
|
7,524 |
|
|
|
57,188 |
|
|
|
25,916 |
|
|
|
4,433 |
|
|
|
30,349 |
|
Total revenue |
|
$ |
93,658 |
|
|
$ |
60,841 |
|
|
$ |
154,499 |
|
|
$ |
73,905 |
|
|
$ |
46,848 |
|
|
$ |
120,753 |
|
11
Contract Balances
The following table presents changes in the Company’s contract assets and contract liabilities during the nine months ended September 30, 2023:
|
|
Balance at |
|
|
Additions |
|
|
Deductions |
|
|
Balance at |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Contract assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Thermal barrier |
|
$ |
143 |
|
|
$ |
— |
|
|
$ |
(143 |
) |
|
$ |
— |
|
Total contract assets |
|
$ |
143 |
|
|
$ |
— |
|
|
$ |
(143 |
) |
|
$ |
— |
|
Contract liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy industrial |
|
$ |
5,846 |
|
|
$ |
14,308 |
|
|
$ |
(14,691 |
) |
|
$ |
5,463 |
|
Total contract liabilities |
|
$ |
5,846 |
|
|
$ |
14,308 |
|
|
$ |
(14,691 |
) |
|
$ |
5,463 |
|
During the nine months ended September 30, 2023, the Company recognized $5.7 million of revenue that was included in deferred revenue as of December 31, 2022.
A contract asset is recorded when the Company satisfies a performance obligation by transferring a promised good or service and has earned the right to consideration from its customer. These assets may represent a conditional right to consideration and are included within accounts receivable and other current assets on the consolidated balance sheets.
A contract liability is recorded when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services under the terms of the contract. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met.
(4) Inventories
Inventories consist of the following:
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
(In thousands) |
|
|||||
Raw materials |
|
$ |
22,361 |
|
|
$ |
19,876 |
|
Work in process |
|
|
11,015 |
|
|
|
2,204 |
|
Finished goods |
|
|
1,045 |
|
|
|
458 |
|
Total |
|
$ |
34,421 |
|
|
$ |
22,538 |
|
(5) Property, Plant and Equipment, Net
Property, plant and equipment consist of the following:
|
|
September 30, |
|
|
December 31, |
|
|
Useful |
|
|||
|
|
2023 |
|
|
2022 |
|
|
life |
|
|||
|
|
(In thousands) |
|
|
|
|
||||||
Construction in progress |
|
$ |
299,942 |
|
|
$ |
209,056 |
|
|
|
— |
|
Buildings |
|
|
24,016 |
|
|
|
24,016 |
|
|
30 years |
|
|
Machinery and equipment |
|
|
166,060 |
|
|
|
136,607 |
|
|
3-10 years |
|
|
Computer equipment and software |
|
|
10,890 |
|
|
|
10,239 |
|
|
3 years |
|
|
Leasehold improvements |
|
|
23,171 |
|
|
|
9,226 |
|
|
Shorter of useful life or lease term |
|
|
Total |
|
|
524,079 |
|
|
|
389,144 |
|
|
|
|
|
Accumulated depreciation |
|
|
(139,053 |
) |
|
|
(129,921 |
) |
|
|
|
|
Property, plant and equipment, net |
|
$ |
385,026 |
|
|
$ |
259,223 |
|
|
|
|
|
12
Depreciation expense was $10.8 million and $6.7 million for the nine months ended September 30, 2023 and 2022, respectively.
Construction in progress totaled $299.9 million and $209.1 million at September 30, 2023 and December 31, 2022, respectively. The balance at September 30, 2023 and December 31, 2022 included engineering designs and construction costs totaling $255.2 million and $164.5 million, respectively, for a planned aerogel manufacturing facility in Bulloch County, Georgia. Capitalized interest totaled $8.8 million and $2.7 million at September 30, 2023 and December 31, 2022, respectively.
(6) Accrued Expenses
Accrued expenses consist of the following:
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
(In thousands) |
|
|||||
Employee compensation |
|
$ |
14,001 |
|
|
$ |
12,467 |
|
Other accrued expenses |
|
|
2,693 |
|
|
|
3,536 |
|
Total |
|
$ |
16,694 |
|
|
$ |
16,003 |
|
(7) Related Party Transactions
Convertible Note
During the year ended December 31, 2022, the Company issued a $100.0 million aggregate principal amount convertible note to Wood River Capital, LLC, an entity affiliated with Koch Disruptive Technologies, LLC (the 2022 Convertible Note). Refer to note 8 for more information.
During the nine months ended September 30, 2023, the Company incurred $7.8 million of interest from the 2022 Convertible Note, and capitalized $6.1 million as part of the construction in progress for the planned manufacturing facility in Bulloch County, Georgia.
Other
During the nine months ended September 30, 2023, the Company recorded costs of $8.6 million as a component of construction in progress, in connection with the planned aerogel manufacturing facility in Bulloch County, Georgia in fees from an entity affiliated with Koch Disruptive Technologies, LLC for project management service. The Company had $2.8 million in accounts payable as of September 30, 2023 due to the entity affiliated with Koch Disruptive Technologies, LLC.
(8) Convertible Note – Related Party
2022 Convertible Note
On February 15, 2022, the Company entered into a note purchase agreement (the Note Purchase Agreement) with Wood River Capital LLC, an entity affiliated with Koch Disruptive Technologies, LLC (Koch), relating to the issuance and sale to Koch of the 2022 Convertible Note in the aggregate principal amount of $100.0 million. The transactions contemplated by the Note Purchase Agreement closed on February 18, 2022 (the Issue Date). The maturity date of the 2022 Convertible Note is February 18, 2027, subject to earlier conversion, redemption, or repurchase.
The 2022 Convertible Note is a senior unsecured obligation of the Company and ranks equal in right of payment to all senior unsecured indebtedness of the Company, and will rank senior in right of payment to any indebtedness that is contractually subordinated to the 2022 Convertible Note.
13
In accordance with ASU 2020-06, the 2022 Convertible Note is accounted for as a single unit of account and consists of the following:
|
|
September 30, |
|
|
|
|
2023 |
|
|
|
|
(In thousands) |
|
|
Convertible note, principal |
|
$ |
100,000 |
|
Payment in-kind |
|
|
12,952 |
|
Accrued interest |
|
|
2,683 |
|
Discount on convertible note, net of accumulated amortization |
|
|
(3,422 |
) |
Debt issuance costs, net of accumulated amortization |
|
|
(125 |
) |
Convertible note |
|
$ |
112,088 |
|
In general, fair values determined by Level 1 inputs utilize observable inputs such as quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are either directly or indirectly observable, such as quoted prices for similar instruments in active markets, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the Company to develop its own assumptions for the asset or liability. The 2022 Convertible Note does not have current observable inputs such as recent trading prices (Level 3) and is measured at fair value using a combination of option pricing and discounted cash flow models and incorporate management’s assumptions for stock price, volatility and risk rate.
The Company estimated the fair value of the 2022 Convertible Notes is approximately $97.5 million as of September 30, 2023. However, as the Company has not elected to utilize the fair value option, it is carried at amortized cost of $112.1 million.
Contractual Interest Rates
The 2022 Convertible Note was issued at par and bears interest at the Secured Overnight Financing Rate (SOFR) plus 5.50% per annum if interest is paid in cash, or, if interest is paid in-kind as an increase in the principal amount of the outstanding note, at the SOFR plus 6.50% per annum. Under the terms of the 2022 Convertible Note, SOFR has a floor of 1% and a cap of 3%. Interest on the 2022 Convertible Note is payable semi-annually in arrears on June 30 and December 30. The Company, at its option, is permitted to settle each semi-annual interest payment in cash, in-kind, or any combination thereof. It is expected that the Notes will mature on February 18, 2027, subject to earlier conversion, redemption or repurchase.
The Company elected to repay the contractual interest due on June 30, 2022, December 30, 2022 and June 30, 2023 in-kind as an increase to the principal amount of $2.9 million, $4.9 million, and $5.1 million, respectively. The contractual interest attributable to the 2022 Convertible Note was recorded as an addition to the convertible note – related party balance on the condensed consolidated balance sheets.
Debt issuance costs, net of accumulated amortization is $0.1 million as of September 30, 2023. The effective interest rate approximated the contract interest rate for the nine months ended September 30, 2023. The Company amortized $0.7 million of the $4.1 million discount on the convertible note as of September 30, 2023 utilizing an effective interest rate of 10.7%.
Conversion Rights
On November 28, 2022, the Company entered into an amendment to the 2022 Convertible Note to reduce the initial Conversion Price by $5.00 per share from $34.936625 per share to $29.936625 per share, by increasing the initial Conversion Rate from 28.623257 shares per $1,000 of Capitalized Principal Amount to 33.400100 shares per $1,000 of Capitalized Principal Amount under the Convertible Note. Accordingly, the 2022 Convertible Note is convertible at the option of the holder at any time prior to the business day immediately preceding the maturity date at an initial conversion rate of 33.400100 shares of the Company’s common stock per $1,000 of capitalized principal. The effective conversion price is approximately $29.936625 per share (the Conversion Price). The Conversion Price is subject to adjustment upon the occurrence of certain dilutive events such as stock splits and combinations, stock dividends, mergers and spin-off. As of September 30, 2023, 3,862,221 shares of the Company’s common stock were issuable upon conversion of the 2022 Convertible Note. The Company has the right to settle conversions in shares of common stock, cash, or any combination thereof. If the closing price per share of the Company’s common stock on the New York Stock Exchange is at least 130% of the Conversion Price for 20 consecutive trading days, the Company may elect to convert the principal and accrued interest owing under the Notes, plus a make-whole amount equal to the sum of the present values of the remaining interest payments that would have otherwise been payable from the date of such conversion, redemption or repurchase, as applicable, through maturity (the Make-Whole Amount), into the Company’s common stock at the Conversion Price.
14
Optional Redemption
The 2022 Convertible Note is redeemable at the Company’s option at any time and in the event that the volume weighted average price of the Company’s common stock for the 10 trading days immediately preceding the date on which the Company provides the redemption notice has been at least 130% of the Conversion Price then in effect at a redemption price of 100% of the principal amount, plus accrued and unpaid interest (excluding the redemption date), plus the Make-Whole Amount.
Contingent Redemption
Upon the occurrence of certain fundamental changes described in the Indenture (each, a Fundamental Change), the Holder of the Note may require that the Company repurchase all or part of the principal amount of the Note at a purchase price of 100% of the principal amount of such Note, plus accrued and unpaid interest to, but excluding, the Fundamental Change repurchase date, plus the Make-Whole Amount. The Indenture includes customary “events of default,” which may result in the acceleration of the maturity of the Note.
Embedded Derivatives
The Company determined that the Make-Whole feature of the 2022 Convertible Note requires bifurcation in accordance with Accounting Standards Codification 815, Derivatives and Hedging (ASC 815). Accordingly, the Company must separately account for the feature at fair value with changes in fair value reported in current period earnings. The fair value of the Make-Whole was determined to be immaterial as of February 18, 2022 and September 30, 2023.
(9) Commitments and Contingencies
Cloud Computing Agreement
The Company is party to a cloud computing agreement that is a service contract for enterprise resource planning software. During the year ended December 31, 2022, the Company amended the agreement to a new five-year term. As of September 30, 2023, the Company had $1.5 million of amortized costs related to implementation of the agreement that began to amortize during 2022. The capitalized implementation costs are classified on the consolidated balance sheets as follows:
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
(In thousands) |
|
|||||
Cloud computing costs included in other current assets |
|
$ |
420 |
|
|
$ |
420 |
|
Cloud computing costs included in other assets |
|
|
1,590 |
|
|
|
1,590 |
|
Amortization of cloud computing costs |
|
|
(556 |
) |
|
|
(242 |
) |
Total capitalized cloud computing costs |
|
$ |
1,454 |
|
|
$ |
1,768 |
|
Thermal Barrier Contracts
The Company is party to production contracts with General Motors to supply fabricated, multi-part thermal barriers (Barriers) for use in the battery system of its next-generation electric vehicles (Contracts). Pursuant to the Contracts, the Company is obligated to supply Barriers at fixed annual prices and at volumes to be specified by General Motors up to a daily maximum quantity through the respective terms of the agreements, which expire at various times from 2026 through 2034. While General Motors has agreed to purchase its requirement for Barriers from the Company for locations to be designated from time to time by General Motors, it has no obligation to purchase any minimum quantity of Barriers under the Contracts. In addition, General Motors may terminate the Contracts at any time and for any or no reason. All other terms of the Contracts are generally consistent with General Motors' standard purchase terms, including quality and warranty provisions customary in automotive industry.
Federal, State and Local Environmental Regulations
The Company is subject to federal, state and local environmental laws and regulations. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation. Penalties may be imposed for noncompliance.
15
Litigation
The Company is, from time to time, a party to litigation that arises in the normal course of its business operations. See Part II, Item 1 “Legal Proceedings” of this Quarterly Report on Form 10-Q for a description of certain of the Company’s current legal proceedings. The Company is not presently a party to any litigation for which it believes a loss is probable requiring an amount to be accrued or a possible loss contingency requiring disclosure.
(10) Leases
The Company leases office, laboratory, warehouse and fabrication space in Massachusetts, Rhode Island and Monterrey, Mexico under operating leases. Under these agreements, the Company is obligated to pay annual rent, real estate taxes, and certain other operating expenses. The Company also leases equipment under operating leases. The Company’s operating leases expire at various dates through 2034.
The Company determines if an arrangement is a lease at inception. Right-of-use (ROU) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s payment obligations under the lease. Operating lease ROU assets and liabilities are recognized based on the present value of lease payments over the lease term. To measure its lease liabilities, the Company uses its incremental borrowing rate or the rate implicit in the lease, if available. The Company calculates its incremental borrowing rate using a synthetic credit rating analysis based on Moody’s Building Materials Industry Rating Methodology. ROU assets also include any direct costs and prepaid lease payments but exclude any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The Company elected the short-term lease recognition exemption for all leases that qualify. For leases that qualify for this exemption, the Company does not recognize ROU assets or lease liabilities. For lease agreements with lease and non-lease components, the Company accounts for each component separately. However, in the case of equipment leases, the Company accounts for lease and non-lease components as a single component.
Maturities of operating lease liabilities as of September 30, 2023 are as follows:
Year |
|
Operating |
|
|
|
|
(In thousands) |
|
|
2023 (excluding the nine months ended September 30, 2023) |
|
$ |
1,254 |
|
2024 |
|
|
4,431 |
|
2025 |
|
|
4,271 |
|
2026 |
|
|
3,958 |
|
2027 |
|
|
3,683 |
|
Thereafter |
|
|
23,018 |
|
Total lease payments |
|
|
40,615 |
|
Less imputed interest |
|
|
(16,642 |
) |
Total lease liabilities |
|
$ |
23,973 |
|
The Company incurred operating lease costs of $4.2 million and $2.9 million during the nine months ended September 30, 2023 and 2022, respectively. Cash payments related to operating lease liabilities were $3.6 million and $2.6 million during the nine months ended September 30, 2023 and 2022, respectively.
As of September 30, 2023, the weighted average remaining lease term for operating leases was 9.3 years. As of September 30, 2023, the weighted average discount rate for operating leases was 11.9%.
As of September 30, 2023, the Company had no additional operating real estate or equipment leases that would commence during 2023.
16
(11) Net Loss Per Share
The computation of basic and diluted net loss per share consists of the following:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(In thousands, except |
|
|||||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(13,073 |
) |
|
$ |
(29,595 |
) |
|
$ |
(45,292 |
) |
|
$ |
(73,129 |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding, basic and diluted |
|
|
69,317,805 |
|
|
|
39,533,695 |
|
|
|
69,243,843 |
|
|
|
36,047,879 |
|
Net loss per share, basic and diluted |
|
$ |
(0.19 |
) |
|
$ |
(0.75 |
) |
|
$ |
(0.65 |
) |
|
$ |
(2.03 |
) |
Potentially dilutive common shares that were excluded from the computation of diluted net loss per share because they were anti-dilutive consist of the following:
|
|
Three and Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Common stock options |
|
|
5,462,015 |
|
|
|
3,989,342 |
|
Restricted common stock units |
|
|
568,469 |
|
|
|
259,766 |
|
Restricted common stock awards |
|
|
889,366 |
|
|
|
856,435 |
|
Convertible note, if converted |
|
|
3,862,221 |
|
|
|
3,016,319 |
|
Total |
|
|
10,782,071 |
|
|
|
8,121,862 |
|
As the Company incurred a net loss for the three and nine months ended September 30, 2023 and 2022, the potential dilutive shares from common stock options, restricted common stock units, restricted common stock awards, and the convertible note were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented. The Company excludes the shares issued in connection with restricted stock awards from the calculation of basic weighted average common shares outstanding until the restrictions lapse.
(12) Income Taxes
The Company incurred net operating losses and recorded a full valuation allowance against net deferred tax assets for all periods presented. Accordingly, the Company has not recorded a provision for federal or state income taxes.
(13) Segment Information
Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s chief operating decision maker reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company reports two segments: Energy Industrial and Thermal Barrier. We evaluate segment performance based on the segment profit (loss) before corporate expenses.
17
Summarized below are the Revenue and Segment Operating Profit for each reporting segment:
|
|
Revenue |
|
|
Segment Operating Profit (Loss) |
|
|
Revenue |
|
|
Segment Operating Profit (Loss) |
|
||||||||||||||||||||
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||||||
|
|
(In thousands) |
|
|
(In thousands) |
|
||||||||||||||||||||||||||
Energy industrial |
|
$ |
27,912 |
|
|
$ |
24,752 |
|
|
$ |
5,825 |
|
|
$ |
2,063 |
|
|
$ |
97,311 |
|
|
$ |
90,404 |
|
|
$ |
24,246 |
|
|
$ |
11,044 |
|
Thermal barrier |
|
|
32,843 |
|
|
|
11,954 |
|
|
|
7,985 |
|
|
|
(8,422 |
) |
|
|
57,188 |
|
|
|
30,349 |
|
|
|
3,057 |
|
|
|
(20,402 |
) |
Total |
|
$ |
60,755 |
|
|
$ |
36,706 |
|
|
$ |
13,810 |
|
|
$ |
(6,359 |
) |
|
$ |
154,499 |
|
|
$ |
120,753 |
|
|
$ |
27,303 |
|
|
$ |
(9,358 |
) |
Corporate expenses |
|
|
|
|
|
|
|
|
28,444 |
|
|
|
21,950 |
|
|
|
|
|
|
|
|
|
77,889 |
|
|
|
60,221 |
|
||||
Operating loss |
|
|
|
|
|
|
|
|
(14,634 |
) |
|
|
(28,309 |
) |
|
|
|
|
|
|
|
|
(50,586 |
) |
|
|
(69,579 |
) |
||||
Other income (expense), net |
|
|
|
|
|
|
|
|
1,561 |
|
|
|
(1,286 |
) |
|
|
|
|
|
|
|
|
5,294 |
|
|
|
(3,550 |
) |
||||
Net loss |
|
|
|
|
|
|
|
$ |
(13,073 |
) |
|
$ |
(29,595 |
) |
|
|
|
|
|
|
|
$ |
(45,292 |
) |
|
$ |
(73,129 |
) |
||||
|
|
Total Assets |
|
|||||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
(In thousands) |
|
|||||
Energy industrial |
|
$ |
88,940 |
|
|
$ |
94,415 |
|
Thermal barrier |
|
|
91,860 |
|
|
|
39,320 |
|
Total assets of reportable segments |
|
|
180,800 |
|
|
|
133,735 |
|
Construction in progress |
|
|
299,943 |
|
|
|
209,050 |
|
All other corporate assets |
|
|
124,403 |
|
|
|
300,631 |
|
|
|
$ |
605,146 |
|
|
$ |
643,416 |
|
(14) Other Current Assets
The CARES Act provides an employee retention credit (CARES Employee Retention Credit), which is a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The tax credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages per employee through December 31, 2020. Additional relief provisions were passed by the United States government, which extend and slightly expand the qualified wage caps on these credits through December 31, 2021. Based on these additional provisions, the tax credit is now equal to 70% of qualified wages paid to employees during a quarter, and the limit on qualified wages per employee has been increased to $10,000 of qualified wages per quarter. The Company qualified for the tax credit under the CARES Act for qualified wages for the years ended December 31, 2020 and 2021. In September 2023, the Company submitted filings for CARES Employee Retention Credits totaling $2.2 million that are reported in the accompanying condensed consolidated balance sheet within prepaid expenses and other current assets as of September 30, 2023, and in the accompanying statement of operations for the three and nine months ended September 30, 2023.
(15) Subsequent Events
The Company has evaluated subsequent events through November 2, 2023, the date of issuance of the consolidated financial statements for the three and nine months ended September 30, 2023.
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission (SEC) on March 16, 2023, which we refer to as the Annual Report.
Certain matters discussed in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q, words such as “may,” “will,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.
Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.
The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q and under “Risk Factors” in Item 1A of the Annual Report and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
You should read the following discussion and analysis of financial condition and results of operations together with Part I Item 1 “Financial Statements,” which includes our financial statements and related notes, elsewhere in this Quarterly Report on Form 10-Q.
Investors and others should note that we routinely use the Investors section of our website to announce material information to investors and the marketplace. While not all of the information that we post on the Investors section of our website is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in us to review the information that we share on the Investors section of our website, https://www.aerogel.com.
Products
Our core businesses are organized into two reportable segments: Energy Industrial and Thermal Barrier. The following describes our key product offerings and new product innovations by reportable segment.
Energy Industrial
We design, develop and manufacture innovative, high-performance aerogel insulation used primarily in the energy industrial and sustainable insulation materials markets. We believe our aerogel blankets deliver the best thermal performance of any widely used insulation product available on the market today and provide a combination of performance attributes unmatched by traditional insulation materials. Our end-user customers select our products where thermal performance is critical and to save money, improve resource efficiency, enhance sustainability, preserve operating assets and protect workers. Our insulation is used by oil producers and the owners and operators of refineries, petrochemical plants, liquefied natural gas facilities, power generating assets and other energy industrial. Our Pyrogel and Cryogel product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption. Our Spaceloft sustainable insulation materials are increasingly used by building owners to improve the energy efficiency and to enhance fire protection in buildings ranging from historic brownstones to modern high rises.
We also derive revenue from a number of other end markets. Customers in these markets use our products for applications as diverse as military and commercial aircraft, trains, buses, appliances, apparel, footwear and outdoor gear.
19
As we continue to enhance our Aerogel Technology Platform, we believe we will have additional opportunities to address high-value applications in the global insulation market, the electric vehicle market and in a number of new, high-value markets, including hydrogen energy, filtration, water purification, and gas sorption.
We market and sell our products primarily through a sales force based in North America, Europe and Asia. The efforts of our sales force are supported by a small number of sales consultants with extensive knowledge of a particular market or region. Our sales force is responsible for establishing and maintaining customer and partner relationships, delivering highly technical information and ensuring high-quality customer service.
Our salespeople work directly with end-user customers and engineering firms to promote the qualification, specification and acceptance of our aerogel and thermal barrier products. We also rely on an existing and well-established channel of qualified insulation distributors and contractors in more than 50 countries around the world to ensure rapid delivery of our aerogel products and strong end-user support.
Thermal Barrier
We are also actively developing a number of promising aerogel products and technologies for the electric vehicle market. We have developed and are commercializing our proprietary line of PyroThin aerogel thermal barriers for use in battery packs in electric vehicles. Our PyroThin product is an ultra-thin, lightweight and flexible thermal barrier designed with other functional layers to impede the propagation of thermal runaway across multiple lithium-ion battery system architectures. Our thermal barrier technology is designed to offer a unique combination of thermal management, mechanical performance and fire protection properties. These properties enable electric vehicle manufacturers to achieve critical battery performance and safety goals. In addition, we are seeking to leverage our patented carbon aerogel technology to develop industry-leading battery materials for use in lithium-ion battery cells. These battery materials have the potential to increase the energy density of the battery cells, thus enabling an increase in the driving range of electric vehicles.
The commercial potential for our PyroThin thermal barriers and our carbon aerogel battery materials in the electric vehicle market is significant. Accordingly, we are hiring additional personnel, incurring additional operating expenses, incurring significant capital expenditures to expand aerogel manufacturing capacity, establishing an automated thermal barrier fabrication operation, enhancing research and development resources and expanding our battery material research facilities, among other items.
We have entered into production contracts with certain major OEMs, including General Motors LLC ("General Motors"), to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation electric vehicles. Pursuant to the contracts with General Motors, we are obligated to supply the barriers at fixed annual prices and at volumes to be specified by the customer up to a daily maximum quantity through the term of the agreements, which expire at various times from 2026 through 2034. While General Motors has agreed to purchase its requirement for the barriers from us at locations to be designated from time to time, it has no obligation to purchase any minimum quantity of barriers under the contracts. In addition, General Motors may terminate the contracts any time and for any or no reason. All other terms of the contracts are generally consistent with General Motors's standard purchase terms, including quality and warranty provisions customary in the automotive industry.
Manufacturing Operations
We manufacture our products using our proprietary technology at our facility in East Providence, Rhode Island. We have operated the East Providence facility since 2008 and have increased our capacity in phases to approximately $250.0 million in annual revenue. To meet expected growth in demand for our aerogel products in the electric vehicle market, we have been in the process of expanding our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia. However, in order to manage the development of the second plant so that its increased capacity comes online in a manner that aligns with our current expectations as to demand from our EV customers, we are extending the timeframe for construction and commissioning of the second plant until such time as its capacity is supported by increased demand. In the meantime, and until we ramp up construction, we expect to be able to substantially reduce our planned capital expenditures for 2023 and 2024. At the same time, we believe that productivity improvements in our existing Rhode Island facility combined with supply of our energy industrial products from one or more contract manufacturers in China beginning in 2024 will permit us to achieve a target revenue capacity of approximately $550.0 million in 2024 and prior to the completion and start-up of the second plant. Nonetheless, there can be no assurance as to when we will ramp up construction on the second plant. There can also be no assurance that our contract manufacturing strategy of meeting the demand of our energy industrial customers with supply from one or more contract manufacturers in China will provide us with adequate manufacturing capacity or supply for that expected demand. Furthermore, when we ramp up construction on the second plant, further cost inflation and/or supply chain disruptions, as well as potential changes in the scope of the facilities, could lead to increases to our prior estimates for completion of the second plant.
20
Recent Developments
On September 28, 2023 (the “First Amendment Effective Date”), Aspen Aerogels Georgia, LLC, a Georgia limited liability company (the “Borrower”), our wholly-owned subsidiary, entered into a first amendment (the “First Amendment”) to amend that certain loan agreement, dated as of November 28, 2022 (the “Loan Agreement”), by and among (i) the Borrower, (ii) us, as a guarantor and (iii) Aspen Aerogels Rhode Island, LLC, a Rhode Island limited liability company (“Aspen RI” and, together with the Borrower and us, each, a “Loan Party” and collectively, the “Loan Parties”), as a guarantor, and (iv) General Motors Holdings LLC (“GM”), as lender.
Pursuant to the First Amendment, the Loan Parties and GM agreed to, among other things, (i) extend the draw period for the delayed draw senior secured term loans (the “Loan”), from beginning on January 1, 2023 and ending on September 30, 2023, to instead a period beginning on the date that is twelve (12) months prior to the date agreed upon by Borrower and GM for the start of production at an aerogel manufacturing facility in Bulloch County, Georgia (the “Plant”) under the applicable GM Purchase Contracts (as defined therein) and ending on March 31, 2024 (or any later date approved in writing by GM at its sole discretion); (ii) extend the maturity date of the Loan Agreement from March 31, 2025 to September 30, 2025; and (iii) add the following financial covenants measured starting from the fiscal quarter ending December 31, 2024 and at the end of each fiscal quarter thereafter (each such fiscal quarter end, a “Test Date”): (A) a covenant requiring that the Total Leverage Ratio (as defined therein) shall not exceed 5.00:1.00 as of the applicable Test Date and (B) a covenant requiring that the ratio of our total indebtedness and our subsidiaries (with certain exceptions) to our consolidated equity shall not be greater than 1.20x as of the applicable Test Date, in each case, with compliance demonstrated through the submission of a certain compliance certificate (the “Financial Covenants”), subject to customary equity cure rights with respect to the Financial Covenants.
The First Amendment also amended the conditions precedent to funding to (i) require the Borrower to provide evidence that cash proceeds of one or more equity and/or debt financing arrangements of not less than $500.0 million in the aggregate (inclusive of all equity investments contributed to the Borrower for use in connection with the Plant prior to the First Amendment Effective Date) have been contributed to and disbursed by the Borrower in the manner prescribed in a pre-determined project budget (subject to a permitted variance) to fund the construction of and equipment for the first phase of the Plant and (ii) require that 70% of the total cost in connection with the construction and operation of the Plant has been fully funded prior to such applicable borrowing under the Loan Agreement.
Financial Summary
Our revenue for the nine months ended September 30, 2023 was $154.5 million, which represented an increase of $33.7 million, or 28%, from $120.8 million for the nine months ended September 30, 2022. Net loss for the nine months ended September 30, 2023 was $45.3 million and net loss per share was $0.65. Net loss for the nine months ended September 30, 2022 was $73.1 million and net loss per share was $2.03.
Key Metrics and Non-GAAP Financial Measures
We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Square Foot Operating Metric
We price our energy industrial product and measure our shipments in square feet. We believe the square foot operating metric allows us and our investors to measure our manufacturing capacity and energy industrial product shipments on a uniform and consistent basis. The following chart sets forth energy industrial product shipments in square feet associated with recognized revenue, including revenue recognized over time, for the periods presented:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
(In thousands) |
|
||||||||||||||
Product shipments in square feet |
|
|
5,909 |
|
|
|
6,711 |
|
|
|
22,337 |
|
|
|
24,074 |
|
21
Adjusted EBITDA
We use Adjusted EBITDA, a non-GAAP financial measure, as a means to assess our operating performance. We define Adjusted EBITDA as net income (loss) before interest expense, taxes, depreciation, amortization, stock-based compensation expense and other items, from time to time, which we do not believe are indicative of our core operating performance. Adjusted EBITDA is a supplemental measure of our performance that is not presented in accordance with U.S. GAAP. Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other measure of financial performance calculated and presented in accordance with U.S. GAAP. In addition, our definition and presentation of Adjusted EBITDA may not be comparable to similarly titled measures presented by other companies.
We use Adjusted EBITDA:
We also believe that the presentation of Adjusted EBITDA provides useful information to investors with respect to our results of operations and in assessing the performance and value of our business. Various measures of EBITDA are widely used by investors to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, capital structures and the methods by which assets were acquired.
Although measures similar to Adjusted EBITDA are frequently used by investors and securities analysts in their evaluation of companies, we understand that Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for net income (loss), income (loss) from operations, net cash provided by (used in) operating activities or an analysis of our results of operations as reported under U.S. GAAP. Some of these limitations are:
Because of these limitations, our Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to reinvest in the growth of our business or as a measure of cash available for us to meet our obligations.
To properly and prudently evaluate our business, we encourage you to review the U.S. GAAP financial statements included elsewhere in this Quarterly Report on Form 10-Q, and not to rely on any single financial measure to evaluate our business.
22
The following table presents a reconciliation of net loss, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the periods presented:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Net loss |
|
$ |
(13,073 |
) |
|
$ |
(29,595 |
) |
|
$ |
(45,292 |
) |
|
$ |
(73,129 |
) |
Depreciation and amortization |
|
|
4,550 |
|
|
|
2,531 |
|
|
|
10,757 |
|
|
|
6,692 |
|
Stock-based compensation(1) |
|
|
2,789 |
|
|
|
2,590 |
|
|
|
7,766 |
|
|
|
6,713 |
|
Other (income) expense |
|
|
(1,561 |
) |
|
|
1,286 |
|
|
|
(5,294 |
) |
|
|
3,550 |
|
Adjusted EBITDA |
|
$ |
(7,295 |
) |
|
$ |
(23,188 |
) |
|
$ |
(32,063 |
) |
|
$ |
(56,174 |
) |
Our financial performance, including such measures as net income (loss), earnings per share and Adjusted EBITDA, are affected by a number of factors including volume and mix of aerogel products sold, average selling prices, our material costs and manufacturing expenses, the costs associated with capacity expansions and start-up of additional production capacity, and the amount and timing of operating expenses. Accordingly, we expect that our net income (loss), earnings per share and Adjusted EBITDA will vary from period to period.
We expect to maintain strong revenue growth during 2023 driven by a continued post-COVID recovery in the energy industrial market, accelerating demand in the electric vehicle market and continued market share gains in the sustainable insulation materials market. Our expectation to maintain strong revenue growth is based, in part, on our OEM customers’ production volume forecasts and targets as well as our expectation to successfully scale our manufacturing capabilities and address any potential supply chain issues to meet this expected demand. As a result, we expect to experience a decrease in both net loss and Adjusted EBITDA during 2023.
Components of Our Results of Operations
Revenue
We recognize revenue from the sale of our energy industrial aerogel products and thermal barriers. Revenue is recognized upon the satisfaction of contractual performance obligations.
We record deferred revenue for sales when (i) we have delivered products, but other revenue recognition criteria have not been satisfied, or (ii) payments have been received in advance of the completion of required performance obligations.
We project revenue growth during 2023 due to accelerating demand in the electric vehicle market and continued market share gains in the sustainable insulation materials market.
Cost of Revenue
Cost of product revenue consists primarily of materials and manufacturing expense. Cost of product revenue is recorded when the related product revenue is recognized.
Material is our most significant component of cost of product revenue and includes fibrous batting, silica materials and additives. Material costs as a percentage of product revenue vary from product to product due to differences in average selling prices, material requirements, product thicknesses, and manufacturing yields. In addition, we provide warranties for our products and record the estimated cost within cost of revenue in the period that the related revenue is recorded or when we become aware that a potential warranty claim is probable and can be reasonably estimated. As a result of these factors, material costs as a percentage of product revenue will vary from period to period due to changes in the mix of aerogel products sold, the costs of our raw materials or the estimated cost of warranties. In addition, global supply chain disturbances, increased reliance on foreign materials procurement, industrial gas supply constraints, increases in the cost of our raw materials, and other factors may significantly impact our material costs and have a material impact on our operations. We expect that material costs will increase in absolute dollars during 2023 due to projected growth in product shipments, but decrease as a percentage of revenue due to projected increases in average selling prices, improved manufacturing, and fabrication yields and a favorable mix of products sold.
23
Manufacturing expense is also a significant component of cost of revenue. Manufacturing expense includes labor, utilities, maintenance expense, and depreciation on manufacturing assets. Manufacturing expense also includes stock-based compensation of manufacturing employees and shipping costs. We expect that manufacturing expense will increase in absolute dollars and increase as a percentage of revenue during 2023 due to increased staffing and spending levels in support of our thermal barrier business, including the start-up and operation of an automated fabrication facility in Monterrey, Mexico. We are also continuing to monitor the impact of engaging one or more contract manufacturers in China to supply our aerogel products for the energy industrial market beginning in 2024 on our manufacturing expense and cost of product revenue.
In total, we expect that cost of product revenue will increase in absolute dollars during 2023 versus 2022 and decrease as a percentage of revenue versus 2022 driven by the costs to support our expected higher run-rate revenue in future periods.
Gross Profit
Our gross profit as a percentage of revenue is affected by a number of factors, including the volume of products produced and sold, the mix of products sold, average selling prices, our material and manufacturing costs, realized capacity utilization and the costs associated with expansions and start-up of production capacity. Accordingly, we expect our gross profit to vary significantly in absolute dollars and as a percentage of revenue from period to period.
During 2023, we expect gross profit to increase in both absolute dollars and as a percentage of total revenue due to the combination of a projected increase in total revenue combined with projected reduction in material costs as a percentage of total revenue, offset, in part, by a projected increase in manufacturing expense as a percentage of revenue.
In the longer term, we expect gross profit to improve in absolute dollars and as a percentage of revenue due to expected increases in total revenue, production volumes and manufacturing productivity. In addition, we expect the gross profit improvement derived from the increases in revenue, volume and productivity will be supported by the continued implementation of lower cost product formulations and realization of material purchasing efficiencies.
Operating Expenses
Operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Operating expenses include personnel costs, legal fees, professional fees, service fees, insurance premiums, travel expense, facilities related costs and other costs, expenses and fees. The largest component of our operating expenses is personnel costs, consisting of salaries, benefits, incentive compensation and stock-based compensation. In any particular period, the timing and extent of personnel additions or reductions, legal activities, including patent enforcement actions, marketing programs, research efforts and a range of similar activities or actions could materially affect our operating expenses, both in absolute dollars and as a percentage of revenue.
During 2023, we expect to continue to hire additional personnel and incur additional operating expenses to support the anticipated multi-year growth in our PyroThin thermal barrier business. As a result, we expect that operating expenses will increase in absolute dollars, and remain consistent as a percentage of revenue during the year. In the longer term, we expect that operating expenses will increase in absolute dollars, but decrease as a percentage of revenue.
Research and Development Expenses
Research and development expenses consist primarily of expenses for personnel engaged in the development of next generation aerogel compositions, form factors and manufacturing technologies. These expenses also include testing services, prototype expenses, consulting services, trial formulations for new products, equipment depreciation, facilities costs and related overhead. We expense research and development costs as incurred. We expect to continue to devote substantial resources to the development of new aerogel technologies, including our carbon aerogel battery materials. We believe that these investments are necessary to maintain and improve our competitive position. We also expect to continue to invest in research and engineering personnel and the infrastructure required in support of their efforts. We expect our research and development expenses will increase in absolute dollars, while decreasing as a percentage of revenue in 2023 and in the longer term.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, travel and related costs, consulting expenses and facilities related costs. We expect our sales and marketing expenses will increase in absolute dollars, while decreasing as a percentage of revenue in 2023 and in the longer term.
24
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, legal expenses, consulting and professional services, audit fees, compliance with securities, corporate governance and related laws and regulations, investor relations expenses and insurance premiums, including director and officer insurance.
We expect our general and administrative expenses to increase as we add general and administrative personnel to support the anticipated growth of our business. We also expect that the patent enforcement actions, described in more detail under “Legal Proceedings” in Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2022 and “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q, if protracted, could result in significant legal expense over the medium to long-term. We expect that our general and administrative expenses will increase in absolute dollars but decrease as a percentage of revenue in the longer term. In 2023, we expect such expenses will increase in both absolute dollars and as a percentage of revenue.
Interest Expense, Convertible Note - Related Party
Interest expense, convertible note - related party is net of the capitalized interest related to the $100.0 million in aggregate initial principal amount of our 2022 Convertible Note and $13.0 million relating to payment in-kind.
Interest Income (Expense), Net
Interest expense, net consists of interest expense related to our revolving credit facility and interest earned on the cash balances invested in deposit accounts, money market accounts, and high-quality debt securities issued by the U.S. government.
Income from Employee Retention Credit
Employee retention credit consists of other income related to our submitted filings for CARES Employee Retention Credits.
Provision for Income Taxes
We have incurred net losses since inception and have not recorded benefit provisions for U.S. federal income taxes or state income taxes since the tax benefits of our net losses have been offset by valuation allowances due to the uncertainty associated with the utilization of net operating loss carryforwards.
Results of Operations
Three months ended September 30, 2023 compared to the three months ended September 30, 2022
The following tables set forth a comparison of the components of our results of operations for the periods presented:
Revenue
|
|
Three Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Energy industrial |
|
$ |
27,912 |
|
|
46% |
|
$ |
24,752 |
|
|
67% |
|
$ |
3,160 |
|
|
13% |
Thermal barrier |
|
|
32,843 |
|
|
54% |
|
|
11,954 |
|
|
33% |
|
|
20,889 |
|
|
175% |
Total revenue |
|
$ |
60,755 |
|
|
100% |
|
$ |
36,706 |
|
|
100% |
|
$ |
24,049 |
|
|
66% |
Total revenue increased $24.0 million, or 66%, to $60.7 million for the three months ended September 30, 2023 from $36.7 million in the comparable period in 2022. The increase in total revenue was the result of an increase in both thermal barrier and energy industrial revenue.
25
The following chart sets forth energy industrial product shipments in square feet associated with recognized revenue, including revenue recognized over time, for the periods presented:
|
|
Three Months Ended September 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
Percentage |
|
||||
Product shipments in square feet (in thousands) |
|
|
5,909 |
|
|
|
6,711 |
|
|
|
(802 |
) |
|
|
(12 |
)% |
Energy industrial revenue increased by $3.1 million, or 13%, to $27.9 million for the three months ended September 30, 2023 from $24.8 million in the comparable period in 2022. This increase was driven by project-based demand in the subsea market and a more favorable mix of product shipments in the global petrochemical and refinery markets in Latin America, offset, in part, by a decrease in the volume of shipments in the global petrochemical and refinery markets of Asia, North America and Europe.
Energy industrial revenue for the three months ended September 30, 2023 included $8.0 million to a North American distributor, in comparison to $10.5 million for the comparable period of 2022.
The average selling price per square foot of our energy industrial products increased by $1.03, or 28%, to $4.72 per square foot for the three months ended September 30, 2023 from $3.69 per square foot for the three months ended September 30, 2022. The increase in average selling price reflected the impact of price increases enacted in 2023 and a change in the mix of products sold, as we strive to maximize capacity in our aerogel manufacturing facility. This increase in average selling price had the effect of increasing product revenue by $6.1 million for the three months ended September 30, 2023 from the comparable period in 2022.
In volume terms, energy industrial product shipments decreased by 0.8 million square feet, or 12%, to 5.9 million square feet for the three months ended September 30, 2023, as compared to 6.7 million square feet for the three months ended September 30, 2022. The decrease in volume had the effect of decreasing product revenue by $3.0 million for the three months ended September 30, 2023 from the comparable period in 2022.
Thermal barrier revenue was $32.8 million for the three months ended September 30, 2023 as compared to $11.9 million for the three months ended September 30, 2022. During the three months ended September 30, 2023 and 2022, thermal barrier revenue included $29.5 million and $9.2 million, respectively, to a major U.S. automotive OEM.
Cost of Revenue
|
|
Three Months Ended September 30, |
|
|
|
|
||||||||||||
|
|
2023 |
2022 |
Change |
||||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
Revenue |
|
Amount |
|
|
Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Energy industrial |
|
$ |
22,087 |
|
|
79% |
|
$ |
22,689 |
|
|
92% |
|
$ |
(602 |
) |
|
(3)% |
Thermal barrier |
|
|
24,858 |
|
|
76% |
|
|
20,376 |
|
|
170% |
|
|
4,482 |
|
|
22% |
Total cost of revenue |
|
$ |
46,945 |
|
|
77% |
|
$ |
43,065 |
|
|
117% |
|
$ |
3,880 |
|
|
9% |
Total cost of revenue increased $3.9 million, or 9%, to $47.0 million for the three months ended September 30, 2023 from $43.1 in the comparable period in 2022. The increase in total cost of revenue was the result of an increase in thermal barrier cost of revenue, offset by a decrease in energy industrial cost of revenue.
Energy industrial cost of revenue decreased $0.6 million, or 3%, to $22.1 million for the three months ended September 30, 2023 from $22.7 million in the comparable period in 2022. The $0.6 million decrease was the result of a $0.2 million decrease in material costs due to change in the product mix and a $0.4 million decrease in manufacturing and other operating costs from the comparable period in 2022. The decrease in manufacturing costs was driven by decrease in compensation and related costs of $0.7 million, depreciation and facility related expenses of $0.4 million and other manufacturing and operating costs of $0.2 million, offset by an increase in utilities expenses of $0.9 million.
Thermal barrier cost of revenue increased $4.5 million to $24.9 million for the three months ended September 30, 2023 as compared to $20.4 million for the three months ended September 30, 2022. The $4.5 million increase was the result of a $1.3 million increase in material costs and a $3.2 million increase in manufacturing costs. The increase in manufacturing costs was driven by a $1.9 million increase in depreciation and facility costs, $1.0 million increase in utilities expenses and other manufacturing and operating costs of $0.6 million, offset by a decrease in compensation and related costs of $0.3 million.
26
Gross Profit
|
|
Three Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Energy industrial |
|
$ |
5,825 |
|
|
21% |
|
$ |
2,063 |
|
|
8% |
|
$ |
3,762 |
|
|
182% |
Thermal barrier |
|
|
7,985 |
|
|
24% |
|
|
(8,422 |
) |
|
(70)% |
|
|
16,407 |
|
|
195% |
Total gross profit (loss) |
|
$ |
13,810 |
|
|
23% |
|
$ |
(6,359 |
) |
|
(17)% |
|
$ |
20,169 |
|
|
317% |
Gross profit increased by $20.1 million, or 317%, to $13.8 million for the three months ended September 30, 2023 from $6.3 million of gross loss in the comparable period in 2022. The increase in gross profit was the result of the $24.0 million increase in total revenue, offset by the $3.9 million increase in total cost of revenue. The increase in gross profit reflects the increase in revenue, offset, in part by, additional resources to support our expected higher run-rate revenue in future periods for both our energy industrial and thermal barrier products from the comparable period in 2022.
Research and Development Expenses
|
|
Three Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Research and development expenses |
|
$ |
4,218 |
|
|
7% |
|
$ |
4,694 |
|
|
13% |
|
$ |
(476 |
) |
|
(10)% |
Research and development expenses decreased by $0.5 million, or 10%, to $4.2 million for the three months ended September 30, 2023 from $4.7 million in the comparable period in 2022. The $0.5 million decrease reflects decreases in professional fees of $0.6 million, compensation and related expenses of $0.1 million and other research and development expenses of $0.1 million, offset by an increase in facility related expenditures of $0.3 million.
Research and development expenses as a percentage of total revenue decreased to 7% of total revenue for the three months ended September 30, 2023 from 13% in the comparable period in 2022.
Sales and Marketing Expenses
|
|
Three Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Sales and marketing expenses |
|
$ |
8,386 |
|
|
14% |
|
$ |
7,293 |
|
|
20% |
|
$ |
1,093 |
|
|
15% |
Sales and marketing expenses increased by $1.1 million, or 15%, to $8.4 million for the three months ended September 30, 2023 from $7.3 million in the comparable period in 2022. The $1.1 million increase was principally the result of increases in depreciation and facility related expenses of $0.9 million and an increase in compensation and related expenses of $0.4 million, offset by a decrease in professional fees of $0.2 million.
Sales and marketing expenses as a percentage of total revenue decreased to 14% of total revenue for the three months ended September 30, 2023 from 20% in the comparable period in 2022.
General and Administrative Expenses
|
|
Three Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
General and administrative expenses |
|
$ |
15,840 |
|
|
26% |
|
$ |
9,963 |
|
|
27% |
|
$ |
5,877 |
|
|
59% |
27
General and administrative expenses increased by $5.8 million, or 59%, to $15.8 million for the three months ended September 30, 2023 from $10.0 million in the comparable period in 2022. The $5.8 million increase was the result of additional staffing combined with increases in compensation and related costs of $5.2 million and professional services expenses of $1.0 million, and other general and administrative expenses of $0.1 million, partially offset by a decrease in facility related expenditures of $0.5 million.
General and administrative expenses as a percentage of total revenue decreased to 26% for the three months ended September 30, 2023 from 27% in the comparable period in 2022.
Other Income (Expense), net
|
|
Three Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Interest (expense), related party |
|
$ |
(1,938 |
) |
|
(3)% |
|
$ |
(1,734 |
) |
|
(5)% |
|
$ |
(204 |
) |
|
12% |
Interest income, net |
|
|
1,313 |
|
|
2% |
|
|
448 |
|
|
1% |
|
|
865 |
|
|
193% |
Income from Employee Retention Credits |
|
|
2,186 |
|
|
4% |
|
|
— |
|
|
— |
|
|
2,186 |
|
|
NM |
Total other income (expense), net |
|
$ |
1,561 |
|
|
3% |
|
$ |
(1,286 |
) |
|
(4)% |
|
$ |
2,847 |
|
|
(221)% |
Other income (expense), net increased by $2.8 million to $1.5 million of other income for the three months ended September 30, 2023 from $1.3 million of other expense in the comparable period in 2022. The $2.8 million increase was the result of $2.2 million of Employee Retention Credits, $0.8 million of interest income and a $0.2 million net impact of capitalized interest relating to our Convertible Note in the comparable period in 2022.
Results of Operations
Nine months ended September 30, 2023 compared to the nine months ended September 30, 2022
The following tables set forth a comparison of the components of our results of operations for the periods presented:
Revenue
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage of |
|
|
|
|
Percentage of |
|
|
|
|
|
|||
|
|
Amount |
|
|
Revenue |
|
Amount |
|
|
Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Energy industrial |
|
$ |
97,311 |
|
|
63% |
|
$ |
90,404 |
|
|
75% |
|
$ |
6,907 |
|
|
8% |
Thermal barrier |
|
|
57,188 |
|
|
37% |
|
|
30,349 |
|
|
25% |
|
|
26,839 |
|
|
88% |
Total revenue |
|
$ |
154,499 |
|
|
100% |
|
$ |
120,753 |
|
|
100% |
|
$ |
33,746 |
|
|
28% |
Total revenue increased $33.7 million, or 28%, to $154.5 million for the nine months ended September 30, 2023 from $120.8 million in the comparable period in 2022. The increase in total revenue was the result of an increase in both thermal barrier and energy industrial revenue.
The following chart sets forth energy industrial product shipments in square feet associated with recognized revenue, including revenue recognized over time, for the periods presented:
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
Amount |
|
|
Percentage |
|
||||
Product shipments in square feet (in thousands) |
|
|
22,337 |
|
|
|
24,074 |
|
|
|
(1,737 |
) |
|
|
(7 |
)% |
Energy industrial revenue increased by $6.9 million, or 8%, to $97.3 million for the nine months ended September 30, 2023 from $90.4 million in the comparable period in 2022. This increase was driven by project-based demand in the subsea market and a more favorable mix of product shipments in the global petrochemical and refinery markets in Latin America and Asia, offset, in part, by a decrease in the volume of shipments in the global petrochemical and refinery markets of North America and Europe.
28
Energy industrial revenue for the nine months ended September 30, 2023 included $27.6 million to a North American distributor, in comparison to $30.7 million for the comparable period of 2022.
The average selling price per square foot of our energy industrial products increased by $0.60, or 16%, to $4.36 per square foot for the nine months ended September 30, 2023 from $3.76 per square foot for the nine months ended September 30, 2022. The increase in average selling price reflected the impact of price increases enacted in 2023 and a change in the mix of products sold, as we strive to maximize capacity in our aerogel manufacturing facility. This increase in average selling price had the effect of increasing product revenue by $13.4 million for the nine months ended September 30, 2023 from the comparable period in 2022.
In volume terms, energy industrial product shipments decreased by 1.7 million square feet, or 7%, to 22.3 million square feet for the nine months ended September 30, 2023, as compared to 24.0 million square feet for the nine months ended September 30, 2022. The decrease in volume had the effect of decreasing product revenue by $6.5 million the nine months ended September 30, 2023 from the comparable period in 2022.
Thermal barrier revenue was $57.2 million for the nine months ended September 30, 2023 as compared to $30.3 million for the nine months ended September 30, 2022. During the nine months ended September 30, 2023 and 2022, thermal barrier revenue included $49.0 million and $22.8 million to a major U.S. automotive OEM, respectively.
Cost of Revenue
|
|
Nine Months Ended September 30, |
|
|
|
|
||||||||||||
|
|
2023 |
2022 |
Change |
||||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
Revenue |
|
Amount |
|
|
Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Energy industrial |
|
$ |
73,065 |
|
|
75% |
|
$ |
79,360 |
|
|
88% |
|
$ |
(6,295 |
) |
|
(8)% |
Thermal barrier |
|
|
54,131 |
|
|
95% |
|
|
50,751 |
|
|
167% |
|
|
3,380 |
|
|
7% |
Total cost of revenue |
|
$ |
127,196 |
|
|
82% |
|
$ |
130,111 |
|
|
108% |
|
$ |
(2,915 |
) |
|
(2)% |
Total cost of revenue decreased $2.9 million, or 2%, to $127.2 million for the nine months ended September 30, 2023 from $130.1 in the comparable period in 2022. The decrease in total cost of revenue was the result of a decrease in energy industrial cost of revenue, offset by an increase in thermal barrier cost of revenue.
Energy industrial cost of revenue decreased $6.3 million, or 8%, to $73.1 million for the nine months ended September 30, 2023 from $79.4 million in the comparable period in 2022. The $6.3 million decrease was the result of a $6.9 million decrease in material costs due to change in the product mix, offset by a $0.6 million increase in manufacturing and other operating costs from the comparable period in 2022. The increase in manufacturing costs was driven by an increase in utilities expenses of $0.7 million, offset by a decrease in compensation and related costs of $0.1 million.
Thermal barrier cost of revenue increased $3.4 million to $54.1 million for the nine months ended September 30, 2023 as compared to $50.7 million for the nine months ended September 30, 2022. The $3.4 million increase was the result of a $6.3 million increase in manufacturing costs, offset by a $2.9 million decrease in material costs. The increase in manufacturing costs was driven by increases in depreciation and facility costs of $5.3 million and utilities expenses of $2.6 million and other manufacturing and operating costs of $1.0 million, offset by a decrease in compensation and related costs of $2.6 million.
Gross Profit
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Energy industrial |
|
$ |
24,246 |
|
|
25% |
|
$ |
11,044 |
|
|
12% |
|
$ |
13,202 |
|
|
120% |
Thermal barrier |
|
|
3,057 |
|
|
5% |
|
|
(20,402 |
) |
|
(67)% |
|
|
23,459 |
|
|
115% |
Total gross profit (loss) |
|
$ |
27,303 |
|
|
18% |
|
$ |
(9,358 |
) |
|
(8)% |
|
$ |
36,661 |
|
|
392% |
Gross profit increased by $36.6 million, or 392%, to $27.3 million for the nine months ended September 30, 2023 from $9.3 million of gross loss in the comparable period in 2022. The increase in gross profit was primarily the result of the $33.7 million increase in total revenue and the $2.9 million decrease in total cost of revenue.
29
The increase in gross profit reflects the decrease in costs, offset, in part by, additional resources to support our expected higher run-rate revenue in future periods for both our energy industrial and thermal barrier products from the comparable period in 2022.
Research and Development Expenses
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Research and development expenses |
|
$ |
12,281 |
|
|
8% |
|
$ |
12,733 |
|
|
11% |
|
$ |
(452 |
) |
|
(4)% |
Research and development expenses decreased by $0.4 million, or 4%, to $12.3 million for the nine months ended September 30, 2023 from $12.7 million in the comparable period in 2022. The $0.4 million decrease reflects a decrease in professional fees of $1.4 million, compensation and related costs of $0.2 million and other research and development expenses of $0.4 million, offset by an increase in depreciation and facility related expenses of $1.6 million.
Research and development expenses as a percentage of total revenue decreased to 8% of total revenue for the nine months ended September 30, 2023 from 11% in the comparable period in 2022.
Sales and Marketing Expenses
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Sales and marketing expenses |
|
$ |
24,226 |
|
|
16% |
|
$ |
20,944 |
|
|
17% |
|
$ |
3,282 |
|
|
16% |
Sales and marketing expenses increased by $3.3 million, or 16%, to $24.2 million for the nine months ended September 30, 2023 from $20.9 million in the comparable period in 2022. The $3.3 million increase was principally the result of increases in compensation and related costs of $1.9 million, facility related expenditures of $1.2 million and other sales and marketing expenses of $0.2 million.
Sales and marketing expenses as a percentage of total revenue decreased to 16% for the nine months ended September 30, 2023 from 17% in the comparable period in 2022.
General and Administrative Expenses
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
General and administrative expenses |
|
$ |
41,382 |
|
|
27% |
|
$ |
26,544 |
|
|
22% |
|
$ |
14,838 |
|
|
56% |
General and administrative expenses increased by $14.8 million, or 56%, to $41.3 million for the nine months ended September 30, 2023 from $26.5 million in the comparable period in 2022. The $14.8 million increase was the result of additional staffing combined with increases in compensation and related costs of $12.6 million and professional services expenses of $2.7 million, offset by a $0.5 million decrease in other general and administrative expenses.
General and administrative expenses as a percentage of total revenue increased to 27% for the nine months ended September 30, 2023 from 22% in the comparable period in 2022.
30
Other Income (Expense), net
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
|
|
|
|
Percentage |
|
|
|
|
Percentage |
|
|
|
|
|
|||
|
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
of Revenue |
|
Amount |
|
|
Percentage |
|||
|
|
($ in thousands) |
||||||||||||||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Interest (expense), related party |
|
$ |
(2,424 |
) |
|
(2)% |
|
$ |
(4,103 |
) |
|
(3)% |
|
$ |
1,679 |
|
|
(41)% |
Interest income, net |
|
|
5,532 |
|
|
4% |
|
|
553 |
|
|
— |
|
|
4,979 |
|
|
NM |
Income from Employee Retention Credits |
|
|
2,186 |
|
|
1% |
|
|
— |
|
|
— |
|
|
2,186 |
|
|
NM |
Total other income (expense), net |
|
$ |
5,294 |
|
|
3% |
|
$ |
(3,550 |
) |
|
(3)% |
|
$ |
8,844 |
|
|
NM |
Other income (expense), net increased by $8.8 million to $5.3 million of other income for the nine months ended September 30, 2023 from $3.5 million of other expense in the comparable period in 2022. The $8.8 million increase was the result of $5.0 million of interest income, $2.2 million of Employee Retention Credits and a $1.6 million net impact of capitalized interest relating to our Convertible Note in the comparable period in 2022.
Liquidity and Capital Resources
Overview
We have experienced significant losses and invested substantial resources since our inception to develop, commercialize and protect our aerogel technology and to build a manufacturing infrastructure capable of supplying aerogel products at the volumes and costs required by our customers. These investments have included research and development and other operating expenses, capital expenditures and investment in working capital balances.
Our long-term financial projections anticipate revenue growth, increasing levels of gross profit, and improved cash flows from operations. To meet expected growth in demand for our aerogel products in the electric vehicle market, we have been in the process of expanding our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia. However, in order to manage the development of the second plant so that its increased capacity comes online in a manner that aligns with our current expectations as to demand from our EV customers, we are extending the timeframe for construction and commissioning of the second plant until such time as its capacity is supported by increased demand. In the meantime, and until we ramp up construction, we expect to be able to substantially reduce our planned capital expenditures for 2023 and 2024. At the same time, we believe that productivity improvements in our existing Rhode Island facility combined with supply of our energy industrial products from one or more contract manufacturers in China beginning in 2024 will permit us to achieve a target revenue capacity of approximately $550.0 million in 2024 and prior to the completion and start-up of the second plant. Nonetheless, there can be no assurance as to when we will ramp up construction on the second plant. There can also be no assurance that our contract manufacturing strategy of meeting the demand of our energy industrial customers with supply from one or more contract manufacturers in China will provide us with adequate manufacturing capacity or supply for that expected demand. Furthermore, when we ramp up construction on the second plant, further cost inflation and/or supply chain disruptions, as well as potential changes in the scope of the facilities, could lead to increases to our prior estimates for completion of the second plant.
We are also increasing our investment in the research and development of next-generation aerogel products and technologies. During 2023, we will continue to develop aerogel products and technologies for the electric vehicle market. We believe the commercial potential for our technology in the electric vehicle market is significant. To meet the anticipated revenue growth and take advantage of this market opportunity, we are adding personnel, incurring additional operating expenses, and planning to construct a carbon aerogel battery materials facility, among other items.
In February 2022, we sold and issued to an affiliate of Koch $100.0 million in aggregate principal amount of our 2022 Convertible Note. In addition, in March 2022, pursuant to a securities purchase agreement dated February 15, 2022, we sold to an affiliate of Koch 1,791,986 shares of our common stock, at a price of $27.902 per share, for net proceeds of $49.9 million after deducting fees and offering expenses of $0.1 million.
We believe that our September 30, 2023 cash and cash equivalents balance of $94.6 million will be sufficient to support current operating requirements, current research and development activities and the initial capital expenditures required to support the evolving commercial opportunities in the electric vehicle market and other strategic business opportunities.
31
However, we plan to supplement our cash balance with equity financings, debt financings, equipment leasing, sale-leaseback transactions, customer prepayments, or government grant and loan programs to provide the additional capital necessary to purchase the capital equipment, construct the new facilities, establish the operations and complete the aerogel capacity expansions required to support our evolving commercial opportunities and strategic business initiatives. We also intend to enter into a new revolving credit facility. We believe that the consummation of equity financings could potentially result in an ownership change under Section 382 of the Internal Revenue Code. Such an ownership change would lead to the use of our net operating loss carryforwards being restricted. Our inability to use a substantial portion of our net operating loss carryforwards would result in a higher effective tax rate and adversely affect our financial condition and results of operations.
Primary Sources of Liquidity
Our principal sources of liquidity are currently our cash and cash equivalents. Cash and cash equivalents consist primarily of cash, money market accounts, and sweep accounts on deposit with banks. As of September 30, 2023, we had $94.6 million of unrestricted cash and cash equivalents.
In February 2022, we sold and issued to an affiliate of Koch $100.0 million in aggregate principal amount of our 2022 Convertible Note. In addition, in March 2022, pursuant to a securities purchase agreement dated February 15, 2022, we sold to an affiliate of Koch 1,791,986 shares of our common stock, at a price of $27.902 per share, for net proceeds of $49.9 million after deducting fees and offering expenses of $0.1 million.
Analysis of Cash Flow
Net Cash Used in Operating Activities
During the nine months ended September 30, 2023, we used $39.8 million in net cash in operating activities, as compared to the use of $70.3 million in net cash during the comparable period in 2022, a decrease in the use of cash of $30.5 million. This decrease in use of cash was the result of lower net loss adjusted for non-cash items of $31.4 million offset by net cash used by changes in operating assets and liabilities of $0.9 million.
During the nine months ended September 30, 2022, we used $70.3 million in net cash in operating activities, as compared to the use of $6.6 million in net cash during the comparable period in 2021, an increase in the use of cash of $63.7 million. This increase in use of cash was the result of increases in net loss adjusted for non-cash items of $40.6 million and in net cash used by changes in operating assets and liabilities of $23.1 million.
Net Cash Used in Investing Activities
Net cash used in investing activities is for capital expenditures for machinery and equipment principally to improve the throughput, efficiency and capacity of our East Providence facility and engineering designs and construction costs for the planned aerogel manufacturing facility in Bulloch County, Georgia. Net cash used in investing activities for the nine months ended September 30, 2023 and 2022 was $147.7 million and $119.3 million, respectively.
Net Cash Provided by Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2023 totaled $0.1 million and consisted of $0.4 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units and $0.1 million issuance costs from private placement of common stock, offset, in part, by $0.4 million in proceeds from employee stock option exercises.
Net cash provided by financing activities for the nine months ended September 30, 2022 totaled $215.5 million and consisted of $99.8 million in net proceeds from the issuance of convertible debt, $49.9 million in net proceeds from the private placement of our common stock, $72.7 million in net proceeds from the ATM offering program, and less than $0.2 million in proceeds from employee stock option exercises, offset, in part, by $4.7 million in cash used for repayments of a prepayment liability and $2.4 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units.
32
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations and commitments as reported in our Annual Report.
Recent Accounting Pronouncements
Information regarding new accounting pronouncements is included in note 2 to our unaudited consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in these accounting policies have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See our Annual Report and note 2 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information about these critical accounting policies, as well as a description of our other significant accounting policies.
Certain Factors That May Affect Future Results of Operations
The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other important factors, which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about: the expected future growth of the market for our aerogel products and our continued gain in market share, in particular in the electric vehicle market, the energy infrastructure insulation market, the lithium-ion battery thermal barrier markets, and other markets we target; our beliefs in the appropriateness of our assumptions, the accuracy of our estimates regarding expenses, loss contingencies, future revenues, revenue capacity, future profits, uses of cash, available credit, capital requirements, and the need for additional financing to operate our business and for capital expenditures and to fund our planned strategic business initiatives; the performance of our aerogel blankets; our expectation that we will be successful in obtaining, enforcing and defending our patents against competitors and that such patents are valid and enforceable; our expectations regarding the investment to open a second manufacturing facility in Georgia, the extended construction and commissioning timeframe for the planned second manufacturing facility, our efforts to manage the construction of the second plant to align with our expectations of demand from EV customers; our estimates of annual production capacity; beliefs about the commercial potential for our technology in the electric vehicle market; beliefs about our ability to produce and deliver products to electric vehicle customers; beliefs about Aspen’s contracts with the major automotive manufacturers; our expectations about the size and timing of awarded business in the electric vehicle market, future revenues and profit margins, arising from our supply relationship and contract with automotive OEMs and our ability to win more business and increase revenue in the electric vehicle market; beliefs about the performance of our thermal barrier products in the battery systems of electric vehicles; the current or future trends in the energy, energy infrastructure, chemical and refinery, LNG, sustainable building materials, electric vehicle thermal barrier, electric vehicle battery materials or other markets and the impact of these trends on our business; our investments in the electric vehicle market and aerogel technology platform; our beliefs about the financial metrics that are indicative of our core performance; our expectations about the effect of manufacturing capacity on financial metrics such as Adjusted EBITDA; our expectations about future revenues, expenses, gross profit, net loss, loss per share and Adjusted EBITDA, sources and uses of cash, capital requirements and the sufficiency of our existing cash balance and available credit; our beliefs about the outcome, effects or estimated costs of current or potential litigation or their respective timing, including expected legal expense in connection with our patent enforcement actions; our expectations about future material costs and manufacturing expenses as a percentage of revenue, including the impact of engaging one or more contract manufacturers in China for supply of our energy industrial products; our expectation about the ability of the Chinese contract manufacturers that we engage to consistently supply the aerogel product that we order in a timely manner; our expectations of future gross profit and the effect of manufacturing expenses, manufacturing capacity and productivity on gross profit; our expectations about our resources and other investments in new technology and related research and development activities and associated expenses; our expectations about short and long term (a) research and development (b) general and administrative and (c) sales and marketing expenses; our expectations of revenue growth, increased gross profit, and improving cash flows over the long term; our intentions about managing capital expenditures and working capital balances; and our expectations about potential sources of future financing.
33
Words such as “may,” “will,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those set forth in this Quarterly Report on Form 10-Q and under the heading “Risk Factors” contained in Item 1A of our Annual Report.
In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q might not occur. Stockholders and other readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to Aspen Aerogels, Inc. or to any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
34
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure results primarily from fluctuations in interest rates, as well as from inflation. In the normal course of business, we are exposed to market risks, including changes in interest rates which affect our cash flows. We may also face additional exchange rate risk in the future as we expand our business internationally.
Interest Rate Risk
We are exposed to changes in interest rates in the normal course of our business. As of September 30, 2023, we had unrestricted cash and cash equivalents of $94.6 million. These amounts were held for working capital and capital expansion purposes and were invested primarily in deposit accounts, money market accounts, and high-quality debt securities issued by the U.S. government via cash sweep accounts primarily at major financial institutions in North America. Due to the short-term nature of these investments, we believe that our exposure to changes in the fair value of our cash as a result of changes in interest rates is not material.
As of September 30, 2023, we had a convertible note outstanding with principal balance of $113.0 million. Our convertible note bears interest at the Secured Overnight Financing Rate (SOFR) plus 5.50% per annum if interest is paid in cash, or, if interest is paid in-kind as an increase in the principal amount of the outstanding note, at the SOFR plus 6.50% per annum. Under the terms of the investment, SOFR has a floor of 1% and a cap of 3%. Interest is paid semi-annually in arrears on June 30 and December 30. We, at our option, are permitted to settle each semi-annual interest payment in cash, in-kind, or any combination thereof.
As of September 30, 2023, we had $0.3 million of restricted cash to support our outstanding letters of credit to secure obligations under certain commercial contracts and other obligations. We terminated our revolving credit facility agreement on November 28, 2022.
Inflation Risk
Although we expect that our operating results will be influenced by general economic conditions, we do not believe that inflation has had a material effect on our results of operations during the periods presented in this report. However, our business may be affected by inflation in the future.
Foreign Currency Exchange Risk
We are subject to inherent risks attributed to operating in a global economy. Principally all our revenue, receivables, purchases and debts are denominated in U.S. dollars.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
As of September 30, 2023, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2023, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
35
(b) Changes in Internal Controls.
During the nine months ended September 30, 2023, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
36
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We are involved in various legal claims and proceedings in the normal course of operations. We believe the outcome of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity, except as described in Part 1, Item 3. “Legal Proceedings” of our Annual Report on Form 10-K. Since the filing of our Form 10-K, there have been no material changes in our legal proceedings from those disclosed therein, other than as noted below.
Our patent infringement proceedings in Italy against of AMA S.p.A. and AMA Composites S.r.l. (collectively, AMA) are ongoing. In July 2023, the technical experts appointed by the judge issued a report finding key claims of our process patents valid and infringed by the aerogel products manufactured by Nano Tech Co., Ltd. and sold by AMA.
Our patent infringement proceedings in Korea against Beerenberg Services AS, Beerenberg Korea Ltd., and Bronx (China) Co., Ltd. (collectively, “Beerenberg”) at the Seoul District Court and Korea Trade Commission (KTC) are ongoing. Beerenberg Korea Ltd. and Bronx (China) Co., Ltd. have confirmed in their answers to the KTC investigation that the accused infringing products are manufactured in China by Bronx (China) Co., Ltd. and imported into Korea by Beerenberg Korea Ltd.
In August and September 2023, LG Chem Ltd. filed oppositions at the Korean Intellectual Property Trial and Appeal Board and at the Japanese Patent Office against one of the Korean patents we are asserting against Beerenberg in Korea and a Japanese counterpart of the Korean patents. We intend to vigorously defend the validity of these patents.
In October 2022, we were served with a summons from Aerogels Poland Nanotechnology LLC (“APN”), a former distributor of our products in Poland with whom we previously terminated our distribution agreements because of APN’s failure to pay amounts due to us. The summons asserts causes of action for declaratory judgment, breach of contract, breach of implied contract, equitable estoppel and fraud, and states that plaintiffs will seek declaratory judgment, actual and liquidated damages in the sum of $20 million, in addition to attorneys’ fees. We were not served with any complaint at the time the summons was served. In December 2022, we filed a notice of appearance in New York County Supreme Court and a demand upon plaintiffs to file and serve a complaint. In March 2023, plaintiffs filed a complaint asserting various causes of action consistent with those set forth in the October 2022 summons, and a demand for monetary damages and other relief in excess of $16 million. On June 30, 2023, we filed a motion for an order to compel arbitration, seeking dismissal of certain claims, and for attorney’s fees. We intend to vigorously defend this matter.
Item 1A. Risk Factors.
The ownership of our common stock involves a number of risks and uncertainties. When evaluating the Company and our business before making an investment decision regarding our securities, potential investors should carefully consider the risk factors and uncertainties described in Part 1, Item 1A. “Risk Factors” of our Annual Report on Form 10-K. Since the filing of our Form 10-K, there have been no material changes in our risk factors from those disclosed therein, other than as provided below.
We are engaging third-party contract manufacturers in China to supply our energy industrial products beginning in 2024. If such contract manufacturers are unable to manufacture and deliver a sufficient quantity of high-quality products on a timely and cost-efficient basis, our net revenue and business operations may be harmed and our reputation may suffer.
We are engaging one or more contract manufacturers in China for supply of our energy industrial products beginning in 2024, which we believe will enable us to achieve a target revenue capacity of approximately $550.0 million in 2024 and prior to the completion and start-up of our planned second manufacturing plant. If our contract manufacturers are unable to deliver the required aerogel product on a timely basis, we may experience delays in delivering our finished aerogel product to customers in the energy industrial market. In addition, because our third party contract manufacturers have manufacturing facilities in China, their ability to provide us with adequate supplies of high-quality products on a timely and cost-efficient basis is subject to a number of additional risks and uncertainties, including political, social and economic instability and other factors that could impact the shipment of supplies. If our manufacturers are unable to provide us with adequate supplies of high-quality aerogel products on a timely and cost-efficient basis, our operations could be disrupted and our revenue and business operations may suffer. Moreover, if our third-party contract manufacturers cannot consistently produce high-quality products that are free of defects, we may experience a loss of customers, which may also reduce our revenues and may harm our reputation and brand. Furthermore, our third-party contract manufacturers may become subject to various supply chain disruptions, including but not limited as a result of COVID-19, other pandemics or public health crises, and geopolitical disputes and conflicts, any of which could slow or halt the delivery of products to us and increase the price of certain materials due to resulting increases in costs of raw materials and shipping costs.
37
Our potential inability to adequately protect our intellectual property as a result of engaging contract manufacturers in China for the supply of our aerogel products for our customers in the energy industrial market could negatively impact our performance.
In connection with our engagement of contract manufacturers in China, we expect to implement customary manufacturer safeguards onsite, such as the use of confidentiality agreements with employees, to protect our proprietary information and technologies during the manufacturing process of our aerogel products for the energy industrial market. However, these safeguards may not effectively prevent unauthorized use of such information and technical know-how, or prevent the contract manufacturer from retaining them. Although the courts in China are increasing and broadening their protection of intellectual property rights, the legal regime governing intellectual property rights in China is relatively immature and it is often difficult to create and enforce intellectual property rights or protect trade secrets there. We face risks that our proprietary information may not be afforded the same protection in China as it is in countries with well-developed intellectual property laws, and local laws may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights in China, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position. In the event that the third-party contract manufacturer of our proprietary aerogel product misappropriates our intellectual property, our business, prospects and financial condition could be materially and adversely affected.
38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Unregistered Sales of Equity Securities.
None.
(b) Use of Proceeds from Initial Public Offering of Common Stock.
Not applicable.
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
We did not repurchase any of our equity securities during the quarter ended September 30, 2023.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the fiscal quarter ended September 30, 2023, none of our directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
39
Item 6. Exhibits.
(a) Exhibits
|
|
|
10.1+ |
|
Employment Offer Letter, dated August 23, 2023, by and between the Company and Santhosh Daniel. |
|
|
|
10.2 |
|
|
|
|
|
10.3+ |
|
Aspen Aerogels, Inc. Bonus Plan (Amended and Restated Effective as of January 1, 2024). |
|
|
|
10.4+ |
|
|
|
|
|
10.5+ |
|
Separation Agreement, dated September 5, 2023, by and between the Company and Kelley Conte. |
|
|
|
10.6+ |
|
Consulting Agreement, dated September 5, 2023, by and between the Company and Kelley Conte. |
|
|
|
31.1 |
|
Certification of principal executive officer under Section 302(a) of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
|
Certification of principal financial officer under Section 302(a) of the Sarbanes-Oxley Act of 2002. |
|
|
|
32 |
|
|
|
|
|
101.INS |
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
|
|
|
|
|
|
+ Management contract or compensatory plan or arrangement.
40
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
ASPEN AEROGELS, INC. |
||
|
|
|
|
|
Date: November 2, 2023 |
|
By: |
|
/s/ Donald R. Young |
|
|
|
|
Donald R. Young |
|
|
|
|
President and Chief Executive Officer (principal executive officer) |
|
|
|
|
|
Date: November 2, 2023 |
|
By: |
|
/s/ Ricardo C. Rodriguez |
|
|
|
|
Ricardo C. Rodriguez |
|
|
|
|
Chief Financial Officer and Treasurer (principal financial officer) |
41
Exhibit 10.1
8/23/2023
Dear Santhosh,
It is my pleasure to invite you to join Aspen Aerogels, Inc. (“Aspen” or the “Company”). As we discussed, this letter confirms certain terms and conditions of our offer of employment. We hope that you choose to join the Aspen team and look forward to a mutually beneficial relationship.
1. Compensation:
a. Job Title; Duties: Aspen will employ you as a Chief Accounting Officer, reporting to Ricardo Rodriguez, Chief Financial Officer, and located in our Marlborough, MA office. We expect you to perform all duties and responsibilities that are associated with this position or otherwise that may be assigned to you by the Company, including but not limited to performing services for other Company affiliates or subsidiaries at the Company’s request without further compensation other than as set forth below, and not to undertake any other employment or consultancy without the prior written consent of the Company. You agree to abide by all policies instituted by the Company, as they may be amended from time to time.
b. Expected Start Date: We expect that your employment will commence on or about September 11,
2023, or such other date as you and the Company shall agree to in writing (the “Start Date”).
c. Base Salary: Aspen will pay you an annual base salary of $300,000. This base salary will be subject to applicable withholdings, payable on a biweekly basis, and prorated during your first calendar year of employment based on your Start Date.
d. Corporate Bonus Plan: In addition to your base salary, and to the extent you are a full-time employee, you may be eligible to receive a discretionary bonus, determined in the Company’s sole discretion and subject to the terms and conditions of the Company’s Corporate Bonus Plan (“Bonus Plan”). Your target annual bonus will be 35% of your annual salary (“Bonus”). This Bonus is contingent upon the achievement of defined targets and will be prorated based on your date of hire for 2023. Participation in the Bonus Plan is also contingent upon necessary Company approvals.
You will receive a separate Participation Letter outlining the details of your participation in the Bonus
Plan upon such approval.
Other Compensation
e. New Hire Stock Equity: As a means of rewarding you for your future contributions to Aspen, subject to the Company’s approval, you will receive, pursuant to Aspen Aerogels 2023 Equity Incentive Plan, an equity grant of about $200,000 in fair market value which, at the discretion of the Company, may include grants of restricted stock units and non-qualified stock options, each of which typically have a three-year graded service-based vesting period. You will receive additional governing documents upon the grant.
f. LTIP: Subject to the approval of the Company, you will be eligible to participate in Aspen’s Long Term Incentive Plan program. You will receive additional information on this program in conjunction with the program timeline.
2. Employee Benefits:
a. As an employee of the Company, you will generally be eligible to participate in the Company's benefits plans and programs in accordance with Company policies, and subject to the terms and
conditions set forth in the benefit programs themselves. You will be able to participate in any other
employee benefit plans that the Company offers its employees for which you meet the eligibility
requirements and consistent with the Company’s policies. Please refer to the benefits summary plan descriptions for further information. By signing below, you understand that nothing in this offer letter requires the Company to establish or maintain any benefit plan, policy or arrangement and that the Company’s benefit plans are governed by their own documents, which may be amended by the Company or its affiliates, as the case may be, from time to time. Benefits log in information will be provided to you under separate cover.
b. You will accrue twenty (20) days of vacation per year at the bi-weekly rate of 6.16 hours per pay period (pro-rated as applicable), subject to any Company policy then in effect. We strongly encourage all employees to take all available vacation time to rest, relax and recharge. Holidays and other time off will be in accordance with the then-current Company policy.
3. No Restrictions. By countersigning this offer, you certify to the Company that: (i) you are free to enter into and fully perform the duties of this position and that you are not subject to any employment, confidentiality, non-competition or other agreement that would restrict your employment by the Company; (ii) no trade secret or proprietary information belonging to any previous employer will be disclosed by you to the Company and that no such information will be retained by you or brought with you to the Company; and (iii) all facts you have presented or will present to the Company are accurate and true, and this includes, but is not limited to, all oral and written statements you have made (including those pertaining to your education, training, qualifications, licensing and prior work experience) on any job application, resume or c.v., or in any interview or discussion with the Company. Additionally, if there are any written agreement(s) containing restrictive covenants (e.g. non-competition) with a previous employer, you have provided any such agreement(s) to the Company for review.
4. Additional Conditions to Employment: Your offer of employment is also expressly conditioned upon the following:
• Your ability to give us, within three (3) days of starting work, proof that you are eligible to be employed in the United States consistent with Form I-9 of the United States Department of Homeland Security. You will be required to present documents proving your identity and authorization to work in the United States, in order to complete Form I-9 and E-Verify process. This is a requirement of the Department of Homeland Security. A list of acceptable documents will be included in your New Hire packet provided by HR.
• Satisfactory completion of a background check, including, but not limited to, verification of previous employment, education, criminal, drug and other checks. A credit check may also be required for certain positions, as permitted by applicable law. We will provide you with a disclosure and authorization of background check forms that you will need to sign before we run the background check in connection with your hire and which will also permit the Company to run background checks at other points during your employment as needed. You will be contacted by our background check vendor to coordinate a drug screen. If this test is not completed within the required timeframe, this offer may be rescinded.
• Your execution of a Restrictive Covenant Agreement, which we have enclosed as Exhibit A with this offer letter, and which, among other things, prohibits the unauthorized use or disclosure of the Company’s confidential and proprietary information and solicitation of its customers, clients, and employees.
• Additionally, upon your acceptance and completion of hiring paperwork, you will be provided with the Company’s Employee Handbook. This document will provide further information regarding the Company’s policies, procedures, and benefits.
• You acknowledge that this offer letter, (along with the final form of any referenced documents), represents the entire agreement between you and the Company and that no verbal or written agreements, promises or representations that are not specifically stated in this offer, are or will be binding upon the Company.
By signing below, you expressly acknowledge and agree that your employment with the Company will be “at will.” This means that either you or the Company may terminate your employment at any time and for any reason with or without notice. It also means that the Company is not promising to employ you for any definite period of time and this is not a contract of employment. While supervisors and managers have certain hiring authority, no supervisor, manager, or representative of the Company has any authority to alter the at-will relationship.
This offer is valid until August 30, 2023, after which time it will lapse. If you have any questions regarding this offer of employment, please contact Annie Buttitta in Human Resources at abuttitta@aerogel.com. To accept your employment with the Company, please sign below using our electronic signature system via DocuSign.
We look forward to having you join the Company. Sincerely Yours,
/s/ Kelley Conte
Kelley Conte
Senior Vice President, Human Resources
/s/ Santhosh Daniel |
|
August 24, 2023 |
Acknowledged and Accepted |
|
Date |
Santhosh Daniel |
|
|
Exhibit A
Restrictive Covenant Agreement
This Restrictive Covenant Agreement (“Agreement”) is made and entered into as of the date set forth below by Aspen Aerogels, Inc. (“Aspen” or the “Company”) and Santhosh Daniel, on behalf of themselves and
their heirs, executors, administrators, successors and assigns (collectively referred to throughout this
Agreement as “Employee,” and, together with Aspen, the “Parties”).
WHEREAS, the Company desires to employ the Employee, pay the Employee a salary and other compensation and provide other benefits, and provide the Employee with access to its confidential information and relationships, on the express condition that Employee executes this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employee Acknowledgments. The Employee expressly acknowledges that:
(a) the Company is in engaged in the business of research, development, manufacturing, commercialization, marketing, sales, distribution of products, services and technologies involving aerogels (the “Business”);
(b) the Business in which the Company is engaged is intensely competitive and Employee’s employment by the Company requires that Employee have access to and knowledge of the Confidential Information (as that term is defined below) of the Company and of the Company Group. For purposes of this Agreement, “Company Group” means, individually and collectively, Aspen Aerogels, Inc., and its direct and indirect subsidiaries and affiliates.
(c) the Company’s Confidential Information is vital to the success of the Company’s Business and has been or will be developed or attained by great efforts and at great expense to the Company and the direct or indirect unauthorized disclosure of any Confidential Information would place the Company at a serious competitive disadvantage and would do serious damage, financial and otherwise, to the Company’s Business and its shareholders and the job security of its employees;
(d) in the course of Employee’s employment with the Company, the Employee has been introduced and provided access to those with important business relationships to the Company Group, and that any and all goodwill created through such introductions and access belongs exclusively to the Company, including, but not limited to, any goodwill created as a result of direct or indirect contacts or relationships between the Employee and any Customer or Potential Customer (as defined below));
(e) by Employee’s training, experience and expertise, Employee’s services to the
Company are special and unique;
(f) the Company would not have provided and will not agree to continue to provide Employee with access to Confidential Information and introductions and access to Customers or Potential Customers, unless Employee agrees to the restrictive covenants set forth in this Agreement and acknowledges that the restrictive covenants set forth below are necessary to protect the legitimate business interests of the Company;
(g) the execution and full compliance with this Agreement is an express term and condition of Employee’s employment with the Company, and the salary and benefits provided and access to Confidential Information and Customers or Potential Customers to Employee are good and reasonable consideration for the restrictive covenants and obligations imposed on Employee by this Agreement; and
(h) Employee has been given a reasonable opportunity to consider the terms of this
Agreement, and to consult with an attorney of their choosing, prior to executing this Agreement.
2. Non-Disclosure.
(a) Confidential Information. “Confidential Information” for purposes of this Agreement means information disclosed to Employee or to which Employee had access that includes, but is not limited to, trade secrets and confidential and proprietary information of the Company Group, or any information provided to the Employee or the Company under an obligation of confidentiality to a third party, or any confidential, trade secret, or proprietary information acquired by the Company from others with whom the Company or any affiliate has a business relationship, whether in written, oral, electronic or other form, including, but not limited to (i) trade secrets, inventions, mask works, ideas, processes, algorithms, formulae, software in source or object code, data programs, other works of authorship, know-how, improvements, technology direction, product or technology development methodology, technology assessment, experimental procedures, results, process development, product plans, development plans, testing procedures, quality control and testing processes, discoveries, developments, designs and techniques, any other proprietary technology and all Inventions (as defined in Section 3); (ii) information regarding research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, margins, discounts, credit terms, pricing and billing policies, quoting procedures, methods of obtaining business, forecasts, future plans and potential strategies, financial projections and business strategies, operational plans, financing and capital-raising plans, activities and agreements, internal services and operational manuals, methods of conducting Company business, suppliers and supplier information, sales techniques and strategies, training methods and materials, and purchasing; (iii) information regarding customers and potential customers of the Company, including customer lists, names, representatives, their needs or desires with respect to the types of products or services offered by the Company, proposals, bids, contracts and their contents and parties,
the type and quantity of products and services provided or sought to be provided to customers and potential
customers of Company and other non-public information relating to customers and potential customers; (iv) information regarding any of the Company’s business partners and its services, including names, representatives, proposals, bids, contracts and their contents and parties, the type and quantity of products and services received by the Company, and other non-public information relating to business partners; (v) information regarding personnel, employee lists, compensation, and employee skills; (vi) any other non- public information which a competitor of the Company could use to the competitive disadvantage of the Company; and (vii) any other scientific, technical or trade secrets of the Company or of any third party provided to the Employee or the Company under a condition of confidentiality, provided that Confidential Information shall not include information that was known to the Employee prior to joining the Company, general industry knowledge, or is in the public domain other than through any fault or act by the Employee.,.
(b) Trade Secrets. the term “trade secrets” as used in this Agreement shall be given its
broadest possible interpretation under applicable law and shall mean all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing that (i) the Company has taken reasonable measures to keep secret, and that (ii) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person
who can obtain economic value from the disclosure or use of the information.
(c) Non-Disclosure. The Employee expressly acknowledges and agrees that all Confidential Information is and shall remain the sole property of the Company or the third party to whom the Company owes an obligation of confidentiality and that the Employee shall hold it in strictest confidence. The Employee shall at all times, both during the Employee’s employment with the Company and after the
termination of the Employee’s employment for any reason or for no reason, maintain in confidence and shall not, without the prior written consent of the Company, use (except in the course of performance of the Employee’s duties for the Company or by court order), disclose, or give to others any Confidential Information. The terms of this Section 2(c) are in addition to, and not in lieu of, any statutory or other contractual or legal obligation that the Employee may have relating to the protection of the Company’s Confidential Information.
(d) Defend Trade Secrets Act. By executing this Agreement, Employee has been notified by this writing, in accordance with the Defend Trade Secrets Act of 2016, that (i) an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, (ii) an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; and (iii) an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret except pursuant to court order;
(e) Notification to Company. In the event the Employee is questioned by anyone not employed by the Company or by an employee of or a consultant to the Company not authorized to receive Confidential Information, in regard to any Confidential Information or concerning any fact or circumstance relating thereto, the Employee agrees to promptly notify the Company’s Chief Legal Officer and General Counsel.
(f) Return of Confidential Information and Company Property. Upon the termination of
the Employee’s employment with the Company for any reason or for no reason, or if the Company
otherwise requests at any other time before such termination, the Employee shall: (i) return to the Company all tangible Confidential Information and copies thereof (regardless how such Confidential Information or copies are maintained); and (ii) deliver to the Company any property of the Company which may be in the Employee’s possession, including, but not limited to, products, materials, memoranda, notes, records, reports, or other documents or photocopies of the same. The Employee agrees that, when the Employee leaves the employ of the Company, or at any time the Company may request, the Employee shall deliver to the Company any and all Company equipment provided to the Employee including laptops and other electronic devices, as well as drawings, notes, memoranda, specifications, devices, formulas, and any other documents pertaining to the Company and/or the Company’s business, including, but not limited to, computer files, together with all copies thereof, and any other material containing or disclosing any Confidential Information as defined in Section 2(a) above (collectively, “such Documents”).
The above shall include any and all such Documents contained on, for example, a home computer system, tablet or smart phone. The Employee further agrees not to retrieve or retain in any way any such Documents, and the Employee shall, for example, first return such Documents to the Chief Legal Officer and General Counsel and then consult with the Company’s Chief Legal Officer and General Counsel regarding the removal and deletion of such Documents from any home computer system, personal electronic device, or other personal property and act in accordance with their instructions. The Employee expressly authorizes the Company’s designated representatives to access such equipment or devices for this limited purpose and shall provide any passwords or access codes necessary to accomplish this task. The Employee further agrees that any property situated on the Company’s premises and/or owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice.
3. Inventions.
(a) Property of the Company. All ideas, discoveries, creations, manuscripts and properties, innovations, improvements, know-how, inventions, designs, developments, apparatus, techniques, methods, laboratory notebooks, formulae, data, protocols, writings, specifications, sound recordings, and pictorial and graphical representations; the exclusive legal right to reproduce, perform, display, distribute and make derivative works of a work of authorship (“Copyright”); and all paternity, integrity, disclosure, modification, withdrawal, special and any other similar rights recognized by the laws of any jurisdiction or country as “moral rights,” “artist’s rights,” “droit moral,” or the like (collectively, “Moral Rights”) (collectively, the “Inventions”), which may be used in the business of the Company, whether patentable, copyrightable or not, which the Employee may conceive, reduce to practice or develop during the Employee’s employment with the Company, whether alone or in conjunction with another or others, whether during or out of regular business hours, whether or not on the Company’s premises or with the use of its equipment, and whether at the request or upon the suggestion of the Company or otherwise, shall be and are the sole and exclusive property of the Company, and that the Employee shall not publish any of the Inventions without the prior written consent of the Company or its designee. The Employee acknowledges and agrees that any Inventions conceived or made by the Employee, alone or with others, within two (2) years following termination of the Employee’s employment are likely to have been conceived in significant part while employed by the Company; accordingly, the Employee agrees that such Inventions shall be presumed to have been conceived during the Employee’s employment with the Company until the Employee has established the contrary by clear and convincing evidence, and that such Inventions are subject to the terms and conditions of this Section 3. The Employee also acknowledges that all original works of authorship which are made by the Employee (solely or jointly with others) within the scope of the Employee’s employment or which relate to the business of the Company or a Company affiliate and which are protectable by copyright are “works made for hire” pursuant to the United States Copyright Act (17
U.S.C. § 101). The Employee hereby assigns to the Company or its designee all of the Employee’s right, title and interest in and to all of the foregoing. During and after Employee’s employment, Employee agrees promptly to inform and disclose all Inventions to the Company in writing, to assign all Inventions to the Company, to provide all assistance reasonably requested by the Company to preserve its interests in the Inventions (such as by executing assignments and other documents, testifying, etc.), such assistance to be provided at the Company’s expense but without additional compensation to Employee. The Employee further represents and warrants that, to the best of the Employee’s knowledge and belief, none of the Inventions shall violate or infringe upon any right, patent, copyright, trademark or right of privacy, or constitute libel or slander against or violate any other rights of any person, firm or corporation, and that the Employee shall use the Employee’s best efforts to prevent any such violation.
(b) Cooperation; Power of Attorney. At any time during or after the Employee’s employment with the Company, the Employee shall fully cooperate with the Company and its attorneys and agents in securing and protecting the Company’s rights to Inventions, including but not limited to the preparation and filing of all papers and other documents as may be required to perfect the Company’s rights in and to any of such Inventions, and joining in any proceeding to obtain letters patent, copyrights, trademarks or other legal rights with respect to any such Inventions in the United States and in any and all other countries, provided that the Company shall bear the expense of such proceedings, and that any
patent or other legal right so issued to the Employee personally shall be assigned by the Employee to the Company or its designee without charge by the Employee. If the Company is unable, after reasonable effort, to secure the Employee’s signature on any such papers and/or other documents, the Employee hereby irrevocably designates and appoints each officer of the Company as the Employee’s agent and
attorney-in-fact to execute any such papers on the Employee’s behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Invention. Additionally, Employee promises to cooperate reasonably with the Company in the transition of matters that the Employee worked on or were involved in prior to their termination of employment. In addition, at the Company’s request, Employee agrees to assist, consult with, and cooperate with the Company in any litigation, intellectual property procedure or administrative procedure or inquiry that involves the Employee’s prior duties with the Company, subject to reimbursement for their reasonable out of pocket expenses, such as travel, meals or lodging.
(c) Licensing and Use of Innovations. With respect to any Inventions, and work of any similar nature (from any source), whenever created, which the Employee has not conceived, reduced to practice or developed during the Employee’s employment with the Company, but which the Employee provides to the Company or incorporates in any Company product or system, the Employee hereby grants
to the Company a royalty-free, fully paid-up, non-exclusive, perpetual and irrevocable license throughout the world to use, modify, create derivative works from, disclose, publish, translate, reproduce, deliver, perform, sell, license, dispose of, and to authorize others so to do, all such Inventions. The Employee shall not
include in any Inventions they deliver to the Company or use on its behalf, without the prior written consent of the Company, any material which is or shall be patented, copyrighted or trademarked by the Employee or others unless the Employee provides the Company with the written permission of the holder of any patent, copyright or trademark owner for the Company to use such material in a manner consistent with then- current Company policy.
(d) Disclosure of Inventions. Promptly upon conception of each Invention, the
Employee agrees to disclose the same to the Company and the Company shall have full power and
authority to file and prosecute patent applications thereon and to procure and maintain patents thereon. The Employee agrees that such Inventions shall remain subject to all provisions of this Agreement, including but not limited to the ownership, cooperation and licensing provisions described in this Section 3. The
Employee acknowledges that the Employee’s obligation to disclose such information is ongoing during the
Employee’s employment with the Company, and that after the Employee executes this Agreement, if the Employee determines that any additional Inventions in which the Employee claims or intends to claim any right, title or interest (including but not limited to patent, copyright and trademark interest) has been or is likely to be delivered to the Company or incorporated in any company product or system, the Employee shall make immediate written disclosure of the same to the Company.
(e) Prior Inventions. Employee shall provide the Company a listing which shall be appended to this Agreement of any and all Inventions, that may relate to the business of the Company or actual or demonstrably anticipated research or development and that were made by the Employee or acquired by the Employee prior to the commencement of the Employee’s employment with the Company, and which are not to be assigned to the Company (“Prior Inventions”). If no such list is attached, the Employee represents and agrees that it is because the Employee has no rights in any existing Inventions that may relate to the Company’s business or actual or demonstrably anticipated research or development. The Employee acknowledges and agrees that if the Employee uses or includes any Prior Inventions in the scope of the Employee’s employment or in any product or service in the Company, or if the Employee’s rights in any Prior Inventions may block or interfere with, or may otherwise be required for, the exercise by the Company of any rights assigned to the Company under this Agreement, the Employee shall immediately notify the Company in writing. Unless the Company and the Employee agree otherwise in writing as to particular Prior Inventions, the Employee grants the Company, in such circumstances (whether or not the Employee gives the Company notice as required above), a non-exclusive, perpetual, transferrable, fully-
paid and royalty free, irrevocable and worldwide license, with rights to sublicense through multiple levels of sublicensees, to reproduce, make derivative works of, distribute, publicly perform, and publicly display in any form or medium, whether now known or later developed, make, have made, use, sell, import, offer for sale, and exercise any and all present or future rights in, such Prior Inventions. To the extent that any third parties have rights in any such Prior Inventions, the Employee hereby represents and warrants that such third party or parties have validly and irrevocably granted the Employee the right to grant the license stated above. In the event Employee becomes aware of any potential infringement regarding Prior Inventions, Employee shall immediately notify the Company. Employee agrees to indemnify and hold harmless the Company, its affiliates and its and their officers, directors, employees and representatives from any claims, losses or costs associated with a potential infringement claim related to any Prior Inventions.
(f) Assignment/Transfer of Web Properties. The Employee agrees to transfer and assign (both during and after employment), and does hereby assign to the Company all rights, titles, and interests in and to any domain name or social media account (collectively called “Web Properties”) registered or owned by the Employee that: (1) was registered with the intent to be used by the Company; and/or (2) relates in any manner to, or is used to comment on, the actual or anticipated business of the Company; and/or (3) contains a registered or common law trademark of the Company.
(g) Incorporation of Software Code. The Employee agrees that they shall not incorporate into any Company software or otherwise deliver to Company any software code licensed under the GNU General Public License or Lesser General Public License or any other license that, by its terms, requires or conditions the use or distribution of such code on the disclosure, licensing, or distribution of any source code owned or licensed by Company except in strict compliance with Company policies regarding the use of such software.
4. Non-Disparagement. Employee agrees that during the Employee’s employment by the Company and at any time thereafter, the Employee shall not take any action or make any statement, verbally or in writing, or via social media which has the purpose or effect of disparaging the Company, or its directors, officers, employees or its products.
5. Non-Solicitation.
(a) Employee agrees that during Employee’s employment (except as necessary to perform services on the Company’s behalf) and for a period of twelve (12) months after the Employee’s termination date (“Non-Solicitation Period”), regardless of the reason Employee’s employment terminates, Employee agrees that Employee shall not, directly or indirectly, for the Employee’s own account or on behalf of any other person or entity, (i) solicit, call upon or accept business from, any Customer or Potential Customer; or (ii) interfere with the business relationship between any Customer or Potential Customer and
the Company; or (iii) solicit, induce, persuade or hire, or attempt to solicit, induce, persuade or hire, or assist any third party in the solicitation, inducement, persuasion or hiring of, any employee or contractor of the Company who worked for the Company during the Employee’s tenure with the Company, to leave the employ of the Company. Employee acknowledges and agrees that the Non-Solicitation Period shall be
tolled and shall not run, during any period in which the Employee is in violation of the terms herein.
(b) “Customer or Potential Customer” shall mean any person or entity who or which, at any time during the one year period prior to the Employee’s contact with such person or entity, if such contact occurs during the Employee’s employment or, if such contact occurs following the termination of the Employee’s employment, during the one year period prior to the date the Employee’s employment with the Company ends: (i) contracted for, was billed for, or received from the Company any product, service, or process with which the Employee worked directly or indirectly during the Employee’s employment by the Company or about which the Employee acquired Confidential Information; or (ii) was in contact with the Employee or in contact with any other employee, owner, or agent of the Company, of which contact the Employee was or should have been aware, concerning the sale or purchase of, or contract for, any product, service, or process with which the Employee worked directly or indirectly during the Employee’s
employment with the Company or about which the Employee acquired Confidential Information; or (iii) was
solicited by the Company in an effort in which the Employee was involved or of which the Employee was aware.
(c) Interests to be Protected. The Company and the Employee acknowledge that Employee shall perform essential services for the Company, its employees, and/or its stockholders during their employment. The Employee shall be exposed to, have access to, and work with, a considerable amount of Confidential Information. The Company and the Employee also expressly recognize and acknowledge that the personnel of the Company have been trained by, and are valuable to, the Company and that the Company shall incur substantial recruiting and training expenses if the Company must hire new personnel or retrain existing personnel to fill vacancies. The Company and the Employee acknowledge this covenant is reasonable and it is necessary for the protection of the Company, its stockholders, and employees.
6. Litigation and Regulatory Cooperation. During and for a reasonable period of time after the Employee’s employment, the Employee shall cooperate fully with the Company in the defense or prosecution of any claims actions, investigations or examinations now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while the Employee was employed by the Company.
7. Workplace Rules. The Company may, from time to time, make, adopt, and/or modify workplace policies and rules and provide to Employee (directly or through designated electronic locations) copies of such policies and rules, as the Company determines, at its discretion, as necessary to comply with laws and regulations and to provide safe, efficient, productive and effective workplace and work environment, including but not limited to the Company’s Code of Business Conduct and Ethics, as well as its Employee Handbook. Employee hereby agrees to comply with all such policies and rules along with all applicable laws and regulations and will complete any corresponding annual or periodic attestations associated with any Company policies.
8. Protected Rights. For the avoidance of doubt, nothing in this Agreement prohibits or otherwise restricts Employee from (a) initiating, testifying, assisting, complying with a subpoena from, or participating in any manner with an investigation conducted by a governmental agency, including without limitation; (b) discussing or disclosing information about unlawful acts in or related to the workplace, including, but not limited to discrimination, harassment, sexual assault, retaliation, wage and hour violations, conduct that is against a clear mandate of public policy, or any other conduct Employee has reason to believe is unlawful; (c) making any necessary disclosures as otherwise required by law.
9. No Conflicting Obligation. Employee hereby represents and warrants to the Company that they (a) are not presently under and will not in the future become subject to any obligation to any person, entity or prior employer which is inconsistent or in conflict with this Agreement or which would prevent, limit or impair in any way their performance of their employment with the Company and (b) has not disclosed and will not disclose to the Company, nor use for the Company’s benefit, any confidential information and trade secrets of any other person or entity, including any prior employer.
10. Change; Reaffirmation. Employee understands, acknowledges and agrees that: (a) Employee’s covenants and promises under this Agreement, including but not limited to Sections 1, 2, 3, 4 and 5, shall continue in accordance with their express terms regardless of any material changes in the Employee’s title, position, duties, salary, compensation or benefits or other terms and conditions of employment, and Employee agrees to comply with such obligations; and (b) if Employee should transfer between or among any member of the Company Group, wherever situated, or be promoted or reassigned to functions other than Employee’s present functions, the terms of this Agreement shall continue to apply with full force, and Employee agrees to comply with such terms. Employee expressly consents to be bound by this Agreement, including but not limited to Sections 1, 2, 3, 4 and 5, for the benefit of the Company or member of the Company Group to whose employ Employee may be transferred, without the necessity that this Agreement be resigned at the time of such transfer.
11. Severability; Enforceability. The parties intend for this Agreement to be enforced as written. However, if any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a duly authorized court having jurisdiction, (a) then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law; and/or (b) because of the scope of the restrictive covenant is found to be unreasonable, the Company and the Employee agree that the court making such determination shall have the power to “blue-pencil” the Agreement as necessary to make it reasonable in scope; and in its reduced or blue-penciled form such portion or provision shall then be enforceable and shall be enforced.
12. Injunctive Relief. Employee acknowledges that the restrictive covenants contained in this Agreement are reasonable and necessary for the protection of the Company’s legitimate business interests, and any violation of these restrictive covenants would cause substantial injury and irreparable harm to the Company, and therefore, in the event of a breach or threatened breach by Employee of any of
these restrictive covenants, the Company shall be entitled to seek and obtain equitable relief, in the form of specific performance, and/or temporary, preliminary or permanent injunctive relief, or any other equitable remedy which then may be available restraining Employee from such breach or threatened breach; provided, however, that the right to apply for such relief shall not be construed as prohibiting the Company from pursuing any other available remedies for such breach or threatened breach.
13. Waiver of Jury Trial. The parties to this Agreement each hereby waives, to the fullest extent permitted by law, any right to trial by jury of any claim, demand, action, or cause of action (a) arising under this Agreement or (b) in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the transactions related hereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity, or otherwise. The parties to this Agreement each hereby agree and consent that any such claim, demand, action, or cause of action shall be decided by court trial without a jury and that the parties to this Agreement may file an original counterpart or a copy of this Agreement with any court as written evidence of the consent of the parties hereto to the waiver of their right to trial by jury.
14. Survival. This Agreement, and the restrictive covenants contained in this Agreement, shall
survive the termination of Employee’s employment for any reason.
15. Amendment. This Agreement may not be modified, altered or changed except in writing and signed by both Parties wherein specific reference is made to this Agreement.
16. Successors. The Company may require any successor to the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The Employee’s obligations under this Agreement may not be assigned by the Employee without the prior written consent of the Company.
17. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
18. Governing Law. All issues concerning this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to any choice of
law or conflict of law provision or rule (whether of the Commonwealth of Massachusetts or any other
jurisdiction) that would cause the application of the law of any jurisdiction other than the Commonwealth of
Massachusetts.
19. Integration. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement of any kind not expressly set forth in this Agreement shall affect, or be used to interpret, change or restrict, the express terms and provisions of this Agreement. Notwithstanding the foregoing, the obligations set forth in this Agreement will be in addition to any obligations undertaken by Employee under any other agreement containing restrictive covenants entered into between the Company and Employee (each an “Other Agreement”), and such obligations shall remain in full force and effect according to their terms.
20. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.
The Parties knowingly and voluntarily sign this Agreement as of the date(s) set forth below:
Employee |
|
Company |
||
|
|
|
Aspen Aerogels, Inc. |
|
|
|
|
|
|
By: |
/s/ Santhosh Daniel |
|
By: |
/s/ Kelley Conte |
Name: |
Santhosh Daniel |
|
Name: |
Kelley Conte |
Date: |
September 9, 2023 |
|
Title: |
Senior Vice President, Human Resources |
|
|
|
Date: |
August 23, 2023 |
Exhibit 10.2
FIRST AMENDMENT TO LOAN AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is entered into as of September 28, 2023 by and among ASPEN AEROGELS, INC., a Delaware corporation (the “Parent”), ASPEN AEROGELS GEORGIA, LLC, a Georgia limited liability company (“Borrower”), ASPEN AEROGELS RHODE ISLAND, LLC, a Rhode Island limited liability company (“Aspen RI”) and GENERAL MOTORS HOLDINGS LLC (the “Lender”).
W I T N E S S E T H:
WHEREAS, the Parent, Borrower, Aspen RI and the Lender are parties to that certain Loan Agreement, dated as of November 28, 2022 (as the same has been and may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time prior to the effectiveness of this Amendment, the “Loan Agreement”); and
WHEREAS, the Parent and Borrower have requested, and the Lender has agreed to, amend certain provisions of the Loan Agreement on the terms set forth herein and subject to the satisfaction of the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties hereby agree as follows:
(a) THE VALIDITY OF THIS AMENDMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO, AND ANY CLAIMS, CONTROVERSIES OR DISPUTES ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AMENDMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE OF MICHIGAN AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE STATE COURTS LOCATED IN WAYNE COUNTY, MICHIGAN OR THE FEDERAL COURTS LOCATED IN THE EASTERN DISTRICT OF MICHIGAN. EACH LOAN PARTY AND THE LENDER WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 9(b).
(c) TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH LOAN PARTY AND THE LENDER HEREBY WAIVES ITS RIGHTS, IF ANY, TO A JURY TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF ANY OF THIS AMENDMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH A “CLAIM”). EACH LOAN PARTY AND THE LENDER REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AMENDMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(d) EACH OF THE LENDER AND THE LOAN PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF MICHIGAN AND THE STATE OF MICHIGAN, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AMENDMENT SHALL AFFECT ANY RIGHT THAT THE LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AMENDMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
[Remainder of Page Intentionally Left Blank; Signature Pages Follow]
IN WITNESS WHEREOF, each of the undersigned has executed this Amendment as of the date set forth above.
BORROWER: |
||
|
|
|
ASPEN AEROGELS GEORGIA, LLC |
||
|
|
|
|
|
|
By: |
/s/ Ricardo C. Rodriguez |
|
|
Name: |
Ricardo C. Rodriguez |
|
Title: |
Chief Financial Officer and Treasurer |
GUARANTORS : |
||
|
|
|
ASPEN AEROGELS, INC. |
||
|
|
|
|
|
|
By: |
/s/ Ricardo C. Rodriguez |
|
|
Name: |
Ricardo C. Rodriguez |
|
Title: |
Chief Financial Officer and Treasurer |
ASPEN AEROGELS RHODE ISLAND, LLC |
||
|
|
|
|
|
|
By: |
/s/ Ricardo C. Rodriguez |
|
|
Name: |
Ricardo C. Rodriguez |
|
Title: |
Chief Financial Officer and Treasurer |
[Signature Page to First Amendment to Loan Agreement]
LENDER:
GENERAL MOTORS HOLDINGS LLC,
|
By: |
/s/ Gustavo Vello |
|
|
|
Name: |
Gustavo Vello |
|
|
Title: |
Assistant Treasurer, GM |
[Signature Page to First Amendment to Loan Agreement]
Exhibit H
Form of Compliance Certificate
(see attached)
Schedule I – Financial Covenant Calculations1
Schedule I(a): Total Leverage Ratio § 6.13(a)
Test Date |
Ratio |
|
As of each Test Date, commencing with the Fiscal Quarter ending December 31, 2024
|
Less than or equal to 5.00 to 1.00 |
1. |
Total Indebtedness (see Section D hereof) of Parent and its Subsidiaries |
$________________
|
2. |
MINUS Indebtedness outstanding under a Revolving Loan Agreement that benefits the Borrower in a principal amount not to exceed $50,000,000 and undrawn letters of credit permitted under clause (n) of the definition of Permitted Indebtedness |
$ (______________) |
3. |
Subtotal (1-2) = |
|
|
Divided by: |
|
4. |
Consolidated EBITDA of Parent and its Subsidiaries for the most recently completed Measurement Period |
$________________
|
5 |
Ratio (3 ÷ 4) = |
________________
|
1. Consolidated Net Income of Parent and its Subsidiaries for the most recently completed Measurement Period
|
$________________
|
PLUS (to the extent included in calculating Consolidated Net Income for the most recently completed Measurement Period, without duplication) |
|
2. the sum of all interest, premium payments, debt discount, fees, charges and related expenses in connection with Indebtedness for borrowed money to the extent treated as interest in accordance with GAAP
|
$________________
|
1 To be delivered also following the delivery of the audited F/S if such statements would result in a different calculation than as set forth in the certificate delivered concurrently with the unaudited financial statements for the applicable period.
3. provision for federal, state, local and foreign income Taxes, taxes on profit or capital, including, without limitation, state franchise and similar Taxes, and foreign withholding taxes
|
$________________
|
4. depreciation and amortization expenses
|
$________________
|
5. noncash (A) charges, expenses, costs or losses solely to the extent constituting extraordinary, unusual or non-recurring items, (B) compensation charges, (C) charges for the excess of GAAP rent expense over actual rent paid during such period due to the use of straight line rent for GAAP purposes or write-off and/or write-downs of inventory or other tangible assets and (D) asset write-offs and/or write-downs or any impairment charges
|
$________________
|
6. charges or expenses incurred in connection with the issuance or incurrence of permitted Indebtedness or the issuance of Equity Interests (that do not result in a Change of Control) in an aggregate amount during the term of this Agreement not to exceed $500,000
|
|
7. any other adjustments as shall be mutually agreed
|
$________________
|
8. Subtotal (1+2+3+4+5+6+7) =
|
$________________ |
MINUS (to the extent included in calculating such Consolidated Net Income for the most recently completed Measurement Period, without duplication) |
|
9. federal, state, local and foreign income Tax credits, Tax credits on profit or capital, including, without limitation, state franchise and similar Tax credits, and foreign withholding Tax credits
|
$________________ |
10. any noncash gain from extraordinary, unusual or non-recurring items
|
$________________ |
11. Subtotal (9+10) =
|
$________________ |
Total (8-11) = |
$________________
|
(i) The amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness which is limited or is non-recourse to a Person or for which recourse is limited to an identified asset shall be valued at the lesser of (A) if applicable, the limited amount of such obligations, and (B) if applicable, the fair market value of such assets securing such obligation |
|
1. All obligations of such Person for borrowed money
|
$________________ |
2. all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products
|
$________________ |
3. all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed
|
$________________ |
4. all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and which are paid in accordance with such terms and not on a deferred basis)
|
$________________ |
5. all obligations of such Person in respect of Disqualified Equity Interests
|
$________________ |
6. any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (1) through (5) above
|
$________________ |
Total (1+2+3+4+5+6) = |
$________________ |
Schedule I(b): Ratio of Total Indebtedness to Consolidated Equity § 6.13(b)
Test Date |
Ratio |
|
As of each Test Date, commencing with the Fiscal Quarter ending December 31, 2024
|
Less than or equal to 1.20x |
1. |
Total Indebtedness (see Section C hereof) of Parent and its Subsidiaries |
$________________
|
2. |
MINUS undrawn letters of credit permitted under clause (n) of the definition of Permitted Indebtedness |
$ (______________) |
3. |
Subtotal (1-2) = |
|
|
Divided by: |
|
4. |
consolidated equity of Parent and its Subsidiaries |
$________________
|
5. |
Ratio (3 ÷ 4) = |
________________ |
(i) The amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness which is limited or is non-recourse to a Person or for which recourse is limited to an identified asset shall be valued at the lesser of (A) if applicable, the limited amount of such obligations, and (B) if applicable, the fair market value of such assets securing such obligation |
|
1. All obligations of such Person for borrowed money
|
$________________ |
2. all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products
|
$________________ |
3. all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed
|
$________________ |
4. all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and which are paid in accordance with such terms and not on a deferred basis)
|
$________________ |
5. all obligations of such Person in respect of Disqualified Equity Interests
|
$________________ |
6. any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (1) through (5) above
|
$________________ |
7. Subtotal (1+2+3+4+5+6) =
|
$________________ |
MINUS |
|
8. Indebtedness under a Revolving Loan Agreement that benefits the Borrower in a principal amount not to exceed $50,000,000
|
$________________ |
Total (7-8) = |
$________________ |
Annex I
(See Attached)
LOAN AGREEMENT
by and between
GENERAL MOTORS HOLDINGS LLC,
(“Lender”)
ASPEN AEROGELS GEORGIA, LLC
(“Borrower”)
and
THE GUARANTORS FROM TIME TO TIME PARTY HERETO
Dated as of November 28, 2022
TABLE OF CONTENTS
Page
1. |
DEFINITIONS AND CONSTRUCTION. |
1 |
|
|
1.1. |
Definitions |
1 |
|
1.2. |
Code |
1 |
|
1.3. |
Schedules and Exhibits |
1 |
|
1.4. |
Definition of “Knowledge” |
1 |
2. |
TERM LOAN, TERMS OF PAYMENT, SECURITY INTEREST, GUARANTY, MATURITY, ASSUMPTION. |
1 |
|
|
2.1. |
Term Loan |
1 |
|
2.2. |
Interest; Interest Rate. |
2 |
|
2.3. |
Payments; Prepayments. |
3 |
|
2.4. |
Grant of Security; Guaranty |
4 |
|
2.5. |
Effect of Maturity |
5 |
3. |
CONDITIONS TO ADVANCES. |
5 |
|
|
3.1. |
Conditions Precedent to the Closing Date |
5 |
|
3.2. |
Conditions Precedent to the Funding of each Term Loan |
5 |
4. |
REPRESENTATIONS AND WARRANTIES. |
6 |
|
|
4.1. |
Due Organization; Authorization; Power and Authority. |
6 |
|
4.2. |
Subsidiaries; Investments. |
6 |
|
4.3. |
Indebtedness; Liabilities |
7 |
|
4.4. |
Collateral. |
7 |
|
4.5. |
Binding Obligations; Perfected Liens. |
7 |
|
4.6. |
Litigation |
7 |
|
4.7. |
Financial Condition |
8 |
|
4.8. |
Solvency |
8 |
|
4.9. |
Regulatory Compliance |
8 |
|
4.10. |
Patriot Act |
8 |
|
4.11. |
OFAC |
8 |
|
4.12. |
Anti-Bribery and Anti-Corruption Laws. |
8 |
|
4.13. |
Tax Returns and Payments; Pension Contributions. |
9 |
|
4.14. |
[Reserved]. |
9 |
|
4.15. |
SEC Reports |
9 |
|
4.16. |
Transactions with Affiliates. |
10 |
|
4.17. |
Environmental Condition |
10 |
|
4.18. |
Material Contracts and Project Documents |
10 |
|
4.19. |
Permits, Etc |
11 |
|
4.20. |
Insurance |
11 |
|
4.21. |
Condemnation |
12 |
|
4.22. |
Contractors |
12 |
|
4.23. |
Utilities and Access |
12 |
|
4.24. |
Zoning |
12 |
|
4.25. |
Absence of Material Adverse Effect |
12 |
|
4.26. |
Full Disclosure |
13 |
|
4.27. |
Intellectual Property |
13 |
5. |
AFFIRMATIVE COVENANTS. |
14 |
|
|
5.1. |
Compliance. |
14 |
|
5.2. |
Financial Statements, Reports, Certificates |
14 |
|
5.3. |
Taxes; Pensions |
17 |
|
5.4. |
Access to Collateral; Inspections; Books and Records |
17 |
|
5.5. |
Insurance. |
18 |
|
5.6. |
Disbursement Account |
21 |
|
5.7. |
Protection of Intellectual Property Rights |
21 |
|
5.8. |
Litigation Cooperation |
21 |
|
5.9. |
Formation or Acquisition of Subsidiaries |
22 |
|
5.10. |
Quarterly Consultation |
22 |
|
5.11. |
Environmental |
22 |
|
5.12. |
Incorporation of Terms |
23 |
|
5.13. |
Use of Proceeds |
23 |
|
5.14. |
Delivery of Material Contracts and Project Contracts |
24 |
|
5.15. |
Further Assurances |
24 |
|
5.16. |
Construction Related Covenants |
24 |
|
5.17. |
Collateral |
26 |
|
5.18. |
Full Disclosure |
27 |
|
5.19. |
Post-Closing Deliveries |
27 |
|
5.20. |
Separate Tax Parcel |
27 |
|
5.21. |
Compliance with Laws |
27 |
6. |
NEGATIVE COVENANTS. |
27 |
|
|
6.1. |
Indebtedness |
27 |
|
6.2. |
Liens |
28 |
|
6.3. |
Dispositions |
28 |
|
6.4. |
Mergers or Acquisitions |
28 |
|
6.5. |
Restricted Payments; Investments |
28 |
|
6.6. |
Restricted Debt Payments. |
28 |
|
6.7. |
Transactions with Affiliates |
29 |
|
6.8. |
Amendments to Material Contracts and Other Debt Documents |
29 |
|
6.9. |
Limitations on Negative Pledges and other Agreements |
29 |
|
6.10. |
Control Agreement |
29 |
|
6.11. |
Compliance |
29 |
|
6.12. |
OFAC; Patriot Act; Anti-Corruption Laws |
30 |
|
6.13. |
Financial Covenants |
30 |
7. |
EVENTS OF DEFAULT. |
30 |
|
|
7.1. |
Payment Default |
30 |
|
7.2. |
Covenant Default |
30 |
|
7.3. |
Attachment; Levy; Restraint on Business |
31 |
|
7.4. |
Insolvency |
31 |
|
7.5. |
Other Indebtedness and Agreements |
31 |
|
7.6. |
Milestones |
31 |
|
7.7. |
Judgments |
32 |
|
7.8. |
Misrepresentations |
32 |
|
7.9. |
Governmental Approvals; Noncompliance; Lapse of Permits |
32 |
|
7.10. |
Loan Documents |
32 |
|
7.11. |
Change of Control |
33 |
|
7.12. |
Proceedings |
33 |
|
7.13. |
Bond Defaults |
33 |
8. |
RIGHTS AND REMEDIES. |
33 |
|
|
8.1. |
Rights and Remedies |
33 |
|
8.2. |
Remedies Cumulative |
33 |
|
8.3. |
Equity Cure Rights |
34 |
9. |
WAIVERS; INDEMNIFICATION. |
34 |
|
|
9.1. |
Demand; Protest; etc |
34 |
|
9.2. |
Lender’s Liability for Collateral |
35 |
|
9.3. |
Indemnification |
35 |
10. |
NOTICES. |
35 |
|
11. |
CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE PROVISION. |
37 |
|
12. |
ASSIGNMENTS; SUCCESSORS. |
39 |
|
|
12.1. |
Assignments |
39 |
|
12.2. |
Successors |
39 |
13. |
AMENDMENTS; WAIVERS. |
39 |
|
|
13.1. |
Amendments and Waivers |
39 |
|
13.2. |
No Waivers; Cumulative Remedies |
39 |
14. |
GENERAL PROVISIONS. |
39 |
|
|
14.1. |
Section Headings |
39 |
|
14.2. |
Interpretation |
40 |
|
14.3. |
Severability of Provisions |
40 |
|
14.4. |
Debtor-Creditor Relationship |
40 |
|
14.5. |
Counterparts; Electronic Execution |
41 |
|
14.6. |
Revival and Reinstatement of Obligations; Certain Waivers |
41 |
|
14.7. |
Confidentiality |
41 |
|
14.8. |
Survival |
42 |
|
14.9. |
Integration |
43 |
|
14.10. |
No Setoff |
43 |
EXHIBIT AND SCHEDULES
Exhibit A |
Form of Security Agreement |
Exhibit B |
Form of Guaranty Agreement |
Exhibit C |
Form of Collateral Assignment Agreement |
Exhibit D |
Form of Promissory Note |
Exhibit E |
Form of Revolver Intercreditor Agreement |
Exhibit F |
Form of Borrowing Request |
Exhibit G |
Form of Title Company “Date Down” Endorsement for Georgia Property |
Exhibit H |
Form of Compliance Certificate |
Schedule 1.1 |
Definitions |
Schedule 1.1(c) |
Contracts to be Collaterally Assigned |
Schedule 1.1(d) |
Excluded Accounts |
Schedule 1.1(p) |
Project Budget |
Schedule 1.1(t) |
Term Loan Budget |
Schedule 3.1 |
Conditions Precedent to the Closing Date |
Schedule 3.2 |
Conditions Precedent to the Funding of each Term Loan |
Schedule 4.2(b) |
Affiliates of Loan Parties |
Schedule 4.3 |
Existing Liabilities |
Schedule 4.16(a) |
Affiliate Transactions |
Schedule 4.16(b) |
Assets and Services |
Schedule 4.17 |
Environmental Conditions |
Schedule 4.18 |
Material Contracts and Project Documents |
Schedule 4.19 |
Permits |
Schedule 4.22 |
Contractors |
Schedule 5.16(b) |
Subcontractors |
Schedule 7.6 |
Milestones |
LOAN AGREEMENT
THIS LOAN AGREEMENT (this “Agreement”), is entered into as of November 28, 2022 by and between GENERAL MOTORS HOLDINGS LLC (“General Motors” together with its successors and assigns, the “Lender”, as that term is hereinafter further defined), ASPEN AEROGELS GEORGIA, LLC, a Georgia limited liability company (“Borrower”), ASPEN AEROGELS, INC., a Delaware corporation (the “Parent”), ASPEN AEROGELS RHODE ISLAND, LLC, a Rhode Island limited liability company (“Aspen RI”) and the other Guarantors from time to time party hereto.
Borrower will be constructing and equipping an aerogel manufacturing plant in Bulloch County, Georgia (the “Project”) to produce barrier blankets for use in insulation components that are used in battery modules for electric vehicles. Borrower has requested, and the Lender has agreed to provide, a multi-draw senior secured loan on the terms and conditions set forth in this Agreement, the proceeds of which will be used, together with capital contributions to Borrower from Parent and the proceeds of other financing, for the construction of and equipment for the first phase of the Project.
The parties agree as follows:
1
2
All payments remitted to the Lender and all proceeds of Collateral received by the Lender shall be applied as follows:
3
4
5
In order to induce the Lender to enter into this Agreement, each of Borrower, Aspen RI and/or Parent, as applicable, makes the following representations and warranties to the Lender which shall be accurate as of the date of this Agreement and the date of the advance of each Term Loan:
6
7
8
9
10
11
12
13
Each of Borrower, Parent and/or Aspen RI, as applicable, covenants and agrees that, until the Obligations are Paid in Full it shall do the following:
14
15
provided, that, for purposes of this Section 5.2, none of Parent or its Subsidiaries shall be required to disclose or provide any information (i) that constitutes non-financial trade secrets or non-financial proprietary information of any Person, (ii) in respect of which disclosure to the Lender (or any of its Party Representatives) is prohibited by applicable law, (iii) that is subject to attorney-client or similar privilege or constitutes attorney work product or (iv) in respect of which Parent or any of its Subsidiaries owes confidentiality obligations to any third party (provided, further that such confidentiality obligations were not entered into in contemplation of the requirements of this Section 5.2); provided, further, that notwithstanding the foregoing, the obligations in Section 5.2(a)
16
and (b) may be satisfied with respect to information filed by Parent with any securities exchange or with the SEC or any analogous governmental or private regulatory authority with jurisdiction over matters relating to securities (including Form 10-Q Reports and Form 10-K reports) and shall be deemed to have been delivered on the date on which such items have been made available on the SEC website or the website of the relevant analogous governmental or private regulatory authority or securities exchange (including, for the avoidance of doubt, by way of “EDGAR”).
17
18
19
20
21
. Commencing with the Fiscal Quarter ending December 31, 2023, and during each Fiscal Quarter thereafter (on such Business Day and at such time as agreed by the Loan Parties and the Lender), representatives of the Loan Parties and the Lender shall meet on a quarterly basis, on such Business Day as mutually agreed (not to be unreasonably withheld, conditioned or delayed) by Borrower and the Lender, to review Lender’s (or its Affiliate’s) production needs at the Georgia Facility. For the avoidance of doubt, (x) if no meeting occurs during any Fiscal Quarter for any reason (unless Lender in its sole discretion agrees to waive the meeting requirement in such Fiscal Quarter in writing (including via email)), the Loan Parties shall be considered in breach of this Section 5.10 and (y) any such meeting may be conducted virtually or via teleconference call as mutually agreed (not to be unreasonably withheld, conditioned or delayed) by Borrower and the Lender.
22
23
24
25
26
Each of Borrower, Parent and Aspen RI, covenants and agrees that until the Obligations are Paid in Full, it will not:
27
To the extent that any Collateral is Transferred as permitted by clause (a) or (b) of this Section 6.3, such Collateral shall be Transferred free and clear of the Liens created by the Loan Documents, which Liens shall be automatically released upon the consummation of such Transfer, and the Lender shall any action reasonably requested by Loan Parties in order to effect the foregoing; provided, that in the case of a Transfer made to any Loan Party, the relevant transferred assets shall become part of the Collateral of the transferee Loan Party (except to the extent such assets are Excluded Assets).
28
29
The Loan Parties will demonstrate compliance with this Section 6.13 by delivering a Compliance Certificate in accordance with and subject to Section 5.2(j)(y).
Any one or more of the following events shall constitute an event of default (each, an “Event of Default”) under this Agreement:
30
31
32
33
34
Unless otherwise provided in this Agreement, all notices or demands relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be furnished electronically as contemplated in Section 5.2) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as a party may designate in accordance herewith), or facsimile.
35
In the case of notices or demands to Borrower or other Loan Parties or the Lender, as the case may be, they shall be sent to the respective address set forth below:
If to any Loan Party: |
ASPEN AEROGELS, INC. 26 Forest Street, Suite 200 Marlborough, MA 01752 |
|
Attn: |
Ricardo C. Rodriguez and Virginia H. Johnson |
|
Email: |
rrodriguez@aerogel.com, gjohnson@aerogel.com, and legal@aerogel.com |
|
|
with a copy to: |
WEIL, GOTSHAL & MANGES LLP |
|
Attn: |
Andrew Colao, Esq. and Jacqueline Oveissi, Esq. |
|
Email: |
andrew.colao@weil.com jacqueline.oveissi@weil.com |
|
|
If to the Lender: |
GENERAL MOTORS HOLDINGS LLC Detroit Treasury Office Email: treasurysfrm@gm.com |
36
with copies to: |
GENERAL MOTORS HOLDINGS LLC Global Purchasing and Supply Chain Cole Engineering Center 29755 Louis Chevrolet Road Warren, MI 48090-9020 Attn: Aaron M. Silver Email: aaron.silver@gm.com
and to:
HONIGMAN LLP Suite 100 |
Any party hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other party. All notices or demands sent in accordance with this Section 10, shall be deemed received on the earlier of the date of actual receipt or three (3) Business Days after the deposit thereof in the mail; provided, that (a) notices sent by overnight courier service shall be deemed to have been given when received, (b) notices by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient) and (c) notices by electronic mail shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return email or other written acknowledgment).
37
38
39
40
41
42
[SIGNATURE PAGES FOLLOW.]
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written.
BORROWER: |
ASPEN AEROGELS GEORGIA, LLC |
|
|
|
|
|
|
|
|
By: |
|
|
Name: |
|
|
Title: |
|
|
|
|
GUARANTORS: |
ASPEN AEROGELS, INC. |
|
|
|
|
|
|
|
|
By: |
|
|
Name: |
|
|
Title: |
|
|
|
|
|
ASPEN AEROGELS RHODE ISLAND, LLC |
|
|
|
|
|
|
|
|
By: |
|
|
Name: |
|
|
Title: |
|
|
|
|
Signature Page to Loan Agreement
LENDER: |
GENERAL MOTORS HOLDINGS LLC, as the |
|
|
Lender |
|
|
|
|
|
|
|
|
By: |
|
|
Name: |
|
|
Title: |
|
Signature Page to Loan Agreement
Exhibit A
Form of Security Agreement
(See attached)
Exhibit B
Form of Guaranty Agreement
(See attached)
Exhibit C
Form of Collateral Assignment Agreement
(See attached)
Exhibit D
Form of Promissory Note
(See attached)
Exhibit E
Form of Revolver Intercreditor Agreement
(See attached)
Exhibit F
Form of Borrowing Request
(See attached)
Exhibit G
Form of Title Company “Date Down” Endorsement for Georgia Property
(See attached)
Exhibit H
Form of Compliance Certificate
(See attached)
EXHIBIT H – FORM OF COMPLIANCE CERTIFICATE
Attached to and made a part of that certain Loan Agreement, as it may be amended, restated, amended and restated, supplemented or otherwise modified in accordance with its terms from time to time, including all schedules and exhibits attached thereto (the “Agreement”), dated as of November 28, 2022, by and between General Motors Holdings LLC, a Delaware limited liability company (“General Motors” together with its successors and assigns, “Lender”), Aspen Aerogels Georgia, LLC, a Georgia limited liability company (the “Borrower”), Aspen Aerogels, Inc., a Delaware corporation (the “Parent”), Aspen Aerogels Rhode Island, LLC, a Rhode Island limited liability company (“Aspen RI”) and the other Guarantors (as that term is defined in the Agreement) from time to time party thereto. Capitalized terms used herein but not specifically defined herein shall have the meanings ascribed to them in the Agreement.
This Certificate is submitted pursuant to Section 5.2(j) of the Agreement.
The undersigned, in the undersigned’s capacity as Financial Officer of the Parent (and not in any individual capacity and without assuming any personal liability), hereby certifies to Lender that as of the date of this Certificate:
1. The undersigned is a Financial Officer of the Parent.
2. The financial statements of Parent and its Subsidiaries being concurrently delivered herewith have been prepared in accordance GAAP consistently applied and there have been no material changes in accounting policies or financial reporting practices of each Loan Party since [date of the last Compliance Certificate/date of last financial statements delivered prior to closing] or, if any such change has occurred, such changes are set forth in a writing attached hereto.
3 Attached hereto as Schedule I(a) is a true and correct calculation of the Total Leverage Ratio covenant contained in Section 6.13(a) of the Agreement as of the Test Date ended [insert applicable Fiscal Quarter end].
4. Attached hereto as Schedule I(b) is a true and correct calculation of the ratio of total Indebtedness of Parent and its Subsidiaries (excluding Indebtedness incurred under a Revolving Loan Agreement that benefits the Borrower in a principal amount not to exceed $50,000,000 and undrawn letters of credit permitted under clause (n) of the definition of Permitted Indebtedness) to the consolidated equity of Parent and its Subsidiaries contained in Section 6.13(b) of the Agreement.
[Signature Page follows]
|
|
|
|
ASPEN AEROGELS, INC. |
|
|
|
|
|
By: |
|
|
Name: |
|
|
Title: |
[Chief Financial Officer] |
|
|
|
|
|
|
|
|
|
|
|
|
[Signature Page to Compliance Certificate]
Schedule I – Financial Covenant Calculations1
Schedule I(a): Total Leverage Ratio § 6.13(a)
Test Date |
Ratio |
|
As of each Test Date, commencing with the Fiscal Quarter ending December 31, 2024
|
Less than or equal to 5.00 to 1.00 |
1. |
Total Indebtedness (see Section D hereof) of Parent and its Subsidiaries |
$________________
|
2. |
MINUS Indebtedness outstanding under a Revolving Loan Agreement that benefits the Borrower in a principal amount not to exceed $50,000,000 and undrawn letters of credit permitted under clause (n) of the definition of Permitted Indebtedness |
$ (______________) |
3. |
Subtotal (1-2) = |
|
|
Divided by: |
|
4. |
Consolidated EBITDA of Parent and its Subsidiaries for the most recently completed Measurement Period |
$________________
|
5 |
Ratio (3 ÷ 4) = |
________________
|
1. Consolidated Net Income of Parent and its Subsidiaries for the most recently completed Measurement Period
|
$________________
|
PLUS (to the extent included in calculating Consolidated Net Income for the most recently completed Measurement Period, without duplication) |
|
2. the sum of all interest, premium payments, debt discount, fees, charges and related expenses in connection with Indebtedness for borrowed money to the extent treated as interest in accordance with GAAP
|
$________________
|
1 To be delivered also following the delivery of the audited F/S if such statements would result in a different calculation than as set forth in the certificate delivered concurrently with the unaudited financial statements for the applicable period.
3. provision for federal, state, local and foreign income Taxes, taxes on profit or capital, including, without limitation, state franchise and similar Taxes, and foreign withholding taxes
|
$________________
|
4. depreciation and amortization expenses
|
$________________
|
5. noncash (A) charges, expenses, costs or losses solely to the extent constituting extraordinary, unusual or non-recurring items, (B) compensation charges, (C) charges for the excess of GAAP rent expense over actual rent paid during such period due to the use of straight line rent for GAAP purposes or write-off and/or write-downs of inventory or other tangible assets and (D) asset write-offs and/or write-downs or any impairment charges
|
$________________
|
6. charges or expenses incurred in connection with the issuance or incurrence of permitted Indebtedness or the issuance of Equity Interests (that do not result in a Change of Control) in an aggregate amount during the term of this Agreement not to exceed $500,000
|
|
7. any other adjustments as shall be mutually agreed
|
$________________
|
8. Subtotal (1+2+3+4+5+6+7) =
|
$________________ |
MINUS (to the extent included in calculating such Consolidated Net Income for the most recently completed Measurement Period, without duplication) |
|
9. federal, state, local and foreign income Tax credits, Tax credits on profit or capital, including, without limitation, state franchise and similar Tax credits, and foreign withholding Tax credits
|
$________________ |
10. any noncash gain from extraordinary, unusual or non-recurring items
|
$________________ |
11. Subtotal (9+10) =
|
$________________ |
Total (8-11) = |
$________________ |
(i) The amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and |
(ii) the amount of any Indebtedness which is limited or is non-recourse to a Person or for which recourse is limited to an identified asset shall be valued at the lesser of (A) if applicable, the limited amount of such obligations, and (B) if applicable, the fair market value of such assets securing such obligation |
|
1. All obligations of such Person for borrowed money
|
$________________ |
2. all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products
|
$________________ |
3. all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed
|
$________________ |
4. all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and which are paid in accordance with such terms and not on a deferred basis)
|
$________________ |
5. all obligations of such Person in respect of Disqualified Equity Interests
|
$________________ |
6. any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (1) through (5) above
|
$________________ |
Total (1+2+3+4+5+6) = |
$________________ |
Schedule I(b): Ratio of Total Indebtedness to Consolidated Equity § 6.13(b)
Test Date |
Ratio |
|
As of each Test Date, commencing with the Fiscal Quarter ending December 31, 2024
|
Less than or equal to 1.20x |
1. |
Total Indebtedness (see Section C hereof) of Parent and its Subsidiaries |
$________________
|
2. |
MINUS undrawn letters of credit permitted under clause (n) of the definition of Permitted Indebtedness |
$ (______________) |
3. |
Subtotal (1-2) = |
|
|
Divided by: |
|
4. |
consolidated equity of Parent and its Subsidiaries |
$________________
|
5. |
Ratio (3 ÷ 4) = |
________________ |
(i) The amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness which is limited or is non-recourse to a Person or for which recourse is limited to an identified asset shall be valued at the lesser of (A) if applicable, the limited amount of such obligations, and (B) if applicable, the fair market value of such assets securing such obligation |
|
1. All obligations of such Person for borrowed money
|
$________________ |
2. all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products
|
$________________ |
3. all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed
|
$________________ |
4. all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and which are paid in accordance with such terms and not on a deferred basis)
|
$________________ |
5. all obligations of such Person in respect of Disqualified Equity Interests
|
$________________ |
6. any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (1) through (5) above
|
$________________ |
7. Subtotal (1+2+3+4+5+6) =
|
$________________ |
MINUS |
|
8. Indebtedness under a Revolving Loan Agreement that benefits the Borrower in a principal amount not to exceed $50,000,000
|
$________________ |
Total (7-8) = |
$________________ |
Schedule 1.1
Definitions
As used in this Agreement, the following terms shall have the following definitions:
“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to any Loan Party.
“Account Services” means commercial credit cards, stored value cards, purchasing cards, treasury management services, netting services, overdraft protections, check drawing services, automated payment services (including depository, overdraft, controlled disbursement, ACH transactions, return items and interstate depository network services), employee credit card programs, cash pooling services, and any arrangement and/or service similar to any of the foregoing and/or otherwise in connection with Cash management and any Accounts.
“Additional Financing Facility” means one or more equity or debt financing arrangements with one or more third parties to provide Borrower with cash proceeds, in the aggregate, of not less than $500,000,000 (inclusive of cash proceeds contributed to the Borrower for use in connection with the construction of the Georgia Facility prior to the First Amendment Effective Date).
“Additional Letters of Credit” has the meaning specified therefor in clause (n) of the definition of “Permitted Indebtedness”.
“Affiliate” means, as applied to any Person, any other Person who controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” means the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of a Person, whether through the ownership of Equity Interests, by contract, or otherwise; provided, that with regard to (a) Borrower: (i) any Person which Controls or is Controlled by Borrower shall be deemed an Affiliate of Borrower and (ii) each partnership in which Borrower is a general partner shall be deemed an Affiliate of Borrower and (b) the Guarantor: (i) any Person which Controls or is Controlled by the Guarantor shall be deemed an Affiliate of the Guarantor and (ii) each partnership in which the Guarantor is a general partner shall be deemed an Affiliate of the Guarantor.
“Agreement” means the Loan Agreement to which this Schedule 1.1 is attached, as amended, supplemented or otherwise modified from time to time.
“Anti-Corruption Laws” has the meaning specified therefor in Section 4.12(a) of this Agreement.
“Architect” means Thompson Consultants Inc. who has been retained by Borrower to design and inspect the construction of the Improvements.
“Architect’s Contract” means the written agreement between Borrower and the Architect, dated February 16, 2022 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time in a manner not otherwise prohibited by this Agreement), for architectural services relating to the design and construction of the Improvements.
“Bankruptcy Code” means title 11 of the United States Code, as in effect from time to time.
“Board of Directors” means, as to any Person, the board of directors (or comparable managers), sole member or equivalent governing body, as applicable, of such Person, or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers), sole member or equivalent governing body, as applicable.
“Books” all books and records including ledgers, federal and state tax returns, records regarding assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
“Borrower” has the meaning specified therefor in the preamble to this Agreement.
“Borrowing Request” has the meaning specified therefor in Section 2.1(b)(i) of this Agreement.
“Budget” means, collectively, (a) the Project Budget and (b) any Term Loan Budget.
“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close in the State of Michigan.
“Capital Lease” means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP as in effect prior to giving effect to the adoption of ASU No. 2016-02 “Leases (Topic 842)” and ASU No. 2018-11 “Leases (Topic 842)”, is or should be accounted for as a capital lease on the balance sheet of that Person; provided, that for the avoidance of doubt, the amount of obligations attributable to any Capital Lease shall be the amount thereof accounted for as a liability in accordance with GAAP.
“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (c) certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.
“Certificate of Occupancy” has the meaning specified therefor in Section 2.2(a) of this Agreement.
“Change of Control” means that
“Claim” has the meaning specified therefor in Section 11(c) of this Agreement.
“Closing Date” means the date on which the conditions set forth in Section 3.1 are satisfied.
“Code” means the Michigan Uniform Commercial Code, as in effect from time to time.
“Collateral” means all property pledged as collateral security for the Obligations under the Security Agreement, the Mortgage, the Leasehold Deed to Secure Debt or any other Security Document, and all other property of the Loan Parties on which the Lender has been granted a Lien by any Loan Party; provided, that, for the avoidance of doubt, (a) any Intellectual Property and Intellectual Property Rights owned or purported to be owned by any Loan Party, (b) any pumps pledged to secure Borrower’s EDGE grant from the Georgia Department of Community Affairs, in each case, does not and shall not constitute Collateral and (c) funds in any Excluded Accounts; provided, that (i) the aggregate balance in such Accounts does not exceed 105% of the amounts permitted pursuant to clause (n) of the definition of “Permitted Indebtedness” at any time and (ii) the sole use of the funds in such accounts is to secure the Parent’s obligations under the Existing Letters of Credit and the Additional Letters of Credit (the foregoing clauses (a), (b) and (c), “Excluded Assets”).
“Collateral Account” is any Deposit Account, Securities Account (as that term is defined in the Code) or Commodity Account (as that term is defined in the Code), in each case, other than any Excluded Accounts.
“Collateral Access Agreement” means an agreement, in form and substance reasonably acceptable to the Lender, between the Lender, the applicable Loan Party and any Person (other than a Loan Party) in possession of any Collateral.
“Collateral Assignment Agreement” means an agreement substantially in the form of Exhibit C hereto, with respect to the contracts listed on Schedule 1.1(c).
“Company Competitor” means any Person that (a) is an entity that designs, develops or manufactures aerogels-based or aerogel-like materials based products or technology, (b) designs, develops or manufactures insulation, fire barrier or other materials for use primarily in energy infrastructure, battery systems and/or sustainable building materials, (c) designs, develops or manufactures battery materials or (d) is an auto part and system supplier or, in each case, any Affiliate of such Person.
“Compliance Certificate” has the meaning specified therefor in Section 5.2(j) of this Agreement.
“Consolidated EBITDA” means, at any date of determination, an amount equal to Consolidated Net Income of Parent and its Subsidiaries for the most recently completed Measurement Period, plus
minus
(b) the following to the extent included in calculating such Consolidated Net Income for the most recently completed Measurement Period, without duplication:
(i) federal, state, local and foreign income Tax credits, Tax credits on profit or capital, including, without limitation, state franchise and similar Tax credits, and foreign withholding Tax credits; and
(ii) any noncash gain from extraordinary, unusual or non‑recurring items.
“Confidential Information” has the meaning specified therefor in Section 14.7 of this Agreement.
“Consolidated Interest Expense” means, without duplication, for any Measurement Period, the result of the sum of all interest, premium payments, debt discount, fees, charges and related expenses in connection with Indebtedness for borrowed money to the extent treated as interest in accordance with GAAP.
“Consolidated Net Income” means, as of any date of determination, with respect to any Person and its Subsidiaries, for any Measurement Period, the net income (or loss) of such Parent and its Subsidiaries for such Measurement Period, determined on a consolidated basis in accordance with GAAP.
“Construction Contracts” mean (a) the General Contractor’s Contract, (b) all other construction or development contracts executed by Borrower, as opposed to contracts executed by the General Contractor, for the construction of the Improvements, and (c) all contracts executed by Contractors.
“Contractor” means each contractor, subcontractor or supplier who will perform work or supply materials for the Georgia Facility pursuant to contracts or work or purchase orders executed or issued by Borrower or the General Contractor.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, even if subject to approval rights with respect to certain decisions, whether through the ability to exercise voting power, by contract or otherwise. A Person shall not be deemed to be “controlled by” another Person solely by means of such other Person’s ownership of Equity Interests in the Person specified unless such other Person holds or beneficially owns, directly or indirectly, 10% or more of the Equity Interest in the Person specified or 10% or more of any class of voting securities of the Person specified; provided, however, the foregoing limitations shall not restrict whether a Person is deemed to be “controlled by” another Person if such other Person has the power to direct or cause the direction of the management or policies of a Person, even if subject to approval rights with respect to certain decisions, and even if through the ability to exercise voting power less than the ownership thresholds set forth in the foregoing clause, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“Control Agreement” means a fully-blocked control agreement, in form and substance reasonably satisfactory to the Lender, executed and delivered by any Loan Party, the Lender and the financial institution in which the applicable account is maintained.
“Convertible Notes” means those certain Aspen Aerogels, Inc. Convertible Senior PIK Toggle Notes due 2027.
“Convertible Notes Subordination Agreement” means that certain Subordination Agreement, dated as of the Closing Date, among the Lender, Parent, Wood River Capital, LLC, Borrower, Aspen RI, subordinating the Holders (as defined in the Convertible Notes) right of payment to the Obligations, as such agreement may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms.
“Cure Amount” has the meaning assigned to such term in Section 8.3.
“Cure Right” has the meaning assigned to such term in Section 8.3.
“Default” means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default.
“Default Interest” has the meaning specified therefor in Section 2.2(b) of this Agreement.
“Deposit Account” means any deposit account (as that term is defined in the Code).
“Disbursement Account” has the meaning specified therefor in Section 5.6 of this Agreement.
“Disinterested Board Member” means a member of the Board of Directors of any Loan Party who (a) is not a current employee of such Loan Party or any of its Affiliates, (b) does not receive remuneration from such Loan Party or any of its Affiliates, either directly or indirectly, in any capacity other than as a director, except in an amount for which disclosure would not be required pursuant to Item 404(a) of the proxy solicitation rules of the SEC and (c) does not possess an interest in any other transaction, and is not engaged in a business relationship, for which disclosure would be required pursuant to Item 404(a) or (b) of the proxy solicitation rules of the SEC.
“Disqualified Equity Interest” means any Equity Interest that, by its terms (or the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Equity Interests that are not Disqualified Equity Interests), pursuant to a sinking fund obligation otherwise, (b) contains a mandatory repurchase obligation or any other repurchase obligation at the option of the holder thereof (other than solely for Equity Interests that are not Disqualified Equity Interests), in whole or in part, (c) provides for scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety-one (91) days after the Term Loan Commitment Expiration Date; provided, that any Equity Interests that would not constitute Disqualified Equity Interests but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests are convertible, exchangeable or exercisable) the right to require the issuer thereof to redeem such Equity Interests upon the occurrence of any change of control or asset sale event occurring prior to ninety-one (91) days following the Maturity Date at the time such Equity Interests are issued shall not constitute Disqualified Equity Interests if such Equity Interests provide that the issuer thereof will not redeem any such Equity Interests pursuant to such provisions prior to the Maturity Date).
Notwithstanding the foregoing, (A) if such Equity Interests are issued pursuant to any plan for the benefit of directors, officers, employees, members of management, managers or consultants or by any such plan to such directors, officers, employees, members of management, managers or consultants, in each case, in the ordinary course of business of Parent, Borrower or any of its Subsidiaries, such Equity Interests shall not constitute Disqualified Equity Interests solely because it may be required to be repurchased by the issuer thereof in order to satisfy applicable statutory or regulatory obligations, and (B) no Equity Interests held by any future, present or former employee, director, officer, manager, member of management or consultant (or their respective Affiliates) of Parent, Borrower or its Subsidiaries shall be considered Disqualified Equity Interests because such stock is redeemable or subject to repurchase pursuant to any management equity subscription agreement, stock option, stock appreciation right or other stock award agreement, stock ownership plan, Governing Document, stockholder agreement or similar agreement that may be in effect from time to time.
“Division” means, in reference to any Person which is an entity, the division of such Person into two (2) or more separate Persons, with the dividing Person either continuing or terminating its existence as part of such division, including, without limitation, as contemplated under Section 18-217 of the Delaware Limited Liability Company Act for limited liability companies formed under Delaware law, or any analogous action taken pursuant to any other applicable law with respect to any corporation, limited liability company, partnership or other entity.
“Dollars” or “$” means United States dollars.
“Domestic Subsidiary” means a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia.
“Eligible Assignee” means (a) any Affiliate of the Lender or (b) any other Person (other than (i) a natural person and (ii) any Person that is identified by Borrower as a Company Competitor of Parent and/or any of its Subsidiaries (or any Affiliate of such competitor) at the time the Lender provides notice of such assignment pursuant to Section 12.1).
“Environmental Action” means any written complaint, summons, citation, notice of violation, order, Claim, judicial or administrative proceeding or judgment, received by any Loan Party from any Governmental Authority or any third party alleging: (a) violations of or non-compliance with Environmental Law; (b) releases of Hazardous Materials from or at any assets, properties, or businesses of any Loan Party, any Subsidiary of a Loan Party, or any of their predecessors in interest; or (c) releases of Hazardous Materials from or at any off-site facilities which received Hazardous Materials for off-site treatment, storage, disposal, or other management that were generated in connection with the Project or the Rhode Island Property by any Loan Party, any Subsidiary of any Loan Party, or any of their predecessors in interest.
“Environmental Indemnity Agreements” means those two Environmental Indemnity Agreements, dated as of the date hereof, among the Lender and the Loan Parties as indemnitors, governing the Rhode Island Property and the Georgia Property, respectively.
“Environmental Law” means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance or code now or hereafter in effect and in each case as amended, including any judicial or administrative order, consent decree or judgment, in each case, to the extent binding on any Loan Party, relating to the protection of the environment or to Hazardous Materials, including, without limitation, those governing the Permits, and also including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, and similar state and local requirements.
“Environmental Liabilities” means all liabilities, monetary obligations, losses, damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, or consultants, and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any Remedial Action required under Environmental Law, and which relate to any Environmental Action.
“Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities.
“Equipment” means all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
“Equity Interests” means, with respect to a Person, all of the shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in such Person, whether voting or nonvoting, including capital stock (or other ownership or profit interests or units), preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act) and including any of the foregoing which is by its terms or upon the happening of an event convertible into any such other interest.
“Equity Investment” has the meaning specified therefor in Schedule 3.2 of this Agreement.
“Event of Default” has the meaning specified therefor in Section 7 of this Agreement.
“Excluded Accounts” means the Accounts listed on Schedule 1.1(d) (as may be supplemented by Borrower in writing from time to time).
“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time to time.
“Excluded Assets” has the meaning specified therefor in the definition of “Collateral”.
“Existing Letters of Credit” has the meaning specified therefor in clause (n) of the definition of “Permitted Indebtedness”.
“Financial Officer” means the Chief Financial Officer, principal accounting officer, treasurer or corporate controller.
“First Amendment Effective Date” means September 28, 2023.
“Fiscal Quarter” means the fiscal quarter of Parent, ending on the last day of each March, June, September and December.
“Floor” means a rate of interest equal to 1.00%.
“Force Majeure” means any of the following circumstances to the extent they are outside the control of any Loan Party: (a) any act or provision of any present or future law or regulation or governmental authority; (b) acts of God; (c) earthquakes; (d) floods; (e) wars; (f) terrorism; or (g) changes to the design of the Project required by the Lender and which could reasonably be expected to result in a Project MAE.
“Foreign Official” has the meaning specified therefor in Section 4.12(b)(i) of this Agreement.
“Foreign Subsidiary” means any direct or indirect Subsidiary of any Loan Party that is not a Domestic Subsidiary.
“Funding Date” means each date of borrowing on which the conditions set forth in Section 3.2 are satisfied.
“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.
“General Contractor” means Turner Construction, who has been retained by Borrower as the general contractor for the construction of the Georgia Facility.
“General Contractor’s Contract” means the stipulated sum contract, dated as of February 17, 2022 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time in a manner not otherwise prohibited by this Agreement), between Borrower and the General Contractor for the costs of construction of the Improvements.
“General Motors” has the meaning specified therefor in the preamble to this Agreement.
“Georgia Facility” means that certain aerogel manufacturing plant to be built on the Georgia Property.
“Georgia Lease” that certain Lease Agreement dated as of May 1, 2022, between Borrower and the Development Authority of Bulloch County with respect to the Georgia Property.
“Georgia Property” means the real property located at Bulloch County, Georgia, upon which the Georgia Facility are to be constructed. The Property is legally described in Exhibit A to the Georgia Lease.
“GM Competitor” is any entity that is:
“GM Purchase Contracts” means all purchase orders and related agreements, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, entered into by Parent or any of its Affiliates and the Lender (or any of the Lender’s affiliates), in connection with the purchase of the Product.
“Governing Documents” means, with respect to any Person, the certificate or articles of incorporation or formation, by-laws, limited liability company agreement or operating agreement or other equivalent organizational documents of such Person.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“Governmental Authority” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, municipal or any other level, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of, or pertaining to, government.
“Governmental Requirements” means all laws, ordinances, rules, regulations, codes, orders, writs, injunctions or decrees of any Governmental Authority applicable to Borrower, Guarantor, or the Property or any portion of the Project.
“Guarantors” means Parent, Aspen RI and any additional guarantor entering into a Guaranty after the Closing Date in accordance with Section 5.9.
“Guaranty” has the meaning specified therefor in Section 2.4(ii) of this Agreement.
“Hazardous Materials” means: (a) substances that give rise to liability under Environmental Law or are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or substances regulated by reason of deleterious properties such as ignitability, corrosively, reactivity, carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any explosives or any radioactive materials, and (d) asbestos in any form, polychlorinated biphenyls, and per- and polyfluoroalkyl substances.
“Improvements” means any physical improvements to the Georgia Property.
“Indebtedness” as to any Person means (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (c) all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (d) all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and which are paid in accordance with such terms and not on a deferred basis), (e) all obligations of such Person in respect of Disqualified Equity Interests, and (f) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (d) above.
For purposes of this definition, (i) the amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness which is limited or is non-recourse to a Person or for which recourse is limited to an identified asset shall be valued at the lesser of (A) if applicable, the limited amount of such obligations, and (B) if applicable, the fair market value of such assets securing such obligation.
“Indemnified Liabilities” has the meaning specified therefor in Section 9.3 of this Agreement.
“Indemnified Person” has the meaning specified therefor in Section 9.3 of this Agreement.
“Insolvency Proceeding” means any of the following: (a) the filing by any Loan Party of a voluntary petition in bankruptcy under any provision of any bankruptcy law (including the Bankruptcy Code) or a petition to take advantage of any receivership or insolvency laws, including any petition seeking the dissolution, winding up, total or partial liquidation, reorganization, composition, arrangement, adjustment or readjustment or other relief of any Loan Party, any Loan Party’s debts or any Loan Party’s assets or the appointment of a trustee, receiver, liquidator, custodian or similar official for any Loan Party or a material part of any Loan Party’s property; (b) the inability of any Loan Party to pay its debts (including trade debts) generally as they become due; (c) the appointment of a receiver, liquidator, trustee, custodian or other similar official for any Loan Party or all or a material part of any Loan Party’s assets; (d) the filing of any petition against any Loan Party under any bankruptcy law (including the Bankruptcy Code) or other receivership or insolvency law, including any petition seeking the dissolution, winding up, total or partial liquidation, reorganization, composition, arrangement, adjustment or readjustment or other relief of any Loan Party, any Loan Party’s debts or any Loan Party’s assets or the appointment of a trustee, receiver, liquidator, custodian or similar official for any Loan Party or a material part of any Loan Party’s property; (e) the general assignment by any Loan Party for the benefit of creditors or any other marshaling of the assets and liabilities of any Loan Party; or (f) a corporate (or similar) action taken by any Loan Party to authorize any of the foregoing.
“Intellectual Property” means all patents, trademarks, service marks, trade names, copyrights, know-how and processes.
“Intellectual Property License Agreements” means all agreements between any Loan Party and any third party pursuant to which (a) such third party grants to any Loan Party a license to any material Intellectual Property Rights, including the Technology License Agreement (other than over-the-counter or off-the-shelf software licenses entered into by a Loan Party that are commercially available to the public) and (b) such Loan Party grants to any third party a license to any material Intellectual Property Rights (other than non-exclusive licenses of material Intellectual Property Rights granted by a Loan Party to its customers in the ordinary course of business) and in each case of clauses (a) and (b), necessary to operate any Loan Party’s business.
“Intellectual Property Rights” means any and all intellectual property rights in any jurisdiction throughout the world, including: (a) patents and patent applications; (b) domain names, trademarks, service marks, trade dress, trade names, logos and corporate names, and registrations and applications for registration thereof together with all translations, transliterations, adaptions, derivations and combinations thereof and including all of the goodwill associated therewith; (c) copyrights and copyrightable works (registered or unregistered); (d) mask works; (e) trade secrets, confidential information, and know‑how; (f) rights in software (including source code, object code, and executable code) and (g) registrations and applications for any of the foregoing.
“Intercreditor Agreement” means (a) the Revolver Intercreditor Agreement and (b) any other intercreditor agreement in form and substance reasonably acceptable to the Lender.
“Interest Payment Date” has the meaning specified therefor in Section 2.2(a) of this Agreement.
“Interest Rate” has the meaning specified therefor in Section 2.2(a) of this Agreement.
“Inventory” means all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of any Loan Party’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
“Investment” means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, (b) bona fide accounts receivable arising in the ordinary course of business and (c) loans and advances of payroll payments or other compensation (including in connection with deferred compensation plans) to present or former employees, directors, members of management or officers in the ordinary course of business), or acquisitions of Indebtedness, Equity Interests, or all or substantially all of the assets of such other Person (or of any division or business line of such other Person), and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustment for increases or decreases in value, or write-ups, write-downs, or write-offs with respect to such Investment.
“IRC” means the Internal Revenue Code of 1986, as amended, and any successor statutes, and all regulations and guidance promulgated thereunder. Any reference to a specific section of the IRC shall be deemed to be a reference to such section of the IRC and any successor statutes, and all regulations and guidance promulgated thereunder.
“Leasehold Deed to Secure Debt” means that certain Leasehold Deed to Secure Debt, Assignment and Security Agreement, dated as of the date hereof, among Borrower and the Lender.
“Leases” means the Georgia Lease and any other leases or amendment to any leases covering any part of the Properties.
“Lender” has the meaning specified therefor in the preamble to this Agreement, and shall also include any other Person made a party to this Agreement pursuant to the provisions of Section 12.1 of this Agreement and “Lenders” means each of the Lenders or any one or more of them.
“Lender Expenses” means all (a) costs or expenses (including Taxes and insurance premiums) required to be paid by any Loan Party under any of the Loan Documents that are paid, advanced, or incurred by the Lender, (b) reasonable and documented out-of-pocket fees or charges paid or incurred by the Lender in connection with the Lender’s transactions with Loan Party under any of the Loan Documents, including, photocopying, notarization, couriers and messengers, telecommunication, public record searches, filing fees, recording fees, publication, real estate surveys, real estate title policies and endorsements, and environmental audits, (c) the Lender’s reasonable and documented out-of-pocket fees and charges imposed or incurred in connection with any background checks related to Loan Party, (d) reasonable and documented out-of-pocket costs and expenses paid or incurred by the Lender to correct any default or enforce any provision of the Loan Documents, or during the continuance of an Event of Default, in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, (e) reasonable and documented out-of-pocket costs incurred in connection with Lender’s exercise of its inspection and related collateral rights pursuant to Section 5.4, (f) the Lender’s reasonable costs and expenses (including reasonable and documented out-of-pocket attorneys’ fees and expenses) relative to third party claims or any other lawsuit or adverse proceeding paid or incurred, whether in enforcing or defending the Loan Documents or otherwise in connection with the transactions contemplated by the Loan Documents, the Lender’s Liens in and to the Collateral, or the Lender’s relationship with Borrower, (g) the Lender’s reasonable and documented costs and expenses (including reasonable and documented out-of-pocket attorneys’ fees and due diligence expenses) incurred in advising, structuring, drafting, reviewing, administering, or amending, waiving, or modifying the Loan Documents, and (h) the Lender’s reasonable and documented out-of-pocket costs and expenses (including reasonable and documented out-of-pocket attorneys, accountants, consultants, and other advisors fees and expenses) incurred in terminating, enforcing (including attorneys, accountants, consultants, and other advisors fees and expenses incurred in connection with a “workout,” a “restructuring,” or an Insolvency Proceeding concerning any Loan Party or in exercising rights or remedies under the Loan Documents), or defending the Loan Documents, irrespective of whether a lawsuit or other adverse proceeding is brought, or in taking any enforcement action or any Remedial Action with respect to the Collateral.
“Lender-Related Person” means, with respect to any Lender, such Lender, together with such Lender’s Affiliates, officers, directors, employees, attorneys, and agents.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, easement, lien (statutory or other), security interest, or other security arrangement and any other preference, priority, or preferential arrangement of any kind or nature whatsoever, including any conditional sale contract or other title retention agreement, the interest of a lessor under a Capital Lease and any synthetic or other financing lease having substantially the same economic effect as any of the foregoing.
“Loan Documents” means (a) this Agreement, (b) the Guaranty, (c) the Security Documents, (d) the Perfection Certificate, (e) the Note and any other note or notes executed by Borrower in connection with this Agreement and payable to the Lender, (f) the Convertible Notes Subordination Agreement and any other subordination agreement entered into with Lender and any other holder of Equity Interests or Indebtedness in the future, (g) any Intercreditor Agreement and (h) any other instrument or agreement entered into, now or in the future, by Borrower or any Guarantor and the Lender in connection with this Agreement and designated by Borrower and the Lender as a “Loan Document”.
“Loan Parties” means Borrower and the Guarantors.
“Major Subcontract” means any subcontractor contract that is related to the Project with a value that exceeds $2,000,000 in the aggregate, other than any such subcontractor contract that will be completed in full prior to December 31, 2022 and for which less than $5,000,000 remains to be paid thereunder as of December 31, 2022.
“Material Adverse Effect” means (a) a material adverse effect on the timing or scope of the Project or a material adverse effect on the ability of the Parent to perform under the GM Purchase Contracts (inclusive of the ability to achieve a Milestone that would be reasonably expected to result in an Event of Default under Section 7.6) or to achieve Start of Production at the Georgia Facility (a Material Adverse Effect pursuant to this clause (a), a “Project MAE”), (b) a material adverse effect on the business, operations, conditions (financial or otherwise) of Borrower or any Guarantor, (c) a material impairment of any Loan Party’s ability to perform its obligations under the Loan Documents to which Borrower is a party or of the Lender’s ability to enforce the Obligations or realize upon the Collateral (other than as a result of an action taken or not taken that is solely in the control of the Lender), or (d) a material impairment of the enforceability or priority of the Lender’s Liens with respect to all or a material portion of the Collateral.
“Material Contracts” means, collectively, (i) the agreements evidencing Material Indebtedness; (ii) the documents evidencing the Convertible Notes, (iii) each purchase contract with regard to the purchase of any machinery and equipment funded with the proceeds of the Term Loan, (iv) the agreements to which any Loan Party is subject in connection with the tax exempt financing issued by the Development Authority of Bulloch County in connection with the construction of the Georgia Facility, and (v) all other contracts, leases, instruments, guaranties, licenses, or other arrangements (other than the Loan Documents) to which Borrower is or became a party and as to which the breach, nonperformance, cancellation or failure to renew by any party thereto could reasonably be expected to result in a Material Adverse Effect.
“Material Indebtedness” means any Indebtedness of any Loan Party or its Subsidiaries in a principal amount in excess of $1,000,000 individually (exclusive of Capital Leases in the aggregate of less than $2,500,000).
“Maturity Date” means the earliest of: (a) September 30, 2025 and (b) ninety (90) days before the maturity date of any other debt facility any Loan Party may be a party to (other than the Revolving Loan Agreement) and (c) the date that any Term Loan shall become due and payable in full hereunder, whether by acceleration or otherwise.
“Measurement Period” means the four Fiscal Quarters then ended for which Financial Statements have been (or are required to have been) delivered pursuant to Section 5.2(a) or (b), as applicable.
“Milestone” means each of the actions, events or deliverables to be completed by Borrower as set forth on Schedule 7.6.
“More Favorable Provision” has the meaning specified therefor in Section 5.12 of this Agreement.
“Mortgage” means that certain Mortgage covering the Rhode Island Property, executed by Aspen RI and delivered to the Lender pursuant to this Agreement, securing the Obligations.
“Net Proceeds” means, with respect to any event, the proceeds actually received (directly or indirectly) from time to time (whether as initial consideration or through the payment of deferred consideration), in cash or Cash Equivalents, by or on behalf of such Loan Party, in connection therewith after deducting therefrom only (i) reasonable fees, commissions, and expenses related thereto and required to be paid by such Loan Party in connection with such event and (ii) taxes paid or payable to any taxing authorities by such Loan Party in connection with such event, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate of any Loan Party or any of its Subsidiaries, and are properly attributable to such transaction.
“Note” has the meaning given on Schedule 3.1.
“Obligations” means all loans hereunder, debts, principal, interest (including any interest that accrues after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), premiums, liabilities, obligations (including indemnification obligations), fees, Lender Expenses (including any fees or expenses that accrue after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), guaranties, and all covenants and duties for amounts owing by Borrower or Guarantor arising out of, under, pursuant to, in connection with, or evidenced by this Agreement or any of the other Loan Documents, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due and all other expenses or other amounts that Borrower or Guarantor is required to pay or reimburse by the Loan Documents or by law or otherwise in connection with the Loan Documents. Without limiting the generality of the foregoing, the Obligations of Borrower under the Loan Documents include the obligation to pay (i) the principal of the Term Loans (including capitalized interest thereon), (ii) interest accrued on the Term Loans, (iii) Lender Expenses, (iv) fees payable under this Agreement or any of the other Loan Documents, and (v) indemnities and other amounts payable by Borrower under any Loan Document. Any reference in this Agreement or in the Loan Documents to the Obligations shall include all or any portion thereof and any extensions, modifications, renewals, or alterations thereof, both prior and subsequent to any Insolvency Proceeding.
“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the Treasury.
“Other Financing Facility” means any agreement (whether in the form of a loan or credit agreement, stockholder agreement, operating agreement, investment agreement or other documentation), other than the Revolving Loan Agreement and Convertible Notes, entered into by any Loan Party which is binding upon such Loan Party, or to which such Loan Party or its assets is subject, in connection with the provision of equity or debt financing by any third party (including any Additional Financing Facility), and is inclusive of all agreements entered into by such parties in connection with any such equity or debt financing.
“Paid in Full” or “Payment in Full” means all Obligations (other than contingent indemnification obligations, if any, to the extent no unsatisfied claim giving rise thereto has been or may reasonably be expected to be asserted) shall have been paid in full in cash by wire transfer of immediately available funds and any commitment to make Term Loans shall have terminated. For clarity, in the event of a termination of the GM Purchase Contracts (other than by the Lender) prior to satisfaction in full of the Obligations, or an Event of Default under this Agreement at any time as and to the extent provided in Section 7, any unpaid portion of the Obligations must be satisfied in full by indefeasible payment in cash.
“Party Representatives” has the meaning specified therefor in Section 14.7 of this Agreement.
“Patriot Act” has the meaning specified therefor in Section 4.10 of this Agreement.
“Perfection Certificate” has the meaning specified therefor in Section 4.1(a) of this Agreement, as amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with, and subject to, Section 5.2(j).
“Periodic Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR”.
“Permits” means all authorizations, approvals, permits, variances, land use entitlements, consents, licenses, franchises and agreements issued by or entered into with any Governmental Authority now or hereafter required for the applicable Loan Party to conduct its business and complete the Project (including amendments to any of the foregoing).
“Permitted Change of Control” means a Change of Control; provided, that the Person who Controls Borrower or the Parent, as applicable, (i) is not a GM Competitor, (ii) agrees in writing to abide by, and assume all, of the liabilities, obligations and terms of this Agreement, the other Loan Documents, the GM Purchase Contracts and any other related agreement or document and (iii) has the reasonable financial and operational capability to comply with the obligations of Borrower or Parent, as applicable, under the GM Purchase Contracts.
“Permitted Indebtedness” means:
provided, that with respect to any Indebtedness incurred pursuant to clauses (e) (with regard to up to $50,000,000 of such Indebtedness), (g) and (l) (to the extent applicable), the proceeds thereof shall be available solely for the Project or as otherwise permitted pursuant to Section 5.13.
“Permitted Investments” are:
“Permitted Liens” means:
“Person” means natural Persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.
“PIK Election” has the meaning specified therefor in Section 2.2(a) of this Agreement.
“PIK Interest” has the meaning specified therefor in Section 2.2(a) of this Agreement.
“Plans” means the final working drawings and specifications for the construction of the Georgia Facility and shall include all architectural and engineering studies, plans and specifications.
“Policy” and “Policies” have the meaning specified therefor in Section 5.5(b) of this Agreement.
“Product” refers to the “Goods” as such term is defined in the GM Purchase Contracts.
“Project” has the meaning specified therefor in the preamble to this Agreement.
“Project Budget” means the project budget delivered to the Lender by Borrower on the Closing Date substantially in the form of budget set forth in Schedule 1.1(p) (which shall be subject to the Permitted Variance), as amended, restated, amended and restated, supplemented or otherwise modified by Borrower from time to time (it being understood and agreed that any amendments, restatements, amendments and restatements, supplements or other modifications in excess of the Permitted Variance subject to the reasonable approval of the Lender); provided, that, for the avoidance of doubt, the Project Budget includes up to $2,500,000 to finance the cost of the payment and performance bonds to be delivered pursuant to Section 5.16(b).
“Project Contracts” means the Construction Contracts, the Architect’s Contract and any and all other contracts between Borrower and any third party relating to the development, construction, management and maintenance of the Project (including amendments to any of the foregoing).
“Project Documents” means the Plans, the Project Contracts and all Permits.
“Project MAE” has the meaning specified therefor in the “Material Adverse Effect” definition.
“Project Permits” means all permits necessary for any work, the nature and extent of which requires a permit, in connection with the construction or equipping of the Project.
“Projections” has the meaning specified therefor in Section 4.26(a).
“Property” means the Rhode Island Property or the Georgia Property, and “Properties” means both collectively.
“Real Property” means any estates or interests in real property now owned or hereafter acquired by Borrower and the improvements thereto.
“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.
“Remedial Action” means all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment, (b) prevent or minimize a release of Hazardous Materials, (c) restore or reclaim natural resources or the environment, (d) perform any pre-remedial studies, investigations, or post-remedial operation and maintenance activities, (e) conduct any other actions in response to a release of Hazardous Materials required by Environmental Law, or (f) correct or resolve any violation of or non-compliance with Environmental Law.
“Requirement of Law” is, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial Officer, Vice President (Finance), Controller or equivalent officer of any Loan Party, as applicable.
“Restricted License” is any license or other agreement, the absence of which would be reasonably expected to cause a Material Adverse Effect on any Loan Party’s business, with respect to which such Loan Party is the licensee (a) that prohibits or otherwise restricts such Loan Party from granting a security interest in such Loan Party’s interest in such license or agreement or any other property, or (b) for which a default under or termination of interferes with the Lender’s right to sell any Collateral.
“Restricted Payment” means to (a) declare or pay any dividend or make any other payment or distribution, directly or indirectly, on account of Equity Interests issued by any Loan Party (including any payment in connection with any merger or consolidation involving any Loan Party) or to the direct or indirect holders of Equity Interests issued by any Loan Party in its capacity as such, or (b) purchase, redeem, make any sinking fund or similar payment, or otherwise acquire or retire for value (including in connection with any merger or consolidation involving any Loan Party) any Equity Interests issued by any Loan Party, (c) make any payment to retire, or to obtain the surrender of, any outstanding warrants, options, or other rights to acquire Equity Interests of any Loan Party now or hereafter outstanding, or (d) pay any fees or other remuneration to any Affiliate of any Loan Party (except pursuant to the terms of the Convertible Notes and any other Permitted Indebtedness entered into with an Affiliate to the extent permitted pursuant to Section 6.7).
“Revenue Bond” means that certain Development Authority of Bulloch County Taxable Revenue Bond (Aspen Aerogels, LLC Project), Series 2022 in the principal amount of up to $650,000,000 issued by the Development Authority of Bulloch County in connection with the construction of the Georgia Facility.
“Revenue Bond Pledge Agreement” means that certain pledge agreement entered into in connection with that certain Revenue Bond.
“Revolver Intercreditor Agreement” means an intercreditor agreement between the Lender and the Revolving Lender substantially in the form of Exhibit E (with such changes to such form as may be reasonably acceptable to the Lender).
“Revolving Lender” means a lender providing working capital financing to any Loan Party with such advances being based on working capital assets.
“Revolving Loan Agreement” means a revolving credit agreement between any Loan Party and a Revolving Lender in form reasonably acceptable to the Lender.
“Rhode Island Facility” means that certain aerogel manufacturing plant built on the Rhode Island Property.
“Rhode Island Property” means the real property located at 3 Dexter Road, East Providence, Rhode Island 02914. The Property is legally described in the Mortgage.
“Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.
“Sanctioned Person” means a Person named on the list of Specially Designated Nationals maintained by OFAC.
“Sanctions” has the meaning specified therefor in Section 4.11 of this Agreement.
“SEC” has the meaning specified in Section 4.15 of this Agreement.
“SEC Reports” has the meaning specified in Section 4.15 of this Agreement.
“Securities Act” means the Securities Act of 1933, as amended.
“Security Agreement” has the meaning specified therefor in Section 2.4(i) of this Agreement.
“Security Documents” means, collectively, any Intercreditor Agreement, the Convertible Notes Subordination Agreement, the Security Agreement, the Guaranty, the Leasehold Deed to Secure Debt, the Mortgage, the Revenue Bond Pledge Agreement, the Collateral Assignment Agreements, the Control Agreement, the Collateral Access Agreements and each other agreement, document or instrument entered into by a Loan Party that creates or purports to create a Lien over all or any part of its assets in respect of the Obligations in favor of the Lender.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“Solvent” means, with respect to any Person as of any date of determination, that (a) at fair valuations, the sum of such Person’s debts (including contingent liabilities) is less than all of such Person’s assets, (b) such Person is not engaged or about to engage in a business or transaction for which the remaining assets of such Person are unreasonably small in relation to the business or transaction or for which the property remaining with such Person is an unreasonably small capital, and (c) such Person has not incurred and does not intend to incur, or reasonably believe that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise), and (d) such Person is “solvent” or not “insolvent”, as applicable within the meaning given those terms and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).
“Start of Production” means the date agreed to by Borrower and the Lender for the start of production at the Georgia Facility under the applicable GM Purchase Contracts.
“Subordinated Indebtedness” means any unsecured Indebtedness (including Indebtedness under the Convertible Notes) incurred from time to time that is subordinated in right of payment to the Obligations pursuant to a subordination agreement in form and substance reasonably acceptable to the Lender and (a) that is not guaranteed by any other party, (b) that is not subject to scheduled amortization, redemption, sinking fund or similar payment and does not have a final maturity, in each case, on or before the date that is six months after the Maturity Date, (c) that does not include any financial covenants or any covenant or agreement that is more restrictive or onerous on any Loan Party in any material respect than any comparable covenant in this Agreement and is otherwise on terms and conditions reasonably acceptable to the Lender, (d) shall be limited to cross-payment default and cross-acceleration to designated “senior debt” (including the Obligations), and (e) the terms and conditions of the subordination are reasonably acceptable to the Lender in its sole discretion.
“Subsidiary” of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the Equity Interests having ordinary voting power to elect a majority of the Board of Directors of such corporation, partnership, limited liability company, or other entity.
“SVB Revolving Loan Agreement” has the meaning specified therefor in clause (l) of Schedule 3.1.
“Taxes” means any taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein, and all interest, penalties or similar liabilities with respect thereto.
“Technology License Agreement” means an Intellectual Property royalty free license agreement between Borrower and/or Aspen RI and Parent providing that Borrower and Aspen RI may carry out their respective operations using any of the Intellectual Property owned by the Parent.
“Title Company” has the meaning specified therefor in Section 5.5(a)(ix) of this Agreement.
“Title Policy” has the meaning specified therefor in Section 5.5(a)(ix) of this Agreement.
“Term Loan” has the meaning specified therefor in Section 2.1(b) of this Agreement.
“Term Loan Budget” means the budget delivered prior to each Funding Date, substantially in the form of the budget consistent with AIA Form G703 and set forth in Schedule 1.1(t) (subject to the Permitted Variance), or such other form that provides substantially the same scope of information, as of the time of such Funding Date, with respect to use of proceeds, schedule of the Project and remaining sources and uses, including setting forth the expected use of proceeds of the Term Loans being funded on the applicable Funding Date (and the Equity Investment and/or any Additional Financing Facility funded concurrently therewith), as amended, restated, amended and restated, supplemented or otherwise modified by Borrower from time to time (it being understood and agreed that any amendments, restatements, amendments and restatements, supplements or other modifications in excess of the Permitted Variance are subject to the reasonable approval of the Lender).
“Term Loan Commitment” has the meaning specified therefor in Section 2.1(a) of this Agreement.
“Term Loan Commitment Expiration Date” means the earlier of (i) with respect to Term Loan Commitments that are funded, the date of borrowing of the applicable Term Loan and (ii) with respect to Term Loan Commitments that are not funded, March 31, 2024 (or such later date as approved in writing by the Lender in its sole discretion).
“Term SOFR” means, the Term SOFR Reference Rate for a six-month interest period on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such interest period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day, and; provided, further, that if Term SOFR determined as provided above shall ever be less than the Floor, then Term SOFR shall be deemed to be the Floor.
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Lender in its reasonable discretion).
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“Test Date” means the last day of each Fiscal Quarter for which a Compliance Certificate has been (or is required to have been) delivered pursuant to Section 5.2(j)(y).
“Total Leverage Ratio” means, as of any Test Date, the ratio of (i) total Indebtedness of Parent and its Subsidiaries (excluding Indebtedness incurred under a Revolving Loan Agreement that benefits the Borrower in a principal amount not to exceed $50,000,000 and undrawn letters of credit permitted under clause (n) of the definition of Permitted Indebtedness) as of such Test Date to (ii) Consolidated EBITDA of Parent and its Subsidiaries for the most recently ended Measurement Period.
“United States” means the United States of America.
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“Vehicle” means any motor vehicle (including any car, van, or truck), regardless of whether used for household, commercial (including fleets, first to last mile delivery, or other transportation and logistics services), or other purposes.
“Voidable Transfer” has the meaning specified therefor in Section 14.6 of this Agreement.
Exhibit 10.3
ASPEN AEROGELS, INC.
BONUS PLAN
(Amended and Restated Effective as of January 1, 2024)
ARTICLE 1
Purpose
1.1 Purpose. The purpose of the Bonus Plan (the “Plan”) is to promote the creation of value for shareholders of Aspen Aerogels, Inc. (the “Company”) by closely aligning the interests of Participants with those goals and expectations established for the Company by the Board of Directors of the Company (the “Board”).
ARTICLE 2
Eligibility
2.1 Eligibility. Each individual who has been selected to participate in the Plan with respect to a Performance Period (the “Participants”) shall be issued a Participation Statement setting forth the terms and conditions of such Participant’s participation in the Plan as determined by the Administrator in its sole discretion. For purposes of the Plan, “Participation Statement” means one or more writings in such form as approved by the Administrator to set forth terms and conditions of a Participant’s bonus opportunity under the Plan for the applicable Performance Period. A Participation Statement may be in an electronic format and may consist of one or more of the following (including a combination thereof): (a) an agreement to be executed by the Participant, (b) a notice or statement issued by the Company which need not be executed by the Participant, and/or (c) an appendix to, or subplan established under, the Plan. An individual who is selected as a Participant for a particular Performance Period is not guaranteed or assured of being selected as a Participant with respect to any subsequent Performance Period.
ARTICLE 3
Bonus Opportunity
3.1 Bonus Opportunity. Each Participant’s Participation Statement shall set forth a target bonus opportunity level for the Participant (whether as a percentage of the Participant’s then current base salary or as a dollar amount or otherwise as determined by the Administrator). The incentive bonus opportunity represents a target cash award (“Target Award”) with payment contingent upon achievement of specified performance metrics set forth in the Participation Statement over the applicable performance period set forth in the Participation Statement (the “Performance Period”).
3.2 Performance Metrics.
3.2.1 Participant Designations. The performance metrics and other terms and conditions of the bonus opportunities provided to Participants under the Plan need not be uniform with respect to any or all Participants. A Participation Statement may, but shall not be required to, classify a Participant as a member of a sub-group of Participants, such as, for example, sales representatives, corporate personnel, etc.
3.2.2 Performance Metrics. Each Participant’s Participation Statement shall set forth and establish the performance metrics or goals to be applicable for the Participant and the relative weightings thereof. Such performance metrics shall consist of measurable or subjective performance goals based upon any financial measures, business measures, strategic objectives or other criteria as determined by the Administrator in its sole discretion, and may be determined with regard to the performance of the Company (absolute or relative to peers or to an index) or any affiliate, business unit, segment, division, region or function, the performance of any individual Participant, or upon any other basis determined by the Administrator in its sole discretion. Performance metrics established by the Administrator under this Plan may include, but shall not be limited to, attaining a “segment revenue” goal, attaining a Company revenue goal , attaining individual performance ratings or individual “motivation by objective” goals, attaining a Company EBITDA, and/or such other performance metrics that may be established from time to time, (collectively, “Goals”). “Segment revenue” means that portion of Company revenue derived from the geographical region and/or business group assigned to a Participant or group of Participants as detailed in a Participation Statement. “Company revenue” and “EBITDA” shall be based upon and conclusively determined by reference to the Company’s unaudited financials.
3.2.3 Allocation of Performance Metrics. A Participation Statement may set forth and establish a percentage allocation of a Target Award that will correlate to the Goals set forth in the Participation Statement. The designated percentage of the Target Award will be achieved based on achievement of the applicable Goals.
3.2.4 Levels of Achievement. A Participation Statement may set forth and establish minimum threshold achievement levels, maximum achievement levels, and one or more intermediate achievement levels applicable to one or more Goals, with corresponding payout levels for a portion, all, or a multiple of a Participant’s Target Award.
3.3 Additional Goals/Special Awards. The Administrator may in its sole discretion include such other goals and awards in a Participation Statement.
3.4 Payment. Following the completion of the Performance Period, the Administrator shall determine the level of performance achieved in respect of the applicable Goals for the Performance Period and the amount (if any) of the bonus payable to each Participant with respect to that Performance Period. Upon approval and certification by the Administrator of the achieved performance, payment in cash, less any applicable tax withholdings, shall be made to each eligible Participant as soon as practicable but no later than March 15 of the calendar year immediately following the Performance Period (the “Payment Date”) in a single lump sum.
3.4.1. Adjustment of Goals. The Administrator may, in its sole discretion and at any time, modify the Goals and/or or the related levels of achievement, in whole or in part, as the Administrator deems appropriate and equitable to reflect a change in the business, operations, corporate structure or capital structure of the Company, the manner in which the Company conducts its business, or any other events or circumstances.
3.4.2 Adjustment of Payout Amounts. The Administrator may, in its sole discretion, increase, decrease or eliminate the amount of any Award otherwise earned by any Participant to reflect such Participant's individual performance or such other factors as the Administrator deems relevant.
3.5 Continued Service. Except as otherwise may be provided in an applicable Participation Statement or a written agreement between the Participant and the Company, or as otherwise determined by the Administrator in its sole discretion, a Participant must remain employed in good standing (and not on notice of termination or resignation) through the applicable Payment Date in order to be eligible to receive any bonus payment under the Plan.
ARTICLE 4
Administration
4.1 Administration. The Compensation Committee of the Board shall be the administrator of the Plan until such time as the Board shall otherwise determine. The Administrator may delegate such of its duties to officers of the Company as it shall determine.
4.2 Authority of Administrator. The Administrator shall have authority, duty and power to interpret and construe the provisions of the Plan as it deems appropriate, to adopt, establish and revise rules, procedures and regulations relating to the Plan, to determine the conditions subject to which any benefits may be payable, to resolve all factual and legal questions concerning the status of the Participants and others under the Plan, including but not limited to, eligibility for benefits and to make any other determinations which it believes necessary or advisable for the administration of the Plan. Benefits under this Plan will be payable only if the Administrator decides in its sole discretion that the applicant is entitled to them under the Plan. The determinations, interpretations, and regulations of the Administrator and the calculations of the Administrator shall be final and binding on all persons and parties concerned.
ARTICLE 5
Amendment and Termination of the Plan
5.1 Amendment and Termination of the Plan. The Administrator reserves the power to alter, amend, wholly revise or terminate the Plan at any time and from time to time and the interest of each Participant is subject to the powers so reserved; provided, however, that no amendment or termination shall be effective without the consent of a Participant to the extent that it would have a materially adverse impact on a Participant’s economic benefit under any Participation Statement.
ARTICLE 6
Miscellaneous
6.1 Unsecured General Creditor. Participants and their beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Company. For purposes of the payment of benefits under this Plan, any and all of the Company’s assets shall be, and remain, the general, unpledged unrestricted assets of the Company.
The Company’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.
6.2 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise.
6.3 Not a Contract of Employment. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Company and the Participant. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Company.
6.4 Compensation Recoupment Policy. Notwithstanding any other provision of this Plan or a Participation Statement, each bonus opportunity granted to a Participant under this Plan shall be subject to forfeiture, and each bonus paid to a Participant under this Plan shall be subject to recoupment, pursuant to the terms of the Company’s Compensation Recoupment Policy, as in effect from time to time.
6.5 Governing Law. Except as otherwise may be provided pursuant to the Compensation Recoupment Policy, all issues concerning this Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to any choice of law or conflict of law provision or rule (whether of the Commonwealth of Massachusetts or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the Commonwealth of Massachusetts.
6.6 Waiver of Jury Trial. By executing a Participation Statement or accepting any benefit under this Plan, each Participant shall waive, to the fullest extent permitted by law, any right to trial by jury of any claim, demand, action, or cause of action (i) arising under this Plan or (ii) in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Plan or any of the transactions related hereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity, or otherwise. By executing a Participation Statement or accepting any benefit under this Plan, each Participant shall agree and consent that any such claim, demand, action, or cause of action shall be decided by court trial without a jury and that an original counterpart or a copy of the Plan and any applicable Participation Statement with any court as written evidence of the Participant’s consent to the waiver of the Participant’s right to trial by jury.
[END OF DOCUMENT]
Exhibit 10.4
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this “Agreement”) is dated and shall be effective as of September 5, 2023 (the “Effective Date”), by and between Aspen Aerogels, Inc., a Delaware corporation (the “Company”), and Stephanie Pittman (the “Executive”).
Recitals:
WHEREAS, the Company wishes to employ the Executive and the Executive wishes to accept such employment on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. Definitions. As used herein, the following terms shall have the following meanings.
“Board” means the Company’s board of directors.
“Cause” means: (i) willful misconduct, dishonesty, fraud or breach of fiduciary duty to the Company; (ii) deliberate disregard of the lawful rules or policies of the Company, failure to perform assigned duties, or material breach of an employment or other agreement with the Company, which results in material harm to the Company; (iii) the unauthorized disclosure of any trade secret or confidential information of the Company; (iv) the commission of an act which constitutes unfair competition with the Company or which induces any customer or supplier to breach a contract with the Company; or (v) the indictment of the Executive for any felony involving deceit, dishonesty or fraud, or any criminal conduct by the Executive that would reasonably be expected to result in material injury or reputational harm to the Company. For purposes hereof, whether or not the Executive has committed an act or omission of the type referred to in subparagraphs (i) through (vi) above shall be determined by the Company in its reasonable, good faith discretion, based upon the facts known to the Company at the relevant time.
“Change of Control” shall mean the first to occur of any of the following events: (i) the consummation of a reorganization, merger, consolidation or other similar transaction of the Company with or into any other Person or Group (within the meaning of Section 13(d)(3) of the Securities Act of 1934, as amended) in which holders of the Company’s voting securities immediately prior to such reorganization, merger, consolidation or other similar transaction shall not, directly or indirectly, continue to hold at least a majority of the outstanding voting securities of the Company; (ii) a sale, lease, exchange or other transfer (in one transaction or a related series of transactions) of all or substantially all of the Company’s assets; (iii) the acquisition by any Person or any Group of such quantity of the Company’s voting securities as causes such Person or Group (other than a Person or Group who is a shareholder of the Company on the Effective Date) to own beneficially, directly or indirectly, as of the time immediately after such transaction or series of transactions, more than fifty percent (50%) of the combined voting power of the voting securities of the Company other than as a result of (a) an acquisition of securities directly from the Company or (b) an acquisition of securities by the Company which by reducing the voting securities outstanding increases the proportionate voting power represented by the voting securities owned by any such Person or Group to more than fifty percent (50%) of the combined voting power of such voting securities; or (iv) a change in the composition of the Board within a two (2) year period such that a majority of the members of the Board are not Continuing Directors.
As used herein, the term “Continuing Directors” shall mean as of any date of determination, any member of the Board who (a) was a member of the Board immediately after the Effective Date, or (b) was nominated for election or elected to the Board with the approval of, or whose election to the Board was ratified by, at least a majority of the Continuing Directors who were members of the Board at the time of that nomination or election; provided, however, that in no case shall (1) the public offering and sale of the Company’s common stock by its shareholders pursuant to a registered secondary offering, (2) the voluntary or involuntary bankruptcy of the Company, or (3) any transaction or series of transactions that would not qualify as a change in control within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) constitute a Change of Control.
“Good Reason” means: (i) any material breach by the Company of this Agreement; (ii) a change in the Executive’s reporting relationships such that the Executive no longer directly reports to the President and Chief Executive Officer; (iii) a material reduction or material adverse change in the Executive’s current duties, responsibilities and authority, without the Executive’s consent; (iv) the demand by the Company for the Executive to relocate Executive’s primary office location from Northborough, Massachusetts, provided (1) such relocation increases the Executive’s regular vehicular one-way in-office commute to such new location by more than forty (40) miles, and (2) the Company does not offer the Executive a remote working arrangement as part of the office relocation, without the Executive’s consent; or (v) any reduction by the Company in the Executive’s Base Salary or the Executive’s Performance Bonus Target without the Executive’s consent, except for across-the-board compensation reductions based on the Company’s financial performance similarly affecting all or substantially all senior management employees of the Company. For purposes hereof, whether or not the Executive has Good Reason to terminate the Executive’s employment by the Company pursuant to subparagraphs (i) through (v) above shall be determined by the Company in its reasonable, good faith discretion, based upon the facts known to the Company at the relevant time.
“Permanent Disability” means the Executive is unable to perform, by reason of physical or mental incapacity, the Executive’s then duties or obligations to the Company, for a total period of one hundred eighty (180) days in any three hundred sixty (360) day period.
“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or any other entity, including a governmental entity or any department, agency or political subdivision thereof.
“Qualifying Termination” means the date on which the Executive’s employment is terminated by the Company without Cause as provided in Section 3(e), or the Executive terminates employment for Good Reason as provided in Section 3(f).
2. Employment.
(a) Term. The term of this Agreement shall commence on the Effective Date and continue until the date that is one (1) year after the Effective Date (the “Expiration Date”), unless terminated earlier by the Company or by the Executive in accordance with the provisions of Section 3 of this Agreement (the “Initial Employment Period”). The Initial Employment Period shall automatically renew for additional one (1) year terms (each such term being a “ Renewal Employment Period”), and the Expiration Date shall be the last day of such Renewal Employment Period, unless either the Company or the Executive provides written notice of non-renewal of the Employment Period to the other party at least sixty (60) calendar days before the applicable Expiration Date, and if extended, any Renewal Employment Period may be terminated earlier by the Company or by the Executive in accordance with the provision of Section 3 of this Agreement. As used in this Agreement, the “Employment Period” shall refer to the Initial Employment Period and any Renewal Employment period, as applicable.
(b) Position and Duties.
(i) During the Employment Period, the Executive shall serve as Chief Human Resources Officer of the Company and shall have the duties, responsibilities and authority consistent with such position that are designated by the Company’s President and Chief Executive Officer, subject to the direction and supervision of the Board.
(ii) The Executive shall devote the Executive’s best efforts and full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company. The Executive shall perform the Executive’s duties and responsibilities to the best of the Executive’s ability in a diligent, trustworthy businesslike and efficient manner. Notwithstanding the foregoing, the Executive may, to the extent not otherwise prohibited by this Agreement, devote such amount of time as does not interfere or compete with the performance of the Executive’s duties under this Agreement to any one or more of the following activities: (A) engaging in charitable activities, including serving on the boards of directors of charitable organizations, consistent with such policies, rules and regulations as the Company may adopt from time to time, or (B) serving on the board of directors of any other company with the prior written approval of the Company.
(iii)The Executive agrees to abide by the Company’s Code of Business Conduct and Ethics, Anti- Corruption Policy, Insider Trading Policy, Disclosure Controls & Procedures Policy, Form 8-K Disclosure Compliance Policy, Regulation FD Disclosure Policy, Compensation Recoupment Policy, Environmental & Sustainability Policy, Health & Safety Policy, and the Delegation of Authority Policy, each as in effect from time to time and such other policies, rules and regulations as the Company may adopt from time to time.
(c) Salary and Benefits. During the Employment Period, Executive shall be entitled to the following compensation and benefits:
(i) Base Salary. During the Employment Period, the Executive’s base salary shall be $400,000 (such annual salary, as it may be adjusted upward by the Board in its discretion, being referred to as the “Base Salary”). The Base Salary shall be payable in regular installments in accordance with the Company’s general payroll practices, shall be subject to customary withholding. Base Salary may be increased at the discretion of the Board, and may be decreased in the discretion of the Board only in connection with across-the-board compensation reductions based on the Company’s financial performance similarly affecting all or substantially all senior management employees of the Company.
(ii) Annual Performance Bonus. The Executive shall be eligible to earn a discretionary annual cash incentive bonus (the “Performance Bonus”) of not less than 50% of the Executive’s then effective Base Salary (each, a “Performance Bonus Target”), subject in all respects to the terms and conditions established by the Board, and provided that, notwithstanding the foregoing, the Executive’s Performance Bonus Target for the 2023 fiscal year shall be pro-rated based on the portion of such fiscal year from the Effective Date through the end of such fiscal year.
(iii) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable travel and other expenses (including periodic dues and membership fees pertaining to pertinent licensing, registrations, professional associations and industry groups with the prior approval of the Company) incurred by the Executive in connection with the performance of the Executive’s duties and obligations under this Agreement. The Executive shall comply with such reasonable limitations and reporting requirements with respect to expenses as may be established by the Company from time to time.
(iv) Benefit Plans and Programs. The Executive shall be entitled to participate in all compensation or employee benefit plans or programs and receive all benefits and perquisites for which salaried employees of the Company generally are eligible under any plan or program now or established later by the Company on the same basis as similarly situated senior executives of the Company. The Executive may participate to the extent permissible under the terms and provisions or such plans or programs, in accordance with program provisions. Nothing in this Agreement shall preclude the Company from amending or terminating any of the plans or programs applicable to salaried employees or senior executives of the Company as long as such amendment or termination is applicable to all salaried employees or senior executives, as the case may be, so long as such plans or programs are replaced with plans no less favorable, in the aggregate, than existing plans.
(v) Long-Term Compensation. The Executive shall also be eligible for grants of long-term incentive compensation, at the discretion of and subject to such terms and conditions as established by the Compensation and Leadership Development Committee of the Board (the “Compensation Committee”). Within thirty (30) days after the Effective Date, the Company will request that the Compensation Committee approve a new hire equity grant to the Executive under the Aspen Aerogels 2023 Equity Incentive Plan (the “Equity Incentive Plan”), with an aggregate fair market value as of the date of grant of approximately $400,000, allocated approximately 75% to non- qualified stock options and 25% to restricted share units, with vesting in substantially equal annual installments over a three-year period from the Effective Date (or if later, from the date of grant), and with such other terms as established by the Compensation Committee and evidenced by an award agreement substantially in the form approved by the Compensation Committee under the Equity Incentive Plan.
(vi) Clawback Policy. All compensation shall be subject to any forfeiture or recoupment pursuant to the Company’s Compensation Recoupment Policy, as then in effect, or any successor compensation recoupment or “clawback” policy established by the Company or the Board generally for senior executives from time to time, and any other such policy required by applicable law.
(d) Change of Control: Equity Awards. In the event of a Change of Control, notwithstanding anything to the contrary in any then outstanding stock option agreement or other equity award agreement (unless otherwise specifically stated in any equity award agreement that provides for vesting based wholly or in part upon the achievement of performance objectives), to the extent any outstanding stock options and other equity awards are not assumed by the Company’s successor in a Change of Control, the vesting of all stock options and other equity awards (unless otherwise specifically stated in any equity award agreement that provides for vesting based wholly or in part upon the achievement of performance objectives) outstanding and held by the Executive as of the Change of Control shall immediately accelerate and become fully vested and exercisable, subject to any permitted action by the Board upon a Change of Control under the Company’s applicable equity plan to terminate the stock options or other equity awards upon a Change of Control, provided, however, that the foregoing shall not apply to any outstanding equity award to the extent such acceleration of vesting would result in a violation of Section 409A of the Code.
3. Termination. The Executive’s employment may be terminated under the following
circumstances:
(a) Expiration. The Executive’s employment hereunder shall terminate upon the Expiration Date as a result of a non-renewal by either party, following notice of non-renewal in accordance with Section 2(a).
(b) Death. The Executive’s employment hereunder shall terminate upon Executive’s death.
(c) Disability. The Company may terminate the Executive’s employment upon the Executive’s Permanent Disability. If any question shall arise as to whether the Executive has a Permanent Disability so as to be unable to perform the essential functions of the Executive’s then existing position or positions with or without reasonable accommodation, the Executive may, and at the request of the Company shall, submit to the Company a certification in reasonable detail by a physician selected by the Company to whom the Executive or the Executive’s guardian has no reasonable objection as to whether the Executive is so disabled or how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue. The Executive shall cooperate with any reasonable request of the physician in connection with such certification. If such question shall arise and the Executive shall fail to submit such certification, the Company’s determination of such issue shall be binding on the Executive. Nothing in this Section 3(c) shall be construed to waive the Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29
U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.
(d) Termination by Company for Cause. The Company may terminate the Executive’s
employment hereunder for Cause.
(e) Termination by Company Without Cause. The Company may terminate the Executive’s
employment hereunder at any time without Cause.
(f) Termination by the Executive. The Executive may terminate the Executive’s employment hereunder at any time for any reason, including but not limited to Good Reason consistent with the Good Reason Process (hereinafter defined). “Good Reason Process” shall mean that (i) the Executive reasonably determines in good faith that a Good Reason condition has occurred; (ii) the Executive notifies the Company in writing of the Good Reason condition within sixty (60) days of the first occurrence of such condition; (iii) the Executive cooperates in good faith with the Company’s efforts, for a period not less than thirty (30) days following receipt of such notice to remedy the condition (the “Cure Period”); (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Executive terminates the Executive’s employment within sixty (60) days after the end of the Cure Period by notifying the Company in writing of such termination for Good Reason. If, during the Cure Period, the Company cures the Good Reason condition or demonstrates to the Executive’s reasonable satisfaction, to be exercised in good faith, that a Good Reason condition has not occurred, Good Reason shall be deemed not to have occurred. For the avoidance of doubt, a notice of non-renewal of the Employment Period by Executive shall not constitute a termination for Good Reason.
(g) Notice of Termination. Except for a termination as specified in Section 3(a) and 3(b), any termination of the Executive’s employment by the Company or any such termination by the Executive shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. Failure to provide a Notice of Termination by either Party pursuant to this Section 3(g) shall be a material breach of the Agreement.
(h) Date of Termination. “Date of Termination” shall mean: (i) if the Executive’s employment is terminated because the Agreement’s Employment Period expires under Section 3(a), the date of the Expiration Date; (ii) if the Executive’s employment is terminated by Executive’s death, the date of Executive’s death; (iii) if the Executive’s employment is terminated on account of Permanent Disability under Section 3(c) or by the Company for Cause under Section 3(d), the date on which Notice of Termination is given; (iv) if the Executive’s employment is terminated by the Company under Section 3(e), the date on which a Notice of Termination is given; (v) if the Executive’s employment is terminated by the Executive under Section 3(f) without Good Reason, thirty (30) days after the date on which a Notice of Termination is given, and (vi) if the Executive’s employment is terminated by the Executive under Section 3(f) with Good Reason, the date which is specified in the Notice of Termination, provided that such date must occur within the sixty (60) day period after the end of the Cure Period. Notwithstanding the foregoing, in the event that either party gives a Notice of Termination, the Company may unilaterally accelerate the Date of Termination, without any additional compensation in lieu of notice being due to the Executive as a result of such acceleration.
4. Compensation on, and Effect of, Termination.
(a) Termination Generally. If the Executive’s employment with the Company is terminated for
any reason, the Company shall pay or provide to the Executive (or to the Executive’s authorized representative or estate) (i) any Base Salary earned through the Date of Termination, unpaid expense reimbursements (subject to, and in accordance with, Section 2(c) of this Agreement) and, to the extent required by law, unused vacation that accrued through the Date of Termination, such amounts to be paid no more than thirty (30) days after the Executive’s Date of Termination (unless required to be paid at an earlier time by law); and (ii) any vested benefits the Executive may have under any employee benefit plan of the Company through the Date of Termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefits”).
(b) Qualifying Termination Prior to A Change of Control. If the Executive incurs a Qualifying Termination during the Employment Period and prior to a Change of Control, then, in addition to the Accrued Benefits, and subject to the Executive signing a separation agreement containing, among other provisions, a general release of claims in favor of the Company and related persons and entities and a non-competition provision (as applicable), in a form and manner reasonably satisfactory to the Company (the “Separation Agreement and Release”) and the Separation Agreement and Release becoming fully effective, all within sixty (60) days of the Date of Termination (the “Release Period”):
(i) the Company shall pay the Executive an amount equal to one hundred percent (100%) of the sum of (A) the Executive’s then effective Base Salary and (B) an amount equal to the Executive’s then effective Performance Bonus Target (the “Severance Amount”).
(ii) the Company shall pay the Executive any accrued but unpaid Performance Bonus for the prior fiscal year then owed or fully earned by the Executive in accordance with Section 2(c)(ii) above (the “Earned Performance Bonus”).
(iii)the Company shall pay the Executive a pro-rata portion of the Performance Bonus based upon actual achievement of the performance metrics for the fiscal year in which the Date of Termination occurs (calculated by dividing the number of full months of the applicable fiscal year through the Date of Termination by twelve (12), and multiplying this fraction by the Executive’s then effective Performance Bonus Target) (the “Pro-Rata Bonus”).
(iv)the COBRA eligible health care insurance benefits (e.g., health, dental) being provided by the Company to the Executive on the Date of Termination shall continue in place at the same cost to the Executive as applied to “active” participants on the Date of Termination for a period equal to the lesser of (i) the COBRA Benefit Period or (ii) twelve (12) months (“Health Care Continuation Benefit”). The “COBRA Benefit Period” means the period of time after such termination during which COBRA benefits are available to the Executive as of the Date of Termination as set forth in the Company’s health care plan. The Executive shall be responsible for applying for the COBRA eligible health care insurance benefit, paying for the same and submitting evidence of such premium costs to the Company for reimbursement during the COBRA Benefit Period. The Company shall reimburse the Executive for the employer’s portion of such premiums (as applicable to the active rate) within fifteen (15) days of receipt of evidence of the payment of the premium costs to the Company (“Premium Reimbursement Payments”).
Notwithstanding the foregoing, if the Company determines, in its sole discretion, that such reimbursement of the premiums would result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Code or any statute or regulation of similar effect (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of reimbursing the premiums, the Company, in its sole discretion, may elect to instead pay the Executive on the first day of each month of such period, a fully taxable cash payment equal to the premiums for that month, subject to applicable tax withholdings (such amount, the “Special Severance Payment”), for the remainder of such period. The Executive may, but is not obligated to, use such Special Severance Payment toward the cost of premiums.
(v) if the Executive requests, the Company shall pay (“Outplacement Payments”) for an outplacement service (to be selected by the Company) for services rendered in assisting the Executive in locating another job, for a period of six (6) months following the Date of Termination or until the Executive begins working for another employer, whichever occurs first
(“Outplacement Services”). These Outplacement Payments, which the Company shall make directly to the vendor providing Outplacement Services, are contingent upon the Executive ’s cooperation with the outplacement service and upon active efforts by the Executive to locate another position.
(vi) Notwithstanding anything to the contrary in any then outstanding stock option agreement or other equity award agreement (unless otherwise specifically stated in any equity award agreement that provides for vesting based wholly or in part upon the achievement of performance objectives), (a) the vesting of such number of stock options and other equity awards outstanding and held by the Executive as would have vested in the twelve (12) months immediately following the Date of Termination had the Executive continued the Executive’s employment for such twelve (12) month period shall immediately accelerate and become vested and exercisable as of the Date of Termination, and (b) subject to any permitted action by the Board upon a Change of Control or other merger, sale, dissolution or liquidation of the Company under Company’s applicable equity plan to terminate the stock options or other equity awards, all vested stock options held by the Executive shall be exercisable for one (1) year from the Date of Termination.
(c) Timing and Form of Severance Payments. The benefits provided to Executive under
Sections 4(b)(i), (ii), (iii), (iv), and (v) shall be paid in the form and at the time specified below:
(i) The Severance Amount shall be paid in substantially equal installments in accordance with the Company’s payroll practice over twelve (12) months commencing within sixty (60) days after the Date of Termination; provided, however, that if the sixty (60) day period begins in one calendar year and ends in a second calendar year, the Severance Amount shall begin to be paid in the second calendar year by the last day of such sixty (60) day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).
(ii) Earned Performance Bonus shall be paid in a lump sum within sixty (60) days after the Date of Termination; provided, however, that if the sixty (60) day period begins in one calendar year and ends in a second calendar year, the Earned Performance Bonus shall be paid in the second calendar year by the last day of such sixty (60) day period.
(iii) The Pro-Rata Bonus shall be paid when the annual performance bonus would have been otherwise paid if Executive had continued the Executive’s employment through the applicable performance period.
(iv) Health Care Continuation Benefit shall commence immediately upon the Executive’s Date of Termination and the Executive shall immediately become eligible for Reimbursement Payments in accordance with Section 4(b)(iii), provided however if an executed Separation Agreement and Release has not become fully effective within Release Period, the Company shall immediately cease making Premium Reimbursement Payments (or, if applicable, Special Severance Payments) and the Executive shall be obligated to promptly repay to the Company any previously received Premium Reimbursement Payments (or, if applicable, any Special Severance Payments).
(v) Outplacement Services shall commence immediately upon the Executive’s Date of Termination, provided however if an executed Separation Agreement and Release has not become fully effective within the Release Period, Outplacement Services shall immediately cease and the Executive shall be obligated to promptly repay to the Company any previously made Outplacement Payments.
(d) Rights to Severance. The receipt of any severance payments or benefits pursuant to Section
4(b) shall be subject to the Executive’s submission to the Company of an executed Separation Agreement and Release that becomes fully effective within the Release Period and the Executive’s continued compliance with the covenants in Sections 7, 8, and 9 herein, so long as the Company provides the form of Severance Agreement to the Executive no less than twenty-one (21) days prior to the end of the Release Period. In the event the Executive materially breaches any of the provisions set forth in Sections 7, 8 or 9 herein or in the Separation Agreement and Release, and does not cure said breach(es) within thirty (30) days of receiving detailed written notice describing the alleged breach(es), in addition to all other legal and equitable remedies, the Company shall have the right to terminate or suspend all continuing payments and benefits to which the Executive may otherwise be entitled pursuant to Section 4 without affecting the effectiveness of the Executive’s release or the Executive’s obligations under the Separation Agreement and Release.
(e) Other Termination Events. The Executive hereby agrees that no severance payments or benefits under Section 4(b) shall be payable or provided upon termination of the Executive’s employment with the Company (i) by the Company with for Cause; (ii) by the Executive without Good Reason; (iii) as a result of the Executive’s death or Permanent Disability; or (iv) as a result of non-renewal of the Employment Period by either the Executive or the Company pursuant to Section 2(a), and the Executive hereby waives any claim for such severance payment or benefits except for the Accrued Benefits.
5. Compensation on Termination after a Change of Control. The provisions of this Section 5 shall apply in lieu of, and expressly supersede, other than with respect to the requirement for the Executive’s submission to the Company of an executed Separation Agreement and Release that becomes fully effective within the Release Period as described in Section 4(d), the provisions of Section 4(b) regarding severance payments and benefits upon a Qualifying Termination, if a Qualifying Termination occurs within twenty-four (24) months after the occurrence of a Change of Control (“COC Qualifying Termination”). This Section 5 shall terminate and be of no force or effect beginning twenty-four (24) months after the occurrence of a Change of Control.
(a) Qualifying Termination after a Change of Control. During the Employment Period, if the Executive incurs a COC Qualifying Termination, then in addition to the Accrued Benefits, and subject to the signing of the Separation Agreement and Release by the Executive and th e Separation Agreement and Release becoming irrevocable within the Release Period:
(i) the Company shall pay the Executive an amount equal to two hundred percent (200%) of the sum of (A) the Executive’s then effective Base Salary and (B) the Executive’s then effective Performance Bonus Target (“COC Severance Amount”).
(ii) the Company shall pay the Executive any accrued but unpaid Performance Bonus for the prior fiscal year then owed or fully earned by the Executive in accordance with Section 2(c)(ii) above
(“COC Earned Performance Bonus”).
(iii) the Company shall pay the Executive the Pro-Rata Bonus.
(iv)the COBRA eligible health care insurance benefits (e.g., health, dental) being provided by the Company to the Executive on the Date of Termination shall continue in place at the same cost to the Executive as applied to “active” participants on the Date of Termination for a period equal to the lesser of (i) the COBRA Benefit Period or (ii) twenty-four (24) months (“COC Health Care Continuation Benefits”). The Executive shall be responsible for applying for the COBRA eligible health care insurance benefit, paying for the same and submitting evidence of such premium costs to the Company for reimbursement during the COBRA Benefit Period. The Company shall reimburse the Executive for the employer’s portion of such premiums (as applicable to the active rate) within fifteen (15) days of receipt of evidence of the payment of the premium costs to the Company (“COC Premium Reimbursement Payments”). Notwithstanding the foregoing, if the Company determines, in its sole discretion, that such reimbursement of the premiums would result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Code or any statute or regulation of similar effect (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of reimbursing the premiums, the Company, in its sole discretion, may elect to instead pay the Executive on the first day of each month of such period a fully taxable cash payment equal to the premiums for that month, subject to applicable tax withholdings (such amount, the “COC Special Severance Payment”), for the remainder of such period. The Executive may, but is not obligated to, use such Special Severance Payment toward the cost of premiums.
(v) if the Executive wishes, the Company shall pay for an outplacement service (“ COC Outplacement Payments”) (to be selected by the Company) for services rendered in assisting the Executive in locating another job, for a period of six (6) months following the Date of Termination or until the Executive begins working for another employer, whichever occurs first (“COC Outplacement Services”). These COC Outplacement Payments, which the Company shall make directly to the vendor providing the COC Outplacement Services, are contingent upon the Executive’s cooperation with the outplacement service and upon active efforts by the Executive to locate another position.
(vi) COC Severance Amount shall be payable in a lump sum within sixty (60) days after the Date of Termination; provided, however, that if the sixty (60) day period begins in one calendar year and ends in a second calendar year, such payment shall be paid or commence to be paid in the second calendar year by the last day of such sixty (60) day period.
Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).
(vii) COC Earned Performance Bonus shall be paid in a lump sum within sixty (60) days after the Date of Termination; provided, however, that if the sixty (60) day period begins in one calendar year and ends in a second calendar year, the Earned Performance Bonus shall be paid in the second calendar year by the last day of such sixty (60) day period.
(viii) The Pro-Rata Bonus shall be paid when the annual performance would have been paid if
Executive had continued the Executive’s employment through the payment date.
(ix) COC Health Care Continuation Benefit shall commence immediately upon the Executive ’s Date of Termination and the Executive shall immediately become eligible for Reimbursement Payments in accordance with Section 5(a)(iv), provided however if an executed Separation Agreement and Release has not become fully effective within the COC Release Period, the Company shall immediately cease making COC Premium Reimbursement Payments (or, if applicable, any COC Special Severance Payments) and the Executive shall be obligated to promptly repay to the Company any previously received COC Premium Reimbursement Payments (or, if applicable, any COC Special Severance Payments).
(x) COC Outplacement Services shall commence immediately upon the Executive’s Date of Termination, provided however if an executed Separation Agreement and Release has not become fully effective within the COC Release Period, COC Outplacement Services shall immediately cease and the Executive shall be obligated to promptly repay to the Company any previously made COC Outplacement Payments.
(xi) Notwithstanding anything to the contrary in any then outstanding stock option agreement or other equity award agreement (unless otherwise specifically stated in any equity award agreement that provides for vesting based wholly or in part upon the achievement of performance objectives), the vesting of all stock options and other equity awards outstanding and held by the Executive shall immediately accelerate and become fully vested and exercisable as of the Date of Termination, and subject to any permitted action by the Board upon a Change of Control pursuant to the Company’s applicable equity plan to terminate the stock options or other equity awards upon a Change of Control, all vested stock options shall be exercisable for one (1) year from the Date of Termination.
(b) Rights to Severance. The receipt of any severance payments or benefits in Section 5 is subject
to the Executive’s compliance with the provisions of Section 4(d) above.
(c) Other Termination Events. The Executive hereby agrees that no severance payments or benefits under Section 5(a) shall be payable or provided upon termination of the Executive’s employment with the Company (i) by the Company with Cause; (ii) by the Executive without Good Reason; (iii) as a result of the Executive’s death or Permanent Disability; or (iv) as a result of non-renewal of the Employment Period by either the Executive or the Company pursuant to Section 2(a), and the Executive hereby waives any claim for such severance payments or benefits except for the Accrued Benefits.
(d) Parachute Payments. If Independent Tax Counsel (as that term is defined below) determines that the aggregate payments and benefits provided or to be provided to the Executive pursuant to this Agreement, and any other payments and benefits provided or to be provided to the Executive from the Company or any of its subsidiaries or other affiliates or any successors thereto constitute “parachute payments” as defined in Section 280G of the Code (“Parachute Payments”) that would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then, except as otherwise provided in the next sentence, such Parachute Payments shall be reduced to the extent the Independent Tax Counsel shall determine is necessary (but not below zero) so that no portion thereof shall be subject to the Excise Tax. If Independent Tax Counsel determines that the Executive would receive in the aggregate greater payments and benefits on an after tax basis if the Parachute Payments were not reduced pursuant to this Section 5(f), then no such reduction shall be made. The determination of which payments or benefits shall be reduced to avoid the Excise Tax shall be made by the Independent Tax Counsel, provided that the Independent Tax Counsel shall reduce or eliminate, as the case may be, payments or benefits in the following order (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section
409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits. To the extent any payment is to be made over time (e.g., in installments, etc.), then the payments shall be reduced in reverse chronological order. The determination of the Independent Tax Counsel under this Section 5(f) shall be final and binding on all parties hereto. For purposes of this Section 5(f), “Independent Tax Counsel” shall mean a lawyer, a certified public accountant with a nationally recognized accounting firm, or a compensation consultant with a nationally recognized actuarial and benefits consulting firm with expertise in the area of executive compensation tax law, who shall be selected by the Board, and whose fees and disbursements shall be paid by the Company. The Executive shall have the right, at the Executive’s own expense, to retain Independent Tax Counsel to rebut any decision made by the Company’s Independent Tax Counsel, who may consider such rebuttal before making its final and binding determination.
6. Tax, Insurance and Indemnity.
(a) Insurance and Indemnity. In no event shall the termination of the Executive’s employment by the Company or any such termination by the Executive pursuant to this Agreement release any claim by the Executive for indemnification that he or she is otherwise entitled to under any director or officer’s insurance policy or any articles, bylaws or other foundation documents of the Company. The Executive shall be entitled to the protections set forth the Company’s Bylaws (as may be amended and restated from time to time) with respect to Indemnification of Directors. Without limiting the foregoing, the Company shall provide Executive with reasonable director’s and officer’s insurance coverage that is at least as favorable as the coverage in existence on the date of this Agreement (the “Existing D&O Coverage”); provided, however, that in no event shall the Company be obligated to maintain director’s and officer’s insurance coverage to the extent that premiums thereunder exceed two hundred percent (200%) of the premiums payable by the Company under the Existing D&O Coverage on the date hereof (the “Threshold”); provided, further, that to the extent such premiums exceed the foregoing Threshold, the Company shall obtain director’s and officer’s insurance coverage on terms as similar as reasonably practicable to the terms of the Existing D&O Coverage without exceeding the Threshold. Such insurance coverage shall continue in effect during the Employment Period and after the Employment Period ends for a period of six (6) years thereafter. The cost of such coverage shall be paid by the Company. Notwithstanding anything to the contrary in this Agreement, upon the occurrence of a Change of Control, the obligations set forth in this section shall terminate, provided that the Company shall (i) secure “tail insurance” with respect to the Existing D&O Coverage on reasonable terms and conditions of coverage, and (ii) require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to honor any indemnification obligations that the Executive is otherwise entitled to under any articles, bylaws or other foundation documents of the Company in the same manner as the Company’s directors and officers immediately prior to such Change of Control.
(b) 409A.
(i) Anything in this Agreement to the contrary notwithstanding, if at the time of the Exec utive’s separation from service within the meaning of Section 409A of the Code, the Company determines that the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement on account of the Executive’s separation from service would be considered deferred compensation otherwise subject to the twenty percent (20%) additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six (6) months and one (1) day after the Executive’s separation from service, or (B) the Executive’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with its original schedule.
(ii) All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by the Executive during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one (1) taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(iii) To the extent that any payment or benefit described in this Agreement constitutes “non- qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Executive’s termination of employment, then such payments or benefits shall be payable only upon the Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
(iv) The parties intend that this Agreement shall be administered in accordance with Section 409A
of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code.
Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-
2(b)(2). The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.
(v) The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.
7. Confidentiality.
(a) Definition of Confidential Information. “Confidential Information” shall mean: trade secrets and confidential and proprietary information of the Company, or any information provided to the Executive or the Company under an obligation of confidentiality to a third party, or any confidential, trade secret, or proprietary information acquired by the Company from others with whom the Company or any affiliate has a business relationship, whether in written, oral, electronic or other form, including, but not limited to: (i) trade secrets, inventions, mask works, ideas, processes, algorithms, formulae, software in source or object code, data programs, other works of authorship, know-how, improvements, technology direction, product or technology development methodology, technology assessment, experimental procedures, results, process development, product plans, development plans, testing procedures, quality control and testing processes, discoveries, developments, designs and techniques, any other proprietary technology and all Inventions (as defined in Section 9); (ii) information regarding research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, margins, discounts, credit terms, pricing and billing policies, quoting procedures, methods of obtaining business, forecasts, future plans and potential strategies, financial projections and business strategies, operational plans, financing and capital-raising plans, activities and agreements, internal services and operational manuals, methods of conducting Company business, suppliers and supplier information, sales techniques and strategies, training methods and materials, and purchasing; (iii) information regarding customers and potential customers of the Company, including customer lists, names, representatives, their needs or desires with respect to the types of products or services offered by the Company, proposals, bids, contracts and their contents and parties, the type and quantity of products and services provided or sought to be provided to customers and potential customers of Company and other non-public information relating to customers and potential customers; (iv) information regarding any of the Company’s business partners and its services, including names, representatives, proposals, bids, contracts and their contents and parties, the type and quantity of products and services received by the Company, and other non-public information relating to business partners; (v) information regarding personnel, employee lists, compensation, and employee skills; (vi) any other non-public information which a competitor of the Company could use to the competitive disadvantage of the Company; and (vii) any other scientific, technical or trade secrets of the Company or of any third party provided to the Executive or the Company under a condition of confidentiality, provided that Confidential Information shall not include information that was known to the Executive prior to joining the Company, general industry knowledge, or is in the public domain other than through any fault or act by the Executive.
(b) Protection and Non-Disclosure of Confidential Information. The Executive expressly acknowledges and agrees that all Confidential Information is and shall remain the sole property of the Company or the third party to whom the Company owes an obligation of confidentiality and that the Executive shall hold it in strictest confidence. The Executive shall at all times, both during the Executive’s employment with the Company and after the termination of the Executive’s employment for any reason or for no reason, maintain in confidence and shall not, without the prior written consent of the Company, use (except in the course of performance of the Executive’s duties for the Company or by court order), disclose, or give to others any Confidential Information. The terms of this Section 7 are in addition to, and not in lieu of, any statutory or other contractual or legal obligation that the Executive may have relating to the protection of the Company’s Confidential Information. The terms of this Section 7 shall survive indefinitely any termination of the Executive’s employment with the Company for any reason or for no reason.
(c) Notification to Company. In the event the Executive is questioned by anyone not employed by the Company or by an employee of or a consultant to the Company not authorized to receive Confidential Information, in regard to any Confidential Information or concerning any fact or circumstance relating thereto, the Executive agrees to promptly notify the Company’s Chief Legal Officer and General Counsel.
(d) Return of Confidential Information. Upon the termination of the Executive’s employment with the Company for any reason or for no reason, or if the Company otherwise requests at any other time before such termination, the Executive shall: (i) return to the Company all tangible Confidential Information and copies thereof (regardless how such Confidential Information or copies are maintained); and (ii) deliver to the Company any property of the Company which may be in the Executive’s possession, including, but not limited to, products, materials, memoranda, notes, records, reports, or other documents or photocopies of the same. The Executive agrees that, when the Executive leaves the employ of the Company, or at any time the Company may request, the Executive shall deliver to the Company any and all Company equipment provided to the Executive including laptops and other electronic devices, as well as drawings, notes, memoranda, specifications, devices, formulas, and any other documents pertaining to the Company and/or the Company’s business, including, but not limited to, computer files, together with all copies thereof, and any other material containing or disclosing any Confidential Information as defined in Section
7(a) above (collectively, “such Documents”). The above shall include any and all such Documents contained on, for example, a home computer system, tablet or smart phone. The Executive further agrees not to retrieve or retain in any way any such Documents, and the Executive shall, for example, first return such Documents to the Chief Legal Officer and General Counsel and then consult with the Company’s Chief Legal Officer and General Counsel regarding the removal and deletion of such Documents from any home computer system, personal electronic device, or other personal property and act in accordance with their instructions. The Executive expressly authorizes the Company’s designated representatives to access such equipment or devices for this limited purpose and shall provide any passwords or access codes necessary to accomplish this task. The Executive further agrees that any property situated on the Company’s premises and/or owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice.
(e) Notice Pursuant to Defend Trade Secrets Act. Notwithstanding any provision of this Agreement prohibiting the disclosure of Inventions or other Confidential Information, the Executive understands that they may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a Company trade secret that: (i) is made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, if the Executive files a lawsuit or other court proceeding against the Company for retaliating against them for reporting a suspected violation of law, the Executive may disclose the Company trade secret to the attorney representing them and use the Company trade secret in the court proceeding, if the Executive files any document containing the Company trade secret under seal and do not disclose the trade secret, except pursuant to court order.
8. Non-Competition and Non-Solicitation.
(a) Interests to be Protected. The Company and the Executive acknowledge that Executive shall perform essential services for the Company, its employees, and/or its stockholders during the Employment Period. The Executive shall be exposed to, have access to, and work with, a considerable amount of Confidential Information. The Company and the Executive also expressly recognize and acknowledge that the personnel of the Company have been trained by, and are valuable to, the Company and that the Company shall incur substantial recruiting and training expenses if the Company must hire new personnel or retrain existing personnel to fill vacancies. The Company and the Executive expressly recognize that it could seriously impair internal and external goodwill and diminish the value of Company’s business should the Executive unfairly compete with the Company in any manner whatsoever. The Company and the Executive acknowledge this covenant is reasonable and it is necessary for the protection of the Company, its stockholders, and employees. For these and other reasons, and the fact that there are many other employment opportunities available to the Executive if the Executive’s employment is terminated, the Company and the Executive are in full and complete agreement that the covenants in this Section 8 are fair and reasonable and are entered into freely, voluntarily, and knowingly.
(b) Non-Competition and Non-Solicitation Definitions.
(i) Non-Competition Period. “Non-Competition Period” shall mean the period commencing on the Effective Date and continuing until one (1) year from the date on which the Executive’s employment with the Company terminates for Cause, or the Executive resigns for any reason or no reason, including Good Reason, or because of a non-renewal of the Employment Period by the Executive pursuant to Section 2(a). If the Executive breaches a fiduciary duty to the Company or takes any property belonging to or in the custody of the Company, physically or electronically, the Non-Competition Period shall be extended to two (2) years from the date on which the Executive’s employment with the Company terminates. In the case of such an extension, the Company shall not increase the Special Consideration (as defined below).
(ii) Non-Solicitation Period. “Non-Solicitation Period” shall mean the period commencing on the Effective Date and continuing until one (1) year from the date on which the Executive’s employment with the Company terminates for any reason or no reason.
(iii)Geographic Reach. “Geographic Reach” shall mean the geographic area in which the Executive provided services or had a material presence or influence within the last two (2) years of the Executive’s employment by the Company.
(iv)Competitive Business. “Competitive Business” shall mean the research, development, manufacturing, commercialization, marketing, sales, distribution of products, services and technologies involving aerogels.
(v) Competitive Services. “Competitive Services” shall mean those activities or services which the Executive provided regardless of job title, at any time within the last two (2) years of the Executive’s employment by the Company.
(vi) Customer or Potential Customer. “Customer or Potential Customer” shall mean any person or entity who or which, at any time during the one year period prior to the Executive’s contact with such person or entity, if such contact occurs during the Executive’s employment or, if such contact occurs following the termination of the Executive’s employment, during the one year period prior to the date the Executive’s employment with the Company ends: (A) contracted for, was billed for, or received from the Company any product, service, or process with which the Executive worked directly or indirectly during the Executive’s employment by the Company or about which the Executive acquired Confidential Information; or (B) was in contact with the Executive or in contact with any other employee, owner, or agent of the Company, of which contact the Executive was or should have been aware, concerning the sale or purchase of, or contract for, any product, service, or process with which the Executive worked directly or indirectly during the Executive’s employment with the Company or about which the Executive acquired Confidential Information; or (C) was solicited by the Company in an effort in which the Executive was involved or of which the Executive was aware.
(c) Covenant Not-To-Compete. During the Non-Competition Period, within the Geographic Reach, and without the prior written consent of the Company (which consent the Company may grant or withhold in its sole discretion) the Executive shall not engage in any Competitive Services through or on behalf of the Executive, a third party or another person or entity engaged in a Competitive Business (the “Covenant Not-to-Compete”), unless the Company, at its sole discretion and option, chooses not to enforce the Covenant Not-to-Compete by informing the Executive in writing of its election at the time of or prior to the Date of Termination. For the avoidance of doubt, the Covenant Not-to-Compete shall not apply if the Executive has been terminated without Cause or in the event of non-renewal of the Employment Period by the Company pursuant to Section 2(a), provided that, in order for the Executive to be eligible for severance payments and benefits as described in Section 4 or 5 of this Agreement (as applicable), the Executive shall agree to a non-competition covenant as a term of the Separation Agreement and Release in a form substantially similar to the Covenant Not-to-Compete contained in this Section 8.
(d) Fair and Reasonable Consideration. The Executive acknowledges and agrees that the Covenant Not-to-Compete is supported by fair and reasonable consideration independent of, and in addition to, the Executive’s continued employment by the Company and the Special Consideration (as defined below). Without limiting the foregoing, the Executive acknowledges and agrees that the Executive’s receipt of a lump sum payment in the amount of $500.00 (the “Consideration Payment”), constitutes fair and reasonable consideration to support the Executive’s Covenant Not-to-Compete. The Consideration Payment shall be paid to the Executive on the Company’s next regularly scheduled payroll date following the Effective Date, subject to customary withholding.
(e) Special Consideration. As consideration for the Covenant Not-To-Compete, if the Company wishes to enforce this Covenant Not-To-Compete, then Company shall pay the Executive, and the Executive agrees to accept, a payment of fifty percent (50%) of the Executive’s highest annualized base salary over the two years prior to the Date of Termination in substantially equal installments in accordance with the Company’s general payroll practices and subject to customary withholding during the Non-Competition Period (the “Special Consideration”), provided that in the event the Executive is eligible for severance payments or benefits as described in Section 4 or 5 herein (as applicable), such severance payments and benefits shall instead be considered the Special Consideration defined herein. The Special Consideration shall not include any other form of compensation, including but not limited to, commissions, bonuses, equity, reimbursement of expenses, travel discounts or other fringe benefits. In the event that the Company waives the Covenant Not-to-Compete pursuant to Section 8(c), the Executive shall not be entitled to the Special Consideration. Notwithstanding the foregoing, if the Company waives the Covenant Not- to-Compete, the Executive may be eligible to receive severance payments and benefits pursuant to the terms of Section 4 or 5 of this Agreement, as applicable, provided that the Separation Agreement and Release shall not contain a non-competition covenant.
(f) Covenant Not-to-Solicit. During the Non-Solicitation Period, the Executive agrees that they shall not, directly or indirectly, for the Executive’s own account or on behalf of any other person or entity, (i) solicit, call upon or accept business from, any Customer or Potential Customer; or (ii) interfere with the business relationship between any Customer or Potential Customer and the Company; or (iii) solicit, induce, persuade or hire, or attempt to solicit, induce, persuade or hire, or assist any third party in the solicitation, inducement, persuasion or hiring of, any employee of the Company who worked for the Company during the Executive’s tenure with the Company, to leave the employ of the Company (the “Covenant Not-to-Solicit”). Executive acknowledges and agrees that the Non-Solicitation Period shall be tolled and shall not run, during any period in which the Executive is in violation of the terms herein.
(g) Acknowledgement; Opportunity to Review. The Executive acknowledges and agrees that (i) the Executive has read and understands this Section 8 and agrees to it knowingly and voluntarily; (ii) the Executive has been given a reasonable opportunity to consider the terms of this Section 8, and to consult with an attorney of the Executive’s choosing, prior to executing this Agreement; and (iii) with respect to the Covenant Not-to-Compete only, the Executive has been provided with notice of the Covenant Not-to-Compete for the Executive’s consideration ten (10) business days before the Covenant Not-to-Compete becomes effective.
9. Inventions.
10. Non-Disparagement. Executive agrees that during the Executive’s employment by the Company and at any time thereafter, the Executive shall not take any action or make any statement, verbally or in writing, or via social media which has the purpose or effect of disparaging the Company, or its directors, officers, employees or its products, provided that nothing in this Section shall restrict the Executive from making any disclosures mandated by state or federal law, from providing information or documents to a state or federal agency if requested by the agency to do so, or from participating in an investigation with a state or federal agency if requested by the agency to do so.
11. Provisions Necessary and Reasonable; Change and Reaffirmation.
(a) Reasonableness of Restrictions. The Executive acknowledges and agrees that the provisions of Sections 7, 8 and 9 of this Agreement are necessary and reasonable to protect the Company’s Confidential Information, property rights, trade secrets, goodwill and business interests. The Executive further acknowledges and agrees that the types of employment which are prohibited by Section 8 are narrow and reasonable in relation to the skills which represent the Executive’s principal salable asset both to the Company and to the Executive’s other prospective employers, and that the specific but broad temporal and geographical scope of Section 8 is reasonable and fair in light of the Company’s need to market its services and develop and sell its products in a large geographic area in order to maintain a sufficient customer base, and in light of the Executive’s material presence or influence in the Geographic Reach during the last two years of the Executive’s employment with the Company.
(b) Change and Reaffirmation. The Executive understands, acknowledges and agrees that: (i) the Executive’s obligations under Sections 7, 8, 9 and 10 shall continue in accordance with their express terms regardless of any material changes in the Executive’s title, position, duties, salary, compensation or benefits or other terms and conditions of employment, including but not limited to any renewal of the Employment Period, and the Executive agrees to comply with such obligations; and (ii) if the Executive should transfer between or among any affiliates of t he Company, wherever situated, or be promoted or reassigned to functions other than the Executive’s present functions, the terms of Section 7, 8, 9 and 10 shall continue to apply with full force, and the Executive agrees to comply with such terms. The Executive expressly consents to be bound by the provisions of Sections 7, 8, 9 and 10 for the benefit of the Company or any parent, subsidiary or affiliate to whose employ the Executive may be transferred, without the necessity that this Agreement be resigned at the time of such transfer.
12. Representations and Warranties of the Executive. Executive hereby represents and warrants to the Company that:
(a) the Company has advised the Executive that at no time should the Executive divulge to or use for the benefit of the Company any trade secret or confidential or proprietary information of any previous employer or other third party, and that the Executive has not divulged or used and shall not divulge or use any such information for the benefit of the Company. The Executive further agrees that if they have signed a confidentiality, non-competition or similar type of agreement with any former employer or other entity, the Executive shall comply with the terms of such agreement to the extent that its terms are lawful under applicable law, or otherwise disclose it to the Company.
(b) after undertaking a careful search (including searches of the Executive’s computers, cell phones, electronic devices, and documents), the Executive has returned all property and confidential information belonging to all prior employers (and/or third parties the Executive performed services for in accordance with the terms of those applicable agreements);
(c) the Executive shall indemnify and hold the Company harmless against loss, damage, liability or expense arising from any claim based upon circumstances alleged to be inconsistent with the representations and warranties in Sections 11(a)-(b) above;
(d) the Executive has not been convicted within the last five (5) years of any felony or misdemeanor in connection with the offer, purchase, or sale of any security or any felony involving fraud or deceit, including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to defraud;
(e) the Executive has not been and is not currently (i) the target of an internal complaint of discrimination or harassment at a prior employer that resulted in any adverse remedial action against the Executive; or (ii) subject to any actual or threatened judicial, administrative or arbitral actions, suits or proceedings (public or private) by or before a court, government agency or arbiter, or before any arbitrator, mediator or other alternative dispute resolution provider, relating to discrimination or harassment in employment;
(f) the Executive is not currently subject to any state administrative enforcement order or judgment entered by a state securities administrator within the last five (5) years and is not subject to any state’s administrative enforcement order or judgment in which fraud or deceit (including, but not limited to, making untrue statements of material facts and omitting to state material facts) was found in which the order or judgement was entered within the last five (5) years;
(g) the Executive is legally authorized to work in the United States of America; and
(h) This Agreement constitutes the legal, valid and binding obligations of the Executive, enforceable in accordance with its terms, and execution, delivery and performance of thi s Agreement by the Executive does not and shall not conflict with, violate or cause a breach of any agreement, contract or instrument to which the Executive is a party or any judgment, order or decree to which the Executive is subject.
13. Representations and Warranties of the Company. The Company hereby represents and warrants to the Executive that:
(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to carry out the transactions contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement has been duly authorized by the Company. This Agreement constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms.
The execution and delivery by the Company of this Agreement, and the fulfillment of and compliance with the respective terms hereof by the Company, do not and shall not (i) conflict with or result in a breach of the terms, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company’s capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerat e any obligation under, (v) result in a violation of, or (vi) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body pursuant to, the charter or bylaws of the Company, or any law, statute, rule or regulation to which the Company is subject, or any agreement, instrument, order judgement or decree to which the Company is subject.
14. Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient with a confirmation of receipt and accompanied by a certified or registered mailing. Such notices, demands and other communications shall be sent to the address indicated below:
To the Company:
Aspen Aerogels, Inc.
26 Forest Street, Suite 200
Marlborough, MA 01752
Telephone: (508) 691-1111
Facsimile: (508) 691-1200
Attention: Chief Legal Officer & General Counsel
To the Executive:
The address on file in the Company’s records.
15. Miscellaneous.
(a) Severability; Blue Pencil. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. If the provisions contained in Sections 7, 8 or 9 of this Agreement are for any reason held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law at the time. The deletion of specific words and phrases (“blue penciling”) and giving effect to the reduced or blue-penciled form is allowed where permitted by applicable law.
(b) Complete Agreement. This Agreement and the agreements referred to herein embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof.
(c) Waiver of Jury trial. The parties to this Agreement each hereby waives, to the fullest extent permitted by law, any right to trial by jury of any claim, demand, action, or cause of action (i) arising under this Agreement or (ii) in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the transactions related hereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity, or otherwise. The parties to this Agreement each hereby agrees and consents that any such claim, demand, action, or cause of action shall be decided by court trial without a jury and that the parties to this Agreement may file an original counterpart or a copy of this Agreement with any court as written evidence of the consent of the parties hereto to the waiver of their right to trial by jury.
(d) Counterparts; Facsimile Transmission. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile or other electronic transmission.
(e) Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon and assignable to, successors of the Company by way of merger, consolidation or sale. The Executive may not assign or delegate to any third person the Executive’s obligations under this Agreement. The rights and benefits of the Executive under this Agreement are personal to him and no such right or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, “the Company” shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise.
(f) Governing Law. All issues concerning this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to any choice of law or conflict of law provision or rule (whether of the Commonwealth of Massachusetts or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the Commonwealth of Massachusetts.
(g) Remedies; Injunctive Relief. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of the Agreement (including but not limited to Sections 7, 8 or 9), and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions of this Agreement.
(h) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and the Executive.
(i) Certain Expenses. Subject to any restrictions that may be imposed under the Company’s Compensation Recoupment Policy, the Company agrees to pay, as incurred, to the fullest extent permitted by law, or indemnify the Executive if such payment is not legally permitted, for all legal fees and expenses that the Executive may in good faith incur as a result of any contest by the Company, the Executive or others of the validity or enforceability of or liability under, or otherwise involving, any provision of this Agreement; provided, however, that the Executive shall reimburse the Company for all such payments made by the Company in connection with a contest by the Company if a court of competent jurisdiction or an arbitrator shall find that the Executive did not act in good faith in connection with such contest.
(j) Withholding. All payments made by the Company to the Executive under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law.
(k) Litigation and Regulatory Cooperation. During and for a reasonable period of time after the Executive’s employment, the Executive shall cooperate fully with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while the Executive was employed by the Company. The Executive’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after the Executive’s employment, the Executive also shall reasonably cooperate with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Executive was employed by the Company. The Company shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive’s performance of obligations pursuant to this Section 11(k), to include reasonable attorneys’ fees and costs incurred by the Executive.
16. Survival. The provisions of Sections 1, 2, 4, 5, 6, 7, 8, 9, 10, 11 and 12 of this Agreement shall survive any termination of this Agreement in accordance with the terms of such sections.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
THE COMPANY: |
|
||
|
|
|
|
ASPEN AEROGELS, INC. |
|||
|
|
|
|
|
By: |
/s/ Donald R. Young |
|
|
Name: |
Donald R. Young |
|
|
Title: |
President and Chief Executive Officer |
|
|
|
|
|
THE EXECUTIVE: |
|
||
|
|
|
|
|
By: |
/s/ Stephanie Pittman |
|
|
Name: |
Stephanie Pittman |
|
EXHIBIT A
PRIOR INVENTIONS
TO: Aspen Aerogels, Inc. (the Company) FROM: Stephanie Pittman
DATE:
The following is a complete list and description of all Inventions (as defined in Section 9 of my Employment Agreement (the “Agreement”)) that (i) I have, alone or jointly with others, conceived, developed, or reduced to practice or caused to be conceived, developed, or reduced to practice prior to the commencement of my employment with the Company, (ii) I consider to be my property or the property of third parties, and (iii) I wish to have excluded from the scope of this Agreement:
Check appropriate lines below:
|
No Inventions to disclose |
|
See description of Inventions below: |
See additional sheets attached with description of Inventions.
Due to a confidentiality agreement, I cannot complete the disclosure above for the inventions listed below, identified only by a cursory name, the party(ies) to whom it belongs, and my relationship to such party(ies):
Cursory Name of Invention |
|
Party(ies) |
|
Relationship |
|
1. |
|
|
|
|
|
2. |
|
|
|
|
|
3. |
|
|
|
|
|
|
See additional sheets attached. |
If this Exhibit is left blank, I represent that there are no Prior Inventions.
|
|
Executive Signature |
|
Exhibit 10.5
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement (“Agreement”) is made and entered into by Aspen Aerogels, Inc. (“Aspen” or the “Company”) and Kelley Conte, on behalf of herself, her heirs, executors, administrators, successors and assigns (collectively referred to throughout this Agreement as “Employee,” and, together with Aspen, the “Parties”). The Parties agree that:
limitations of Section 6(a) of that certain Amended and Restated Executive Employment Agreement dated as of January 1, 2023 (the “Executive Agreement”).
(iii) waiving all of Employee’s claims (except as provided in this Agreement) and releasing Aspen and certain other parties, all as further described below in this Agreement; and (iv) waiving and releasing any rights or entitlements to severance or similar post-termination payments or benefits, other than those provided in this Agreement, Aspen will provide Employee with the following “Separation Benefit”:
allegations of corporate fraud;
information regarding any of the Company’s business partners and its services, including names, representatives, proposals, bids, contracts and their contents and parties, the type and quantity of products and services received by the Company, and other non-public information relating to business partners; (v) information regarding personnel, employee lists, compensation, and employee skills; (vi) any other non-public information which a competitor of the Company could use to the competitive disadvantage of the Company; and (vii) any other scientific, technical or trade secrets of the Company or of any third party provided to the Employee or the Company under a condition of confidentiality, provided that Confidential Information shall not include information that was (a) known to the Employee prior to joining the Company, (b) general industry knowledge,
(c) required to be disclosed by Employee in connection with a judicial, special or arbitral proceeding or pursuant to court order or subpoena, (d) is in the public domain other than through any fault or act by the Employee, or (e) is approved for release with the Company’s written authorization;
Company or its designee without charge by Employee.
If the Company is unable, after reasonable effort, to secure Employee’s signature on any such papers and/or other documents, Employee hereby irrevocably designates and appoints each officer of the Company as Employee’s agent and attorney-in-fact to execute any such papers on Employee’s behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Invention;
Notwithstanding the foregoing, and in its discretion as provided pursuant to Section 8(c) of the Executive Agreement, the Company has chosen not to enforce the Covenant Not-To-Compete and hereby waives any right to enforce the Covenant Not-To-Compete.
Accordingly, Employee acknowledges and agrees that Employee shall have no right to receive any “Special Consideration” as defined in Section 8(e) of the Executive Agreement. Further, Employee acknowledges and agrees that Employee is bound by and will comply with the terms of the Restrictive Covenants as set out in the Executive Agreement, other than the Covenant Not-To-Compete, which Restrictive Covenants by their terms survive the termination of Employee’s employment with Aspen.
Massachusetts Privacy Statute; The Massachusetts Sexual Harassment Statute; The Massachusetts Wage Act; The Massachusetts Minimum Fair Wages Act; The Massachusetts Equal Pay Act; The Massachusetts Paid Family and Medical Leave Law; any and all state or local laws addressing matters similar to those addressed by the foregoing federal and state laws; any other federal, state or local law, rule, regulation, or ordinance; any public policy, contract claim, tort, or common law; and any basis for recovering costs, fees, or other expenses including attorneys’ fees incurred in these matters.
This release covers both claims Employee knows about and those Employee may not know about, and is binding upon Employee and Employee’s successors, assigns and heirs. Employee also represents that Employee has not pledged, given or sold any portion of any claim discussed in this Agreement to anyone else. If any claim is not subject to release, to the extent permitted by law, Employee waives any right or ability to be a class or collective action representative or to otherwise participate in any putative or certified class, collective or multi-party action or proceeding based on such a claim in which Aspen or any other Releasee identified in this Agreement is a party.
(v) Employee may, at Employee’s sole option, revoke Employee’s assent to this Agreement within seven (7) days after signing it, upon return of the written notice included as Exhibit B to this Agreement by delivering it, via first class mail and e-mail, to:
Virginia H. Johnson
Chief Legal Officer, General Counsel & Corporate Secretary Aspen Aerogels, Inc.
26 Forest Street, Suite 200
Marlborough, MA 01752
E-mail: gjohnson@aerogel.com
(vi) this Agreement will not become effective until this 7-day period has expired and will be void if Employee revokes it within such period; and (vii) the eighth (8th) day following Employee’s signing of this Agreement is the “Effective Date” of this Agreement.
EMPLOYEE ACKNOWLEDGES THAT THE COMPANY PROVIDED EMPLOYEE WITH A COPY OF THIS AGREEMENT ON SEPTEMBER 5, 2023.
EMPLOYEE IS ADVISED THAT EMPLOYEE HAS UP TO TWENTY- ONE (21) CALENDAR DAYS TO CONSIDER THIS AGREEMENT, WHICH MEANS EMPLOYEE MAY EXECUTE THIS AGREEMENT ANY TIME UNTIL AND THROUGH SEPTEMBER 26, 2023 AND ABSENT SUCH EXECUTION, THIS AGREEMENT WILL BECOME NULL AND VOID.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO PRIOR VERSIONS OF THIS AGREEMENT DID NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE (21) CALENDAR DAY CONSIDERATION PERIOD.
EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS EMPLOYEE HAS OR MIGHT HAVE AGAINST RELEASEES. NEITHER ASPEN NOR ITS AGENTS, REPRESENTATIVES OR ATTORNEYS, MADE ANY REPRESENTATIONS CONCERNING THE TERMS OF THIS AGREEMENT OTHER THAN THOSE CONTAINED HEREIN.
(Signature Page Follows)
The Parties knowingly and voluntarily sign this Agreement as of the date(s) set forth below:
EMPLOYEE |
|
COMPANY |
||
Kelley Conte |
|
Aspen Aerogels, Inc. |
||
|
|
|
|
|
By: |
/s/ Kelley Conte |
|
By: |
/s/ Donald Young |
Name: |
Kelley Conte |
|
Name: |
Donald Young |
Date: |
August 21, 2023 |
|
Date: |
August 20, 2023 |
|
|
|
|
|
Return Address for Signed Agreement
Virginia H. Johnson
Chief Legal Officer, General Counsel & Corporate Secretary Aspen Aerogels, Inc.
26 Forest Street, Suite 200
Marlborough, MA 01752
E-mail: gjohnson@aerogel.com
EXHIBIT A
CONSULTING AGREEMENT
EXHIBIT B
NOTICE TO REVOKE CONFIDENTIAL SEPARATION AND RELEASE AGREEMENT DATE:
Virginia H. Johnson
Chief Legal Officer, General Counsel & Corporate Secretary Aspen Aerogels, Inc.
26 Forest Street, Suite 200
Marlborough, MA 01752
E-mail: gjohnson@aerogel.com
Re: Seven Day Notice To Revoke
Dear Ms. Johnson:
I hereby exercise my right to revoke the CONFIDENTIAL SEPARATION AND RELEASE AGREEMENT executed and delivered to you. I understand this revocation must be signed and delivered to Virginia Johnson within seven (7) calendar days from the date the CONFIDENTIAL SEPARATION AND RELEASE AGREEMENT was signed by me.
Very truly yours,
|
|
|
||
|
|
|
||
|
|
|
|
|
|
|
|
By: |
|
|
|
|
Name: |
|
|
|
|
Date: |
|
|
|
|
|
|
Exhibit 10.6
Consulting Agreement
This Agreement (hereinafter “Agreement”) is made and entered into as of September 5, 2023 (the “Effective Date”) by and between Aspen Aerogels, Inc., a Delaware corporation, its affiliates, successors or assigns (together the “Company”), and the undersigned, Kelley Conte (“Consultant”), with the principal place of residence at 19 Causeway Street, Hudson, MA 01749, in consideration of the compensation, now and hereafter paid to Consultant by Company under this Agreement. The Company and Consultant have also entered into a Separation and Release Agreement and General Release dated September 5, 2023 (the “Separation Agreement”) to which this Agreement is attached as Exhibit A.
For the purposes of this Agreement, the term “Business of the Company” means, any and all of: (i) the development, manufacture, commercial exploitation, marketing, licensing and sales of aerogels and related products and services; or (ii) any primary or substantial work responsibilities carried out by Consultant on behalf of the Company; or (iii) actual or demonstrably anticipated research or development of the Company. The parties agree that the “Business of the Company” is national and international in scope.
Consultant further understands that the trade secrets or know-how of the Company also constitute Confidential Information and must be kept in the strictest confidence and may never be used or disclosed by Consultant other than as provided in this Section 2(a).
For the purposes of this paragraph, Inventions shall not include inventions that Consultant develops entirely on Consultant’s own time without using the Company’s equipment, supplies, facilities, or trade secret information except for those inventions that either (i) relate at the time of conception or reduction to practice of the invention to the Business of the Company, or (ii) result from any work performed by Consultant for the Company. Consultant further acknowledges that all original works of authorship which are made by Consultant (solely or jointly with others) within the scope of and during the term of this Agreement with the Company and which are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act. To the extent applicable law treats any such original works of authorship as not a work made for hire, Consultant hereby assigns as described above, to the Company, or its designee, all of Consultant’s right, title, and interest in such works to the Company. Consultant understands and agrees that the decision whether or not to commercialize or market any invention developed by Consultant solely or jointly with others is within the Company’s sole discretion and for the Company’s sole benefit and that no royalty will be due to Consultant as a result of the Company’s efforts to commercialize or market any such invention.
If the Company is unable because of Consultant’s mental or physical incapacity or for any other reason to secure Consultant’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions or original works of authorship assigned to the Company as above, then Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as its agent and attorney in fact, to act for and in its behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by Consultant.
Consultant acknowledges receipt of the current copy of Aspen’s Code of Business Conduct and Ethics (“Code of Conduct”) available at http://ir.aerogel.com/investors/governance/default.aspx; understands how the Code of Conduct applies to the Consultant and agrees to strictly comply with the Code of Conduct.
(10) days’ written notice to Company. All the terms of this Agreement that by their nature are intended to survive the termination of this Agreement shall survive such termination. For the purposes of this Agreement, “Cause” means: (i) willful misconduct, dishonesty, fraud or breach of fiduciary duty to the Company; (ii) deliberate disregard of the lawful rules or policies of the Company, failure to perform the Services, or material breach of an agreement with the Company, which results in direct harm to the Company; (iii) the unauthorized disclosure of any trade secret or confidential information of the Company; (iv) the commission of an act which constitutes unfair competition with the Company or which induces any customer or supplier to breach a contract with the Company; (v) the indictment of Consultant for any felony involving deceit, dishonesty or fraud, or any criminal conduct by the Consultant that would reasonably be expected to result in material injury or reputational harm to the Company; or (vi) the Consultant’s revocation of the Separation Agreement. For purposes hereof, whether or not the Consultant has committed an act or omission of the type referred to in subparagraphs (i) through (vi) above will be determined by the Company in its reasonable, good faith discretion, based upon the facts known to the Company at the relevant time.
CONSULTANT |
|
COMPANY |
||
Kelley Conte |
|
Aspen Aerogels, Inc. |
||
|
|
|
|
|
By: |
/s/ Kelley Conte |
|
By: |
/s/ Donald Young |
Name: |
Kelley Conte |
|
Name: |
Donald Young |
Date: |
August 21, 2023 |
|
Date: |
August 20, 2023 |
|
|
|
|
|
Schedule A – Statement of Work
This Statement of Work dated September 5, 2023 describes Services to be performed by Consultant for Aspen Aerogels, Inc. (the “Company”) and is issued pursuant to the Consulting Agreement dated September 5, 2023 (the “Agreement”). This Statement of Work may be extended or modified only by a written agreement of both Company and Consultant.
Consultant to provide Services to the Company in connection with Company’s operations as reasonably requested by the Company from time to time during the term of the Statement of Work, including:
Consultant will perform the Services free of the direction and control of the Company, but consistent with the objectives and deadlines set by the Company.
Consultant agrees to promptly advise the Company in case of any potential conflict between Consultant’s Services to be provided under this Statement of Work and Consultant’s other engagement or employment with third parties.
Subject to the right of Consultant to terminate this Statement of Work earlier for no or any reason under Section 13 of the Agreement and the Company’s right to terminate this Statement of Work for Cause, the Services pursuant to the Statement of Work shall begin September 5, 2023 and end on March 31, 2024 (the “Initial Term”). Thereafter, the Initial Term may be extended upon the mutual written consent of the Company and Consultant (the Initial Term and any such extensions, the “Term”).
In connection with Consultant’s Services pursuant to this Statement of Work, as Compensation for her Services, Company agrees that, subject to and conditioned upon the Consultant not revoking the Separation Agreement:
For the avoidance of doubt, Consultant’s right to receive any and all of the benefits set forth in clauses (i), (ii), (iii) and (iv) of the preceding sentence shall be forfeited and shall not be provided by the Company if the Consultant revokes the Separation Agreement. For the further avoidance of doubt, all then-unvested RSUs and Options shall be forfeited and not vest in the event that either party terminates this Statement of Work and the Consulting Agreement, in accordance with the terms hereof.
* * * * * I, Donald R. Young, certify that:
Exhibit 31.1
CERTIFICATIONS UNDER SECTION 302
1. I have reviewed this Quarterly Report on Form 10-Q of Aspen Aerogels, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 2, 2023 |
|
|
|
/s/ Donald R. Young |
|
|
|
|
Donald R. Young |
|
|
|
|
President and Chief Executive Officer (principal executive officer) |
Exhibit 31.2
CERTIFICATIONS UNDER SECTION 302
I, Ricardo C. Rodriguez, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Aspen Aerogels, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 2, 2023 |
|
|
|
/s/ Ricardo C. Rodriguez |
|
|
|
|
Ricardo C. Rodriguez |
|
|
|
|
Chief Financial Officer and Treasurer (principal financial officer) |
Exhibit 32
CERTIFICATIONS UNDER SECTION 906
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Aspen Aerogels, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 2, 2023 |
|
|
|
/s/ Donald R. Young |
|
|
|
|
Donald R. Young |
|
|
|
|
President and Chief Executive Officer (principal executive officer) |
|
|
|
||
Dated: November 2, 2023 |
|
|
|
/s/ Ricardo C. Rodriguez |
|
|
|
|
Ricardo C. Rodriguez |
|
|
|
|
Chief Financial Officer and Treasurer (principal financial officer) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.