Related Party Transactions
In March 2007, Safeguard reorganized its indirect holdings in the Company, by contributing 40,909,093 common shares of the Company to AMG and increasing its ownership interest in AMG to 89.7%. In June 2007, Safeguard’s ownership interest in AMG increased to 91.5%. In July 2007, Safeguard sold a portion of its shares of AMG and retained 40.2% of the outstanding share capital of AMG. In October 2007, Safeguard sold a further portion of its shares of AMG, such that Safeguard’s ownership interest in AMG reduced to 26.6%. In addition, AMG has entered into a call option agreement with ALD International (the “AMG Call Option Agreement”), pursuant to which AMG may, at its option, require ALD International to instruct the Company to issue to AMG any common shares issuable upon the conversion of certain convertible promissory notes issued by BSI, as described below under “Convertible Notes”. The Company was not a party to any of the foregoing transactions among AMG, Safeguard or ALD International. However, the Company did enter into the transactions described below with one or more of these parties.
As at December 31, 2008, AMG directly held 52,559,733 common shares of the Company, representing 50.4% of the total issued and outstanding shares. Subsequent to the Company’s equity offering that was completed on February 3, 2009, AMG directly held 56,497,933 common shares of the Company, representing 50.7% of the total issued and outstanding shares.
Fundo Wheels
In the fourth quarter 2008, the Company purchased $1.7 million in finished goods inventory (aluminum wheels) from Fundo under an arrangement whereby Fundo agreed to resell such inventory on behalf of the Company to Fundo’s existing customers and remit the proceeds from such sales to the Company. In connection with this arrangement, AMG unconditionally agreed to pay the Company an amount equal to any shortfall in the actual proceeds from the sales of such inventory. Fundo defaulted on its obligations to the Company and, pursuant to the Company’s demand under the guarantee, AMG paid the Company $1.7 million plus interest at 7%.
ALD Vacuum Technologies
In fiscal 2008, BSI purchased a furnace and equipment spare parts from ALD Vacuum Technologies GmbH, a wholly-owned subsidiary of AMG, for $1.6 million. This equipment, which facilitates the production of ingots from solar grade silicon, was purchased on arm’s length terms and is being used by BSI for quality control purposes and for research and development activities.
Private Placements
The Company issued common shares to AMG in private placement transactions that were concluded concurrently with equity offerings on September 27, 2007 and February 3, 2009. See above under “Liquidity and Capital Resources – Equity Financings”.
Convertible Notes
On August 31, 2006, the Company issued a convertible promissory note in exchange for US$3.0 million, which is held by ALD International (the “August 2006 Note”). On March 1, 2007, BSI borrowed $4.5 million from ALD International (the “March 2007 Note”). The notes are repayable on demand, bear interest at the U.S. prime rate plus 1%, are secured against the assets of BSI, and are subordinated to the indebtedness due to the Bank under the Credit Agreement. Each note may be settled, at the lender’s option, in cash or common shares of the Company (or a combination thereof); the conversion price of the August 2006 Note is $0.40 per share and the conversion price of the March 2007 Note is $0.42 per share. See “Liquidity and Capital Resources – Convertible Notes” above for a summary of the outstanding amounts under these notes, and see “Capital Structure” below for a summary of the common shares issuable upon the conversion of these notes.
On July 23, 2007, US$0.35 million of the principal amount of the August 2006 Note was converted into common shares of the Company. As a result, AMG increased its ownership position in the Company to 50.6% by exercising its option under the AMG Call Option Agreement to acquire the 913,500 common shares that were issued upon such conversion.
Executive Management
Both Dr. Schimmelbusch and Mr. Spector are members of the Management Board of AMG, and are also members of the executive committee of the general partner of Safeguard, which controls ALD International.
The Company and Allied Resources Corporation (“Allied”) share the cost of John Fenger, President – Light Metals of the Company. During fiscal 2008, the Company contributed $0.4 million to the cost of the remuneration of Mr. Fenger (for the year ended December 31, 2007 – $0.5 million). Dr. Schimmelbusch is both the Chairman and CEO of the Company and the Chairman of Allied.