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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period from __________ to __________
Commission file number 0-6890
MECHANICAL TECHNOLOGY INCORPORATED
(Exact name of registrant as specified in its charter)
New York 14-1462255
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
325 Washington Avenue Extension, Albany, New York 12205
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518)218-2500
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act
$1.00 Par Value Common Stock
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [ ]
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 X No
_____ _____
The aggregate market value of the registrant's Common Stock held by
nonaffiliates of the registrant on December 20, 1999 (based on the last
sale price of $21.50 per share for such stock reported by NASDAQ for that
date) was approximately $137,542,000.
As of December 20, 1999, the registrant had 11,698,571 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Where Incorporated into Form 10-K Report
Proxy Statement for Part III
Annual Meeting of Shareholders
to be held on March 16, 2000
<PAGE>
PART I
ITEM 1: BUSINESS
MTI manufactures and sells precision diagnostic and measurement
instruments and incubates alternative energy technology. Given MTI's
recent success with Plug Power, Inc. and its early development efforts
with Proton Exchange Membrane ("PEM") fuel cells, gas and steam powered
turbines and the Sterling Engines, MTI is in a unique position to be a
leader in the evolution of alternative energy technology. MTI's
alternate energy strategy includes: acquisition of companies that have
synergies with MTI's core competencies; acquisition of majority stock
positions in established alternative energy companies; and internal
development and growth of alternative energy businesses.
Over the last several years MTI sold off non-core businesses and
restructured its balance sheet. Today MTI is a very different company,
substantially streamlined in focus, but with challenges remaining. MTI
is a manufacturer of advanced diagnostic, test and measurement products
that combine precision sensing capabilities with proprietary software
and systems to serve a variety of applications for commercial and
military customers. The Company has two principal business units: the
Advanced Products Division ("Advanced Products"), which produces
diagnostic and sensing instruments and computer-based balancing systems;
and Ling Electronics, Inc. ("Ling"), a developer and manufacturer of
vibration test systems and power conversion products, which was sold on
October 21, 1999, as part of a strategic alliance with SatCon Technology
Corporation.
In the coming year, Advanced Products will focus on improving existing
products and developing additional products for diagnostic and testing
equipment. The non-contact sensing instrumentation products utilize
fiber optic, laser and capacitance technology to perform high precision
position measurements for product design and quality control inspection
requirements, primarily in the semiconductor and computer disk drive
industries. Advanced Products' computer-based aircraft engine balancing
systems include an on-wing jet engine balancing system used by both
commercial and military aircraft fleet maintenance personnel. This
product provides trim balancing and vibration analysis in the field or
in test cells.
MTI is uniquely positioned to be the moving force behind the evolution
of alternative energy technology. As a pioneer in the alternative
energy field, MTI has demonstrated its ability, first in the research
and development of gas and steam turbines; then through its development
efforts in connection with the Sterling Engines; and most recently in
its research and development of PEM fuel cell technology. MTI has
successfully turned its PEM fuel cell research into a public company
dedicated to bringing a safe, reliable and cost-effective fuel cell to
market. Plug Power, Inc., which was initially a joint venture of MTI
and Detroit Edison, believes that it will soon have residential fuel
cells in the market place. MTI helped develop the strategic
partnerships, capital investment, and growth strategy of Plug Power,
Inc. It is MTI's forward strategy to use its resources and experiences
to repeat this success with other alternative energy companies.
<PAGE>
Mechanical Technology Incorporated was incorporated in New York in 1961.
Unless the context otherwise requires, the "registrant", "Company",
"Mechanical Technology" and "MTI" refers to Mechanical Technology
Incorporated and its subsidiaries. The Company's principal executive
offices are located at 325 Washington Avenue Extension, Albany, New York
12205 and its telephone number is (518) 218-2500.
Significant Developments in the Business
On June 27, 1997, the Company and Edison Development Corp. ("EDC"), a
subsidiary of DTE Energy Co. formed a joint venture, Plug Power, L.L.C.
("Plug Power"), to further develop the Company's Proton Exchange Membrane
("PEM") Fuel Cell technology. In exchange for its contribution of
contracts and intellectual property and certain other net assets that had
comprised the fuel cell research and development business activity of the
Technology segment (which assets had a net book value of $357 thousand),
the Company received a 50% interest in Plug Power. EDC made an initial
cash contribution of $4.75 million in exchange for the remaining 50%
interest in Plug Power. The Company's investment in Plug Power is included
in the balance sheet caption "Investment in Plug Power"; the assets
contributed by the Company to Plug Power had previously been included in
the assets of the Company's Technology segment. See the supplemental
disclosure regarding Contribution of Net Assets to Plug Power in the
Consolidated Statements of Cash Flows for additional information regarding
the assets contributed by the Company to Plug Power.
Plug Power has focused exclusively on the research, development and
manufacture of an economically viable PEM fuel cell. During 1999, the
Company invested $6 million cash in Plug Power and sold the MTI campus
to Plug Power in exchange for shares of Plug Power and Plug Power's
assumption of $6 million of debt.
On October 29, 1999 Plug Power Inc. made an initial public offering
("IPO") of its common stock on the NASDAQ National Market under the
symbol "PLUG." The initial public offering price for the 6 million
shares issued was $15 per share. Additionally, the underwriters of the
IPO exercised their 900,000 share over allotment at the IPO price.
Since Plug Power was formed in 1997 the Company, EDC and other investors
have contributed substantial amounts of cash and other assets to Plug
Power. Contributions to Plug Power by the Company totaled $20.7 million
as of September 30, 1999. Immediately prior to the Plug Power IPO, the
Company purchased an additional 2,733,333 shares of Plug Power at $7.50
per share for a total purchase price of $20.5 million. Immediately
after Plug Power's IPO, the Company owned 13,704,315 shares of Plug
Power or approximately 31.9 percent of outstanding Plug Power stock.
The Company's contribution to Plug Power increased to $41.2 million as
of Plug Power's IPO date.
On October 21, 1999, the Company created a strategic alliance with
SatCon Technology Corporation (SatCon), an innovator of alternative
energy technologies. SatCon acquired Ling Electronics, Inc. and Ling
Electronics, Ltd. from the Company and the Company committed to invest
approximately $7 million in SatCon. In consideration for the
acquisition of Ling Electronics and the Company's investment, the
Company will receive 1,800,000 shares of SatCon's common stock and
<PAGE>
warrants to purchase an additional 100,000 shares of SatCon's common
stock. The Company funded $2.57 million of its investment in SatCon and
will make the remaining investment by the end of January 2000. SatCon
will also receive warrants to purchase 100,000 shares of the Company's
common stock.
On July 12, 1999, the Company completed the sale of 801,223 shares of
common stock to current shareholders through a rights offering. The
offering raised approximately $12.8 million before offering costs of
approximately $158 thousand for net proceeds of approximately $12.7
million. The Company will use some or all of the proceeds of the offering
for investment into Plug Power. In addition, some proceeds may be used
for acquisitions, efforts to increase market share, working capital,
general corporate purposes and other capital expenditures.
On September 30, 1998, the Company completed the sale of 1,196,399 shares
of common stock to current shareholders through a rights offering. The
offering raised approximately $7.2 million before offering costs of
approximately $186 thousand for net proceeds of approximately $7 million.
The Company used substantially all of the proceeds of the offering for
investment in Plug Power. The remaining proceeds were used for efforts to
increase market share, working capital, general corporate purposes and
other capital expenditures.
The sale of the Company's Technology Division, the sole component of the
Technology segment, to NYFM, Incorporated (a wholly owned subsidiary of
Foster-Miller, Inc., a Waltham, Massachusetts-based technology company)
on March 31, 1998, completed management's planned sale of non-core
businesses. Accordingly, the Company no longer includes Technology among
its reportable business segments. The Technology Division is reported
as a discontinued operation as of December 26, 1997, and the
consolidated financial statements have been restated to report
separately the net assets and operating results of the business. The
Company's prior year financial statements have been restated to conform
to this treatment. See Note 16 to the accompanying Consolidated
Financial Statements.
On September 30, 1997, the Company sold all of the assets of its L.A.B.
division to Noonan Machine Company of Franklin Park, IL. The Company
received $2.6 million in cash and two notes, totaling $650 thousand, from
Noonan Machine Company. The purchaser has requested that the principal
amount of the note be reduced to reflect the resale value of certain
assets of L.A.B. The Company is enforcing its rights with respect to the
note. The net proceeds from the sale were used to pay down all
outstanding debt and build working capital. The sale of L.A.B. resulted
in a $2.0 million gain, which was recorded in the fourth quarter of fiscal
year 1997.
On December 27, 1996, the Company and First Albany Companies Inc. ("FAC")
entered into a Settlement Agreement and Release whereby the Company issued
FAC 1.0 million shares of Common Stock in full satisfaction of its
obligations pursuant to the Claim Participation Agreement dated December
21, 1993 and amended December 14, 1994, among United Telecontrol
Electronics, Inc. ("UTE"), the Company and First Commercial Credit
<PAGE>
Corporation, in the principal amount of $3.0 million plus accrued interest
of $1.2 million. As a result, the Company in the first quarter of fiscal
1997 realized a gain on the extinguishment of debt totaling $2.5 million,
net of approximately $100 thousand of transaction related expenses and net
of taxes of $106 thousand.
Business Segments
The Company currently conducts business in two business segments:
Alternative Energy Technology and Test and Measurement.
Alternative Energy Technology
The Alternative Energy Technology segment incubates companies that
research, develop, manufacture and distribute alternative energy
technology solutions. Investments at September 30, 1999 consist of a 40.65
percent equity interest in Plug Power L.L.C. Plug Power is a leading
designer and developer of on-site, electricity generation systems
utilizing proton exchange membrane ("PEM") fuel cells for residential
applications. GE Fuel Cell Systems, LLC, a joint venture that is owned by
General Electric's GE Power Systems business (75%) and Plug Power (25%)
will market, sell, service, and install Plug Power's products once they
are developed.
On October 29, 1999 Plug Power Inc. made an initial public offering
("IPO") of its common stock on the NASDAQ National Market under the
symbol "PLUG." The initial public offering price for the 6 million
shares issued was $15 per share.
Immediately prior to the Plug Power IPO, the Company purchased an
additional 2,733,333 shares of Plug Power at $7.50 per share for a total
purchase price of $20.5 million. The Company financed the acquisition
of these shares through a $22.5 million loan from KeyBank N.A.
Immediately after Plug Power's IPO, the Company owned 13,704,315 shares
of Plug Power or approximately 31.9 percent of outstanding Plug Power
stock.
Plug Power is developing a PEM fuel cell for residential and automotive
applications. As of December 1999, Plug Power has reported achieving
the following milestones:
June 1998 Powered a three-bedroom home ("Demonstration Home")
with a hydrogen-fueled residential fuel cell system
November 1998 Demonstrated a methanol-fueled residential fuel cell
system
December 1998 Selected to design and manufacture 80 test and
evaluation residential fuel cell systems for the
State of New York for installation at various test
sites over the next two years
December 1998 Demonstrated a natural gas-fueled residential fuel
cell system
<PAGE>
February 1999 Entered into agreement with GE On-Site Power to
distribute and service Plug Power residential fuel
cell systems
June 1999 Began construction of a state-of-the-art, 51,000
square foot manufacturing facility in Latham, New
York
August 1999 Powered the Demonstration Home with a residential
fuel cell system connected to its existing natural
gas pipeline
September 1999 Filed their 50th patent application relating to fuel
cell technology, system designs and manufacturing
processes
December 1999 Announced successful completion of a four-month test
of a natural gas powered fuel cell system in the
Demonstration Home
In October, 1999, MTI sold Ling to SatCon in exchange for common stock and
purchased or made commitments to purchase SatCon common stock and
warrants. Assuming all funding commitments are made and warrants
exercised, MTI will own approximately 16% of SatCon's issued and
outstanding common stock.
SatCon manufactures and sells power and energy management products for
telecommunications, silicon wafer manufacturing, factory automation,
aircraft, satellites and automotive applications. SatCon has four
operating divisions: Film Microelectronics, Inc. designs and manufactures
microelectronic circuits and interconnect products; Magmotor manufactures
motors and magnetic suspension systems; Beacon Power manufactures
flywheel energy storage devices; and the Technology Center is responsible
for new technology and product development.
Test and Measurement
Test and Measurement offers a wide range of technology-based equipment and
systems for improved manufacturing, product testing, and inspection for
industry. Business units in this segment include the Advanced Products
Division, Ling Electronics, Inc. (sold on October 21, 1999) and the L.A.B.
Division (sold on September 30, 1997).
Advanced Products designs, manufactures and markets high-performance test
and measurement instruments and systems. These products are categorized
in two general product families: non-contact sensing instrumentation and
computer-based balancing systems. The Division's largest customers
include industry leaders in the computer, electronic, semiconductor,
automotive, aerospace, aircraft and bioengineering fields.
<PAGE>
The non-contact sensing instrumentation products utilize fiber optic,
laser and capacitance technology to perform high precision position
measurements for product design and quality control inspection
requirements, primarily in the semiconductor and computer disk drive
industries. Product trademarks such as the Fotonic Sensor and Accumeasure
are recognized worldwide.
The Division's computer-based aircraft engine balancing systems include an
on-wing jet engine balancing system used by both commercial and military
aircraft fleet maintenance personnel. This product provides trim
balancing and vibration analysis in the field or in test cells.
Ling, of Anaheim, California, designs, manufactures, and markets
electro-dynamic vibration test systems, high-intensity-sound
transducers, power conversion equipment and power amplifiers used to
perform reliability testing and stress screening during product
development and quality control. This mode of testing is used by
industry and the military to reveal design and manufacturing flaws in a
broad range of precision products, from satellite parts to computer
components. Recent Ling products for power and frequency conversion and
"clean power" applications include systems capable of output up to 432
kVA. Ling was sold on October 21, 1999 to SatCon in exchange for
770,000 shares of SatCon common stock (with a market value of $6.738
million on the transaction date).
The L.A.B. Division, which was sold on September 30, 1997, designed,
manufactured and marketed mechanically driven and hydraulically driven
test systems for package and product reliability testing. Among other
uses, this equipment simulates the conditions a product will encounter
during transportation and distribution including shock, compression,
vibration and impact. This type of testing is widely conducted by
businesses involved in product design, packaging and distribution.
The Company believes that the test and measurement industry will undergo
substantial consolidation in the near future. The challenges facing MTI
today are similar to those facing other smaller companies in industries
where consolidation is a part of the landscape. The Company believes
that consolidation may become a competitive necessity and that Advanced
Products is well-positioned to combine with complementary, synergistic
businesses to enhance and expand product offerings and increase
profitability and market position. Accordingly, the Company is actively
exploring strategic acquisitions and alliances for its businesses.
The business units in the Test and Measurement segment have numerous
customers and are not dependent upon a single or a few customers.
Backlog
The backlog of orders believed to be firm as of September 30, is $2.1
million for 1999 and 1998 (of which $997 thousand and $487 thousand,
respectively, relates to the Company's Advanced Products Division). The
backlog relates to contracts awarded by commercial customers or government
agencies.
<PAGE>
Marketing and Sales
The Company sells its products and services through a combination of a
direct sales force, manufacturer's representatives, distributors and
commission salespeople. Each business unit is responsible for its own
sales organization. Typically, the Company's product businesses employ
regional manufacturer's representatives on an exclusive geographic basis
to form a nationwide or worldwide distribution organization; the business
unit is responsible for marketing and sales management and provides the
representatives with sales and technical expertise on an "as-required"
basis. To a great extent, the marketing and sales of the Company's larger
products and systems consist of a joint effort by the business unit's
senior management, its direct sales force and manufacturer's
representatives to sophisticated customers. The manufacturer's
representatives are compensated on a commission basis.
Research and Development
The Company conducts considerable research and development to support
existing products and develop new products. (See the accompanying
Consolidated Statements of Operations). The Company holds patents and
rights in various fields of technology. The technology of the Company is
generally an advancement of the "state of the art", and the Company
expects to maintain a competitive position by continuing such advances
rather than relying on patents. Licenses to other companies to use
Company-developed technology have been granted and are expected to be of
benefit to the Company, though royalty income received in recent years has
not been material in amount and is not expected to be material in the
foreseeable future.
Competition
The Company and each of its business units are subject to intense
competition. The Company faces competition from at least several
companies, many of which are larger than MTI and have greater financial
resources. While the business units in the Company's Test and Measurement
segment each have a major share of their respective markets, the Company
does not consider any of them to be dominant within its industry.
The primary competitive considerations in the test and measurement segment
are product quality and performance, price and timely delivery. The
Company believes that its product development skills and reputation are
competitive advantages.
Employees
The total number of employees of the Company and its subsidiaries was 104
as of September 30, 1999, compared to 123 as of the beginning of the
fiscal year.
<PAGE>
Executive Officers
The executive officers of the registrant (all of whom serve at the
pleasure of the Board of Directors), their ages, and the position or
office held by each, are as follows:
Position or Office Name Age
Chief Executive Officer, George C. McNamee 53
and a Director
Vice President and Chief Cynthia A. Scheuer 38
Financial Officer
Vice President and General Manager, Denis P. Chaves 59
Advanced Products
President and Chief Executive Officer James R. Clemens 50
Ling Electronics, Inc.
Mr. McNamee has been Chief Executive Officer of the Company since April
1998 and a director since 1996.
Ms. Scheuer was appointed Vice President and Chief Financial Officer of
the Company in November 1997. Prior to joining the Company, she was a
senior business assurance manager at Coopers & Lybrand L.L.P. where she
was employed since 1983.
Mr. Chaves has been Vice President and General Manager of the Company's
Advanced Products Division since 1987 and was Vice President and General
Manager of the Company's L.A.B. Division from January 1994 until it was
sold in September, 1997. Previously, he served as Manager of Corporate
Marketing for the Company from 1981 to 1987.
Mr. Clemens has been President and Chief Executive Officer of Ling
Electronics, Inc., a wholly owned subsidiary of the Company, since April
1998. Mr. Clemens was previously Vice President and General Manager of
Ling from April 1997 to April 1998. Mr. Clemens resigned as an officer of
the Company on October 21, 1999, to join SatCon Technology Corporation.
From December 1994 to March 1997, he was a site manager for Teleflex
Control. From September 1992 to November 1994, he was President and Chief
Operating Officer of MTI's former subsidiary United Telecontrol
Electronics, Inc.
ITEM 2: PROPERTIES
The Company leases property in New York and, prior to the sale of Ling,
leased space in California. In management's opinion, the facilities are
generally well-maintained and adequate to meet the Company's current and
future needs.
The Company's corporate headquarters were located in a building in Latham,
New York which was sold to Plug Power during 1999 and a portion of which was
leased back to the Company until November 1999. The building contained a
total of approximately 31,000 square feet. In November 1999, the Company
<PAGE>
completed its relocation to Albany, New York, where it leases a facility for
Advanced Products and corporate headquarters. The facility has approximately
20,700 square feet of office and manufacturing space. The lease expires on
November 30, 2009.
Ling Electronics, Inc. (Ling) leases approximately 85,000 square feet of
office and manufacturing space in Anaheim, California. The lease will
expire in June of 2003. Ling was sold, and the lease assigned, to SatCon
Technology Corporation on October 21, 1999.
ITEM 3: LEGAL PROCEEDINGS
At any point in time, the Company and its subsidiaries may be involved in
various lawsuits or other legal proceedings; these could arise from the
sale of products or services or from other matters relating to its regular
business activities, may relate to compliance with various governmental
regulations and requirements, or may be based on other transactions or
circumstances. The Company does not believe there are any such proceedings
presently pending that could have a material adverse effect on the
Company's financial condition except for the matters described in Note 14
to the accompanying Consolidated Financial Statements (which description
is incorporated herein by reference).
On September 9, 1998, Barbara Lawrence, the Lawrence Group, Inc.
("Lawrence"), and certain other Lawrence-related entities ("Plaintiffs")
filed suit in the United States Bankruptcy Court for the Northern District
of New York against First Albany Corporation ("FAC"), Dale Church, Edward
Dohring, Alan Goldberg, George McNamee, Beno Sternlicht, Marty Mastroianni
(former President and Chief Operating Officer of MTI) and 33 other
individuals ("Defendants") who purchased a total of 820,909 shares of MTI
stock from the Plaintiffs. The complaint alleged that Defendants
purchased MTI stock from the Plaintiffs in violation of sections 10b, 20,
20A and rule 10b-5 of the Securities Exchange Act of 1934. In December
1998, the complaint was amended to add MTI as a defendant and assert a
claim for common law fraud against all the Defendants including MTI. The
case concerns the Defendants' 1998 purchase of MTI shares from the
Plaintiffs at the price of $2.25 per share. Ownership of the shares was
disputed and several of the Plaintiffs were in bankruptcy at the time of
the sale. FAC acted as Placement Agent for the Defendants in the
negotiation and sale of the shares and in proceedings before the
Bankruptcy Court for the Northern District of New York, which approved the
sale in September 1997. Plaintiffs claim that the Defendants failed to
disclose material inside information concerning Plug Power, LLC to the
Plaintiffs and therefore the $2.25 per share purchase price was unfair.
Plaintiffs are seeking damages of $5 million plus punitive damages and
costs. In April 1999, Defendants filed a motion to dismiss the amended
compliant, which was denied. In June 1999, the parties agreed to stay
discovery and amend Defendants time to answer the amended complaint until
September 17, 1999. In October 1999, Defendants answered the amended
Complaint.
<PAGE>
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the registrant's security
holders during the fourth quarter of fiscal 1999.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Price Range of Common Stock
On April 16, 1999, the stock began trading on the NASDAQ National Market
System under the same symbol, MKTY. From August 1994 through April 15,
1999, the Company's Common Stock traded on the over-the-counter market
under the symbol MKTY on the OTC Bulletin Board. Set forth below are the
highest and lowest prices at which shares of the Company's Common Stock
have been traded during each of the Company's last two fiscal years.
Prices as Adjusted to
Effect for April 30,1999
Prices as Reported Three for Two Stock Split
High Low High Low
Fiscal Year 1999
First Quarter 8-5/8 6-3/4 5-3/4 4-1/2
Second Quarter 21 8 14 5-1/3
Third Quarter 30 11-11/12 30 7-15/16
Fourth Quarter 35-9/16 23-6/16 35-9/16 23-6/16
Fiscal Year 1998
First Quarter 6-3/4 3-3/4 4-1/2 2-1/2
Second Quarter 8-1/8 3-1/2 5-5/12 2-1/3
Third Quarter 8-1/8 5-11/16 5-5/12 3-3/4
Fourth Quarter 9-3/8 6 6-1/4 4
Number of Equity Security Holders
As of December 20, 1999, the Company had approximately 479 holders of its
$1.00 par value Common Stock. In addition, there are approximately 4,154
beneficial owners holding stock in "street" name.
Dividends
The payment of dividends is within the discretion of the Company's Board
of Directors and will depend, among other factors, on earnings, capital
requirements, and the operating and financial condition of the Company.
The Company has never paid and does not anticipate paying dividends in the
foreseeable future.
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
The following table sets forth summary financial information regarding
Mechanical Technology Incorporated for the years ended September 30, as
indicated:
<TABLE>
Statement of Earnings Data (In thousands, except per share data)
Restated Restated Restated
1999 1998 1997 1996 1995
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net Sales $ 12,885 $ 21,028 $ 24,102 $ 22,755 $ 18,140
Gain on Sale of
Subsidiary/Division or
Building - - 2,012 750 6,779
(Loss) Income from Continuing
Operations before
Extraordinary Item and
Income Taxes (10,692) (2,006) 2,701 673 3,352
(Loss) Income from Continuing
Operations before
Extraordinary Item (10,729) (2,031) 2,558 598 3,256
Extraordinary Item -
Gain on Extinguish-
ment of Debt, Net of
Taxes ($106) - - 2,507 - -
(Loss) Income from
Continuing Operations (10,729) (2,031) 5,065 598 3,256
Income (Loss) from
Discontinued
Operations, Net
of Taxes 41 (2,285)2 (545) 3,150 (334)
Net(Loss)Income $ (10,688) $ (4,316) $ 4,520 $ 3,748 $ 2,922
Diluted Earnings
Per Share1,3
(Loss) Income from
Continuing Operations
before Extraordinary
Item $ (0.94) $ (0.21) $ 0.28 $ 0.09 $ 0.57
Extraordinary Item - - 0.27 - -
(Loss)Income from
Discontinued
Operations - (0.24) (0.06) 0.50 (0.06)
Net (Loss)Income $ (0.94) $ (0.45) $ 0.49 $ 0.59 $ 0.51
Weighted Average Shares
Outstanding and
Equivalents1 11,330,530 9,576,672 9,149,176 6,310,094 5,742,045
Balance Sheet Data:
Working Capital $ 18,662 $ 5,779 $ 7,696 $ 7,086 $ 2,712
Total Assets 31,780 21,128 14,003 13,481 13,444
Total Long- Term Debt - - - 5,508 6,960
Total Shareholders' Equity (Deficit) 27,786 11,124 8,213 2,164 (3,490)
__________________________
<PAGE>
1 Earnings per share information has been retroactively adjusted to reflect the April 30, 1999 3 for 2 stock split.
2 Includes a net charge of $1,769 related to the discontinuance of the Company's Technology Division and a $516 loss
from operations prior to discontinuance.
3 Earnings per share have been restated to comply with SFAS No. 128, "Earnings Per Share."
</TABLE>
<PAGE>
Prior years have been restated to reflect the Technology and
Defense/Aerospace segments as discontinued operations. (See Note 16 to
the accompanying Consolidated Financial Statements).
There were no cash dividends on common stock declared for any of the
periods presented.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations: 1999 in Comparison with 1998
The following three paragraphs summarize significant organizational
changes, which impact the comparison of 1999 and 1998 results of
operations.
On June 27, 1997, the Company and Edison Development Corp. ("EDC"), a
subsidiary of DTE Energy Co. formed a joint venture, Plug Power L.L.C.
("Plug Power") to further develop the Company's Proton Exchange Membrane
("PEM") Fuel Cell technology. In exchange for its contribution of
employees, contracts, intellectual property and certain other assets that
had comprised the fuel cell research and development business activity of
the Technology segment (which assets had a net book value of $357
thousand), the Company received a 50% interest in Plug Power. EDC made an
initial cash contribution of $4.75 million in exchange for the remaining
50% interest in Plug Power. The Company's investment in Plug Power is
included in the balance sheet caption "Investment in Plug Power"; the
assets contributed by the Company to Plug Power had previously been
included in the assets of the Company's Technology segment. See the
supplemental disclosure regarding Contribution of Net Assets to Plug Power
in the Consolidated Statements of Cash Flows for additional information
regarding the assets contributed by the Company to Plug Power.
Since Plug Power was formed in 1997 the Company, EDC and other investors
have contributed substantial amounts of cash and other assets to Plug
Power. Contributions to Plug Power by the Company totaled $20.7 million
as of September 30, 1999 and increased to $41.2 million as of Plug
Power's IPO date. After Plug Power' s IPO, the Company owned 13,704,315
shares or 31.9% of outstanding Plug Power stock.
The sale of the Company's Technology Division, the sole component of the
Technology segment, to NYFM, Incorporated (a wholly owned subsidiary of
Foster-Miller, Inc., a Waltham, Massachusetts-based technology company)
on March 31, 1998 completed management's planned sale of non-core
businesses. Accordingly, the Company no longer includes Technology among
its reportable business segments. The Technology Division is reported
as a discontinued operation as of December 26, 1997, and the
consolidated financial statements have been restated to report
separately the net assets and operating results of the business.
The following is management's discussion and analysis of certain
significant factors, which have affected the Company's results of
operations for 1999 compared to 1998. This discussion relates only to the
Company's continuing operations before the sale of Ling, which occurred in
<PAGE>
October 1999.
Sales for fiscal 1999 totaled $12.9 million compared to $21.0 million for
the prior year, a decrease of $8.1 million or 38.7%. This decrease is the
result of continuing weak market conditions. Advanced Products and Ling
reported sales decreases of 48.7% and 31.6%, respectively in the year
ended September 30, 1999.
Selling, general and administrative expenses for fiscal 1999 were 38.4% of
sales, as compared to 27.6% in 1998. Higher levels of
general/administrative expenses as a percentage of sales for fiscal 1999
resulted primarily from the 38.7% decrease in sales. Actual selling,
general and administrative expenses decreased $.863 million from 1998 to
1999.
Product development and research costs during fiscal 1999 were 8.6% of
sales, compared to 4% for 1998. Development costs increased $.274 million
from 1998 to 1999 reflecting the Advanced Products Division's commitment
to developing diagnostic and other new products.
The operating loss of $1.4 million for the year ended September 30, 1999
represents a $3.4 million or 170.4% decrease from the $2 million
operating income reported during the same period last year. The
decrease is the result of decreased sales levels and corresponding
decreases in gross profits due to fixed cost absorption at lower sales
levels. Gross profit decreased to 36% of sales in fiscal 1999 from 41%
of sales in fiscal 1998.
In addition to the matters noted above, the Company recorded a $9.4
million loss from the recognition of the Company's proportionate share of
losses of Plug Power compared to a $3.8 million loss in 1998.
Results during fiscal 1999 were adversely effected by the sales decrease.
Further, as a result of ownership changes in 1996, the availability of net
operating loss carryforwards to offset future taxable income will be
significantly limited pursuant to the Internal Revenue Code.
Results of Operations: 1998 in Comparison with 1997
The following two paragraphs summarize significant organizational changes,
which impact the comparison of 1998 and 1997 results of operations.
Net assets of the discontinued technology operation were $8 thousand and
$3,186 thousand at September 30, 1998 and 1997, respectively, and the loss
on discontinued operations included a loss from operations of $516
thousand and a loss on disposal of $1,769 thousand at September 30, 1998.
The loss on disposal includes a provision for estimated operating results
prior to disposal. The Company's prior year financial statements have
been restated to conform to this treatment.
On September 30, 1997, the Company sold all of the assets of its L.A.B.
Division to Noonan Machine Company of Franklin Park, IL. The Company
received $2.6 million in cash and two notes, totaling $650 thousand, from
Noonan Machine Company. The purchaser has requested that the principal
amount of the note be reduced to reflect the resale value of certain
assets of L.A.B. The Company is enforcing its rights with respect to the
<PAGE>
note. The net proceeds from the sale were used to pay down outstanding
debt and build working capital. The sale of L.A.B. resulted in a $2.0
million gain, which was recorded in the fourth quarter of fiscal year
1997. In addition, $250 thousand of the proceeds associated with one of
the notes was recorded as deferred revenue due to the possible reduction
of the $250 thousand note receivable, in the event of a sale of certain
fixed assets, in accordance with the terms of the note.
The following is management's discussion and analysis of certain
significant factors, which have affected the Company's results of
operations for 1998 compared to 1997. This discussion relates only to the
Company's continuing operations.
Sales for fiscal 1998 totaled $21.0 million compared to $24.1 million for
the prior year, a decrease of $3.1 million or 12.8%. This decrease is
attributable to the reduction of sales resulting from the sale of the
L.A.B. Division on September 30, 1997, which reported sales of
$3.3 million and operating income of $500 thousand at September 30, 1997.
Advanced Products reported a sales increase of 26.2% and Ling reported a
sales decrease of 11.3% in the year ended September 30, 1998.
Selling, general and administrative expenses for fiscal 1998 were 27.6% of
sales, as compared to 29.1% in 1997. Product development and research
costs during fiscal 1998 were 4% of sales, compared to 4.2% for 1997.
Lower levels of selling, general and administrative expenses for fiscal
1998 resulted primarily from cost reduction efforts during fiscal 1998 as
well as the elimination of costs for L.A.B. of $600 thousand.
Operating income of $2 million at September 30, 1998 represented a $400
thousand or 25.5% increase from the $1.6 million operating income
recorded during the same period last year. The increase is the result
of increased sales levels for Advanced Products and improved margins as
a result of cost control measures. Excluding the L.A.B. division
results in 1997, operating income increased $900 thousand.
In addition to the matters noted above, during the fourth quarter of
fiscal 1998, the Company recorded a $3.8 million loss from the recognition
of the Company's proportionate share of losses in Plug Power compared to a
$330 thousand loss in 1997. During the fourth quarter of fiscal 1997, the
Company recorded a $2.0 million gain on the sale of the L.A.B. Division.
Further, the Company recorded a $2.5 million extraordinary gain, net of
taxes, on the extinguishment of debt during the first quarter of fiscal
1997.
Results during fiscal 1998 were enhanced by lower interest expense,
principally resulting from reduced indebtedness. Moreover, the Company
benefited from reduced income tax expense due to the loss generated by
discontinued operations and the use of net operating loss carryforwards.
However, as a result of recent ownership changes, the availability of
further net operating loss carryforwards to offset future taxable income
will be significantly limited pursuant to the Internal Revenue Code.
<PAGE>
Liquidity and Capital Resources
At September 30, 1999, the Company's order backlog was $2.1 million,
representing no change from the prior year-end.
Inventories in 1999 remained stable at $3.75 million to support expected
sales increases during the first quarter of 2000. Additionally, accounts
receivable decreased by $1.1 million in 1999 due to the reduced sales
during fiscal 1999.
Cash flow used by continuing operations was $2.3 million in 1999 compared
with $.5 million provided in 1998 and $1.1 million provided in 1997. Cash
flow from operating activities was impacted in 1999 by operating losses
and 1998 and 1997 were impacted by positive operating income and
fluctuations in working capital components.
Working capital was $18.7 million at September 30, 1999, a $12.9 million
increase from $5.8 million at fiscal year-end 1998. Capital increased
$12.7 million in 1999 which reflects the proceeds received from the sale
of common shares to existing shareholders through a rights offering.
Capital expenditures were $2.7 million for 1999, $3.2 million for 1998 and
$.4 million for 1997. The capital expenditures in 1999 were in accordance
with the higher level of planned expenditures including the construction
of a new facility for Advanced Products and corporate headquarters and
renovations to an existing building, which were subsequently sold to Plug
Power in July 1999. Capital expenditures in 2000 are expected to
approximate $.4 million, which consists of expenditures for facility fit-
up and computer and manufacturing equipment. The Company expects to
finance these expenditures with cash from operations and existing credit
facilities.
Cash and cash equivalents were $5.9 million at September 30, 1999 compared
to $5.6 million at September 30, 1998. Investments in marketable
securities were $7.9 million at September 30, 1999. These increases are
primarily attributable to $12.7 million of net cash proceeds from the sale
of common shares to existing shareholders through a rights offering, which
closed on July 12, 1999 net of payments associated with the Company's
construction project. During 1999, the Company also funded $4 million of
previously accrued capital contributions to Plug Power.
At September 30, 1999 and 1998, there were no borrowings outstanding on
the lines of credit. The Company has a working capital line of credit
available in the amount of $4 million and a $1 million equipment line of
credit. These lines of credit expire on January 31, 2000. The Company is
currently negotiating an extension of these lines of credit.
The reduction in net assets of discontinued operations to a net liability
of $.5 million reflects the collection of receivables and settlement of
liabilities. The sale of the Technology Division was completed as of
March 31, 1998.
KeyBank issued a letter of credit for approximately $6 million in
connection with the issuance of $6 million of Industrial Development
Revenue Bonds ("IDR Bonds"). The KeyBank credit agreements required the
Company to meet certain covenants, including a fixed charge coverage and
leverage ratio. Further, if certain performance standards were achieved,
<PAGE>
the interest rates on the debt may be reduced. The IDR Bond Obligation,
letter of credit and unexpended bond proceeds were transferred to Plug
Power in connection with the sale of the MTI facility and adjacent
residence effective July 1, 1999.
The Industrial Development Agency for the Town of Colonie issued $6
million in IDR Bonds on behalf of the Company to assist in the
construction of a new building for Advanced Products and the Company's
corporate staff and renovation of existing buildings leased to Plug Power.
The bond closing was completed December 17, 1998 and proceeds of the IDR
Bonds were deposited with a trustee for the bondholders. The Company has
drawn bond proceeds to cover qualified project costs.
On November 1, 1999, the Company entered into a $22.5 million Credit
Agreement with KeyBank, N.A. ("the $22.5 million Credit Agreement"). The
proceeds of this loan were used to fund the Company's remaining $20.5
million balance of its Mandatory Capital Commitment to contribute $22.5
million to Plug Power. Pursuant to the Mandatory Capital Commitment, the
Company purchased 266,667 shares of Plug Power for $2 million on September
30, 1999 and 2,733,333 shares of Plug Power for $20.5 million in November
1999. The Company may sell shares of Plug Power Common Stock to pay
monthly interest and or quarterly principal payments (beginning May 2001)
on the Loan. Plug Power's stock is currently traded on the NASDAQ,
therefore the stock is subject to stock market conditions. Due to the
Company's significant ownership position, sales of Plug Power stock will
be subject to SEC Rule 144 limitations including a limit of one (1)
percent of total outstanding shares per quarter.
The $22.5 million Credit Agreement requires the Company to meet certain
covenants, including maintenance of a collateral account which at all
times has a minimum market value of $600 thousand and a balance on
November 1, 1999 of $2.65 million, and maintenance of a collateral
coverage ratio. The existing covenants under the original letter of
credit were eliminated pursuant to the $22.5 million Credit Agreement.
The $22.5 million Credit Agreement is collateralized by 100% of the
Company's equity interest in Plug Power.
On October 21, 1999, the Company created a strategic alliance with
SatCon Technology Corporation (SatCon). SatCon acquired Ling
Electronics, Inc. and Ling Electronics, Ltd. from the Company and the
Company committed to invest approximately $7 million in SatCon. In
consideration for the acquisition of Ling Electronics and the Company's
investment, the Company will receive 1,800,000 shares of SatCon's common
stock and warrants to purchase an additional 100,000 shares of SatCon's
common stock. The Company funded $2.57 million of its investment in
SatCon and will make the remaining investment by the end of January
2000. SatCon will also receive warrants to purchase 100,000 shares of
the Company's common stock.
The Company anticipates that it will be able to meet the liquidity needs
of its continuing operations and its investment commitment to SatCon
from current cash resources, cash flow generated by operations and
borrowing under its existing lines of credit.
<PAGE>
Market Risk
Market risk represents the risk of changes in value of a financial
instrument, caused by fluctuations in interest rates and equity prices.
Because the Company's cash and investment position exceeds both short
and long term obligations, the Company's exposure to interest rate risk
relates primarily to its investment in marketable debt securities. The
investments are at variable rates, which generally reflect market
conditions. The Company manages its investments to increase return on
investment and only invests in instruments with high credit quality.
The Company has performed a sensitivity analysis on its marketable debt
securities and its investment in Plug Power common stock. The
sensitivity analysis presents the hypothetical change in fair value of
those financial instruments held by the Company at September 30, 1999
which are sensitive to changes in interest rates. Market risk is
estimated as the potential change in fair value resulting from an
immediate hypothetical one-percentage point parallel shift in the yield
curve. The fair values of the Company's investments in marketable
securities have been based on quoted market prices. As the carrying
amounts on short-term investments maturing in less than 180 days
approximate the fair value, these are not included in the sensitivity
analysis. The fair value of marketable securities over 180 days is $3.0
million. A one-percentage point change in the interest rates would
change the fair value of investments over 180 days by $85 thousand.
The Company also has an investment in Plug Power, which is accounted for
on the equity method. The fair market value of the investment is $164.6
million based on the October 28, 1999 $15 per share initial public
offering price. If the market price on the Plug Power stock would
decrease by ten percent the fair value of the stock would decrease by
$16.5 million.
Year 2000
The Company's Year 2000 plan is complete. The plan addresses the issue
of computer programs and embedded computer chips being unable to
distinguish between the year 1900 and the year 2000 as well as the
ability to recognize the leap year date of February 29, 2000. The plan
has been divided into six areas: (1)Systems evaluation, (2) Software
evaluation, (3) Third-party suppliers, (4) Facility systems, (5)
Products and (6)Contingency plans. The general phases common to all
segments are: (1) Inventorying Year 2000 items, (2) Assigning priorities
to identified items, (3) Assessing the Year 2000 compliance of items
determined to be material to the Company, (4) Repairing or replacing
material items that are determined not to be Year 2000 compliant, (5)
Testing material items and (6) Designing and implementing contingency
and business continuation plans for each organization and company
location.
Systems Evaluation
All internal systems have been identified, inventoried, prioritized and
assessed for Year 2000 compliance. Systems found to be non-compliant
<PAGE>
were replaced and compliant systems were assessed to determine what if
any maintenance is required to keep them compliant. Plans have been
developed to ensure that staff is available to oversee restarting
certain machines and manually adjusting their dates.
Software Evaluation
All software material to the Company has been identified, evaluated, and
is now in compliance and certified as such by vendors or new software
has been purchased.
Third-Party Suppliers
Third-party suppliers have been identified and reviewed to determine
whether their products and supplies are Year 2000 compliant. Any
provider identified as non-compliant has been or will be replaced with
an alternative provider if they cannot serve our needs.
Facility Systems
All facility systems are believed to be Year 2000 compliant including
telephone, fire alarm, security and network components.
Products
The Company has evaluated both current product offerings and products in
the field to determine their ability to comply with Year 2000 issues.
The products were found to fall into three categories, non-compliant,
compliant if modifications are made and fully compliant or not impacted
(that is, the product does not have a computer or contains an embedded
computer but does not use a date function). All products currently sold
by the Company are fully Year 2000 compliant. The Company has produced
and made available for sale, upgrades to products requiring
modifications to be Year 2000 compliant. Those products identified as
non-compliant are products that have been in the field for a number of
years and must be replaced by the customer.
Contingency Plans
In the event the Company's Year 2000 plan is ineffective or
unanticipated problems arise, the Company has developed contingency
plans which are now in place. The plans include use of hard copy data
and alternate suppliers.
Costs
The total cost associated with required modifications to become Year
2000 compliant is not expected to be material to the Company's financial
position. The estimated total cost of the Year 2000 project was
approximately $120 thousand, which included software, hardware and
cabling upgrade and replacement costs. This estimate does not include
the Company's potential share of Year 2000 costs that may be incurred by
joint ventures, in which the company participates but is not the
operator. The total amount expended on the Plan through September 30,
1999 was $124 thousand for the upgrade and replacement of hardware.
<PAGE>
Risks
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the
Company's results of operations, liquidity and financial condition. Due
to the general uncertainty inherent in the Year 2000 problem, resulting
in part from the uncertainty of the Year 2000 readiness of third-party
suppliers and customers, the Company is unable to determine at this time
whether the consequences of Year 2000 failures will have a material
impact on the Company's results of operations, liquidity or financial
condition. The Year 2000 Plan is expected to significantly reduce the
Company's level of uncertainty about the Year 2000 problem and, in
particular, about the Year 2000 compliance and readiness of its material
customers. The Company believes that, with its Year 2000 Plan, the
possibility of significant interruptions of normal operations should be
reduced.
Forward Looking Statements
Statements in this Form 10-K or in documents incorporated herein by
reference that are not historical facts or information constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, including, but not limited to, the
information set forth herein. Such forward looking statements involve
known and unknown risks, uncertainties or other factors which may cause
the actual results, levels of activity, performance or achievement of
Company or industry results to be materially different from any future
results, levels of activity, performance or achievement expressed or
implied by such forward-looking statements. Such factors include, among
others, the following: general economic and business conditions; the
ability of the Company to implement its business strategy; the Company's
access to financing; the Company's ability to successfully identify new
business opportunities; the Company's ability to attract and retain
employees; changes in the industry; competition; the effect of regulatory
and legal proceedings and other factors discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
As a result of the foregoing and other factors, no assurance can be given
as to the future results and achievements of the Company. Neither the
Company nor any other person assumes responsibility for the accuracy and
completeness of these statements.
ITEM 8: FINANCIAL STATEMENTS
The financial statements filed herewith are set forth on the Index to
Consolidated Financial Statements on Page F-1 of the separate financial
section which follows page 29 of this report and are incorporated herein
by reference.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Executive Officers" in Item 1
of this Form 10-K Report, and the information which will be set forth in
the section entitled "Election of Directors", and under the captions
"Security Ownership of Certain Beneficial Owners" and "Compliance with
Section 16(a) of the Securities Exchange Act of 1934" in the section
entitled "Additional Information", in the definitive Proxy Statement to be
filed by the registrant, pursuant to Regulation 14A, for its Annual
Meeting of Shareholders to be held on March 16, 2000 (the "2000 Proxy
Statement"), is incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
The information which will be set forth under the captions "Executive
Compensation", "Compensation Committee Report", "Compensation Committee
Interlocks and Insider Participation", "Employment Agreements", and
"Directors Compensation", in the section entitled "Additional Information"
in the registrant's 2000 Proxy Statement, is incorporated herein by
reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information which will be set forth under the captions "Security
Ownership of Certain Beneficial Owners" and "Security Ownership of
Management" in the section entitled "Additional Information" in the
registrant's 2000 Proxy Statement, is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information which will be set forth under the caption "Certain
Information Regarding Nominees" in the section entitled "Election of
Directors", and under the captions "Directors Compensation", "Security
Ownership of Certain Beneficial Owners", and "Certain Relationships and
Related Transactions", in the section entitled "Additional Information",
in the registrant's 2000 Proxy Statement is incorporated herein by
reference.
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
FORM 8-K
(a) (1) The financial statements filed herewith are set forth on the
Index to Consolidated Financial Statements on page F-1 of the separate
financial section which accompanies this Report, which is incorporated
herein by reference.
The following exhibits are filed as part of this Report:
Exhibit
Number Description
3.1 Certificate of Incorporation of the registrant,
as amended and restated. (6)
3.2 By-Laws of the registrant, as restated. (6)
4.93 Credit Agreement dated as of September 22, 1998
among Mechanical Technology Incorporated and
KeyBank National Association ("KeyBank"). (8)
4.94 Security Agreement, dated as of September 22,
1998, executed by the registrant in favor of
KeyBank and securing the registrant's
obligations to KeyBank. (8)
4.95 Security Agreement, dated as of September 22,
1998, executed by Ling Electronics, Inc. (a
wholly owned subsidiary of the registrant) in
favor of KeyBank and securing the registrant's
obligations to KeyBank. (8)
4.96 Guaranty of Payment and Performance, dated as of
September 22, 1998, executed by Ling
Electronics, Inc. (a wholly-owned subsidiary of
the registrant) in favor of KeyBank and
guaranteeing payment of the registrant's
obligations to KeyBank. (8)
<PAGE>
4.103 Assignment and Assumption Agreement, dated as of
July 1, 1999, by and among Town of Colonie
Industrial Development Agency, the registrant,
Plug Power, LLC, KeyBank National Association
and First Albany Corporation in connection with
the sale of the MTI facility to Plug Power and
the assignment and assumption of rights and
obligations in connection with the Industrial
Development Revenue Bonds (Letter of Credit
Secured) Series 1998 A in the original
aggregate amount of $6,000,000. (10)
4.104 Credit Agreement, dated as of November 1, 1999,
between the registrant and KeyBank National
Association for a $22.5 million term loan to
finance a capital contribution to Plug Power,
LLC. (11)
4.105 Stock Pledge Agreement, dated as of November 1,
1999, by the registrant with KeyBank National
Association pledging 13,704,315 shares of Plug
Power stock in support of the $22.5 million
credit agreement. (11)
10.1 Mechanical Technology Incorporated Restricted
Stock Incentive Plan. Filed as Exhibit 28.1 to
the registrant's Form S-8 Registration
Statement No. 33-26326 and incorporated herein
by reference. (1)
10.14 Mechanical Technology Incorporated Stock
Incentive Plan - included as Appendix A to the
registrant's Proxy Statement, filed pursuant to
Regulation 14A, for its December 20, 1996
Special Meeting of Shareholders and
incorporated herein by reference. (2)
10.17 Agreement, dated March 14, 1998, between the
Registrant and Mr. James Clemens, Vice President
and General Manager of Ling Electronic, Inc.,
regarding his employment. (3)
10.18 Limited Liability Company Agreement of Plug
Power, L.L.C., dated June 27, 1998, between
Edison Development Corporation and Mechanical
Technology, Incorporated. (4)(5)
10.19 Contribution Agreement, dated June 27, 1998,
between Mechanical Technology, Incorporated and
Plug Power, L.L.C. (4)(5)
<PAGE>
10.20 Asset Purchase Agreement, dated as of September
22, 1998, between Mechanical Technology,
Incorporated and Noonan Machine Company. (4)
10.21 Asset Purchase Agreement between MTI and NYFM,
Incorporated, dated as of March 31, 1998. (7)
10.24 Contribution Agreement between Edison Development
Corporation and MTI, dated as of June 10, 1998.
(7)
10.30 Mechanical Technology Incorporated 1999 Employee
Stock Incentive Plan. (9)
10.31 Agreement of Sale, dated June 23, 1999, by and
between the registrant and Plug Power, LLC for
the sale of the MTI campus and adjacent
residence. (10)
10.32 Stock Purchase Agreement, dated October 21,
1999, between the registrant, Ling Electronics,
Inc., Ling Electronics, Ltd. and SatCon
Technology Corporation.
10.33 Securities Purchase Agreement, dated October 21,
1999, between the registrant and SatCon
Technology Corporation.
10.34 Mechanical Technology Incorporated Registration
Rights Agreement, dated October 21, 1999, between
the registrant and SatCon Technology Corporation.
10.35 SatCon Technology Corporation Registration
Rights Agreement, dated October 21, 1999, between
SatCon Technology Corporation and the registrant.
10.36 Mechanical Technology Incorporated Stock
Purchase Warrant dated October 21, 1999.
10.37 SatCon Technology Corporation Stock Purchase
Warrant dated October 21, 1999.
10.38 Lease dated August 10, 1999 between Carl E.
Touhey and Mechanical Technology, Inc.
10.39 Registration Rights Agreement, dated November
1, 1999 by and among Plug Power Inc. and the
registrant.
10.40 Plug Power Inc. Lock-Up Agreement, dated
November 1, 1999.
21 Subsidiaries of the registrant.
27 Financial Data Schedule
<PAGE>
______________________
Certain exhibits were previously filed (as indicated below) and are
incorporated herein by reference. All other exhibits for which no
other filing information is given are filed herewith:
(1) Filed as Exhibit 28.1 to the registrant's Form S-8 Registration
Statement No. 33-26326, filed December 29, 1988, and incorporated
herein by reference.
(2) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended September
30, 1996.
(3) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 8-K Report dated May 12, 1997.
(4) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for the fiscal year ended September
30,1997.
(5) Refiled herewith after confidential treatment request with
respect to certain schedules and exhibits were denied by the
Commission. Confidential treatment with respect to certain
schedules and exhibits was granted.
(6) Filed as an Exhibit to the Proxy Statement, Schedule 14A,
dated March 9, 1998.
(7) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form S-2 dated August 18, 1998.
(8) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for the fiscal year ended September
30, 1998.
(9) Filed as an Exhibit to the registrant's Proxy Statement,
Schedule 14A, dated February 12, 1999.
(10) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-Q Report for its fiscal quarter ended June
25, 1999.
(11) Filed as an Exhibit to the registrant's 13D Report dated
November 4, 1999.
(a) (2) Schedule. The following consolidated financial statement
schedule for each of the three years in the period ended September 30,
1999 is included pursuant to Item 14(d):
Report of Independent Accountants on Financial Statements
Schedule
Schedule II--Valuation and Qualifying Accounts
<PAGE>
(b) Two reports on Form 8-K were filed during the quarter ended
September 30, 1999 and three reports were filed subsequent to the
quarter ended September 30, 1999.
The Company filed a Form 8-K Report, dated July 2, 1999, reporting
under item 5 thereof its intention to release 125,000 shares for the
Rights Offering over-subscription and pre-releasing preliminary third
quarter 1999 results.
The Company filed a Form 8-K Report, dated August 30, 1999, reporting
under item 5 thereof that the Company's fuel cell affiliate, Plug
Power, filed a registration statement with the Securities and
Exchange Commission, in connection with the initial public offering
of its common stock. If the public offering price is greater than
$7.50 per share, the Company has agreed to purchase 3 million shares
of Plug Power stock at the fixed price of $7.50 per share, pursuant
to the Mandatory Capital Contribution Agreement dated as of January
26, 1999.
The Company filed a Form 8-K Report, dated October 4, 1999, reporting
under item 5 thereof that Plug Power filed an amendment to its
registration statement with the Securities and Exchange Commission
stating that shares of Plug Power would be offered at an estimated
price range of $13 to $15 per share. On September 30, 1999, the
Company purchased 266,667 shares of Plug Power at $7.50 per share
thereby reducing the Company's commitment to purchase shares at the
public offering from 3 million to 2,733,333 shares.
The Company filed a Form 8-K Report, dated October 22, 1999,
reporting under item 5 thereof the creation of a strategic alliance
with SatCon Technology Corporation. SatCon acquired Ling
Electronics, Inc. and Ling Electronics, Ltd. from the Company and the
Company will invest approximately $7,000,000 in SatCon. In
consideration for the acquisition of Ling Electronics and the
Company's investment, the Company will receive 1,800,000 shares of
SatCon's common stock and warrants to purchase an additional 100,000
shares of SatCon's common stock. The Company immediately funded
$2,570,000 of its investment in SatCon and will make the remaining
investment by the end of January 2000. SatCon will also receive
warrants to purchase 100,000 shares of the Company's common stock.
The Company filed a Form 8-K Report, dated November 16, 1999,
reporting under item 5 thereof that on November 8, 1999 Plug Power
received correspondence from counsel to DCT, Inc., alleging , among
other things, that the Company misappropriated from DCT, Inc.
business and technical trade secrets, ideas, know-how and strategies
relating to fuel cell systems, and that certain contractual
obligations owed to DCT, Inc. were breached.
(d) Separate financial statements for Plug Power, Inc., a less than fifty
percent owned entity, will be filed as an amendment to this Form 10-K as
soon as they become available. Plug Power's fiscal year ends December 31,
1999 and their financial statements should be available by March 30, 1999,
the SEC filing deadline for their Report on Form 10-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MECHANICAL TECHNOLOGY INCORPORATED
Date: December 28,1999 By: /s/ G.C. McNamee
George C. McNamee
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ George C. McNamee Chief Executive Officer and
George C. McNamee Chairman of the Board of
Directors December 28, 1999
/s/ Cynthia A. Scheuer Chief Financial Officer
Cynthia A. Scheuer (Principal Financial and
Accounting Officer) "
/s/ Dale W. Church Director "
Dale W. Church
/s/ Edward A. Dohring Director "
Edward A. Dohring
/s/ Alan P. Goldberg Director "
Alan P. Goldberg
/s/ E. Dennis O'Connor Director "
E. Dennis O'Connor
/s/ Walter L. Robb Director "
Dr. Walter L. Robb
/s/ Beno Sternlicht Director "
Dr. Beno Sternlicht
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Shareholders
of Mechanical Technology Incorporated
Our audits of the consolidated financial statements referred to in our
report dated November 12, 1999 appearing on page F-2 of this Form 10-K
of Mechanical Technology Incorporated also included an audit of the
financial statement schedule listed in Item 14(a)(2) of this Form 10-K.
In our opinion, this financial statement schedule presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers L.L.P.
Albany, New York
November 12, 1999
<PAGE>
SCHEDULE II
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
Additions
Balance at Charged to Charged Balance
beginning costs and to other at end of
Description of period expenses accounts Deductions period
Allowance for
doubtful accounts
Year ended
September 30:
1999 $ 99 $ 76 $ - $ 62 $ 113
1998 94 95 - 90 99
1997 73 49 - 28 94
Includes accounts written off as uncollectible, recoveries and the effect
of currency exchange rates.
Valuation allowance
for deferred tax assets
Year ended
September 30:
1999 $ 4,089 $ 5,092 $ - $ 5,431 $ 3,750
1998 2,754 1,335 - - 4,089
1997 4,264 - - 1,510 2,754
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Accountants. . . . . . . . . . . F-2
Consolidated Financial Statements:
Balance Sheets as of September 30, 1999 and 1998 . . F-3 & F-4
Statements of Operations for the Years Ended
September 30, 1999, 1998 and 1997 . . . . . . . . F-5
Statements of Shareholders' Equity for the Years Ended
September 30, 1999, 1998 and 1997 . . . . . . . . F-6
Statements of Cash Flows for the Years Ended
September 30, 1999, 1998 and 1997 . . . . . . . . F-7 - F-8
Notes to Consolidated Financial Statements . . . . . F-9 - F-35
Separate financial statements of the registrant alone are omitted because
the registrant is primarily an operating company and all subsidiaries
included in the consolidated financial statements being filed, in the
aggregate, do not have minority equity interest and/or indebtedness to
any person other than the registrant or its consolidated subsidiaries in
amounts which together exceed 5% of the total assets as shown by the most
recent year-end consolidated balance sheet.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Mechanical Technology Incorporated
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and retained earnings and
of cash flows present fairly, in all material respects, the financial
position of Mechanical Technology Incorporated and Subsidiaries at
September 30, 1999 and 1998, and the results of their operations and
their cash flows for each of the three years in the period ended
September 30, 1999, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits
of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers L.L.P.
Albany, New York
November 12, 1999
F-2
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and 1998
(Dollars in thousands)
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,870 $ 5,567
Investments in marketable securities 7,876 -
Accounts receivable, less allowance of
$113 (1999) and $99 (1998) 3,852 4,959
Other receivables - related parties 105 87
Inventories 3,752 3,748
Taxes receivable 10 8
Note receivable - current 329 327
Prepaid expenses and other current assets 265 472
Net assets of a discontinued operation - 8
______ ______
Total Current Assets 22,059 15,176
Property, Plant and Equipment, net 827 4,467
Note receivable - noncurrent 184 264
Investment in Plug Power 8,710 1,221
_______ ________
Total Assets $ 31,780 $ 21,128
======= ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
September 30, 1999 and 1998
(Dollars in thousands)
1999 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Income taxes payable $ - $ 5
Accounts payable 614 2,064
Accrued liabilities 2,243 3,328
Contribution payable-Plug Power - 4,000
Net liabilities of discontinued operations 540 -
_______ _______
Total Current Liabilities 3,397 9,397
LONG-TERM LIABILITIES
Deferred income taxes and other credits 597 607
_______ _______
Total Liabilities $ 3,994 $ 10,004
_______ _______
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share,
authorized 15,000,000; issued
11,649,959 (1999) and 10,773,968(1998) 11,649 10,775
Paid-in capital 42,755 16,274
Deficit (26,573) (15,885)
_______ _______
27,831 11,164
Accumulated Other Comprehensive Loss:
Unrealized loss on available for sale
securities, net (5) -
Foreign currency translation adjustment (11) (11)
_______ _______
Accumulated Other Comprehensive Loss (16) (11)
Common stock in treasury, at cost,
6,750 shares (1999) and
4,500 shares (1998) (29) (29)
_______ _______
Total Shareholders' Equity 27,786 11,124
Total Liabilities and Shareholder's Equity $ 31,780 $ 21,128
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended September 30, 1999, 1998 and 1997
(Dollars in thousands, except per share)
Restated
1999 1998 1997
Net sales $ 12,885 $ 21,028 $ 24,102
Cost of sales 8,239 12,386 14,474
_______ _______ _______
Gross profit 4,646 8,642 9,628
Selling, general and administrative
expenses 4,949 5,812 7,015
Product development and research costs 1,105 831 1,020
_______ _______ _______
Operating (loss) income (1,408) 1,999 1,593
Interest expense (106) (102) (323)
Gain on sale of division/subsidiary - - 2,012
Equity in losses of Plug Power (9,363) (3,806) (330)
Other income(expense), net 185 (97) (251)
_______ _______ _______
(Loss)income from continuing operations
before extraordinary item and income
taxes (10,692) (2,006) 2,701
Income tax expense 37 25 143
_______ _______ _______
(Loss)income from continuing operations
before extraordinary item (10,729) (2,031) 2,558
Extraordinary item- gain on extinguishment
of debt, net of taxes ($106) - - 2,507
_______ _______ _______
(Loss)income from continuing operations (10,729) (2,031) 5,065
Income(loss)from discontinued operations 41 (2,285) (545)
_______ _______ _______
Net(loss)income $(10,688) $ (4,316) $ 4,520
======= ======= =======
Earnings (loss) per share (Basic and Diluted):
(Loss)income before extraordinary item $ (.94) $ (.21) $ .28
Extraordinary item - - .27
(Loss)from discontinued operations - (.24) (.06)
_______ _______ _______
Net(loss)income $ (.94) $ (.45) $ .49
======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended September 30, 1999, 1998 and 1997
(Dollars in thousands)
Restated
1999 1998 1997
COMMON STOCK
Balance, October 1
(1997 balance as previously reported) $ 10,775 $ 8,864 $ 4,902
Three-for-two common stock split effected
in the form of a 50% stock dividend
effective April 30, 1999 - - 2,451
Issuance of shares - options 56 117 -
Issuance of shares 818 1,794 1,511
_______ _______ _______
Balance, September 30 $ 11,649 $ 10,775 $ 8,864
======= ======= =======
PAID-IN-CAPITAL
Balance, October 1
(1997 balance as previously reported) $ 16,274 $ 10,968 $ 13,423
Three-for-two common stock split effected
in the form of a 50% stock dividend
effective April 30, 1999 - - (2,451)
Issuance of shares - options 168 108 -
Issuance of shares 11,826 5,198 (4)
Plug Power investment 14,487 - -
_______ _______ _______
Balance, September 30 $ 42,755 $ 16,274 $ 10,968
======= ======= =======
DEFICIT
Balance, October 1 $(15,885) $(11,569) $(16,089)
Net(loss)income (10,688) (4,316) 4,520
_______ _______ _______
Balance, September 30 $(26,573) $(15,885) $(11,569)
======= ======= =======
UNREALIZED LOSS ON AVAILABLE FOR SALE
SECURITIES, NET
Balance, October 1 $ - $ - $ -
Unrealized loss on available for
for sale securities, net (5) - -
_______ _______ _______
Balance, September 30 $ (5) $ - $ -
======= ======= =======
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Balance, October 1 $ (11) $ (19) $ (19)
Adjustments - 8 -
_______ _______ _______
Balance, September 30 $ (11) $ (11) $ (19)
======= ======= =======
<PAGE>
TREASURY STOCK
Balance, October 1 $ (29) $ (29) $ (29)
Restricted stock grants - - -
_______ _______ _______
Balance, September 30 $ (29) $ (29) $ (29)
======= ======= =======
RESTRICTED STOCK GRANTS
Balance, October 1 $ - $ (2) $ (24)
Grants issued/vested, net - 2 22
_______ _______ _______
Balance, September 30 $ - $ - $ (2)
======= ======= =======
SHAREHOLDERS' EQUITY
September 30 $ 27,786 $ 11,124 $ 8,213
======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
<TABLE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended September 30, 1999, 1998 and 1997
(Dollars in thousands)
<CAPTION>
Restated
1999 1998 1997
<S> <C> <C> <C>
OPERATING ACTIVITIES
(Loss)income from continuing operations $ (10,729) $ (2,031) $ 5,065
Adjustments to reconcile net (loss) income to net cash
provided (used) by continuing operations:
Depreciation and amortization 581 323 243
Gain on extinguishment of debt, net of taxes - - (2,507)
Gain on sale of subsidiaries - - (2,012)
Unrealized loss on marketable securities (5) - -
Equity in losses of Plug Power 9,363 3,806 330
Accounts receivable reserve 14 5 21
Loss on sale of fixed assets 28 9 -
Deferred income taxes and other credits (10) 13 (170)
Other - - 31
Stock option compensation 55 - -
Changes in operating assets and liabilities net
of effects from discontinued operations:
Accounts receivable 1,093 (1,069) (44)
Accounts receivable - related parties (18) - -
Inventories (4) (362) 228
Prepaid expenses and other current assets (174) (346) (18)
Accounts payable (1,450) 788 (87)
Income taxes (7) (76) (49)
Accrued liabilities (1,085) (519) 58
________ _______ _______
Net cash (used) provided by continuing operations (2,348) 541 1,089
________ _______ _______
Discontinued Operations:
Income/(loss)from discontinued operations 41 (2,285) (574)
Adjustments to reconcile income to net cash
provided (used) by discontinued operations:
Changes in net assets/liabilities
of discontinued operations 548 3,178 31
Net assets transferred from discontinued operations - (878) -
________ _______ _______
Net cash provided (used) by discontinued operations 589 15 (543)
________ _______ _______
Net cash (used) provided by operations (1,759) 556 546
________ _______ _______
INVESTING ACTIVITIES
Purchases of property, plant & equipment (2,738) (3,166) (377)
Investment in marketable securities (7,876) - -
Proceeds from sale of subsidiaries - - 2,600
Principal payments from note receivable 78 59 -
Investment in Plug Power (6,000) - -
Note receivable Plug Power - (500) -
________ _______ _______
Net cash (used)provided by investing activities (16,536) (3,607) 2,223
________ _______ _______
<PAGE>
FINANCING ACTIVITIES
Borrowings under IDA financing, less restricted
cash 5,858 - -
Proceeds from options exercised 153 225 -
Proceeds from rights offering 12,820 7,178 -
Costs of rights offering (158) (186) -
Debt issue costs (75) (28) -
Net (payments) under line-of-credit and note
agreement - - (100)
Principal payments on long-term debt - - (1,310)
________ _______ _______
Net cash provided(used)by financing activities 18,598 7,189 (1,410)
________ _______ _______
Effect of exchange rate changes on cash flows - 8 -
Increase in cash and cash equivalents 303 4,146 1,359
Cash and cash equivalents - beginning of year 5,567 1,421 62
________ _______ _______
Cash and cash equivalents - end of year $ 5,870 $ 5,567 $ 1,421
======== ======= =======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-7
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For The Years Ended September 30, 1999, 1998 and 1997
(Dollars in thousands)
Restated
1999 1998 1997
Supplemental Disclosures
NONCASH INVESTING ACTIVITIES
Contribution of net assets to Plug Power:
Accounts receivable $ - $ 500 $ -
Note receivable - 500 -
Inventories - - 1
Property, plant and equipment, net - - 452
Accounts payable - - (46)
Accrued liabilities - - (50)
Contribution payable - Plug Power - 4,000 -
______ ______ ________
$ - $ 5,000 $ 357
______ ______ ________
Proceeds from sale of subsidiary
Notes receivable $ - $ - $ 650
______ ______ ________
Net noncash provided by investing activities $ - $ 5,000 $ 1,007
______ ______ ________
NONCASH FINANCING ACTIVITIES
Conversion of Note Payable to Common Stock:
Note Payable extinguishment $ - $ - $ (3,000)
Common stock issued - - 1,500
Accrued interest - Note Payable - - (1,213)
Additional paid-in capital - Other Investors 14,487 - -
Campus contribution to Plug Power:
Debt (6,000) - -
Fixed assets 5,861 - -
Prepaid expenses 364 - -
Restricted cash 142 - -
______ ______ ________
Net noncash provided (used) by
financing activities $14,854 $ - $ (2,713)
______ ______ ________
Net noncash provided (used) by
investing and financing activities $14,854 $ 5,000 $ (1,706)
====== ====== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions and
accounts have been eliminated. The Company has a 40.65% interest in Plug
Power, L.L.C. ("Plug Power"). The consolidated financial statements
include the Company's investments in Plug Power (including obligations to
invest), plus its share of losses. The investment is included in the
financial line "Investment in Plug Power".
Use of Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Financial Instruments
The fair value of the Company's financial instruments including cash and
cash equivalents, investments, line-of-credit, note payable and long-term
debt, approximates carrying value. Fair values were estimated based on
quoted market prices, where available, or on current rates offered to the
Company for debt with similar terms and maturities.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Property, Plant, and Equipment
Property, plant and equipment are stated at cost and depreciated using
primarily the straight-line method over their estimated useful lives:
Buildings and improvements 20 to 40 years
Leasehold improvements 10 years
Machinery and equipment 2 to 10 years
Office furniture and fixtures 3 to 10 years
Significant additions or improvements extending assets' useful lives are
capitalized; normal maintenance and repair costs are expensed as
incurred. The costs of fully depreciated assets remaining in use are
included in the respective asset and accumulated depreciation accounts.
F-9
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Accounting Policies (continued)
When items are sold or retired, related gains or losses are included in
net income.
Income Taxes
The Company accounts for taxes in accordance with Financial Accounting
Standard No. 109, "Accounting for Income Taxes," which requires the use
of the asset and liability method of accounting for income taxes. Under
the asset and liability method, deferred income taxes are recognized for
the tax consequences of "temporary differences" by applying enacted
statutory tax rates applicable for future years to differences between
financial statement and tax bases of existing assets and liabilities.
Under FAS No. 109, the effect of tax rate changes on deferred taxes is
recognized in the income tax provision in the period that includes the
enactment date. The provision for taxes is reduced by investment and
other tax credits in the years such credits become available.
Revenue Recognition
Sales of products are recognized when products are shipped to customers.
Sales of products under long-term contracts are recognized under the
percentage-of-completion method. Percentage-of-completion is based on the
ratio of incurred costs to current estimated total costs at completion.
Total contract losses are charged to operations during the period such
losses are estimable.
Foreign Currency Translation
Assets and liabilities of the foreign subsidiary are translated at year-
end rates of exchange, and revenues and expenses are translated at the
average rates of exchange for the year. Gains or losses resulting from
the translation of the foreign subsidiary's balance sheet are accumulated
in a separate component of shareholders' equity.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid short-term
investments with maturities of less than three months.
Investments in Marketable Securities
Management determines the appropriate classification of its investments
in marketable securities at the time of purchase and reevaluates such
determinations at each balance sheet date. Marketable securities for
which the Company does not have the intent or ability to hold to
maturity are classified as available for sale along with any
F-10
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Accounting Policies (continued)
investments in mutual funds. Securities available for sale are carried
at fair value, with the unrealized gains and losses, net of income
taxes, reported as a separate component of Shareholders' Equity. The
Company has had no investments that qualify as trading or held to
maturity.
The amortized cost of debt securities is adjusted for accretion of
discounts to maturity. Such accretion as well as interest are included
in interest income. Realized gains and losses are included in Other
income (expense), net in the Consolidated Statements of Operations. The
cost of securities sold is based on the specific identification method.
The Company's investments in marketable securities are diversified among
high-credit quality securities in accordance with the Company's
investment policy.
Earnings (Loss) Per Share
Effective October 1, 1997, the Company adopted Financial Accounting
Standard No. 128, "Earnings per Share." In accordance with this
Standard, net income(loss) per share is computed using the weighted
average number of common shares outstanding during each year. Diluted
net income(loss) per share includes the effects of all potentially
dilutive securities. Earnings per share amounts for all periods
presented have been computed in accordance with this Standard.
Advertising
The costs of advertising are expensed as incurred. Advertising expense
was approximately $102, $83 and $92 thousand in 1999, 1998, and 1997,
respectively.
Asset Impairment
The Company adopted SFAS No. 121, "Accounting For The Impairment of Long-
Lived Assets and for Long-Lived Assets To Be Disposed Of." This
statement requires companies to record impairments to long-lived assets,
certain identifiable intangibles, and related goodwill when events or
changing circumstances indicate a probability that the carrying amount of
an asset may not be fully recovered. Impairment losses are recognized
when expected future cash flows are less than the asset's carrying value.
Reclassification and Restatement
Certain 1998 and 1997 amounts have been reclassified to conform to the
1999 presentation. The financial statements for 1997 have also been
restated to reflect the discontinuance of the Company's Technology
Division (See Note 16).
F-11
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) Investments in Marketable Securities
The following is a summary of the investments in marketable securities
classified as current assets:
(Dollars in thousands) 1999 1998
Available for sale securities:
Corporate debt securities
Fair Value $ 7,876 $ -
====== =====
Amortized Cost $ 7,881 $ -
====== =====
Unrealized Loss $ (5) $ -
====== =====
The difference between the amortized cost of available for sale
securities and their fair market value results in unrealized gains and
losses, which are recorded as a separate component of stockholders'
equity. Gross realized gains and losses on sales of available for sale
securities were immaterial in 1999, 1998 and 1997.
The estimated fair value of available for sale securities by contractual
maturity is as follows:
(Dollars in thousands) 1999
Due in one year or less $ 4,916
Due after one year through three years -
Due after three years 2,960
______
$ 7,876
======
Expected maturities may differ from contractual maturities because the
issuers of the securities may have the right to prepay obligations
without prepayment penalties.
(3) Inventories
Inventories consist of the following:
(Dollars in thousands) 1999 1998
Finished goods $ 73 $ 112
Work in process 916 791
Raw materials, components and
Assemblies 2,763 2,845
______ ______
$ 3,752 $ 3,748
====== ======
F-12
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) Property, Plant and Equipment
Property, plant and equipment consists of the following:
(Dollars in thousands) 1999 1998
Land and improvements $ - $ 125
Buildings and improvements 26 6,111
Leasehold improvements 470 517
Machinery and equipment 3,686 4,285
Office furniture and fixtures 621 866
_____ ______
4,803 11,904
Less accumulated depreciation 3,976 7,437
_____ ______
$ 827 $ 4,467
===== ======
At the beginning of 1998, assets with a net book value of $878 thousand
consisting primarily of land, building and management information systems
were transferred from discontinued operations to continuing operations.
Construction in progress, included in buildings and improvements, was
approximately $1,371 thousand in 1998.
At the end of 1999, the Company was committed to approximately $387
thousand of future expenditures for new furniture, equipment and
fixtures.
Depreciation expense was $489, $317 and $216 thousand for 1999, 1998
and 1997, respectively. Repairs and maintenance expense was $166, $177
and $175 thousand for 1999, 1998 and 1997, respectively.
Prior to the sale of all land and buildings to Plug Power in 1999, the
cost and accumulated depreciation of buildings and improvements leased
to Plug Power was:
(Dollars in thousands) 1998 1997
Cost $ 1,547 $ 21
Accumulated depreciation (660) (17)
______ _____
$ 887 $ 4
====== =====
F-13
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Notes Receivable
Notes receivable consists of the following:
(Dollars in thousands) 1999 1998
Notes receivable with an interest
rate of 10%, interest and principal
due September 30, 1998 (A) $ 250 $ 250
Notes receivable with an interest
rate 10%, due in monthly installments
through September 30, 2002 263 341
______ _____
513 591
Less: Current portion (329) (327)
______ _____
$ 184 $ 264
====== =====
(A) The principal amount of this note may be reduced in accordance with
the terms of the note in the event of a sale of the fixed assets. The
purchaser has requested that the principal amount of the note be reduced
to reflect the resale value of certain assets of L.A.B. The Company is
enforcing its rights with respect to the note and is currently litigating
for the collection of this note.
(6) Investment in Plug Power, L.L.C.
On June 27, 1997, the Company and Edison Development Corp. ("EDC"), a
subsidiary of DTE Energy Co. formed a joint venture, Plug Power, L.L.C.
("Plug Power"), to further develop the Company's Proton Exchange Membrane
("PEM") Fuel Cell technology. In exchange for its contribution of
contracts and intellectual property and certain other net assets that had
comprised the fuel cell research and development business activity of the
Technology segment (which assets had a net book value of $357 thousand),
the Company received a 50% interest in Plug Power. EDC made an initial
cash contribution of $4.75 million in exchange for the remaining 50%
interest in Plug Power. The Company's investment in Plug Power is
included in the balance sheet caption "Investment in Plug Power"; the
assets contributed by the Company to Plug Power in fiscal 1997 had
previously been included in the assets of the Company's Technology
segment. See the supplemental disclosure regarding Contribution of Net
Assets to Plug Power in the Consolidated Statements of Cash Flows for
additional information regarding the assets contributed by the Company to
Plug Power. The Company recorded the carrying value of the net assets
contributed as its initial investment in Plug Power in recognition of the
nature of the venture's undertaking.
F-14
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Investment in Plug Power, L.L.C. (continued)
On April 15, 1998, EDC contributed $2.25 million in cash to Plug Power.
The Company contributed a below-market lease for office and manufacturing
facilities in Latham, New York valued at $2 million and purchased a one-
year option to match the remaining $250 thousand of EDC's contribution.
In May 1998, EDC contributed an additional $2 million to Plug Power and
the Company purchased another one-year option to match the contribution.
The Company paid approximately $191 thousand for the options, which were
scheduled to mature April 24, 1999 ($250 thousand) and June 15, 1999 ($2
million).
As of March 25, 1999, the Company and Plug Power exchanged the foregoing
options and certain "research credits" (described below) for 2.25
million Plug Power membership interests. The Company earned the
research credits by assisting Plug Power in securing the award of
certain government grants and research contracts during the period June
1997 through April 1999.
In August, 1998, the Company committed to contribute an additional $5
million dollars (in cash, accounts receivable and research credits) to
Plug Power between August 5, 1998 and March 31, 1999 and recorded a
liability representing this obligation. During the period from September
1998 to February 1999, the Company fully funded this commitment by
contributing $4 million cash and converting $.5 million of accounts
receivable and $.5 million of notes receivable.
During April 1999, the Company and EDC amended and restated the Plug
Power Mandatory Capital Contribution Agreement. The agreement, which was
effective as of January 26, 1999, stated that, in the event Plug Power
determined that it required funds at any time through December 31, 2000,
Plug Power had the right to call upon the Company and EDC to each make
capital contributions as follows:
* The Company and EDC would each fund capital calls of up to $7.5
million in 1999 and $15 million in 2000 ("Capital Commitment").
* In exchange for such capital contributions to Plug Power, the
Company and EDC would receive class A membership interests
("Shares") from Plug Power at $7.50 per share.
* The Company and EDC would share the Capital Commitment equally.
* Plug Power's Board of Managers would determine when there is
need for such capital contributions.
* The Company and EDC would have sixty (60) days from the date of
such authorization to tender their payment to Plug Power.
The agreement was scheduled to terminate on December 31, 2000 or the
date of an initial public offering of shares by Plug Power at a per
F-15
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Investment in Plug Power, L.L.C. (continued)
share price of greater than $7.50 per share ("Termination Date").
In exchange for the Capital Commitment, Plug Power agreed to permit the
Company and EDC to make capital contributions to the extent of their
Capital Commitment on the Termination Date, whether or not such funds
have been called, in exchange for shares at the fixed price of $7.50 per
share.
In June 1999, the Company and Plug Power entered into an agreement for
the sale of the MTI campus and adjacent residence, including all land
and buildings, to Plug Power in exchange for 704,315 Class A membership
interests and the assumption of approximately $6 million in debt by Plug
Power. The sale of the MTI facility and the transfer of the $6 million
IDR bonds to Plug Power were effective as of July 1, 1999 with no gain
or loss recognized.
In August 1999, the Company committed to purchase 3 million shares of
Plug Power if the public offering price of Plug Power's stock was
greater than $7.50 per share. The Mandatory Capital Contribution
Agreement between the Company and Plug Power, dated as of January 26,
1999 was amended and restated to reflect this commitment.
On September 30, 1999, the Company purchased 266,667 shares of Plug
Power at $7.50 per share. This purchase reduced the Company's
commitment to purchase Plug Power shares at the time of its public
offering from 3,000,000 shares to 2,733,333 shares at a price of $7.50
per share.
The Company's total contributions to Plug Power (including contributions
of cash, assets, research credits, below market lease and real estate)
for the period commencing on June 27, 1997, and ending September 30,
1999 total $20.7 million.
During calendar 1999, Plug Power's equity increased approximately
$50.628 million primarily due to investments by investors. Of this
amount, $30.368 million was received in cash, $9.010 million in property
and services and $11.250 million represents membership interests issued
in connection with the formation of GE Fuel Cell Systems LLC. As a
result, the Company recorded its proportionate share of the increase in
Plug Power's equity ($14.854 million) as investment in Plug Power and
additional paid-in capital.
The Company has recorded its proportionate share of Plug Power's losses
to the extent of its recorded investment in Plug Power. The carrying
value of the Company's investment is $8.71 million as of September 30,
1999 for a 40.65% interest in Plug Power.
F-16
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Investment in Plug Power, L.L.C. (continued)
The Company will recognize its proportionate shares of losses in the
future to the extent of its carrying value and additional future
investments.
On November 1, 1999, the Company purchased 2,733,333 shares of Plug
Power at $7.50 per share. This purchase completed the Company's
commitment to purchase Plug Power shares at the time of its public
offering. Plug Power's public offering was completed at $15 per share.
The Company's total contributions to Plug Power as of November 1, 1999
total $41.2 million. Immediately after the Plug Power IPO, the Company
owned 13,704,315 shares or 31.9% of Plug Power.
At September 30, 1999 and 1998, the difference between the carrying value
of the Company's investment in Plug Power and its interest in the
underlying equity consists of the following:
(Dollars in thousands) 1999 1998
Calculated ownership (40.65% in 1999 and
50% in 1998) $12,704 $ 2,431
Unrecognized negative goodwill (3,994) (2,085)
Value of below market lease contribution - (2,000)
Calculated 50% of equity value under option - (1,125)
Contribution liability - 4,000
______ ______
Carrying value of Investment in Plug Power $ 8,710 $ 1,221
====== ======
Summarized below is financial information for Plug Power. Plug Power's
fiscal year ends December 31.
9 Months
Ended Year Ended
Sept 30, Dec 31, Dec 31,
(Dollars in thousands) 1999 1998 1997
Current assets $12,024 $ 5,293 $3,917
Noncurrent assets 31,522 2,800 929
Current liabilities 6,291 2,601 1,250
Noncurrent liabilities 6,002 - -
Stockholders' equity 31,253 5,493 3,597
Gross revenue 6,702 6,541 1,194
Gross profit (3,148) (2,323) (33)
Net loss (24,867) (9,616) (5,903)
F-17
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) Income Taxes
Deferred tax assets and liabilities are determined based on the temporary
differences between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates.
Income tax expense (benefit) for the years ended September 30, consists
of the following:
(Dollars in thousands) 1999 1998 1997
Continuing operations
Federal $ 1 $ 15 $ 62
State 36 10 81
Deferred - - -
_______ _______ _______
37 25 143
_______ _______ _______
Discontinued operations
Federal - - (17)
State - - (12)
Deferred - - -
_______ _______ _______
- - (29)
_______ _______ _______
Extraordinary Item
Federal - - 28
State - - 78
Deferred - - -
_______ _______ _______
- - 106
_______ _______ _______
$ 37 $ 25 $ 220
======= ======= =======
The significant components of deferred income tax expense (benefit) for
the years ended September 30, are as follows:
(Dollars in thousands) 1999 1998 1997
Continuing operations
Deferred tax (benefit) expense $ (1,833) $ (667) $ (356)
Net operating loss carryforward (3,259) 105 1,223
Valuation allowance 5,092 562 (867)
_______ ________ _______
- - -
_______ ________ _______
Discontinued operations
Deferred tax expense(benefit) 114 (508) 60
Net operating loss carryforward (97) (265) (251)
Valuation allowance (17) 773 191
_______ ________ _______
- - -
_______ ________ _______
$ - $ - $ -
======= ======== =======
F-18
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) Income Taxes (continued)
1999 1998 1997
Extraordinary item
Deferred tax (benefit) expense - - (28)
Net operating loss carryforward - - 862
Valuation allowance - - (834)
_______ _______ _______
- - -
_______ _______ _______
$ - $ - $ -
======= ======= =======
The Company's effective income tax rate from continuing operations
differed from the Federal statutory rate as follows:
1999 1998 1997
Federal statutory tax rate (34%) (34%) 34%
State taxes, net of
federal tax effect - - 2%
Change in valuation allowances 34% 28% (32%)
Alternative minimum tax - - 2%
Other, net - 7% (1%)
_______ _______ _______
-% 1% 5%
======= ======= =======
The deferred tax assets and liabilities as of September 30, consist of
the following tax effects relating to temporary differences and
carryforwards:
(Dollars in thousands)
1999 1998
Current deferred tax assets:
Loss provisions for discontinued
operations $ 300 $ 337
Bad debt reserve 112 96
Inventory valuation 173 161
Inventory capitalization 39 20
Vacation pay 63 66
Warranty and other sale obligations 86 25
Other reserves and accruals 116 151
_______ _______
889 856
Valuation allowance (889) (856)
_______ _______
Net current deferred tax assets $ - $ -
======= =======
F-19
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) Income Taxes (continued)
1999 1998
Noncurrent deferred tax assets (liabilities):
Net operating loss $ 5,687 $ 1,951
Property, plant and equipment 122 (9)
Investment in Plug Power (3,322) 954
Other 224 187
Alternative minimum tax credit 150 150
_______ _______
2,861 3,233
Valuation allowance (2,861) (3,233)
Other credits (597) (607)
_______ _______
Noncurrent net deferred tax
liabilities and other credits $ (597) $ (607)
======= =======
The valuation allowance at year ended September 30, 1999 is $3.750
million and at September 30, 1998 was $4.089 million. During the year
ended September 30, 1999, the valuation allowance decreased by $339
thousand.
At September 30, 1999, the Company has unused Federal net operating loss
carryforwards of approximately $14.219 million. The Federal net operating
loss carryforwards if unused will begin to expire during the year ended
September 30, 2009. The use of $5.339 million of these carryforwards is
limited on an annual basis, pursuant to the Internal Revenue Code, due to
certain changes in ownership and equity transactions. For the year ended
September 30, 1999, the Company has available alternative minimum tax
credit carryforward of approximately $150 thousand.
The Company made cash payments, net of refunds, for income taxes of $15,
$42 and $361 thousand for 1999, 1998 and 1997, respectively.
(8) Accrued Liabilities
Accrued liabilities consist of the following:
(Dollars in thousands) 1999 1998
Salaries, wages and related expenses $ 553 $ 999
Acquisition and disposition costs 431 410
Legal and professional fees 169 305
Warranty and other sale obligations 398 607
Accrued severance - 143
Deferred income 264 267
Commissions 182 213
Interest expense 7 8
Other 239 376
______ ______
$ 2,243 $ 3,328
====== ======
F-20
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) Debt
The Company has a working capital line of credit available in the amount
of $4 million with interest payable monthly at a rate of prime (8.25% and
8.5% at September 30, 1999 and 1998, respectively) or LIBOR plus 2.5%
(7.9% and 7.875% at September 30, 1999 and 1998, respectively). This
obligation is collateralized by the assets of the Company, exclusive of
its investment in Plug Power. The Company also has a $1 million
equipment loan/lease line of credit at an interest rate of LIBOR plus
2.75% (8.15% and 8.125% at September 30, 1999 and 1998, respectively).
This obligation is collateralized by the equipment purchased under the
line of credit. The lines of credit expire on January 31, 2000. No
amounts were outstanding under these lines at September 30, 1999 and
1998.
On December 17, 1998, the Industrial Development Agency for the Town of
Colonie issued $6 million in Industrial Development Revenue ("IDR") Bonds
on behalf of the Company to assist in the construction of a new building
for Advanced Products and the Company's corporate staff and renovation of
existing buildings leased to Plug Power. The IDR Bond proceeds were
deposited with a trustee for the bondholders and the Company drew bond
proceeds to cover qualified project costs. First Albany Companies Inc.
("FAC"), which owns 34% of the Company's stock, underwrote the sale of
the IDR Bonds. FAC received no fees for underwriting the IDR Bonds but
will be reimbursed for its out-of-pocket costs.
KeyBank issued a letter of credit (the credit agreement) for
approximately $6 million in connection with the $6 million IDR Bonds. The
KeyBank credit agreements require the Company to meet certain covenants,
including a fixed charge coverage and leverage ratio. Further, if
certain performance standards are achieved, the interest rates on the
debt may be reduced.
The credit agreement also requires the Company to grant a first lien on
all consolidated assets of the Company, exclusive of its investment in
Plug Power, a first mortgage on all land and buildings owned by the
Company and a first lien on any equipment purchased by the Company.
The IDR Bond Obligation, letter of credit and unexpended bond proceeds
were transferred to Plug Power in connection with the sale of the MTI
facility and adjacent residence effective July 1, 1999.
F-21
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) Debt (continued)
On November 1, 1999, the Company entered into a $22.5 million Credit
Agreement with KeyBank, N.A. ("the $22.5 million Credit Agreement"), the
Company has pledged 13,704,315 shares of Plug Power Common Stock as
collateral for its $22.5 million loan from KeyBank, N.A. ("Loan"). The
proceeds of this loan were used to fund the Company's remaining $20.5
million balance of its Mandatory Capital Commitment to contribute $22.5
million to Plug Power. Although the Credit Agreement does not require
the Company to sell shares of Plug Power Common Stock, the Company may
sell shares of Plug Power Common Stock to pay interest or principal on
the Loan. Pursuant to the $22.5 million Credit Agreement, the Company is
obligated to make interest only payments for the first 18 months
following the closing of the Loan, and to repay the principal in 6 equal
quarterly installments of $3.750 million each, commencing on June 30,
2001. In addition, a one time commitment fee totaling $247,500 is
payable for the Loan, $75,000 of which was paid as of September 30, 1999.
Interest is payable monthly at a rate of Prime (8.25% on November 1,
1999) or if certain performance standards are achieved, the interest
rates on the $22.5 million Credit Agreement may be reduced.
The $22.5 million Credit Agreement requires the Company to meet certain
covenants, including maintenance of a collateral account which at all
times has a minimum market value of $600 thousand and a balance on
November 1, 1999 of $2.65 million, and maintenance of a collateral
coverage ratio. The existing covenants under the original letter of
credit were eliminated pursuant to the $22.5 million Credit Agreement.
The weighted average interest rate for the Note Payable, IDR Bonds and
Line of Credit during 1999 was 5.11%, 9.02% during 1998 and 10.75% during
1997.
Cash payments for interest were $164, $97 and $201 thousand for 1999,
1998 and 1997, respectively.
(10) Shareholders' Equity
On July 12, 1999, the Company completed the sale of 801,223 shares of
common stock to current shareholders through a rights offering. The
offering raised approximately $12.820 million before offering costs of
approximately $158 thousand for net proceeds of approximately $12.671
million. The Company will use some or all of the proceeds of the
offering for investment into Plug Power. In addition, some proceeds may
be used for acquisitions for the Company's core businesses, efforts to
increase market share, working capital, general corporate purposes and
other capital expenditures.
F-22
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) Shareholders' Equity (continued)
On April 23, 1999, the Company declared a 3 for 2 stock split in the form
of a stock dividend. Holders of the Company's $1.00 par value common
stock received one additional share of $1.00 par value common stock for
every two shares of common stock owned as of April 30, 1999. The
financial statements for all prior periods have been retroactively
adjusted to reflect this stock split for both common stock issued and
options outstanding.
On September 30, 1998, the Company completed the sale of 1,196,399 shares
of common stock to current shareholders through a rights offering. The
offering raised approximately $7.178 million before offering costs of
approximately $186 thousand for net proceeds of approximately $6.992
million. The Company has used some or all of the proceeds of the
offering for investment in Plug Power. In addition, some
proceeds may be used for acquisitions for the Company's core businesses,
efforts to increase market share, working capital, general corporate
purposes and other capital expenditures.
Changes in common shares for 1999, 1998 and 1997 are as follows:
Common Shares 1999 1998 1997
Balance, October 1
(1997 balance as previously
reported) 10,773,968 8,862,992 4,902,201
Three-for-two common stock split
effected in the form of a 50%
stock dividend effective
April 30, 1999 - - 2,451,101
Issuance of shares for
stock option exercises 74,768 116,377 -
Issuance of shares for stock sale 801,223 1,794,599 1,500,000
Issuance of shares - consultant - - 9,690
__________ __________ _________
Balance, September 30 11,649,959 10,773,968 8,862,992
========== ========== =========
Treasury Shares
Balance, October 1 4,500 4,500 4,500
Acquisition of shares 2,250 - -
__________ __________ _________
Balance, September 30 6,750 4,500 4,500
========== ========== =========
F-23
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) Earnings per Share
The amounts used in computing earnings per share and the effect on income
and the weighted average number of shares of potentially dilutive
securities are as follows:
(Dollars in Thousands) 1999 1998 1997
(Loss) income before extraordinary
item and available to common
stockholders $ (10,729) $ (2,031) $ 2,558
Weighted average number of shares:
Weighted average number of
shares used in net (loss)/income
per share, including the bonus
element effects for the rights
offering 11,330,530 9,576,672 9,134,308
Effect of dilutive securities:
Stock options - - 14,868
___________________________________________________________________________
Weighted average number of
shares used in diluted net
(loss)/income per share 11,330,530 9,576,672 9,149,176
___________________________________________________________________________
During fiscal 1999, options to purchase 741,613 shares of common stock
at prices ranging between $1.63 and $22.50 per share were outstanding but
were not included in the computation of Earnings per Share-assuming
dilution because the Company incurred a loss from continuing operations
and inclusion would be anti-dilutive. The options expire between
December 20, 2006 and June 16, 2009.
During fiscal 1998, options to purchase 607,372 shares of common stock at
prices ranging from $1.63 to $4 per share were outstanding but were not
included in the computation of Earnings per Share-assuming dilution
because the Company incurred a loss from continuing operations and
inclusion would be anti-dilutive. The options expire between December
20, 2006 and August 31, 2008.
(12) Stock Option Plan
During March 1999, the shareholders approved the 1999 Employee Stock
Incentive Plan ("1999 Plan"). The 1999 Plan provides that an initial
aggregate number of 1 million shares of common stock may be awarded or
issued. The number of shares available under the 1999 Plan may be
adjusted for stock splits and during 1999 the number of shares available
under the plan increased to 1,500,000 shares. Under the 1999 Plan, the
Board of Directors is authorized to award stock options to officers,
employees and others.
F-24
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) Stock Option Plan (continued)
During December 1996, the shareholders approved a stock incentive plan
("1996 Plan"). The 1996 Plan provides that an initial aggregate number of
500,000 shares of common stock may be awarded or issued. The number of
shares available under the 1996 Plan may be increased by 10% of any
increase in the number of outstanding shares of common stock for reasons
other than shares issued under this 1996 Plan. During 1999 and 1998, the
number of shares available under the 1996 Plan increased to 1,159,582 and
719,640 shares respectively. Under the 1996 Plan, the Board of Directors
is authorized to award stock options, stock appreciation rights,
restricted stock, and other stock-based incentives to officers, employees
and others.
Options are generally exercisable in from one to five cumulative annual
amounts beginning 12 months after the date of grant. Certain options
granted may be exercisable immediately. Option exercise prices are not
less than the market value of the shares on the date of grant.
Unexercised options generally terminate ten years after grant.
During 1999, the Company awarded 15,000 options to a consultant. The
fair value of these options ($55 thousand) was charged to expense.
For the purpose of applying Financial Accounting Standard No. 123 ("FAS
123"), "Accounting for Stock-Based Compensation", the fair value of each
option granted is estimated on the grant date using the Black-Scholes
Single Option model. The dividend yield was 0% for 1999, 1998, and 1997,
respectively. The expected volatility was 78% in 1999, 102% in 1998 and
78% in 1997. The expected life of the options is 5 years. The risk free
interest rate ranges from 4.37% to 5.81% in 1999, 5.52% to 5.85% in 1998
and 6.12% to 6.67% in 1997. The Company applies Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," in
accounting for stock options. Accordingly, no compensation cost has been
recognized in 1999, 1998 or 1997. Had compensation cost and fair value
been determined pursuant to FAS 123, net loss would increase from
$(10,688) to $(11,988) thousand in 1999 and from $(4,316) to $(4,773)
thousand in 1998 and net income would decrease from $4,520 to $4,351
thousand in 1997. Basic and diluted loss per share would increase from
$(0.94) to $(1.06) in 1999 and from $(0.45) to $(0.50) in 1998 and basic
and diluted earnings per share would decrease from $0.49 to $0.48 in
1997. The weighted average fair value of options granted during 1999,
1998 and 1997 for purposes of FAS 123, is $5.80, $4.70 and $1.96 per
share, respectively.
F-25
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) Stock Option Plan (continued)
Activity with respect to the 1996 Plan is as follows:
1999 1998 1997
Shares under option
at October 1 607,372 623,400 -
Options granted 232,550 297,750 634,650
Options exercised (78,949) (116,378) -
Options canceled (19,360) (197,400) (11,250)
________ _________ ________
Shares under option
at September 30 741,613 607,372 623,400
======== ========= ========
Options exercisable
at September 30 419,438 271,373 115,200
Shares available for
granting of options 222,642 355,710 276,600
The weighted average exercise price is as follows:
1999 1998 1997
Shares under option
at October 1 $ 2.89 $ 1.94 $ -
Options granted 8.62 3.83 1.94
Options exercised 2.26 1.91 -
Options canceled 3.36 1.74 1.63
Shares under option at
September 30 4.89 2.89 1.94
Options exercisable at
September 30 5.59 2.64 1.95
The following is a summary of the status of options outstanding at
September 30, 1999:
Outstanding Options Exercisable Options
___________________________________ ________________________________
Weighted
Average Weighted Weighted
Exercise Remaining Average Average
Price Contractual Exercise Exercise
Range Number Life Price Number Price
$1.63-$2.29 257,438 7.7 $2.12 151,313 $2.09
$3.17-$4.67 244,875 8.7 $3.98 113,625 $3.98
$5.00-$5.33 129,300 9.2 $5.28 49,500 $5.30
$12.50 105,000 9.5 $12.50 105,000 $12.50
$22.50 5,000 9.7 $22.50 -
_______ _______
741,613 419,438
======= =======
F-26
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(13) Retirement Plan
The Company maintains a voluntary savings and retirement plan (Internal
Revenue Code Section 401(k) Plan) covering substantially all employees.
The Company plan allows eligible employees to contribute a percentage of
their compensation; the Company makes additional contributions in amounts
as determined by management and the Board of Directors. The investment
of employee contributions to the plan is self-directed. The cost of the
plan was $168, $152 and $179 thousand for 1999, 1998 and 1997,
respectively.
(14) Commitments and Contingencies
On September 9, 1998, Barbara Lawrence, the Lawrence Group, Inc.
("Lawrence"), and certain other Lawrence-related entities ("Plaintiffs")
filed suit in the United States Bankruptcy Court for the Northern
District of New York against First Albany Corporation, a wholly owned
subsidiary of First Albany Companies Inc., Dale Church, Edward Dohring,
Alan Goldberg, George McNamee, Beno Sternlicht, Marty Mastroianni (former
President and Chief Operating Officer of the Company) and 33 other
individuals ("Defendants") who purchased a total of 820,909 shares of MTI
stock from the Plaintiffs. The complaint alleged that Defendants
purchased MTI stock from the Plaintiffs in violation of sections 10b, 20,
20A and rule 10b-5 of the Securities Exchange Act of 1934. In December
1998, the complaint was amended to add MTI as a defendant and assert a
Claim for common law fraud against all the Defendants including the
Company. The case concerns the Defendants' 1998 purchase of MTI shares
from the Plaintiffs at the price of $2.25 per share. Ownership of the
shares was disputed and several of the Plaintiffs were in bankruptcy at
the time of the sale. First Albany Corporation acted as Placement Agent
for the Defendants in the negotiation and sale of the shares and in
proceedings before the Bankruptcy Court for the Northern District of New
York, which approved the sale in September 1997. Plaintiffs claim that
the Defendants failed to disclose material inside information concerning
Plug Power, LLC to the Plaintiffs and therefore the $2.25 per share
purchase price was unfair. Plaintiffs are seeking damages of $5 million
plus punitive damages and costs. In April 1999, Defendants filed a
motion to dismiss the amended complaint, which was denied. In June 1999,
the parties agreed to stay discovery and amend Defendants time to answer
the amended complaint until September 17, 1999. In October 1999,
Defendants answered the amended Complaint.
During October 1998, a legal action brought by a group of investors
against the Company related to a stock purchase agreement and side letter
agreements for the sale of the stock of the Company's wholly owned
subsidiary, Ling Electronics, Inc. ("Ling"), was determined in favor of
the Company.
F-27
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14) Commitments and Contingencies (continued)
In February 1995, Ling made a voluntary disclosure to the United States
Department of Commerce regarding unlicensed exports of certain products
shipped in the first four months of fiscal 1995. Ling has fully
cooperated with the Office of Export Enforcement, which has not taken any
action to date. Possible administrative sanctions include: no action; a
warning letter; denial of export privileges; and/or imposition of civil
penalties. Foreign sales represent a significant portion of Ling's total
revenue. The final outcome of this matter is not presently determinable
and, therefore no provision for any liability that may result has been
recorded in the Company's financial statements.
The Company and its subsidiaries lease certain manufacturing, warehouse
and office facilities. The leases generally provide for the Company to
pay increases over a base year level for taxes, maintenance, insurance
and other costs of the leased properties. The leases contain renewal
provisions.
Future minimum rental payments required under noncancelable operating
leases are (dollars in thousands): $269 in 2000; $305 in 2001; $304 in
2002; $300 in 2003; and $300 in 2004. Rent expense under all leases was
$482, $403 and $446 thousand for 1999, 1998 and 1997, respectively.
Rental income under all sub-leases was $164, $66 and $19 thousand in
1999, 1998 and 1997, respectively.
(15) Related Party Transactions
At September 30, 1999 First Albany Companies Inc. ("FAC") owned
approximately 34% of the Company's Common Stock (See Note 19).
During fiscal 1999, 1998 and 1997, First Albany Corporation, a wholly
owned subsidiary of FAC, provided financial advisory services in
connection with the sale of the Technology Division in 1999 and 1998 and
the L.A.B. Division in 1997, for which First Albany Corporation was paid
fees of $15, $10 and $75 thousand, respectively.
Amounts receivable from an officer totaled approximately $38 thousand and
is included in the balance sheet caption "Other receivables-related
parties" at September 30, 1999.
On June 27, 1997, the Company entered into a management services
agreement with Plug Power to provide certain services and facilities for
a period of one year. This agreement expired on June 27, 1998. The
Company continued to provide services, which were billed on a cost
reimbursement basis. During 1998, the Company entered into leases for
manufacturing, laboratory and office space which expired on July 1, 1999
pursuant to the sale of the MTI facility to Plug Power in exchange for
704,315 Plug Power Class A membership interests and the assumption of $6
million in debt by Plug Power.
F-28
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15) Related Party Transactions (continued)
Billings under these agreements amounted to $448, $661 and $65 thousand
for 1999, 1998 and 1997, respectively. Amounts receivable from Plug Power
under these agreements is included in the balance sheet caption "Other
receivables-related parties".
On September 30, 1999, the Company made an additional cash contribution
of approximately $2 million to Plug Power in exchange for 266,667 Plug
Power Class A membership interests.
On July 1, 1999, the Company contributed the MTI campus to Plug Power in
exchange for 704,315 Plug Power Class A membership interests. During the
remainder of 1999, the Company paid $59 thousand to Plug Power in
connection with a lease of office and manufacturing space. This lease
will terminate on November 24, 1999.
On August 5, 1998, the Company made a short-term loan to Plug Power of
$500 thousand, which was subsequently contributed to capital on September
23, 1998. The Company also converted $500 thousand of its accounts
receivable from Plug Power to capital on September 23, 1998. At
September 30, 1998, the remaining obligation to provide additional funds
to Plug Power was $4 million. During fiscal 1999, the Company fully
funded this commitment by contributing $4 million cash.
(16) Discontinued Operations
The sale of the Company's Technology Division, the sole component of the
Technology segment, to NYFM, Incorporated (a wholly owned subsidiary of
Foster-Miller, Inc., a Waltham, Massachusetts-based technology company)
on March 31, 1998 completed management's planned sale of non-core
businesses. Accordingly, the Company no longer includes Technology among
its reportable business segments and now operates in only one segment,
Test & Measurement. The Technology Division is reported as a
discontinued operation as of December 26, 1998, and the consolidated
financial statements have been restated to report separately the net
assets and operating results of the business. In exchange for the
Technology Division's assets, NYFM, Incorporated (a) agreed to pay the
Company a percentage of gross sales in excess of $2.5 million for a
period of five years; (b) assumed approximately $40 thousand of
liabilities; and (c) established a credit for warranty work of
approximately $35 thousand.
F-29
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(16) Discontinued Operations (continued)
Discontinued operations consist of the following:
(Dollars in thousands) 1999 1998 1997
Sales $ - $ 532 $ 7,878
======= ====== ======
Income(loss)from discontinued
operations before income tax 41 (516) (574)
Income tax (benefit) - - (29)
_______ ______ ______
Net income(loss)from discontinued
operations $ 41 $ (516) $ (545)
======= ====== ======
Loss on disposal of Division $ - $(1,769) $ -
Income tax (benefit) - - -
_______ ______ ______
Loss on disposal of Division $ - $(1,769) $ -
======= ====== ======
The assets and liabilities of the Company's discontinued operations are
as follows at September 30:
(Dollars in thousands) 1999 1998
Assets (primarily accounts receivable) $ 220 $ 1,136
Liabilities (primarily accrued expenses) 760 1,128
_______ ______
Net (Liabilities)Assets $ (540) $ 8
======= ======
Assets with a net book value of $878 thousand consisting primarily of
land, building and management information systems were transferred to
continuing operations on October 1, 1997.
(17) Sale of Division/Subsidiary
L.A.B. Division
On September 30, 1997, the Company sold all of the assets of its L.A.B.
Division to Noonan Machine Company of Franklin Park, IL. The Company
received $2.60 million in cash and two notes, totaling $650 thousand,
from Noonan Machine Company. The purchaser has requested that the
principal amount of the note be reduced to reflect the resale value of
certain assets of L.A.B. The Company is enforcing its rights with
respect to the note. The net proceeds from the sale were used to pay
down all outstanding debt and build working capital.
The sale resulted in a $2.0 million gain, which was recorded in the
fourth quarter of fiscal year 1997. In addition, $250 thousand of the
proceeds associated with one of the notes was recorded as deferred
revenue due to contingencies associated with the realization of this
note. This note is still outstanding as of September 30, 1999.
F-30
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(18) Geographic and Segment Information
The Company sells its products on a worldwide basis with its principal
markets listed in the table below where information on export sales is
summarized by geographic area for the Company as a whole:
(Dollars in thousands)
Geographic Area 1999 1998 1997
United States $ 9,576 $ 17,022 $ 17,290
Europe 1,180 1,072 1,223
Japan 787 1,534 1,243
Pacific Rim 760 834 1,901
China 278 302 1,900
Canada 153 228 178
Rest of World 151 36 367
______ _______ _______
Total Sales $12,885 $ 21,028 $ 24,102
====== ======= =======
In 1999, no customers accounted for more than 10% of sales and in 1998,
one customer accounted for 11.5% of sales.
The Company operates in two business segments, Alternative Energy
Technology and Test and Measurement. The Alternative Energy Technology
segment incubates alternative energy technology. The Test and Measurement
segment develops, manufactures, markets and services sensing instruments,
computer-based balancing systems for aircraft engines, vibration test
systems and power conversion products.
The accounting policies of the Alternative Energy Technology and Test and
Measurement segments are the same as those described in the summary of
significant accounting policies. The Company evaluates performance based
on profit or loss from operations before income taxes, accounting
changes, non-recurring items and interest income and expense. Inter-
segment sales are not significant.
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "Other" column includes
corporate related items and items like income taxes or unusual items,
which are not allocated to reportable segments. In addition, segments
noncash items include any depreciation and amortization in reported
profit or loss. For the Alternative Energy Technology segment, the
information is based on an annual period from October 1 to September 30
derived from Plug Power's unaudited financial statements.
F-31
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(18) Geographic and Segment Information (continued)
<TABLE>
(Dollars in thousands)
<CAPTION>
Alternative
Energy Reconciling Consolidated
Technology Test and Items Totals
1999 (unaudited) Measurement Other (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenues $ 8,247 $ 12,885 $ - $ (8,247) $ 12,885
Segment profit/
(loss) (27,391) (1,404) 79 8,028 (10,688)
Equity in Plug
Power loss - - - (9,363) (9,363)
Total assets 43,547 8,185 14,885 (34,837) 31,780
Investment in
Plug Power - - - 8,710 8,710
Capital
expenditures 9,247 183 2,555 (9,247) 2,738
Depreciation and
amortization 1,165 202 379 (1,165) 581
1998
Revenues $ 5,948 $ 21,028 $ - $ (5,948) $ 21,028
Segment profit/
(loss) (8,243) 2,155 (2,665) 4,437 (4,316)
Equity in Plug
Power loss - - - (3,806) (3,806)
Total assets 8,093 9,424 10,483 (6,872) 21,128
Investment in
Plug Power - - - 1,221 1,221
Capital
expenditures 1,889 202 2,964 (1,889) 3,166
Depreciation and
amortization 418 205 118 (418) 323
1997
Revenues $ 242 $ 24,102 $ - $ (242) $ 24,102
Segment profit/
(loss) (4,752) 2,411 2,439 4,422 4,520
Equity in Plug
Power loss - - - (330) (330)
Total assets 4,979 8,696 5,280 (4,952) 14,003
Investment in
Plug Power - - - 27 27
Capital
expenditures 133 375 2 (133) 377
Depreciation and
amortization 93 206 37 (93) 243
</TABLE>
F-32
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(18) Geographic and Segment Information (continued)
The following table presents the details of "Other" segment profit
(loss).
(Dollars in thousands) 1999 1998 1997
Corporate and Other
Expenses/(Income):
Depreciation and
amortization $ 379 $ 118 $ 37
Interest expense 106 102 323
Interest income (335) (65) -
Income tax expense 37 25 143
Other (income)expense, net (225) 200 1,032
(Income)loss from
discontinued operations (41) 2,285 545
Gain on sale of division - - (2,012)
Gain on extinguishment
of debt, net of tax - - (2,507)
_____ _______ _______
Total (income) expense $ (79) $ 2,665 $ (2,439)
The reconciling items are the amounts of revenues earned and expenses
incurred for corporate operations, which is not included in the segment
information.
(19) Extraordinary Item - Extinguishment of Debt
During fiscal 1996, FAC purchased 909,091 shares of the Company's Common
Stock from the New York State Superintendent of Insurance as the court-
ordered liquidator of United Community Insurance Company ("UCIC"). In
connection with this purchase, FAC also acquired certain rights to an
obligation ("Term Loan") due from the same finance company ("FCCC") to
whom the Company was obligated under a Note Payable, due December 31,
1996.
FCCC was in default of its Term Loan to UCIC. FAC, as the owner of the
rights to the Term Loan, filed suit-seeking payment. Collateral for the
FCCC Term Loan included the Company's Note Payable to FCCC. FAC
exercised its rights to the collateral securing the Term Loan, including
the right to obtain payment on the Note Payable directly from the
Company. The Company and FAC entered into an agreement dated as of
December 27, 1996 under which the Company issued to FAC 1.0 million
shares of Common Stock in full satisfaction of the Note Payable
and accrued interest.
F-33
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(19) Extraordinary Item - Extinguishment of Debt (continued)
If FCCC were to seek collection of the Note Payable plus accrued
interest from the Company, the Company, based on the opinion of counsel,
believes that the outcome of any such action pursued by FCCC against the
Company would not have a material adverse impact on the Company's
financial position or results of operation.
(20) Comprehensive (Loss) Income
Total comprehensive (loss) income for the years ended September 30
consists of:
(Dollars in Thousands) 1999 1998 1997
Net (loss)income $(10,688) $ (4,316) $ 4,520
Other comprehensive income(loss),
before tax:
Foreign currency translation
adjustments - 8 -
Unrealized loss on available
for sale securities (5) - -
Income tax related to items of
other comprehensive
income(loss) - - -
_______ _______ ______
Total comprehensive (loss)income $(10,693) $ (4,308) $ 4,520
======= ======= ======
(21) Subsequent Events
On October 21, 1999, the Company created a strategic alliance with
SatCon Technology Corporation (SatCon). SatCon acquired Ling
Electronics, Inc. and Ling Electronics, Ltd. from the Company and the
Company will invest approximately $7 million in SatCon. In consideration
for the acquisition of Ling Electronics and the Company's investment,
the Company will receive 1,800,000 shares of SatCon's common stock and
warrants to purchase an additional 100,000 shares of SatCon's common
stock. The Company immediately funded $2.57 million of its investment
in SatCon and will make the remaining investment by the end of January
2000. SatCon will also receive warrants to purchase 100,000 shares of
the Company's common stock.
The Company immediately issued SatCon 36,000 stock purchase warrants.
The warrants are immediately exercisable at $37.66 per share and expire
on October 21, 2003. The estimated fair value of these warrants at the
date issued was $14.81 per share using a Black Scholes option pricing
model and assumptions similar to those used for valuing the Company's
stock options.
The Company immediately received 36,000 stock purchase warrants from
SatCon. The warrants are immediately exercisable at $8.83 per share and
expire on October 21, 2003.
F-34
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(21) Subsequent Events (continued)
In addition, David Eisenhaure, President and Chief Executive Officer of
SatCon Technology Corporation, will become a member of the Board of
Directors of the Company and Alan Goldberg, a director of the Company
and co-Chief Executive Officer of First Albany Companies Inc. will
become a member of SatCon Technology Corporation's Board of Directors.
SatCon Technology Corporation has also agreed to appoint an additional
member to its Board of Directors based on recommendations by the
Company.
SatCon Technology Corporation manufactures and sells power and energy
management products for telecommunications, silicon wafer manufacturing,
factory automation, aircraft, satellites and automotive applications.
SatCon has four operating divisions: Film Microelectronics, Inc.
designs and manufactures microelectronic circuits and interconnect
products. Magmotor manufactures motors and magnetic suspension systems.
Beacon Power manufactures flywheel energy storage devices and the
Technology Center is responsible for new technology and product
development.
F-35
<PAGE>
Exhibit 10.32
STOCK PURCHASE AGREEMENT
among
MECHANICAL TECHNOLOGY INCORPORATED,
LING ELECTRONICS, INC.,
LING ELECTRONICS, LTD.
and
SATCON TECHNOLOGY CORPORATION
TABLE OF CONTENTS
Section Page
1. Purchase and Sale of the Shares and the U.K. Shares. 1
1.1 Purchase of the Shares and the U.K. Shares from the Parent. 1
1.2 Further Assurances. 1
1.3 Purchase Price for the Shares. 2
1.4 Closing. 2
2. Representations of the Parent Regarding the Securities. 2
3. Representations Regarding the Parent, the Company and the U.K. 3
Subsidiary.
3.1 Organization. 3
3.2 Capitalization of the Company. 3
3.3 Subsidiaries. 3
3.4 Authorization. 4
3.5 Financial Statements. 5
3.6 Absence of Undisclosed Liabilities. 6
3.7 Litigation. 6
3.8 Insurance. 6
3.9 Personal Property. 7
3.10 Intangible Property. 8
3.11 Real Estate and Leases. 9
3.12 Inventory. 9
3.13 Accounts Receivable and Payable.. 10
3.14 Tax Matters. 10
3.15 Books and Records. 13
3.16 Contracts and Commitments. 13
3.17 Compliance with Agreements and Laws. 15
3.18 Employee Relations. 16
3.19 Employee Benefit Plans. 17
3.20 Environmental Matters. 20
<PAGE>
3.21 Absence of Certain Changes or Events. 22
3.22 Suppliers. 24
3.23 Warranty and Product Liability Claims. 24
3.24 Prepayments and Deposits. 24
3.25 Indebtedness to and from Officers, Directors and Parent. 24
3.26 Banking Facilities. 25
3.27 Powers of Attorney and Suretyships. 25
3.28 Conflicts of Interest. 25
3.29 Regulatory Approvals. 26
3.30 Year 2000 Compliance. 26
3.31 Disclosure. 27
3.32 Broker's Fees. 27
3.33 Securities Representations. 27
4. Representation and Warranties of the Buyer. 29
4.1 Organization and Qualification. 29
4.2 Authorization; Enforcement. 30
4.3 Capitalization. 30
4.4 Authorization and Validity; Issuance of Shares. 31
4.5 No Conflicts. 31
4.6 Consents and Approvals. 31
4.7 Litigation; Proceedings. 32
4.8 No Default or Violation. 32
4.9 Disclosure; Absence of Certain Changes. 33
4.10 Buyer SEC Documents; Financial Statements. 33
4.11 Broker's Fees. 33
4.12 Form S-3 Eligibility. 34
4.13 Listing and Maintenance Requirements Compliance. 34
4.14 Intellectual Property Rights. 34
4.15 Registration Rights; Rights of Participation. 34
4.16 Tax Status; Firpta. 34
4.17 Transactions With Affiliates. 35
4.18 Material Contracts.: 35
4.19 ERISA.. 36
4.20 Environmental Matters. 36
4.21 Year 2000 Matters. . 38
4.22 Private Offering. 38
4.23 Investment Company. 38
5. Public Announcements. 39
6. Conditions to Obligations of the Buyer. 39
6.1 Continued Truth of Representations and Warranties of
the Parent and the Company; Compliance with Covenants
and Obligations. 39
6.2 Performance by the Parent and the Company. 39
6.3 Governmental Approvals. 39
6.4 Consent of Lenders, Lessors and Other Third Parties. 39
6.5 Adverse Proceedings. 40
6.6 Opinion of Counsel. 40
6.7 Employment Contracts. 40
6.8 Repayment of Indebtedness. 40
6.9 Closing Deliveries. 40
7. Conditions to Obligations of the Parent. 41
7.1 Continued Truth of Representations and Warranties of the Buyer;
Compliance with Covenants and Obligations. 42
7.2 Corporate Proceedings. 42
7.3 Governmental Approvals. 42
7.4 Consents of Lenders, Lessors and Other Third Parties. 42
7.5 Adverse Proceedings. 42
7.6 Opinion of Counsel. 42
7.7 Closing Deliveries. 42
<PAGE>
7.8 Buyer Registration Rights Agreement. 43
8. Indemnification. 43
8.1 By the Parent and the Company. 43
8.2 By the Buyer. 44
8.3 Indemnification Claims. 44
8.4 Survival of Representations and Warranties. 47
8.5 Limitations. 47
9. Tax Matters. 48
9.1 Preparation and Filing of Tax Returns. 48
9.2 Tax Indemnification by the Parent. 48
9.3 Allocation of Certain Taxes. 49
9.4 Cooperation on Tax Matters. 49
9.5 Termination of Tax-Sharing Agreements. 50
9.6 Certain Tax Elections. 50
10. Post-Closing Agreements. 51
10.1 Proprietary Information. 51
10.2 No Solicitation or Hiring of Former Employees. 51
10.3 Non-Competition Agreement. 52
10.4 Board Representation. 52
10.5 Benefit Transition. 53
10.6 Co-operation in Financial and Other Reparation. 53
11. Notices. 53
12. Successors and Assigns. 54
13. Entire Agreement; Amendments; Attachments. 54
14. Severability. 55
15. Investigation of the Parties. 55
16. Expenses. 55
17. Submission to Jurisdiction. 55
18. Governing Law. 56
19. Section Headings. 56
20. Counterparts. 56
Exhibit A - Opinion of Catherine S. Hill PLLC
Exhibit B - Estoppel Certificate
Exhibit C - Opinion of Hale and Dorr LLP
Exhibit D - Buyer Registration Rights Agreement
STOCK PURCHASE AGREEMENT
Agreement (the "Agreement") made as of the 21st day of October, 1999 by and
among SatCon Technology Corporation, a Delaware corporation with its principal
office at 161 First Street, Cambridge, Massachusetts 02142 (the "Buyer"),
Mechanical Technology Incorporated, a New York corporation with its principal
office at 968 Albany-Shaker Road, Latham, New York 12110 (the "Parent"), Ling
Electronics, Inc., a California corporation and a wholly-owned subsidiary of
the Parent, with its principal office at 4890 East La Palma Avenue, Anaheim,
California 92807 (the "Company") and Ling Electronics, Ltd., a United Kingdom
corporation and a wholly-owned subsidiary of the Parent with its principal
office c/o J.Bignall, 3 De Walden Court, 85 New Cavendish Street, London W1M
7RA (the "U.K. Subsidiary" or the "Subsidiaries").
Preliminary Statement
1. The Buyer desires to purchase, and the Parent desires to sell (i) all
of the issued and outstanding shares (collectively, the "Shares") of the common
stock, $0.01 par value per share of the Company and (ii) all of the issued and
outstanding ordinary shares (the "U.K. Shares") of the U.K. Subsidiary, subject
to the terms and conditions of this Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Purchase and Sale of the Shares and the U.K. Shares.
1.1 Purchase of the Shares and the U.K. Shares from the Parent. Subject to and
upon the terms and conditions of this Agreement, at the closing of the
transactions contemplated by this Agreement (the "Closing"), the Parent shall
sell, transfer, convey, assign and deliver to the Buyer, and the Buyer shall
purchase, acquire and accept from the Parent, all the Shares and the U.K.
Shares. At the Closing the Parent shall deliver to the Buyer certificates
evidencing the Shares and the U.K. Shares duly endorsed in blank or with stock
powers duly executed by the Parent.
1.2 Further Assurances. At any time and from time to time after the Closing, at
the Buyer's request and without further consideration, the Parent shall
promptly execute and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation, and take all such other action as the Buyer may
reasonably request, more effectively to transfer, convey and assign to the
Buyer, and to confirm the Buyer's title to, all of the Shares and the U.K.
Shares owned by the Parent, to put the Buyer in actual possession and operating
control of the assets, properties and business of the Company and the U.K.
Subsidiary, to assist the Buyer in exercising all rights with respect thereto
and to carry out the purpose and intent of this Agreement.
1.3 Purchase Price for the Shares. In full payment for the Shares and the U.K.
Shares (collectively, the "Securities"), the Buyer shall pay to the Parent
$70,000.00 and shall issue to the Parent a certificate issued in the name of
the Parent representing 770,000 shares (the "SatCon Shares") of common stock,
$0.01 par value per share, of the Buyer ("Buyer Common Stock").
1.4 Closing. The Closing shall take place at the offices of Hale and Dorr LLP,
60 State Street, Boston, Massachusetts 02109 at 10:00 a.m., Boston Time, on the
date of execution of this Agreement or at such other location as the parties
shall mutually agree. The transfer of the Securities by the Parent to the Buyer
shall be deemed to occur at 8:00 a.m., Boston Time, on the Closing Date.
2. Representations of the Parent Regarding the Securities.
The Parent represents and warrants to the Buyer as follows: (a) The Parent has
good and marketable title to the Securities free and clear of any and all
covenants, conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever. The Securities
constitute all of the outstanding securities of the Company and the U.K.
Subsidiary.
(b) The Parent has the full right, power and authority to enter into this
Agreement and to transfer, convey and sell to the Buyer at the Closing the
Securities to be sold by the Parent hereunder and, upon consummation of the
purchase contemplated hereby, the Buyer will acquire from the Parent good and
marketable title to the Securities free and clear of all covenants, conditions,
restrictions, voting trust arrangements, liens, charges, encumbrances, options
and adverse claims or rights whatsoever.
(c) The Parent is not a party to, subject to or bound by any agreement or any
judgment, order, writ, prohibition, injunction or decree of any court or other
<PAGE>
governmental body which would prevent the execution or delivery of this
Agreement by the Parent or the transfer, conveyance and sale of the Securities
to be sold by the Parent to the Buyer pursuant to the terms hereof.
3. Representations Regarding the Parent, the Company and the U.K. Subsidiary.
The Parent, the Company and the U.K. Subsidiary, jointly and severally,
represent and warrant to the Buyer that:
3.1 Organization. Each of the Parent and the Company is a corporation duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation, and has all requisite power and
authority (corporate and other) to own its properties, to carry on its business
as now being conducted, to execute and deliver this Agreement and the
agreements contemplated herein, and to consummate the transactions contemplated
hereby and thereby. Each of the Parent and the Company is duly qualified to do
business and in good standing in all jurisdictions in which its ownership of
property or the character of its business requires such qualification, except
where the failure to be so qualified or in good standing, as the case may be,
would not, individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of any of this Agreement or any of the material
transactions contemplated hereby, (y) have or result in a material adverse
effect on the results of operations, assets, or financial condition of the
Parent or the Company or (z) impair the Parent's or the Company's ability to
perform in all material respects on a timely basis their respective material
obligations under this Agreement (any of (x), (y) or (z), being a "Material
Adverse Effect"). Certified copies of the Certificate of Incorporation and
Bylaws of the Company, as amended to date, have been previously delivered to
the Buyer, are complete and correct, and no amendments have been made thereto
or have been authorized since the date thereof.
3.2 Capitalization of the Company. The Company's authorized capital stock
consists of 5,000,000 shares of Common Stock, $0.01 par value per share, of
which Thirty-Two Thousand, Three Hundred and Ninety Eight (32,398) shares are
issued and outstanding on the date hereof and held of record and beneficially
by the Parent. All such issued and outstanding shares of the Company's common
stock have been and on the Closing Date will be duly and validly issued and
are, or will be on such date, fully paid and non-assessable. There are not, and
on the Closing Date there will not be, outstanding (i) any options, warrants or
other rights to purchase from the Company any capital stock of the Company;
(ii) any securities convertible into or exchangeable for shares of such stock;
(iii) any outstanding debt securities issued or guaranteed by the Company or
(iv) any other commitments of any kind for the issuance of additional shares of
capital stock or options, warrants or other securities of the Company. No
shares of the issued and outstanding shares of Common Stock are held in the
treasury of the Company.
3.3 Subsidiaries.
(a) Other than Plug Power, LLC, Turbonetics Energy, Inc. , MTI
International, Inc. and the U.K. Subsidiary, the Parent does not own any equity
interest in any corporation partnership, joint venture or other entity.
Turbonetics Energy, Inc., MTI International, Inc., Power Plug, LLC do not
compete with the Company.
(b) Except as set forth in Schedule 3.3(b), the Parent owns of
record and beneficially all of the outstanding shares of capital stock of the
U.K. Subsidiary free and clear of all covenants, conditions, restrictions,
liens, charges and encumbrances.
<PAGE>
(c) Except as set forth in Schedule 3.3(c), the U.K. Subsidiary is a
corporation duly organized and validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to own its properties and carry on its business
as now being conducted. The U.K. Subsidiary is duly qualified to do business
and in good standing in all jurisdictions in which its ownership of property or
the character of its business requires such qualification except where the
failure to be so qualified or in good standing, as the case may be, would not
have a Material Adverse Effect. Copies of the charter, bylaws and other
governing instruments of The U.K. Subsidiary, each as amended to date, have
been previously delivered to the Buyer, are complete and correct, and no
amendments have been made thereto or have been authorized since the date of
such delivery. The Company does not own any capital stock of or other equity
interest in any corporation, partnership or other entity. The shares of capital
stock of the U.K. Subsidiary have been duly and validly issued and are fully
paid and non-assessable.
(d) The U.K. Subsidiary does not hold shares of its capital stock in its
treasury, and there are not, and on the Closing Date there will not be,
outstanding any (i) options, warrants or other rights with respect to the
capital stock of the U.K. Subsidiary, (ii) any securities convertible into or
exchangeable for shares of such stock, or (iii) any other commitments of any
kind for the issuance of additional shares of capital stock or options,
warrants or other securities of any of them.
(e) As of August 22, 1999, the U.K. Subsidiary had the assets and
liabilities set forth on Schedule 3.3(e). Since August 22, 1999, there have
been no material changes in the assets or liabilities of the U.K. Subsidiaries.
3.4 Authorization. The execution and delivery by the Company, the U.K.
Subsidiary and the Parent of this Agreement and the agreements provided for
herein, and the consummation by the Company, the U.K. Subsidiary and the Parent
of all transactions contemplated hereunder and thereunder by the Company, the
U.K. Subsidiary and the Parent, have been duly authorized by all requisite
corporate action. This Agreement has been duly executed by the Company, the
U.K. Subsidiary and the Parent. This Agreement and all other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which the Company, the U.K. Subsidiary or the Parent is
a party constitute the valid and legally binding obligations of the Company,
the U.K. Subsidiary and the Parent, enforceable against them in accordance with
their respective terms. The execution, delivery and performance by the Company,
the U.K. Subsidiary and the Parent of this Agreement and the agreements
provided for herein, and the consummation by the Company, the U.K. Subsidiary
and the Parent of the transactions contemplated hereby and thereby, will not,
with or without the giving of notice or the passage of time or both, (a)
violate the provisions of any law, rule or regulation applicable to the
Company, the U.K. Subsidiary or the Parent; (b) violate the provisions of the
Certificate of Incorporation or Bylaws of the Company, the U.K. Subsidiary or
the Parent; (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator; or (d) conflict with or result in the breach
or termination of any term or provision of, or constitute a default under, or
cause any acceleration under, or cause the creation of any lien, charge or
encumbrance upon the properties or assets of the Company, the U.K. Subsidiary
or the Parent pursuant to, any indenture, mortgage, deed of trust or other
instrument or agreement to which the Company, the U.K. Subsidiary or the Parent
is a party or by which the Company, the U.K. Subsidiary or the Parent or any of
their respective properties is or may be bound. Schedule 3.4 attached hereto
sets forth a true, correct and complete list of all consents and approvals of
third parties that are required in connection with the consummation by the
<PAGE>
Company, the U.K. Subsidiary and the Parent of the transactions contemplated by
this Agreement.
3.5 Financial Statements.
(a) The Parent previously delivered to the Buyer the unaudited consolidated
balance sheets of the Company and the U.K. Subsidiary as of September 30, 1996,
1997 and 1998 (the "Fiscal Year Balance Sheets") and the related statements of
income of the Company and the U.K. Subsidiary for the fiscal years then ended
(collectively, the "Fiscal Year Financial Statements"). The Parent has also
previously delivered to the Buyer the unaudited consolidated balance sheets of
the Company and the U.K. Subsidiary as of August 22, 1999 (the "Current Balance
Sheet") and the related statements of income for the eleven-month period then
ended (collectively, the "Current Financial Statements"). The Fiscal Year
Financial Statements and, the Current Financial Statements (collectively, the
"Financial Statements") have been prepared in accordance with generally
accepted accounting principles applied consistently with past practices and
have been certified by the Company's chief financial officer. The date of the
August 22, 1999 Fiscal Year Balance Sheet is hereinafter referred to as the
"Balance Sheet Date."
(b) The Financial Statements fairly present, as of their respective dates,
the financial condition, retained earnings, assets and liabilities of the
Company and the U.K. Subsidiary and the results of operations of the Company's
and the U.K. Subsidiary's businesses for the periods indicated. With respect to
contracts and commitments for the sale of goods or the provision of services by
the Company and the U.K. Subsidiary, the Financial Statements contain and
reflect adequate reserves, which are consistent with previous reserves taken,
for all reasonably anticipated material losses and costs and expenses. The
amounts shown as accrued for current and deferred Taxes (other than state and
federal income taxes) in the Financial Statements are sufficient for the
payment of all accrued and unpaid Taxes (other than state and federal income
taxes), interest, penalties, assessments or deficiencies applicable to the
Company or any Subsidiary, whether disputed or not, for the applicable period
then ended and periods prior thereto.
(c) The book value of inventory reflected on the August 22, 1999 Balance
Sheet, as computed on a first-in, first-out basis is true and correct.
3.6 Absence of Undisclosed Liabilities. Except as and to the extent (a)
reflected and reserved against in the Current Balance Sheet, (b) set forth on
Schedule 3.6 attached hereto, or (c) incurred in the ordinary course of
business after the date of the Current Balance Sheet and not material in
amount, either individually or in the aggregate, neither the Company nor any of
the Subsidiaries has any liability or obligation, secured or unsecured, whether
accrued, absolute, contingent, unasserted or otherwise, which is material to
the condition (financial or otherwise) of the assets, properties, business or
prospects of the Company and the U.K. Subsidiaries taken as a whole. For
purposes of this Subsection 3.6, "material" means any amount in excess of
$100,000.
3.7 Litigation. Except as set forth on Schedule 3.7 attached hereto (a) there
is no action, suit or proceeding to which the Company or any of the
Subsidiaries is a party (either as a plaintiff or defendant) pending or
threatened before any court or governmental agency, authority, body or
arbitrator and to the best knowledge of the Parent, there is no basis for any
such action, suit or proceeding; (b) neither the Company nor any of the
Subsidiaries, nor any officer, director or employee of any of the foregoing,
has been permanently or temporarily enjoined by any order, judgment or decree
<PAGE>
of any court or any governmental agency, authority or body from engaging in or
continuing any conduct or practice in connection with the business, assets, or
properties of the Company or any of the Subsidiaries; and (c) there is not in
existence on the date hereof any order, judgment or decree of any court,
tribunal or agency enjoining or requiring the Company or any of the
Subsidiaries to take any action of any kind with respect to its business,
assets or properties.
3.8 Insurance. Schedule 3.8 attached hereto sets forth a true, correct and
complete list of all fire, theft, casualty, general liability, workers
compensation, business interruption, environmental impairment, product
liability, automobile and other insurance policies maintained by the Company,
the U.K. Subsidiary or the Parent with respect to the business and the Company
or the U.K. Subsidiary and of all life insurance policies maintained on the
lives of any of their employees (collectively, the "Insurance Policies"). The
Company has previously delivered complete and accurate information to the Buyer
on all claims made under such Insurance Policies (other than life insurance
policies) since October 1, 1996. A true, correct and complete summary of all
Insurance Policies currently in effect has previously been delivered by the
Parent or the Company to the Buyer. As of the date hereof and the Closing Date,
the Insurance Policies are in full force and effect and are in amounts of a
nature which are adequate and customary for the Company's and the Subsidiaries'
business. All premiums due on the Insurance Policies or renewals thereof have
been paid, if billed, and there is no default under the Insurance Policies.
Except as set forth on Schedule 3.8, neither the Company nor any of the
Subsidiaries has received any notice or other communication from any issuer of
the Insurance Policies since September 30, 1996 canceling or materially
amending any of the Insurance Policies, materially increasing any deductibles
or retained amounts thereunder, or materially increasing the annual or other
premiums payable thereunder, and, to the best knowledge of the Parent, no such
cancellation, amendment or increase of deductibles, retainages or premiums is
threatened. Except as set forth on Schedule 3.8, neither the Company nor any of
the Subsidiaries has any outstanding claims or any dispute with any insurance
carrier regarding claims, settlements or premiums and neither the Company nor
any of the Subsidiaries has failed to give any notice or present any claim
under any Insurance Policy in due and timely fashion. There are no outstanding
requirements or recommendations by any issuer of the Insurance Policies or by
any Board of Fire Underwriters or other similar body exercising similar
functions or by any governmental authority exercising similar functions which
requires or recommends any changes in the conduct of the business of, or any
repairs or other work to be done on or with respect to any of the properties or
assets of, the Company or any of the Subsidiaries.
3.9 Personal Property. Except as disclosed in Schedule 3.9:
(a) the Company or the U.K. Subsidiary, as the case may be, has good and
marketable title to each item of tangible personal property used by the Company
in the conduct of the Company's historic operations ("Personal Property") free
and clear of all liens, leases, encumbrances, claims under bailment and storage
agreements, equities, conditional sales contracts, security interests, charges
and restrictions ("Liens"), except for Liens, if any, for personal property
taxes not due;
(b) no officer, director, stockholder or employee of the Company or the
U.K. Subsidiary, nor any spouse, child or other relative or affiliate thereof,
owns directly or indirectly, in whole or in part, any of the Personal Property;
<PAGE>
(c) each item of Personal Property not owned by the Company or the U.K.
Subsidiary is in such condition that upon the return of such property to its
owner in its present condition at the end of the relevant lease term or as
otherwise contemplated by the applicable agreement between the Company or the
U.K. Subsidiary, as the case may be, and the owner or lessor thereof, the
obligations of the Company or the U.K. Subsidiary, as the case may be, to such
owner or lessor will be discharged; and
(d) the Company and the U.K. Subsidiary own or otherwise have the right to
use all of the Personal Property now used or useful in the operation of their
business or the use of which is necessary for or useful in the performance of
any material contract, letter of intent or proposal to which any of them is a
party.
3.10 Intangible Property. Schedule 3.10 attached hereto sets forth: (i) a true,
correct and complete list of, all items of intangible property owned by, or
used or useful in connection with the business of, the Company or any of the
Subsidiaries, including, but not limited to, trade secrets, know-how, any other
confidential information of the Company, United States and foreign patents,
trade names, trademarks, trade name and trademark registrations, copyrights and
copyright registrations, and applications for any of the foregoing (the
"Intangible Property"); and (ii) a true, correct and complete list of all
licenses or similar agreements or arrangements to which the Company or the U.K.
Subsidiary is a party, either as licensee or licensor, with respect to the
Intangible Property. Except as otherwise disclosed in Schedule 3.10:
(a) the Company or the U.K. Subsidiary is the sole and exclusive owner of
all right, title and interest in and to the Intangible Property and all
designs, and permits, used in connection therewith, free and clear of all
liens, security interests, charges, encumbrances, equities or other adverse
claims;
(b) the Company or the U.K. Subsidiary has the right and authority to use,
and to continue to use after the Closing, the Intangible Property in connection
with the conduct of its business in the manner presently conducted, and such
use or continuing use does not and, to the best of the Company's knowledge,
will not conflict with, infringe upon or violate any rights of any other
person, corporation or entity;
(c) none of the Company, the Parent nor the U.K. Subsidiary has received
notice of, or to the best of the Parent's knowledge there is no basis for, a
pleading or threatened claim, interference action or other judicial or
adversarial proceeding against the Company that any of the operations,
activities, products, services or publications of the Company or any of its
customers or distributors infringes or will infringe any patent, trademark,
trade name, copyright, trade secret or other property right of a third party,
or that it is illegally or otherwise using the trade secrets, formulae or
property rights of others;
(d) there are no outstanding, nor, to the best of the Company's knowledge,
any threatened disputes or other disagreements with respect to any licenses or
similar agreements or arrangements described in Schedule 3.10 or with respect
to infringement by a third party of any of the Intangible Property;
(e) the Intangible Property owned or licensed by the Company or the
relevant Subsidiary is sufficient to conduct the Company's or the U.K.
Subsidiary's business as presently conducted;
<PAGE>
(f) the Company or the U.K. Subsidiary has taken all steps reasonably
necessary to protect its right, title and interest in and to the Intangible
Property and the continued use of the Intangible Property;
(g) no officer, director, stockholder or employee of the Company or the
U.K. Subsidiary, nor any spouse, child or other relative or affiliate thereof,
owns directly or indirectly, in whole or in part, any of the Intangible
Property; and
(h) To the best of the Parent's knowledge, no third party is infringing, or
will threaten to infringe, upon or otherwise violate any of the Intangible
Property in which the Company or the U.K. Subsidiary has ownership rights.
3.11 Real Estate and Leases. Neither the Company nor any Subsidiary owns any
real property. Schedule 3.11 attached hereto sets forth (a) a true, correct and
complete list as of the date hereof of all leases of real property, identifying
separately each ground lease, to which the Company or any of the Subsidiaries
is a party (collectively, the "Leases"). True, correct and complete copies of
all Leases and all amendments, modifications and supplemental agreements
thereto, have previously been delivered by the Parent or the Company to the
Buyer. The Leases are in full force and effect, are binding and enforceable
against each of the parties thereto in accordance with their respective terms
and, except as set forth on Schedule 3.11, have not been modified or amended
since the date of delivery to the Buyer. No party to any Lease has sent written
notice to the other claiming that such party is in default thereunder and that
such default remains uncured. Except as set forth on Schedule 3.11, there has
not occurred any event which would constitute a breach of or default in the
performance of any covenant, agreement or condition contained in any Lease, nor
has there occurred any event which with the passage of time or the giving of
notice or both would constitute such a breach or material default. Neither the
Company nor any of the Subsidiaries is obligated to pay any leasing or
brokerage commission relating to any Lease and, except as set forth on Schedule
3.11, will not have any obligation to pay any leasing or brokerage commission
upon the renewal of any Lease. Except as set forth on Schedule 3.11, no
construction, alteration or other leasehold improvement work with respect to
any of the Leases remains to be paid for or to be performed by the Company or
any of the Subsidiaries. Except as set forth on Schedule 3.11, the Financial
Statements contain adequate reserves to provide for the restoration of the
property subject to the Leases at the end of the respective Lease terms, to the
extent required by the Leases.
3.12 Inventory. The inventory owned by the Company and its U.K. Subsidiary
consists of items of a quality and quantity which are usable or saleable
without discount in the ordinary course of the business conducted by the
Company and the Subsidiaries. The value of all items of obsolete materials and
of materials of below standard quality have been written down to realizable
market value and the values at which such inventory is carried reflect the
normal Inventory valuation policy of the Company and the Subsidiaries of
stating Inventory at the lower of cost or market value in accordance with
generally accepted accounting principles.
3.13 Accounts Receivable and Payable. Schedule 3.13 attached hereto sets forth
a true, correct and complete list of the accounts and notes receivable of the
Company and the Subsidiaries (the "Account Receivable"), including the aging
thereof as of October 19, 1999. All Accounts Receivable of the Company and the
U.K. Subsidiary arose out of the sales of inventory or services in the ordinary
course of business and are collectible in the face value thereof within 90 days
after the date of invoice, except for retainages and balances which are subject
to customer acceptance of units, using normal collection procedures, net of the
<PAGE>
reserve for doubtful accounts set forth thereon, which reserve is adequate and
was calculated in accordance with generally accepted accounting principles
consistently applied. Schedule 3.13 attached hereto also sets forth a true,
correct and complete list of accounts payable of the Company and the
Subsidiaries ("Accounts Payable"), including the aging thereof as of the date
hereof. All Accounts Payable arose in the ordinary course of business.
3.14 Tax Matters.
(a) Unless otherwise provided, for purposes of this Agreement, "Taxes"
means all taxes, charges, fees, levies or other similar assessments or
liabilities, including without limitation income, gross receipts, ad valorem,
premium, value- added, excise, real property, personal property, sales, use,
transfer, withholding, employment, payroll and franchise taxes imposed by the
United States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or any
contest or dispute thereof.
(b) Unless otherwise provided, for purposes of this Agreement, "Tax
Returns" means all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection with
Taxes.
(c) Except as set forth on Schedule 3.14, since October 1, 1996, each of
the Company and the Subsidiaries has filed all material Tax Returns that it was
required to file, and all such material Tax Returns were correct and complete
in all material respects. Each group of corporations with which the Company or
any of the Subsidiaries has filed (or was required to file) consolidated,
combined, unitary or similar material Tax Returns (an "Affiliated Group") has
filed all material Tax Returns that it was required to file with respect to any
period in which the Company or any of the Subsidiaries was a member of such
Affiliated Group (an "Affiliated Period"), and all such Tax Returns were
correct and complete in all material respects. Each of the Company and the
Subsidiaries has paid all Taxes that are shown to be due on any such Tax
Returns and subsequent assessment to such Tax Returns that were due and payable
and each Affiliated Group has paid all Taxes and subsequent assessments to such
Tax Returns that were due and payable with respect to all Affiliated Periods.
The unpaid Taxes of the Company and the Subsidiaries for tax periods through
the date of the Current Balance Sheet do not exceed the accruals and reserves
for Taxes set forth on the Current Balance Sheet (exclusive of any accruals for
"deferred taxes" or similar items that reflect timing differences between Tax
and financial accounting principles and exclusive of federal and state income
taxes that are accrued on the Parent's balance sheet). Since October 1, 1996,
all Taxes that the Company or any of the Subsidiaries is or was required by law
to withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper governmental entity.
(d) The Parent has delivered to the Buyer correct and complete copies of
all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company or any of the
Subsidiaries since September 30, 1996 and materially correct and complete
copies of the portion of the federal income Tax Returns, examination reports
and statements of deficiency assessed against or agreed to with respect to any
Affiliated Group relating to the activities of the Company and the Subsidiaries
for all Affiliated Periods since September 30, 1996. The Parent has delivered
or made available to the Buyer materially correct and complete copies of all
other Tax Returns of the Company and the Subsidiaries request by the Buyer
<PAGE>
together with all related examination reports and statements of deficiency for
all periods from and after September 30, 1996 and materially correct and
complete copies of the portion of all other Tax Returns, examination reports
and statements of deficiency assessed against or agreed to with respect to any
Affiliated Group relating to the activities of the Company and the Subsidiaries
for all Affiliated Periods since September 30, 1996. The Tax Returns of the
Company, each of the Subsidiaries, and each Affiliated Group have been audited
by the applicable taxing authorities or are closed by the applicable statute of
limitations for all taxable years through the taxable year specified on
Schedule 3.14 hereto. No examination or audit of any Tax Return of the Company
or any of the Subsidiaries or any Affiliated Group with respect to an
Affiliated Period by any Governmental Entity is currently in progress or, to
the knowledge of the Company and the Subsidiaries and the members of any
Affiliated Group, threatened or contemplated and exclusive of federal and state
income taxes that are accrued on the Parent's balance sheet. Since October 1,
1996, neither the Company nor any of the Subsidiaries nor the members of any
Affiliated Group has been informed by any jurisdiction that the jurisdiction
believes that the Company or any of the Subsidiaries or the Affiliated Group
was required to file any Tax Return that was not filed.
(e) Neither the Company nor any of the Subsidiaries nor any Affiliated
Group has waived any statute of limitations with respect to Taxes or agreed to
an extension of time with respect to a Tax assessment or deficiency.
(f) Neither the Company nor any of the Subsidiaries is a "consenting
corporation" within the meaning of Section 341(f) of the Internal Revenue Code
of 1986, as amended (the "Code"), and none of the assets of the Company or the
Subsidiaries are subject to an election under Section 341(f) of the Code.
(g) Neither the Company nor any of the Subsidiaries has been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(l)(A)(ii) of the Code.
(h) Other than the Parent's employment agreement with Jim Clemens executed
in connection with this Agreement, neither the Company nor any of the
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any agreement that could obligate it to make any payments that will be
an "excess parachute payment" under Code Section 280G.
(i) Neither the Company nor any of the Subsidiaries has any actual or to
the best of the Parent's knowledge, potential liability for any Taxes of any
person (other than the Company, the Subsidiaries, and any Affiliated Group) as
a transferee or successor, by contract, or otherwise.
(j) None of the assets of the Company or any of the Subsidiaries is
property that is required to be treated as being owned by any other person
pursuant to the provisions of former Section 168(f)(8) of the Code.
(k) None of the assets of the Company or any of the Subsidiaries is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(l) None of the assets of the Company or any of the Subsidiaries directly
or indirectly secures any debt the interest on which is tax exempt under
Section 103(a) of the Code.
(m) Neither the Company nor any of the Subsidiaries has undergone a change
in its method of accounting resulting in an adjustment to its taxable income
pursuant to Section 481 of the Code.
<PAGE>
(n) Neither the Company nor any of the Subsidiaries has ever participated
in or cooperated with an international boycott within the meaning of Section
999 of the Code.
(o) Neither the Company nor any of the Subsidiaries is or has ever been a
member of a group of corporations with which it has filed (or been required to
file) consolidated, combined or unitary Tax Returns, other than a group of
which only the Company, the Subsidiaries, and any current Affiliated Group are
or were members.
(p) Neither the Company nor any Subsidiary is or has been
required to make a basis reduction pursuant to Treasury Regulation
Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
3.15 Books and Records. The general ledgers and books of account of the Company
and the Subsidiaries, all federal, state and local income, franchise, property
and other Tax Returns filed by the Company and the Subsidiaries are in all
material respects complete and correct and have been maintained in accordance
with good business practice and in accordance with all applicable procedures
required by laws and regulations.
3.16 Contracts and Commitments.
(a) Schedule 3.16 attached hereto contains a true, complete and correct
list and description of the following contracts and agreements, whether written
or oral (collectively, the "Contracts"):
(1) all loan agreements, indentures, mortgages and guaranties to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries or any of their property is bound;
(2) all pledges, conditional sale or title retention agreements, security
agreements, equipment obligations, personal property leases and lease purchase
agreements to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries or any of their property is bound;
(3) all contracts, agreements, commitments, (other than purchase orders) or
other understandings or arrangements to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries or
any of their property is bound which (A) involve payments or receipts by the
Company or any of the Subsidiaries of more than $25,000 in the case of any
single contract, agreement, commitment, understanding or arrangement under
which full performance (including payment) has not been rendered by all parties
thereto or (B) which may materially adversely affect the condition (financial
or otherwise) or the properties, assets, business or prospects of the Company
or any of the Subsidiaries;
(4) all collective bargaining agreements, employment and consulting agreements,
executive compensation plans, bonus plans, deferred compensation agreements,
pension plans, retirement plans, employee stock option or stock purchase plans
and group life, health and accident insurance and other employee benefit plans,
agreements, arrangements or commitments to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries or
any of their property is bound;
(5) all agency, distributor, sales representative, franchise or similar
agreements to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries or any of their property is bound;
<PAGE>
(6) all contracts, agreements or other understandings or arrangements between
the Company and any of the Subsidiaries (including, but not limited to, any tax
sharing arrangements) or between the Company and the Parent or their
affiliates;
(7) all leases, whether operating, capital or otherwise, under which the
Company or any of the Subsidiaries is lessor or lessee;
(8) all contracts, agreements and other documents or information relating to
past disposal of waste (whether or not hazardous), and sales of steel scrap,
prototypes, tools and dies;
(9) all contracts, agreements or other arrangements imposing a non-competition
or non-solicitation obligation on the Company or any of its Subsidiaries; and
(10) any other material agreements or contracts (other
than purchase orders) entered into by the Company or any of the Subsidiaries.
(b) Except as set forth on Schedule 3.16:
(1) Each Contract is a valid and binding agreement of the Company or the
relevant Subsidiary, enforceable against the Company or the relevant Subsidiary
in accordance with its terms, and, to the best of the Parent's knowledge, each
Contract is a valid and binding agreement of the other parties thereto;
(2) the Company or the relevant Subsidiary has fulfilled all material
obligations required pursuant to the Contracts to have been performed by the
Company or the relevant Subsidiary, as the case may be, on its part prior to
the date hereof, and to the best of the Parent's knowledge it will be able to
fulfill, when due, all of its obligations under the Contracts which remain to
be performed after the date hereof; the Company's outstanding purchase orders
on the Closing Date provide for a number of units to be delivered that are
consistent with the Company's historical capacity to produce such number of
units within the prescribed contractual period;
(3) the Company or the relevant Subsidiary is not in breach of or default
in any material respect under any Contract, and, to the best knowledge of the
Parent, no event has occurred which with the passage of time or giving of
notice or both would constitute such a default, result in a loss of rights or
result in the creation of any lien, charge or encumbrance, thereunder or
pursuant thereto;
(4) to the best knowledge of the Parent, there is no existing breach or
default by any other party of a material obligation under any Contract, and to
the best knowledge of the Parent no event has occurred which with the passage
of time or giving of notice or both would constitute a default by such other
party, result in a loss of rights or result in the creation of any lien, charge
or encumbrance thereunder or pursuant thereto;
(5) there are not and, since October 1, 1996 have not been, any claims
material in amount of a non-routine nature relating to the Company or any
Subsidiary by customers of the Company or any of the Subsidiaries under any
warranties, whether express or implied;
(6) the Company and the Subsidiaries are not restricted by any Contract
from carrying on their business anywhere in the world; and
<PAGE>
(7) neither the Company nor any of the Subsidiaries has any written or oral
contracts to sell products or perform services which are expected to be
performed at, or to result in, a loss.
(c) True, correct and complete (in all material respects) copies of all
Contracts have previously been delivered by the Company or the Parent to the
Buyer.
3.17 Compliance with Agreements and Laws. The Company and the Subsidiaries each
have all licenses, permits and certificates, including environmental, health
and safety permits, from federal, state and local authorities the possession of
which are material to conduct their respective business and the ownership and
operation of their respective assets (collectively, the "Permits"). Schedule
3.17 attached hereto sets forth a true, correct and complete list of all such
Permits which are material to the conduct of the Company's business, copies of
which have previously been delivered by the Company or the Parent to the Buyer.
Neither the Company nor any of the Subsidiaries is in violation in any material
respect of any law, regulation or ordinance (including, without limitation,
laws, regulations or ordinances relating to building, zoning, environmental
protection, occupational, health and safety, disposal of hazardous substances,
hazardous waste, land use or similar matters) relating to its properties. The
business of the Company and the Subsidiaries as conducted since October 1,
1996, has not violated, and on the date hereof does not violate, in any
material respect, any federal, state, local or foreign laws, regulations or
orders (including, but not limited to, any of the foregoing relating to
employment discrimination, occupational safety and health, environmental
protection, hazardous substances, hazardous waste or corrupt practices), the
enforcement of which would have a material adverse effect on the results of
operations, condition (financial or otherwise), assets, properties business or
prospects of the Company or any of the Subsidiaries. Except as set forth on
Schedule 3.17, neither the Company nor any of the Subsidiaries has had notice
or communication from any federal, state or local governmental or regulatory
authority or otherwise since October 1, 1996 of any such violation or
noncompliance.
3.18 Employee Relations.
(a) The Company and each of the Subsidiaries is in compliance in all
material respects with all federal, state and municipal laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours, and is not engaged in any unfair labor practice, and there are
no arrears (other than arising out of its normal weekly payroll cycle) in the
payment of wages or social security taxes.
(b) Except as set forth on Schedule 3.18 attached hereto:
(1) none of the employees of the Company or the Subsidiaries is represented by
any labor union;
(2) there is no unfair labor practice complaint against the Company or any of
the Subsidiaries pending before the National Labor Relations Board or any state
or local agency;
(3) to the best of the Parent's knowledge, there is no pending labor strike or
other material labor trouble affecting the Company or any of the Subsidiaries
(including, without limitation, any organizational drive);
(4) there is no material labor grievance pending against the Company or any of
the Subsidiaries;
<PAGE>
(5) to the best of the Parent's knowledge, there is no pending representation
question respecting the employees of the Company or any of the Subsidiaries;
(6) there are no pending arbitration proceedings arising out of or under any
collective bargaining agreement to which the Company or any of the Subsidiaries
is a party, or to the best knowledge of the Parent, any basis for which a claim
may be made under any collective bargaining agreement to which the Company or
any of the Subsidiaries is a party;
(7) other then as required under COBRA, neither the Company nor any of the
Subsidiaries has any continuing obligation for health, life, medical insurance
or other similar fringe benefits to any former employee of the Company or any
Subsidiary; and
(8) no employee is entitled to a bonus payment for any period prior to the
Closing Date or has any contractual arrangements (whether oral or in writing)
relating to severance, or has been promised any stay pay or similar
arrangement.
(c) For purposes of this Subsection 3.18, the term "employee" shall be
construed to include sales agents and other independent contractors who spend a
majority of their working time on the business of the Company or any of the
Subsidiaries.
3.19 Employee Benefit Plans.
(a) Employee Plans. Schedule 3.19 attached hereto contains a true, correct
and complete list of all pension, benefit, profit sharing, retirement, deferred
compensation, welfare, insurance, disability, bonus, vacation pay, severance
pay and other similar plans, programs and agreements, whether reduced to
writing or not, other than any "multiemployer plan" as such term is defined in
Section 4001(a)(3) of ERISA, relating to the Company's employees, or maintained
at any time since October 1, 1996 by the Company or by any other member
(hereinafter, "Affiliate") of any controlled group of corporations, group of
trades or businesses under common control, or affiliated service group (as
defined for purposes of Section 414(b), (c) and (m), respectively, of the
Internal Revenue Code of 1986, as amended (the "Code")) (the Employee Plans")
and, except as set forth on Schedule 3.19 attached hereto, the Company has no
obligations, contingent or otherwise, past or present, under applicable law or
the terms of any Employee Plan.
(b) Prohibited Transactions. Neither the Company nor any of its Affiliates,
directors, officers, employees or agents, or any "party in interest" or
"disqualified person," as such terms are defined in Section 3 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975
of the Code has, with respect to any Employee Plan, engaged in or been a party
to any nonexempt "prohibited transaction," as such term is defined in Section
4975 of the Code or Section 406 of ERISA, in connection with which, directly or
indirectly, the Buyer or any of its Affiliates, directors or employees or any
Employee Plan or any related funding medium could be subject to either a
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code.
(c) Compliance. With respect to all Employee Plans, the Company and its
Affiliates are in compliance in all material respects with the requirements
prescribed by any and all statutes, orders or governmental rules or regulations
currently in effect, including, but not limited to, ERISA and the Code,
applicable to such Employee Plans. The Company and its Affiliates have in all
<PAGE>
material respects performed all obligations required to be performed by them
under, and is not in violation in any respect of, and there has been no default
or violation by any other party with respect to, any of the Employee Plans.
Except as set forth on Schedule 3.19 attached hereto: (i) none of the Employee
Plans which are subject to Title IV of ERISA has been or will be terminated in
whole or in part within the meaning of ERISA or the Code; (ii) no liability has
been incurred to, nor has any event or circumstance occurred, nor will any
event or circumstance occur prior to the Closing Date, which could result in
such a liability being asserted by, the Pension Benefit Guaranty Corporation
("PBGC") with respect to any Employee Plan (other than the payment of annual
premiums under Section 4007 of ERISA or benefits payable in accordance with the
terms of such Employee Plan); (iii) no Employee Plan that is subject to Part 3
of Subtitle B of Title I of ERISA or Section 412 of the Code, or both, incurred
any "accumulated funding deficiency" (as defined in ERISA), whether or not
waived; (iv) neither the Company nor any Affiliate has failed to pay any
amounts due and owing as required by the terms of any Employee Plan; (v) there
has been no "reportable event" within the meaning of Section 4043(b)(1)-(9) of
ERISA, or any event described in Section 4063(a) of ERISA, with respect to any
Employee Plan, other than as disclosed herein or on accompanying schedules;
(vi) neither Company nor any Affiliate has failed to make any payment to an
Employee Plan required under Section 302 of ERISA nor has any lien ever been
imposed under Section 302(f) of ERISA; (vii) neither the Company nor any
Affiliate has adopted an amendment to any Employee Plan which requires the
provision of security under Section 307 of ERISA, (viii) the PBGC has not
instituted any proceedings to terminate an Employee Plan pursuant to Section
4042 of ERISA.
(d) Multiemployer Plans. Schedule 3.19 lists each and every multiemployer
plan to which the Company or its Affiliates contribute, are required to
contribute at any time since October 1, 1996. No multiemployer plan listed in
Schedule 3.14 is in "reorganization" (as defined in Section 4241 of ERISA) or
"insolvent" (as defined in Section 4245 of ERISA). Neither the Company nor any
Affiliate has withdrawn or is reasonably expected to withdraw from a
multiemployer plan in a complete or partial withdrawal which has resulted or
will result in "withdrawal liability," as defined for purposes of Part I of
Subtitle E of Part IV of ERISA, with respect to any such plan which has not
been satisfied in full. The Company and its Affiliates have made all
contributions to any such plan as are required through the Closing Date under
the terms of any such plans or applicable statutes, regulations, rulings and
other applicable law; and no event has occurred, or can occur prior to the
Closing Date, which could give rise to any other liability (other than a
continuing obligation to contribute to such plan(s) under the terms of any
applicable collective bargaining agreements) on the part of the Company or the
Buyer, or their Affiliates, officers, employees or directors with respect to
such plan(s).
(e) Retiree Benefits. Except as set forth in Schedule 3.19, no Employee
Plan provides health or life insurance benefits for retirees. No such plan
contains any provisions, and no commitments or agreements exist, which in any
way would limit or prohibit the Buyer from amending any such plan to reduce or
eliminate such retiree benefits.
(f) Copies of Employee Plans and Related Documents. The Company has
previously delivered to the Buyer true, correct and complete copies of all
Employee Plans which have been reduced to writing and written descriptions of
all Employee Plans which have not been reduced to writing, and all agreements,
including trust agreements and insurance contracts, related to such Employee
Plans, and the Summary Plan Description and all modifications thereto for each
Employee Plan communicated to employees. The Company does not have and is not
<PAGE>
required to contribute to an Employee Plan that is a "defined benefit plan," as
such term is defined in Section 3(35) of ERISA (the "Defined Benefit Plans").
(g) Qualifications. Each Employee Plan intended to qualify under Section
401(a) of the Code has been determined by the Internal Revenue Service to so
qualify, and the trusts created thereunder have been determined to be exempt
from tax under the provisions of Section 501(a). Each Employee Plan which is a
funded welfare benefit plan intended to be exempt from tax under the provisions
of Section 501(c)(9) of the Code has been determined by the Internal Revenue
Service to be so exempt. Copies of all determination letters with respect to
each such Employee Plan have been previously delivered by the Company to the
Buyer, and nothing has since occurred, or will occur prior to the Closing Date,
which might cause the loss of such qualification or exemption, no such Employee
Plan has been operated in a manner which would cause it to be disqualified in
operation, and all such Employee Plans have been administered in compliance
with and consistent with all applicable requirements of the Code and ERISA,
including, without limitation, all reporting, notice, and disclosure
requirements.
(h) Funding Status, Etc.
(1) Except as set forth on Schedule 3.19, neither the Company nor any
corporation or trade or business (whether or not incorporated) which would be
treated as a member of the controlled group of the Company under Section
4001(a)(14) of ERISA would be liable for (A) any amount pursuant to Section
4062, 4063, 4064, 4068 or 4069 of ERISA if any of the Employee Plans which are
subject to Title IV of ERISA were to terminate or (B) any amount pursuant to
Section 4201 of ERISA if a complete or partial withdrawal from any
multiemployer plan listed on Schedule 3.19 occurred before the Closing. Except
as set forth on Schedule 3.19, all Employee Plans which are subject to Title IV
of ERISA have no unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA. There is no unpaid contribution due with respect to the
plan year of any such Defined Benefit Plan ended prior to the Closing Date, as
required under the minimum funding requirements of Section 412 of ERISA.
(2) With respect to each Employee Plan which is a qualified defined
contribution pension, profit-sharing or stock bonus plan, as defined in ERISA,
all employer contributions accrued for plan years ending prior to the Closing
Date under the Plan terms and applicable law have been made by the Company.
(3) All premiums or other payments required by the terms of any group or
individual insurance policies and programs maintained by the Company and
covering any present or former employees of the Company with respect to all
periods up to and including the Closing Date have been fully paid for the
length of the obligation.
(i) Claims and Litigation. Except as set forth on Schedule 3.19, to the
best of the Company's knowledge, there are no threatened or pending claims,
suits or other proceedings by present or former employees of the Company or its
affiliates, plan participants, beneficiaries or spouses of any of the above,
the Internal Revenue Service, the PBGC, or any other person or entity involving
any Employee Plan including claims against the assets of any trust, involving
any Employee Plan, or any rights or benefits thereunder, other than ordinary
and usual claims for benefits by participants or beneficiaries including claims
pursuant to domestic relations orders.
(j) No Implied Rights. Nothing expressed or implied herein shall confer
upon any past or present employee of the Company, his or her representatives,
beneficiaries, successors and assigns, nor upon any collective bargaining
<PAGE>
agent, any rights or remedies of any nature, including, without limitation, any
rights to employment or continued employment with the Company, the Buyer, or
any successor or affiliate.
(k) Liabilities. Except as heretofore accrued on the Current Financial
Statements and except with respect to the period between August 22, 1999 and
the Closing Date, there are no liabilities with respect to any Employee Plan
which liability relates to any period prior to the Closing Date, including,
without limitation, any taxes, accrued vacation or sick pay (whether or not
vested), accrued vacation, sick and personal leaves, employee policies,
employee benefit claims or liability to the Pension Benefit Guaranty
Corporation. The Company does not have a policy or any contractual obligation
to pay severance pay.
3.20 Environmental Matters.
(a) Hazardous Materials have not at any time been generated, used, treated
or stored on any property, plants or other facility now or formerly owned,
leased, or operated by the Company or any Subsidiary or their predecessors, in
violation in any material respect of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require remedial
action under any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit, and none of the Company or any of its Subsidiaries or their
predecessors have received any notice of any such violation with respect to
Hazardous Materials.
(b) There has been no spill, discharge, leak, emission, injection, escape,
dumping or release of any kind onto any property now owned or leased by the
Company or any of its Subsidiaries or their predecessors, or into the
environment surrounding any such property, of Hazardous Materials, other than
those releases permissible under applicable environmental laws.
(c) The Company or any of its Subsidiaries or their predecessors, their
operations and any property owned, leased or operated by the Company, the
Subsidiaries or their predecessors are in compliance in all material respects
with all applicable Environmental Laws and the requirements of any permits
issued under such laws.
(d) There are no past, pending or, to the best knowledge of the Parent,
threatened Environmental Claims against the Company or any of the Subsidiaries
or their predecessors, or which involves or relates to any property now or
previously owned, leased or operated by the Company or any of the Subsidiaries,
or their predecessors.
(e) There is no condition or occurrence on any property now or previously
owned, leased or operated by the Company, the Subsidiaries, or their
predecessors or any property adjoining or in the vicinity of any such property
that to the best knowledge of the Parent could reasonably be anticipated (i) to
form the basis of an Environmental Claim against the Company or any of the
Subsidiaries or their predecessors or (ii) to cause any property of the
Company, the Subsidiaries or their predecessors, to be subject to any
restrictions on the ownership, occupancy, use or transferability of such
property under any Environmental Law.
(f) Schedule 3.20 is a list of all documents (whether in hard copy or
electronic form) that contain any environmental reports, investigations and
audits relating to premises currently or previously owned, leased or operated
by the Company or any Subsidiary or other predecessors (whether conducted by or
<PAGE>
on behalf of the Company or a Subsidiary or a third party, and whether done at
the initiative of the Company or a Subsidiary or directed by a Governmental
Entity or other third party) which were issued or conducted during the past
five years and which the Company has possession of or access to. A complete and
accurate copy of each such document has been provided to the Buyer.
(g) For purposes of this Agreement, "Hazardous Materials" shall refer to
(a) any petroleum or petroleum products, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment that contain dielectric fluid containing levels
of polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or
substances defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or substance
exposure to which is prohibited, limited or regulated by any governmental
authority; "Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law now or
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health, safety
or Hazardous Materials, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA") 42 U.S.C. 9601 et seq.; the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. 1801 et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. 6901 et seq.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. 1251 et seq.; the Toxic Substances Control
Act, 15 U.S.C. 2601 et seq.; the Clean Air Act, 42 U.S.C. 7401 et seq.; the
Safe Drinking Water Act, 42 U.S.C. 3808 et seq.; and their counterparts under
any state or local laws; "Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of non-compliance or violation, investigations or
proceedings relating in any way to any Environmental Law or any permit issued
under any such Law (hereafter "Claims"), including without limitation (a) any
and all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages, fines or
penalties pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to health, safety or the
environment.
3.21 Absence of Certain Changes or Events.
(a) Except as set forth on Schedule 3.21 attached hereto, since August 22,
1999, neither the Company nor any of the Subsidiaries has entered into any
transaction which is not in the usual and ordinary course of business, and,
without limiting the generality of the foregoing, neither the Company nor any
of the Subsidiaries has:
(1) incurred any material obligation or liability for borrowed money;
(2) discharged or satisfied any Lien or paid any obligation or liability other
than current liabilities reflected in the Current Balance Sheet;
(3) mortgaged, pledged or subjected to Lien any of their
respective properties or assets;
<PAGE>
(4) sold or purchased, assigned or transferred any of its tangible assets or
cancelled any debts or claims, except for inventory sold and raw materials
purchased in the ordinary course of business;
(5) made any material amendment to or termination of any Contract or done any
act or omitted to do any act which would cause the breach of any Contract;
(6) except for the Starsine Unit shipped in August which was lost and with
respect to which an insurance claim has been made, suffered any losses of
personal or real property, whether insured or uninsured, and whether or not in
the control of the Company or the relevant Subsidiary, as the case may be, in
excess of $75,000 in the aggregate, or waived any rights of any value;
(7) authorized any declaration or payment of dividends by the Company or any
Subsidiary which is not wholly owned by the Company, or paid any such
dividends, or authorized any transfer of assets of any kind whatsoever by the
Company or any such Subsidiary to any of their respective stockholders with
respect to any shares of their capital stock;
(8) authorized or issued recall notices for any of its products
or initiated any safety investigations;
(9) received notice of any litigation, warranty claim or
products liability claims;
(10) made any material change in the terms, status or funding condition of any
Employee Plan, as defined in Subsection 3.19 hereof;
(11) other than has previously been disclosed in writing to
the Buyer; engaged any new employee for a salary in excess of $50,000 per
annum;
(12) other than the release of incentive compensation to the Company's sales
force, made, or committed to make, any changes in the compensation payable to
any officer, director, employee or agent of the Company or any Subsidiary, or
any bonus payment or similar arrangements made to or with any of such officers,
directors, employees or agents;
(13) incurred any capital expenditure in excess of $50,000
in any instance or $100,000 in the aggregate;
(14) made any material alteration in the manner of keeping the books, accounts
or records of the Company or any Subsidiary, or in the accounting practices
therein reflected; or
(b) Except as set forth on Schedule 3.21 or disclosed to the Buyer in
writing prior to the Closing, since September 30, 1998, neither the Company nor
any Subsidiary has suffered any material adverse change in the consolidated
results of operations, condition (financial or otherwise), assets, liabilities
(whether absolute, accrued, contingent or otherwise), business or prospects of
the Company and the Subsidiaries taken as a whole.
(c) To the best of the Parent's knowledge, there is no existing or
threatened occurrence, event or development which, as far as can be reasonably
foreseen, could have a material adverse effect on the business, properties,
assets, condition (financial or otherwise) or prospects of the Company and the
Subsidiaries taken as a whole.
<PAGE>
3.22 Suppliers. Schedule 3.22 attached hereto sets forth a true, correct and
complete list of the present sole source suppliers of significant goods or
services, other than utilities, for any product with respect to which practical
alternative sources of supply are not available on comparable terms and
conditions, indicating the contractual arrangements for continued supply from
each such supplier. Except as set forth on Schedule 3.22, (a) the Company and
each of the Subsidiaries has good relations with all of its sole source
suppliers, and (b) neither the Company nor any of the Subsidiaries is more than
60 days in arrears in any trade accounts payable or other payments owing to any
supplier, except for amounts which the Company is disputing in good faith.
3.23 Warranty and Product Liability Claims. Other than as set forth on Schedule
3.23 attached hereto neither the Company nor the U.K. Subsidiary has suffered
any nor has any outstanding warranty and product liability claims against the
Company or any of the Subsidiaries from October 1, 1997 through the date hereof
in excess of $10,000 per occurrence or $100,000 on the aggregate for such
period.
3.24 Prepayments and Deposits. Neither the Company nor the U.K. Subsidiary has
received any prepayments and deposits, from customers for products to be
shipped, or services to be performed, after the Closing Date.
3.25 Indebtedness to and from Officers, Directors and Parent. Except as set
forth on Schedule 3.25 attached hereto and except for intercompany indebtedness
payable among the Company and any Subsidiary or among the Subsidiaries, neither
the Company nor any of the Subsidiaries is indebted, directly or indirectly, to
any person who is an officer, director or stockholder of any of the foregoing
entities or any affiliate of any such person in any amount whatsoever other
than for salaries for services rendered or reimbursable business expenses, all
of which have been reflected on the Current Balance Sheet, and no such officer,
director, stockholder or affiliate is indebted to the Company or any of the
Subsidiaries except for advances made to employees of the Company or any of the
Subsidiaries in the ordinary course of business to meet reimbursable business
expenses anticipated to be incurred by such obligor. The total intercompany
indebtedness on the Closing Date (approximately $7,000,000) will be contributed
to the equity of the Company prior to the Closing.
3.26 Banking Facilities. Schedule 3.26 attached hereto sets forth a true,
correct and complete list of:
(a) each bank, savings and loan or similar financial institution in which
the Company or any of the Subsidiaries has an account or safety deposit box and
the numbers of the accounts or safety deposit boxes maintained by the Company
or any of the Subsidiaries thereat; and
(b) the names of all persons authorized to draw on each such account or to
have access to any such safety deposit box facility, together with a
description of the authority (and conditions thereof, if any) of each such
person with respect thereto.
3.27 Powers of Attorney and Suretyships. Except as set forth on Schedule 3.27
attached hereto, neither the Company nor any of the Subsidiaries has any
general or special powers of attorney outstanding (whether as grantor or
grantee thereof) or has any obligation or liability (whether actual, accrued,
accruing, continent or otherwise) as guarantor, surety, co-signer, endorser,
co-maker, indemnitor or otherwise in respect of the obligation of any person,
corporation, partnership, joint venture, association, organization or other
entity, except as endorser or maker of checks or letters of credit,
respectively, endorsed or made in the ordinary course of business.
<PAGE>
3.28 Conflicts of Interest. Except as set forth on Schedule 3.28 attached
hereto and except for the existence of transactions for the supply of goods or
services between the Buyer and affiliates of the Parent, neither the Parent nor
any officer or director of the Company or any Subsidiary nor, to the best
knowledge of the Parent, any affiliate of any such person, now has or within
the last three (3) years had, either directly or indirectly:
(a) an equity or debt interest in any corporation, partnership, joint
venture, association, organization or other person or entity which furnishes or
sells or during such period furnished or sold services or products to the
Company or any of the Subsidiaries, or purchases or during such period
purchased from the Company or any of the Subsidiaries any goods or services, or
otherwise does nor during such period did business with the Company or any of
the Subsidiaries; or
(b) a beneficial interest in any contract, commitment or agreement to which
the Company or any of the Subsidiaries is or was a party or under which any of
them is or was obligated or bound or to which any of their respective
properties may be or may have been subject, other than stock options and other
contracts, commitments or agreements between the Company or any of the
Subsidiaries and such persons in their capacities as employees, officers or
directors of the Company or such Subsidiary.
3.29 Regulatory Approvals. All consents, approvals, authorizations or other
requirements prescribed by any law, rule or regulation which must be obtained
or satisfied by the Company or any of the Subsidiaries and which are necessary
for the execution and delivery by the Parent and the Company of this Agreement
or any documents to be executed and delivered by the Parent or the Company in
connection herewith are set forth on Schedule 3.29 attached hereto and have
been, or prior to the Closing Date will be, obtained and satisfied.
3.30 Year 2000 Compliance.
(a) The Company has conducted "year 2000" audits with respect to (i) all of
the Company's internal systems that are material to the business or operations
of the Company, including, without limitation, computer hardware systems,
software applications, firmware, equipment containing embedded microchips and
other embedded systems ("Internal Systems") and (ii) all of the software,
hardware, firmware and other technology ("Products") which constitute part of
the products and services manufactured, marketed or sold by the Company or
licensed by the Company to third parties. The Company has obtained "year 2000"
certifications with respect to all third-party systems that are material to the
business or operations of the Company, including without limitation systems
belonging to the Company's suppliers, service providers and customers. The
Company has furnished to the Buyer true and correct copies of all "year 2000"
audits, certifications, reports and other similar documents that have been
prepared or performed by or on behalf of the Company or any third party with
respect to the Company's business or operations.
(b) The Company has developed a remediation plan reasonably designed to
cause all of its Internal Systems and Products to be Year 2000 Compliant, and
to have such compliance tested prior to December 1999 (the "Year 2000
Program"). A complete and accurate copy of the Year 2000 Program has previously
been provided to the Buyer. Except as set forth on Schedule 3.30, the Company
is on schedule and within budget in implementing the Year 2000 Program and has
no reason to believe that the remainder of the year 2000 Program can not be
implemented and tested prior to December 1999 with no more than the budgeted
expenditures.
<PAGE>
(c) For purposes of this Agreement, "Year 2000 Compliant" means that the
applicable system or item:
(1) will accurately receive, record, store, provide, recognize and process all
date and time data from, during, into and between the twentieth and
twenty-first centuries, the years 1999 and 2000 and all leap years;
(2) will accurately perform all date-dependent calculations and operations
(including, without limitation, mathematical operations, sorting, comparing and
reporting) from, during, into and between the twentieth and twenty-first
centuries, the years 1999 and 2000 and all leap years; and
(3) will not malfunction, cease to function or provide invalid or incorrect
results as a result of (x) the change of years from 1999 to 2000 or from 2000
to 2001, (y) date data, including date data which represents or references
different centuries, different dates during 1999 and 2000, or more than one
century or (z) the occurrence of any particular date;
in each case without human intervention, other than original data entry or
revisions to computer code that can be implemented at reasonable cost and with
reasonable effort; provided, in each case, that all applications, hardware and
other systems used in conjunction with such system or item which are not owned
or licensed by the Company correctly exchange date data with or provide data to
such system or item.
(d) Except as set forth on Schedule 3.30, the Company has not provided any
guarantee or warranty for any product sold or licensed, or service provided, by
the Company to the effect that such product or service (i) complies with or
accounts for the fact of the arrival of the year 2000, (ii) will not be
adversely affected with respect to functionality, interoperability, performance
or volume capacity (including without limitation the processing and reporting
of data) by virtue of the arrival of the year 2000 or (iii) is otherwise Year
2000 Compliant.
3.31 Disclosure. The information concerning the Company and the Subsidiaries
set forth in this Agreement, the Exhibits and Schedules attached hereto and any
document, statement or certificate furnished or to be furnished to the Buyer
pursuant hereto, does not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated herein or
therein or necessary to make the statements and facts contained herein or
therein, in light of the circumstances in which they are made, not false and
misleading. The Parent and the Company have disclosed to the Buyer all material
facts pertaining to the transactions contemplated by this Agreement and the
Exhibits hereto. Copies of all documents heretofore or hereafter delivered or
made available to the Buyer pursuant to this Agreement were or will be complete
and accurate copies of such documents.
3.32 Broker's Fees. Except for the fee payable by the Parent to FAC Equities,
no fees or commissions or similar payments with respect to the transactions
contemplated by this Agreement have been paid or will be payable by the Parent,
the Company or any Subsidiary to any broker, financial advisor, finder,
investment banker, or bank. The Buyer shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section 3.32 that may be due in
connection with the transactions contemplated by this Agreement.
3.33 Securities Representations.
<PAGE>
(a) Parent is an "accredited investor" within the meaning of the Securities
Act. Parent has knowledge and experience in financial and business matters such
that it is capable of evaluating the merits and risks of the investment in the
SatCon Shares and is financially able to undertake the risks involved in such
an investment. Parent understands that (i) the SatCon Shares have not been
registered under the Securities Act, or any state securities law by reason for
their issuance in a transaction exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) and Regulation D promulgated
thereunder and an exemption under the applicable state securities law and (ii)
such SatCon Shares must be held indefinitely unless a registration statement
covering the resale of such shares is effective under the Securities Act and
such state law or unless an exemption from registration under the Securities
Act and such state law is available.
(b) Parent agrees that SatCon Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the Securities
Act, or (ii) the Buyer first shall have been furnished with an opinion of legal
counsel, reasonably satisfactory to the Parent and which may be counsel to the
Buyer, to the effect that such sale or transfer is exempt from the registration
requirements of the Securities Act. The SatCon Shares may be pledged and
transferred to Key Bank, N.A. in connection with the Parent's credit facility.
Each certificate representing SatCon Shares shall bear a legend substantially
in the following form:
"The securities represented by this certificate
have not been registered under the Securities Act
of 1922, as amended, and may not be offered, sold
or otherwise transferred, pledged or hypothecated
without the consent of SatCon Technology Corporation
and unless and until such securites are registered
under such Act or an opinion of counsel satisfactory
to SatCon Technology Cororation is obtained to the
effect that such registration is not required."
(c) The Buyer has granted the Parent and its attorneys or other
representatives access to all information about the Buyer which Parent has
requested; and the Parent has had the opportunity to ask questions of, and
receive answers from, representatives of the Buyer to ask questions of, and
receive answers from, representatives of the Buyer concerning such information
and the Buyer's financial condition and prospects.
(d) The principal office of the Parent and the place at which the decision
by the Parent to participate in this Agreement and the transactions
contemplated hereby was made is located in New York.
Any information furnished in the schedules of the Parent, Company or U.K.
Subsidiary (a "Disclosure Schedule") shall be deemed to modify all of the
Parent's representations and warranties. The inclusion of any information in
the Disclosure Schedule shall not be deemed to be an admission or
acknowledgment, in and of itself, that such information is required by the
terms hereof to be disclosed, is material to the Disclosure Schedule, has or
would have a material adverse effect. For purposes of this Agreement, the terms
"to the best of the Company's knowledge," "to the best of the Parent's
knowledge," "known by the Company," "known to the Parent" or other words of
similar meaning shall mean the actual knowledge of George McNamee, Cynthia
Scheuer or James Clemens without any obligation of investigation, and shall not
refer to the knowledge of any other person or entity.
<PAGE>
4. Representation and Warranties of the Buyer.
The Buyer represents and warrants to the Parent as follows:
4.1 Organization and Qualification. The Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
Except for Beacon Power Corporation or ("Beacon") and as set forth on Schedule
4.1, the Buyer has no subsidiaries (collectively, the "Buyer Subsidiaries"); it
being agreed that for purpose of this Agreement Beacon is not a Buyer
Subsidiary of the Buyer. Each of the Buyer Subsidiaries (which, except as
provided in the prior sentence, for purposes of this Agreement means any entity
in which the Buyer, directly or indirectly, owns the majority of such entity's
capital stock or holds an equivalent equity or similar interest) is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization (as applicable),
with the full corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each of the Buyer
and the Buyer Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature of the business conducted or property owned by it makes
such qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, would not, individually or in the aggregate,
(x) adversely affect the legality, validity or enforceability of any of this
Agreement or any of the material transactions contemplated hereby, (y) have or
result in a material adverse effect on the results of operations, assets, or
financial condition of the Buyer and the Buyer Subsidiaries, taken as a whole
or (z) impair the Buyer's ability to perform in all material respects on a
timely basis its material obligations under this Agreement (any of (x), (y) or
(z), being a "Buyer Material Adverse Effect"). The Buyer has on file with the
Securities Exchange Commission true and correct copies of the Buyer's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "Certificate of Incorporation"), and the Buyer's Bylaws, as in effect on
the date hereof (the "Bylaws").
4.2 Authorization; Enforcement. The Buyer has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by this
Agreement, and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of each of this Agreement and the consummation by it
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action. This Agreement has been duly executed by the Buyer
and constitutes the valid and binding obligation of the Buyer enforceable
against the Buyer in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application and except that rights to indemnification and
contribution may be limited by Federal or state securities laws or public
policy relating thereto. Neither the Buyer nor any Buyer Subsidiary is in any
material violation of any of the provisions of its respective certificate of
incorporation, bylaws or other charter documents such that any right of a
holder of the SatCon Shares would be affected.
4.3 Capitalization. As of the date hereof, the authorized capital stock of the
Buyer is as set forth in Schedule 4.3. All of such outstanding shares of
capital stock, except as disclosed in the Buyer SEC Documents (as defined in
Section 4.10) have been, or upon issuance will be, validly authorized and
issued, fully paid and nonassessable and were issued in accordance with the
<PAGE>
registration or qualification provisions of the Securities Act, or pursuant to
valid exemptions therefrom. Except as disclosed in Schedule 4.3 or in the Buyer
SEC Documents, (i) no shares of the Buyer's capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Buyer, nor is any holder of the SatCon Common
Stock entitled to preemptive or similar rights arising out of any agreement or
understanding with the Buyer by virtue of this Agreement, (ii) there are no
outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, or giving any Person (as defined below)
any right to subscribe for or acquire, any shares of capital stock of the Buyer
or any of its Buyer Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Buyer or any of its Buyer Subsidiaries is or may
become bound to issue additional shares of capital stock of the Buyer or any of
its Buyer Subsidiaries or options, warrants, scrip rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Buyer or any of its
Buyer Subsidiaries, (iii) there are no outstanding debt securities of the Buyer
or any of its Buyer Subsidiaries, (iv) there are no agreements or arrangements
under which the Buyer or any of its Buyer Subsidiaries is obligated to register
the sale of any of their securities under the Securities Act, (v) there are no
outstanding securities of the Buyer or any of its Buyer Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Buyer or any of its
Buyer Subsidiaries is or may become bound to redeem a security of the Buyer or
any of its Buyer Subsidiaries, (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the SatCon Common Stock, (vii) the Buyer does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar plan
or agreement and (viii) except for the put rights granted to the holders of the
Class D Preferred Stock of Beacon and except as specifically disclosed in the
Buyer SEC Documents, to the knowledge of the Buyer no Person (as defined below)
or group of related Persons beneficially owns (as determined pursuant to Rule
13d-3 promulgated under the Exchange Act or has the right to acquire by
agreement with or by obligation binding upon the Buyer beneficial ownership of
in excess of 5% of the Common Stock. "Person" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability Buyer, joint stock Buyer, government (or an
agency or subdivision thereof) or other entity of any kind.
4.4 Authorization and Validity; Issuance of Shares. The SatCon Shares are duly
authorized and reserved for issuance and will be validly issued, fully paid and
non-assessable, free and clear of all liens, encumbrances and rights of first
refusal, other than Liens created by the Parent and will not be subject to any
preemptive or similar rights. Assuming the accuracy of the Parent's
representation in Section 3.34. The issuance by the Buyer of the SatCon Shares
is exempt from registration under the Securities Act.
4.5 No Conflicts. The execution, delivery and performance of this Agreement by
the Buyer and the consummation by the Buyer of the transactions contemplated
hereby do not and will not (i) conflict with or violate any provision of the
Certificate of Incorporation, Bylaws or other organizational documents of the
Buyer or any of the Buyer Subsidiaries, (ii) subject to obtaining the consents
referred to in Section 4.6, conflict with, or constitute a breach or a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
(evidencing a Buyer or Buyer Subsidiary debt or otherwise) to which the Buyer
or any Buyer Subsidiary is a party or by which any property or asset of the
<PAGE>
Buyer or any Buyer Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Buyer or
any Buyer Subsidiary is subject (including Federal and state securities laws
and regulations and the rules and regulations of the principal market or
exchange on which the Common Stock is traded or listed) applicable to the Buyer
or any of its Buyer Subsidiaries (except for any shareholder approval that may
be required pursuant to the rules of the NASDAQ), or by which any material
property or asset of the Buyer or any Buyer Subsidiary is bound or affected
except, in each such case, for any violation, conflict, default or breach which
is not reasonably expected to have a Buyer Material Adverse Effect.
4.6 Consents and Approvals. Except as specifically set forth on Schedule 4.6,
neither the Buyer nor any Buyer Subsidiary is required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal or state governmental authority,
regulatory or self regulatory agency, or other Person in connection with the
execution, delivery and performance by the Buyer of this Agreement, other than
(i) the application(s) or any letter(s) acceptable to the National Market
System of Nasdaq Stock Market ("Nasdaq") for the listing of the SatCon Common
Stock with Nasdaq (and with any other national securities exchange or market on
which the Common Stock is then listed), (ii) any filings, notices or
registrations under applicable state securities laws, (iii) the filing of a
form D with the Securities and Exchange Commission (the "Commission"), and (iv)
the approval of the Buyer's Board of Directors (together with the consents,
waivers, authorizations, orders, notices and filings referred to on Schedule
4.6, the "Buyer Required Approvals").
4.7 Litigation; Proceedings. Except as specifically set forth on Schedule 4.7,
there is no action, suit, notice of violation, proceeding or investigation
pending or, to the knowledge of the Buyer or any of its Buyer Subsidiaries,
threatened against or affecting the Buyer or any of its Buyer Subsidiaries or
any of their respective properties or assets before or by any court,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) which (i) adversely affects or challenges the
legality, validity or enforceability of any of this Agreement or (ii) could
reasonably be expected to, individually or in the aggregate, to have a Buyer
Material Adverse Effect.
4.8 No Default or Violation. Except as specifically set forth on Schedule 4.8,
neither the Buyer nor any Buyer Subsidiary (i) is in default under or in
violation of any indenture, loan or other credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties or assets is bound and which is required to be included as an
exhibit to any Buyer SEC Document (as defined in Section 4.10 hereof) or will
be required to be included as an exhibit to the Buyer's next filing under
either the Securities Act or Exchange Act, (ii) is in violation of any order of
any court, arbitrator or governmental body applicable to it, (iii) is in
violation of any statute, rule or regulation of any governmental authority to
which it is subject, (iv) is in default under or in violation of its
Certificate of Incorporation, Bylaws or other organizational documents,
respectively, or (v) is in default under or in violation of any of the listing
requirements of Nasdaq as in effect on the date hereof and is not aware of any
facts which would reasonably lead to delisting or suspension of the Common
Stock by Nasdaq in the foreseeable future except, in each such case, for any
violation or default which is not reasonably expected to have a Buyer
Materially Adverse Effect. The business of the Buyer and its Buyer Subsidiaries
is not being conducted, and has not been conducted, in violation of any law,
ordinance, rule or regulation of any governmental entity, except where such
<PAGE>
violations have not resulted or would not reasonably result, individually or in
the aggregate, in a Buyer Material Adverse Effect. Neither the Buyer nor any of
its Buyer Subsidiaries is in breach of any agreement where such breach,
individually or in the aggregate, would have a Buyer Material Adverse Effect.
4.9 Disclosure; Absence of Certain Changes. None of this Agreement, the
Schedules to this Agreement, the Buyer SEC Documents (as amended to date)
contained as of their respective dates, any untrue statement of a material fact
or omitted to state any material fact necessary in order to make the statements
made herein and therein, in light of the circumstances under which they were
made, not misleading. Except as disclosed on Schedule 4.9 or in Buyer SEC
Documents filed on EDGAR through the date hereof, since the filing of the
Buyer's quarterly report on Form 10-Q on August 16, 1999, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, liabilities or results of
operations of the Buyer or the Buyer Subsidiaries. The Buyer has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Buyer or any of its Buyer
Subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
4.10 Buyer SEC Documents; Financial Statements. The Common Stock of the Buyer
is registered pursuant to Section 12(g) of the Exchange Act. The Buyer has
filed during its current fiscal year all reports, schedules, forms, statements
and other documents required to be filed by it with the Commission pursuant to
the reporting requirements of the Exchange Act, including pursuant to Section
13, 14 or 15(d) thereof (the foregoing materials and financial statements and
schedules thereto being collectively referred to herein as the "Buyer SEC
Documents"), on a timely basis or has received a valid extension of such time
of filing and has filed any such Buyer SEC Documents prior to the expiration of
any such extension. The Buyer has delivered to each of the Purchasers or its
representatives true, complete and accurate copies of the Buyer SEC Documents
that were not filed pursuant to EDGAR. As of their respective dates and giving
effect to all amendments thereto filed with the Commission, the financial
statements of the Buyer included in the Buyer SEC Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
in all material respects the financial position of the Buyer as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, year-end audit
adjustments. The Buyer acknowledges that the Parent will be trading in the
securities of the Buyer in reliance on the foregoing representation and
warranty.
4.11 Broker's Fees. No fees or commissions or similar payments with respect to
the transactions contemplated by this Agreement have been paid or will be
payable by the Buyer to any broker, financial advisor, finder, investment
banker, or bank. Parent shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section 4.11 that may be due in connection with the
transactions contemplated by this Agreement.
4.12 Form S-3 Eligibility. The Buyer is, and at the Closing Date will be,
eligible to register the SatCon Common Stock for resale with the Commission
under Form S-3 (or any successor form) promulgated under the Securities Act.
<PAGE>
4.13 Listing and Maintenance Requirements Compliance. The principal market on
which the Buyer's Common Stock is currently traded is Nasdaq. Except as
disclosed on Schedule 4.13, the Buyer has not in the three years preceding the
date hereof received notice (written or oral) from Nasdaq (or any stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted)) to the effect that the Buyer is not in
compliance with the listing or maintenance requirements of such market or
exchange. The Buyer is not aware of any facts which would reasonably lead to
delisting or suspension of the Common Stock by Nasdaq. After giving effect to
the transactions contemplated by this Agreement and the Transaction Documents,
the Buyer is and will be in compliance with all such maintenance requirements
except for any approval required under the NASD rules.
4.14 Intellectual Property Rights. To the best of the knowledge of the Buyer,
the Buyer owns or possesses, or can obtain by payment of royalties in amounts
which, in the aggregate, will not have a Buyer Material Adverse Effect, all of
the patents, trademarks, service marks, trade names, copyrights, proprietary
rights, trade secrets, and licenses or rights to the foregoing, necessary for
the conduct of the business of the Buyer as currently conducted. To the best of
the Buyer's knowledge, the business of the Buyer does not cause the Buyer to
infringe or violate any of the patents, trademarks, service marks, trade names,
copyrights, licenses or proprietary rights of any person or entity.
4.15 Registration Rights; Rights of Participation. Except as described on
Schedule 4.15 hereto, (i) the Buyer has not granted or agreed to grant to any
Person any rights (including "piggy-back" registration rights) to have any
securities of the Buyer registered with the Commission or any other
governmental authority which has not been satisfied and (ii) no Person,
including, but not limited to, current or former stockholders of the Buyer,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement.
4.16 Tax Status; Firpta. Except as set forth on Schedule 4.16, the Buyer and
each of the Buyer Subsidiaries has made or filed all federal and state income
and all other Tax Returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Buyer and each of its Buyer Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported Taxes) and has
paid all Taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith (which are set forth
on Schedule 4.16 hereof), and has set aside on it books provisions reasonably
adequate for the payment of all Taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid Taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Buyer know of no basis for any such
claim. The Buyer is not a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code.
4.17 Transactions With Affiliates. Except as set forth on Schedule 4.17, none
of the officers, directors, or employees of the Buyer is presently a party to
any transaction with the Buyer or any of its Buyer Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Buyer, any corporation, partnership, trust or entity in which
<PAGE>
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
4.18 Material Contracts. Except for this Agreement, the other agreements to be
entered into pursuant to the terms of this Agreement, contracts attached as
exhibits to the Buyer's SEC Documents and the contracts of the Buyer and its
Subsidiaries set forth on Schedule 4.18 attached hereto (collectively, the
"Contracts"), neither the Buyer nor its Subsidiaries are a party to or
otherwise bound by any written or oral:
(a) written contract for the employment of any officer, employee or other
person on a full-time or consulting basis, which is not terminable on thirty
(30) days' notice without cost or liability to the Buyer or any Subsidiary,
except normal severance arrangements and accrued vacation pay;
(b) bonus, pension, profit-sharing, retirement, hospitalization, insurance,
stock purchase, stock option or other plan, contract or understanding pursuant
to which benefits are provided to any employee of the Buyer or any Subsidiary
(other than group insurance plans applicable to employees generally);
(c) agreement or indenture relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of the Buyer or Subsidiary or any agreement or instrument evidencing
any guaranty by the Buyer or any Subsidiary of payment or performance by any
other Person;
(d) voting trust or agreement, stockholders' agreement, pledge agreement,
buy-sell agreement or first refusal or preemptive rights agreement relating to
any securities of the Buyer;
(e) agreement or obligation (contingent or otherwise) to issue, sell or
otherwise distribute or to repurchase or otherwise acquire or retire any shares
of its capital stock or any of its other equity securities;
(f) agreement under which the Buyer or any Subsidiary has granted any
person any registration rights, other than this Agreement;
(g) agreement providing for disposition of the business, assets or shares
of the Buyer or its Subsidiaries, agreement of merger or consolidation to which
the Buyer or any Subsidiary is a party or letter of intent with respect to the
foregoing;
(h) agreement or letter of intent (other than the acquisition of Ling
Electronics, Inc.) with respect to the acquisition of the business, assets or
shares of any other Person.
4.19 ERISA. Set forth in Schedule 4.19 is a list and brief description of each
"employee pension benefit plan," as such term is defined in Section 3(2) of
ERISA, now or formerly maintained by the Buyer or any of their respective
Subsidiaries, to which the Buyer or any Subsidiary is now or will be obligated
to contribute. Except as described in Schedule 4.19, no event has occurred, or
to the knowledge of the Buyer or its Subsidiaries, is threatened or about to
occur, which would constitute a reportable event within the meaning of Section
4043(b) of ERISA, and no notice of termination has been filed by the plan
administrator pursuant to Section 4041 of ERISA or issued by the Pension
Benefit Guaranty Corporation (the "PBGC") pursuant to Section 4042 of ERISA
with respect to any pension benefit plan described in Schedule 4.19 subject to
ERISA. To the best knowledge of the Buyer, no prohibited transaction (as
defined in Section 4975 of the Code) has occurred with respect to any employee
<PAGE>
benefit plan maintained by the Buyer or any of its Subsidiaries. Neither the
Buyer nor any of their respective Subsidiaries nor any of their respective
ERISA Affiliates is or has been a participant in any multiemployer plan as
defined in ERISA. "ERISA Affiliate" means with respect to any Person, any
entity that would be considered to be under common control with such person for
purposes of Title IV of ERISA.
4.20 Environmental Matters.
(a) Hazardous Materials have not at any time been generated, used, treated
or stored on any property, plants or other facilities now owned, leased, or
operated by the Buyer or any Subsidiary (or at any property, plant or other
facilities ever owned, leased or operated by any predecessor entity at such
locations), in violation of any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit or which would require remedial action under
any applicable law, ordinance, rule, regulation, order, judgment, decree or
permit, and none of the Buyer, its Subsidiaries or its predecessors have
received any notice of any such violation with respect to Hazardous Materials
except for such violations that the Buyer reasonably does not expect will have
a material adverse effect on the Buyer;
(b) There has been no spill, discharge, leak, emission, injection, escape,
dumping or release of any kind onto any property now owned or leased by the
Buyer, its Subsidiaries or any predecessor (or onto any other property ever
owned or leased by it, or by any predecessor entity at any such location), or
into the environment surrounding any such property, of Hazardous Materials,
other than those releases permissible under such regulations, laws or statutes
or allowable under applicable permits and except for such violations that the
Buyer reasonably does not expect will have a material adverse effect on the
Buyer;
(c) The Buyer, its Subsidiaries or its predecessor, their operations and
any property owned by the Buyer, its Subsidiaries or its predecessor are in
material compliance with all material Environmental Laws and the material
requirements of any permits issued under such laws;
(d) There are no past, pending or, to the best of the Buyer's knowledge,
threatened Environmental Claims against the Buyer, its Subsidiaries or its
predecessor or any property now or previously owned or leased by the Buyer, its
Subsidiaries or its predecessor;
(e) To the best of the Buyer's knowledge, there is no condition or
occurrence on any property now or previously owned or leased by the Buyer, its
Subsidiaries or its predecessor or any property adjoining or in the vicinity of
any such property that could reasonably be anticipated (i) to form the basis of
an Environmental Claim against the Buyer, its Subsidiaries or its predecessor
or (ii) to cause any property of the Buyer, its Subsidiaries or its predecessor
to be subject to any restrictions on the ownership, occupancy, use or
transferability of such property under any Environmental Law.
(f) For purposes of this Agreement, "Hazardous Materials" shall refer to
(a) any petroleum or petroleum products, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment that contain dielectric fluid containing levels
of polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or
substances defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import, under any
<PAGE>
applicable Environmental Law; and (c) any other chemical, material or substance
exposure to which is prohibited, limited or regulated by any governmental
authority; "Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law now or
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health, safety
or Hazardous Materials, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA") 42 U.S.C. 9601 et seq.; the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. 1801 et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. 6901 et seq.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. 1251 et seq.; the Toxic Substances Control
Act, 15 U.S.C. 2601 et seq.; the Clean Air Act, 42 U.S.C. 7401 et seq.; the
Safe Drinking Water Act, 42 U.S.C. 3808 et seq.; and their counterparts under
any state or local laws; "Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of non-compliance or violation, investigations or
proceedings relating in any way to any Environmental Law or any permit issued
under any such Law (hereafter "Claims"), including without limitation (a) any
and all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages, fines or
penalties pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to health, safety or the
environment.
4.21 Year 2000 Matters. The Buyer's statements regarding "Year 2000 Risk" set
forth in the SEC Documents are true and correct in all material respects.
"Year 2000 Risk" means the risk that computer applications used by the Buyer
and/or its suppliers, vendors and customers may be unable to recognize and
perform without error date-sensitive functions involving certain dates prior to
and any date after December 31, 1999, including, without limitation, September
9, 1999.
4.22 Private Offering. The Buyer and all Persons acting on its behalf have not
made within the six months preceding the Closing Date, directly or indirectly,
and will not make, offers or sales of any securities or solicited any offers to
buy any security at any time within six months after the Closing Date under
circumstances that would require registration of the Securities, the Warrants
or the Warrant Shares or the issuance of such securities under the Securities
Act.
4.23 Investment Company. The Buyer is not, and is not controlled by or under
common control with an affiliate (an "Affiliate") of an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
Any information furnished in the schedules of the Buyer (a "Buyer Disclosure
Schedule") shall be deemed to modify all of the Buyer's representations and
warranties. The inclusion of any information in the Buyer Disclosure Schedule
shall not be deemed to be an admission or acknowledgment, in and of itself,
that such information is required by the terms hereof to be disclosed, is
material to the Buyer, has or would have a Buyer Material Adverse Effect. For
purposes of this Agreement, the terms "to the Buyer's knowledge," "known by the
Buyer" or other words of similar meaning shall mean the actual knowledge of
David Eisenhaure or Michael Turmelle without any obligation of investigation,
and shall not refer to the knowledge of any other person or entity.
<PAGE>
5. Public Announcements. The parties agree that all general public
pronouncements or other general public communications concerning this Agreement
and the transaction contemplated hereby, and the timing, manner and content of
such disclosures, shall be subject to the mutual agreement of the Parent and
the Buyer.
6. Conditions to Obligations of the Buyer.
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing in the sole discretion of the Buyer:
6.1 Continued Truth of Representations and Warranties of the Parent and the
Company; Compliance with Covenants and Obligations. The representations and
warranties of the Parent, the Company and the U.K. Subsidiary shall be true on
and as of the Closing Date as though such representations and warranties were
made on and as of such date (even though they purport to have been given on a
date prior to the Closing Date), except for any changes permitted by the terms
hereof or consented to in writing by the Buyer. The Parent, the Company and the
U.K. Subsidiary shall have performed and complied with all terms, conditions,
covenants, obligations, agreements and restrictions required by this Agreement
to be performed or complied with by each of them prior to or at the Closing
Date.
6.2 Performance by the Parent and the Company. At the Closing, the Parent and
the Company shall have delivered to the Buyer a certificate signed by the Chief
Financial Officer of the Company and the Parent, as the case may be, as to
their compliance with Subsection 6.01 hereof.
6.3 Governmental Approvals. All governmental agencies, department, bureaus,
commissions and similar bodies, the consent, authorization or approval of which
is necessary under any applicable law, rule, order or regulation for the
consummation by the Parent, the Company or the Subsidiaries of the transactions
contemplated by this Agreement and the operation of the business of the Company
and the Subsidiaries by the Buyer shall have consented to, authorized,
permitted or approved such transactions.
6.4 Consent of Lenders, Lessors and Other Third Parties. The Parent, the
Company and the Subsidiaries shall have received all requisite consents and
approvals of all lenders, lessors and other third parties whose consent or
approval is required in order for the Parent, the Company and the Subsidiaries
to consummate the transactions contemplated by this Agreement, including
without limitation, those set forth on Schedules 3.4. In addition, except as
set forth on Schedule 6.4, there shall be no Liens on the assets of the Company
and the Company shall deliver termination statements in forms acceptable to the
Buyer with respect to each security interest or other encumbrance outstanding
in or on the assets of the Company.
6.5 Adverse Proceedings. No action or proceeding by or before any court or
other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit
or invalidate the transactions contemplated by this Agreement or which might
affect the right of the Buyer to own the Shares or to own or operate the
business of the Company and the Subsidiaries after the Closing.
6.6 Opinion of Counsel. The Buyer shall have received an opinion of Catherine
S. Hill PLLC, counsel to the Parent, the Company and the Subsidiaries, dated as
<PAGE>
of the Closing Date, in substantially the form attached hereto as Exhibit A,
and as to such other matters as may be reasonably requested by the Buyer or its
counsel.
6.7 Employment Contracts. On or prior to the Closing Date, the Buyer shall have
executed employment contracts and other arrangements with the individuals
listed on Schedule 6.7 attached hereto, upon substantially the terms set forth
in Schedule 6.7.
6.8 Repayment of Indebtedness. On the Closing Date, the Company and the
Subsidiaries shall not have any indebtedness other than accounts payable
incurred in the ordinary course of business. In addition, on or before the
Closing Date, the Parent shall contribute the intercompany loan balance to the
Company of approximately $7,000,000, the amount of intercompany indebtedness to
be determined at the Closing.
6.9 Closing Deliveries. The Buyer shall have received at or prior to the
Closing such documents, instruments or certificates as the Buyer may reasonably
request including, without limitation:
(a) the stock certificates representing the Shares and the U.K. shares duly
endorsed in accordance with Subsection 1.01 of this Agreement (together with
any lost stock affidavits provided to the Company by the Parent);
(b) a copy of the Election to Reattribute Losses in the form executed by
the Company and the Parent;
(c) such certificates of the Company's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 6 as the
Buyer shall reasonably request;
(d) a certificate of the Parent's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 6 as the
Buyer shall reasonably request;
(e) a certificate of the Secretary of State of the State of California as
to the legal existence and good standing (including tax) of the Company in
California;
(f) a certificate of the Secretary of State of the State of New York as to
the legal existence and good standing (including tax) of the Parent in New
York.
(g) certificates of the Secretary of the Company attesting to the
incumbency of the Company's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents delivered
pursuant to Subsection 3.01;
(h) certificates of the Secretary of the Parent attesting to the incumbency
of the Parent's officers, the authenticity of the resolutions authorizing the
transactions contemplated by this Agreement, and the authenticity and
continuing validity of the charter documents delivered pursuant to Subsection
3.01;
(i) Estoppel certificates in the form attached hereto as Exhibit B from
each lessor from whom the Company or any Subsidiary leases real or personal
property consenting to the acquisition of the Shares by the Buyer and the other
transactions contemplated hereby, and representing that there are no
<PAGE>
outstanding claims against the Company or such Subsidiary under such Lease;
provided, however, that the parties agree that such estoppel certificates may
be delivered after Closing but before November 15, 1999, if not reasonably
available at the Closing, provided that if not delivered to the Buyer by
November 15, 1999, the Parent agrees to indemnify the Buyer against any Losses
(as defined in Section 8.1) arising out of the failure of any assertions in the
form of estoppel certificate to be complete and correct.
(j) written resignations of all members of the Company's Board of
Directors;
(k) the corporate minute books of the Company and all
corporate seals; and
(l) a cross receipt executed by the Buyer and the Parent; and
(m) if requested by the Buyer, (i) the Company and the Subsidiaries will
delivery to the Buyer and to the Internal Revenue Services notices that the
Securities are not a "U.S. real property interest" in accordance with the
Treasury Regulations under Section 897 and 1445 of the Code, or (ii) the Parent
will delivery to the Buyer certificates of non-foreign status in accordance
with the Treasury Regulations under Section 1445 of the Code.
7. Conditions to Obligations of the Parent.
The obligations of the Parent under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing in the sole discretion of the Parent:
7.1 Continued Truth of Representations and Warranties of the Buyer; Compliance
with Covenants and Obligations. The representations and warranties of the Buyer
in this Agreement shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except for any
changes consented to in writing by the Parent. The Buyer shall have performed
and complied with all terms, conditions, covenants, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
7.2 Corporate Proceedings. All corporate and other proceedings required to be
taken on the part of the Buyer to authorize or carry out this Agreement shall
have been taken.
7.3 Governmental Approvals. All governmental agencies, departments, bureaus,
commissions and similar bodies, the consent, authorization or approval of which
is necessary under any applicable law, rule, order or regulation for the
consummation by the Buyer of the transactions contemplated by this Agreement
shall have consented to, authorized, permitted or approved such transactions.
7.4 Consents of Lenders, Lessors and Other Third Parties. The Buyer shall have
received all requisite consents and approvals of all lenders, lessors and other
third parties whose consent or approval is required in order for the Buyer to
consummate the transactions contemplated by this Agreement, including, without
limitation, those set forth on Schedule 4.6 attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before any court or
other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit
or invalidate the transactions contemplated by this Agreement or which might
affect the right of the Parent to transfer the Shares.
<PAGE>
7.6 Opinion of Counsel. The Parent shall have received an opinion of Hale and
Dorr LLP, counsel to the Buyer, dated as of the Closing Date, in substantially
the form attached hereto as Exhibit C.
7.7 Closing Deliveries. The Parent shall have received at or prior to the
Closing such documents, instruments or certificates as the Buyer may reasonably
request including, without limitation:
(a) such certificates of the Buyer's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 7 as the
Parent shall reasonably request;
(b) a certificate of the Secretary of State of the State of Delaware as to
the legal existence and good standing (including tax) of the Buyer in Delaware;
(c) a certificate of the Secretary of the Buyer attesting to the incumbency
of the Buyer's officers, the authenticity of the resolutions authorizing the
transactions contemplated by this Agreement, and the authenticity and
continuing validity of the charter documents and bylaws delivered pursuant to
Subsection 7.01;
(d) Issuance of the SatCon Shares; and
(e) a cross receipt executed by the Buyer and the Parent.
7.8 Buyer Registration Rights Agreement. The Buyer and the Parent shall have
executed the Registration Rights Agreement, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit D, pursuant to which the
Buyer shall grant certain registration rights to the Parent with respect to the
SatCon Shares.
8. Indemnification.
8.1 By the Parent and the Company. The Parent hereby indemnifies and holds
harmless the Buyer from and against all claims, damages, losses, liabilities,
costs and expenses (including, without limitation, settlement costs and any
legal, accounting or other expenses for investigating or defending any actions
or threatened actions) (collectively, the "Losses") in connection with each and
all of the following:
(a) any misrepresentation or breach of any representation or
warranty made by the Parent or the Company in this Agreement;
(b) any breach of any covenant, agreement or obligation of the
Parent or the Company contained in this Agreement or any other agreement,
instrument or document contemplated by this Agreement;
(c) any material misrepresentation contained in any certificate or schedule
furnished by the Parent or the Company pursuant to this Agreement;
(d) any claim of an employee of the Company or a former employee of the
Company for payment pursuant to any bonus, change in control, stay- pay,
severance payment, deferred compensation or similar arrangement for or with
respect to any period prior to the Closing Date, or for any severance or
obligations pursuant to a contractual arrangement in effect at or prior to the
Closing; or any claim of an employee or former employee of the Company arising
out of the termination of vesting of such employee's options under the Parent's
stock option plan;
<PAGE>
(e) any failure of the Parent to provide the Buyer good, valid and
marketable title to the Shares or Parent Warrant free and clear of all liens,
charges, encumbrances, adverse claims, restrictions or other rights; and
(f) any claim by a stockholder or former stockholder of the Company, or any
other person or entity, seeking to assert, or based upon: (i) ownership or
rights to ownership of any shares of stock of the Company; (ii) any rights of a
stockholder of the Company, including any option, preemptive rights or rights
to notice or to vote; (iii) any rights under the Certificate of Incorporation
or By-laws of the Company; or (iv) any claim that his, her or its shares were
wrongfully repurchased by the Company.
8.2 By the Buyer. The Buyer hereby indemnifies and holds harmless the Parent
from and against all Losses in connection with each and all of the following:
(a) any misrepresentation or breach of any representation or
warranty made by the Buyer in this Agreement;
(b) any breach of any covenant, agreement or obligation of the
Buyer contained in this Agreement or any other agreement, instrument or
document contemplated by this Agreement;
(c) any claim against the Parent based on the employee's
termination from the Company after the Closing Date;
(d) any material misrepresentation contained in any certificate
or schedule furnished by the Buyer pursuant to this Agreement; and
(e) any failure of the Buyer to provide the Parent with good,
valid and marketable title to the SatCon Shares and the SatCon Warrant
free and clear of all liens, charges, encumbrances, adverse claims or
other rights.
8.3 Indemnification Claims.
(a) A party entitled, or seeking to assert rights, to indemnification under
this Section 8 (an "Indemnified Party") shall give written notification to the
party from whom indemnification is sought (an "Indemnifying Party") of the
commencement of any suit or proceeding relating to a third party claim for
which indemnification pursuant to this Section 8 may be sought. Such
notification shall be given within 20 days after receipt by the Indemnified
Party of notice of such suit or proceeding, and shall describe in reasonable
detail (to the extent known by the Indemnified Party) the facts constituting
the basis for such suit or proceeding and the amount of the claimed damages;
provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall relieve the Indemnifying Party of any
liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such suit or
proceeding with counsel reasonably satisfactory to the Indemnified Party;
provided that (i) the Indemnifying Party may only assume control of such
defense if it acknowledges in writing to the Indemnified Party that any
damages, fines, costs or other liabilities that may be assessed against the
Indemnified Party in connection with such suit or proceeding constitute Losses
for which the Indemnified Party shall be indemnified pursuant to this Section 8
and (ii) the Indemnifying Party may not assume control of the defense of a suit
or proceeding involving criminal liability or in which equitable relief is
sought against the Indemnified Party. If the Indemnifying Party does not so
<PAGE>
assume control of such defense, the Indemnified Party shall control such
defense. The party not controlling such defense (the "Non-controlling Party")
may participate therein at its own expense; provided that if the Indemnifying
Party assumes control of such defense and the Indemnified Party reasonably
concludes that the Indemnifying Party and the Indemnified Party have
conflicting interests or different defenses available with respect to such suit
or proceeding, the reasonable fees and expenses of counsel to the Indemnified
Party shall be considered "Losses" for purposes of this Agreement. The party
controlling such defense (the "Controlling Party") shall keep the
Non-controlling Party advised of the status of such suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such suit or proceeding (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim,
demand, invoice, billing or other document evidencing or asserting the same)
and shall otherwise cooperate with and assist the Controlling Party in the
defense of such suit or proceeding. The Indemnifying Party shall not agree to
any settlement of, or the entry of any judgment arising from, any such suit or
proceeding without the prior written consent of the Indemnified Party, which
shall not be unreasonably withheld or delayed. The Indemnified Party shall not
agree to any settlement of, or the entry of any judgment arising from, any such
suit or proceeding without the prior written consent of the Indemnifying Party,
which shall not be unreasonably withheld or delayed.
(b) In order to seek indemnification under this Section 8, an Indemnified
Party shall give written notification (a "Claim Notice") to the Indemnifying
Party which contains (i) a description and the amount (the "Claimed Amount") of
any Losses incurred or reasonably expected to be incurred by the Indemnified
Party, (ii) a statement that the Indemnified Party is entitled to
indemnification under this Section 8 for such Losses and a reasonable
explanation of the basis therefor, and (iii) a demand for payment (in the
manner provided in paragraph (c) below) in the amount of such Losses.
(c) Within 20 days after delivery of a Claim Notice, the Indemnifying Party
shall deliver to the Indemnified Party a written response (the "Response") in
which the Indemnifying Party shall: (i) agree that the Indemnified Party is
entitled to receive all of the Claimed Amount (in which case the Response shall
be accompanied by a payment by the Indemnifying Party to the Indemnified Party
of the Claimed Amount, by check or by wire transfer, (ii) agree that the
Indemnified Party is entitled to receive part, but not all, of the Claimed
Amount (the "Agreed Amount") (in which case the Response shall be accompanied
by a payment by the Indemnifying Party to the Indemnified Party of the Agreed
Amount, by check or by wire transfer, or (iii) dispute that the Indemnified
Party is entitled to receive any of the Claimed Amount. If the Indemnifying
Party in the Response disputes its liability for all or part of the Claimed
Amount, the Indemnifying Party and the Indemnified Party shall follow the
procedures set forth in Section 8.03(d) for the resolution of such dispute (a
"Dispute").
(d) During the 60-day period following the delivery of a Response that
reflects a Dispute, the Indemnifying Party and the Indemnified Party shall use
good faith efforts to resolve the Dispute. If the Dispute is not resolved
within such 60-day period, the Indemnifying Party and the Indemnified Party
shall discuss in good faith the submission of the Dispute to a mutually
acceptable alternative dispute resolution procedure (which may be non-binding
or binding upon the parties, as they agree in advance) (the "ADR Procedure").
In the event the Indemnifying Party and the Indemnified Party agree upon an ADR
Procedure, such parties shall, in consultation with the chosen dispute
<PAGE>
resolution service (the "ADR Service"), promptly agree upon a format and
timetable for the ADR Procedure, agree upon the rules applicable to the ADR
Procedure, and promptly undertake the ADR Procedure. The provisions of this
Section 8.03(d) shall not obligate the Indemnifying Party and the Indemnified
Party to pursue an ADR Procedure or prevent either such party from pursuing the
Dispute in a court of competent jurisdiction; provided that, if the
Indemnifying Party and the Indemnified Party agree to pursue an ADR Procedure,
neither the Indemnifying Party nor the Indemnified Party may commence
litigation or seek other remedies with respect to the Dispute prior to the
completion of such ADR Procedure. Any ADR Procedure undertaken by the
Indemnifying Party and the Indemnified Party shall be considered a compromise
negotiation for purposes of federal and state rules of evidence, and all
statements, offers, opinions and disclosures (whether written or oral) made in
the course of the ADR Procedure by or on behalf of the Indemnifying Party, the
Indemnified Party or the ADR Service shall be treated as confidential and,
where appropriate, as privileged work product. Such statements, offers,
opinions and disclosures shall not be discoverable or admissible for any
purposes in any litigation or other proceeding relating to the Dispute
(provided that this sentence shall not be construed to exclude from discovery
or admission any matter that is otherwise discoverable or admissible). The fees
and expenses of any ADR Service used by the Indemnifying Party and the
Indemnified Party shall be shared equally by the
Indemnifying Party and the Indemnified Party.
(e) Notwithstanding the other provisions of this Section 8.03, if a third
party asserts (other than by means of a lawsuit) that an Indemnified Party is
liable to such third party for a monetary or other obligation which may
constitute or result in Losses for which such Indemnified Party may be entitled
to indemnification pursuant to this Section 8, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party,
(ii) such Indemnified Party may subsequently make a claim for indemnification
in accordance with the provisions of this Section 8, and (iii) such Indemnified
Party shall be reimbursed, in accordance with the provisions of this Section 8,
for any such Losses for which it is entitled to indemnification pursuant to
this Section 8 (subject to the right of the Indemnifying Party to dispute the
Indemnified Party's entitlement to indemnification, or the amount for which it
is entitled to indemnification, under the terms of this Section 8).
8.4 Survival of Representations and Warranties. All representations and
warranties contained in this Agreement, shall (a) survive the Closing and any
investigation at any time made by or on behalf of an Indemnified Party and (b)
shall expire on the date 18 months following the Closing Date, except that (i)
the representations and warranties set forth in Sections 2, 3.1, 3.2, 3.4, 4.1,
4.2, 4.3 and 4.4 shall survive the Closing without limitation, (ii) the
representations and warranties set forth in Sections 3.14, 3.19, 4.16 and 4.19
shall survive until 30 days following expiration of all statutes of limitation
applicable to the matters referred to therein and (iii) the representation and
warranties in Section 3.20 and 4.20 shall survive for two years after the
Closing Date. If an Indemnified Party delivers to an Indemnifying Party, before
expiration of a representation or warranty, either a Claim Notice based upon a
breach of such representation or warranty, or a notice that, as a result a
legal proceeding instituted by or written claim made by a third party, the
Indemnified Party reasonably expects to incur Losses as a result of a breach of
such representation or warranty (an "Expected Claim Notice"), then such
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice. If the legal proceeding or
<PAGE>
written claim with respect to which an Expected Claim Notice has been given is
definitively withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Indemnifying Party.
8.5 Limitations.
(a) Notwithstanding anything to the contrary herein, (i) the aggregate
liability of the Parent, on the one hand, and the Buyer, on the other hand, for
Losses under this Section 8 shall not exceed $7,000,000, and (ii) the Parent
and the Buyer shall be liable under this Section 8 for only that portion of the
aggregate Losses for which they or it would otherwise be liable which exceeds
$500,000; provided that the limitation set forth in clause (ii) above shall not
apply to a claim pursuant to Section 8.1 or 8.2 relating to a breach of the
representations and warranties set forth in Section 2, 3.1, 3.2, 3.4, 3.14,
3.19, 3.20, 4.1, 4.2, 4.3, 4.4 , 4.16, 4.19 and 4.20 to a breach of the
covenants set forth in Section 10. For purposes solely of this Section 8, all
representations and warranties of the Parent and the Company in Sections 2 and
3 (other than Section 3.31 and all representations and warranties of the Buyer
in Section 4 hereof (other than Section 4.9) shall be construed as if the term
"material"(and variations thereof) were omitted from such representations and
warranties. On and after the Closing, the Parent shall have no recourse to, and
no right of contribution from the Company or any Subsidiary, with respect to
any matter whatsoever, including a breach of any representation, warranty,
covenant or agreement set forth in this Agreement.
(b) Except with respect to claims based on fraud, after the Closing, the
rights of the Indemnified Parties under this Section 8 shall be the exclusive
remedy of the Indemnified Parties with respect to claims resulting from or
relating to any misrepresentation, breach of warranty or failure to perform any
covenant or agreement contained in this Agreement.
9. Tax Matters.
9.1 Preparation and Filing of Tax Returns.
(a) The Parent shall cause to be prepared and timely filed all Tax Returns
of the Company and the Subsidiaries required to be filed prior to the Closing
Date when such filings are due (taking into account extensions).
(b) The Buyer shall prepare and timely file or shall cause to be prepared
and timely filed all other Tax Returns with respect to the Company and the
Subsidiaries or in respect of their businesses, assets or operations.
9.2 Tax Indemnification by the Parent.
(a) In addition to any indemnification provided under Section 8, the Parent
shall indemnify the Buyer in respect of, and hold the Buyer harmless, on an
after-Tax basis, against (x) Losses resulting from, relating to, or
constituting a breach of any representation contained in Section 3.14 hereof,
(y) the failure to perform any covenant or agreement set forth in this Section
9, and (z), without duplication, the following Taxes with respect to the
Company and the Subsidiaries:
(1) Any and all Taxes due and payable by the Company or any Subsidiaries for
any taxable period that ends (or is deemed pursuant to Section 9.3(b) to end)
on or before the Closing Date;
<PAGE>
(2) Any liability of such entities for Taxes of other entities as transferee or
successor or pursuant to any contractual obligation for any period that ends
(or is deemed pursuant to Section 9.3(b) to end) on or before the Closing Date;
and
(3) Any sales, use, transfer, stamp, conveyance, value added, recording,
registration, documentary, filing or other similar Taxes and fees, whether
levied on the Buyer, the Parent, the Company, a Subsidiary or any of their
respective Affiliates, on account of this Agreement or the transactions
contemplated hereby.
(b) The amounts specified in paragraphs (i), (ii), and (iii) shall be
reduced (but not below zero) by the amount of any accruals for Tax liabilities
on the Current Balance Sheet (exclusive of any accruals for "deferred taxes" or
similar items that reflect timing differences between Tax and financial
accounting principles) and the amounts of any estimated Tax payments made on or
before the Closing Date.
(c) Amounts payable pursuant to this Section 9.2 shall be computed after
taking into account all Tax consequences to the Buyer (or its Affiliates) of
(i) the receipt of (or the right to receive) the indemnification payment and
(ii) the incurrence of the liability that gave rise to the right to receive the
indemnification payment. Thus, it is the intention of the Parties that the
Buyer be held harmless with respect to the liability that gave rise to the
right to the indemnification payment on an after-Tax basis.
(d) All claims for indemnification pursuant to this Section 9 shall be made
in accordance with Section 8 hereof.
9.3 Allocation of Certain Taxes.
(a) The Buyer and the Parent agree that if the Company or any Subsidiary is
permitted but not required under applicable foreign, state or local Tax laws to
treat the Closing Date as the last day of a taxable period, the Buyer and the
Parent shall treat such day as the last day of a taxable period.
(b) Any Taxes for a taxable period beginning before the Closing Date and
ending after the Closing Date with respect to the Company and/or the
Subsidiaries shall be apportioned for purposes of Section 9.2 between the
portion of the period ending on the Closing Date and the portion of the period
commencing on the day immediately following the Closing Date based on the
actual operations of the Company and/or the Subsidiaries, as the case may be,
during such portions of the periods, and each such portion of such period shall
be deemed to be a taxable period (whether or not it is in fact a taxable
period).
9.4 Cooperation on Tax Matters.
(a) The Buyer and the Parent and their respective Affiliates shall
cooperate in the preparation of all Tax Returns for any Tax periods for which
one party could reasonably require the assistance of the other party in
obtaining any necessary information. Such cooperation shall include, but not be
limited to, furnishing prior years' Tax Returns or return preparation packages
illustrating previous reporting practices or containing historical information
relevant to the preparation of such Tax Returns, and furnishing such other
information within such party's possession requested by the party filing such
Tax Returns as is relevant to their preparation. Such cooperation and
information also shall include without limitation provision of powers of
attorney for the purpose of signing Tax Returns and defending audits, promptly
<PAGE>
forwarding copies of appropriate notices and forms or other communications
received from or sent to any taxing authority which relate to the Company or
the Subsidiaries, and providing copies of all relevant Tax Returns, together
with accompanying schedules and related workpapers, documents relating to
rulings or other determinations by any taxing authority and records concerning
the ownership and tax basis of property, which the requested party may possess.
(b) If the Buyer or any of the Company and the Subsidiaries (as the case
may be) on the one hand, or the Parent on the other, fails to provide any
information requested by the other party within a reasonable period, or
otherwise fails to do any act required of it under this Section 9.5, then the
party failing to provide the information or do such act shall be obligated,
notwithstanding any other provision of this Agreement, to indemnify the party
requesting the information or act and shall so indemnify the requesting party
and hold such party harmless from and against any and all costs, claims or
damages, including, without limitation, all Taxes or deficiencies thereof,
payable as a result of such failure. Notwithstanding the foregoing, the party
that failed to deliver the information or do the act requested shall in no
event be obligated to make any payments pursuant to this Section 7.5(b) if such
party used all reasonable commercial efforts to provide the requested
information or perform the requested act.
9.5 Termination of Tax-Sharing Agreements. All Tax-sharing agreements or
similar arrangements with respect to or involving the Company and the
Subsidiaries shall be terminated prior to the Closing Date and, after the
Closing Date, the Company and the Subsidiaries shall not be bound thereby or
have any liability thereunder for amounts due in respect of periods ending on
or before the Closing Date.
9.6 Certain Tax Elections. The Parent shall not elect, cause to be elected, or
participate in any election pursuant to Treasury Regulation Section 1.1502-
76(b)(2) (or any comparable provisions of foreign or state law) to allocate
items of income and expense of the Company and the Subsidiaries between the
taxable year of the Parent ending on the Closing Date and its taxable year
commencing on the day after the Closing Date on a proportionate method based on
the number of days contained in each such taxable year. The Buyer shall not
elect, cause to be elected, or participate in any election pursuant to Section
338(h)(10) or 338(g) with respect to the transactions contemplated herein. The
Buyer shall cooperate with the Parent in reallocation of the Company and the
Subsidiary Net Operating Losses.
10. Post-Closing Agreements.
The Parent and the Buyer agree that from and after the Closing Date:
10.1 Proprietary Information.
(a) The Parent and each of its affiliates (as such term is defined in the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder) (individually, an "Affiliate" and collectively "Affiliates") shall
hold in confidence and shall use their best efforts to have all officers,
directors and personnel who continue after the Closing to be employed by the
Parent or any Affiliate thereof to hold in confidence all knowledge and
information of a secret or confidential nature with respect to the business of
the Company and the Subsidiaries and not to disclose, publish or make use of
the same without the consent of the Buyer, except to the extent that such
information shall have become public knowledge other than by breach of this
Agreement by the Parent or pursuant to subpoena or court order.
<PAGE>
(b) If (i) the employment of an officer, director or other employee of the
Parent or any Affiliate thereof, to whom secret or confidential knowledge or
information concerning the business of the Company or the Subsidiaries has been
disclosed, is terminated and (ii) such individual is subject to an obligation
to maintain such knowledge or information in confidence after such termination,
the Parent shall, upon request by the Buyer, take all reasonable steps at their
expense to enforce such confidentiality obligation in the event of an actual or
threatened breach thereof.
(c) Parent agrees that the remedy at law for any breach of this Subsection
10.1 would be inadequate and that the Buyer shall be entitled to injunctive
relief in addition to any other remedy it may have upon breach of any provision
of this Subsection 10.1.
10.2 No Solicitation or Hiring of Former Employees. Except as provided by law,
for a period of three years after the Closing Date and except that the Parent
may employ James Clemens on a part time basis until September 30, 2003,
provided that such employment date not interfere with Mr. Clemens obligation to
the Buyer, neither Parent nor any Affiliate thereof (including the Parent)
shall (a) solicit any person who was an employee of the Parent or any of the
Subsidiaries on the date hereof or the Closing Date to terminate his employment
with the Buyer (or the Company or any of the Subsidiaries, as the case may be)
or to become an employee of the Parent or Affiliate, or (b) hire any person who
was such an employee on the date hereof or on the Closing Date.
10.3 Non-Competition Agreement.
(a) For a period of five years after the Closing Date, neither Parent nor
any Subsidiary thereof shall: (i) develop, manufacture, market or sell any
product which competes with any existing or proposed product manufactured by
either the Company or any of the Subsidiaries on or prior to the Closing Date,
or (ii) engage in any business competitive with the business of the Company or
any of the Subsidiaries as conducted on the date hereof or on the Closing Date,
in the United States or any other country in which the Company or any of the
Subsidiaries conducted its business during the two years prior to the Closing
Date.
(b) The parties hereto agree that the duration and geographic scope of the
non-competition provision set forth in this Subsection 10.3 are reasonable. In
the event that any court of competent jurisdiction determines that the duration
or the geographic scope, or both, are unreasonable and that such provision is
to that extent unenforceable, the parties hereto agree that the provision shall
remain in full force and effect for the greatest time period and in the
greatest area that would not render it unenforceable. The parties intend that
this non-competition provision shall be deemed to be a series of separate
covenants, one for each and every county of each and every state of the United
States of America and each and every political subdivision of each and every
country outside the United States of America where this provision is intended
to be effective. The Parent agrees that damages are an inadequate remedy for
any breach of this provision and that the Buyer shall, whether or not it is
pursuing any potential remedies at law, be entitled to equitable relief in the
form of preliminary and permanent injunctions without bond or other security
upon any actual or threatened breach of this non-competition provision.
10.4 Board Representation.
(a) The Buyer agrees to nominate and recommend to its shareholders the
election to the Buyer's Board of Directors two person designated by the Parent
and acceptable to the Buyer's Board of Directors acting reasonably (it being
<PAGE>
agreed that in acting reasonably the Buyer's Board of Directors may consider
the desirability of having two members of the Buyer's Board of Directors
affiliated with the Parent). The Buyer's obligations under this Section 10.4(a)
shall terminate if the Parent does not own five percent (5%) or more of the
Buyer's outstanding Common Stock on or before July 31, 2000 or ceases to own
five percent (5%) or more of the Buyer's outstanding Common Stock thereafter.
The initial nominee to the Buyer's Board of Directors will be Alan Goldberg.
(b) The Parent agrees to nominate and recommend to its shareholders the
election to the Parent's Board of Directors one person designated by the Buyer.
The initial nominee will be David Eisenhaure. The Parent's obligations under
this Section 10.4 shall terminate if the Purchaser ceases to own five percent
(5%) or more of the Buyer's outstanding Common Stock or the Buyer's obligations
under Section 3.10(a) ceases, whichever occurs first.
(c) Both parties will endeavor to have the representatives set forth above
elected or appointed to their boards as soon as possible, but in no event later
than December 1, 1999. The Parent shall have no obligation to appoint or elect
the Buyer's nominee to its Board of Directors until the Buyer has appointed or
elected the Parent's nominees to the Buyer's Board of Directors.
10.5 Benefit Transition.
Parent and Buyer shall cooperate to take whatever steps are necessary to
effect, as promptly as practicable after the Closing Date, to the extent
elected by participants, the distribution and direct rollover to Buyer's 401(k)
Plan of the accrued benefit as of the Closing Date of the Company's employees
under the 401(k) Plan. With respect to such rollover: (i) Buyer shall provide
to Parent written assurances that Buyer's 401(k) is an "eligible retirement
plan" and (ii) Parent shall provide to Buyer written assurances that Parent's
401(k) Plan are or are part of an "eligible retirement plan." For purposes of
this Section 10.5, the term "eligible retirement plan." For purpose of this
Section 10.5, the term "eligible retirement plan" shall have the meaning set
forth in Sections 401(a)(31)(D) and 402(c)(8)(B) of the Code.
10.6 Co-operation in Financial and Other Reparation.
Each of Parent and Buyer agrees to fully cooperate with each other in (i) the
preparation and audit by the Buyer and its independent public accountants of
financial statements of the Company for such periods as are necessary for the
Buyer to comply with its reporting obligations under the Exchange Act and the
rules and regulations thereunder, (ii) the preparation and audit Parent and its
independent public accountants of the financial statements of the Parent and
its consolidated subsidiaries for the fiscal year ended September 30, 1999,
(iii) preparation of Tax Returns and in connection with other audits, including
but not limited to sales tax, workers compensation and (iv) the preparation by
the Buyer of a balance sheet as of the Closing Date and a statement of income
for the period then ended. Each of Parent and Buyer agrees to take such other
steps as the other party shall reasonably request (at the expense of the
requesting party) in order to permit compliance by a party hereto with its
reporting obligations under the Exchange Act.
11. Notices.
Any notices or other communications required or permitted hereunder shall be
sufficiently given if delivered personally or sent by telex, federal express,
registered or certified mail, postage prepaid, addressed as follows or to such
other address of which the parties may have given notice:
<PAGE>
To the Buyer:
SatCon Technology Corporation
161 First Street
Cambridge, MA 02142
Attention: President and
Chief Financial Officer
Facsimile: (617) 576-7455
With a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Jeffrey N. Carp, Esq.
David C. Phelan, Esq.
Facsimile: (617) 526-5000
To the Parent or the Company:
Mechanical Technology Incorporated
968 Albany-Shaker Road
Latham, New York 12110
Attention: Cynthia A. Scheuer, Chief
Financial Officer
Facsimile: (518) 785-2211
With a copy to:
Catherine S. Hill PLLC
4 Global View
Troy, New York 12180
Attention: Catherine S. Hill
Facsimile: (518) 285-7564
Unless otherwise specified herein, such notices or other communications shall
be deemed received (a) on the date delivered, if delivered personally, (b)
three business days after being sent, if sent by registered or certified mail
or (c) the day after the day such notice is sent by fax or a reputable
overnight courier.
12. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Buyer, on
the one hand, and the Parent, the Company and the Subsidiaries, on the other
hand, may not assign their respective obligations hereunder without the prior
written consent of the other party; provided, however, that the Buyer may
assign this Agreement, and its rights and obligations hereunder, to a
subsidiary or Affiliate of the Buyer. Any assignment in contravention of this
provision shall be void. No assignment shall release the Buyer, the Parent, the
Company or the Subsidiaries from any obligation or liability under this
Agreement.
13. Entire Agreement; Amendments; Attachments.
(a) This Agreement, all Schedules and Exhibits hereto, and all agreements
and instruments to be delivered by the parties pursuant hereto represent the
entire understanding and agreement between the parties hereto with respect to
the subject matter hereof and supersede all prior oral and written and all
contemporaneous oral negotiations, commitments and understandings between such
parties.
<PAGE>
(b) If the provisions of any Schedule or Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
14. Severability.
Any provision of this Agreement which is invalid, illegal or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity, illegality or unenforceability, without affecting in any
way the remaining provisions hereof in such jurisdiction or rendering that or
any other provision of this Agreement invalid, illegal or unenforceable in any
other jurisdiction.
15. Investigation of the Parties.
All representations and warranties contained herein which are made to the best
knowledge of a party shall require that such party make reasonable
investigation and inquiry with respect thereto to ascertain the correctness and
validity thereof.
16. Expenses.
Except as otherwise expressly provided herein, the Buyer, on the one hand, and
the Purchaser, on the other hand, will pay all of their own fees and expenses
(including, without limitation, legal and accounting fees and expenses)
incurred by them in connection with the transactions contemplated hereby. The
fees and expenses of the Company and the Subsidiaries in connection with the
transactions contemplated hereby shall be borne solely by the Parent and not by
the Company or any Subsidiary. The Parent shall be responsible for the payment
of all sales or transfer taxes arising out of the conveyance of the Shares
owned by such Stockholder.
17. Submission to Jurisdiction.
The Parent, Company and Buyer each irrevocably consent and commit themselves to
the jurisdiction of all of the federal and state courts situated in the
Commonwealth of Massachusetts and the United States District Court for the
District of Boston for any and all matters and/or disputes arising out of this
Agreement or the transactions contemplated hereby.
18. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts.
19. Section Headings.
The section headings are for the convenience of the parties and in no way
alter, modify, amend, limit, or restrict the contractual obligations of the
parties.
20. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which shall be one and the same
document.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
SATCON TECHNOLOGY CORPORATION
By: /s/ David B. Eisenhaure
Name: David B. Eisenhaure
Title: President
MECHANICAL TECHNOLOGY
INCORPORATED
By:/s/ Cynthia A. Scheuer
Name: Cynthia A. Scheuer
Title: Vice President and CFO
LING ELECTRONICS, INC.
By: /s/ Cynthia A. Scheuer
Name: Cynthia A. Scheuer
Title: Secretary/Treasurer
LING ELECTRONICS, LTD.
By: /s/ Cynthia A. Scheuer
Name: Cynthia A. Scheuer
Title: Member/Board of Directors
Exhibit 10.33
SECURITIES PURCHASE AGREEMENT
between
SATCON TECHNOLOGY CORPORATION
and
MECHANICAL TECHNOLOGY INCORPORATED
Dated as of October 21, 1999
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of October
21, 1999, between SatCon Technology Corporation, a Delaware corporation (the
"Company"), and Mechanical Technology Incorporated, a New York corporation (the
"Purchaser").
WHEREAS, the Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D as promulgated by the United States Securities
and Exchange Commission (the "Commission") under Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act");
WHEREAS, subject to the terms and conditions set forth in this Agreement, the
Company desires to issue and sell 370,800 shares ("Primary Closing Shares") of
the Company's Common Stock par value $0.01 per share ("Common Stock") and a
stock purchase warrant (the "A Warrant") to purchase up to 36,000 shares of the
Company's Common Stock in the form of Exhibit A annexed hereto; and
WHEREAS, subject to the terms and conditions set forth in this Agreement, the
Purchaser desires to purchase the Primary Closing Shares and the A Warrant in
exchange for $2,570,000 in cash and a stock purchase warrant (the "MA Warrant")
to purchase up to 36,000 shares of the Purchaser's $1.00 par value Common Stock
in the form of Exhibit B annexed hereto; and
WHEREAS, subject to the terms and conditions set forth in this Agreement, the
Company desires to issue and sell 659,200 shares ("Secondary Closing Shares",
together with the Primary Closing Shares, collectively the "Shares") of Common
Stock and a stock purchase warrant (the "B Warrant", together with the A
Warrant, collectively the "Warrants") to purchase up to 64,000 shares of the
Company's Common Stock, in the form of Exhibit A annexed hereto, if the Company
<PAGE>
achieves certain Milestones (as defined below) or the Purchaser elects to waive
such Milestones, prior to January 31, 2000; and
WHEREAS, subject to the terms and conditions set forth in this Agreement, the
Purchaser desires to purchase Secondary Closing Shares and the B Warrant in
exchange for $4,500,000 in cash and a stock purchase warrant (the "MB Warrant")
to purchase up to 64,000 shares of the Purchaser's $1.00 par value Common Stock
in the form of Exhibit B annexed hereto; and
WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form of Exhibit C attached hereto (the "STC Registration
Rights Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws; and
WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form of Exhibit D attached hereto (the "MTI Registration
Rights Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder and applicable state securities laws.
NOW THEREFORE, in consideration of the promises and mutual covenants and
agreements hereinafter, the Company and the Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES AND WARRANTS
1.1 Purchase and Sale. Subject to the terms and conditions set forth herein,
the Company shall issue and sell to the Purchaser, and the Purchaser shall
purchase from the Company, on the Primary Closing Date, the Primary Closing
Shares and the A Warrant. The aggregate purchase price of the Primary Closing
Shares and the A Warrant shall be $2,570,000 and the MA Warrant. Subject to the
terms and conditions set forth herein, the Company shall issue and sell to the
Purchaser, and the Purchaser shall purchase from the Company, on the Secondary
Closing Date, the Secondary Closing Shares and the B Warrant. The aggregate
purchase price of the Secondary Closing Shares and the B Warrant shall be
$4,500,000 and the MB Warrant.
1.2 Closings. Primary Closing. The closing of the purchase and sale of the
Primary Closing Shares and the A Warrant (the "Primary Closing") shall take
place at the offices of Mechanical Technology Incorporated in Latham, New York,
or by transmission by facsimile and overnight courier, immediately following
the execution hereof or such later date or different location as the parties
shall agree, but not prior to the date that the conditions set forth in Section
4.1 have been satisfied or waived by the appropriate party (the "Primary
Closing Date"). At the Primary Closing:
(1) The Purchaser shall deliver, as directed by the Company, two million,
five hundred seventy thousand dollars ($2,570,000) in United States dollars in
immediately available funds to an account or accounts designated in writing by
the Company;
(2) The Purchaser shall deliver to the Company the MA Warrant, in the form
of Exhibit B hereto;
<PAGE>
(3) The Company shall deliver to the Purchaser a certificate evidencing the
Primary Closing Shares;
(4) The Company shall deliver to the Purchaser the A Warrant, in the form
of Exhibit A hereto; and
(5) The parties shall execute and deliver each of the documents referred to in
Section 4.1 hereof. Secondary Closing. The closing of the purchase and sale of
the Secondary Closing Shares and the B Warrant (the "Secondary Closing") shall
take place at the offices of Mechanical Technology Incorporated in Latham, New
York or by transmission by facsimile and overnight courier on a date on or
prior to January 31, 2000 selected by the Purchaser (the "Secondary Closing
Date"). At the Secondary Closing,
(1) The Purchaser shall deliver, as directed by the Company, four million
five hundred thousand dollars ($4,500,000) in United States dollars in
immediately available funds to an account or accounts designated in writing by
the Company;
(2) The Purchaser shall deliver to the Company the MB Warrant, in the form
of Exhibit B hereto;
(3) The Company shall deliver to the Purchaser a certificate evidencing the
Secondary Closing Shares;
(4) The Company shall deliver to the Purchaser the B Warrant, in the form
of Exhibit A hereto; and
(5) The parties shall execute and deliver each of the documents referred to
in Section 4.2 hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
a. Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
Except for Beacon Power Corporation ("Beacon") or as set forth on Schedule
2.1(a), the Company has no subsidiaries (collectively, the "Subsidiaries"); it
being agreed that for purposes of this Agreement Beacon is not a subsidiary of
the Company. Each of the Subsidiaries (which, except as provided in the prior
sentence, for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns the majority of such entity's capital stock or
holds an equivalent equity or similar interest) is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
full corporate power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified as a foreign corporation to do business and is
in good standing as a foreign corporation in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate, (x)
<PAGE>
adversely affect the legality, validity or enforceability of any of this
Agreement or the Transaction Documents (as defined in Section 2.1(b)) or any of
the material transactions contemplated hereby or thereby, (y) have or result in
a material adverse effect on the results of operations, assets, or financial
condition of the Company and its Subsidiaries, taken as a whole or (z) impair
the Company's ability to perform in all material respects on a timely basis its
material obligations under any Transaction Document (any of (x), (y) or (z),
being a "Material Adverse Effect"). The Company has on file with the Securities
Exchange Commission true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
of Incorporation"), and the Company's Bylaws, as in effect on the date hereof
(the "Bylaws").
b. Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement, the A Warrant, the B Warrant and the
Registration Rights Agreement (collectively, the "Transaction Documents"), and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of this Agreement and the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action. This
Agreement has been duly executed by the Company and the A Warrant and
Registration Rights Agreement at the Primary Closing will be duly executed by
the Company. Subject to the terms and conditions contained herein, the B
Warrant at the Secondary Closing will be duly executed by the Company. When
delivered in accordance with the terms hereof, the Transaction Documents will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application and except that rights to indemnification and contribution may be
limited by Federal or state securities laws or public policy relating thereto.
Neither the Company nor any Subsidiary is in any material violation of any of
the provisions of its respective certificate of incorporation, bylaws or other
charter documents such that any right of a holder of the Common Stock would be
affected.
c. Capitalization. As of the date hereof, the authorized capital stock of
the Company is as set forth in Schedule 2.1(c). All of such outstanding shares
of capital stock have been, or upon issuance will be, validly authorized and
issued, fully paid and nonassessable (except as disclosed in the SEC Documents
(as defined in Section 2.1(p)) and were issued in accordance with the
registration or qualification provisions of the Securities Act, or pursuant to
valid exemptions therefrom. Except as disclosed in Schedule 2.1(c), (i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company, nor is any holder of the Common Stock entitled to preemptive or
similar rights arising out of any agreement or understanding with the Company
by virtue of any Transaction Document, (ii) there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, or giving any Person (as defined below) any right to
subscribe for or acquire, any shares of capital stock of the Company or any of
its Subsidiaries, or contracts, commitments, understandings or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
<PAGE>
shares of capital stock of the Company or any of its Subsidiaries, (iii) there
are no outstanding debt securities of the Company or any of its Subsidiaries,
(iv) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of their securities
under the Securities Act (except the Registration Rights Agreement), (v) there
are no outstanding securities of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the shares of Common Stock, the A Warrant or the B Warrant as described in this
Agreement or upon the exercise of the A Warrant or the B Warrant, (vii) the
Company does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement and (viii) except for the put
rights granted to the holders of the Class D Preferred Stock of Beacon or
pursuant to this Agreement or the Warrants issued to investment funds managed
by Brown Simpson Capital Management, LLC, no Person (as defined below) or group
of related Persons beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) or has the right to acquire by agreement with or by obligation
binding upon the Company beneficial ownership of in excess of 5% of the Common
Stock. "Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
d. Authorization and Validity; Issuance of Shares. The Common Stock issued
pursuant to this Agreement and the Common Stock issuable upon exercise of the A
Warrant and, when issued, the B Warrant will at all times hereafter continue to
be duly authorized and reserved for issuance and the shares of Common Stock
issued upon the exercise of the A Warrant and, when issued, the B Warrant (the
"Warrant Shares") will be validly issued, fully paid and non-assessable, free
and clear of all liens, encumbrances and Company rights of first refusal, other
than liens and encumbrances created by the Purchaser (collectively, "Liens")
and will not be subject to any preemptive or similar rights. Assuming the
accuracy of the Purchaser's representations in Section 2.2, the issuance by the
Company of the Common Stock, the A Warrant, the B Warrant and the Warrant
Shares is exempt from registration under the Securities Act.
e. No Conflicts. The execution, delivery and performance of this Agreement
and each of the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby (including the
issuance of the Warrant Shares) do not and will not (i) conflict with or
violate any provision of the Certificate of Incorporation, Bylaws or other
organizational documents of the Company or any of the Subsidiaries, (ii)
subject to obtaining the consents referred to in Section 2.1(f), conflict with,
or constitute a breach or a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument (evidencing a Company or
Subsidiary debt or otherwise) to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or any Subsidiary is subject (including Federal
and state securities laws and regulations and the rules and regulations of the
principal market or exchange on which the Common Stock is traded or listed)
applicable to the Company or any of its Subsidiaries, or by which any material
<PAGE>
property or asset of the Company or any Subsidiary is bound or affected except,
in each such case, for any violation, conflict, default or breach which is not
reasonably expected to have a Material Adverse Effect.
f. Consents and Approvals. Except as specifically set forth on Schedule
2.1(f), neither the Company nor any Subsidiary is required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal or state governmental
authority, regulatory or self regulatory agency, or other Person in connection
with the execution, delivery and performance by the Company of this Agreement
or the Transaction Documents, other than (i) the filing of a registration
statement with the Commission, which shall be filed in accordance with and in
the time periods set forth in the Registration Rights Agreement, (ii) the
application(s) or any letter(s) acceptable to the National Market System of
Nasdaq Stock Market ("Nasdaq") for the listing of the Shares and the Warrant
Shares with Nasdaq (and with any other national securities exchange or market
on which the Common Stock is then listed), (iii) any filings, notices or
registrations under applicable state securities laws, and (iv) the filing of a
form D with the Commission (together with the consents, waivers,
authorizations, orders, notices and filings referred to on Schedule 2.1(f), the
"Required Approvals").
g. Litigation; Proceedings. Except as specifically set forth on Schedule
2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties or assets before or by any
court, governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) which (i) adversely affects or challenges the
legality, validity or enforceability of any of this Agreement or the
Transaction Documents or (ii) could reasonably be expected to, individually or
in the aggregate, have a Material Adverse Effect.
h. Material Contracts. Except for this Agreement, the other agreements to
be entered into pursuant to the terms of this Agreement, contracts attached as
exhibits to the Company's SEC Documents and the contracts of the Company and
its Subsidiaries set forth on Exhibit 2.1(h) attached hereto (collectively, the
"Contracts"), neither the Company nor its Subsidiaries are a party to or
otherwise bound by any written or oral:
(1) written contract for the employment of any officer, employee or other
person on a full-time or consulting basis, which is not terminable on thirty
(30) days' notice without cost or liability to the Company or any Subsidiary,
except normal severance arrangements and accrued vacation pay;
(2) bonus, pension, profit-sharing, retirement, hospitalization, insurance,
stock purchase, stock option or other plan, contract or understanding pursuant
to which benefits are provided to any employee of the Company or any Subsidiary
(other than group insurance plans applicable to employees generally);
(3) agreement or indenture relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of the Company or Subsidiary or any agreement or instrument
evidencing any guaranty by the Company or any Subsidiary of payment or
performance by any other Person;
(4) voting trust or agreement, stockholders' agreement, pledge agreement,
buy-sell agreement or first refusal or preemptive rights agreement relating to
any securities of the Company;
<PAGE>
(5) agreement or obligation (contingent or otherwise) to issue, sell or
otherwise distribute or to repurchase or otherwise acquire or retire any shares
of its capital stock or any of its other equity securities;
(6) agreement under which the Company or any Subsidiary has granted any
person any registration rights, other than this Agreement;
(7) agreement providing for disposition of the business, assets or
shares of the Company or its Subsidiaries, agreement of merger or consolidation
to which the Company or any Subsidiary is a party or letter of intent with
respect to the foregoing;
(8) agreement or letter of intent (other than the acquisition of Ling
Electronics, Inc.) with respect to the acquisition of the business, assets or
shares of any other Person.
i. ERISA. Set forth in Exhibit 2.1(i) is a list and brief description of
each "employee pension benefit plan," as such term is defined in Section 3(2)
of ERISA, now or formerly maintained by the Company or any of their respective
Subsidiaries, to which the Company or any Subsidiary is now or will be
obligated to contribute. Except as described in Exhibit 2.1(i), no event has
occurred, or to the knowledge of the Company or its Subsidiaries, is threatened
or about to occur, which would constitute a reportable event within the meaning
of Section 4043(b) of ERISA, and no notice of termination has been filed by the
plan administrator pursuant to Section 4041 of ERISA or issued by the Pension
Benefit Guaranty Corporation (the "PBGC") pursuant to Section 4042 of ERISA
with respect to any pension benefit plan described in Exhibit 2.1(i) subject to
ERISA. To the best knowledge of the Company, no prohibited transaction (as
defined in Section 4975 of the Code) has occurred with respect to any employee
benefit plan maintained by the Company or any of its Subsidiaries. Neither the
Company nor any of their respective Subsidiaries nor any of their respective
ERISA Affiliates is or has been a participant in any multiemployer plan as
defined in ERISA. "ERISA Affiliate" means with respect to any Person, any
entity that would be considered to be under common control with such person for
purposes of Title IV of ERISA.
j. Environmental Matters.
(1) Hazardous Materials have not at any time been generated, used, treated
or stored on any property, plants or other facilities now owned, leased, or
operated by the Company or any Subsidiary (or at any property, plant or other
facilities ever owned, leased or operated by any predecessor entity at such
locations), in violation of any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit or which would require remedial action under
any applicable law, ordinance, rule, regulation, order, judgment, decree or
permit, and none of the Company, its Subsidiaries or its predecessors have
received any notice of any such violation with respect to Hazardous Materials
except for such violations that the Company reasonably does not expect will
have a Material Adverse Effect;
(2) There has been no spill, discharge, leak, emission, injection, escape,
dumping or release of any kind onto any property now owned or leased by the
Company, its Subsidiaries or any predecessor (or onto any other property ever
owned or leased by it, or by any predecessor entity at any such location), or
into the environment surrounding any such property, of Hazardous Materials,
other than those releases permissible under such regulations, laws or statutes
or allowable under applicable permits and except for such violations that the
Company reasonably does not expect will have a material adverse effect on the
Company;
<PAGE>
(3) The Company, its Subsidiaries or its predecessor, their operations and
any property owned by the Company, its Subsidiaries or its predecessor are in
material compliance with all material Environmental Laws and the material
requirements of any permits issued under such laws;
(4) There are no past, pending or, to the best of the Company's knowledge,
threatened Environmental Claims against the Company, its Subsidiaries or its
predecessor or any property now or previously owned or leased by the Company,
its Subsidiaries or its predecessor;
(5) To the best of the Company's knowledge, there is no condition or occurrence
on any property now or previously owned or leased by the Company, its
Subsidiaries or its predecessor or any property adjoining or in the vicinity of
any such property that could reasonably be anticipated (i) to form the basis of
an Environmental Claim against the Company, its Subsidiaries or its predecessor
or (ii) to cause any property of the Company, its Subsidiaries or its
predecessor to be subject to any restrictions on the ownership, occupancy, use
or transferability of such property under any Environmental Law.
(6) For purposes of this Agreement, "Hazardous Materials" shall refer to
(a) any petroleum or petroleum products, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment that contain dielectric fluid containing levels
of polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or
substances defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or substance
exposure to which is prohibited, limited or regulated by any governmental
authority; "Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law now or
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health, safety
or Hazardous Materials, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA") 42 U.S.C. 9601 et seq.; the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. 1801 et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. 6901 et seq.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. 1251 et seq.; the Toxic Substances Control
Act, 15 U.S.C. 2601 et seq.; the Clean Air Act, 42 U.S.C. 7401 et seq.; the
Safe Drinking Water Act, 42 U.S.C. 3808 et seq.; and their counterparts under
any state or local laws; "Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of non-compliance or violation, investigations or
proceedings relating in any way to any Environmental Law or any permit issued
under any such Law (hereafter "Claims"), including without limitation (a) any
and all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages, fines or
penalties pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to health, safety or the
environment.
k. Year 2000 Matters. The Company's statements regarding "Year 2000
Risk" set forth in the SEC Documents are true and correct in all material
respects.
<PAGE>
"Year 2000 Risk" means the risk that computer applications used by the Company
and/or its suppliers, vendors and customers may be unable to recognize and
perform without error date- sensitive functions involving certain dates prior
to and any date after December 31, 1999, including, without limitation,
September 9, 1999.
l. No Default or Violation. Except as specifically set forth on Schedule
2.1(l), neither the Company nor any Subsidiary (i) is in default under or in
violation of any indenture, loan or other credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties or assets is bound and which is required to be included as an
exhibit to any SEC Document (as defined in Section 2.1(o) hereof) or will be
required to be included as an exhibit to the Company's next filing under either
the Securities Act or Exchange Act, (ii) is in violation of any order of any
court, arbitrator or governmental body applicable to it, (iii) is in violation
of any statute, rule or regulation of any governmental authority to which it is
subject, (iv) is in default under or in violation of its Certificate of
Incorporation, Bylaws or other organizational documents, respectively, or (v)
is in default under or in violation of any of the listing requirements of
Nasdaq as in effect on the date hereof and is not aware of any facts which
would reasonably lead to delisting or suspension of the Common Stock by Nasdaq
in the foreseeable future except, in each such case, for any violation or
default which is not reasonably expected to have a Materially Adverse Effect.
The business of the Company and its Subsidiaries is not being conducted, and
has not been conducted, in violation of any law, ordinance, rule or regulation
of any governmental entity, except where such violations have not resulted or
would not reasonably result, individually or in the aggregate, in a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries is in breach of
any agreement where such breach, individually or in the aggregate, would have a
Material Adverse Effect
m. Disclosure; Absence of Certain Changes. None of this Agreement, the
Schedules to this Agreement, the Transaction Documents, the SEC Documents (as
amended to date) contained as of their respective dates, any untrue statement
of a material fact or omitted to state any material fact necessary in order to
make the statements made herein and therein, in light of the circumstances
under which they were made, not misleading. Except as disclosed on Schedule
2.1(m) or in SEC Documents filed on EDGAR through the date hereof, since the
filing of the Company's quarterly report on Form 10-Q on August 16, 1999, there
has been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, liabilities or results
of operations of the Company or the Subsidiaries. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
n. Private Offering. The Company and all Persons acting on its behalf have
not made within the six months preceding the Closing Date, directly or
indirectly, and will not make, offers or sales of any securities or solicited
any offers to buy any security at any time within six months after the Closing
Date under circumstances that would require registration of the Securities, the
Warrants or the Warrant Shares or the issuance of such securities under the
Securities Act.
o. SEC Documents; Financial Statements. The Common Stock of the Company is
registered pursuant to Section 12(g) of the Exchange Act. The Company has filed
during its current fiscal year all reports, schedules, forms, statements and
other documents required to be filed by it with the Commission pursuant to the
<PAGE>
reporting requirements of the Exchange Act, including pursuant to Section 13,
14 or 15(d) thereof (the foregoing materials and financial statements and
schedules thereto being collectively referred to herein as the "SEC
Documents"), on a timely basis or has received a valid extension of such time
of filing and has filed any such SEC Documents prior to the expiration of any
such extension. The Company has delivered to the Purchaser or its
representatives true, complete and accurate copies of the SEC Documents that
were not filed pursuant to EDGAR. As of their respective dates and giving
effect to all amendments thereto filed with the Commission, the financial
statements of the Company included in the SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto as in effect at
the time of filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
in all material respects the financial position of the Company as of and for
the dates thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal, year-end
audit adjustments. The Company acknowledges that the Purchaser will be trading
in the securities of the Company in reliance on the foregoing representation
and warranty.
p. Investment Company. The Company is not, and is not controlled by or
under common control with an affiliate (an "Affiliate") of an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
q. Broker's Fees. No fees or commissions or similar payments with respect to
the transactions contemplated by this Agreement or the Transaction Documents
have been paid or will be payable by the Company to any broker, financial
advisor, finder, investment banker, or bank, other than as set forth in
Schedule 2.1(q). The Purchaser shall have no obligation with respect to any
fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section 2.1(q) that may be due in
connection with the transactions contemplated by this Agreement and the
Transaction Documents.
r. Form S-3 Eligibility. The Company is, and at the Closing Date will be,
eligible to register securities (including the Shares and the Warrant Shares)
for resale with the Commission under Form S-3 (or any successor form)
promulgated under the Securities Act.
s. Listing and Maintenance Requirements Compliance. The principal market on
which the Common Stock is currently traded is Nasdaq. Except as disclosed on
Schedule 2.1(s), the Company has not in the three years preceding the date
hereof received notice (written or oral) from Nasdaq (or any stock exchange,
market or trading facility on which the Common Stock is or has been listed (or
on which it has been quoted)) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such market or
exchange. The Company is not aware of any facts which would reasonably lead to
delisting or suspension of the Common Stock by Nasdaq. After giving effect to
the transactions contemplated by this Agreement and the Transaction Documents,
the Company is and will be in compliance with all such maintenance requirements
except for any approval required under the NASD rules.
t. Intellectual Property Rights. To the best of the knowledge of the Company,
the Company owns or possesses, or can obtain by payment of royalties in amounts
which, in the aggregate, will not have a Material Adverse Effect, all of the
patents, trademarks, service marks, trade names, copyrights, proprietary
<PAGE>
rights, trade secrets, and licenses or rights to the foregoing, necessary for
the conduct of the business of the Company as currently conducted. To the best
of the Company's knowledge, the business of the Company does not cause the
Company to infringe or violate any of the patents, trademarks, service marks,
trade names, copyrights, licenses or proprietary rights of any person or
entity.
u. Registration Rights; Rights of Participation. Except as described on
Schedule 2.1(u) hereto, (i) the Company has not granted or agreed to grant to
any Person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied and (ii) no Person,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any Transaction Document.
v. Tax Status; Firpta. Except as set forth on Schedule 2.1(v), the Company and
each of the Subsidiaries has made or filed all federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its Subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and
other governmental assessments and charges that are material in amount, shown
or determined to be due on such returns, reports and declarations, except those
being contested in good faith (which are set forth on Schedule 2.1(v) hereof),
and has set aside on it books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company is not a "United
States real property holding corporation" within the meaning of Section
847(c)(2) of the Internal Revenue Code of 1986, as amended.
w. Transactions With Affiliates. Except as set forth on Schedule 2.1(c) or
Schedule 2.1(w), none of the officers, directors, or employees of the Company
is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
x. Application to Takeover Protection. The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination or other similar anti-takeover
provision under the Certificate of Incorporation, Bylaws or the laws of the
state of incorporation which is or could become applicable to the Purchaser or
the Transaction Documents as a result of the transactions contemplated by this
Agreement or the Transaction Documents. None of the transactions contemplated
by this Agreement or the Transaction Documents, including the exercise of the A
Warrant or the B Warrant, will trigger any poison pill provisions of any of the
Company's stockholders' rights or similar agreements.
<PAGE>
y. Solicitation Materials. The Company has not (i) distributed any offering
materials in connection with the offering and sale of the Shares or the A
Warrant or the B Warrant, other than the SEC Documents, the Schedules to this
Agreement, any amendments and supplements thereto, material or information
requested by the Purchaser or its representative in connection with the
transaction contemplated by this Agreement, and the materials listed on
Schedule 2.1(y), or (ii) solicited any offer to buy or sell the Shares, the A
Warrant or the B Warrant by means of any form of general solicitation or
advertising. Neither the Company, nor any of its Affiliates, nor any Person
acting on its or their behalf, has engaged or will engage in any form of
general solicitation or general advertising (within the meaning of Regulation D
under the Securities Act) in connection with the offer or sale of the Shares or
Warrants.
z. Acknowledgment of Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Warrant Shares upon exercise of the Warrants. The Company further acknowledges
that its obligation to issue Warrant Shares upon exercise of the Warrants in
accordance with this Agreement, and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
aa. Acknowledgment Regarding Purchaser's Purchase of Securities. The Company
acknowledges and agrees that the Purchaser is acting solely in the capacity of
arm's length Purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the Purchaser is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by any Purchaser or any of their respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is
merely incidental to the Purchaser's purchase of the securities. The Company
further represents to each Purchaser that the Company's decision to enter into
this Agreement has been based solely on the independent evaluation of the
Company and its representatives.
bb. Other Agreements. The Company has not, directly or indirectly, made any
agreements with the Purchaser relating to the terms and conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
cc. Investment Intent. The Company is acquiring the MA Warrant and the MB
Warrant and any shares of stock it receives upon exercise of the MA Warrant or
the MB Warrant (the "M Shares") for its own account and not with a present view
to or for distributing or reselling the M Shares, the MA Warrant, the MB
Warrant or any part thereof or interest therein in violation of the Securities
Act; provided, however, that by making the representations herein, the Company
does not agree to hold any of the M Shares, the MA Warrant or the MB Warrant
for any minimum or other specific term and reserves the right to dispose of the
M Shares, the MA Warrant or the MB Warrant at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.
dd. Company Status. At the time the Company was offered the MA Warrant, the
MB Warrant, and at the Primary Closing Date and Secondary Closing Date, (i) it
was and will be an "accredited investor" as defined in Rule 501 under the
Securities Act and (ii) the Company, either alone or together with its
representatives, had and will have such knowledge, sophistication and
<PAGE>
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares and the
Warrants.
ee. Reliance. The Company understands and acknowledges that (i) the M
Shares, the MA Warrant and the MB Warrant are being offered and sold to the
Company without registration under the Securities Act in a private placement
that is exempt from the registration provisions of the Securities Act under
Section 4(2) of the Securities Act or Regulation D promulgated thereunder and
(ii) the availability of such exemption depends in part on, and the Purchaser
will rely upon the accuracy and truthfulness of, the representations set forth
in this Section 2.1 and the Company hereby consents to such reliance.
ff. Governmental Review. The Company understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the M Shares, the MA
Warrant or the MB Warrant.
Any information furnished in the schedules to Section 2.1 (a "Disclosure
Schedule") shall be deemed to modify all of the Company's representations and
warranties. The inclusion of any information in the Disclosure Schedule shall
not be deemed to be an admission or acknowledgment, in and of itself, that such
information is required by the terms hereof to be disclosed, is material to the
company, has or would have a Material Adverse Effect. For purposes of this
Agreement, the terms "to the Company's knowledge," "known by the Company" or
other words of similar meaning shall mean the actual knowledge of David
Eisenhaure or Michael Turmelle without any obligation of investigation, and
shall not refer to the knowledge of any other person or entity.
2.2 Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows:
a. Organization; Authority. The Purchaser is a corporation duly formed,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation with the requisite power and authority, corporate or
otherwise, to enter into and to consummate the transactions contemplated hereby
and by the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The purchase by the Purchaser of the Shares, the A
Warrant and the B Warrant hereunder has been duly authorized by all necessary
action on the part of the Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by the
Purchaser and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
b. Authorization and Validity; Issuance of Shares. The common stock
issuable upon exercise of the MA Warrant and, when issued, the MB Warrant, will
at all times hereafter continue to be duly authorized and reserved for issuance
and the shares of common stock issued upon the exercise of the MA Warrant, and
when issued, the MB Warrant, will be validly issued, fully paid and
non-assessable, free and clear of all liens, encumbrances, and Purchaser rights
of first refusal, other than liens and encumbrances created by the Company and
will not be subject to any preemptive or similar rights. Assuming the accuracy
of the Company's representations in Section 2.1, the issuance by the Purchaser
of the MA Warrant, the MB Warrant and any shares upon exercise of such warrants
is exempt from registration under the Securities Act.
<PAGE>
c. Purchaser SEC Documents; Financial Statements. The Common Stock of the
Purchaser is registered pursuant to Section 12(g) of the Exchange Act. The
Purchaser has filed during its current fiscal year all reports, schedules,
forms, statements and other documents required t be filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act,
including pursuant to Section 13, 14 or 15(d) thereof (the foregoing materials
and financial statements and schedules thereto being collectively referred to
herein as the "Purchaser SEC Documents"), on a timely basis or has received a
valid extension of such time of filing and has filed any such Purchaser SEC
Documents prior to the expiration of any such extension. The Purchaser has
delivered to the Company or its representatives true, complete and accurate
copies of the Purchaser SEC Documents that were not filed pursuant to EDGAR. As
of their respective financial statements of the Purchasers included in the
Purchaser SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects
the financial position of the Purchaser as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, year-end audit adjustments. The
Purchaser acknowledges that the Company will be trading in the securities of
the Purchaser in reliance on the foregoing representation and warranty.
d. Disclosure; Absence of Certain Changes. None of this Agreement, the
Schedules to this Agreement, the Purchaser SEC Documents (as amended to date)
contained as of their respective dates, any untrue statement of a material fact
or omitted to state any material fact necessary in order to make the statements
made herein and therein, in light of the circumstances under which they were
made, not misleading. Except as disclosed in Purchaser SEC Documents files on
EDGAR through the date hereof, since the filing of the Purchaser quarterly
report on Form 10-Q on August 6, 1999, there has been no Material Adverse
Change and no material adverse development in the business, properties,
operations, financial condition, liabilities or results of operations of the
Purchaser. The Purchaser has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Purchaser or any of its Purchaser Subsidiaries have any knowledge or reason
to believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
e. Investment Intent. The Purchaser is acquiring the Shares, the A Warrant
and the B Warrant for its own account and not with a present view to or for
distributing or reselling the Shares, the A Warrant, the B Warrant or the
Warrant Shares or any part thereof or interest therein in violation of the
Securities Act; provided, however, that by making the representations herein,
the Purchaser does not agree to hold any of the Shares, the A Warrant, the B
Warrant or the Warrant Shares for any minimum or other specific term and
reserves the right to dispose of the Shares, the A Warrant, the B Warrant or
the Warrant Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.
f. Purchaser Status. At the time the Purchaser was offered the Shares, the
A Warrant, the B Warrant, and at the Primary Closing Date and Secondary Closing
Date, (i) it was and will be an "accredited investor" as defined in clause
(a)(7) of Rule 501 under the Securities Act and (ii) the Purchaser, either
alone or together with its representatives, had and will have such knowledge,
sophistication and experience in business and financial matters so as to be
<PAGE>
capable of evaluating the merits and risks of the prospective investment in the
Shares and the Warrants.
g. Reliance. The Purchaser understands and acknowledges that (i) the
Shares, the A Warrant and the B Warrant are being offered and sold to the
Purchaser without registration under the Securities Act in a private placement
that is exempt from the registration provisions of the Securities Act under
Section 4(2) of the Securities Act or Regulation D promulgated thereunder and
(ii) the availability of such exemption depends in part on, and the Company
will rely upon the accuracy and truthfulness of, the representations set forth
in this Section 2.2 and the Purchaser hereby consents to such reliance.
h. Governmental Review. The Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Shares, the A
Warrant or the B Warrant.
i. Residency. The Purchaser is a resident of the State of New York.
The Company acknowledges and agrees that the Purchaser makes no representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in this Section 2.2.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
a. If the Purchaser should decide to dispose of the Shares, the A Warrant,
the B Warrant or the Warrant Shares held by it, the Purchaser understands and
agrees that it may do so only pursuant to an effective registration statement
under the Securities Act, to the Company or pursuant to an available exemption
from the registration requirements of the Securities Act, including Rule 144
promulgated under the Securities Act ("Rule 144"). In connection with any
transfer of any Shares, A Warrant, B Warrant or Warrant Shares other than
pursuant to an effective registration statement, Rule 144 or to the Company,
the Company may require the transferor thereof to provide to the Company a
written opinion of counsel experienced in the area of United States securities
laws selected by the transferor, the form and substance of which opinion shall
be customary for opinions of counsel in comparable transactions, to the effect
that such transfer does not require registration of such transferred securities
under the Securities Act; provided, however, that if the Shares, A Warrant, B
Warrant or Warrant Shares may be sold pursuant to Rule 144(k), no written
opinion of counsel shall be required from the Purchaser if the Purchaser
provides reasonable assurances that such security can be sold pursuant to Rule
144(k). Notwithstanding the foregoing, the Company hereby consents to and
agrees to register any transfer by the Purchaser to an Affiliate of the
Purchaser, provided that the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act. Any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and the
Transaction Documents. If the Purchaser provides the Company with an opinion of
counsel, the form and substance of which opinion shall be customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Shares, A Warrant, B Warrant and the
Warrant Shares may be made without registration under the Securities Act or the
Purchaser provides the Company with reasonable assurances that the Shares, A
<PAGE>
Warrant, B Warrant and the Warrant Shares can be sold pursuant to Rule 144
without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by the Purchaser and without any restrictive legend.
Notwithstanding the foregoing or anything else contained herein to the
contrary, the securities may be pledged as collateral in connection with a bona
fide margin account or other lending arrangement.
b. The Purchaser agrees to the imprinting by the Company, so long as is
required by this Section 3.1(b), of the following legend on the Shares, the A
Warrant, the B Warrant and the Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT.
Neither the Shares, the A Warrant, the B Warrant nor the Warrant Shares shall
be required to contain the legend set forth above (or any other legend) (i) at
any time after transfer pursuant to a registration statement is effective under
the Securities Act covering such security, (ii) if in the written opinion of
counsel to the Company or the Purchaser experienced in the area of United
States securities laws such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission) or (iii) if such Shares,
the A Warrant, the B Warrant or the Warrant Shares are sold pursuant to Rule
144. When requested, which request will be accompanied by the certificate
representing such shares, the Company agrees that it will provide the Purchaser
with a certificate or certificates representing the Shares, the A Warrant, the
B Warrant or the Warrant Shares, free from such legend at such time as such
legend is no longer required hereunder. If such certificate or certificates had
previously been issued with such a legend or any other legend, the Company
shall, upon request, receive such certificate or certificates free of any
legend.
c. Notwithstanding the foregoing, the Purchaser's disposition of the
Warrant Shares shall be subject to Suspension Periods (as defined in the
Registration Rights Agreement) set forth in Section 3(r) of the Registration
Rights Agreement.
3.2 Stop Transfer Instruction. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company which enlarge
the restrictions on transfer set forth in Section 3.1.
3.3 Furnishing of Information. Until the Shares, the A Warrant, the B
Warrant or the Warrant Shares have been sold pursuant to a registration
statement under the Securities Act or are eligible for sale pursuant to Rule
144(k), the Company will cause its Shares to continue at all times to be
registered under Section 12(g) of the Exchange Act, will timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
<PAGE>
Section 13, 14 or 15(d) of the Exchange Act and, unless filed by EDGAR,
promptly furnish, but in no event later than two (2) business days after the
filing thereof with the Commission, the Purchaser with true and complete copies
of all such filings, and will not take any action or file any document (whether
or not permitted by the Exchange Act or the rules thereunder) to terminate or
suspend such reporting and filing obligations. Until the Shares, the A Warrant,
the B Warrant or the Warrant Shares have been sold pursuant to a registration
statement under the Securities Act or are eligible for sale pursuant to Rule
144(k), if the Company is not required to file reports pursuant to Section
13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the
Purchaser and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form
and substance substantially similar to those that would otherwise be required
to be included in reports required by Section 13(a) or 15(d) of the Exchange
Act, as well as any other information required thereby, in the time period that
such filings would have been required to have been made under the Exchange Act.
The Company further covenants that it will take such further action as any
holder of the Shares, the A Warrant, the B Warrant or the Warrant Shares may
reasonably request, all to the extent required from time to time to enable such
Person to sell the Shares, the A Warrant, the B Warrant or the Warrant Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in Section 3.1(b).
3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement, the
Company shall (i) qualify the Warrant Shares under the securities or "blue sky"
laws of such jurisdictions as the Purchaser may request (or to obtain an
exemption from such qualification), (ii) shall provide evidence of any such
action so taken to the Purchaser on or prior to the Closing Date and (iii)
shall continue such qualification at all times through the resale of all
Warrant Shares, but in any event not past the 4th anniversary of the Closing
Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Shares, the A Warrant, the B Warrant or the Warrant Shares in a manner that
would require the registration under the Securities Act or the sale of the
Shares, the A Warrant, the B Warrant or the Warrant Shares to any Purchaser or
cause the offering of such securities to be integrated with any other offering
of securities by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.
3.6 Listing and Reservation of Warrant Shares.
a. The Company shall (i) not later than three (3) business days after each
Closing Date prepare and file with Nasdaq (as well as any other national
securities exchange or market on which the Common Stock is then listed) an
additional shares listing application or a letter acceptable to Nasdaq covering
and listing a number of shares of Common Stock which are issued at such Closing
or issuable pursuant to the Warrants issuable at such Closing which is at least
equal to 1 times the maximum number of Warrant Shares then issuable, (ii) take
all steps necessary to cause such shares of Common Stock to be approved for
listing on Nasdaq (as well as on any other national securities exchange or
market on which the Common Stock is then listed) as soon as possible
thereafter, (iii) maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all such Warrant Shares, and (iv) provide to the
Purchaser evidence of such listing. Neither the Company nor any of its
<PAGE>
Subsidiaries shall take any action which may result in the delisting or
suspension of the Common Stock on Nasdaq. Prior to the effectiveness of the
Initial Registration Statement (as defined in the Registration Rights
Agreement), the Company shall promptly provide to the Purchaser copies of any
notices it receives from Nasdaq regarding the continued eligibility of the
Common Stock for listing on such automated quotation system, so long as such
notice does not include material, nonpublic information. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 3.6(a).
b. The Company at all times shall reserve a sufficient number of shares of its
authorized but unissued Common Stock to provide for 1 times the full exercise
of the outstanding Warrants. If at any time the number of shares of Common
Stock authorized and reserved for issuance is insufficient to cover 100% of the
number of Warrant Shares issued and issuable upon exercise of the Warrants
(based on the Exercise Price (as defined in the Warrants) of the Warrants in
effect from time to time) without regard to any limitation on conversions or
exercises, the Company will promptly take all corporate action necessary to
authorize and reserve 100% of such shares, including, without limitation,
calling a special meeting of stockholders to authorize additional shares to
meet the Company's obligations under this Section 3.6(b), in the case of an
insufficient number of authorized shares, and using its best efforts to obtain
stockholder approval of an increase in such authorized number of shares. In
addition, upon the occurrence of an adjustment of the Exercise Price (as
defined in the Warrant), the Company shall be required to file, within ten (10)
business days of such event, a registration statement covering the product of
1.0 and the number Warrant Shares, less the number of Warrant Shares for which
a registration statement is then effective. The Company shall use its best
efforts to cause such registration statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event on or prior to that date which is one hundred and twenty (120) days after
the filing date thereof. All calculations of the above amount shall be made
without regard to any limitation on exercises of Warrants.
3.7 Notice of Breaches.
a. The Company and the Purchaser shall give prompt written notice to the
other of any breach by it of any representation, warranty or other agreement
contained in this Agreement or in the Transaction Documents. However, no
disclosure by either party pursuant to this Section 3.7 shall be deemed to cure
any breach of any representation, warranty or other agreement contained herein
or in the Transaction Documents.
b. Notwithstanding the generality of Section 3.7(a), the Company shall
promptly notify, provided such notification will not constitute material
non-public information, the Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company or any Subsidiary to the effect
that the consummation of the transactions contemplated hereby and by the
Registration Rights Agreement violates or would violate any written agreement
or understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchaser a copy of any
written statement in support of or relating to such claim or notice.
c. The default by any Purchaser of any of its obligations, representations
or warranties under this Agreement or the Transaction Documents shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Companys' obligations under this Agreement or any Transaction Document to any
non-defaulting Purchaser.
<PAGE>
3.8 Form D. The Company agrees to file a Form D with respect to the Shares, A
Warrant and B Warrant as required by Rule 506 under Regulation D and to provide
a copy thereof to the Purchaser promptly after such filing.
3.9 Use of Proceeds. The Company intends to use the proceeds from the sale
of the Common Stock and the exercise of the Warrants (i) to enhance the
Company's ability to satisfy purchase orders that both parties anticipate that
the Company will receive from Plug Power, (ii) otherwise to develop the
Company's module manufacturing capability or (iii) in connection with the
transition and integration of Ling Electronics into the Company's other
operations and not to fund future investment in Beacon Power Corporation. The
Company is free to use the proceeds of the offering for other corporate
purposes if the board of directors of the Company determines that it is in the
best interest of the Company to do so. The Purchaser acknowledges that the
Company may, in the future, acquire cash from other sources and that it may
invest such cash in Beacon Power Corporation. It is not the intention of the
parties to establish an auditable trail between receipt of the proceeds and the
use of such funds.
3.10 Board Representation.
a. The Company agrees to nominate and recommend to its shareholders the
election to the Company's Board of Directors two person designated by the
Purchaser and acceptable to the Company's Board of Directors acting reasonably
(it being agreed that in acting reasonably the Company's Board of Directors may
consider the desirability of having two members of the Company's Board of
Directors affiliated with the Purchaser). The Company's obligations under this
Section 3.10(a) shall terminate if the Purchaser does not own five percent (5%)
or more on or before July 31, 2000 or ceases to own five percent (5%) or more
of the Company's outstanding Common Stock. The initial nominee to the Company's
Board of Directors will be Alan Goldberg.
b. The Purchaser agrees to nominate and recommend to its shareholders the
election to the Company's Board of Directors one person designated by the
Company. The initial nominee will be David Eisenhaure. The Purchaser's
obligations under this Section 3.10(b) shall terminate if the Purchaser ceases
to own five percent (5%) or more of the Company's outstanding Common Stock or
the Company's obligations under Section 3.10(a) ceases, whichever occurs first.
c. Both parties will endeavor to have the representatives set forth above
elected or appointed to their boards as soon as possible, but in no event later
than December 1, 1999. The Purchaser shall have no obligation to appoint or
elect the Company's nominee to its Board of Directors until the Company has
appointed or elected the Purchaser's nominees to the Company's Board of
Directors.
3.11 Transactions with Affiliates. So long as any Shares, A Warrant or B
Warrant are outstanding, the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors or persons who were officers or directors at any time
during the previous two years, stockholders who beneficially own 5% or more of
the Common Stock, or Affiliates or any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "Related Party"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have
<PAGE>
been obtainable from a Person other than such Related Party, or (c) any
agreement, transaction, commitment or arrangement which is approved by a
majority of the disinterested directors of the Company. For purposes hereof,
any director who is also an officer of the Company or any Subsidiary of the
Company shall not be a disinterested director with respect to any such
agreement, transaction, commitment or arrangement. "Affiliate" for purposes of
this section only means, with respect to any person or entity, another person
or entity that, directly or indirectly, (i) has a 5% or more equity interest in
that person or entity, (ii) has 5% or more common ownership with that person or
entity, (iii) controls that person or entity, or (iv) shares common control
with that person or entity. "Control" or "Controls" for purposes of this
section means that a person or entity has the power, direct or indirect, to
conduct or govern the policies of another person or entity.
3.12 Transfer Agent Instructions. At the Primary Closing the Company shall
issue irrevocable instructions to its transfer agent (and shall issue to any
subsequent transfer agent as required), to issue certificates, registered in
the name of the Purchaser or its respective nominee(s), for the Warrant Shares
issuable pursuant to the A Warrant in such amounts as specified from time to
time by the Purchaser to the Company in a form acceptable to the Purchaser (the
"Primary Closing Irrevocable Transfer Agent Instructions"). At the Secondary
Closing the Company shall issue irrevocable instructions to its transfer agent
(and shall issue to any subsequent transfer agent as required), to issue
certificates, registered in the name of the Purchaser or its respective
nominee(s), for the Warrant Shares issuable pursuant to the B Warrant in such
amounts as specified from time to time by the Purchaser to the Company in a
form acceptable to the Purchaser (the "Secondary Closing Irrevocable Transfer
Agent Instructions"). So long as required pursuant to Section 3.1(b), all such
certificates shall bear the restrictive legend specified in Section 3.1(b) of
this Agreement. The Company warrants that no instruction other than the Primary
Closing Irrevocable Transfer Agent Instructions and the Secondary Closing
Irrevocable Transfer Agent Instructions referred to in this Section 3.12, and
stop transfer instructions to give effect to Section 3.1 hereof (in the case of
the Warrant Shares, prior to registration of the Shares under the Securities
Act) will be given by the Company to its transfer agent and that the Shares,
the A Warrant, the B Warrant or the Warrant Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Transaction Documents. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Purchaser by violating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 3.12 will
be inadequate and agrees, in the event of a beach or threatened breach by the
Company of the provisions of this Section 3.12, that the Purchaser, shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond
or other security being required.
3.13 Press Release; Filing of Form 8-K. Subject to the provisions of Section
6.10 hereof, prior to the opening of Nasdaq on October 21, 1999, the Company
and the Purchaser shall file a joint press release in form and substance
acceptable to the Company and the Purchaser.
3.14 Purchaser Transfer Agent Instructions. At the Primary Closing the
Purchaser shall issue irrevocable instructions to its transfer agent (and shall
issue to any subsequent transfer agent as required), to issue certificates,
registered in the name of the Company or its respective nominee(s), for the M
Shares issuable pursuant to the MA Warrant in such amounts as specified from
<PAGE>
time to time by the Company to the Purchaser in a form acceptable to the
Company (the "Primary Closing Irrevocable Transfer Agent Instructions"). At the
Secondary Closing the Purchaser shall issue irrevocable instructions to its
transfer agent (and shall issue to any subsequent transfer agent as required),
to issue certificates, registered in the name of the Company or its respective
nominee(s), for the M Shares issuable pursuant to the MB Warrant in such
amounts as specified from time to time by the Company to the Purchaser in a
form acceptable to the Company (the "Secondary Closing Irrevocable Transfer
Agent Instructions"). So long as required pursuant to Section 3.15(b), all such
certificates shall bear the restrictive legend specified in Section 3.15(b) of
this Agreement. The Purchaser warrants that no instruction other than the
Primary Closing Irrevocable Transfer Agent Instructions and the Secondary
Closing Irrevocable Transfer Agent Instructions referred to in this Section
3.14, and stop transfer instructions to give effect to Section 3.15 hereof (in
the case of the M Shares, prior to registration of the Shares under the
Securities Act) will be given by the Purchaser to its transfer agent and that
the M Shares, the MA Warrant or the MB Warrant shall otherwise be freely
transferable on the books and records of the Purchaser as and to the extent
provided in this Agreement and the Transaction Documents. The Purchaser
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Company by violating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Purchaser acknowledges that
the remedy at law for a breach of its obligations under this Section 3.14 will
be inadequate and agrees, in the event of a beach or threatened breach by the
Purchaser of the provisions of this Section 3.14, that the Company, shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond
or other security being required.
3.15 Purchaser Transfer Restrictions.
a. If the Company should decide to dispose of the M Shares, the MA Warrant
or the MB Warrant held by it, the Company understands and agrees that it may do
so only pursuant to an effective registration statement under the Securities
Act, to the Company or pursuant to an available exemption from the registration
requirements of the Securities Act, including Rule 144 promulgated under the
Securities Act ("Rule 144"). In connection with any transfer of any M Shares,
MA Warrant or MB Warrant other than pursuant to an effective registration
statement, Rule 144 or to the Purchaser, the Purchaser may require the
transferor thereof to provide to the Purchaser a written opinion of counsel
experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be customary for
opinions of counsel in comparable transactions, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act; provided, however, that if the M Shares, MA Warrant or MB
Warrant may be sold pursuant to Rule 144(k), no written opinion of counsel
shall be required from the Company if the Company provides reasonable
assurances that such security can be sold pursuant to Rule 144(k).
Notwithstanding the foregoing, the Purchaser hereby consents to and agrees to
register any transfer by the Company to an Affiliate of the Company, provided
that the transferee certifies to the Purchaser that it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Any such
transferee shall agree in writing to be bound by the terms of this Agreement
and shall have the rights of a Company under this Agreement and the Transaction
Documents. If the Company provides the Purchaser with an opinion of counsel,
the form and substance of which opinion shall be customary for opinions of
counsel in comparable transactions, to the effect that a public sale,
assignment or transfer of the M Shares, MA Warrant and MB Warrant may be made
<PAGE>
without registration under the Securities Act or the Purchaser provides the
Company with reasonable assurances that the M Shares, MA Warrant and the MB
Warrant can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold, the Purchaser shall permit the transfer, and, in the case of
the M Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by the Company
and without any restrictive legend. Notwithstanding the foregoing or anything
else contained herein to the contrary, the securities may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement.
b. The Company agrees to the imprinting by the Purchaser, so long as is
required by this Section 3.15(b), of the following legend on the M Shares, the
MA Warrant and the MB Warrant:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
Neither the M Shares, the MA Warrant nor the MB Warrant shall be required to
contain the legend set forth above (or any other legend) (i) at any time after
transfer pursuant to a registration statement is effective under the Securities
Act covering such security, (ii) if in the written opinion of counsel to the
Purchaser of the Company experienced in the area of United States securities
laws such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission) or (iii) if such M Shares, the MA Warrant or the
MB Warrant are sold pursuant to Rule 144. When requested, which request will be
accompanied by the certificate representing such shares, the Purchaser agrees
that it will provide the Company with a certificate or certificates
representing the M Shares, the MA Warrant or the MB Warrant, free from such
legend at such time as such legend is no longer required hereunder. If such
certificate or certificates had previously been issued with such a legend or
any other legend, the Purchaser shall, upon request, receive such certificate
or certificates free of any legend.
3.16 Purchaser Stop Transfer Instruction. The Purchaser may not make any
notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions on transfer set forth in Section 3.14.
3.17 Purchaser Furnishing of Information. Until the M Shares, the MA Warrant
or the MB Warrant have been sold pursuant to a registration statement under the
Securities Act or are eligible for sale pursuant to Rule 144(k), the Purchaser
will cause its M Shares to continue at all times to be registered under Section
12(g) of the Exchange Act, will timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Purchaser after the date hereof pursuant to Section 13, 14 or
15(d) of the Exchange Act and, unless filed by EDGAR, promptly furnish, but in
no event later than two (2) business days after the filing thereof with the
Commission, the Company with true and complete copies of all such filings, and
will not take any action or file any document (whether or not permitted by the
Exchange Act or the rules thereunder) to terminate or suspend such reporting
<PAGE>
and filing obligations. Until the M Shares, the MA Warrant or the MB Warrant
have been sold pursuant to a registration statement under the Securities Act or
are eligible for sale pursuant to Rule 144(k), if the Purchaser is not required
to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will
prepare and furnish to the Company and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Purchaser further covenants that it will take such
further action as any holder of the M Shares, the MA Warrant or the MB Warrant
may reasonably request, all to the extent required from time to time to enable
such Person to sell the M Shares, the MA Warrant or the MB Warrant without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including the legal
opinion referenced above in Section 3.15(b).
3.18 Purchaser Blue Sky Laws. In accordance with the MTI Registration Rights
Agreement, the Purchaser shall (i) qualify the M Shares under the securities or
"blue sky" laws of such jurisdictions as the Company may request (or to obtain
an exemption from such qualification), (ii) shall provide evidence of any such
action so taken to the Company on or prior to the Primary Closing Date and
(iii) shall continue such qualification at all times through the resale of all
M Shares, but in any event not past the 4th anniversary of the Primary Closing
Date.
3.19 Purchaser Listing and Reservation of M Shares.
a. The Purchaser shall (i) not later than three (3) business days after
each Closing Date prepare and file with Nasdaq (as well as any other national
securities exchange or market on which the common stock is then listed) an
additional shares listing application or a letter acceptable to Nasdaq covering
and listing a number of shares of common stock which are issuable pursuant to
the Warrants issuable at such Closing which is at least equal to 1 times the
maximum number of M Shares then issuable, (ii) take all steps necessary to
cause such shares of common stock to be approved for listing on Nasdaq (as well
as on any other national securities exchange or market on which the Common
Stock is then listed) as soon as possible thereafter, (iii) maintain, so long
as any other shares of common stock shall be so listed, such listing of all
such M Shares, and (iv) provide to the Company evidence of such listing.
Neither the Purchaser nor any of its Subsidiaries shall take any action which
may result in the delisting or suspension of the common stock on Nasdaq. The
Purchaser shall pay all fees and expenses in connection with satisfying its
obligations under this Section 3.19(a).
b. The Purchaser at all times shall reserve a sufficient number of shares
of its authorized but unissued common stock to provide for 1 times the full
exercise of the outstanding Warrants. If at any time the number of shares of
common stock authorized and reserved for issuance is insufficient to cover 100%
of the number of Warrant Shares issued and issuable upon exercise of the
warrants (based on the Exercise Price (as defined in the Warrants) of the
Warrants in effect from time to time) without regard to any limitation on
conversions or exercises, the Purchaser will promptly take all corporate action
necessary to authorize and reserve 100% of such shares, including, without
limitation, calling a special meeting of stockholders to authorize additional
shares to meet the Company's obligations under this Section 3.19(b), in the
case of an insufficient number of authorized shares, and using its best efforts
<PAGE>
to obtain stockholder approval of an increase in such authorized number of
shares. 3.20 Ordinary Course Brokerage and Trading. The Purchaser represents
and agrees that neither Purchaser, nor any person that is required by internal
policy to pre-clear securities transactions with the Purchaser will, enter into
any short sales of the Company's common stock, except in connection with an
intended sale of common stock, and in such event, only to the extent covered
within seven (7) Trading Days of such short sale. In addition, the Purchaser
represents and agrees on behalf of itself and each of the persons identified in
the preceding sentence that it will not establish a short position or sell any
of the Shares during (i) the twenty (20) Trading Day period prior to the one
(1) year anniversary of the Primary Closing Date or (ii) the seventy five (75)
Trading Days ending on August 28, 2003 and 2006.
ARTICLE IV.
CONDITIONS
4.1 Primary Closing Conditions.
a. Conditions Precedent to the Obligation of the Company to Sell. The
obligation of the Company to sell the Shares, the A Warrant, the B Warrant or
the Warrant Shares hereunder is subject to the satisfaction or waiver (with
prior written notice to the Purchaser) by the Company, at or before the Primary
Closing, of each of the following conditions:
(1) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser in this Agreement shall be true
and correct in all material respects as of the date when made (except for
representations and warranties that speak as of a specific date) and as of the
Closing Date;
(2) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by the Purchaser at or prior to the Primary Closing; and
(3) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Transaction Documents.
(4) Shares of Common Stock. The Purchaser shall have duly reserved the
number of M Shares required by this Agreement and the Transaction Documents to
be reserved for issuance upon exercise of the MA Warrant;
(5) Transfer Agent Instructions. The Primary Closing Irrevocable Transfer
Agent Instructions, in a form acceptable to the Company, shall have been
delivered to and acknowledged in writing by the Purchaser's transfer agent with
a copy forwarded to each Company;
(6) Resolutions. The Board of Directors of the Purchaser shall have adopted
resolutions consistent with Section 2.1(b) and in a form reasonably acceptable
to the Company (the "Resolutions");
(7) Litigation. No litigation shall have been instituted or threatened
against the Purchaser which could reasonably be expected to, individually or in
the aggregate, have an MTI Material Adverse Effect; and
<PAGE>
(8) Adverse Changes. Since the date of the financial statements included in
the Purchaser's Quarterly Report on Form 10-Q or Annual Report on Form 10-K,
whichever is most recent, last filed prior to the date of this Agreement, no
event which had a Material Adverse Effect shall have occurred which is not
disclosed in the Schedules hereto (for purposes hereof, changes in the market
price of the Common Stock may be considered in determining whether there has
occurred an event which has had an MTI Material Adverse Effect).
b. Conditions Precedent to the Obligation of the Purchaser to Purchase.
The obligation of the Purchaser hereunder to acquire and pay for the Primary
Closing Shares and the A Warrant is subject to the satisfaction or waiver (with
prior written notice to the Company) by the Purchaser, at or before the Primary
Closing, of each of the following conditions:
(1) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all respects as of the date when made and as of the
Primary Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date);
(2) Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Primary Closing;
(3) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement and the Transaction Documents;
(4) No Suspensions of Trading in Common Stock. The trading in the Common
Stock shall not have been suspended by the Commission or on Nasdaq (except for
any suspension of trading of limited duration solely to permit dissemination of
material information regarding the Company);
(5) Listing of Common Stock. The Common Stock shall have been at all times
since the date hereof, and on the Primary Closing Date shall be, listed for
trading on Nasdaq;
(6) Required Approvals. All Required Approvals shall have been obtained and
copies thereof delivered to the Purchaser;
(7) Shares of Common Stock. The Company shall have duly reserved the number
of Warrant Shares required by this Agreement and the Transaction Documents to
be reserved for issuance upon exercise of the A Warrant;
(8) Change of Control. No Change of Control shall have occurred between the
date hereof and the Closing Date. "Change of Control" means the occurrence of
any of (i) an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act), other than the Purchaser or any of their Affiliates, of in
excess of 40% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's Board of Directors which is
not approved by those individuals who are members of the Board of Directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, or (v) the execution by the Company of an agreement to which the
<PAGE>
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) , (iii), (iv) or (v);
(9) Transfer Agent Instructions. The Primary Closing Irrevocable Transfer
Agent Instructions, in a form acceptable to the Purchaser, shall have been
delivered to and acknowledged in writing by the Company's transfer agent with a
copy forwarded to each Purchaser;
(10) Resolutions. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 2.1(b) and in a form reasonably acceptable
to the Purchaser (the "Resolutions");
(11) Litigation. No litigation shall have been instituted or threatened
against the Company which could reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect; and
(12) Adverse Changes. Since the date of the financial statements included in
the Company's Quarterly Report on Form 10-Q or Annual Report on Form 10-K,
whichever is most recent, last filed prior to the date of this Agreement, no
event which had a Material Adverse Effect shall have occurred which is not
disclosed in the Schedules hereto (for purposes hereof, changes in the market
price of the Common Stock may be considered in determining whether there has
occurred an event which has had a Material Adverse Effect).
c. Documents and Certificates. At the Primary Closing, the Company shall
have delivered to the Purchaser the following in form and substance reasonably
satisfactory to the Purchaser:
(1) Opinion. An opinion of the Company's legal counsel in the form attached
hereto as Exhibit D dated as of the Primary Closing Date;
(2) Common Stock Certificate. A Common Stock Certificate(s) representing
the Primary Closing Shares, registered in the name of the Purchaser, in form
satisfactory to the Purchaser;
(3) Warrant. A warrant representing the A Warrant purchased by the
Purchaser, registered in the name of the Purchaser;
(4) Registration Rights. The Company shall have executed and delivered the
SatCon Registration Rights Agreement;
(5) Officer's Certificate. An Officer's Certificate dated the Primary
Closing Date and signed by an executive officer of the Company confirming the
accuracy of the Company's representations, warranties and covenants as of the
Primary Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in this Section 4.1 as of the Primary Closing
Date;
(6) Secretary's Certificate. A Secretary's Certificate dated the Primary
Closing Date and signed by the Secretary or Assistant Secretary of the Company
certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Closing Date,
(B) that attached thereto is a true and complete copy of the by-laws of the
Company, as in effect on the Closing Date and (C) that attached thereto is a
true and complete copy of the Resolutions duly adopted by the Board of
Directors of the Company authorizing the execution, delivery and performance of
this Agreement and of the Transaction Documents, and that such Resolutions have
not been modified, rescinded or revoked;
<PAGE>
(7) Certificates of Incorporation. The Company shall have delivered to the
Purchaser a copy of a certificate evidencing the incorporation and good
standing of the Company and each Subsidiary, in such corporation's state of
incorporation issued by the Secretary of State of such state of incorporation
as of a date within ten days of the Primary Closing Date. The Company shall
have delivered to the Purchaser a copy of its Certificate of Incorporation as
certified by the Secretary of State of the State of Delaware within ten days of
the Primary Closing Date;
(8) Transfer Agent Letter. The Company shall have delivered to the
Purchaser a letter from the Company's transfer agent certifying the number of
shares of Common Stock outstanding as of a date within five days of the Primary
Closing Date; and
(9) Other Documents. The Company shall have delivered to each Purchaser
such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchaser or its counsel may reasonably request.
d. Purchaser Documents and Certificates. At the Primary Closing, the
Purchaser shall have delivered to the Company the following in form and
substance reasonably satisfactory to the Company:
(1) Cash Payment. The Purchaser shall deliver, as directed by the
Company, two million, five hundred seventy thousand dollars ($2,570,000) in
United States dollars in immediately available funds to an account or accounts
designated in writing by the Company;
(2) Warrant. A warrant representing the MA Warrant purchased by the
Company, registered in the name of the Company;
(3) Registration Rights. The Purchaser shall have executed and delivered
the MTI Registration Rights Agreement; and
(4) Officer's Certificate. An Officer's Certificate dated the Primary
Closing Date and signed by an executive officer of the Purchaser confirming the
accuracy of the Purchaser's representations, warranties and covenants as of the
Primary Closing Date and confirming the compliance by the Purchaser with the
conditions precedent set forth in this Section 4.1 as of the Primary Closing
Date;
4.2 Secondary Closing Conditions.
a. Conditions Precedent to the Obligation of the Company to Sell. The
obligation of the Company to sell the Secondary Closing Shares and the B
Warrant hereunder is subject to the satisfaction or waiver (with prior written
notice to the Purchaser) by the Company, at or before the Secondary Closing, of
each of the following conditions:
(1) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser in this Agreement shall be true
and correct in all material respects as of the date when made (except for
representations and warranties that speak as of a specific date) and as of the
Secondary Closing Date;
(2) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by such Purchaser at or prior to the Secondary Closing; and
<PAGE>
(3) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Transaction Documents.
(4) Shares of Common Stock. The Purchaser shall have duly reserved the
number of M Shares required by this Agreement and the Transaction Documents to
be reserved for issuance upon exercise of the MB Warrant;
(5) Transfer Agent Instructions. The Secondary Closing Irrevocable Transfer
Agent Instructions, in a form acceptable to the Company, shall have been
delivered to and acknowledged in writing by the Purchaser's transfer agent with
a copy forwarded to each Company;
(6) Resolutions. The Board of Directors of the Purchaser shall have adopted
resolutions consistent with Section 2.2(b) and in a form reasonably acceptable
to the Company (the "Resolutions");
(7) Litigation. No litigation shall have been instituted or threatened
against the Purchaser which could reasonably be expected to, individually or in
the aggregate, have an MTI Material Adverse Effect; and
(8) Adverse Changes. Since the date of the financial statements included in
the Purchaser's Quarterly Report on Form 10-Q or Annual Report on Form 10-K,
whichever is most recent, last filed prior to the date of this Agreement, no
event which had a Material Adverse Effect shall have occurred which is not
disclosed in the Schedules hereto (for purposes hereof, changes in the market
price of the Common Stock may be considered in determining whether there has
occurred an event which has had an MTI Material Adverse Effect).
b. Conditions Precedent to the Obligation of the Purchaser to Purchase.
The obligation of the Purchaser hereunder to acquire and pay for the Secondary
Closing Shares and the B Warrant at the Secondary Closing is subject to the
satisfaction or waiver (with prior written notice to the Company) by the
Purchaser, as of the date of the Secondary Closing, of each of the following
conditions:
(1) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects as of the date when made and as of
the Secondary Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date);
(2) Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Secondary Closing;
(3) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement and the Transaction Documents;
(4) No Suspensions of Trading in Common Stock. The trading in the Common
Stock shall not have been suspended by the Commission or on Nasdaq (except for
any suspension of trading of limited duration solely to permit dissemination of
material information regarding the Company);
<PAGE>
(5) Listing of Common Stock. The Common Stock shall have been at all times
since the date hereof, and on the Secondary Closing Date shall be, listed for
trading on Nasdaq;
(6) Required Approvals. All Required Approvals shall have been obtained and
copies thereof delivered to such Purchaser;
(7) Shares of Common Stock. The Company shall have duly reserved the number
of Warrant Shares required by this Agreement and the Transaction Documents to
be reserved for issuance upon exercise of the Warrants;
(8) Change of Control. No Change of Control shall have occurred between the
date hereof and the Secondary Closing Date. "Change of Control" means the
occurrence of any of (i) an acquisition after the date hereof by an individual
or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under
the Exchange Act), other than the Purchasers or any of their Affiliates, of in
excess of 40% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's Board of Directors which is
not approved by those individuals who are members of the Board of Directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, or (v) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) , (iii), (iv) or (v);
(9) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in a form acceptable to the Purchaser, shall have been delivered
to and acknowledged in writing by the Company's transfer agent with a copy
forwarded to the Purchaser;
(10) Litigation. No litigation shall have been instituted or threatened
against the Company which could reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect; and
(11) Adverse Changes. Since the date of the Primary Closing, no event which
had a Material Adverse Effect shall have occurred which is not disclosed in the
Schedules hereto (for purposes hereof, changes in the market price of the
Common Stock may be considered in determining whether there has occurred an
event which has had a Material Adverse Effect but shall not themselves
constitute a Material Adverse Effect).
c. Documents and Certificates. At the Secondary Closing, the Company shall
have delivered to the Purchaser the following in form and substance reasonably
satisfactory to the Purchaser:
(1) Stock Certificate. A Stock Certificate representing the Secondary
Closing Shares, registered in the name of the Purchaser, in form satisfactory
to the Purchaser;
(2) Warrant. A warrant representing the B Warrant purchased by the
Purchaser, registered in the name of the Purchaser;
(3) Officer's Certificate. An Officer's Certificate dated the Secondary
Closing Date and signed by an executive officer of the Company confirming the
accuracy of the Company's representations, warranties and covenants as of the
Secondary Closing Date and confirming the compliance by the Company with the
Milestones and the conditions precedent set forth in this Section 4.1 as of the
Secondary Closing Date;
<PAGE>
(4) Certificates of Incorporation. The Company shall have delivered to each
of the Purchasers a copy of a certificate evidencing the incorporation and good
standing of the Company and each Subsidiary, in such corporation's state of
incorporation issued by the Secretary of State of such state of incorporation
as of a date within ten days of the Secondary Closing Date. The Company shall
have delivered to the Purchaser a copy of its Certificate of Incorporation as
certified by the Secretary of State of the State of Delaware within ten days of
the Secondary Closing Date; and
(5) Other Documents. The Company shall have delivered to the Purchaser such
other documents relating to the transactions contemplated by the Transaction
Documents as the Purchaser or its counsel may reasonably request.
d. Purchaser Documents and Certificates. At the Secondary Closing, the
Purchaser shall have delivered to the Company the following in form and
substance reasonably satisfactory to the Company:
(1) Cash Payment. The Purchaser shall deliver, as directed by the
Company, four million, five hundred thousand dollars ($4,500,000) in United
States dollars in immediately available funds to an account or accounts
designated in writing by the Company;
(2) Warrant. A warrant representing the MB Warrant purchased by the
Company, registered in the name of the Company;
(3) Officer's Certificate. An Officer's Certificate dated the Secondary
Closing Date and signed by an executive officer of the Purchaser confirming the
accuracy of the Purchaser's representations, warranties and covenants as of the
Secondary Closing Date and confirming the compliance by the Purchaser with the
conditions precedent set forth in this Section 4.2 as of the Secondary Closing
Date;
ARTICLE V.
INDEMNIFICATION
5.1 Indemnification. In addition to all of the Company's other obligations
under this Agreement and the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless the Purchaser, its past and present
Affiliates and their successors and assigns (in accordance with the provisions
of Section 6.5 hereof), each other holder of the Warrant Shares and all of
their stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing Person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
proceedings, costs (as incurred), penalties, fees (including legal fees and
expenses), liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnity is a party to the action for which
indemnification hereunder is sought), and including interest, penalties and
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or in the Transaction Documents, or any other
certificate, instrument or document contemplated hereby or thereby or (b) any
breach of any covenant, agreement or obligation of the Company contained in
this Agreement or the Transaction Documents, or any other certificate,
instrument or document contemplated hereby or thereby. The indemnification
<PAGE>
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same
terms and conditions to any affiliate of the Purchaser and officers, directors,
agents, employees and controlling Persons (if any), as the case may be, of the
Purchaser and any such affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Purchaser and any such affiliate and any such Person. The Company
also agrees that neither the Purchaser nor any such Affiliates, officers,
directors, agents, employees or controlling Persons shall have any liability to
the Company or any Person asserting claims on behalf of or in right of the
Company in connection with or as a result of the consummation of this Agreement
or any of the Transaction Documents except to the extent that any losses,
claims, damages, liabilities or expenses incurred by the Company result from
the gross negligence or willful misconduct of the Purchaser or entity in
connection with the transactions contemplated by this Agreement or the
Transaction Documents. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
5.2 Purchaser Indemnification. In addition to all of the Purchaser's other
obligations under this Agreement and the Transaction Documents, the Purchaser
shall defend, protect, indemnify and hold harmless the Company, its past and
present Affiliates and their successors and assigns (in accordance with the
provisions of Section 6.5 hereof), each other holder of the M Shares and all of
their stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing Person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
proceedings, costs (as incurred), penalties, fees (including legal fees and
expenses), liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnity is a party to the action for which
indemnification hereunder is sought), and including interest, penalties and
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Purchaser in this Agreement or in the Transaction Documents, or any other
certificate, instrument or document contemplated hereby or thereby or (b) any
breach of any covenant, agreement or obligation of the Purchaser contained in
this Agreement or the Transaction Documents, or any other certificate,
instrument or document contemplated hereby or thereby. The indemnification
obligations of the Purchaser under this paragraph shall be in addition to any
liability which the Purchaser may otherwise have, shall extend upon the same
terms and conditions to any affiliate of the Company and officers, directors,
agents, employees and controlling Persons (if any), as the case may be, of the
Company and any such affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Purchaser, the Company and any such affiliate and any such Person. The
Purchaser also agrees that neither the Company nor any such Affiliates,
officers, directors, agents, employees or controlling Persons shall have any
liability to the Purchaser or any Person asserting claims on behalf of or in
right of the Purchaser in connection with or as a result of the consummation of
this Agreement or any of the Transaction Documents except to the extent that
any losses, claims, damages, liabilities or expenses incurred by the Purchaser
result from the gross negligence or willful misconduct of the Company or entity
in connection with the transactions contemplated by this Agreement or the
Transaction Documents. To the extent that the foregoing undertaking by the
Purchaser may be unenforceable for any reason, the Purchaser shall make the
<PAGE>
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
5.3 Procedures.
a. If a third party shall notify an indemnified party (the "Indemnified
Party") with respect to any matter that may give rise to a claim for
indemnification under the indemnity set forth above in Sections 5.1 and 5.2,
the procedure set forth below shall be followed.
(1) Notice. The Indemnified Party shall give to the party providing
indemnification (the "Indemnifying Party") written notice of any claim, suit,
judgment or matter for which indemnity may be sought under Section 6.1 promptly
but in any event within thirty days after the Indemnified Party receives notice
thereof; provided, however, that failure by the Indemnified Party to give such
notice shall not relieve the Indemnifying Party from any liability it shall
otherwise have pursuant to this Agreement except to the extent that the
Indemnifying Party is actually prejudiced by such failure. Such notice shall
set forth in reasonable detail (i) the basis for such potential claim and (ii)
the dollar amount of such claim.
(2) Defense of Claim. With respect to a claim by a third party against an
Indemnified Party for which indemnification may be sought under this Agreement,
the Indemnifying Party shall have the right, at its option, to be represented
by counsel of its choice and to assume the defense or otherwise control the
handling of any claim, suit, judgment or matter for which indemnify is sought,
which is set forth in the notice sent by the Indemnified Party, by notifying
the Indemnified Party in writing to such effect within fifteen days of receipt
of such notice; provided, however, that the Indemnified Party shall have the
right to employ counsel to represent it if, in the Indemnified Party's
reasonable judgment based upon the advice of counsel, it is advisable in light
of the separate interests of the Indemnified Party, to be represented by
separate counsel, and in that event the reasonable fees and expenses of such
separate counsel shall be paid by the Indemnifying Party. If the Indemnifying
Party does not give timely notice in accordance with the preceding sentence,
the Indemnifying Party shall be deemed to have given notice that it does not
wish to control the handling of such claim, suit or judgment. In the event the
Indemnifying Party elects (by notice in writing within such fifteen day period)
to assume the defense of or otherwise control the handling of any such claim,
suit, judgment or matter for which indemnity is sought, the Indemnifying Party
shall indemnify and hold harmless the Indemnified Party from and against any
and all reasonable professional fees (including attorneys' fees, accountants,
consultants and engineering fees) and investigation expenses incurred by the
Indemnifying Party prior to such election, notwithstanding the fact that the
Indemnifying Party may not have been so liable to the Indemnified Party had the
Indemnifying Party not elected to assume the defense of or to otherwise control
the handling of such claim, suit, judgment or other matter. In the event that
the Indemnifying Party does not assume the defense or otherwise control the
handling of such matter, the Indemnified Party may retain counsel, as an
indemnification expense, to defend such claim, suit, judgment or matter.
(3) Final Authority. The parties shall cooperate in the defense of any such
claim or litigation and each shall make available all books and records which
are relevant in connection with such claim or litigation. In connection with
any claim, suit or other proceeding with respect to which the Indemnifying
Party has assumed the defense or control, the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with respect
to any matter which does not include a provision whereby the plaintiff or
claimant in the matter releases the Indemnified Party from all liability with
<PAGE>
respect thereto, without the written consent of the Indemnified Party. In
connection with any claim, suit or other proceeding with respect to which the
Indemnifying Party has not assumed the defense or control, the Indemnified
Party may not compromise or settle such claim without the consent of the
Indemnifying Party, which shall not be unreasonably withheld and shall be
deemed to have been given if the Indemnified Party provides the Indemnifying
Party with a written notice setting forth the material terms of such compromise
or settlement and the Indemnifying Party does not object thereto in writing
within ten days of its receipt of such notice.
ARTICLE VI.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto and the Transaction Documents contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral or written, with respect to such
matters.
6.2 Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party (if received by 7:00 p.m. EST where such
notice is received) or the first business day following such delivery (if
received after 7:00 p.m. EST where such notice is received); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
SatCon Technology Corporation
161 First Street
Cambridge, MA 02142-1221
Telephone: (617)
Facsimile: (617) 576-7455
Attention: President and Chief Executive Officer
With a copy to:
Hale & Dorr LLP
60 State Street
Boston, MA 02109
Telephone: (617) 526-6468
Facsimile: (617) 526-5000
Attention: Jeffrey N. Carp, Esq.
If to Mechanical Technology Incorporated:
968 Albany-Shaker Road
Latham, New York 12110
Telephone: (518) 785-2211
Facsimile: (518) 785-2127
Attention: Cynthia A. Scheuer, Chief Financial Officer
<PAGE>
With a copy, in the case of Notice to Mechanical Technology Incorporated, to:
Catherine S. Hill, PLLC
4 Global View
Troy, New York 12180
Telephone: (518) 285-7586
Facsimile: (518) 285-7564
Attention: Catherine S. Hill
Each party shall provide written notice to the other party of any change in
address or facsimile number in accordance with the provisions hereof.
6.3 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and each of the Purchaser or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
6.4 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
6.5 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns.
Neither the Company nor the Purchaser may assign this Agreement or any rights
or obligations hereunder without the prior written consent of each of the other
party hereto. This provision shall not limit either the Purchaser's right or
the Company's right to transfer securities in accordance with all of the terms
of this Agreement or the Transaction Documents.
6.6 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
6.7 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the federal courts
sitting in the City of Albany, County of Albany or if diversity jurisdiction
cannot be obtained, then in the state courts sitting in the City of Albany,
County of Albany for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address for such notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
<PAGE>
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
6.8 Survival. The representations and warranties of the Company and the
Purchaser contained in Sections 2.1 and 2.2, the agreements and covenants set
forth in Section 3, and the indemnification provisions set forth in Section 5,
shall survive the Closing and any exercise of the A Warrant, the B Warrant and
the M Warrant regardless of any investigation made by or on behalf of the
Purchaser or by or on behalf of the Company, except that, in the case of
representations, warranties and indemnities such survival shall be limited to
the period of 18 months following the Closing Date on which they were made or
deemed to have been made, except for representations in 2.1(a), 2.1(b), 2.1(d),
2.1(i) and 2.1(v) which shall survive for the applicable statute of limitations
and 2.1(j) which shall survive for the period of two (2) years. This section
shall have no effect on the survival of the indemnification provisions of the
Registration Rights Agreement.
6.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature page were an original thereof.
6.10 Publicity. The Company and the Purchaser shall consult with each other
in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of the Purchaser without the
Purchaser's prior written consent. Subject to the Company's review and
approval, the Purchaser and its affiliated companies shall, without further
cost, have the right to use in its advertising, marketing or other similar
materials, the Company's logo and trademarks and all or parts of the Company's
press releases that focus on the Transaction forming the subject matter of this
Agreement or which make reference to the Transaction; provided, however, that
Company approval is not required with regard to formal newspaper announcements
of transactions or "tombstones." The Purchaser understands that this grant by
the Company only waives objections that the Company might have to the use of
such materials by the Purchaser and in no way constitutes a representation by
the Company that references in such materials to the activities of
third-parties have been cleared or constitute a fair use.
6.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
<PAGE>
6.12 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, the Purchaser will be
entitled to specific performance of the obligations of the Company under this
Agreement or the Transaction Documents without the showing of economic loss and
without any bond or other security being required. The Company and the
Purchaser (severally and not jointly) agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agree to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
6.13 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.14 Fees and Expenses. Except as set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Warrant Shares
pursuant hereto.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
SATCON TECHNOLOGY CORPORATION
By:/s/Daniel B. Eisenhaure
Name:Daniel B. Eisenhaure
Title:President and Chief Executive Officer
MECHANICAL TECHNOLOGY
INCORPORATED
By:/s/Cynthia A. Scheuer
Name:Cynthia A. Scheuer
Title:Vice President/Chief Financial Officer
EXHIBIT A
Form of SatCon Warrant
EXHIBIT B
Form of MTI Warrant
<PAGE>
EXHIBIT C
Form of SatCon Registration Rights Agreement
EXHIBIT D
Form of MTI Registration Rights Agreement
EXHIBIT E
Form of Legal Opinion
Exhibit 10.34
MTI REGISTRATION RIGHTS AGREEMENT
This MTI Registration Rights Agreement (this "Agreement") is made and entered
into as of October 21, 1999, between Mechanical Technology Incorporated, a New
York corporation (the "Company"), and SatCon Technology Corporation, a Delaware
corporation (the "Purchaser").
This Agreement is made pursuant to the Securities Purchase Agreement, dated as
of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that directly
or indirectly controls or is controlled by or under common control with such
Person. For the purposes of this definition, "control," when used with respect
to any Person, means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "affiliated," controlling" and "controlled" have meanings correlative to
the foregoing.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $1.00 per share.
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 4(c) hereof.
"Indemnifying Party" has the meaning set forth in Section 4(c) hereof.
"Person" means an individual or a corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind.
"Registrable Securities" means the shares of Common Stock issued or issuable
upon exercise of the Warrants, and any shares of the Company's capital stock
issued as a result of any stock split, stock dividend, recapitalization,
exchange or similar event; provided, that Registrable Securities shall not
include any such shares that are eligible for sale under Rule 144(k).
"Registration Statement" means the Initial Registration Statement and any
additional registration statements contemplated by Section 3, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
<PAGE>
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities" means the Company's Common Stock issuable pursuant to the Purchase
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Underlying Shares" means the shares of Common Stock issuable upon exercise of
the Warrants.
"Underwritten Registration or Underwritten Offering" means a registration in
connection with which securities of the Company are sold to an underwriter for
reoffering to the public pursuant to an effective registration statement.
"Warrants" means the warrants issuable to the Purchaser pursuant to the
Purchase Agreement.
2. Piggyback Registrations. Except as provided herein if, at any time when
there is not an effective Registration Statement covering the Registrable
Securities, the Company shall determine to prepare and file with the Commission
a registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-2 (but only in connection with a rights offering), S-4 or
Form S- 8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely to existing
shareholders or solely in connection with any acquisition of any entity or
business or equity securities issuable in connection with stock option or other
employee benefit plans, the Company shall send to each Holder of Registrable
Securities written notice of such determination and, if within ten (10) days
after receipt of such notice, any such Holder shall so request in writing,
(which request shall specify the Registrable Securities intended to be disposed
of by the Purchasers), the Company will use reasonable efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holder, to the extent
requisite to permit the disposition of the Registrable Securities so to be
registered, provided that if at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such Holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not from its
obligation to pay expenses in accordance with this Agreement), and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities being registered pursuant to this
<PAGE>
Section 2 for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such Holder requests to be registered;
provided, however, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 2 that are eligible for sale
pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten
public offering, if the managing underwriter(s) or underwriter(s) should
reasonably object to the inclusion of the Registrable Securities in such
registration statement, then if the Company after consultation with the
Underwriter's representative should reasonably determine that the inclusion of
such Registrable Securities would materially adversely affect the offering
contemplated in such registration statement, and based on such determination
recommends inclusion in such registration statement of fewer Registrable
Securities then proposed to be sold by the Holders, then (x) the number of
Registrable Securities of the Holder and other holders of piggy-back
registration rights included in such registration statement shall be reduced
pro rata among such Holders and other holders of piggy-back registration rights
(based upon the number of Registrable Securities requested to be included in
the registration) or, in the case of other holders of piggy-back registration
rights, in the manner provided for in that applicable agreement, or (y) none of
the Registrable Securities of the Holders shall be included in such
registration statement if the Company, after consultation with the
underwriter(s), recommends the inclusion of none of such Registrable
Securities; provided, however, that if securities are being offered for the
account of other persons or entities as well as the Company, such reduction
shall not represent a greater fraction of the number of Registrable Securities
intended to be offered by the Holders than the fraction of similar reductions
imposed on such other persons or entities (other than the Company).
3. Registration Expenses. In the event of a registration described in
Section 2, all reasonable expenses of registration and of the offering effected
thereby of any Holder of Registrable Securities participating in the offering,
including, without limitation, printing expenses, fees and disbursements of
counsel and independent public accountants, counsel to the holders fees and
expenses (including counsel fees incurred in connection with complying with
state securities or "blue sky" laws, fees of the National Association of
Securities Dealers, Inc. and fees of transfer agents and registrars), shall be
borne by the Company, except that each Holder of Registrable Securities shall
bear underwriting commissions, individual counsel fees, if any, and discounts
attributable to such Holder's Registrable Securities being registered.
4. Further Obligations of the Company. Whenever, under the preceding
sections of this Agreement, the Company is required hereunder to register
Registrable Securities, it agrees that it shall also do the following:
(a) Unless and until the distribution of all Registrable Securities
requested to be registered under section 2 above is complete, diligently
prepare for filing with the Commission a registration statement and such
amendments and supplements to said registration statement and the prospectus
used in connection therewith as may be necessary to keep said registration
statement effective for a period of at least 120 days and to comply with the
provisions of the Securities Act with respect to the sale of securities covered
by said registration statement for the period necessary to complete the
proposed public offering;
(b) Furnish to any selling Holder of Registrable Securities such copies of
each preliminary and final prospectus and such other documents as such Holder
may reasonably request to facilitate the public offering of its Registrable
Securities;
<PAGE>
(c) Enter into any underwriting agreement with provisions reasonably required
by the proposed underwriter for the selling Holder of Registrable Securities,
if any, and reasonably acceptable to the Company; and
(d) Register or qualify the Registrable Securities covered by said registration
statement under the securities or "blue-sky" laws of such jurisdictions as the
selling Holder of Registrable Securities may reasonably request.
5. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents (including any underwriters retained by such Holder
in connection with the offer and sale of Registrable Securities), investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and the officers, directors, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all joint or several losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, together with actions, proceedings
or inquiries by any regulatory or self-regulatory organization, whether
commenced or threatened, "Losses"), as incurred, arising out of or relating to
(i) any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary Prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading (in the
case of any Prospectus or form of prospectus or supplement thereto, in light of
the circumstances under which they were made), except to the extent, but only
to the extent, that such untrue statements or omissions are based upon and in
conformity with information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or (ii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
other law, including, without limitation, any state securities law, or any rule
or regulation thereunder relating to the offer or sale of Registrable
Securities, provided, however, that the Company shall not be required to
indemnify any person with respect to a loss arising out of a sale of any
Registrable Securities during any period during which the Company has advised
the Holder to suspend sales pursuant to a registration statement. The Company
shall not, however, be liable for any Losses to any Holder with respect to any
untrue or alleged untrue statement of material fact or omission or alleged
omission of material fact if such statement or omission was made in a
preliminary Prospectus and such Holder did not receive a copy of the final
Prospectus (or any amendment or supplement thereto) at or prior to the
confirmation of the sale of the Registrable Securities in any case where such
delivery is required by the Securities Act and the untrue or alleged untrue
statement of material fact or omission or alleged omission of material fact
contained in such preliminary Prospectus was corrected in the final Prospectus
(or any amendment or supplement thereto) and such final prospectus was provided
by the Company to the Holder prior to the time of such sale. The Company shall
notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement.
(b) Indemnification by Holder. The Holder shall indemnify and hold harmless
the Company, the directors, officers, agents and employees, each Person who
<PAGE>
controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, arising solely out of
or based solely upon (i) any untrue statement of a material fact contained in
the Registration Statement, any Prospectus, or any form of prospectus, or
arising solely out of or based solely upon any omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading to the extent, but only to the extent, that such untrue statement or
omission is contained in any information so furnished in writing by such Holder
to the Company specifically for inclusion in the Registration Statement or such
Prospectus and that such information was reasonably relied upon by the Company
for use in the Registration Statement, such Prospectus or such form of
prospectus or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of prospectus or (ii)
any violation or alleged violation by the Holders of the Securities Act, the
Exchange Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of Registrable Securities; provided, however, that the indemnity agreement
contained in this Section 4(b) shall not apply to amounts paid in settlement of
any Losses if such settlement is effected without the prior written consent of
such Holder. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the payment of
all fees and expenses incurred in connection with defense thereof; provided,
however, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant
to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
<PAGE>
consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing
to defend such Proceeding in a manner not inconsistent with this Section) shall
be paid to the Indemnified Party, as incurred, within ten (10) Business Days of
written notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 4(a) or 4(b)
is unavailable to an Indemnified Party because of a failure or refusal of a
court of competent jurisdiction to enforce such indemnification in accordance
with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 4(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms. In no event shall any selling Holder be required to
contribute an amount under this Section 4(d) in excess of the net proceeds
received by such Holder upon sale of the Registrable Securities pursuant to the
Registration Statement giving rise to such contribution obligation.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
<PAGE>
6. Rule 144.
During the period commencing on the date hereof and ending on the second
anniversary of the Secondary Closing (as defined in the Purchase Agreement), as
long as any Holder owns Registrable Securities, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or l5(d) of the Exchange Act. During the
period commencing on the date hereof and ending on the second anniversary of
the Secondary Closing (as defined in the Purchase Agreement), as long as any
Holder owns Registrable Securities, if the Company is not required to file
reports pursuant to Section 13(a) or l5(d) of the Exchange Act, it will prepare
and furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will use
commercially reasonable efforts to take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Person to sell Underlying Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including requesting of its counsel to provide any legal
opinions referred to in the Purchase Agreement. Upon the request of any Holder,
the Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements of this
Section 5.
7. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder of any
of their obligations under this Agreement, each Holder or the Company, as the
case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement. The Company and
each Holder agree that monetary damages would not provide adequate compensation
for any losses incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holder in this Agreement or otherwise conflicts with or limits the
provisions hereof. Neither the Company nor any of its subsidiaries currently
has in force or effect any agreement granting any registration rights with
respect to any of its securities to any Person. This Agreement, together with
the Purchase Agreement and SatCon Registration Rights Agreement, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
(c) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
<PAGE>
unless the same shall be in writing and signed by the Company and the Holders
of at least two-thirds of the then outstanding Registrable Securities;
provided, however, that for the purposes of this sentence, Registrable
Securities that are owned, directly or indirectly, by the Company, or an
Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holder and that
does not directly or indirectly affect the rights of other Holder may be given
by Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.
(d) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with
correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
5:00 p.m. eastern time where such notice is to be received), or the first
Business Day following such delivery (if received after 5:00 p.m. eastern time
where such notice is to be received) or (b) on the second Business Day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications are (i) if to the
Purchaser to SatCon Technology Corporation, 161 First Street, Cambridge, MA
02142-1221, Attn: President and Chief Executive Officer, fax no. (617)
576-7455, with copies to Hale & Dorr LLP, 60 State Street, Boston, MA 02109,
Attn: Jeffrey N. Carp, Esq., fax no. (617) 526-5000 and (ii) if to Company to
Mechanical Technology Incorporated, 968 Albany-Shaker Road, Latham, New York
12110. Attention: Chief Financial Officer with copies to Catherine S. Hill,
PLLC, 4 Global View, Troy, New York 12180 Attn: Catherine S. Hill, Esq., fax
no. (518) 285- 7564 or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of the Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of the
Holder. The Holder may assign its rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement. In addition, the rights of
the Holder hereunder, including the right to have the Company register for
resale Registrable Securities in accordance with the terms of this Agreement,
shall be automatically assignable by the Holder if: (i) the Holder agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer
or assignment, furnished with written notice of (a) the name and address of
such transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Holders (and to subsequent) successors
and assigns.
<PAGE>
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) the same with the same force
and effect as if such facsimile signature were the original thereof.
(g) Governing Law. The corporate laws of the State of New York shall govern
all issues concerning the relative rights of the Company and the Purchaser as
its stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the federal courts sitting in the City of Albany,
County of Albany, or if diversity jurisdiction cannot be obtained, then in the
state courts sitting in the City of Albany, County of Albany, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consent to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(h) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(i) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties hereto shall
use their reasonable efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.
(j) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(k) Shares Held by The Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its
Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(l) Revision of SEC Position on Warrants. In the event the rules and
regulations of the Commission or the policies of the staff of the Commission
are modified and as a result thereof the Company determines in good faith that
<PAGE>
it may be practicable and in the interests of the Company and the Holders to
register the exercise of the Warrants so that the Warrant Shares may be freely
resold without maintaining an effective registration statement under the
Securities Act for resales, the Company and the Holders agree to cooperate in
good faith to effect such amendments to this Agreement as may be appropriate to
provide that the Company may fulfill its obligations hereunder with respect to
the Warrants and the Warrant Shares by maintaining an effective registration
statement under the Securities Act covering the exercise of the Warrants rather
than the resale of the Warrant Shares.
IN WITNESS WHEREOF, the parties have executed this MTI Registration Rights
Agreement as of the date first written above.
MECHANICAL TECHNOLOGY INCORPORATED
By:/s/Cynthia A. Scheuer
Name:Cynthia A. Scheuer
Title:Vice President/Chief Financial Officer
SATCON TECHNOLOGY CORPORATION
By:/s/David B. Eisenhaure
Name:David B. Eisenhaure
Title:President/Chief Executive Officer
Exhibit 10.35
SATCON REGISTRATION RIGHTS AGREEMENT
This SatCon Registration Rights Agreement (this "Agreement") is made and
entered into as of October 21, 1999, between SatCon Technology Corporation, a
Delaware corporation (the "Company"), and Mechanical Technology Incorporated, a
New York corporation (the "Purchaser").
This Agreement is made pursuant to the Securities Purchase Agreement, dated as
of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement. As used in this Agreement, the
following terms shall have the following meanings:
"Advice" has meaning set forth in Section 3(m) hereof.
"Affiliate" means, with respect to any Person, any other Person that directly
or indirectly controls or is controlled by or under common control with such
Person. For the purposes of this definition, "control," when used with respect
to any Person, means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "affiliated," controlling" and "controlled" have meanings correlative to
the foregoing.
"Aggregate Price" has the meaning set forth in Section 2(d) hereof.
"AMEX" shall mean the American Stock Exchange.
"Business Day" means any day except Saturday, Sunday and any day which shall be
a legal holiday or a day on which banking institutions in the State of New York
generally are authorized or required by law or other government actions to
close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $0.01 per share.
"Effectiveness Date" means the earlier of the 180th day following the (i)
Primary Closing Date (with respect to the Common Stock and Underlying
Securities issuable upon the exercise of the Warrants issued on the Primary
Closing Date), (ii) Secondary Closing Date (with respect to the Common Stock
and Underlying Securities issuable upon the exercise of the Warrant issued on
the Secondary Closing Date or (iii) the fifth day after the Company has
received notice (written or oral) from the Commission that the Commission Staff
will not be reviewing the applicable Registration Statement or has no further
comments on the applicable Registration Statement.
"Effectiveness Period" has the meaning set forth in Section 2(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Event" has the meaning set forth in Section 2(d) hereof.
<PAGE>
"Filing Date" means as soon as practicable but in no event later than the 90th
day following the Primary Closing Date or the Secondary Closing Date, as
applicable.
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 5(c) hereof.
"Indemnifying Party" has the meaning set forth in Section 5(c) hereof.
"Initial Registration Statement" has the meaning set forth in Section 2(a)
hereof.
"Losses" has the meaning set forth in Section 5(a) hereof.
"Nasdaq" shall mean the Nasdaq Stock Market.
"NYSE" shall mean the New York Stock Exchange.
"Person" means an individual or a corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind.
"Primary Closing Date" shall mean the Primary Closing Date as defined in the
Purchase Agreement.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.
"Registrable Securities" means the shares of Common Stock issued or issuable
upon exercise of the Warrants, and any shares of the Company's capital stock
issued as a result of any stock split, stock dividend, recapitalization,
exchange or similar event; provided, that Registrable Securities shall not
include any such shares that are eligible for sale under Rule 144(k).
"Registration Statement" means the Initial Registration Statement and any
additional registration statements contemplated by Sections 2(a) and 7(d),
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference in
such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
<PAGE>
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Secondary Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Securities" means the Company's Common Stock issuable pursuant to the Purchase
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one special counsel to the Holders, for which the
Holders will be reimbursed by the Company to the extent provided in Section 4.
"Trading Day" means a day on which the Nasdaq (or in the event the Common Stock
is not traded on Nasdaq, such other securities market on which the Common Stock
is listed) is open for trading.
"Underlying Shares" means the shares of Common Stock issuable upon exercise of
the Warrants.
"Underwritten Registration or Underwritten Offering" means a registration in
connection with which securities of the Company are sold to an underwriter for
reoffering to the public pursuant to an effective registration statement.
"Warrants" means the warrants issuable pursuant to the Purchase Agreement.
2. Registration Requirements
(a) Filing and Effectiveness Obligations. On or prior to the Filing Date
relating to each of the Primary Closing Date and the Secondary Closing Date, the
Company shall prepare and file with the Commission a Registration Statement (the
"Initial Registration Statement") which shall cover all Registrable Securities
issued to the Purchaser on such closing date for an offering to be made on a
continuous basis pursuant to a "Shelf" registration statement under Rule 415.
The Initial Registration Statement shall be on Form S-3 or any successor form
(except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance herewith, subject to the reasonable
consent of the original Holders of the Registrable Securities). The Company
shall (i) not permit any securities other than the Registrable Securities and
securities with respect to which there are outstanding demand or "piggy-back"
registration rights as of the date of filing of each Initial Registration
Statement to be included in the Initial Registration Statement and (ii) use
commercially reasonable efforts to cause the Initial Registration Statement to
be declared effective under the Securities Act as promptly as possible after the
filing thereof, and prior to the Effectiveness Date, and, except as provided
herein, to keep such Initial Registration Statement continuously effective under
the Securities Act until the date which is two years after the date that such
Initial Registration Statement is declared effective by the Commission or such
earlier date when all Registrable Securities covered by such Initial
Registration Statement have been sold or may be sold without volume restrictions
<PAGE>
pursuant to Rule 144 as determined by counsel to the Company pursuant to a
written opinion letter, addressed to the Holders and the Company's transfer
agent to such effect (the "Effectiveness Period"). The number of shares of
Common Stock initially included in the Initial Registration Statement with
respect to each closing shall be the sum of the number of Securities and shares
of Common Stock that are then issuable upon the exercise of the Warrants which
were issued by the Company at such closing, without regard to any limitation on
the Investor's ability to exercise the Warrants. If at any time the number of
shares of Common Stock issuable pursuant to the Warrant is adjusted in
accordance with the terms thereof, and more shares are issuable pursuant to the
Warrants than remain available for sale pursuant to the Initial Registration
Statement, the Company shall immediately, but in no more than five (5) Business
Days, file a Registration Statement sufficient to register such additional
shares of Common Stock.
(b) Form S-3 Eligibility. The Company represents and warrants that it
currently meets the registrant eligibility and transaction requirements for the
use of Form S-3 (for primary and secondary offerings) for the registration of
the sale of Registrable Securities by the Purchasers and any other Holders and
the Company shall file all reports required to be filed by the Company with the
Commission in a timely manner so as to maintain such eligibility for the use of
Form S-3.
3. Registration Procedures
In connection with the Company's registration obligations hereunder arising out
of the Primary Closing Date transactions and the Secondary Closing Date
transactions (but specifically excluding the Company's obligations under
Section 7(c) hereof which shall be governed by Section 7(c) of the Brown
Simpson Agreement, the Company shall:
(a) Preparation of Registration Statement. Prepare and file with the
Commission on or prior to each Filing Date a Registration Statement on Form S-3
or its successor form (or if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3 such registration shall be on
another appropriate form in accordance herewith (which shall include a Plan of
Distribution substantially in the form of Exhibit A annexed hereto.
(b) Amendments. (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities
Act all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the Securities Act; (iii) respond
as promptly as possible to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto and as promptly
as possible provide the Holders true and complete copies of all correspondence
from and to the Commission relating to the Registration Statement; and (iv)
comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders thereof set
forth in the Registration Statement as so amended or in such Prospectus as so
supplemented.
<PAGE>
(c) Notifications. Notify the Holders of Registrable Securities to be sold,
as promptly as possible (and, in the case of (i)(A) below, not less than five
(5) days prior to such filing and, in the case of (i)(C) below, not later than
the first Business Day after effectiveness) and (if requested by any such
Person) confirm such notice in writing no later than one (1) Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post- effective amendment to the Registration Statement is proposed to be
filed; (B) when the Commission notifies the Company whether there will be a
"review" of such Registration Statement and whenever the Commission comments in
writing on such Registration Statement and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction, or the initiation or threatening of any Proceeding for
such purpose; and (vi) of the occurrence of any event that makes any statement
made in the Registration Statement or Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration
Statement or the Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) Suspensions. Use its reasonable efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the effectiveness
of the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) Supplements and Post-Effective Amendments. If requested by any managing
underwriter or the Holders of a majority in interest of the Registrable
Securities to be sold in connection with an Underwritten Offering, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the Company reasonably agrees should
be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section 3(e)
that would, in the opinion of counsel for the Company, violate applicable law
or if the Holders of a majority of the Registrable Securities consent to the
delay in taking, or the failure to take, any such action, which consent shall
not be unreasonably withheld.
(f) Copies of Registration Statement. Furnish to each Holder, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all
exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.
<PAGE>
(g) Copies of Prospectus. Promptly deliver to each Holder, without charge,
as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders and any underwriters in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Blue Sky. Prior to any public offering of Registrable Securities, use
commercially reasonable efforts to register or qualify or cooperate with the
selling Holders, in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder or underwriter requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in
any such jurisdiction where it is not then so subject or subject the Company to
any material tax in any such jurisdiction where it is not then so subject.
(i) Certificates. Cooperate with the Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall be free,
to the extent permitted by applicable law and the Purchase Agreement, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such managing underwriters or
Holders may request at least two (2) Business Days prior to any sale of
Registrable Securities.
(j) Supplements and Amendments. Upon the occurrence of any event
contemplated by Section 3(c)(vi), as promptly as possible, prepare a supplement
or amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(k) Listing. Cause all Registrable Securities relating to each Registration
Statement to be listed on Nasdaq and any other securities exchange, quotation
system, market or over-the-counter bulletin board, if any, on which similar
securities issued by the Company are then listed as and when required pursuant
to the Purchase Agreement.
(l) Earnings Statement. Comply in all material respects with all applicable
rules and regulations of the Commission and make generally available to its
securityholders earning statements satisfying the provisions of Section 11(a)
of the Securities Act and Rule 158 not later than 45 days after the end of any
12-month period (or 90 days after the end of any 12- month period if such
period is a fiscal year), commencing on the first day of the first fiscal
quarter of the Company after the effective date of the Registration Statement,
which statement shall conform to the requirements of Rule 158.
<PAGE>
(m) Information. The Company may require each selling Holder to furnish to
the Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the
Registration Statement, and the Company may exclude from such registration the
Registrable Securities of any such Holder who unreasonably fails to furnish
such information within a reasonable time after receiving such request.
The Company shall hold in confidence and not make any disclosure of information
concerning a Holder provided to the Company unless (i) disclosure of such
information, in the opinion of counsel to the Company, is required by law, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) disclosure of
such information is required by court or administrative order or is necessary
to respond to inquiries of regulatory authorities (provided, however, that the
Holder shall be given notice of any such pending disclosure so that the Holder
may seek a protective order), or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning a Holder is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to such Holder prior to making such disclosure, and allow the
Holder, at its expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.
If the Registration Statement refers to any Holder by name or otherwise as the
holder of any securities of the Company, then such Holder shall have the right
to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force)
the deletion of the reference to such Holder in any amendment or supplement to
the Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any Registrable
Securities under the Registration Statement until it has received copies of the
Prospectus as then amended or supplemented as contemplated in Section 3(g) and
notice from the Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by Section 3(c) and
(ii) it and its officers, directors or Affiliates, if any, will comply with the
prospectus delivery requirements of the Securities Act as applicable to them in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
Each Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the kind
described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi), such
Holder will forthwith discontinue disposition of such Registrable Securities
under the Registration Statement until such Holder's receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement contemplated
by Section 3(j), or until it is advised in writing (the "Advice") by the
Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus
or Registration Statement. Notwithstanding anything to the contrary, the
Company shall cause its transfer agent to deliver unlegended shares of Common
Stock to a transferee of a Holder in accordance with the terms of the
Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Holder has entered into a contract for sale
prior to the Holder's receipt of a notice from the Company of the happening of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
<PAGE>
3(c)(v) or 3(c)(vi) and for which the Holder has not yet settled.
(n) Responses to the Commission. The Company agrees to respond fully and
completely to any and all comments on a Registration Statement received from
the Commission staff as promptly as possible but, for non-Underwritten
Offerings, in no event later than ten (10) Business Days of the receipt of such
comments, regardless of whether such comments are in oral or written form.
(o) Confirmation of Effectiveness. Within two (2) Business Days after a
Registration Statement which covers applicable Registrable Securities is
ordered effective by the Commission, the Company shall deliver, and shall cause
legal counsel for the Company to deliver, to the transfer agent for such
Registrable Securities (with copies to the Holders whose Registrable Securities
are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the Commission in the
form attached hereto as Exhibit B.
(p) Notwithstanding any other provision of this Section 3, the Company may
delay the filing or effectiveness of any Registration Statement or any
amendment or supplement thereto and suspend the right of the Holders to effect
sales of Registrable Securities thereunder for one or more periods (each a
"Suspension Period") of up to 60 calendar days in the aggregate per twelve (12)
month period in the event that such filing, effectiveness or sale would require
the Company to disclose any non-public information that the Company is not
otherwise required to disclose or to file any financial statements that the
Company is not otherwise required to file, provided however, that no Suspension
Period shall exceed 45 consecutive calendar days.
(q) Notwithstanding any other provision of this Section 3, the Holders shall
not be permitted to effect sales of the Registrable Securities under a
Registration Statement during a period in which the Company is engaged in the
process of registering under the Securities Act in an underwritten offering,
for as long as the underwriter reasonably considers is necessary.
4. Registration Expenses
All fees and expenses incident to the performance of or compliance with this
Agreement by the Company (other than Section 7(c) hereof which will be governed
by Section 7(c) of the Brown Simpson Agreement) shall be borne by the Company,
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to
be made with Nasdaq and each other securities exchange or market on which
Registrable Securities are required hereunder to be listed and (B) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection
with Blue Sky qualifications as determined by a majority in interest of the
Holders), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is requested by the holders of a majority of
the Registrable Securities included in the Registration Statement), (iii)
messenger, telephone and delivery expenses, (iv) reasonable fees and
disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in
<PAGE>
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder. The Company shall not be required to pay selling concessions,
discounts or other compensation paid to brokers, underwriters or other agents
in connection with the sale of any Registrable Securities, whether or not
incurred in an Underwritten Offering, or fees and expenses incurred by a Holder
that are not specified in this Section.
5. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents (including any underwriters retained by such Holder
in connection with the offer and sale of Registrable Securities), investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and the officers, directors, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all joint or several losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, together with actions, proceedings
or inquiries by any regulatory or self-regulatory organization, whether
commenced or threatened, "Losses"), as incurred, arising out of or relating to
(i) any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary Prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading (in the
case of any Prospectus or form of prospectus or supplement thereto, in light of
the circumstances under which they were made), except to the extent, but only
to the extent, that such untrue statements or omissions are based upon and in
conformity with information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or (ii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
other law, including, without limitation, any state securities law, or any rule
or regulation thereunder relating to the offer or sale of Registrable
Securities, provided, however, that the Company shall not be required to
indemnify any person with respect to a loss arising out of a sale of any
Registrable Securities during any period during which the Company has advised
the Holder to suspend sales pursuant to a registration statement. The Company
shall not, however, be liable for any Losses to any Holder with respect to any
untrue or alleged untrue statement of material fact or omission or alleged
omission of material fact if such statement or omission was made in a
preliminary Prospectus and such Holder did not receive a copy of the final
Prospectus (or any amendment or supplement thereto) at or prior to the
confirmation of the sale of the Registrable Securities in any case where such
delivery is required by the Securities Act and the untrue or alleged untrue
statement of material fact or omission or alleged omission of material fact
contained in such preliminary Prospectus was corrected in the final Prospectus
(or any amendment or supplement thereto), unless the failure to deliver such
final Prospectus (as amended or supplemented) was a result of noncompliance by
the Company with Section 3(g) of this Agreement. The Company shall notify the
<PAGE>
Holders promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement.
(b) Indemnification by Holder. The Holder shall indemnify and hold harmless
the Company, the directors, officers, agents and employees, each Person who
controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, arising solely out of
or based solely upon (i) any untrue statement of a material fact contained in
the Registration Statement, any Prospectus, or any form of prospectus, or
arising solely out of or based solely upon any omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading to the extent, but only to the extent, that such untrue statement or
omission is contained in any information so furnished in writing by such Holder
to the Company specifically for inclusion in the Registration Statement or such
Prospectus and that such information was reasonably relied upon by the Company
for use in the Registration Statement, such Prospectus or such form of
prospectus or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of prospectus or (ii)
any violation or alleged violation by the Holders of the Securities Act, the
Exchange Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of Registrable Securities; provided, however, that the indemnity agreement
contained in this Section 5(b) shall not apply to amounts paid in settlement of
any Losses if such settlement is effected without the prior written consent of
such Holder. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the payment of
all fees and expenses incurred in connection with defense thereof; provided,
however, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant
to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
<PAGE>
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing
to defend such Proceeding in a manner not inconsistent with this Section) shall
be paid to the Indemnified Party, as incurred, within ten (10) Business Days of
written notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party because of a failure or refusal of a
court of competent jurisdiction to enforce such indemnification in accordance
with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms. In no event shall any selling Holder be required to
contribute an amount under this Section 5(d) in excess of the net proceeds
received by such Holder upon sale of the Registrable Securities pursuant to the
Registration Statement giving rise to such contribution obligation.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
<PAGE>
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Rule 144
During the Effectiveness Period, as long as any Holder owns Registrable
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or l5(d) of the Exchange Act. During the Effectiveness Period, as long as
any Holder owns Registrable Securities, if the Company is not required to file
reports pursuant to Section 13(a) or l5(d) of the Exchange Act, it will prepare
and furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will use
commercially reasonable efforts to take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Person to sell Underlying Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including requesting of its counsel to provide any legal
opinions referred to in the Purchase Agreement. Upon the request of any Holder,
the Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements of this
Section 6.
7. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder of any
of their obligations under this Agreement, each Holder or the Company, as the
case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement. The Company and
each Holder agree that monetary damages would not provide adequate compensation
for any losses incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holder in this Agreement or otherwise conflicts with or limits the
provisions hereof. Except as disclosed in Schedule 2.1(a) of the Purchase
Agreement, neither the Company nor any of its subsidiaries has previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person. This Agreement, together with the Purchase
Agreement and the MTI Registration Rights Agreement, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters.
<PAGE>
(c) Piggy-Back Registrations. Except as provided herein if, at any time
when there is not an effective Registration Statement covering the Registrable
Securities, the Company shall determine to prepare and file with the Commission
a registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans (and other than a registration statement filed pursuant to Section 2(b)
of the Registration Rights Agreement between the Company and Brown Simpson
Capital Management, LLC (and/or its affiliated fund), the Company shall send to
each Holder of Registrable Securities written notice of such determination and,
if within ten (10) days after receipt of such notice, any such Holder shall so
request in writing, (which request shall specify the Registrable Securities
intended to be disposed of by the Purchasers), the Company will use reasonable
efforts to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Holder,
to the extent requisite to permit the disposition of the Registrable Securities
so to be registered, provided that if at any time after giving written notice
of its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register or to delay registration
of such securities, the Company may, at its election, give written notice of
such determination to such Holder and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay expenses in accordance with Section 4 hereof), and (ii)
in the case of a determination to delay registering, shall be permitted to
delay registering any Registrable Securities being registered pursuant to this
Section 7(c) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such Holder requests to be registered;
provided, however, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 7(c) that are eligible for sale
pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten
public offering, if the managing underwriter(s) or underwriter(s) should
reasonably object to the inclusion of the Registrable Securities in such
registration statement, then if the Company after consultation with the
Underwriter's representative should reasonably determine that the inclusion of
such Registrable Securities would materially adversely affect the offering
contemplated in such registration statement, and based on such determination
recommends inclusion in such registration statement of fewer Registrable
Securities then proposed to be sold by the Holders, then (x) the number of
Registrable Securities of the Holder and other holders of piggy-back
registration rights included in such registration statement shall be reduced
pro rata among such Holders and other holders of piggy-back registration rights
(based upon the number of Registrable Securities requested to be included in
the registration) or, in the case of other holders of piggy-back registration
rights, in the manner provided for in that applicable agreement, or (y) none of
the Registrable Securities of the Holders shall be included in such
registration statement if the Company, after consultation with the
underwriter(s), recommends the inclusion of none of such Registrable
Securities; provided, however, that if securities are being offered for the
account of other persons or entities as well as the Company, such reduction
shall not represent a greater fraction of the number of Registrable Securities
intended to be offered by the Holders than the fraction of similar reductions
imposed on such other persons or entities (other than the Company).
Notwithstanding the foregoing, the Company shall not file any registration
<PAGE>
statement under the Securities Act (other than on Form S-4 or Form S-8)
relating to the offer and sale of any equity securities of the Company, or
offer or sell any equity securities of the Company in a transaction exempt from
registration pursuant to Regulation S under the Securities Act, until such time
as the Initial Registration Statement has been effective for a period of sixty
(60) Trading Days, which period shall be tolled if the effectiveness of the
Initial Registration Statement is suspended for any reason whatsoever.
(d) Further Obligations of the Company. Whenever, under the preceding
sections of this Agreement, the Company is required hereunder to register
Registrable Securities pursuant to Section 7(c) above, it agrees that it shall
also do the following:
(1) Unless and until the distribution of all Registrable Securities
requested to be registered under section 7(c) above is complete, diligently
prepare for filing with the Commission a registration statement and such
amendments and supplements to said registration statement and the prospectus
used in connection therewith as may be necessary to keep said registration
statement effective for a period of at least 120 days and to comply with the
provisions of the Securities Act with respect to the sale of securities covered
by said registration statement for the period necessary to complete the
proposed public offering;
(2) Furnish to any selling Holder of Registrable Securities such copies of
each preliminary and final prospectus and such other documents as such Holder
may reasonably request to facilitate the public offering of its Registrable
Securities;
(3) Enter into any underwriting agreement with provisions reasonably required
by the proposed underwriter for the selling Holder of Registrable Securities,
if any, and reasonably acceptable to the Company; and
(4) Register or qualify the Registrable Securities covered by said registration
statement under the securities or "blue-sky" laws of such jurisdictions as the
selling Holder of Registrable Securities may reasonably request.
(e) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders
of at least two-thirds of the then outstanding Registrable Securities;
provided, however, that for the purposes of this sentence, Registrable
Securities that are owned, directly or indirectly, by the Company, or an
Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holder and that
does not directly or indirectly affect the rights of other Holder may be given
by Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.
(f) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with
correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
5:00 p.m. eastern time where such notice is to be received), or the first
Business Day following such delivery (if received after 5:00 p.m. eastern time
<PAGE>
where such notice is to be received) or (b) on the second Business Day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications are (i) if to the
Company to SatCon Technology Corporation, 161 First Street, Cambridge, MA
02142-1221, Attn: President and Chief Executive Officer, fax no. (617)
576-7455, with copies to Hale & Dorr LLP, 60 State Street, Boston, MA 02109,
Attn: Jeffrey N. Carp, Esq., fax no. (617) 526-5000 and (ii) if to Purchaser to
Mechanical Technology Incorporated, 968 Albany-Shaker Road, Latham, New York
12110. Attention: Chief Financial Officer with copies to Catherine S. Hill,
PLLC, 4 Global View, Troy, New York 12180 Attn: Catherine S. Hill, Esq., fax
no. (518) 285- 7564 or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of the Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of the
Holder. The Holder may assign its rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement. In addition, the rights of
the Holder hereunder, including the right to have the Company register for
resale Registrable Securities in accordance with the terms of this Agreement,
shall be automatically assignable by the Holder if: (i) the Holder agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer
or assignment, furnished with written notice of (a) the name and address of
such transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Holders (and to subsequent) successors
and assigns.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) the same with the same force
and effect as if such facsimile signature were the original thereof.
(i) Governing Law. The corporate laws of the State of Delaware shall govern
all issues concerning the relative rights of the Company and the Purchaser as
its stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the federal courts sitting in the City of Albany,
County of Albany or if diversity jurisdiction cannot be obtained, then in the
state courts sitting in the city of Albany, county of Albany, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
<PAGE>
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consent to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(j) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties hereto shall
use their reasonable efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.
(l) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(m) Shares Held by The Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its
Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(n) Revision of SEC Position on Warrants. In the event the rules and
regulations of the Commission or the policies of the staff of the Commission
are modified and as a result thereof the Company determines in good faith that
it may be practicable and in the interests of the Company and the Holders to
register the exercise of the Warrants so that the Warrant Shares may be freely
resold without maintaining an effective registration statement under the
Securities Act for resales, the Company and the Holders agree to cooperate in
good faith to effect such amendments to this Agreement as may be appropriate to
provide that the Company may fulfill its obligations hereunder with respect to
the Warrants and the Warrant Shares by maintaining an effective registration
statement under the Securities Act covering the exercise of the Warrants rather
than the resale of the Warrant Shares.
[SIGNATURE PAGE TO FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this SatCon Registration Rights
Agreement as of the date first written above.
SATCON TECHNOLOGY CORPORATION
By:/s/ David B. Eisenhaure
Name:David B. Eisenhaure
Title:President/Chief Executive Officer
MECHANICAL TECHNOLOGY INCORPORATED
By:/s/ Cynthia A. Scheuer
Name:Cynthia A. Scheuer
Title:Vice President/Chief Financial Officer
EXHIBIT A
PLAN OF DISTRIBUTION
Our company is registering the shares of common stock on behalf of the selling
stockholders. All costs, expenses and fees in connection with the registration
of the shares offered by this prospectus will be borne by the Company, other
than brokerage commissions and similar selling expenses, if any, attributable
to the sale of shares which will be borne by the selling stockholders. Sales of
shares may be effected by selling stockholders from time to time in one or more
types of transactions (which may include block transactions) on the Nasdaq
National Market, in the over-the-counter market, in negotiated transactions,
through put or call options transactions relating to the shares, through short
sales of shares, or a combination of such methods of sale, at market prices
prevailing at the time of sale, or at negotiated prices. Such transactions may
or may not involve brokers or dealers. The selling stockholders have advised
our company that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of
their securities, nor is there an underwriter or coordinated broker acting in
connection with the proposed sale of shares by the selling stockholders.
The selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with such
transactions, broker-dealers or other financial institutions may engage in
short sales of the shares or of securities convertible into or exchangeable for
the shares in the course of hedging positions they assume with selling
stockholders. The selling stockholders may also enter into options or other
transactions with broker-dealers or other financial institutions which require
the delivery to such broker-dealers or other financial institutions of shares
offered by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as amended or supplemented
to reflect such transaction).
The selling stockholders may make these transactions by selling shares directly
to purchasers or to or through broker-dealers, which may act as agents or
principals. Such broker- dealers may receive compensation in the form of
discounts, concessions or commissions from selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
<PAGE>
they sell as principal, or both (which compensation as to a particular broker-
dealer might be in excess of customary commissions).
The selling stockholders and any broker-dealers that act in connection with the
sale of shares are "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by such broker-dealers or any
profit on the resale of the shares sold by them while acting as principals
might be deemed to be underwriting discounts or commissions under the
Securities Act. The selling stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of
the shares against certain liabilities, including liabilities arising under the
Securities Act.
Because selling stockholders are "underwriters" within the meaning of Section
2(11) of the Securities Act, the selling stockholders will be subject to the
prospectus delivery requirements of the Securities Act. Our company has
informed the selling stockholders that the anti-manipulative provisions of
Regulation M promulgated under the Exchange Act may apply to their sales in the
market.
Selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of Rule 144.
Upon our company being notified by a selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
- - the name of each such selling stockholder and of the participating broker-
dealer(s);
- - the number of shares involved;
- - the initial price at which such shares were sold;
- - the commissions paid or discounts or concessions allowed to such
broker- dealer(s), where applicable;
- - that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this prospectus; and
- - other facts material to the transactions.
In addition, upon our company being notified by a selling stockholder that a
donee or pledgee intends to sell more than 500 shares, a supplement to this
prospectus will be filed.
<PAGE>
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn.:
Re: SatCon Technology Corporation
Ladies and Gentlemen:
We are counsel to SatCon Technology Corporation, a Delaware corporation (the
"Company"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "Purchase Agreement") entered into by and
among the Company and Mechanical Technology Incorporated (the "Holder")
pursuant to which the Company issued to the Holder its shares of the Company's
common stock, par value $0.01 per share (the "Common Stock"), and Warrants (the
"the Warrants") to acquire shares of Common Stock. Pursuant to the Purchase
Agreement, the Company also has entered into a Registration Rights Agreement
with the Holder (the "Registration Rights Agreement") pursuant to which the
Company agreed, among other things, to register the Registrable Securities (as
defined in the Registration Rights Agreement), including the shares of Common
Stock and shares of Common stock issuable upon exercise of the Warrants, under
the Securities Act of 1933, as amended (the "1933 Act"). In connection with the
Company's obligations under the Registration Rights Agreement, on
_______________, 1999, the Company filed a Registration Statement on Form S-3
(File No. 333-_____________) (the "Registration Statement") with the Securities
and Exchange Commission (the "SEC") relating to the Registrable Securities
which names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
cc: [LIST NAMES OF HOLDERS]
Exhibit 10.36
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
October 21, 1999
36,000 shares Warrant No. 1
MECHANICAL TECHNOLOGY INCORPORATED
STOCK PURCHASE WARRANT
Registered Owner: SatCon Technology Corporation
This certifies that, for value received, Mechanical Technology Incorporated, a
New York corporation, the ("Company") grants the following rights to the
Registered Owner, or assigns, of this Warrant:
1. Issue. Upon tender (in accordance with Section 5 hereof) to the Company, the
Company, within three (3) Business Days of the date thereof, shall issue to the
Registered Owner, or assigns, up to the number of shares specified in Section 2
hereof of fully paid and nonassessable shares of Common Stock that the
Registered Owner, or assigns, is otherwise entitled to purchase.
2. Number of Shares. The total number of shares of Common Stock that the
Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant (the "Warrant Shares") is 36,000 shares, subject to
adjustment from time to time as to the number and kind of securities for which
this Warrant is exercisable, all as set forth in Section 6 hereof. The Company
shall at all times reserve and hold available out of its authorized and unissued
shares of Common Stock or other securities, as the case may be, sufficient
shares of Common Stock to satisfy all conversion and purchase rights represented
by outstanding convertible securities, options and warrants, including this
Warrant. The Company covenants and agrees that all shares of Common Stock or
other securities, as the case may be, that may be issued upon the exercise of
this Warrant shall, upon issuance, be duly and validly issued, fully paid and
nonassessable, free from all taxes, liens and charges with respect to the
purchase and the issuance of the shares, and shall not have any legend or
restrictions on resale, expect as required by Section 3.13 of the Purchase
Agreement.
3. Exercise Price. The per share exercise price of this Warrant, representing
the price per share at which the shares of stock issuable upon exercise of this
Warrant may be purchased, is $37.66, subject to adjustment from time to time
pursuant to the provisions of Section 6 hereof (the "Exercise Price").
4. Exercise Period. This Warrant may be exercised from the Closing Date (as
defined in the Purchase Agreement) up to and including October 13, 2003 (the
"Exercise Period"). If not exercised during this period, this Warrant and all
rights granted under this Warrant shall expire and lapse.
<PAGE>
5. Tender; Issuance of Certificates.
a. Subject to Section 15 hereof, this Warrant may be exercised, in whole or in
part, by (i) actual delivery of (a) the Exercise Price in cash or exchange of
in-the-money warrants, (b) a duly executed Warrant Exercise Form, a copy of
which is attached to this Warrant as Exhibit A, properly executed by the
Registered Owner, or assigns, of this Warrant, and (c) by surrender of this
Warrant. The Warrant Shares so purchased shall be deemed to be issued to the
Registered Owner as of the close of business on the date (the "Exercise Date")
on which the last of the following shall have occurred: (i) this Warrant shall
have been surrendered and (ii) the completed Warrant Exercise Form shall have
been delivered and payment shall have been made for such shares as set forth
above. The payment and Warrant Exercise Form must be delivered to the registered
office of the Company either in person or as set for in Section 12 hereof.
b. In lieu of physical delivery of the Warrant, provided the Company's transfer
agent is participating in the Depositary Trust Company's ("DTC") Fast automated
Securities Transfer ("FAST") program, upon request of the Registered Owner and
in compliance with the provisions hereof, the Company shall use its best efforts
to cause its transfer agent to electronically transmit the Warrant Shares to the
Registered Owner by crediting the account of the Registered Owner's Prime Broker
with DTC through its Deposit Withdrawal Agent Commission system. The time period
for delivery described herein shall apply to the electronic transmittals
described herein.
c. The Registered Owner may, at its option, also elect to pay some or all of the
Exercise Price payable upon an exercise of this Warrant by canceling a portion
of this Warrant exercisable for such number of Warrant Shares as is determined
by dividing (i) the total Exercise Price payable in respect of the number of
Warrant Shares being purchased upon such exercise by (ii) the excess of the Fair
Market Value per share of Common Stock as of the Exercise Date over the Exercise
Price per share. If the Registered Owner wishes to exercise this Warrant
pursuant to this method of payment with respect to the maximum number of Warrant
Shares purchasable pursuant to this method, then the number of Warrant Shares so
purchasable shall be equal to the total number of Warrant Shares, minus the
product obtained by multiplying (x) the total number of Warrant Shares by (y) a
fraction, the numerator of which shall be the Exercise Price per share and the
denominator which shall be the Fair Market Value per share of Common Stock as of
the Exercise Date. The Fair Market Value per share of Common Stock shall be
determined as follows:
(i.) If the Common Stock is listed on a national securities exchange, the
Nasdaq National Market or another nationally recognized trading system as of the
Exercise Date, the Fair Market Value per share of Common Stock shall be deemed
to be the average of the high and low reported sale prices per share of Common
Stock thereon on the trading day immediately preceding the Exercise Date
(provided that if no such price is reported on such day, the Fair Market Value
per share of Common Stock shall be determined pursuant to clause (ii)).
(ii). If the Common Stock is not listed on a national securities exchange, the
Nasdaq National Market or another nationally recognized trading system as of the
Exercise Date, the Fair Market Value per share of Common Stock shall be deemed
to be the amount most recently determined by the Board of Directors to represent
the fair market value per share of the Common Stock (including, without
limitation, a determination for purposes of granting Common Stock options or
issuing Common Stock under an employee benefit plan of the Company); and upon
request of the Registered Owner, the Board of Directors (or a representative
thereof) shall promptly notify the Registered Owner of the Fair Market Value per
share of Common Stock.
<PAGE>
Notwithstanding the foregoing, if the Board of Directors has not made such a
determination within the three-month period prior to the Exercise Date, then (A)
the Board of Directors shall make a determination of the Fair Market Value per
share of the Common Stock within 15 days of a request by the Registered Owner
that it do so, and (B) the exercise of this Warrant pursuant to this Section
6(c) shall be delayed until such determination is made.
d. Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in the Warrant Exercise Form, and any cash payments
due under Section 14 hereof shall be delivered to the Registered Owner within a
reasonable time, not exceeding three (3) Business Days, after this Warrant shall
have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the Registered Owner and shall be
registered in the name of the Registered Owner or such other name as shall be
designated by such Registered Owner. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the Registered
Owner a new Warrant representing the number of shares with respect to which this
Warrant shall not then have been exercised.
6. Adjustment of Exercise Price.
a. Common Stock Dividends; Common Stock Splits; Reverse Common Stock Splits. If
the Company, at any time while this Warrant is outstanding, (a) shall pay a
stock dividend on its Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares or (d) issue by reclassification of shares
of Common Stock any shares of capital stock of the Company, then (i) the
Exercise Price shall be multiplied by a fraction the numerator of which shall be
the number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and the denominator of which shall be the number
of shares of Common Stock outstanding (excluding treasury shares, if any) after
such event and (ii) the number of Warrant Shares shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event and the
denominator of which shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event. Any adjustment made
pursuant to this paragraph (6)(a) shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
b. Rights; Options; Warrants or Other Securities. If the Company, at any time
while this Warrant is outstanding, shall fix a record date for the issuance of
rights, options, warrants or other securities to all of the holders of Common
Stock entitling them to subscribe for or purchase, convert to, exchange for or
otherwise acquire shares of Common Stock for no consideration or at a price per
share less than the Exercise Price, the Exercise Price shall be multiplied by a
fraction, the denominator of which shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights, options, warrants or other securities plus the number of additional
shares of Common Stock offered for subscription, purchase, conversion, exchange
or acquisition and the numerator of which shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such rights, options, warrants or other securities plus the number
of shares which the aggregate offering price of the total number of shares so
offered would purchase at the Exercise Price. Such adjustment shall be made
whenever such rights, options, warrants or other securities are issued, and
shall become effective immediately after the record date for the determination
<PAGE>
of shareholders entitled to receive such rights, options, warrants or other
securities.
c. Subscription Rights. If the Company, at any time while this Warrant is
outstanding, shall fix a record date for the distribution to all of the holders
of Common Stock evidence of its indebtedness or assets or rights, options,
warrants or other security entitling them to subscribe for or purchase, convert
to, exchange for or otherwise acquire any security (excluding those referred to
in paragraphs 6(a) and (b) above), then in each such case the Exercise Price at
which the Warrant shall thereafter be exercisable shall be determined by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of shareholders entitled to receive such distribution by
a fraction, the denominator of which shall be the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and the numerator
of which shall be such Per Share Market Value of the Common Stock on such record
date less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good faith;
provided, however, that in the event of a distribution exceeding ten percent
(10%) of the net assets of the Company, such fair market value shall be
determined in accordance with the Appraisal Procedure. Such adjustment shall be
made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
d. Rounding. All calculations under this Section 6 shall be made to the nearest
cent or the nearest l/l00th of a share, as the case may be.
e. Notice of Adjustment. Whenever the Exercise Price is adjusted pursuant to
paragraphs 6(a), (b) or (c), the Company shall promptly deliver to the
Registered Owner a notice setting forth the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
f. Redemption Events. The following are "five days. On and after the date of any
Redemption Event, the Registered Owner shall have the option to require the
Company to redeem (the "Redemption Right"), for a period of thirty (30) days
after the Registered Owner receives notice of Redemption Event, in cash within
10 days of the Redemption Event, the Registered Owner's shares of Common Stock
immediately theretofore acquirable and receivable upon the exercise of such
Registered Owner's Warrant at a price per share equal to the product of (i) the
amount by which, if any, the Average Price immediately preceding the latest of
the effective date, the date of the closing, date of occurrence or the date of
the announcement, as the case may be, of the Redemption Event triggering such
Redemption Right exceeds the Exercise Price and (ii) the number of shares of
Common Stock issuable upon exercise of the Warrant immediately prior to such
Redemption Event. After the occurrence of (A), the Registered Owner shall have
the right at his or its option, in lieu of the Redemption Right, to exercise the
Warrant for shares of stock and other securities, cash and property receivable
upon or deemed to be held by holders of Common Stock following such Redemption
Event; the Registered Owner shall be entitled upon such event to receive such
amount of securities, cash or property as if the Registered Owner had exercised
the Warrant of the shares of the Common Stock issuable upon exercise of the
Warrant immediately prior to such Redemption Event (without taking into account
any limitations or restrictions on the exercise of the Warrant). In the case of
a transaction specified in (A) in which holders of the Company's Common Stock
receive cash, the Registered Owner shall have the right at his or its option, in
lieu of the Redemption Right, to exercise the Warrant for such number of shares
of the surviving company equal to the amount of cash into which the Warrant is
exercisable divided by the fair market value of the shares of the surviving
company on the effective date of the merger. In the case of (A), the Company
<PAGE>
shall not effect any such Redemption Event unless, prior to the consummation
thereof, each Person (other than the Company) which may be required to deliver
any stock, securities, cash or property upon the exercise of the Warrant as
provided herein shall assume, by written instrument delivered and reasonably
satisfactory to, the Registered Owner, (a) the obligations of the Company under
the Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any continuing obligations of the Company under this Warrant), (b)
the obligations of the Company under the Purchase Agreement, the Warrant and the
Registration Rights Agreement, and (c) the obligation to deliver to the
Registered Owner such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this Section 6(f), the Registered
Owner may be entitled to receive. Nothing in this Section 6(f) shall be deemed
to authorize the Company to enter into any transaction not otherwise permitted
by the Purchase Agreement. This provision shall similarly apply to successive
Redemption Events.
g. Notice of Certain Events. If:
(i) the Company shall declare a dividend (or any other distribution) on its
Common Stock; or
(ii) the Company shall declare a special nonrecurring cash dividend on or a
redemption of its Common Stock; or
(iii) the Company shall authorize the granting to the holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights; or
(iv) the approval of any shareholders of the Company shall be required in
connection with any reclassification of the Common Stock of the Company, any
consolidation or merger to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company, or any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or
property; or
(v) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of exercise of this Warrant, and shall cause to be delivered to the
Registered Owner, at least 10 Business Days prior to the applicable record or
effective date hereinafter specified, a notice (provided such notice shall not
include any material non-public information) stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
<PAGE>
h. Adjustment of Number of Shares. Upon each adjustment of the Exercise Price as
a result of the calculations made in this Section 6, this Warrant shall
thereafter evidence the right to receive, at the adjusted Exercise Price, that
number of shares of Common Stock (calculated to the nearest one-hundredth)
obtained by dividing (i) the product of the aggregate number of shares covered
by this Warrant immediately prior to such adjustment and the Exercise Price in
effect immediately prior to such adjustment of the Exercise Price by (ii) the
Exercise Price in effect immediately after such adjustment of the Exercise
Price.
7. Officer's Certificate. Whenever the number of shares purchasable upon
exercise shall be adjusted as required by the provisions of Section 7, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price, number of shares or
other securities determined as herein provided, setting forth in reasonable
detail the facts requiring such adjustment and the manner of computing such
adjustment. Each such officer's certificate shall be signed by the chairman,
president or chief financial officer of the Company and by the secretary or any
assistant secretary of the Company. Each such officer's certificate shall be
made available at all reasonable times for inspection by any Registered Owner of
the Warrants and the Company shall, forthwith after each such adjustment,
deliver a copy of such certificate to the each of the Registered Owners.
8. Definitions. Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to such terms in the Purchase Agreement. As used
in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that directly or
indirectly controls or is controlled by or under common control with such
Person. For the purposes of this definition, "control," when used with respect
to any Person, means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms of "affiliated," "controlling" and "controlled" have meanings correlative
to the foregoing.
"Appraisal Procedure" shall have the following meaning. The independent
directors of the Company shall determine the fair market value. The Holders
shall have ten (10) Business Days to provide the Company with written notice of
its approval or disapproval of such determination. If the Holders do not respond
within such ten (10) Business Day period, they will be deemed to have approved
the fair market value determination of the independent directors. If the Holders
appropriately respond that they do not approve of the determination and the
independent directors and Holders collectively can not agree on an appropriate
fair market value within 30 Business Days, then the Company, on the one hand,
and the Holders, on the other hand shall each appoint an Appraiser. A neutral
Appraiser shall be appointed by the two party- appointed Appraisers. The three
Appraisers shall collectively ascertain the fair market value, which valuation
shall be binding upon all parties absent manifest error.
"Appraiser" shall mean a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing. "Average Price" on any date means (x) the sum of the Per Share Market
Value for the ten (10) Trading Days immediately preceding such date minus (y)
the highest and lowest Per Share Market Value during the ten (10) Trading Days
immediately preceding such date, divided by (z) eight (8), or a similar
calculation if another figure for the number of Trading Days is set forth for
clause (x) of this definition.
<PAGE>
"Business Day" means any day except Saturday, Sunday and any day which shall be
a legal holiday or a day on which banking institutions in the state of New York
generally are authorized or required by law or other government actions to
close.
"Change of Control" means the occurrence of any of (i) an acquisition after the
date hereof by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act), other than the Purchasers or
any of their Affiliates, of in excess of 40% of the voting securities of the
Company, (ii) a replacement of more than one-half of the members of the
Company's Board of Directors which is not approved by those individuals who are
members of the Board of Directors on the date hereof in one or a series of
related transactions, (iii) the merger of the Company with or into another
entity, consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions, or (v) the execution by the
Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) , (iii), (iv) or
(v);
"Closing" means the closing of the purchase and sale of Common Stock and
warrants as described in Section 1.2 and 1.3 of the Purchase Agreement.
"Common Stock" means the shares of the Company's Common Stock, par value $0.01
per share.
"Company" means SatCon Technology Corporation, a Delaware corporation.
"Exercise Period" has the meaning assigned to it the Section 4 hereof.
"Exercise Price" has the meaning assigned to it in Section 3 hereof
"MTI Registration Rights Agreement" means that certain Registration Rights
Agreement, dated October 13, 1999, among the Company and the Purchasers.
"Per Share Market Value" means on any particular date (i) the closing bid price
per share of the Common Stock on such date on the National Market System of the
Nasdaq Stock Market or other registered national stock exchange on which the
Common Stock is then listed or if there is no such price on such date, then the
closing bid price on such exchange or quotation system on the date nearest
preceding such date, or (ii) if the Common Stock is not listed then on the
National Market System of the Nasdaq Stock Market or any registered national
stock exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (iii) if the Common
Stock is not then publicly traded the fair market value of a share of Common
Stock as determined in accordance with the Appraisal Procedure. In addition, all
determinations of the Per Share Market Value shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions during such
period.
"Purchase Agreement" means that certain Securities Purchase Agreement, dated
October 13, 1999, among the Company and the Purchaser.
"Purchaser" has the meaning set forth in the Purchase Agreement.
"Redemption Event" has the meaning assigned to it in Section 6(f) hereof.
"Redemption Right" has the meaning assigned to it in Section 6(f) hereof.
<PAGE>
"Registered Owner" means the person identified on the face of this Warrant as
the registered owner hereof or such other person as shown on the records of the
Company as being the registered owner of this Warrant or their assigns.
"Trading Day(s)" means any day on which the primary market on which shares of
Common Stock are listed is open for trading.
"Underlying Shares" means the shares of Common Stock issuable upon exercise of
the Warrants.
"Warrant(s)" means the warrants issuable to SatCon Technology Corporation at the
Closing.
9. Registration Rights. The Warrant Shares are subject to the Registration
Rights Agreement.
10. Reservation of Underlying Shares; Listing. The Company covenants that it
will at all times reserve and keep available out of its authorized shares of
Common Stock, free from preemptive rights, solely for the purpose of issue upon
exercise of the Warrants as herein provided, such number of shares of the Common
Stock as shall then be issuable upon the exercise of all outstanding Warrants
into Common Stock. The Company covenants that all shares of the Common Stock
issued upon exercise of the Warrant which shall be so issuable shall, when
issued, be duly and validly issued and fully paid and non-assessable. The
Company shall promptly secure the listing of the shares of Common Stock issuable
upon exercise of the Warrant upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon exercise of this Warrant) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock form time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and shall
maintain such listing of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any shares of the
same class shall be listed on such national securities exchange or automated
quotation system.
11. Notices. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been received (a) upon
hand delivery (receipt acknowledged) or delivery by telex (with correct answer
back received), telecopy or facsimile (with transmission confirmation report) at
the address or number designated below (if received by 5:00 p.m. eastern time
where such notice is to be received), or the first Business Day following such
delivery (if received after 5:00 p.m. eastern time where such notice is to be
received) or (b) on the second Business Day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications are (i) if to the Purchaser to SatCon Technology
Corporation, 161 First Street, Cambridge, MA 02142-1221, Attn: President and
Chief Executive Officer, fax no. (617) 576-7455, with copies to Hale & Dorr LLP,
60 State Street, Boston, MA 02109, Attn: Jeffrey N. Carp, Esq., fax no. (617)
526-5000 and (ii) if to the Company to Mechanical Technology Incorporated at 968
Albany-Shaker Road, Latham, New York 12110, Attention: Cynthia A. Scheuer, Chief
Financial Officer with copies to Catherine S. Hill, PLLC, 4 Global View, Troy,
New York 12180, Attention: Catherine Hill, or such other address as may be
designated in writing hereafter, in the same manner, by such Person.
<PAGE>
12. Compliance With Governmental Requirements. The Company covenants that if any
shares of Common Stock required to be reserved for purposes of exercise of
Warrants hereunder require registration with or approval of any governmental
authority under any Federal or state law, or any national securities exchange,
before such shares may be issued upon exercise, the Company will use its best
efforts to cause such shares to be duly registered or approved, as the case may
be.
13. Fractional Shares. Upon any exercise hereunder, the Company shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
Registered Owner shall be entitled to receive, in lieu of the final fraction of
a share, one whole share of Common Stock.
14. Payment of Tax Upon Issue of Transfer. The issuance of certificates for
shares of the Common Stock upon exercise of the Warrants shall be made without
charge to the Registered Owners thereof for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon exercise in a name other than that of the
Registered Owner of such Warrant so converted and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
15. Warrants Owned by Company Deemed Not Outstanding. In determining whether the
holders of the outstanding Warrants have concurred in any direction, consent or
waiver under this Warrant, warrants which are owned by the Company or by any
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company shall be disregarded and deemed not to
be outstanding for the purpose of any such determination. Warrants so owned
which have been pledged in good faith may be regarded as outstanding if the
pledgee establishes to the satisfaction of the Company the pledgee's right so to
act with respect to such warrants and that the pledgee is not the Company or any
other obligor upon the securities or any Affiliate of the Company or any other
obligor on the warrants.
16. Effect of Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
17. No Rights as Stockholder. This Warrant shall not entitle the Registered
Owner to any rights as a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions, or
to receive notice of, or to attend, meetings of stockholders or any other
proceedings of the Company, unless and to the extent converted into shares of
Common Stock in accordance with the terms hereof.
18. Certain Actions Prohibited. The Company will not, by amendment of its
charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
<PAGE>
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
19. Shareholder Rights Plan. Notwithstanding the foregoing, in the event that
the Company shall distribute "poison pill" rights pursuant to a "poison pill"
shareholder rights plan (the "Rights"), the Company shall, in lieu of making any
adjustment pursuant to Section 6 hereof, make proper provision so that each
Registered Owner who exercises a Warrant after the record date for such
distribution and prior to the expiration or redemption of the Rights shall be
entitled to receive upon such exercise, in addition to the shares of Common
Stock issuable upon such exercise, a number of Rights to be determined as
follows: (i) if such exercise occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder of
a number of shares of Common Stock equal to the number of shares of Common Stock
issuable upon such exercise at the time of such exercise would be entitled in
accordance with the terms and provisions of and applicable to the Rights; and
(ii) if such exercise occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares into which the Warrant to
exercised was exercisable immediately prior to the Distribution Date would have
been entitled on the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights, and in each case subject to the
terms and conditions of the Rights.
20. Successors and Assigns. This Warrant shall be binding upon and inure to the
benefit of the Registered Owners and its assigns, and shall be binding upon any
entity succeeding to the Company by merger or acquisition of all or
substantially all the assets of the Company. The Company may not assign this
Warrant or any rights or obligations hereunder without the prior written consent
of the Registered Owner. The Registered Owner may assign this Warrant without
the prior written consent of the Company.
21. Transfers. The Company shall maintain a register (the "Register") containing
the name and address of the Registered Owner of this Warrant, which Register can
be relied upon by the Company as conclusive evidence of the Registered Owner. If
the Registered Owner transfers or assigns this Warrant it shall promptly notify
the Company in writing of the name and address of the person to which such
transfer or assignation was made. Upon receipt of such notice the Company shall
immediately update the Register to incorporate the new Registered Owner.
22. Governing Law. This Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of Delaware without regard to
the principles of conflicts of law thereof. Each party hereby irrevocably
submits to the nonexclusive jurisdiction of the federal courts sitting in the
City of Albany, County of Albany, and if diversity jurisdiction cannot be
obtained, the state courts sitting in the City of Albany, County of Albany for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Warrant and agrees that such service
<PAGE>
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer as of the date first set forth above.
MECHANICALTECHNOLOGY INCORPORATED
By:/s/ Cynthia A. Scheuer
Name:Cynthia A. Scheuer
Title:Vice President/
Chief Financial Officer
EXHIBIT A
Warrant Exercise Form
TO: MECHANICAL TECHNOLOGY INCORPORATED
The undersigned hereby: (1) irrevocably subscribes for and offers to purchase
_______ shares of Common Stock of Mechanical Technology Incorporated, pursuant
to Warrant No. ___ heretofore issued to ___________________ on ____________,
199__; (2) encloses either (a) a cash payment of $__________ or (b) the
cancellation of such portion of the attached Warrant as is exercisable for a
total of _______ Warrant Shares (using a Fair Market Value of $ _____ per share
for purposes of this calculation); and (3) requests that a certificate for the
shares be issued in the name of the undersigned and delivered to the undersigned
at the address specified below.
Date:
Investor Name:
Taxpayer Identification
Number:
By:
Printed Name:
Title:
Address:
Note: The above signature should correspond exactly with the name on the face
of this Warrant or with the name of assignee appearing in assignment form below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant is to be issued in the name of said undersigned
for the balance remaining of the shares purchasable thereunder less any
fraction of a share paid in cash and delivered to the address stated above.
<PAGE>
Exhibit 10.37
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
October 21, 1999
36,000 shares Warrant No. 1
SATCON TECHNOLOGY CORPORATION
STOCK PURCHASE WARRANT
Registered Owner: Mechanical Technology Incorporated
This certifies that, for value received, SatCon Technology Corporation, a
Delaware corporation, the ("Company") grants the following rights to the
Registered Owner, or assigns, of this Warrant:
1. Issue. Upon tender (in accordance with Section 5 hereof) to the Company, the
Company, within three (3) Business Days of the date thereof, shall issue to the
Registered Owner, or assigns, up to the number of shares specified in Section 2
hereof of fully paid and nonassessable shares of Common Stock that the
Registered Owner, or assigns, is otherwise entitled to purchase.
2. Number of Shares. The total number of shares of Common Stock that the
Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant (the "Warrant Shares") is 36,000 shares, subject to
adjustment from time to time as to the number and kind of securities for which
this Warrant is exercisable, all as set forth in Section 6 hereof. The Company
shall at all times reserve and hold available out of its authorized and
unissued shares of Common Stock or other securities, as the case may be,
sufficient shares of Common Stock to satisfy all conversion and purchase rights
represented by outstanding convertible securities, options and warrants,
including this Warrant. The Company covenants and agrees that all shares of
Common Stock or other securities, as the case may be, that may be issued upon
the exercise of this Warrant shall, upon issuance, be duly and validly issued,
fully paid and nonassessable, free from all taxes, liens and charges with
respect to the purchase and the issuance of the shares, and shall not have any
legend or restrictions on resale, expect as required by Section 3.13 of the
Purchase Agreement.
3. Exercise Price. The per share exercise price of this Warrant, representing
the price per share at which the shares of stock issuable upon exercise of this
Warrant may be purchased, is $8.80, subject to adjustment from time to time
pursuant to the provisions of Section 6 hereof (the "Exercise Price").
4. Exercise Period. This Warrant may be exercised from the Closing Date (as
defined in the Purchase Agreement) up to and including October 13, 2003 (the
"Exercise Period"). If not exercised during this period, this Warrant and all
rights granted under this Warrant shall expire and lapse.
<PAGE>
5. Tender; Issuance of Certificates.
a. Subject to Section 15 hereof, this Warrant may be exercised, in whole or in
part, by (i) actual delivery of (a) the Exercise Price in cash, (b) a duly
executed Warrant Exercise Form, a copy of which is attached to this Warrant as
Exhibit A, properly executed by the Registered Owner, or assigns, of this
Warrant, and (c) by surrender of this Warrant. The Warrant Shares so purchased
shall be deemed to be issued to the Registered Owner as of the close of
business on the date (the "Exercise Date") on which the last of the following
shall have occurred: (i) this Warrant shall have been surrendered and (ii) the
completed Warrant Exercise Form shall have been delivered and payment shall
have been made for such shares as set forth above. The payment and Warrant
Exercise Form must be delivered to the registered office of the Company either
in person or as set for in Section 11 hereof.
b. In lieu of physical delivery of the Warrant, provided the Company's transfer
agent is participating in the Depositary Trust Company's ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Registered Owner and
in compliance with the provisions hereof, the Company shall use its best
efforts to cause its transfer agent to electronically transmit the Warrant
Shares to the Registered Owner by crediting the account of the Registered
Owner's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system. The time period for delivery described herein shall apply to the
electronic transmittals described herein.
c. Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in the Warrant Exercise Form, and any cash payments
due under Section 13 hereof shall be delivered to the Registered Owner within a
reasonable time, not exceeding three (3) Business Days, after this Warrant
shall have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the Registered Owner and shall be
registered in the name of the Registered Owner or such other name as shall be
designated by such Registered Owner. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the
Registered Owner a new Warrant representing the number of shares with respect
to which this Warrant shall not then have been exercised.
6. Adjustment of Exercise Price.
a. Common Stock Dividends; Common Stock Splits; Reverse Common Stock Splits. If
the Company, at any time while this Warrant is outstanding, (a) shall pay a
stock dividend on its Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares or (d) issue by reclassification of
shares of Common Stock any shares of capital stock of the Company, then (i) the
Exercise Price shall be multiplied by a fraction the numerator of which shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and the denominator of which shall be the number
of shares of Common Stock outstanding (excluding treasury shares, if any) after
such event and (ii) the number of Warrant Shares shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event and the
denominator of which shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event. Any adjustment made
pursuant to this paragraph (6)(a) shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
<PAGE>
b. Rights; Options; Warrants or Other Securities. If the Company, at any time
while this Warrant is outstanding, shall fix a record date for the issuance of
rights, options, warrants or other securities to all of the holders of Common
Stock entitling them to subscribe for or purchase, convert to, exchange for or
otherwise acquire shares of Common Stock for no consideration or at a price per
share less than the Exercise Price, the Exercise Price shall be multiplied by a
fraction, the denominator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance
of such rights, options, warrants or other securities plus the number of
additional shares of Common Stock offered for subscription, purchase,
conversion, exchange or acquisition and the numerator of which shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights, options, warrants or other
securities plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at the Exercise Price. Such
adjustment shall be made whenever such rights, options, warrants or other
securities are issued, and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such rights,
options, warrants or other securities.
c. Subscription Rights. If the Company, at any time while this Warrant is
outstanding, shall fix a record date for the distribution to all of the holders
of Common Stock evidence of its indebtedness or assets or rights, options,
warrants or other security entitling them to subscribe for or purchase, convert
to, exchange for or otherwise acquire any security (excluding those referred to
in paragraphs 6(a) and (b) above), then in each such case the Exercise Price at
which the Warrant shall thereafter be exercisable shall be determined by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of shareholders entitled to receive such distribution
by a fraction, the denominator of which shall be the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and the
numerator of which shall be such Per Share Market Value of the Common Stock on
such record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of Common Stock as determined by the Board of Directors
in good faith; provided, however, that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market value
shall be determined in accordance with the Appraisal Procedure. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
d. Rounding. All calculations under this Section 6 shall be made to the nearest
cent or the nearest l/l00th of a share, as the case may be.
e. Notice of Adjustment. Whenever the Exercise Price is adjusted pursuant to
paragraphs 6(a), (b) or (c), the Company shall promptly deliver to the
Registered Owner a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
f. Redemption Events. The following are "Redemption Events" under this Section
6(f): (A) any Change of Control or (B) any suspension from listing or delisting
of the Common Stock from the Nasdaq or any Subsequent Market on which the
Common Stock is listed for a period of five consecutive days. On and after the
date of any Redemption Event, the Registered Owner shall have the option to
require the Company to redeem (the "Redemption Right"), for a period of thirty
(30) days after the Registered Owner receives notice of Redemption Event, in
cash within 10 days of the Redemption Event, the Registered Owner's shares of
Common Stock immediately theretofore acquirable and receivable upon the
<PAGE>
exercise of such Registered Owner's Warrant at a price per share equal to the
product of (i) the amount by which, if any, the Average Price immediately
preceding the latest of the effective date, the date of the closing, date of
occurrence or the date of the announcement, as the case may be, of the
Redemption Event triggering such Redemption Right exceeds the Exercise Price
and (ii) the number of shares of Common Stock issuable upon exercise of the
Warrant immediately prior to such Redemption Event. After the occurrence of
(A), the Registered Owner shall have the right at his or its option, in lieu of
the Redemption Right, to exercise the Warrant for shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders
of Common Stock following such Redemption Event; the Registered Owner shall be
entitled upon such event to receive such amount of securities, cash or property
as if the Registered Owner had exercised the Warrant of the shares of the
Common Stock issuable upon exercise of the Warrant immediately prior to such
Redemption Event (without taking into account any limitations or restrictions
on the exercise of the Warrant). In the case of a transaction specified in (A)
in which holders of the Company's Common Stock receive cash, the Registered
Owner shall have the right at his or its option, in lieu of the Redemption
Right, to exercise the Warrant for such number of shares of the surviving
company equal to the amount of cash into which the Warrant is exercisable
divided by the fair market value of the shares of the surviving company on the
effective date of the merger. In the case of (A), the Company shall not effect
any such Redemption Event unless, prior to the consummation thereof, each
Person (other than the Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of the Warrant as provided
herein shall assume, by written instrument delivered and reasonably
satisfactory to, the Registered Owner, (a) the obligations of the Company under
the Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any continuing obligations of the Company under this Warrant),
(b) the obligations of the Company under the Purchase Agreement, the Warrant
and the Registration Rights Agreement, and (c) the obligation to deliver to the
Registered Owner such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this Section 6(f), the Registered
Owner may be entitled to receive. Nothing in this Section 6(f) shall be deemed
to authorize the Company to enter into any transaction not otherwise permitted
by the Purchase Agreement. This provision shall similarly apply to successive
Redemption Events.
g. Notice of Certain Events. If:
(i) the Company shall declare a dividend (or any other distribution) on its
Common Stock; or
(ii) the Company shall declare a special nonrecurring cash dividend on or a
redemption of its Common Stock; or
(iii) the Company shall authorize the granting to the holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights; or
(iv) the approval of any shareholders of the Company shall be required in
connection with any reclassification of the Common Stock of the Company, any
consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other securities,
cash or property; or
<PAGE>
(v) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of exercise of this Warrant, and shall cause to be delivered to
the Registered Owner, at least 10 Business Days prior to the applicable record
or effective date hereinafter specified, a notice (provided such notice shall
not include any material non-public information) stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer
or share exchange; provided, however, that the failure to mail such notice or
any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice.
h. Adjustment of Number of Shares. Upon each adjustment of the Exercise Price
as a result of the calculations made in this Section 6, this Warrant shall
thereafter evidence the right to receive, at the adjusted Exercise Price, that
number of shares of Common Stock (calculated to the nearest one-hundredth)
obtained by dividing (i) the product of the aggregate number of shares covered
by this Warrant immediately prior to such adjustment and the Exercise Price in
effect immediately prior to such adjustment of the Exercise Price by (ii) the
Exercise Price in effect immediately after such adjustment of the Exercise
Price.
7. Officer's Certificate. Whenever the number of shares purchasable upon
exercise shall be adjusted as required by the provisions of Section 6, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price, number of shares or
other securities determined as herein provided, setting forth in reasonable
detail the facts requiring such adjustment and the manner of computing such
adjustment. Each such officer's certificate shall be signed by the chairman,
president or chief financial officer of the Company and by the secretary or any
assistant secretary of the Company. Each such officer's certificate shall be
made available at all reasonable times for inspection by any Registered Owner
of the Warrants and the Company shall, forthwith after each such adjustment,
deliver a copy of such certificate to the each of the Registered Owners.
8. Definitions. Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to such terms in the Purchase Agreement. As used
in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that directly
or indirectly controls or is controlled by or under common control with such
Person. For the purposes of this definition, "control," when used with respect
to any Person, means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms of "affiliated," "controlling" and "controlled" have meanings correlative
to the foregoing.
<PAGE>
"Appraisal Procedure" shall have the following meaning. The independent
directors of the Company shall determine the fair market value. The Holders
shall have ten (10) Business Days to provide the Company with written notice of
its approval or disapproval of such determination. If the Holders do not
respond within such ten (10) Business Day period, they will be deemed to have
approved the fair market value determination of the independent directors. If
the Holders appropriately respond that they do not approve of the determination
and the independent directors and Holders collectively can not agree on an
appropriate fair market value within 30 Business Days, then the Company, on the
one hand, and the Holders, on the other hand shall each appoint an Appraiser. A
neutral Appraiser shall be appointed by the two party- appointed Appraisers.
The three Appraisers shall collectively ascertain the fair market value, which
valuation shall be binding upon all parties absent manifest error.
"Appraiser" shall mean a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing. "Average Price" on any date means (x) the sum of the Per Share Market
Value for the ten (10) Trading Days immediately preceding such date minus (y)
the highest and lowest Per Share Market Value during the ten (10) Trading Days
immediately preceding such date, divided by (z) eight (8), or a similar
calculation if another figure for the number of Trading Days is set forth for
clause (x) of this definition.
"Business Day" means any day except Saturday, Sunday and any day which shall be
a legal holiday or a day on which banking institutions in the state of New York
generally are authorized or required by law or other government actions to
close.
"Change of Control" means the occurrence of any of (i) an acquisition after the
date hereof by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act), other than the Purchasers or
any of their Affiliates, of in excess of 40% of the voting securities of the
Company, (ii) a replacement of more than one-half of the members of the
Company's Board of Directors which is not approved by those individuals who are
members of the Board of Directors on the date hereof in one or a series of
related transactions, (iii) the merger of the Company with or into another
entity, consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions, or (v) the execution by the
Company of an agreement to which the Company is a party or by which it is
bound, providing for any of the events set forth above in (i), (ii) , (iii),
(iv) or (v);
"Closing" means the closing of the purchase and sale of Common Stock and
warrants as described in Section 1.2 and 1.3 of the Purchase Agreement.
"Common Stock" means the shares of the Company's Common Stock, par value $0.01
per share.
"Company" means SatCon Technology Corporation, a Delaware corporation.
"Exercise Period" has the meaning assigned to it the Section 4 hereof.
"Exercise Price" has the meaning assigned to it in Section 3 hereof
"Per Share Market Value" means on any particular date (i) the closing bid price
per share of the Common Stock on such date on the National Market System of the
Nasdaq Stock Market or other registered national stock exchange on which the
Common Stock is then listed or if there is no such price on such date, then the
closing bid price on such exchange or quotation system on the date nearest
<PAGE>
preceding such date, or (ii) if the Common Stock is not listed then on the
National Market System of the Nasdaq Stock Market or any registered national
stock exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (iii) if the Common
Stock is not then publicly traded the fair market value of a share of Common
Stock as determined in accordance with the Appraisal Procedure. In addition,
all determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar transactions
during such period.
"Purchase Agreement" means that certain Securities Purchase Agreement, dated
October 13, 1999, among the Company and the Purchaser.
"Purchaser" has the meaning set forth in the Purchase Agreement.
"Redemption Event" has the meaning assigned to it in Section 6(f) hereof.
"Redemption Right" has the meaning assigned to it in Section 6(f) hereof.
"Registered Owner" means the person identified on the face of this Warrant as
the registered owner hereof or such other person as shown on the records of the
Company as being the registered owner of this Warrant or their assigns.
"SatCon Registration Rights Agreement" means that certain Registration Rights
Agreement, dated October 13, 1999, among the Company and the Purchasers.
"Trading Day(s)" means any day on which the primary market on which shares of
Common Stock are listed is open for trading.
"Underlying Shares" means the shares of Common Stock issuable upon exercise of
the Warrants.
"Warrant(s)" means the warrants issuable to Mechanical Technology Incorporated
at the Closing.
9. Registration Rights. The Warrant Shares are subject to the Registration
Rights Agreement.
10. Reservation of Underlying Shares; Listing. The Company covenants that it
will at all times reserve and keep available out of its authorized shares of
Common Stock, free from preemptive rights, solely for the purpose of issue upon
exercise of the Warrants as herein provided, such number of shares of the
Common Stock as shall then be issuable upon the exercise of all outstanding
Warrants into Common Stock. The Company covenants that all shares of the Common
Stock issued upon exercise of the Warrant which shall be so issuable shall,
when issued, be duly and validly issued and fully paid and non-assessable. The
Company shall promptly secure the listing of the shares of Common Stock
issuable upon exercise of the Warrant upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance upon exercise of this Warrant)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all shares of Common Stock form time to time issuable
upon the exercise of this Warrant; and the Company shall so list on each
national securities exchange or automated quotation system, as the case may be,
and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
<PAGE>
automated quotation system.
11. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with
correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
5:00 p.m. eastern time where such notice is to be received), or the first
Business Day following such delivery (if received after 5:00 p.m. eastern time
where such notice is to be received) or (b) on the second Business Day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications are (i) if to the
Company to SatCon Technology Corporation, 161 First Street, Cambridge, MA
02142-1221, Attn: President and Chief Executive Officer, fax no. (617)
576-7455, with copies to Hale & Dorr LLP, 60 State Street, Boston, MA 02109,
Attn: Jeffrey N. Carp, Esq., fax no. (617) 526-5000 and (ii) if to the
Purchaser to Mechanical Technology Incorporated at 968 Albany-Shaker Road,
Latham, New York 12110, Attention: Cynthia A. Scheuer, Chief Financial Officer
with copies to Catherine S. Hill, PLLC, 4 Global View, Troy, New York 12180,
Attention: Catherine Hill, or such other address as may be designated in
writing hereafter, in the same manner, by such Person.
12. Compliance With Governmental Requirements. The Company covenants that if
any shares of Common Stock required to be reserved for purposes of exercise of
Warrants hereunder require registration with or approval of any governmental
authority under any Federal or state law, or any national securities exchange,
before such shares may be issued upon exercise, the Company will use its best
efforts to cause such shares to be duly registered or approved, as the case may
be.
13. Fractional Shares. Upon any exercise hereunder, the Company shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
Registered Owner shall be entitled to receive, in lieu of the final fraction of
a share, one whole share of Common Stock.
14. Payment of Tax Upon Issue of Transfer. The issuance of certificates for
shares of the Common Stock upon exercise of the Warrants shall be made without
charge to the Registered Owners thereof for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax
that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon exercise in a name other than that of the
Registered Owner of such Warrant so converted and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
15. Warrants Owned by Company Deemed Not Outstanding. In determining whether
the holders of the outstanding Warrants have concurred in any direction,
consent or waiver under this Warrant, warrants which are owned by the Company
or by any person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding for the purpose of any such determination.
Warrants so owned which have been pledged in good faith may be regarded as
<PAGE>
outstanding if the pledgee establishes to the satisfaction of the Company the
pledgee's right so to act with respect to such warrants and that the pledgee is
not the Company or any other obligor upon the securities or any Affiliate of
the Company or any other obligor on the warrants.
16. Effect of Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
17. No Rights as Stockholder. This Warrant shall not entitle the Registered
Owner to any rights as a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions, or
to receive notice of, or to attend, meetings of stockholders or any other
proceedings of the Company, unless and to the extent converted into shares of
Common Stock in accordance with the terms hereof.
18. Certain Actions Prohibited. The Company will not, by amendment of its
charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder
of this Warrant in order to protect the exercise privilege of the holder of
this Warrant against dilution or other impairment, consistent with the tenor
and purpose of this Warrant. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
19. Shareholder Rights Plan. Notwithstanding the foregoing, in the event that
the Company shall distribute "poison pill" rights pursuant to a "poison pill"
shareholder rights plan (the "Rights"), the Company shall, in lieu of making
any adjustment pursuant to Section 6 hereof, make proper provision so that each
Registered Owner who exercises a Warrant after the record date for such
distribution and prior to the expiration or redemption of the Rights shall be
entitled to receive upon such exercise, in addition to the shares of Common
Stock issuable upon such exercise, a number of Rights to be determined as
follows: (i) if such exercise occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder
of a number of shares of Common Stock equal to the number of shares of Common
Stock issuable upon such exercise at the time of such exercise would be
entitled in accordance with the terms and provisions of and applicable to the
Rights; and (ii) if such exercise occurs after the Distribution Date, the same
number of Rights to which a holder of the number of shares into which the
Warrant to exercised was exercisable immediately prior to the Distribution Date
would have been entitled on the Distribution Date in accordance with the terms
and provisions of and applicable to the Rights, and in each case subject to the
terms and conditions of the Rights.
20. Successors and Assigns. This Warrant shall be binding upon and inure to the
benefit of the Registered Owners and its assigns, and shall be binding upon any
entity succeeding to the Company by merger or acquisition of all or
substantially all the assets of the Company. The Company may not assign this
Warrant or any rights or obligations hereunder without the prior written
consent of the Registered Owner. The Registered Owner may assign this Warrant
without the prior written consent of the Company.
<PAGE>
21. Transfers. The Company shall maintain a register (the "Register")
containing the name and address of the Registered Owner of this Warrant, which
Register can be relied upon by the Company as conclusive evidence of the
Registered Owner. If the Registered Owner transfers or assigns this Warrant it
shall promptly notify the Company in writing of the name and address of the
person to which such transfer or assignation was made. Upon receipt of such
notice the Company shall immediately update the Register to incorporate the new
Registered Owner.
22. Governing Law. This Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York without regard to
the principles of conflicts of law thereof. Each party hereby irrevocably
submits to the nonexclusive jurisdiction of the state and federal courts
sitting in the City of Albany, County of Albany, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address for
such notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF
ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer as of the date first set forth above.
SATCON TECHNOLOGY CORPORATION
By: /s/David B. Eisenhaure
Name:David B. Eisenhaure
Title:President/Chief Executive
Officer
EXHIBIT A
Warrant Exercise Form
TO: SatCon Technology Corporation
The undersigned hereby: (1) irrevocably subscribes for and offers to purchase
_______ shares of Common Stock of SatCon Technology Corporation, pursuant to
Warrant No. ___ heretofore issued to ___________________ on ____________,
199__; (2) encloses either (a) a cash payment of $__________ or (b) the
cancellation of such portion of the attached Warrant as is exercisable for a
total of ______ Warrant Shares (using a Fair Market Value of $ _______ per
share for purposes of this calculation); and (3) requests that a certificate
for the shares be issued in the name of the undersigned and delivered to the
undersigned at the address specified below.
<PAGE>
Date:
Investor Name:
Taxpayer Identification
Number:
By:
Printed Name:
Title:
Address:
Note: The above signature should correspond exactly with the name on the face
of this Warrant or with the name of assignee appearing in assignment form
below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant is to be issued in the name of said undersigned
for the balance remaining of the shares purchasable thereunder less any
fraction of a share paid in cash and delivered to the address stated above. 11
Exhibit 10.38
TOUHEY ASSOCIATES
MODIFIED GROSS LEASE
LANDLORD: Carl E. Touhey
TENANT: Mechanical Technology Inc.
LOCATION: 325 Washington Avenue Extension
Albany, NY 12205
TABLE OF CONTENTS
ARTICLE 1: AGREEMENT 1
ARTICLE 2: PREMISES 1
ARTICLE 3: TERM 1
ARTICLE 4: BASE RENT 1
ARTICLE 5: ADDITIONAL RENT - OPERATING EXPENSES 2
ARTICLE 6: USE OF PREMISES 2
ARTICLE 7: ASSIGNMENT AND SUBLETTING 2
ARTICLE 8: COMPLIANCE WITH LAWS 2-3
ARTICLE 9: TENANT'S CARE OF THE PREMISES 3
ARTICLE 10: ALTERATIONS 3
ARTICLE 11: RULES AND REGULATIONS 3
ARTICLE 12: QUIET ENJOYMENT 3
ARTICLE 13: SUBORDINATION AND NON-DISTURBANCE 4
ARTICLE 14: END OF TERM 4
ARTICLE 15: SECURITY DEPOSIT 4
ARTICLE 16: LANDLORD'S SERVICES 4-5
ARTICLE 17: COMMON AREAS 5
ARTICLE 18: PARKING 5
ARTICLE 19: ENTRY BY LANDLORD 5
ARTICLE 20: INSURANCE 6
ARTICLE 21: INDEMNIFICATION 7
ARTICLE 22: DAMAGE AND DESTRUCTION 7
ARTICLE 23: EMINENT DOMAIN 8
ARTICLE 24: DEFAULT 8-9
ARTICLE 25: MISCELLANEOUS 9-11
EXHIBIT A: THE PREMISES
EXHIBIT A-1: FACILITY REQUIREMENTS - EXCLUDING RESTROOMS/HALLWAYS
EXHIBIT A-2: SITE PLAN
EXHIBIT B: WORKLETTER
EXHIBIT C: TENANT ALTERATIONS
EXHIBIT D: RULES AND REGULATIONS
EXHIBIT E: JANITORIAL SERVICES SCHEDULE
<PAGE>
TOUHEY ASSOCIATES
LEASE OF PREMISES
_____________________
This Lease is made this 10th day of August, 1999 between:
Carl E. Touhey, Pine West Plaza, Bldg. #2, Washington Avenue Extension, Albany,
NY 12205
as Landlord, and
Mechanical Technology Inc., 325 Washington Avenue Extension, Albany, NY 12205
as Tenant.
ARTICLE 1: AGREEMENT
The Landlord hereby leases to and the Tenant hereby leases from the Landlord
the premises described herein according to the terms and conditions of this
lease.
ARTICLE 2: PREMISES
The premises consists of approximately 20,700 useable square feet of space in
the building known as 325 Washington Avenue Extension, Albany, NY 12205. See
Exhibit A.
ARTICLE 3: TERM
3.1 The Term of this lease shall be 10 years commencing on the 1st day of
December, 1999 and expiring on the 30th day of November, 2009.
3.2 The Landlord will be deemed to have delivered possession of the
premises to the Tenant on the date set forth in the Workletter (Exhibit B) upon
substantial completion of the work set forth in the Workletter. Substantial
completion means that the Tenant can use the premises for their intended
purposes without material interference to its ordinary business activities and
a certificate of occupancy has been granted. The premises will be completed 30
days after occupancy unless otherwise agreed by Tenant and Landlord not to be
unreasonably withheld.
3.3 In the event that space shall become available which is contiguous to
the said 20,700 SF occupied by Tenant, Landlord shall first offer this to
Tenant before actively attempting to lease at prevailing rates.
ARTICLE 4: BASE RENT
4.1 The Tenant shall pay monthly rent to the Landlord according to the
following schedule:
$25,012.50 Years 1-5
$26,306.25 Years 6-10
<PAGE>
Monthly rent will be paid in advance on or before the first day of each
calendar month of the term. If the lease commencement date is on a day other
than the first day of a calendar month, then monthly rent will be appropriately
prorated by Landlord based on the actual number of calendar days in such month.
Monthly rent will be paid to Landlord, without written notice or demand, and
without deduction or offset (other than deductions or offsets expressly
permitted herein), in lawful money of the United States of America at
Landlord's address, or to such other address as Landlord may from time to time
designate in writing.
ARTICLE 5: ADDITIONAL RENT - OPERATING EXPENSES
5.1 Utility Services. The Tenant shall pay directly to the Utility Company
and shall solely be liable for the cost of natural gas, or other fuel,
electricity, communication, or any other service used in or supplied to the
demised premises throughout the term of this lease or any extension thereto.
5.2 The Tenant's proportionate share is 78.80% and is calculated as
follows: Tenant's useable square footage 20,700, divided by the total useable
square footage in the building 26,268.
5.3 The Tenant shall pay as additional rent within 30 days of receipt of
the Landlord's invoice and supporting detail the Tenant's proportionate share
of any increase in real and personal property taxes and assessments and any tax
or assessments levied in lieu of, or in addition to, real property taxes above
those incurred by the Landlord during the initial year of the lease (the base
year: December 1, 1999 - November 30, 2000). The base year amount is determined
by multiplying the tax rate in effect during the base year times the assessment
for the parcel at full assessment. If there is a tax abatement in effect then
this amount will be calculated as if there were no abatement. Tenant reserves
the right to protest the taxes if Landlord chooses not to.
ARTICLE 6: USE OF PREMISES
6.1 The Tenant shall use the premises for any purpose allowed by applicable
laws and ordinances including general office purposes, assembly, limited
machine shop, shipping/receiving, research, a laboratory, etc. in connection
with the operation of the Tenant's business.
6.2 Tenant is engaged in assembly, limited machine shop, laboratory,
shipping/receiving, office and research and will continue to conduct such
business as it is currently conducted. Tenant will control its employees,
agents and invitees in such a manner as to not create a nuisance or interfere
with any other tenant in the building or park or the Landlord in its operation
of the building or park.
ARTICLE 7: ASSIGNMENT AND SUBLETTING
7.1 The Tenant shall not assign this lease, nor sublease, nor permit the
premises or any part of the premises to be used or occupied by others without
the prior written consent of the Landlord which shall not be unreasonably
withheld or delayed. Landlord shall have ten (10) business days from receipt of
Tenant's request to deny its consent or it will be deemed to consent. If
Landlord denies consent it must explain the reasons for denial.
7.2 If the Landlord consents to a proposed assignment or sublease, then the
Landlord will have the right to require the Tenant to pay to Landlord (a) any
<PAGE>
rent or other consideration paid to Tenant by any proposed transferee that is
in excess of the rent allocable to the transferred space then being paid by
Tenant to the Landlord pursuant to this lease; and (b) any other profit or gain
(after deducting any necessary expenses incurred) realized by Tenant from any
such sublease or assignment.
7.3 The Landlord consents to an assignment of this lease or sublease of all
or part of the premises to a wholly-owned subsidiary of the Tenant or the
parent of the Tenant or to any corporation into or with which the Tenant may be
merged or consolidated or to any purchaser of the stock or assets of the
Tenant; provided that in the case of a sublease the Tenant promptly provides
the Landlord with a fully executed copy of such assignment or sublease and that
the Tenant is not released from liability under the lease.
ARTICLE 8: COMPLIANCE WITH LAWS
8.1 At its sole cost and expense, Tenant will promptly comply with all
laws, statutes, ordinances, and governmental rules, regulations, or
requirements now in force or in force after the lease date and with the
requirements of any board of fire underwriters or other similar body
constituted now or after the date, insofar as they relate to the use or
occupancy of the premises by the Tenant.
8.2 (a) Tenant will not permit the premises to be used or operated in a
manner that may cause the premises or the project to be contaminated by any
hazardous materials or in violation of any hazardous materials laws.
(b) For purposes of this lease, "hazardous materials" means any explosives,
radioactive materials, hazardous wastes, or hazardous substances, as defined by
federal, state, or local statute, law, ordinance, code, rule, regulation,
order, or decree regulating, relating to, or imposing liability or standards of
conduct concerning hazardous materials, waste, or substances now or at any time
hereafter in effect (collectively, "hazardous materials laws").
8.3 Tenant will not do or permit to be done anything upon the premises or
the project which would (a) jeopardize or be in conflict with fire insurance
policies covering the project and fixtures and property in the project in
existence as of August 18, 1999; (b) increase the rate of fire insurance
applicable to the project to an amount higher than it otherwise would be for
general office use of the project; or (c) subject Landlord to any liability or
responsibility for injury to any person or persons or to property by reason of
any business or operation being carried on upon the premises.
ARTICLE 9: TENANT'S CARE OF THE PREMISES
Tenant will maintain the premises in their condition at the time they were
delivered to Tenant, reasonable wear and tear excluded. All damage or injury to
the premises, the building or the project, that is caused by Tenant, its
agents, employees, or invitees may be repaired, restored, or replaced by
Landlord, at the expense of Tenant.
ARTICLE 10: ALTERATIONS
During the term, Tenant will not make or allow to be made any alterations,
additions, or improvements to or of the premises or any part of the premises,
or attach any fixtures or equipment to the premises, except for those
<PAGE>
enumerated in Exhibit C or nonstructural, minor alterations, without first
obtaining Landlord's written consent which will not be unreasonably withheld or
delayed. All such alterations, additions, and improvements consented to by
Landlord, will be made in a good and workmanlike manner and will be performed
by contractors approved by Landlord and subject to conditions specified by the
Landlord.
ARTICLE 11: RULES AND REGULATIONS
The Tenant and its employees, agents, licensees, and visitors will at all times
observe faithfully, and comply strictly with, the rules and regulations set
forth in Exhibit D, however such rules and regulations shall not be in conflict
with stated use in Article 6. Landlord may from time to time reasonably amend,
delete, or modify existing rules and regulations, or adopt reasonable new rules
and regulations for the use, safety, cleanliness, and care of the premises, the
building, and the project, and the comfort, quiet, and convenience of occupants
of the building and/or the project.
ARTICLE 12: QUIET ENJOYMENT
Landlord covenants and agrees that so long as Tenant pays the rent and observes
and performs all the terms and conditions of this lease, the Tenant may
peaceably and quietly enjoy the premises subject to the terms and conditions of
this lease, and Tenant's possession will not be disturbed by the Landlord or
anyone claiming by, through, or under the Landlord.
ARTICLE 13: SUBORDINATION AND NON-DISTURBANCE
13.1 This lease and the Tenant's rights under this lease are subject and
subordinate to any ground or underlying lease, mortgage, indenture, deed of
trust, or other lien encumbrance (each a "superior lien"), together with any
renewals, extensions, modifications, consolidations, and replacements of such
superior lien, now or after the date placed, charged or enforced against the
land, the building, or all or any portion of the project (except to the extent
any such instrument expressly provides that this lease is superior to such
instrument). This provision will be self- operative and no further instrument
of subordination will be required in order to effect it. In the event a current
or future mortgage holder requires a separate subordination agreement to be
executed, the Tenant will, upon Landlord's request, execute same promptly.
13.2 Tenant will, upon request of any person or party succeeding to the
interest of Landlord, automatically become the Tenant of and attorn to such
successor in interest without change in the terms or provisions of this lease.
13.3 As long as the Tenant is in compliance with the terms of this lease and
is not in default in the performance of its obligations under the lease, the
Tenant's use and possession of the premises shall not be disturbed nor will the
lease be terminated by any person or party succeeding to the Landlord's
interest.
ARTICLE 14: END OF TERM
At the end of this lease, Tenant will promptly quit and surrender the premises
in good order and repair, ordinary wear and tear excepted. The Tenant will
remove the Tenant's trade fixtures, equipment, and furniture and will fully
repair any damage occasioned by the removal of any trade fixtures, equipment or
furniture. All trade fixtures, equipment, furniture, inventory and effects, on
<PAGE>
the premises after the end of the term will be deemed conclusively to have been
abandoned and may be appropriated, sold, stored, destroyed, or otherwise
disposed of by Landlord without written notice to Tenant or any other person
and without obligation to account for them. Tenant will pay Landlord for all
expenses incurred in connection with the removal of such property, including
but not limited to the cost of repairing any damage to the building or premises
caused by the removal of such property. Tenant's obligation to observe and
perform this covenant will survive the expiration or other termination of this
lease.
ARTICLE 15: SECURITY DEPOSIT
INTENTIONALLY OMITTED
ARTICLE 16: LANDLORD'S SERVICES
16.1 The Landlord will repair and maintain, at Landlord's cost, the common
areas of the project, including lobbies, corridors, and restrooms (as well as
restrooms in Tenant premises), the windows in the building, the mechanical,
HVAC, plumbing and electrical equipment serving the building, and the
sidewalks, parking lots, grounds and structure of the building in reasonably
good order and condition.
16.2 The Landlord will furnish the premises, at Landlord's cost, with those
services customarily provided in comparable office buildings in the vicinity of
the project, including (1) water and sewer; (2) lighting replacement during
business hours (for building standard lights, but not for any special tenant
lights, which will be replaced at Tenant's sole cost and expense); (3) restroom
supplies; (4) window washing with reasonable frequency, as determined by
Landlord but no less than Spring and Fall; (5) daily cleaning service and trash
removal (including restrooms in Tenant premises) on weekdays, and (6) snow and
ice removal on sidewalks, parking lot and loading dock area. Landlord may
provide, but will not be obligated to provide, any such services on holidays or
weekends.
16.3 The term "business hours" means 7:00 a.m. to 6:00 p.m. on Monday
through Friday, except holidays (as that term is defined below). The term
"holidays" means New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
16.4 The Landlord's services herein to be provided contemplate a use similar
in nature to that of a Tenant's operation as noted in Article 6. Specialized or
extraordinary requirements exceeding such normal services are not included
except as follows:
1) Landlord will treat anti-static floors as required. Tenant shall reimburse
the Landlord for the cost of the material (wax) and labor in excess of the cost
of the material for normal maintenance of VCT.
ARTICLE 17: COMMON AREAS
As used in this lease, the term "common areas" means, without limitation, the
hallways, entryways, stairs, elevators, driveways, walkways, terraces, docks,
loading areas, restrooms, trash facilities, and all other areas and facilities
in the building or project that are provided and designated from time to time
by the Landlord for the general nonexclusive use and convenience of Tenant with
<PAGE>
Landlord and other Tenants of the building or project and their respective
employees, invitees, licensees, or other visitors. The Landlord grants the
Tenant, its employees, invitees, licensees, and other visitors a nonexclusive
license for the term to use the common areas in common with others entitled to
use the common areas, subject to the terms and conditions of this lease.
Without advance written notice to Tenant, and without any liability to Tenant
in any respect, provided Landlord will take no action permitted under this
Article 17 in such a manner as to materially impair or adversely affect
Tenant's substantial benefit and enjoyment of the premises, Landlord will have
the right to:
(a) Temporarily close any of the common areas for maintenance, alteration,
or improvement purposes; and
(b) Change the size, use, shape or nature of any such common areas.
ARTICLE 18: PARKING
Tenant will be entitled to use the parking spaces around the building or in the
project in common with other Tenants during the term subject to the rules and
regulations set forth in Exhibit D, and any amendments or additions to them.
The parking spaces will be unassigned, nonreserved, and nondesignated. The
Tenant uses the parking spaces at its own risk, and the Landlord will not be
liable for loss or damage to any vehicle or any contents of such vehicle or
accessories to any such vehicle, or any property left in any of the parking
areas. Tenant shall be entitled to at least sixty (60) spaces but no more than
eighty (80) spaces for Tenant's use on a regular basis.
ARTICLE 19: ENTRY BY LANDLORD
Landlord, its agents, employees, and contractors may enter the premises at any
time in response to an emergency and with reasonable notice otherwise to:
(a) Inspect the premises;
(b) Exhibit the premises to prospective purchasers, lenders, or tenants;
(c) Determine whether Tenant is complying with all its obligations in this
lease;
(d) Supply cleaning service and any other service to be provided by
Landlord to Tenant according to this lease; or
(e) Make repairs required of Landlord under the terms of this lease or make
repairs to any adjoining space or utility services or make repairs,
alterations, or improvements to any other portion of the building; however, all
such work will be done as promptly as reasonably possible so as to cause as
little interference to Tenant as reasonably possible.
ARTICLE 20: INSURANCE
20.1 Landlord's Insurance. At all times during the term, Landlord will carry
and maintain:
(a) Fire and extended coverage insurance covering the building, the
project, its equipment, common area furnishings, and leasehold improvements in
the premises;
(b) Bodily injury and property damage insurance; and
(c) Such other insurance as Landlord reasonably determines from time to
time.
These insurance coverages and amounts will be reasonably determined by
<PAGE>
Landlord, based on coverages carried by prudent owners of comparable buildings
in the vicinity of the project. A copy of the Landlord's insurance policies
will be provided to the Tenant upon written request.
20.2 Tenant's Insurance. At all times during the term, Tenant will carry and
maintain, at Tenant's expense, the following insurance, in the amounts
specified below or such other amounts as Landlord may from time to time
reasonably request, with insurance companies and on forms satisfactory to
Landlord:
(a) Bodily injury and property damage liability insurance, with a combined
single occurrence limit of not less than $3,000,000. All such insurance will be
equivalent to coverage offered by a commercial general liability form,
including without limitation personal injury and contractual liability coverage
for the performance by Tenant of the indemnity agreements set forth in Article
21 of this lease.
(b) Worker's compensation insurance satisfying Tenant's obligations and
liabilities under the worker's compensation laws of the State of New York,
including employer's liability insurance in the limits required by the laws of
the State of New York; and
(c) If Tenant operates owned, hired, or nonowned vehicles on the project,
comprehensive automobile liability at a limit of liability not less than
$500,000 combined bodily injury and property damage.
20.3 Certificate of insurance, naming the Landlord as additional insured,
will be delivered to the Landlord prior to the Tenant's occupancy of the
premises. All commercial general liability or comparable policies maintained by
Tenant will name Landlord as additional insured. All commercial general
liability and property policies maintained by Tenant will be written as primary
policies, not contributing with and not supplemental to the coverage that the
Landlord may carry. A copy of the Tenant's insurance policies will be provided
to the Landlord upon written request.
20.4 Waiver of Subrogation. The Landlord and Tenant each waive any and all
rights to recover against the other or against the officers, directors,
shareholders, partners, employees, agents, customers, invitees, or business
visitors of such other party, for any loss or damage to such waiving party
arising from any cause covered by any property insurance required to be carried
by such party pursuant to this Article 20 or any other property insurance
actually carried by such party to the extent of the limits of such party.
Landlord and Tenant from time to time will cause their respective insurers to
issue appropriate waiver of subrogation rights endorsements to all property
insurance policies carried in connection with the project or the premises or
the contents of the project or the premises.
ARTICLE 21: INDEMNIFICATION
21.1 Except for any injury or damage to persons or property on the premises
that is caused by or results from the negligence or deliberate act of Landlord,
its employees, or agents, Tenant will not hold Landlord, its employees, or
agents liable for, and Tenant will indemnify and hold harmless Landlord, its
employees, and agents from and against, any and all demands, claims, causes of
action, fines, penalties, damages (including consequential damages),
liabilities, judgements, and expenses (including without limitation reasonable
attorneys' fees) incurred in connection with or arising from:
(a) the use or occupancy or manner of use or occupancy of the premises by
Tenant or any person claiming under Tenant;
<PAGE>
(b) any activity, work, or thing done or permitted by Tenant in or about
the premises, the building, or the project;
(c) any breach by Tenant or its employees, agents, contractors, or invitees
of this lease; and
(d) any injury or damage to the person, property, or business of Tenant,
its employees, agents, contractors, or invitees entering upon the premises
under the express or implied invitation of Tenant.
21.2 If any action or proceeding is brought against Landlord, its employees,
or agents by reason of any such claim for which Tenant has indemnified
Landlord, Tenant, upon written notice from Landlord, will defend the same at
Tenant's expense.
ARTICLE 22: DAMAGE AND DESTRUCTION
22.1 If the premises or the building are damaged by fire or other insured
casualty, Landlord will give Tenant written notice of the time which will be
needed to repair such damage, as determined by Landlord in its reasonable
discretion, and the election (if any) which Landlord has made according to this
Article 22. Such notice will be given before the 10th day (the "notice date")
after the fire or other insured casualty.
22.2 If the premises or the building are damaged by fire or other insured
casualty to an extent which may be repaired within 30 days after the notice
date, as reasonably determined by Landlord, Landlord will promptly begin to
repair the damage after the notice date and will diligently pursue the
completion of such repair. In that event this lease will continue in full force
and effect except that monthly rent will be abated on a pro rata basis from the
date of the damage until the date of the completion of such repairs (the
"repair period") based on the proportion of the rentable area of the premises
Tenant is unable to use during the repair period.
22.3 If the premises or the building are damaged by fire or other insured
casualty to an extent that may not be repaired within 30 days after the notice
date, as reasonably determined by Landlord, then (1) Landlord may cancel this
lease as of the date of such damage by written notice given to Tenant on or
before the notice date or (2) Tenant may cancel this lease as of the date of
such damage by written notice given to Landlord within 30 days after the notice
date. If neither Landlord nor Tenant so elects to cancel this lease, Landlord
will diligently proceed to repair the building and premises and monthly rent
will be abated on a pro rata basis during the repair period based on the
proportion of the rentable area of the premises Tenant is unable to use during
the repair period.
22.4 Notwithstanding the provisions of Subparagraphs 22.1, 22.2, and 22.3
above, if the premises or the building are damaged by uninsured casualty, or if
the proceeds of insurance are insufficient to pay for the repair of any damage
to the premises or the building, Landlord will have the option to repair such
damage or cancel this lease as of the date of such casualty by written notice
to Tenant on or before the notice date.
22.5 If any such damage by fire or other casualty is the result of the
willful conduct or gross negligence of Tenant, its agents, contractors,
employees or invitees, there will be no abatement of monthly rent as otherwise
provided for in this Article 22. Tenant will have no rights to terminate this
lease on account of any damage to the premises, the building, or the project,
except as set forth in this lease.
<PAGE>
ARTICLE 23: EMINENT DOMAIN
Landlord must notify Tenant of any actions, intentions or plans of any person
to take all or part of the premises by eminent domain within 10 days of
Landlord's knowledge of such action, intention or plan ("Eminent Domain
Notice").
If all or any of the premises may be taken by exercise of the power of eminent
domain (or conveyed by Landlord in lieu of such exercise), Tenant may within 60
days of such Eminent Domain Notice notify Landlord of its intention to
terminate this lease. If all the premises are to be taken by eminent domain,
Tenant must terminate the lease effective as of a date (the "termination date")
which is the earlier of the date upon which the condemning authority takes
possession of the premises or the date on which title to the premises is vested
in the condemning authority. If less than all of the premises are taken by
eminent domain and Tenant elects not to terminate the lease, the monthly rent
will be abated in the proportion of the rentable area of the premises so taken
to the rentable area of the premises immediately before such taking, and
tenant's share will be appropriately recalculated. If 25% or more of the
building or the project is so taken, Landlord may cancel this lease by written
notice to Tenant given as of 120 days after the Eminent Domain Notice Date. In
the event of any such taking, the entire award will be paid to Landlord and
Tenant will have no right or claim to any part of such award; however, Tenant
will have the right to assert a claim against the condemning authority in a
separate action, so long as Landlord's award is not otherwise reduced, for
Tenant's moving expenses and leasehold improvements owned by Tenant.
ARTICLE 24: DEFAULT
24.1 Events of Default. The following events are referred to, collectively,
as "events of default" or, individually, as an "event of default":
(a) Tenant defaults in the due and punctual payment of rent, and such
default continues for 10 days after written notice from Landlord; however,
Tenant will not be entitled to more than 2 written notices for monetary
defaults during any 12 month period, and if after such written notice any rent
is not paid when due, an event of default will be considered to have occurred
without further notice;
(b) This lease or the premises or any part of the premises are taken upon
execution or by other process of law directed against Tenant, or are taken upon
or subject to any attachment by any creditor of Tenant or claimant against
Tenant, and said attachment is not discharged or disposed of within 30 days
after its levy;
(c) Tenant files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United States or
under any insolvency act of any state, or admits the material allegations of
any such petition by answer or otherwise, or is dissolved or makes an
assignment for the benefit of creditors;
(d) Involuntary proceedings under any such bankruptcy law or insolvency act
or for the dissolution of Tenant are instituted against Tenant, or a receiver
or trustee is appointed for all or substantially all of the property of Tenant,
and such proceeding is not dismissed or such receivership or trusteeship
vacated within 60 days after such institution or appointment;
(e) Tenant breaches any of the other agreements, terms, covenants, or
conditions that this lease requires Tenant to perform, and such breach
continues for a period of 30 days after written notice from Landlord to Tenant
or, if such breach cannot be cured reasonably within such 30 day period, if
Tenant fails to diligently commence to cure such breach within 30 days after
<PAGE>
written notice from Landlord and to complete such cure within a reasonable time
thereafter.
24.2 Landlord's Remedies. If any one or more events of default set forth in
Section 24.1 occurs then Landlord has the right, at its election:
(a) To give Tenant written notice of Landlord's intention to terminate this
lease on the earliest date permitted by law or on any later date specified in
such notice, in which case Tenant's right to possession of the premises will
cease and this lease will be terminated, except as to Tenant's liability;
(b) Without further demand or notice, to reenter and take possession of the
premises or any part of the premises, repossess the same, expel Tenant and
those claiming through or under Tenant, and remove the effects of both or
either, using such force for such purposes as may be necessary without
prejudice to any remedies for arrears of monthly rent or other amounts payable
under this lease; or
(c) Without further demand or notice to cure any event of default and to
charge Tenant for the cost of effecting such cure, including without limitation
reasonable attorneys' fees.
24.3 Waiver of Redemption. The Tenant waives any right of redemption arising
as a result of the Landlord's exercise of its remedies under this Article 24.
24.4 Notice of Landlord's Default. In the event of any default in the
obligation of the Landlord under this lease, Tenant will deliver to Landlord
written notice listing the reasons for Landlord's default and Landlord will
have 30 days following receipt of such notice to cure such default or, in the
event the default cannot reasonably be cured within a 30 day period, to
commence action and proceed diligently to cure such default. A copy of such
notice to Landlord will be sent to any holder of a mortgage or other
encumbrance on the building or project of which Tenant has been notified in
writing, any such holder will also have the same time periods to cure such
default. If any such default remains uncured Tenant has the right at it's
election to cure such default at Landlord's expense with prior written
notification given to Landlord.
24.5 Self Help. If either party defaults, the other party may, without being
obligated and without waiving the default, cure the default. The defaulting
party shall pay upon demand, all costs, expenses, and disbursements incurred by
the non-defaulting party to cure the default.
ARTICLE 25: MISCELLANEOUS
25.1 Late Charges. A late charge of 5% shall be assessed to any payment of
rent or additional rent not made within 10 days of the due date and shall be
considered additional rent. Interest on amounts more than 10 days past due
shall accrue and be payable at the rate of 1% per month.
25.2 No Waiver. The waiver by Landlord of any agreement, condition, or
provision contained in this lease will not be deemed to be a waiver of any
subsequent breach of the same or any other agreement, condition, or provision
contained in this lease, nor will any custom or practice that may grow up
between the parties in the administration of the terms of this lease be
construed to waive or to lessen the right of Landlord to insist upon the
performance by Tenant in strict accordance with the terms of this lease. The
subsequent acceptance of rent by Landlord will not be deemed to be a waiver of
any preceding breach by Tenant or any agreement, condition, or provision of
<PAGE>
this lease, other than the failure of Tenant to pay the particular rent so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent.
25.3 Estoppel Certificates. At any time and from time to time but within 10
days after prior written request by either party, the other party will execute,
acknowledge, and deliver promptly upon request, a certificate certifying that
this lease is in full force and effect and, if modified, stating the date and
nature of each modification.
25.4 Holding Over. Tenant will have no right to remain in possession of all
or any part of the premises after the expiration of the term without the
express consent of Landlord. If Tenant remains in possession of all or any part
of the premises after the expiration of the term, without the express consent
of Landlord: (a) such tenancy will be deemed to be a periodic tenancy from
month-to-month only; (b) such tenancy will not constitute a renewal or
extension of this lease for any further term; and (c) such tenancy may be
terminated by Landlord upon the earlier of 30 days prior written notice or the
earliest date permitted by law. In such event, monthly rent will be increased
to an amount equal to 120% of the monthly rent payable during the last month of
the term, and any other sums due under this lease will be payable in the amount
and at the times specified in this lease. Such month-to-month tenancy will be
subject to every other term, condition, and covenant contained in this lease.
25.5 Notices. Any notice, request, demand, consent, approval, or other
communication required or permitted under this lease must be in writing and
will be deemed to have been given when personally delivered, sent by facsimile
with receipt acknowledged, deposited with any nationally recognized overnight
carrier that routinely issues receipts, or deposited in any depository
regularly maintained by the United States Postal Service, postage prepaid,
certified mail, return receipt requested, addressed to the party for whom it is
intended at its address set forth in this lease. Either Landlord or Tenant may
add additional addresses or change its address for purposes of receipt of any
such communication by giving 10 days prior written notice of such change to the
other party in the manner prescribed in this Section 25.5.
25.6 Severability. If any provision of this lease proves to be illegal,
invalid, or unenforceable, the remainder of this lease will not be affected by
such finding, and in lieu of each provision of this lease that is illegal,
invalid, or unenforceable a provision will be added as a part of this lease as
similar in terms to such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid, and enforceable.
25.7 Written Amendment Required. No amendment, alteration, modification of,
or addition to the lease will be valid or binding unless expressed in writing
and signed by Landlord and Tenant. Tenant agrees to make any modifications of
the terms and provisions of this lease required or requested by any lending
institution providing financing for the building, or project, as the case may
be, provided that no such modifications will materially adversely affect
Tenant's rights and obligations under this lease.
25.8 Confidentiality. The terms of this lease are considered confidential
and the Tenant shall not disclose any of the terms of this lease to anyone
except that the Tenant shall make those disclosures in financial statements
which are customarily made or such other disclosures as the Tenant may be
required to make by perspective creditors of the Tenant.
<PAGE>
25.9 Broker's Warranty. The parties warrant that CB Richard Ellis/Robert Cohn
is the only broker they dealt with on this lease. Landlord is solely
responsible for paying the broker's commission as per the Tenant's Request for
Proposal.
25.10 Entire Agreement. This lease, the exhibits and addenda, if any, contain
the entire agreement between Landlord and Tenant. No promises or
representations, except as contained in this lease, have been made to Tenant
respecting the condition or the manner of operating the premises, the building,
or the project.
25.11 Binding Effect. The covenants, conditions, and agreements contained in
this lease will bind and inure to the benefit of Landlord and Tenant and their
respective heirs, distributees, executors, administrators, successors, and,
except as otherwise provided in this lease, their assigns.
Landlord and Tenant have executed this lease as of the day and year first above
written.
LANDLORD:
Carl E. Touhey
BY:
WITNESS
TENANT:
Mechanical Technology Inc.
BY:
WITNESS
<PAGE>
STATE OF NEW YORK
COUNTY OF
On this ____ day of __________ , 19__
before me personally came
________________ to me known and
known to be the individual described in and
who executed the foregoing instrument and
acknowledges to me that he executed the
same.
_________________________
STATE OF NEW YORK
COUNTY OF
On this ____ day of_________ , 19__ before
me personally came _______________to me
known, who being by me duly sworn, did
depose and say that he resides in
___________________; that he is the
_____________ of the corporation described
in and which executed the foregoing
instrument; that he knows the seal of said
corporation; that the seal affixed to said
instrument is such corporate seal; that it was
so affixed by order of the Board of Directors of
said corporation, and that he signed his name
thereto by like order.
_________________________
EXHIBIT B
WORKLETTER
This Exhibit is attached to and forms a part of the certain lease dated August
10, 1999 ("the lease") pursuant to which the Landlord has leased to Tenant
space in the building known as 325 Washington Avenue Extension, Albany, NY
12205.
<PAGE>
The Landlord will make, at Landlord's sole cost, the following alterations to
the premises:
Construct floor plan as indicated on Exhibit A and A-1:
1. Erect sheetrock partitions and doors as indicated. All sheetrock walls to
receive two (2) coats of paint (one (1) color to be selected by Tenant).
2. Ceiling to be 2' x 4' tile in a T-bar grid system using building standard
tile unless otherwise indicated. Ceiling height to be 9' except in clean room
which shall be 10'.
3. Unless otherwise indicated in Exhibit A-1 lighting to be building standard
2' x 4' recessed fluorescent fixtures at a rate of at least one (1)
fixture/80SF. The assembly, parts, engineering lab and machine shop have
different light fixture placement requirements which will be accommodated in
lighting plan.
4. Electrical light switches and duplex convenience outlets as reasonably
necessary (one (1) switch per room, one (1) outlet per wall) including up to
two (2) dedicated circuits unless otherwise noted.
5. HVAC supply and return ducts as reasonably necessary. Computer room to
receive separate HVAC system (shall control both temperature and humidity) and
thermostat zone control. The unit shall be mounted in the ceiling of the room.
Clean room air intake must be tied directly to HVAC and have a separate
thermostat zone control.
6. All work related to communications shall be the Tenant's responsibility.
7. Tenant to provide cleanroom. Landlord to install.
8. Floor covering as follows (per Exhibit A-1): 26 oz. commercial grade carpet
with minimum of ten (10) year warranty (one (1) color to be selected by
Tenant), VCT tile - building standard (one (1) color to be selected by Tenant),
VCT anti-static tile (one (1) color to be selected by Tenant).
9. Provide roof penetrations for anti-static VCT areas requiring exhaust
systems.
10. Landlord to install compressor, vacuum pump, and exhaust system (provided
by Tenant) as per finalized Exhibit A. Compressor, vacuum and exhaust systems -
Landlord to replicate Tenant's existing systems. Landlord will not be designing
systems for Tenant.
11. Tenant occupancy date for substantial completion to be November 19, 1999.
12. Landlord to provide keys for office doors in demised premises. Tenant to
provide additional security system with swipe cards over and above keyed locks.
13. Countertops/cabinets to be provided by Landlord in the kitchen area and
conference room only. Tenant to provide all other furniture and shelving.
14. Landlord to provide roof penetration and installation of smoke eater unit
(provided by Tenant).
15. Landlord to provide two (2) roof penetrations for exhaust systems in
assembly area (provided by Tenant).
<PAGE>
This Lease shall not be valid until Exhibit A (floor plan and mechanicals) have
been mutually agreed to by Landlord and Tenant.
EXHIBIT C
TENANT ALTERATIONS
This Exhibit is attached to and forms a part of the certain lease dated August
10, 1999 ("the lease") pursuant to which the Landlord has leased to Tenant
space in the building known as 325 Washington Avenue Extension, Albany, NY
12205.
The Landlord grants the Tenant permission to make the following alterations to
the premises, at Tenant's sole cost, in accordance with Article 10 of this
lease:
1. All work in accordance with Tenant's security system and communications.
2. Installation of a free standing sign between the building and parallel to
Frontage Road. The sign shall be in accordance with municipal code and shall
not exceed twenty square feet. Tenant shall have the right to change the face
of the sign at will.
EXHIBIT D
RULES AND REGULATIONS
1. The sidewalks, halls, passages, exits, entrances, elevators, and
stairways of the building will not be obstructed by any Tenants or used by any
of them for any purpose other than for ingress to and egress from their
respective premises. No Tenant and no employee or invitee of any Tenant will go
upon the roof of the building. No Tenant will be permitted to place or install
any object on the exterior of the building or on the roof of the building
without the Landlord's written permission.
2. No sign, placard, picture, name, advertisement, or written notice
visible from the exterior of Tenant's premises will be inscribed, painted,
affixed, or otherwise displayed by Tenant on any part of the building or the
premises without the prior written consent of Landlord except as indicated in
Exhibit C. All approved signs or lettering on doors will be printed, painted,
affixed, or inscribed at the expense of the Tenant by a person approved by
Landlord. Other than draperies expressly permitted by Landlord and building
standard mini-blinds, material visible from outside the building will not be
permitted.
3. No cooking will be done or permitted by any Tenant on the premises. Use
by the Tenant of refrigerators, microwave ovens and Underwriters' Laboratory
approved equipment for brewing coffee, tea, hot chocolate, and similar
beverages will be permitted.
<PAGE>
4. No Tenant will employ any person or persons other than the cleaning
service of Landlord for the purpose of cleaning the premises, unless otherwise
agreed to by Landlord in writing. The Tenant upon 60 day written notice to
Landlord, may elect to provide for cleaning services. In such case the Landlord
shall provide a monthly rent abatement of $1,300.
5. The toilet rooms, toilets, urinals, wash bowls and other plumbing
fixtures will not be used for any purposes other than those for which they were
constructed, and no sweepings, rubbish, rags, or other foreign substances will
be thrown in such plumbing fixtures. All damages resulting from any misuse of
the fixtures will be borne by the Tenant who, or whose servants, employees,
agents, visitors, or licensees, caused the same.
6. No Tenant will in any way deface any part of the premises or the
building of which they form a part.
7. No Tenant will alter, change, replace, or rekey any lock or install a
new lock on any entry door to the premises without the Landlord's permission.
Landlord, its agents, or employees will retain a key to all entry door locks to
the premises. Each Tenant, upon termination of its tenancy, will deliver to
Landlord all keys and access cards for the premises and building that have been
furnished to such Tenant.
8. Upon the initial move into the premises and the final move out of the
premises the persons employed to move Tenant's equipment, material, furniture,
or other property in or out of the building must be acceptable to Landlord and
must be bonded and fully insured. Tenant will be responsible for the provision
of building security during all moving operations, and will be liable for all
losses and damages sustained by any party as a result of the failure to supply
adequate security. Any damage done to the building by moving or maintaining
such property will be repaired at the expense of Tenant. Supplies, goods,
materials, packages, furniture, and all other items of every kind delivered to
or taken from the premises will be delivered or removed through the entrance
and route designated by Landlord.
9. No Tenant will use or keep in the premises or the building any
kerosene, gasoline, or inflammable or combustible or explosive fluid or
material or chemical substance other than limited quantities of such materials
or substances reasonably necessary for the operation or maintenance of office
equipment or limited quantities of cleaning fluids and solvents required in
Tenant's normal operations in the premises. Without Landlord's prior written
approval, no Tenant will use any method of heating or air conditioning other
than that supplied by Landlord. No Tenant will use or keep or permit to be used
or kept any foul or noxious gas or substance in the premises. Tenant shall
provide MSDS sheets to Landlord for all hazardous materials.
10. Tenant will not bring any animals (except "Seeing Eye" dogs) or birds
into the building, and will not permit bicycles or other vehicles inside or on
the sidewalks outside the building except in areas designated from time to time
by Landlord for such purposes.
11. All persons entering or leaving the building between the hours of 6:00
p.m. and 7:00 a.m. Monday through Friday, and at all hours on Saturdays,
Sundays, and holidays will comply with such off- hour regulations as Landlord
may establish and modify from time to time. Tenant and Tenant's employees will
be responsible for locking building doors when they leave the building during
these hours.
<PAGE>
12. Each Tenant will store all its trash and garbage within its premises.
The Tenant will comply with all Municipal, State and Federal laws as they
relate to refuse removal and recycling. Removal of any furniture or
furnishings, large equipment, packing crates, packing materials, and boxes will
be the responsibility of each Tenant and such items may not be disposed of in
the building trash receptacles nor will they be removed by the building's
janitorial service, except at Landlord's sole option and at the Tenant's
expense. Landlord will provide a 6 yard dumpster for cardboard to be placed at
the rear of the property screened by a reasonable enclosure. Landlord to pay
for cost of dumpster to be taken 1/week. Any additional cost to be paid by
Tenant.
13. Canvassing, peddling, soliciting, and distributing handbills or any
other written materials in the building are prohibited, and each Tenant will
cooperate to prevent the same.
14. The requirements of the Tenants will be attended to only upon
application by written, personal, or telephone notice at the office of the
Landlord. Employees of Landlord will not perform any work or do anything
outside of their regular duties unless under special instructions from
Landlord.
15. A directory of the building will be provided for the display of the
name of Tenants only. All entries on the building directory will conform to
standards and style set by Landlord in its sole discretion and will be paid for
by the Tenant. No Tenant will have any right to the use of any exterior sign.
16. Tenant will see that the doors of the premises are closed and locked
and that all water faucets, water apparatus, and utilities are shut off before
Tenant or Tenant's employees leave the premises.
17. Tenant will not bring on to the premises or store on the premises
firearms, munitions or explosives of any type.
18. Tenant (including Tenant's employees, agents, invitees, and visitors)
will use the parking spaces solely for the purpose of parking passenger cars,
small vans, and small trucks and will comply in all respects with any rules and
regulations that may be promulgated by Landlord from time to time with respect
to the parking areas. The parking areas may be used by Tenant, its agents, or
employees, for occasional overnight parking of vehicles. Tenant will ensure
that any vehicle parked in any of the parking spaces will be kept in proper
repair and will not leak excessive amounts of oil or grease or any amount of
gasoline.
EXHIBIT E
JANITORIAL SERVICES SCHEDULE
The Landlord shall provide the following janitorial services to the Tenant on a
5 day a week (holidays excluded) basis.
A) Tenant's Office Area
The following tasks will be performed on a daily basis:
1) empty baskets
<PAGE>
2) dust office furniture (note: janitorial personnel are not authorized to
touch or move anything on desks or cabinets).
3) vacuum carpets
4) empty/wash ash trays
5) damp mop hard surface/tile floors
6) spot clean entrance glass/glass tops
7) clean sinks, counter tops, and table tops
The following additional tasks will be performed:
8) dust venetian blinds twice per mont
9) high and low dusting once per week
10) change waste receptacle liners as needed
11) clean tenant entrance glass once per week
12) spray buff resilient floor tile twice per month
13) strip and wax resilient floor once per quarter
14) clean exterior windows three times per year
15) clean carpets semi-annually (Landlord shall not be responsible for
moving any furniture)
*NOTE: Anti-static VCT shall be maintained in accordance with manufacturers
recommendation which may differ from standard VCT. Tenant to pay for additional
cost of labor and materials required to maintain this VCT above the cost to
maintain standard VCT.
B) Rest Rooms
The following tasks will be performed on a daily basis:
1) clean and disinfect toilets and urinals
2) damp mop and disinfect floors
3) clean mirrors
4) clean sinks and counter tops
5) empty waste receptacles
6) vacuum carpeted areas
7) dust partitions
8) fill toilet tissue and paper towel dispensers
The following additional tasks will be performed:
9) spot clean walls and partitions as needed
10) refill soap dispensers as needed
11) wash partitions once per quarter
12) wash walls once per quarter
13) machine clean restroom floors once per quarter
C) Common Entrance Lobbies and Hall Ways
The following tasks will be performed on a daily basis:
1) vacuum carpeted areas
2) damp mop hard tile floors
3) vacuum walk off mats
4) clean entrance doors
<PAGE>
The following additional tasks will be performed:
5) mop baseboard once per week
6) high dusting once per week
7) clean exterior windows as necessary
8) shampoo carpeted areas once per quarter
EXHIBIT 10.39
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
This Registration Rights Agreement (this "Agreement") is entered into as of
November 1, 1999 by and among Plug Power Inc., a Delaware corporation (the
"Company"), and each of the parties executing a signature page hereto (each a
"Holder" and collectively the "Holders").
WHEREAS, the Holders are the owners of the number of shares of the common
stock, par value $.01 per share, of the Company (the "Common Stock") set forth
opposite their respective names on Exhibit A attached hereto (collectively, the
---------
"Shares").
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
-----------
As used in this Agreement, the following terms have the following meanings:
"Commission" means the Securities and Exchange Commission.
----------
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Person" means any individual, corporation, partnership, limited liability
------
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Prospectus" means the prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, and by all other
amendments and supplements to the prospectus, including post-effective
amendments, and in each case including all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
"Registrable Securities" means the Shares and any shares of Common Stock
----------------------
issued or issuable with respect to the Shares by reason of a stock dividend or
stock split, recapitalization or similar transaction, but excludes (i) Shares
the sale of which is covered by a Registration Statement that has been declared
effective under the Securities Act, (ii) Shares eligible for sale pursuant to
Rule 144 (or any similar provision then in force, but not Rule 144A) under the
Securities Act, including a sale pursuant to the provisions of Rule 144(k), and
(iii) Shares sold
<PAGE>
pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A)
under the Securities Act, including a sale pursuant to the provisions of Rule
144(k).
"Registration Statement" means any registration statement of the Company
----------------------
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement, and all amendments and supplements to any such registration
statement, including post-effective amendments, in each case including the
Prospectus, all exhibits, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time, or any successor statute, and the rules and regulations of the Commission
promulgated thereunder.
SECTION 2. PIGGYBACK REGISTRATION.
----------------------
(a) If at any time or times after the date hereof while any
Registrable Securities are outstanding the Company proposes to register under
the Securities Act any shares of Common Stock (other than (i) a registration on
Form S-8 or any successor form or in connection with any employee or director
welfare, benefit or compensation plan, (ii) a registration on Form S-4 or any
successor form or in connection with an exchange offer, (iii) a registration in
connection with a securities or rights offering exclusively to the Company's
securityholders, (iv) a registration in connection with an offering solely to
employees of the Company or its affiliates, (v) a registration relating to a
transaction pursuant to Rule 145 or any other similar rule of the Commission
under the Securities Act or (vi) a shelf registration), then the Company will
give written notice of such proposed registration to the Holders at least ten
(10) business days before the filing of any Registration Statement with respect
thereto. If within five (5) business days after such notice is given, the
Company receives a written request from any Holder for the inclusion in such
Registration Statement of some or all of the Registrable Securities held by such
Holder (which request will specify the number of Registrable Securities intended
to be disposed of by such Holder and the intended method of distribution
thereof), the Company will (subject to the provisions of paragraphs (b) and (c)
of this Section 2) include such Registrable Securities in such Registration
Statement. The Company may withdraw a Registration Statement filed under this
Section 2 at any time prior to the time it becomes effective, provided that the
Company will give prompt notice of such withdrawal to the Holders which
requested to be included in such Registration Statement. Each Holder shall have
the right to request inclusion of such Holder's Registrable Securities in up to
three Registration Statements pursuant to this Section 2(a). The rights of the
Holders under this Section 2(a) will terminate on the date on which the third
Registration Statement to which such rights apply is declared effective by the
Commission.
2
<PAGE>
(b) In connection with any registration under this Section 2
involving an underwriting (an "Underwritten Offering"), the Company will not be
required to include a Holder's Registrable Securities in such Underwritten
Offering unless such Holder accepts the terms of the underwriting as agreed upon
between the Company and the underwriters selected by the Company. If the
managing underwriter(s) of an Underwritten Offering advises the Company that the
number of securities to be sold in such Underwritten Offering, including by
Persons other than the Company (including the Holders) (collectively, the
"Selling Stockholders"), is greater than the number which can be offered without
adversely affecting such Underwritten Offering, including, without limitation,
the price range or probability of success of such Underwritten Offering, then
the Company will include in such Underwritten Offering in the following
priority: (i) first, all shares the Company proposes to sell and (ii) second,
that number of shares of Common Stock proposed to be sold by the Selling
Stockholders (including Registrable Securities proposed to be sold by the
Holders) which, in the opinion of such managing underwriter(s), can be sold
without adversely affecting such Underwritten Offering, including, without
limitation, the price range or probability of success of such Underwritten
Offering, which shares shall be allocated among the Selling Stockholders
(including the Holders requesting registration) on a pro rata basis according to
the relationship that the number of shares requested to be included by each
Selling Stockholder (including the Registrable Securities requested to be
included by each Holder) in such Underwritten Offering bears to the total number
of shares requested to be registered by all Selling Stockholders (including the
total number of Registrable Securities requested to be registered by all
Holders).
(c) Each Holder hereby agrees that such Holder may not participate in
any Underwritten Offering unless such Holder (a) agrees to sell such Holder's
Registrable Securities on the basis provided in the underwriting arrangements
applicable to such Underwritten Offering and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of the underwriting
arrangements for such Underwritten Offering.
SECTION 3. REGISTRATION PROCEDURES.
-----------------------
(a) The Company will notify each Holder whose Registrable Securities
are included in a Registration Statement of the effectiveness of such
Registration Statement and will furnish to each such Holder, without charge,
such number of conformed copies of such Registration Statement and any post-
effective amendment thereto and such number of copies of the Prospectus
(including each preliminary Prospectus) and any amendments or supplements
thereto, as such Holder may reasonably request in order to facilitate the sale
of such Holder's Registrable Securities.
(b) The Company will promptly notify each Holder requesting
registration of, and confirm in writing, any request by the Commission for
amendments or supplements to the Registration Statement or the Prospectus
related thereto or for additional information. In addition, the Company will
promptly notify each such Holder of, and confirm in writing, the
3
<PAGE>
filing of the Registration Statement, any Prospectus supplement related thereto
or any post-effective amendment to the Registration Statement and the
effectiveness of any post-effective amendment.
(c) The Company will use commercially reasonable efforts to register
or qualify the Registrable Securities covered by any Registration Statement
under such other securities or "blue sky" laws of such states of the United
States as any Holder requesting registration reasonably requests; provided,
however, that the Company will not be required (i) to qualify as a foreign
corporation to do business in any jurisdiction in which it is not then
qualified, (ii) to file any general consent to service of process, or (iii) to
subject itself to taxation in any jurisdiction where it would not otherwise be
subject to taxation.
(d) At any time when a Prospectus relating to the Registration
Statement is required to be delivered under the Securities Act, the Company will
promptly notify each Holder holding Registrable Securities covered by such
Registration Statement of the happening of any event as a result of which the
Prospectus included in the Registration Statement includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. In such event, the
Company will promptly prepare and file with the Commission and furnish to each
such Holder a reasonable number of copies of a supplement or amendment to such
Prospectus so that, as thereafter deliverable to the purchasers of Registrable
Securities, such Prospectus will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4. REGISTRATION EXPENSES. The Company will bear all expenses
---------------------
incurred in connection with the registration of the Registrable Securities
pursuant to Section 2 of this Agreement; provided, however, that the Holders
-----------------
will be responsible and will pay for (i) any brokerage or underwriting discounts
and commissions and taxes of any kind (including, without limitation, transfer
taxes) with respect to any disposition, sale or transfer of Registrable
Securities, (ii) any fees or expenses of any counsel, accountants or other
persons retained or employed by the Holders and (iii) out-of-pocket expenses of
the Holders and their agents, including, without limitation, any travel costs.
SECTION 5. INDEMNIFICATION AND CONTRIBUTION.
--------------------------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, each Holder, its officers,
directors, employees and agents and each Person, if any, which controls such
Holder within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, (collectively, "Controlling Persons"), from and against
all losses, claims, damages, liabilities and expenses (including
4
<PAGE>
without limitation any legal or other fees and expenses reasonably incurred by
any Holder or any such Controlling Person in connection with defending or
investigating any action or claim in respect thereof) (collectively, "Damages")
to which any of them may become subject under the Securities Act or otherwise,
insofar as such Damages arise out of or are based upon (i) any untrue or alleged
untrue statement of material fact contained in any Registration Statement
(including any related preliminary or final Prospectus) pursuant to which
Registrable Securities of such Holder were registered under the Securities Act,
or (ii) any omission or alleged omission to state therein a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as and to the extent that
such statement or omission arose out of or was based upon information regarding
such Holder or its plan of distribution which was furnished to the Company by
such Holder for use therein, provided, further that the Company will not be
liable to any person who participates as an underwriter in the offering or sale
of Registrable Securities or any Controlling Person of such underwriter, in any
such case to the extent that any such Damages arise out of or are based upon (A)
an untrue statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement (including any related preliminary or final
Prospectus) in reliance upon and in conformity with information furnished to the
Company for use in connection with the Registration Statement or the Prospectus
contained therein by such underwriter or Controlling Person or (B) the failure
of such underwriter or Controlling Person to send or give a copy of the final
Prospectus furnished to it by the Company at or prior to the time such action is
required by the Securities Act to the person claiming an untrue statement or
alleged untrue statement or omission or alleged omission if such statement or
omission was corrected in such final prospectus. The obligations of the Company
under this Section 5(a) shall survive the completion of any offering of
Registrable Securities pursuant to a Registration Statement under this Agreement
or otherwise and shall survive the termination of this Agreement.
(b) Indemnification by the Holders. Each Holder agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, the Company, its directors,
officers, employees and agents and each Controlling Person of the Company, from
and against any and all Damages to which any of them may become subject under
the Securities Act or otherwise to the extent such Damages arise out of or are
based upon any untrue statement or omission or alleged untrue statement or
omission based upon (i) any untrue statement or alleged untrue statement of
material fact contained in any Registration Statement (including any related
preliminary or final Prospectus), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, if and to the extent that such statement or omission arose out
of or was based upon information regarding such Holder or its plan of
distribution which was furnished to the Company by such Holder for use therein,
or (ii) the failure by such Holder to deliver or cause to be delivered to any
purchaser of the shares covered by the Registration Statement the Prospectus
contained in the Registration Statement (as amended or supplemented, if
applicable) furnished by the Company to such Holder. Notwithstanding the
foregoing, (A) in no event will a Holder have any obligation under this Section
5(b) for amounts the Company pays in settlement of any such loss, claim, damage,
5
<PAGE>
liability or action if such settlement is effected without the consent of the
Holder (which consent shall not be unreasonably withheld) and (B) the total
amount for which a Holder shall be liable under this Section 5(b) shall not in
any event exceed the aggregate proceeds received by such Holder from the sale of
the Holder's Registrable Securities in such registration. The obligations of the
Holders under this Section 5(b) shall survive the completion of any offering of
Registrable Securities pursuant to a Registration Statement under this Agreement
or otherwise and shall survive the termination of this Agreement.
(c) Contribution. To the extent that the indemnification provided for in
------------
paragraph (a) or (b) of this Section 5 is held by a court of competent
jurisdiction to be unavailable to an indemnified party in respect of any
Damages, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, will contribute to the amount
paid or payable by such indemnified party as a result of such Damages (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand, and each Holder on the other, from the offering of
the Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company, on the one hand, and the Holders, on the
other, in connection with the statements or omissions which resulted in such
Damages, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of the Holders on the other hand will
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, however,
-----------------
that in no event shall the obligation of any indemnifying party to contribute
under this Section 5(c) exceed the amount that such indemnifying party would
have been obligated to pay by way of indemnification if the indemnification
provided for under paragraph (a) or (b) of this Section 5 had been available
under the circumstances.
If indemnification is available under paragraph (a) or (b) of this Section
5, the indemnifying parties will indemnify each indemnified party to the full
extent provided in such paragraphs without regard to the relative benefits to or
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 5(c).
The Company and each Holder agrees that it would not be just or equitable
if contribution pursuant to this Section 5(c) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to herein.
No indemnified party guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any indemnifying party who was not guilty of such fraudulent
misrepresentation.
6
<PAGE>
SECTION 6. MARKET STAND-OFF. Each Holder whose Registrable Securities are
----------------
covered by a Registration Statement filed pursuant to Section 2 hereof agrees,
if requested by the Company in the case of a nonunderwritten offering (a
"Nonunderwritten Offering" and, together with an Underwritten Offering, an
"Offering") or if requested by the managing underwriter(s) in an Underwritten
Offering, not to effect any public sale or distribution of any of any securities
of the Company of any class included in such Offering, including a sale pursuant
to Rule 144 or Rule 144A under the Securities Act (except as part of such
Offering), during the 15-day period prior to, and during the 180-day period (or
such longer period as may be required by the managing underwriter(s)) beginning
on, the date of pricing of each Offering, to the extent timely notified in
writing by the Company or the managing underwriter(s).
SECTION 7. COVENANTS OF HOLDERS. Each Holder will (a) furnish to the
--------------------
Company such information regarding such Holder and such Holder's intended method
of distribution of the Registrable Securities as the Company may from time to
time reasonably request in writing in order to comply with the Securities Act
and the provisions of this Agreement, (b) to the extent required by the
Securities Act, deliver or cause delivery of the Prospectus contained in the
Registration Statement to any purchaser of such Holder's Registrable Securities
covered by the Registration Statement, (c) promptly notify the Company of any
sale of Registrable Securities by such Holder and (d) notify the Company as
promptly as practicable of any inaccuracy or change in information previously
furnished by the Holder to the Company or of the occurrence of any event, in
either case as a result of which any Prospectus contains or would contain an
untrue statement of a material fact regarding the Holder or the Holder's
intended method of distribution of the Registrable Securities or omits or would
omit to state any material fact regarding the Holder or the Holder's intended
method of distribution of the Registrable Securities required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing, and promptly furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that the Prospectus will not contain, with respect to
the Holder or the Holder's intended method of distribution of the Registrable
Securities, an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
SECTION 8. MISCELLANEOUS.
-------------
(a) Amendments and Waivers. The provisions of this Agreement, including
----------------------
this Section 8(a), may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof will not be effective, unless
the Company has obtained the written consent of the Holders of a majority in
interest of the Registrable Securities then outstanding; provided, however, that
-----------------
any such amendment, modification, supplement or waiver which materially
adversely affects the rights of any Holder shall require the prior written
consent of such Holder.
7
<PAGE>
(b) Notices. Except as set forth below, all notices and other
-------
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by facsimile,
registered or certified mail (return receipt requested), postage prepaid or
courier or overnight delivery service to the Company at the following address
and to each Holder at the address set forth below such Holder's signature to
this Agreement (or at such other address for any party as shall be specified by
like notice, provided that notices of a change of address shall be effective
only upon receipt thereof), and further provided that in case of directions to
amend the Registration Statement pursuant to Section 7, a Holder must confirm
such notice in writing by overnight express delivery with confirmation of
receipt:
If to the Company: Plug Power Inc.
968 Albany-Shaker Road
Latham, New York 12110
Attention: General Counsel
Facsimile No.: 518-782-7914
In addition to the manner of notice permitted above, notices given pursuant to
Sections 1 and 6 hereof may be effected telephonically and confirmed in writing
thereafter in the manner described above.
(c) Successors and Assigns. This Agreement will inure to the benefit of
----------------------
and be binding upon the successors of each of the parties. No Holder may assign
any of its rights hereunder without the prior written consent of the Company and
any attempted assignment by any Holder without such consent will be void and of
no effect and will terminate all obligations of the Company hereunder with
respect to such Holder.
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed will be deemed to be an original and all of which taken
together will constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
--------
reference only and will not limit or otherwise affect the meaning hereof.
(f) Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of Delaware without regard to principles
of conflicts of law.
(g) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein will not be in any way
8
<PAGE>
impaired thereby, it being intended that all of the rights and privileges of the
Holders will be enforceable to the fullest extent permitted by law.
(h) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and is intended to be the complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter, including such
agreements and understandings contained in the Limited Liability Company
Agreement forming Plug Power, LLC.
[Remainder of Page Intentionally Left Blank]
9
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first set forth above.
PLUG POWER INC.
------------------------------------
Gary Mittleman
Chief Executive Officer
10
<PAGE>
REGISTRATION RIGHTS AGREEMENT
HOLDER SIGNATURE PAGE
EDISON DEVELOPMENT CORPORATION
------------------------------------
Name:
Title:
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED
------------------------------------
Name:
Title:
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
GE ON-SITE POWER, INC.
------------------------------------
Name:
Title:
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
11
------------------------------------
Michael J. Cudahy
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
<PAGE>
ANTEAUS ENTERPRISES, INC.
------------------------------------
Name:
Title:
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
ANTEAUS RETIREMENT BENEFITS PLAN [2]
------------------------------------
Name:
Title:
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
12
<PAGE>
------------------------------------
Kevin Linsey
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
13
<PAGE>
EXHIBIT A
---------
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES
- - ------ ----------------
<S> <C>
Edison Development Corporation 13,704,315
Mechanical Technology Incorporated 13,704,315
GE On-Site Power, Inc. 5,250,000
Michael J. Cudahy 1,840,000
Southern California Gas Company 1,350,000
Antaeus Enterprises [1]
Antaeus Enterprises [2] [299,850]
Kevin Linsey 60,000
</TABLE>
Exhibit 10.40
Lock-Up Agreement
November 1, 1999
Goldman, Sachs & Co.
Hambrecht & Quist LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
First Albany Corporation
c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Re: Plug Power Inc. - Lock-Up Agreement
Ladies and Gentlemen:
The undersigned understands that you, as representatives (the
"Representatives"), have entered into an Underwriting Agreement on behalf of the
several Underwriters named in Schedule I to such agreement (collectively, the
"Underwriters"), with Plug Power Inc., a newly- formed Delaware corporation (the
"Company") that will succeed by merger (the "Merger") immediately prior to the
offering described below to all the assets and liabilities of Plug Power,
L.L.C., a Delaware limited liability company (the "LLC"), providing for a public
offering of the Common Stock of the Company (the "Shares") pursuant to a
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission (the "SEC").
In consideration of the agreement by the Underwriters to offer and sell the
Shares, and of other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, the undersigned agrees that, during the period
beginning from the date of the final Prospectus covering the public offering of
the Shares and continuing to and including the date 180 days after the date of
such final Prospectus, the undersigned will not offer, sell, contract to sell,
pledge, grant any option to purchase, make any short sale or otherwise dispose
of any Membership Interests in the LLC or shares of Common Stock of the Company,
or any options or warrants to purchase any Membership Interests in the LLC or
shares of Common Stock of the Company, or any securities convertible into,
exchangeable for or that represent the right to receive Membership Interests in
the LLC or shares of Common Stock of the Company, whether now owned or
hereinafter acquired, owned directly by the undersigned (including holding as a
custodian) or with respect to which the undersigned has beneficial ownership
within the rules and regulations of the SEC (collectively the "MTI Shares").
The foregoing restriction is expressly agreed to preclude the undersigned from
engaging in any hedging or other transaction which is designed to or which
reasonably could be expected to lead to or result in a sale or disposition of
the MTI Shares even if such Shares would be disposed of by someone other than
the undersigned. Such prohibited hedging or other transactions would include
without limitation any short sale or any purchase, sale or grant of any right
(including without limitation any put or call option) with respect to any of the
<PAGE>
MTI Shares or with respect to any security that includes, relates to, or derives
any significant part of its value from such Shares.
The undersigned further represents and agrees that the undersigned has not taken
and will not take, directly or indirectly, any action which is designed to or
which has constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares, or which has otherwise constituted
or will constitute any prohibited bid for or purchase of the Shares or any
related securities.
Notwithstanding the foregoing, the undersigned may (i) transfer the MTI Shares
as a bona fide gift or gifts, provided that the donee or donees thereof agree to
be bound in writing by the restrictions set forth herein, (ii) transfer the MTI
Shares to any trust for the direct or indirect benefit of the undersigned or the
immediate family of the undersigned, provided that the trustee of the trust
agrees to be bound in writing by the restrictions set forth herein, and provided
further that any such transfer shall not involve a disposition for value, (iii)
pledge the MTI Shares to KeyBank pursuant to that certain Stock Pledge
Agreement, dated as of November 2, 1999, by and among the undersigned and
KeyBank (a copy of which is attached hereto as Exhibit A), provided that KeyBank
executes the letter attached hereto as Exhibit B, agreeing to be bound by the
restrictions set forth herein with respect to the MTI Shares, or (iv) with the
prior written consent of Goldman, Sachs & Co. on behalf of the Underwriters. For
purposes of this Lock-Up Agreement, "immediate family" shall mean any
relationship by blood, marriage or adoption, not more remote than first cousin.
In addition, notwithstanding the foregoing, if the undersigned is a corporation,
the corporation may transfer the capital stock of the Company to any
wholly-owned subsidiary of such corporation; provided, however, that in any such
case, it shall be a condition to the transfer that the transferee execute an
agreement stating that the transferee is receiving and holding such capital
stock subject to the provisions of this Agreement and there shall be no further
transfer of such capital stock except in accordance with this Agreement, and
provided further that any such transfer shall not involve a disposition for
value. The undersigned now has, and, except as contemplated by clause (i), (ii),
(iii), or (iv) above, for the duration of this Lock- Up Agreement will have,
good and marketable title to the Undersigned's Membership Interests in the LLC
(prior to effectiveness of the Merger) and Shares (after effectiveness of the
Merger), free and clear of all liens, encumbrances, and claims whatsoever. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of the MTI
Shares except in compliance with the foregoing restrictions.
The undersigned understands that the Company and the Underwriters are relying
upon this Lock-Up Agreement in proceeding toward consummation of the offering.
The undersigned further understands that this Lock-Up Agreement is irrevocable
and shall be binding upon the undersigned's heirs, legal representatives,
successors, and assigns.
Very truly yours,
MECHANICAL TECHNOLOGY INCORPORATED
By:______________________________________
Name: Cynthia A. Scheuer
Title: Vice President and CFO
Exhibit A
<PAGE>
Stock Pledge Agreement
Exhibit B
[Letterhead of KeyBank]
Goldman, Sachs & Co.
Hambrecht & Quist LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
First Albany Corporation
c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Re: Plug Power Inc. - Mechanical Technology Incorporated Lock-Up Agreement
Ladies and Gentlemen:
The undersigned understands that you, as representatives (the
"Representatives"), have entered into an Underwriting Agreement on behalf of the
several Underwriters named in Schedule I to such agreement (collectively, the
"Underwriters"), with Plug Power Inc., a Delaware corporation (the "Company"),
and Plug Power, LLC, providing for a public offering of the Common Stock of the
Company (the "Shares") pursuant to a Registration Statement on Form S-1 filed
with the Securities and Exchange Commission (the "SEC").
The undersigned also understands that in connection with such offering you have
received a Lock-up Agreement dated as of November 2, 1999, from Mechanical
Technology Incorporated ("MTI"), an executed copy of which is attached hereto as
Exhibit A (the "MTI Lock-Up Agreement"). The undersigned further understands
that the MTI Lock-Up Agreement permits MTI to pledge the MTI Shares (as defined
therein) to the undersigned, only upon the execution by the undersigned of this
agreement.
In consideration of the agreement by the Underwriters to offer and sell the
Shares and to permit the pledge of the MTI shares to the undersigned, and of
other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the undersigned hereby agrees, with respect to the MTI
Shares, to be bound by all of the restrictions applicable to MTI and the MTI
Shares under the MTI Lock-Up Agreement, to the same extent and on the same terms
and conditions as would have been applicable to MTI thereunder in the absence of
the pledge of MTI Shares to the undersigned. The undersigned understands that
the Company and the Underwriters are relying upon this agreement in proceeding
toward consummation of the offering. The undersigned further understands that
this agreement is irrevocable and shall be binding upon the undersigned's heirs,
legal representatives, successors, and assigns.
Very truly yours,
KEYBANK
By:_____________________________
Name:
Title:
Exhibit 21
SUBSIDIARIES OF MECHANICAL TECHNOLOGY INCORPORATED
Jurisdiction of
Incorporation or
Subsidiary Name Organization
- ------------------------ -----------------
Turbonetics Energy, Inc. New York
Ling Electronics, Ltd. United Kingdom
MTI International, Inc. Guam
Ling Electronics, Inc. California
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