==========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 1999
/ / 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 12205-5505
(Address of principal executive offices) (Zip Code)
(518) 218-2500
Registrant's telephone number, including area code
Not Applicable
(Former name,former address and former fiscal year, if changed since last
report)
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
Class Outstanding at December 31, 1999
Common Stock, $1.00 Par Value 11,717,508 Shares
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<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
INDEX
Page No.
Part I Financial Information
Consolidated Balance Sheets - December 31, 1999
and September 30, 1999 3 - 4
Consolidated Statements of Operations - 5
Three months ended December 31, 1999
and December 25, 1998
Consolidated Statements of Cash Flows -
Three months ended December 31, 1999
and December 25, 1998 6
Notes to Consolidated Financial Statements 7 - 14
Management's Discussion and Analysis of Financial
Condition and Results of Operations 15 - 19
Part II Other Information
Item 1 20
Item 6 21
Signature 22
<PAGE>
PART I FINANCIAL INFORMATION
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1999 (Unaudited) and
September 30,1999 (Derived from audited financial statements)
(Dollars in thousands)
Dec.31, Sept.30,
1999 1999
Assets
Current Assets:
Cash and cash equivalents $ 5,646 $ 5,870
Investments in marketable debt securities 4,830 7,876
Restricted cash and investments 2,350 -
Accounts receivable, less allowance of
$0 and $113 669 3,852
Other receivables - related parties 306 105
Inventories:
Raw materials and components 752 2,763
Work in process 229 916
Finished goods 45 73
_______ _______
Total inventories 1,026 3,752
Note receivable - current 331 329
Prepaid expenses and other current assets 352 265
Taxes receivable - 10
_______ _______
Total Current Assets 15,510 22,059
Property, Plant and Equipment, net 500 827
Note receivable - noncurrent 163 184
Investment in Plug Power 64,166 8,710
Investment in SatCon 14,341 -
_______ _______
Total Assets $ 94,680 $ 31,780
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1999 (Unaudited) and
September 30, 1999 (Derived from audited financial statements)
(Dollars in thousands)
Dec.31, Sept 30,
1999 1999
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 182 $ 614
Accrued liabilities 1,681 2,243
Contribution payable - SatCon 4,500 -
Income taxes payable 6 -
Net liabilities of discontinued operations 544 540
_______ _______
Total Current Liabilities 6,913 3,397
Long-term debt, net of current maturities 22,500 -
Deferred income taxes and other credits 11,164 597
_______ _______
Total Liabilities 40,577 3,994
Commitments (Note 4)
Shareholders' Equity:
Common stock 11,724 11,649
Paid-in-capital 70,754 42,755
Accumulated Deficit (28,346) (26,573)
_______ _______
54,132 27,831
Accumulated Other Comprehensive Loss:
Unrealized loss on available for sale
securities,net - (5)
Foreign currency translation adjustment - (11)
_______ _______
Accumulated Other Comprehensive Loss - (16)
Treasury stock (29) (29)
_______ _______
Total Shareholders' Equity 54,103 27,786
_______ _______
Total Liabilities and Shareholders' Equity $ 94,680 $31,780
======= ======
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except per share)
Three months ended
Dec.31, Dec.25,
1999 1998
Revenue $ 1,357 $ 2,710
Cost of sales 804 1,711
______ ______
Gross profit 553 999
Selling, general and administrative
expenses 790 1,126
Product development and
research costs 317 222
______ ______
Operating loss (554) (349)
Interest expense (322) (58)
Gain on sale of division/subsidiary 1,262 -
Equity in Plug Power losses (2,991) (1,221)
Other (expense) income, net 98 31
______ ______
Loss before income taxes (2,507) (1,597)
Income tax (benefit)expense (734) -
______ _______
Net loss $(1,773) $ (1,597)
====== =======
Net Loss per Share (Basic and
Diluted): $ (.15) $ (.14)
====== =======
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Three months ended
Dec.31, Dec.25,
1999 1998
Operating Activities
Net loss from continuing operations $ (1,773) $(1,597)
Adjustments to reconcile net (loss)income to net
cash provided (used) by continuing operations:
Depreciation and amortization 57 125
Gain on sale of division/subsidiary (1,262) -
Equity in Plug Power loss 2,991 1,221
Reserve for bad debts (24) 9
Loss on sale of fixed assets 14 -
Deferred income taxes and other credits (740) -
Changes in operating assets and liabilities:
Accounts receivable 911 1,246
Other receivables - related parties (201) (5)
Inventories (176) 28
Prepaid expenses and other current assets (51) (225)
Accounts payable 210 (837)
Income taxes 16 6
Accrued liabilities 87 (1,156)
_______ ______
Net cash provided(used) by continuing operations 59 (1,185)
_______ ______
Discontinued operations:
Change in net liabilities/assets of
discontinued operations 4 303
_______ ______
Net cash provided by discontinued operations 4 303
_______ ______
Net cash provided(used) by operating activities 63 (882)
_______ ______
Investing Activities
Purchases of property, plant & equipment (118) (1,587)
Investment in Plug Power (20,500) (2,500)
Investment in SatCon (2,570) -
Proceeds from sale of subsidiary, net 23 -
Establish restricted cash account (2,650) -
Proceeds from sale of marketable debt securities 4,965 -
Investment in marketable debt securities (2,000) -
Principal payments from note receivable 19 18
_______ ______
Net cash used by investing activities (22,831) (4,069)
_______ ______
Financing Activities
Proceeds from long term debt 22,500 -
Debt issue costs (205) -
Borrowings under IDA financing, less restricted cash - 4,824
Proceeds from stock options exercised 249 -
_______ ______
Net cash provided by financing activities 22,544 4,824
_______ ______
Effect of exchange rate on cash - 1
_______ ______
Decrease in cash and cash equivalents (224) (126)
<PAGE>
Cash and cash equivalents - beginning of period 5,870 5,567
_______ ______
Cash and cash equivalents - end of period $ 5,646 $ 5,441
====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of only normal,
recurring adjustments, necessary for a fair presentation of results for such
periods. The results for any interim period are not necessarily indicative
of results for the full year. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted. These consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto for the fiscal year ended September 30, 1999.
2. Reclassification
Certain fiscal 1999 amounts have been reclassified to conform with the fiscal
2000 presentation.
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.
3. Investment in Plug Power
On November 1, 1999, the Company purchased 2,733,333 shares of Plug Power at
$7.50 per share with proceeds from a $22.5 million Credit Agreement (see Note
5). 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
(including contributions of cash, assets, research credits, below market lease
and real estate) now totals $41.2 million. Immediately after the Plug Power
IPO, the Company owned 13,704,315 shares or 31.9% of Plug Power.
During fiscal 2000, Plug Power's shareholders' equity increased $178.755
million primarily due to cash investments by individuals and corporate
investors, including the Company, and the public offering. As a result, the
Company recorded its proportionate share of the increase in Plug Power's
equity ($37.946 million) as investment in Plug Power and additional
paid-in-capital (net of associated deferred taxes of $11.307 million).
The carrying value of the Company's investment in Plug Power is $64.166 million
as of December 31, 1999. At December 31, 1999, the market value of the
Company's investment in Plug Power was approximately $387.147 million, as
quoted on the NASDAQ National Market.
The Company will recognize its proportionate share of losses in the future to
the extent of its carrying value and additional future investments.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Investment in Plug Power (continued)
Summarized below is financial information for Plug Power. Plug Power's
fiscal year ends December 31.
3 months ended
Dec.31, Dec.31,
1999 1998
(Dollars in thousands)
Current assets $ 183,014 $ 5,293
Non-current assets 33,112 2,800
Current liabilities 9,002 2,601
Noncurrent liabilities 5,717 -
Stockholders' equity 201,407 5,493
Gross revenue 4,298 1,545
Negative gross profit (1,349) (494)
Net loss (8,602) (2,524)
4. Sale of Ling Electronics/Investment in SatCon
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 invested approximately
$7 million in SatCon. In consideration for the acquisition of Ling Electronics
and the Company's investment, the Company received 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 on October
21, 1999 and $4.5 million on January 31, 2000 in accordance with the stock
purchase agreement. The Company's commitment to fund $4.5 million was recorded
and is included in the financial statement line "Contribution Payable-SatCon"
as of December 31, 1999. SatCon also received warrants to purchase 100,000
shares of the Company's common stock. The sale of Ling resulted in a $1.262
million gain.
As a part of the SatCon transaction, the Company issued warrants to purchase
36,000 and 64,000 shares of the Company's stock on October 21, 1999 and
January 31, 2000, respectively. The warrants are immediately exercisable at
$37.66 per share and expire on October 21, 2003 and January 31, 2004,
respectively. The estimated fair value of these warrants at the dates issued
were $14.81 and $49.14 per share, respectively, using a Black Scholes option
pricing model and assumptions similar to those used for valuing the Company's
stock options.
The Company also received warrants to purchase 36,000 and 64,000 shares of
SatCon common stock on October 21, 1999 and January 31, 2000, respectively.
The warrants are immediately exercisable at $8.80 per share and expire on
October 21, 2003 and January 31, 2004, respectively.
The Company accounts for its investment in SatCon on the equity method. The
consolidated financial statements include the Company's investments in SatCon
(including obligations to invest) plus its share of earnings/losses (on a one-
quarter lag). The investment is included in the financial statement line
"Investment in SatCon."
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Sale of Ling Electronics/Investment in SatCon (continued)
The carrying value of the Company's investment in SatCon is $14.341 million as
of December 31, 1999 including an accrual of $4.5 million which will fund the
Company's commitment to purchase 659,200 shares. The Company funded this
commitment on January 31, 2000. At December 31, 1999, the quoted market value
of the Company's investment in SatCon, including accrued shares, was
approximately $15.019 million as quoted on the NASDAQ National Market.
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's Board
of Directors. SatCon has also agreed to appoint an additional member to its
Board of Directors based on the recommendations of 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 are responsible for
new technology and product development.
5. Debt
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
$22,500,000 loan from KeyBank, N.A. ("Loan"). The proceeds of this loan were
used to fund $20.5 million of the Company's Mandatory Capital Commitment to
Plug Power. 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 in August 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
the Prime Rate (8.50% on December 31, 1999) or if certain performance standards
are achieved, at a reduced rate. The performance standards are based on the
trading volume and price of Plug Power stock.
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 beginning balance on November 1,
1999 of $2.65 million, and maintenance of a collateral coverage ratio. All
other covenants in the original KeyBank lines of credit were eliminated in
connection with this financing.
The Company's $4 million working capital line of credit and $1 million equipment
loan/lease line of credit have been extended and will expire on March 31, 2000.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Shareholders' Equity
Changes in shareholders' equity for the three-months ended December 31, 1999
is as follows:
Dec.31
(Dollars in Thousands) 1999
COMMON STOCK
Balance, October 1 $ 11,649
Issuance of shares - options 75
_______
Balance, December 31, 1999 $ 11,724
=======
PAID-IN CAPITAL
Balance, October 1 $ 42,755
Issuance of shares - options 175
Plug Power investment, net of deferred taxes
of $11,307 26,639
MTI warrants issued 533
Compensatory stock options 652
_______
Balance, December 31, 1999 $ 70,754
=======
ACCUMULATED DEFICIT
Balance, October 1 $(26,573)
Net (loss) (1,773)
_______
Balance, December 31, 1999 $(28,346)
=======
UNREALIZED LOSS ON AVAILABLE FOR
SALE SECURITIES, NET
Balance, October 1 $ (5)
Adjustment 5
_______
Balance, December 31, 1999 $ -
=======
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Balance, October 1 $ (11)
Adjustment 11
_______
Balance, December 31, 1999 $ -
=======
TREASURY STOCK
Balance, October 1 $ (29)
_______
Balance, December 31, 1999 $ (29)
=======
SHAREHOLDERS' EQUITY
December 31, 1999 $ 54,103
=======
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Income Taxes
The Company's effective tax rates for the three months ended December 31, 1999
and December 25, 1998 were (29.3%) and 0%, respectively.
Income tax (benefit) expense consists of the following:
For the three month period
ended
Dec.31, 1999 Dec.25, 1998
(Dollars in Thousands)
Federal $ 3 $ -
State 3 -
Deferred (740) -
___________ ___________
$ (734) $ -
=========== ===========
The valuation allowance at December 31, 1999 has been reduced to zero from
$3.750 million at September 30, 1999. This $3.750 million decrease in the
valuation allowance results from the establishment of deferred tax liabilities
associated with the Company's Investment in Plug Power. These deferred tax
liabilities are primarily due to the difference between the book and tax
treatments of the Plug Power investment and losses.
8. 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:
For the three month period
ended
Dec.31, 1999 Dec.25, 1998
(Dollars in Thousands)
Loss from continuing operations
available to common stockholders $ (1,773) $ (1,597)
Weighted average number of
shares:
Weighted average number of shares
used in net loss per share, 11,671,644 11,122,696
including the bonus element effects
for the rights offering
Effect of dilutive securities:
Stock options - -
____________________________________________________________________________
Weighted average number of shares
Used in diluted net loss per share 11,671,644 11,122,696
____________________________________________________________________________
During the first quarter of fiscal 2000, options to purchase 655,687 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 during this period and
inclusion would be anti-dilutive. The options, which expire between December
20, 2006 and November 1, 2009 were outstanding at December 31, 1999.
<PAGE>
During the first quarter of fiscal 1999, options to purchase 680,010 shares of
common stock at prices ranging from $1.63 to $5.29 per share were outstanding
but were not included in the computation of Earnings per Share-assuming
dilution because the Company incurred a loss during this period and inclusion
would be anti-dilutive. The options, which expire between December 20, 1999
and December 22, 2008 were outstanding at December 25, 1998.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Comprehensive (Loss)Income
Total comprehensive (loss) income consists of the following:
Three months ended
Dec.31, Dec.25,
(Dollars in thousands) 1999 1998
Net loss $(1,773) $(1,597)
Other comprehensive income, before tax:
Foreign currency translation
adjustments 11 1
______ ______
Total comprehensive loss $(1,762) $(1,596)
====== ======
10. Cash Flows - Supplemental Information
Three months ended
Dec.31, Dec.25,
(Dollars in thousands) 1999 1998
NONCASH INVESTING ACTIVITIES
Proceeds from sale of subsidiary
Invested in SatCon $ 6,737 $ -
Contribution payable to SatCon 4,500 -
Warrants issued to SatCon (533) -
______ ______
Net noncash investing activities $10,704 $ -
______ ______
NONCASH FINANCING ACTIVITIES
Additional paid-in capital - Other investors $26,639 $ -
______ ______
Net noncash financing activities $26,639 $ -
______ ______
Net noncash provided by investing
and financing activities $37,343 $ -
====== ======
Noncash financing activities for the three months ended December 31, 1999
include an increase in investment in Plug Power and additional paid-in-capital
generated primarily by investments in Plug Power by third parties.
11. Geographic and Segment Information
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 and computer-based
balancing systems for aircraft engines.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Geographic and Segment Information (continued)
The Company evaluates performance based on profit or loss from operations
before income taxes, accounting changes, non-recurring items and interest
income and expense.
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. Amounts in the
Alternative Energy Technology segment represent the Company's interest in
Plug Power. The Company's investment in SatCon is currently reported in the
Other category. In future periods, the Company will include its proportionate
share of the results of operations of other similar investments (on a
one-quarter lag). The information is derived from Plug Power's unaudited
financial statements.
<TABLE>
(Dollars in thousands)
<CAPTION>
Three Months
Ended Alternative Energy Test and Reconciling Consolidated
Dec.31, 1999 Technology Measurement Other Items Totals
<S> <C> <C> <C> <C> <C>
Revenues $ 4,298 $ 1,357 $ - $ (4,298) $ 1,357
Segment profit/
(loss) (8,602) (440) 1,658 5,611 (1,773)
Equity in Plug
Power loss - - - (2,991) (2,991)
Total assets 216,126 1,946 28,568 (151,960) 94,680
Investment in
Plug Power - - - 64,166 64,166
Investment in
SatCon - - - 14,341 14,341
Capital
expenditures 2,512 26 92 (2,512) 118
Depreciation and
amortization 363 26 31 (363) 57
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended Alternative Energy Test and Reconciling Consolidated
Dec.25, 1998 Technology Measurement Other Items Totals
<S> <C> <C> <C> <C> <C>
Revenues $ 1,545 $ 2,710 $ - $ (1,545) $ 2,710
Segment profit/
(loss) (2,524) (335) (41) 1,303 (1,597)
Equity in Plug
Power loss - - - (1,221) (1,221)
Total assets 8,093 7,779 13,553 (8,093) 21,332
Investment in
Plug Power - - - - -
Capital
expenditures 710 11 1,576 (710) 1,587
Depreciation and
amortization 176 46 79 (176) 125
</TABLE>
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Geographic and Segment Information (continued)
The following table presents the details of "Other" segment profit (loss).
(Dollars in thousands) Three months ended
Dec.31, Dec.25,
1999 1998
Corporate and Other
Expenses/(Income):
Depreciation and
amortization $ 31 $ 79
Interest expense 322 58
Interest income (161) (47)
Income tax (benefit) (734) -
Other (income)expense, net 146 (49)
Gain on sale of division (1,262) -
_____________________
Total (income) expense $(1,658) $ 41
The reconciling items are the amounts of revenues earned and expenses incurred
for corporate operations, which is not included in the segment information.
12. Related Party Transactions
During fiscal 2000, First Albany Corporation provided financial advisory
services in connection with the sale of Ling Electronics for which they were
paid fees of $.353 million.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's earnings during the periods included
in the accompanying consolidated statements of income.
Continuing Operations
Sales decreased $1.353 million to $1.357 million for the three months ended
December 31, 1999 as compared to $2.710 million for the three months ended
December 25, 1998, a 50% decrease. This decrease is the result of the sale of
Ling on October 21, 1999 and a $.444 million increase in Advanced Products
sales. Ling sales were $.140 million for the quarter in 2000 and $1.94 million
for the 1999 quarter. The sale of Ling resulted in a $1.262 million gain,
which was recorded in the first quarter of fiscal 2000.
Selling, general and administrative expenses decreased $.336 million to
$.790 million for the three months ended December 31, 1999 as compared to $1.126
million for the three months ended December 25, 1998, a 30% decrease. This
decrease is primarily the result of the sale of Ling in October 1999.
Operating loss increased $.205 million to an operating loss of $(.554)
million for the three months ended December 31, 1999 as compared to $(.349)
million for the three months ended December 25, 1998, a 58.7% increase. This
is primarily the result of increased Ling operating losses prior to its sale
in October 1999, and a $.095 million increase in expenditures for product
development.
Other
In addition to the matters noted above, for the three months ended December
31, 1999, the Company recorded a $2.991 million loss from the recognition of
the Company's proportionate share of losses of Plug Power compared to a
$1.221 million loss for the comparable period in fiscal 1999.
Results during the first quarter of fiscal 2000 were reduced by higher
interest expense of $.322 million for the three months ended December 31, 1999
compared to $.058 million for the comparable period in fiscal 1999, principally
resulting from increased indebtedness associated with the $22.5 million Credit
Agreement used to fund additional investments in Plug Power. The tax rates for
the three months ended December 31, 1999 and December 25, 1998 were (29.3%) and
0%, respectively. The December 31, 1999 tax rate is due to the loss generated
by operations offset by deferred tax liabilities associated with the
accounting for the investment in and recognition of the Company's proportionate
share of losses from Plug Power.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
Working capital of $8.597 million at December 31, 1999 reflects a $10.065
million decrease from September 30, 1999. This decrease reflects the $2.570
million investment in SatCon and the $4.5 million contribution payable to
SatCon as well as the impact of the sale of Ling in October 1999.
At December 31, 1999, cash and cash equivalents were $5.646 million versus
$5.870 million at September 30, 1999. Net cash provided by operating
activities for the first quarter of fiscal 2000 amounted to $.063 million,
as compared to cash used of $1.185 million in the prior year. Accounts
receivable decreased due to the collection of receivables generated late in
the fourth quarter of fiscal 1999 and the sale of Ling in October 1999.
Accounts receivable totaled $.669 million or an 82.6% decrease as of December
31, 1999 as compared to $3.852 million as of September 30, 1999.
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 $20.5 million of the Company's
Mandatory Capital Commitment 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 is obligated to make monthly 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
August 2001.
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 beginning balance on
November 1, 1999 of $2.65 million, and maintenance of a collateral coverage
ratio. All other covenants in the original KeyBank lines of credit were
eliminated in connection with this financing. The $22.5 million Credit
Agreement is collateralized by 100% of the Company's equity interest in Plug
Power.
Capital spending during the first three months of fiscal 2000 was $.118
million, a decrease from the comparable period in 1999 where capital spending
totaled $1.587 million. Capital spending during fiscal 2000 included the fit-
up for the Company's new facility. Total additional capital spending during
fiscal 2000 is expected to be approximately $.280 million for computer and
manufacturing equipment.
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>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Market Risk
Market risk represents the risk of changes in value of a financial
instrument, caused by fluctuations in interest rates and equity prices.
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.
At December 31, 1999, the Company had variable rate debt totaling $22.500
million. Interest rate changes generally do not affect the fair market value
but do impact future earnings and cash flows. The earnings and cash flow
impact for the next year resulting from a one-percentage point increase in
interest rates would be approximately $.225 million, holding other variables
(debt level) constant.
The Company has performed a sensitivity analysis on its marketable debt
securities and its investments in Plug Power and SatCon common stock. The
sensitivity analysis presents the hypothetical change in fair value of those
financial instruments held by the Company at December 31, 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 $4.830 million. A one-percentage point change in the interest rates would
change the fair value of investments over 180 days by $339 thousand.
The Company also has investments in Plug Power and SatCon, which are
accounted for on the equity method. The fair market values, at December 31,
1999, of the investments are $387.147 million for Plug Power and $15.019
million for SatCon, including accrued shares. If the market price on these
investments decreased by ten percent, the fair value of the stocks would
decrease by $38.7 and $1.5 million for Plug Power and SatCon, respectively.
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.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Systems Evaluation
All internal systems have been identified, inventoried, prioritized and
assessed for Year 2000 compliance. Systems found to be non-compliant 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
installed.
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 customers.
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 was not 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 Plug Power or SatCon, in which the Company participates but
is not the operator. The total amount expended on the Plan through
December 31, 1999 was $124 thousand for the upgrade and replacement of
hardware. No additional expenditures are expected.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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
the 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 the
implementation and completion of the Year 2000 Plan as scheduled, the
possibility of significant interruptions of normal operations should be
reduced. To date the Company has experienced no Year 2000 failures.
Statement Concerning Forward Looking Statements
Statements in this Form 10-Q 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.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
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 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.
On January 25, 2000, a complaint was filed by DCT, Inc. against Plug
Power, The Detroit Edison Company and Edison Development Corporation in the
Wayne County, Michigan Circuit Court. The complaint alleges, among other
things, that Plug Power, The Detroit Edison Company and Edison Development
Corporation misappropriated from DCT business and technical trade secrets,
ideas, know-how and strategies relating to fuel cell systems and breached
certain contractual obligations owed to DCT. Plug Power believes that the
allegations made against it are without merit and intends to vigorously
contest the litigation, but the ultimate outcome of any litigation is of
course uncertain.
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
10.41 Mechanical Technology Incorporated Stock
Purchase Warrant dated January 31, 2000.
10.42 SatCon Technology Corporation Stock
Purchase Warrant dated January 31, 2000.
27 Financial Data Schedule
(b) Three reports on Form 8-K were filed during the quarter ended December 31,
1999 and one report was filed subsequent to the quarter ended December 31, 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.
The Company filed a Form 8-K Report, dated January 31, 2000, reporting
under item 5 thereof that on January 25, 2000, a complaint was filed by
DCT, Inc. against Plug Power, Inc., The Detroit Edison Company and Edison
Development Corporation in the Wayne County, Michigan Circuit Court.
The complaint alleges, among other things, that Plug Power, The Detroit
Edison Company and Edison Development Corporation misappropriated from
DCT business and technical trade secrets, ideas, know-how and strategies
relating to fuel cell systems and breached certain contractual obligations
owed to DCT.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Mechanical Technology Incorporated
02-11-2000 s/George C. McNamee
__________ ____________________________________
(Date) George C. McNamee
Chairman and Chief Executive Officer
02-11-2000 s/Cynthia A. Scheuer
__________ ____________________________________
(Date) Cynthia A. Scheuer
Vice President/Chief Financial Officer
<PAGE>
EXHIBIT 10.41
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.
January 31, 2000
64,000 shares Warrant No. MB
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 up to 64,000 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, except as required
by Section 3.15(b) 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 January 31, 2004 (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 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. 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)).
<PAGE>
(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.
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 5(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 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.
<PAGE>
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
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
<PAGE>
(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.
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:
<PAGE>
"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.
"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.
<PAGE>
"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 21, 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 21, 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.
"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.
<PAGE>
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 325 Washington Avenue Extension,
Albany, New York 12205, 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.
<PAGE>
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 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.
<PAGE>
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
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.
<PAGE>
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.
MECHANICAL TECHNOLOGY INCORPORATED
By:
Name:
Title:
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 ____________,
200_; (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 10.42
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.
January 31, 2000
64,000 shares Warrant No. B
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 up to 64,000 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, except as required by Section 3.1(b) 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 January 31, 2004 (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
preceding such date, or (ii) if the Common Stock is not listed then on the
<PAGE>
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
automated quotation system.
<PAGE>
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
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
<PAGE>
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:
Name:
Title:
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.
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 5,646
<SECURITIES> 7,180
<RECEIVABLES> 669
<ALLOWANCES> 0
<INVENTORY> 1,026
<CURRENT-ASSETS> 15,510
<PP&E> 1,416
<DEPRECIATION> 916
<TOTAL-ASSETS> 94,680
<CURRENT-LIABILITIES> 6,913
<BONDS> 0
0
0
<COMMON> 11,724
<OTHER-SE> 42,379
<TOTAL-LIABILITY-AND-EQUITY> 94,680
<SALES> 1,357
<TOTAL-REVENUES> 1,357
<CGS> 804
<TOTAL-COSTS> 1,911
<OTHER-EXPENSES> 1,631
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 322
<INCOME-PRETAX> (2,507)
<INCOME-TAX> (734)
<INCOME-CONTINUING> (1,773)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,773)
<EPS-BASIC> (.15)
<EPS-DILUTED> (.15)
</TABLE>
