<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999
COMMISSION FILE NUMBER 1-11512
______________________
SATCON TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
______________________
State of Incorporation: DELAWARE I.R.S. Employer ID. No. 04-2857552
161 FIRST STREET
CAMBRIDGE, MA 02142-1221
(Address of principal executive offices)
(617) 661-0540
(Registrant's telephone number, including area code)
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.01 Par Value, 9,617,009 shares outstanding as of July 31, 1999.
______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I: FINANCIAL INFORMATION Page
----------------------------- ----
ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets (Unaudited)..................................................1
Consolidated Statements of Operations (Unaudited)........................................2
Consolidated Statements of Cash Flows (Unaudited)........................................3
Notes to Interim Consolidated Financial Statements (Unaudited)...........................4
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.....................................................10
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..............................15
PART II: OTHER INFORMATION
Items No. 1 through 6...........................................................................16
Signature.......................................................................................17
</TABLE>
<PAGE>
SATCON TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, SEPTEMBER 30,
---------------- ----------------
1999 1998
---------------- ----------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ....................................................... $ 516,610 $ 1,201,610
Marketable securities .......................................................... -- 657,431
Accounts receivable, net of allowance of $239,206 at June 30, 1999 and
$51,836 at September 30, 1998 ................................................. 2,984,371 3,347,405
Unbilled contract costs, net of allowance of $688,510 at June 30, 1999 and
$57,611 at September 30,1998 851,767 1,196,318
Inventory ........................................................................ 3,851,679 3,678,067
Prepaid expenses and other assets................................................. 442,057 358,308
Amounts due from related party -- 596,453
------------ ------------
Total current assets........................................................... 8,646,484 11,035,592
Property and equipment, net....................................................... 3,320,909 2,677,786
Intangibles, net ................................................................. 3,246,804 2,967,988
Investment in Beacon Power Corporation............................................ -- 1,458,183
Other assets 64,755 27,041
------------ ------------
Total assets................................................................... $ 15,278,952 $ 18,166,590
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit.................................................................... $ 2,617,296 --
Accounts payable.................................................................. 1,847,655 $ 1,447,897
Accrued payroll and payroll related expenses...................................... 635,431 352,701
Deferred liabilities.............................................................. 241,651 197,930
Other accrued expenses............................................................ 980,965 385,999
Current portion of long-term debt................................................. -- 146,594
------------ ------------
Total current liabilities...................................................... 6,322,998 2,531,121
------------ ------------
Long-term liabilities:
Long-term debt................................................................. -- 221,462
------------ ------------
Total long-term liabilities.................................................... -- 221,462
------------ ------------
Commitments and contingencies........................................................ -- --
Stockholders' equity:
Preferred stock; $.01 par value, 1,000,000 shares authorized; none issued
and outstanding................................................................. -- --
Common stock, $.01 par value, 20,000,000 shares authorized; 9,367,009 shares
issued at June 30, 1999 and 9,018,549 shares at September 30, 1998.............. 93,670 90,185
Additional paid-in capital........................................................ 32,886,571 28,377,718
Shares held in escrow, at market; 42,860 shares at June 30, 1999.................. (332,165) --
Amounts receivable from exercise of stock options................................. (750,000) --
Retained earnings/(deficit)....................................................... (22,692,418) (12,870,440)
Net unrealized losses on marketable securities, net of tax effect................. -- (10,380)
Treasury stock, at cost; 44,500 shares at June 30, 1999 and 28,300 shares
at September 30, 1998........................................................... (249,704) (173,076)
------------ ------------
Total stockholders' equity..................................................... 8,955,954 15,414,007
------------ ------------
Total liabilities and stockholders' equity.................................. $ 15,278,952 $ 18,166,590
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE>
SATCON TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenue....................................................... $ 4,091,579 $ 3,643,681 $11,478,898 $11,664,848
----------- ----------- ----------- -----------
Cost of revenue............................................... 5,194,413 2,406,437 11,375,009 8,137,304
Selling, general and administrative expenses.................. 5,176,010 1,111,644 7,194,338 3,653,939
Research and development expenses............................. 228,672 25,273 381,272 312,303
Amortization.................................................. 101,047 75,468 272,840 213,063
----------- ----------- ----------- -----------
Total operating expenses...................................... 10,700,142 3,618,822 19,223,459 12,316,609
----------- ----------- ----------- -----------
Operating income/(loss)....................................... (6,608,563) 24,859 (7,744,561) (651,761)
Loss from Investment in Beacon Power Corporation.............. (396,620) (1,269,229) (1,884,803) (2,239,213)
Other income/(loss)........................................... (141,452) -- (150,464) --
Interest income/(expense), net................................ (45,672) 36,035 (42,150) 142,398
----------- ----------- ----------- -----------
Net loss...................................................... $(7,192,307) $(1,208,335) $(9,821,978) $(2,748,576)
=========== =========== =========== ===========
Net loss per weighted average share, basic and diluted........ $(0.78) $(0.13) $(1.08) $(0.31)
=========== =========== =========== ===========
Weighted average number of common shares, basic and diluted... 9,176,849 9,018,549 9,072,060 8,939,562
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
SATCON TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the nine months ended
June 30,
1999 1998
-------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .......................................................... $(9,821,978) $(2,748,576)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................................... 744,486 651,263
Allowance for unbilled contract costs............................ 630,299 (26,241)
Allowance for doubtful accounts.................................. 187,970 (70,807)
Allowance for inventory.......................................... 714,536 --
Loss from Investment in Beacon Power Corp........................ 1,884,803 2,239,213
Loss on sale of marketable securities............................ 87,535 --
Write-off of impaired assets..................................... 260,790 --
Non-cash compensation expense related to issuance of
common stock options to non-employees......................... 2,183,373 --
Changes in operating assets and liabilities, net
of effects of acquisitions:
Accounts receivable............................................ 12,954 62,974
Prepaid expenses and other assets.............................. (63,949) 48,590
Unbilled contract costs........................................ (285,748) 194,093
Inventory...................................................... (754,876) (2,025,918)
Other assets................................................... 558,739 (101,406)
Accounts payable............................................... 284,122 693,963
Accrued expenses and payroll................................... 322,194 (372,097)
Deferred liabilities........................................... 43,721 (15,986)
----------- -----------
Total adjustments................................................. 6,810,949 1,277,641
----------- -----------
Net cash used in operating activities............................... (3,011,029) (1,470,935)
----------- -----------
Cash flows from investing activities:
Sales and maturities of marketable securities...................... 580,144 577,867
Patent and intangible expenditures................................. (51,333) (415,867)
Capital expenditures............................................... (170,574) (852,321)
Cash paid for acquisitions......................................... (995,876) --
Investment in Beacon Power Corporation............................. (155,000) (1,999,781)
----------- -----------
Net cash used in investing activities............................... (792,639) (2,690,102)
----------- -----------
Cash flows from financing activities:
Repayment of borrowings........................................... (100,000) (42,842)
Proceeds from line of credit....................................... 2,617,296 --
Proceeds from exercise of stock options............................ 678,000 581,739
Proceeds from exercise of warrants................................. -- 1,221,873
Purchase of treasury stock......................................... (76,628) --
----------- -----------
Net cash provided by financing activities........................... 3,118,668 1,760,770
----------- -----------
Net decrease in cash and cash equivalents........................... (685,000) (2,400,267)
Cash and cash equivalents at beginning of period.................... 1,201,610 4,256,504
----------- -----------
Cash and cash equivalents at end of period.......................... $ 516,610 $ 1,856,237
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
SATCON TECHNOLOGY CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(UNAUDITED)
Note A. Basis of Presentation
- -----------------------------
The accompanying unaudited consolidated financial statements include the
accounts of SatCon Technology Corporation and its majority-owned subsidiaries
(collectively, the "Company") as of June 30, 1999 and 1998 and have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial reporting and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. All intercompany accounts and
transactions have been eliminated. These consolidated financial statements,
which in the opinion of management reflect all adjustments (including normal
recurring adjustments) necessary for a fair presentation, should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended September 30, 1998.
Operating results for the three-month and nine-month period ended June 30, 1999
are not necessarily indicative of the results that may be expected for any
future interim period or for the entire fiscal year.
In May 1999, the Company appointed Arthur Andersen LLP as the Company's
independent public accountants. In connection with the finalization of the
Company's financial results for the three and nine months ended June 30, 1999,
the Company with the assistance of Arthur Andersen LLP, conducted a review of
its accounting policies and assessed the realizability of certain assets. As a
result of this effort, the Company has:
. changed the accounting method for its investment in Beacon Power
Corporation from the cost method to the equity method, effective October
23, 1998. See Note B.
. provided the following additional valuation reserves and adjustments:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, 1999 JUNE 30, 1999
-------------------------------------
<S> <C> <C>
Accounts receivable...................................................... $ 225,000 $ 305,000
Unbilled contract costs.................................................. 2,320,000 2,420,000
Inventory................................................................ 725,000 1,425,000
Intangibles Patents..................................................... 150,000 150,000
Warranty reserve......................................................... 12,000 36,000
Sales return reserve..................................................... 22,000 67,000
Other.................................................................... 10,000 10,000
-------------------------------------
$3,464,000 $4,413,000
=====================================
</TABLE>
. written off $196,000 of machinery and equipment, $84,000 of which relates
to the first quarter ended December 31, 1998.
. accrued rent expense of $90,000, which was recorded ratably over the first
three quarters of fiscal 1999.
. recorded the fair market value, $56,000, of a warrant granted to a non-
employee in November 1998.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
4
<PAGE>
SATCON TECHNOLOGY CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-(CONTINUED)
Note B. Significant Events
- --------------------------
BEACON POWER CORPORATION
On October 23, 1998, the Company entered into a Securities Purchase Agreement
(the "Agreement") with Beacon Power Corporation ("Beacon"), Perseus Capital,
L.L.C. ("Perseus"), Duquesne Enterprises, Inc. ("Duquesne") and Micro Generation
Technology Fund, L.L.C ("Micro", and together with Perseus and Duquesne the
"Purchasers"). Pursuant to the terms of the Agreement, (i) the Purchasers
purchased from Beacon and Beacon issued, sold and delivered to the Purchasers
1,900,000 shares (the "Shares") of Beacon's Class D Preferred Stock, $.01 par
value per share; (ii) the Purchasers have the right to receive certain warrants
to purchase shares of Beacon's common stock, $.01 par value per share
("Beacon's Common Stock"); (iii) the Company granted the Purchasers the right
(the "Put Right") to cause the Company, in circumstances described below, to
purchase all of the Shares and all of Beacon's Common Stock issuable upon
conversion of the Shares; and (iv) upon exercise of the Put Right pursuant to
the terms of the Agreement, the Company must pay the consideration contemplated
by the Agreement in shares of the Company's common stock, $.01 par value per
share (the "Common Stock"), valued at the average fair value for the fifteen
trading days before and after notice of exercise of the Put Right. The aggregate
consideration received by Beacon was $4,750,000. The Put Right is exercisable
within sixty days of the second, third, fourth and fifth anniversary of the
closing date of the transaction, upon certain events of bankruptcy of Beacon and
upon the occurrence of certain going private transactions involving the Company.
If the Put Right were to be exercised, the Company would most likely recognize a
loss equal to the value of the Company's shares issued upon exercise of the Put
Right. The Company retained approximately .1% of Beacon's outstanding voting
stock. The Company owns shares of Series A Preferred stock of Beacon. Series A
preferred stock is non-voting and is convertible at anytime into Beacon's Common
Stock. On an as converted basis, the Company would own approximately 70% of
Beacon's outstanding voting stock.
On June 22, 1999, the Company purchased from Beacon a note (the "June 22, 1999
Note") with a principal amount of $125,000 due and payable on the earlier of
(i) September 22, 1999 ("Maturity Date") or (ii) upon the occurrence of an event
of default, as defined therein. The note bears interest at 12 1/2% per annum;
provided that if the note is not repaid in full on or prior to Maturity Date the
interest rate would increase to 15% per annum. The June 22, 1999 Note was
issued pursuant to the terms of a Note Purchase Agreement, dated as of June 22,
1999, by and among Beacon, the Purchasers named therein and the Company (the
"Note Purchase Agreement"). Interest on the June 22, 1999 Note is payable on the
Maturity Date.
On July 6, 1999, the Company purchased from Beacon an additional note (the
"July 6, 1999 Note") with a principal amount of $125,000 due and payable on the
earlier of (i) Maturity Date or (ii) upon the occurrence of an event of default.
The note bears interest at 12 1/2% per annum; provided that if the note is not
repaid in full on or prior to Maturity Date the interest rate would increase to
15% per annum (the "July 6, 1999 Note" and together with with the June 22, 1999
Note, the "Notes"). The July 6, 1999 Note was also issued pursuant to the terms
of the Note Purchase Agreement. Interest on the July 6, 1999 Note is payable at
the Maturity Date.
In early August 1999, the Company exchanged in full the Notes and $83,333.33
for a note with a principal amount of $333,333.33 ("Bridge Note") plus accrued
interest due and payable on the earlier of (i) the date of conversion of the
note as described below or (ii) upon the occurrence of an event of default. The
Bridge Note bears interest at 12 1/2% per annum; provided that if the Funding
Date (as defined below) does not occur within six months, such interest rate
shall increase effective February 2, 2000 to 15% per annum. The Bridge Note was
issued pursuant to the terms of a Note and Warrant Purchase Agreement, dated as
of August 2, 1999, by and among Beacon, the Purchasers named therein and the
Company (the "Note and Warrant Purchase Agreement"). Interest on the Bridge Note
is payable on the Maturity Date.
Pursuant to the terms of the Note and Warrant Purchase, the Company is
required to purchase two (2) additional notes each with a principal amount of
$333,333.33 no earlier than August 4, 1999 and October 1, 1999, respectively,
and no later than the earliest of (a) October 15, 1999 and November 15, 1999,
respectively, (b) two days after the Company closes on a new equity or debt
securities financing or (c) at such other times as mutually agreeable to the
Company and Beacon. The Bridge Note and the committed notes of $333,333.33 are
collectively referred to as the "Bridge Securities."
5
<PAGE>
SATCON TECHNOLOGY CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-(CONTINUED)
BEACON POWER CORPORATION)-(CONTINUED)
In the event Beacon obtains a funding commitment for at least $5 million of
external funds within four months of the issuance of the first Bridge Security
and closes a funding pursuant to such commitment within six months of the first
issuance of the first Bridge Security (the date of such funding, the "Funding
Date"), all outstanding principal and interest on the Bridge Securities will
convert into equity of Beacon at a price and on terms that are equivalent to the
securities issued by Beacon pursuant to the funding commitment. If Beacon does
not obtain a qualified financing commitment within the four month period
referred to above, or close such funding within the six month period referred to
above, the Bridge Securities will convert into securities of Beacon pursuant to
terms to be agreed to with Beacon, or if no terms are agreed to, the Company has
the right to demand payment of all principal and interest on the Bridge
Securities.
Warrants to purchase shares of Beacon Securities were and will be issued in
connection with each issuance of the Bridge Securities. The warrants will be
for the purchase of the type of securities to be issued upon conversion of the
Bridge Securities or if such securities are not converted, Beacon common stock.
The number of shares of Beacon securities that will be subject to the warrants
will be determined by dividing (i) 25% of the principal amount of the Bridge
Securities issued by (ii) the price per share of the Bridge Securities, or, if
the Bridge Securities are not converted, $2.50.
After consultation with its new independent public accountants, Arthur
Andersen LLP, the Company retroactively changed its method of accounting for its
investment in Beacon to the equity method, effective October 23, 1998. This
change resulted in an additional $1,614,000 loss in the investment in Beacon.
The effect of this change on the quarterly results for fiscal 1999 is as
follows:
<TABLE>
<CAPTION>
AS REPORTED AS ADJUSTED
--------------------------------------
<S> <C> <C>
Equity in the loss of Beacon:
Quarter ended December 31, 1998........................ $272,437 $1,064,010
Quarter ended March 31, 1999........................... -- 424,173
Quarter ended June 30, 1999............................ N/A 396,620
--------------------------------------
Nine months ended June 30, 1999........................ N/A $1,884,803
======================================
</TABLE>
At June 30, 1999, the Company has accrued losses of $271,620 which is included
in accrued expenses, relating to its share of Beacon losses which it is required
to fund pursuant to the terms of the Note and Warrant Purchase Agreement. In
future periods, the Company will continue to record its share of Beacon's losses
up to the amount of its actual and committed investment. It is anticipated that
substantially all of the Company's $603,380 remaining and committed investment
in Beacon will be recorded as a loss over the two quarters ending December 31,
1999.
ISSUANCE OF COMMON STOCK AND OPTIONS TO PURCHASE COMMON STOCK
During the quarter ended quarter June 30, 1999, the Company granted options to
purchase 750,000 shares of the Company's common stock to consultants at prices
ranging from $5.75 to $10.00 per share. The options are fully vested. The
Company has charged the fair market value of the options as determined by using
the Black-Scholes option pricing model, of approximately $2,127,000, to selling,
general and administrative expenses. Subsequent to these grants, a consultant
exercised an option to purchase 200,000 shares at $7.00 per share. The Company
received $650,000 of cash and the remaining amount due from the shareholder is
classified within stockholders' equity as amounts receivable from exercise of
stock options.
On March 9, 1999, the Company issued 42,860 shares of Common Stock to an
escrow agent in connection with a consulting agreement entered into by the
Company and Mr. Albert R. Snider pursuant to which Mr. Snider will perform such
consulting, advisory and related services as the Company may reasonably request
from time to time between October 1, 1999 and October 1, 2002. These shares were
issued in reliance upon the exemptions from registration under Section 4(2) of
the Securities Act or Regulation D promulgated thereunder, relative to sales by
an issuer not involving any public offering.
6
<PAGE>
SATCON TECHNOLOGY CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-(CONTINUED)
ISSUANCE OF COMMON STOCK AND OPTIONS TO PURCHASE COMMON STOCK-(Continued)
At March 31, 1999, the Company accounted for the $190,191 initial fair market
value of the shares issued to Mr. Snider as a prepaid expense with a
corresponding increase to stockholders' equity. In the quarter ended June 30,
1999, the Company has (i) reclassified the prepaid expense to stockholders'
equity, and (ii) marked the value of the shares placed in escrow to fair market
value at June 30, 1999. As long as the shares remain in escrow, the Company will
continue to mark the shares to their fair market value.
LINE OF CREDIT
The Company has a $3,000,000 demand discretionary line of credit with a bank.
The line of credit bears interest at the bank's prime rate plus 1 1/2% (9 1/4%
as of June 30, 1999). Available borrowings are based on a formula of eligible
accounts receivable and inventory (the "Borrowing Base"). The Company was also
permitted to borrow up to $500,000 in excess of the Borrowing Base (such excess,
"Over Advances"); provided the Over Advances were fully paid on August 6, 1999.
On August 9, 1999, the Company was otherwise required to pay the Over Advances,
in full, but received an extension to September 30, 1999 ("the Extension") from
the bank in consideration of paying $250,000 of the Over Advances. Under the
terms of the Extension, the Company is required to pay all of the remaining Over
Advances in full by September 30, 1999. At June 30, 1999, the amount outstanding
under this facility exceeded the eligible Borrowing Base, by approximately
$500,000. As of August 16, 1999, the amount of the Over Advances is
approximately $250,000.
Acquisitions
On April 12, 1999, the Company executed an agreement to purchase
substantially all of the assets and assume certain liabilities of HyComp, Inc.
("HyComp"). This agreement was dated as of March 31, 1999 and was by and between
HyComp and HyComp Acquisition Corp., a wholly-owned subsidiary of the Company.
On April 12, 1999 (the "Closing Date"), the Company completed the acquisition of
HyComp. The aggregate consideration paid by the Company for the acquired assets
of HyComp consisted of (i) $750,000 in cash; (ii) the assumption of certain
liabilities and obligations of HyComp in the amount of approximately $250,000;
(iii) transaction costs of $73,000 and (iv) the Company agreed to pay a 5%
royalty to HyComp on certain sales for 52 weeks subsequent to the Closing Date.
At June 30, 1999, the Company had recorded $50,000 of accrued royalties. The
purchase price has been allocated as follows:
<TABLE>
<CAPTION>
<S> <C>
Inventory............................................................... $ 162,825
Deposits................................................................ 19,800
Property and equipment.................................................. 940,500
-------------
$1,123,125
=============
</TABLE>
The pro forma financial information has not been presented as the results of
HyComp are not material.
7
<PAGE>
SATCON TECHNOLOGY CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-(CONTINUED)
Note C. Loss per Share
- ----------------------
The following is the reconciliation of the numerators and denominators of the
basic and diluted per share computations of loss:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net loss........................................................ $(7,192,307) $(1,208,335) $(9,821,978) $(2,748,576)
BASIC:
Common shares outstanding, beginning of period.................. 9,074,049 9,018,549 8,990,249 8,769,146
Weighted average common shares issued during the period......... 102,800 -- 95,378 170,419
Weighted average shares repurchased during the period........... -- -- (13,567) --
----------- ----------- ----------- -----------
Weighted average shares outstanding--basic...................... 9,176,849 9,018,549 9,072,060 8,939,562
=========== =========== =========== ===========
Net loss per weighted average share, basic...................... $ (0.78) $ (0.13) $ (1.08) $ (0.31)
=========== =========== =========== ===========
DILUTED:
Weighted average shares outstanding--basic...................... 9,176,849 9,018,549 9,072,060 8,939,562
Weighted average common stock equivalents (a)................... -- -- -- --
----------- ----------- ----------- -----------
Weighted average shares outstanding--diluted.................... 9,176,849 9,018,549 9,072,060 8,939,562
=========== =========== =========== ===========
Net loss per weighted average share, diluted.................... $ (0.78) $ (0.13) $ (1.08) $ (0.31)
=========== =========== =========== ===========
</TABLE>
(a) not included if antidilutive
As of June 30, 1999 and 1998, 1,327,951 and 943,675 options and warrants,
respectively, were excluded from the weighted average common shares outstanding
as their effect would be anti-dilutive.
Note D. Inventory
- -----------------
Inventory consists of the following:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1999 1998
--------------- --------------
<S> <C> <C>
Raw material......................................................... $1,519,934 $1,783,803
Work-in-process...................................................... 1,933,986 1,788,241
Finished goods....................................................... 397,759 106,023
--------------- --------------
$3,851,679 $3,678,067
=============== ==============
</TABLE>
During the quarter ended June 30, 1999, the Company performed a review of the
inventory valuation methodologies. The Company determined that $725,000 of
additional reserves were required for potentially obsolete and excess inventory
at June 30, 1999. In addition, the Company determined that adjustments totaling
approximately $700,000 were required to reduce inventory and increase cost of
revenues for the quarter ended March 31, 1999.
8
<PAGE>
SATCON TECHNOLOGY CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-(CONTINUED)
Note E. Comprehensive Income
- ----------------------------
As of October 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130
requires that changes in comprehensive income be shown in a financial statement
that is displayed with the same prominence as other financial statements.
Financial statements for prior periods must be restated.
The Company's total comprehensive income is as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net loss.......................................................... $(7,192,307) $(1,208,549) $(9,821,978) $(2,748,576)
=========== =========== =========== ===========
Other comprehensive income/(loss), net of tax:
Unrealized gains/(losses) on securities...................... $ 15,085 $ 547 $ 10,380 $ 6,683
----------- ----------- ----------- -----------
Other comprehensive income/(loss)................................. $ 15,085 $ 547 $ 10,380 $ 6,683
----------- ----------- ----------- -----------
Comprehensive loss................................................ $(7,177,222) $(1,208,002) $(9,811,598) $(2,741,893)
=========== =========== =========== ===========
</TABLE>
9
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934 as amended,
and Section 27A of the Securities Act of 1933. For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes", "anticipates", "plans", "expects", and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the Company's actual results to differ
materially from those indicated by such forward-looking statements. The factors
include, without limitation, those set forth below under the caption "Factors
Affecting Future Results."
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
revenue for certain items in the Company's Statement of Operations for each
period:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------------------------------
1999 1998 1999 1998
-------------------------------------------------
<S> <C> <C> <C> <C>
Revenue........................................................ 100.0% 100.0% 100.0% 100.0%
Cost of revenue................................................ 127.0 66.0 99.1 69.8
Selling, general and administrative expenses................... 126.5 30.5 62.7 31.3
Research and development expenses.............................. 5.6 0.7 3.3 2.7
Amortization................................................... 2.5 2.1 2.4 1.8
Total operating expenses (excluding cost of
revenue)...................................................... 134.6 33.3 68.4 35.8
Operating income/(loss)........................................ (161.5) 0.7 (67.5) (5.6)
Loss from Investment in Beacon Power Corporation............... (9.7) (34.8) (16.4) (19.2)
Other income/(loss)............................................ (3.5) - (1.3) -
Interest income/(expense), net................................. (1.1) 1.0 (0.4) 1.2
Net loss....................................................... (175.8%) (33.2%) (85.6%) (23.6%)
</TABLE>
Three Months Ended June 30, 1999 ("Q3 1999") Compared to the Three Months Ended
- -------------------------------------------------------------------------------
June 30, 1998 ("Q3 1998")
- -------------------------
Revenue. The Company's revenue increased approximately $448,000 or 12%, from
Q3 1998 to Q3 1999. The increase is primarily due to a significant increase in
product revenues of approximately $1,000,000 offset by a reduction in product
development revenues of $500,000.
Cost of revenue. Cost of revenue increased approximately $2,788,000 or 115%,
from Q3 1998 to Q3 1999. During the quarter ended June 30, 1999, the Company
performed a review of its inventory valuation methodologies. The Company
determined that $725,000 of additional reserves was required for potentially
obsolete and excess inventory at June 30, 1999. In addition, the Company
recorded $350,000 of additional reserve for unbilled contract costs and expensed
$150,000 of abandoned patents. The remainder was the result of a change in
product mix.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased approximately $4,064,000 or 366% from Q3 1998
to Q3 1999. During the quarter ended June 30, 1999, the Company granted options
to purchase 750,000 shares of common stock to consultants at prices ranging from
$5.75 to $10.00 per share, and accordingly, the Company has charged the fair
market value of $2,127,000 to selling, general and administrative expenses.
The Company also recorded a reserve of $1,280,000 for unbilled contract costs
and an additional reserve of $802,000 for accounts receivable.
Research and development expenses. Research and development expenses increased
approximately $203,000 or 805% from Q3 1998 to Q3 1999. The increase is
attributable to the continued development of magnetic bearings and suspension
systems and electro-optic and sensor inspection systems.
10
<PAGE>
Amortization. Amortization increased approximately $26,000 or 34% from Q3
1998 to Q3 1999. This was primarily the result of goodwill recorded in
connection with the acquisition of Inductive and Lighthouse in January 1999.
Loss from Investment in Beacon Power Corporation. After consultation with
its new independent public accountants, Arthur Andersen LLP, the Company
retroactively changed its method of accounting for its investment in Beacon to
the equity method, effective October 23, 1998. This change resulted in an
additional $1,614,000 loss in the investment in Beacon. The effect of this
change on the quarterly results for fiscal 1999 is as follows:
<TABLE>
<CAPTION>
AS REPORTED AS ADJUSTED
--------------------------------------
<S> <C> <C>
Equity in the loss of Beacon:
Quarter ended December 31, 1998........... $272,437 $1,064,010
Quarter ended March 31, 1999.............. -- 424,173
Quarter ended June 30, 1999............... N/A 396,620
--------------------------------------
Nine months ended June 30, 1999........... N/A $1,884,803
======================================
</TABLE>
At June 30, 1999, the Company has accrued losses of $271,620 relating to its
share of Beacon losses which it is required to fund pursuant to the terms of the
Note Purchase and Warrant Agreement. In future periods, the Company will
continue to record its share of Beacon's losses up to the amount of its actual
and committed investment. It is anticipated that substantially all of the
Company's $603,380 remaining and committed investment in Beacon will be recorded
as a loss over the two quarters ending December 31, 1999.
Other income/(loss),net. Other income/(loss), net increased approximately
$141,000 from Q3 1998 to Q3 1999. The loss was primarily the result of the sale
of marketable securities.
Interest income/(expense), net. Interest income/(expense), net decreased
approximately $82,000 or 227% from Q3 1998 to Q3 1999. The decrease is the
result of increased borrowings under the Line of Credit to approximately
$2,617,000 at June 30, 1999.
Nine Months Ended June 30, 1999 ("Q3 1999 YTD") Compared to the Nine Months
- ---------------------------------------------------------------------------
Ended June 30, 1998 ("Q3 1998 YTD")
- -----------------------------------
Revenue. The Company's revenue decreased approximately $186,000 or 1.6%, from
Q3 1998 YTD to Q3 1999 YTD. The decrease is primarily attributable to a
reduction in revenue related to research and development contracts of
approximately $1,100,000. This decrease in revenue was partially offset by
increases of sale of manufactured products of approximately $1,000,000.
Cost of revenue. Cost of revenue increased approximately $3,238,000 or 40%,
from Q3 1998 YTD to Q3 1999 YTD. During the nine months ended June 30, 1999,
the Company performed a review of its inventory valuation methodologies. The
Company determined that $725,000 of additional reserves was required for
potentially obsolete and excess inventory. In addition, the Company determined
that adjustments totaling approximately $700,000 were required to reduce
inventory. The Company also recorded $350,000 of additional reserve for
unbilled contract costs and expensed $150,000 of abandoned patents. The
remainder was the result of a change in product mix.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased approximately $3,540,000 or 97% from Q3 1998
YTD to Q3 1999 YTD. The increase is primarily due to options granted to
purchase 750,000 shares of common stock to consultants at prices ranging from
$5.75 to $10.00 per share with a fair market value of $2,127,000. The Company
also recorded a reserve of $1,280,000 for unbilled contract costs and an
additional reserve of $802,000 for accounts receivable.
Research and development. Research and development expenses increased
approximately $69,000 or 22% from Q3 1998 YTD to Q3 1999 YTD. The increase is
primarily the result of expenses related to the continued development of
magnetic bearings and suspension systems and electro-optic and sensor inspection
systems.
11
<PAGE>
Amortization. Amortization increased approximately $60,000
or 28% from Q3 1998 YTD to Q3 1999 YTD. This was primarily the result of the
acquisition of Inductive and Lighthouse in January 1999.
Loss from Investment in Beacon Power Corporation. After consultation with its
new independent public accountants, Arthur Andersen LLP, the Company
retroactively changed its method of accounting for its investment in Beacon to
the equity method, effective October 23, 1998. This change resulted in an
additional $1,614,000 loss in the investment in Beacon. The effect of this
change on the quarterly results for fiscal 1999 is as follows:
<TABLE>
<CAPTION>
AS REPORTED AS ADJUSTED
-------------------------------------
<S> <C> <C>
Equity in the loss of Beacon:
Quarter ended December 31, 1998............... $272,437 $1,064,010
Quarter ended March 31, 1999.................. -- 424,173
Quarter ended June 30, 1999................... N/A 396,620
--------------------------------------
Nine months ended June 30, 1999............... N/A $1,884,803
======================================
</TABLE>
At June 30, 1999, the Company has accrued losses of $271,620 relating to its
share of Beacon losses which it is required to fund pursuant to the terms of the
Note and Warrant Purchase Agreement. In future periods, the Company will
continue to record its share of Beacon's losses up to the amount of its actual
and committed investment. It is anticipated that substantially all of the
Company's $603,380 remaining and committed investment in Beacon will be recorded
as a loss over the two quarters ending December 31, 1999.
Other income/(loss),net. Other income, net decreased approximately $150,000
from Q3 1998 YTD to Q3 1999 YTD. The loss was the result of the sale of
marketable securities.
Interest income/(expense), net. Interest income, net decreased approximately
$185,000 or 130% from Q3 1998 YTD to Q3 1999 YTD. The decrease is the result of
increased borrowings under the line of credit to approximately $2,617,000 at
June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents was approximately $517,000 as of
June 30, 1999, a decrease of approximately $685,000 from September 30, 1998.
Cash used in operating activities was approximately $3,011,000 for Q3 1999 YTD,
compared to approximately $1,471,000 for Q3 1998 YTD.
On June 22, 1999, the Company purchased from Beacon a note with a principal
amount of $125,000 due and payable on the earlier of (i) September 22, 1999
("Maturity Date") or (ii) upon the occurrence of an event of default. The note
bears interest at 12 1/2% per annum; provided that if the note is not repaid in
full on or prior to Maturity Date the interest rate would increase to 15% per
annum (the "June 22, 1999 Note "). The June 22, 1999 Note was issued pursuant to
the terms of a Note Purchase Agreement, dated as of June 22, 1999, by and among
Beacon, the Purchasers named therein and the Company (the "Note Purchase
Agreement"). Interest on the June 22, 1999 Note is payable on the Maturity Date.
On July 6, 1999, the Company purchased from Beacon an additional note with
a principal amount of $125,000 due and payable on the earlier of (i) Maturity
Date or (ii) upon the occurrence of an event of default. The note
bears interest at 12 1/2% per annum; provided that if the note is not repaid in
full on or prior to Maturity Date the interest rate would increase to 15% per
annum (the "July 6, 1999 Note" and together with with the June 22, 1999 Note,
the "Notes"). The July 6, 1999 Note was also issued pursuant to the terms of the
Note Purchase Agreement. Interest on the July 6, 1999 Note is payable at
Maturity Date.
In early August 1999, the Company exchanged in full the Notes and $83,333.33
for a note with a principal amount of $333,333.33 ("Bridge Note") plus accrued
interest due and payable on the earlier of (i) the date of conversion as
described below or (ii) upon the occurrence of an event of default. The Bridge
Note bears interest at 12 1/2% per annum; provided that if the Funding Date
(defined below) does not occur within six months such interest rate shall
increase effective February 2, 2000 to 15% per annum pursuant to the terms of a
Note and Warrant Purchase Agreement, dated as of August 2, 1999, by and among
Beacon, the Purchasers named therein and the Company (the "Note and Warrant
Purchase Agreement"). Interest on the Bridge Note is payable on the Maturity
Date.
12
<PAGE>
Pursuant to the terms of the Note and Warrant Purchase Agreement, the Company
is required to purchase two (2) additional notes each with a principal amount of
$333,333.33 and a warrant to purchase a number of shares of Beacon Class E
Preferred Stock no earlier than August 4, 1999 and October 1, 1999,
respectively, and no later than the earliest of (a) October 15, 1999 and
November 15, 1999, respectively, (b) two days after the Company closes on a new
equity or debt securities financing or (c) at such other times as mutually
agreeable to the Company and Beacon.
The Company has $3,000,000 demand discretionary line of credit with a bank.
The line of credit bears interest at the bank's prime rate plus 1 1/2% (9 1/4%
as of June 30, 1999). Available borrowings are based on a formula of eligible
accounts receivable and inventory. At June 30, 1999, the amount outstanding
under this facility exceeded the eligible borrowing base (such excess "Over
Advances"). On August 9, 1999, the Company was otherwise required to pay the
Over Advances, in full, but received an extension to September 30, 1999 ("the
Extension") from the bank in consideration of paying $250,000 of the Over
Advances. Under the terms of the Extension, the Company is required to pay all
of the remaining Over Advances in full by September 30, 1999.
The Company anticipates needing approximately $917,000 of external funding
over the next 90 days to pay the remaining $250,000 of Over Advances to its bank
on September 30, 1999 and to fulfill its commitment to Beacon Power Corporation
to advance $333,333 by October 15, 1999 and $333,333 by November 15, 1999. After
obtaining these funds, the Company believes that its existing cash resources,
cash flow from operations and its line of credit will be sufficient to meet its
operations through at least June 30, 2000. Although the Company believes that it
will be able to obtain at least $917,000 of funding from external sources or
through the exercise of currently outstanding options and warrants, there can be
no assurance that the Company will be able to do so on acceptable terms or at
all. The Company's ability to generate cash from operations depends upon, among
other things, revenue growth, its credit and payment terms with vendors, the
collection of accounts receivable and the availability of the Company's demand
discretionary line of credit. If such sources of cash prove insufficient or it
is otherwise unable to obtain necessary third party funding through the issuance
of debt or equity securities or otherwise, the Company will be required to make
changes in its operations, sell assets or otherwise seek protection from its
creditors. Any of these actions will likely have a material adverse effect on
the Company.
The Company has currently outstanding a stock repurchase program which
authorizes the Company to repurchase up to 5% of its outstanding common stock
(the "Repurchase Program"). Under the Repurchase Program the Company is
authorized to purchase shares of the Company's common stock on the open market
from time to time, depending on market conditions.
EFFECTS OF INFLATION
The Company believes that inflation and changing prices over the past three
years have not had a significant impact on the Company's net sales and revenues
or on income from continuing operations.
FACTORS AFFECTING FUTURE RESULTS
The Company's future results remain difficult to predict and may be affected
by a number of factors which could cause actual results to differ materially
from forward-looking statements contained in this Quarterly Report on Form 10-Q
and presented elsewhere by management from time to time. These factors include
business conditions within the automotive, telecommunications, industrial
machinery, and semiconductor industries and the world economies as a whole, and
competitive pressures that may impact research and development spending. The
Company's revenue growth is dependent on technology developments and contract
research and development for both the government and commercial sectors and no
assurance can be given that such investments will continue or that the Company
can successfully obtain such funds. In addition, the Company's future growth
opportunities are dependent on the introduction of new products that must
penetrate automotive, telecommunications, industrial, and computer market
segments. No assurance can be given that new products can be developed, or if
developed, will be successful; that competitors will not force prices to an
unacceptably low level or take market share from the Company; or that the
Company can achieve or maintain profits in these markets. Because of these and
other factors, past financial performances should not be considered an indicator
of future performance. Investors should not use historical trends to anticipate
future results and should be aware that the Company's stock price frequently
experiences significant volatility.
On October 23, 1998, the Company entered into the Agreement with Beacon,
Perseus, Duquesne and Micro. Pursuant to the terms of the agreement, (i) the
Purchasers purchased from Beacon and Beacon issued, sold and delivered to the
Purchasers the Shares) of Beacon's Class D Preferred Stock, $.01 par value per
share; (ii) the Purchasers have the right to receive certain warrants to
purchase shares of Beacon's Common Stock; (iii) the Company granted the
Purchasers the Put Right to cause the Company, in circumstances described below,
to purchase all of the Shares and all of Beacon's Common Stock issuable upon
conversion of the
13
<PAGE>
Shares; and (iv) upon exercise of the Put Right pursuant to the terms of the
agreement, the Company must pay the consideration contemplated by the agreement
in shares of the Company's Common Stock, valued at the average fair value for
the fifteen trading days before and after notice of exercise of the Put Right.
The aggregate consideration received by Beacon was $4,750,000. The Put Right is
exercisable within sixty days of the second, third, forth and fifth anniversary
of the closing date of the transaction, upon certain events of bankruptcy of
Beacon and upon the occurrence of certain going private transactions involving
the Company. If the Put Right were to be exercised, the Company would most
likely recognize a loss equal to the value of the Company's shares issued upon
exercise of the Put Right.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131 ("SFAS 131"), "Disclosure about Segments of an Enterprise and Related
Information." SFAS 131 is effective for fiscal years beginning after December
15, 1997 and establishes annual and interim reporting standards for an
enterprise's operating segments and related disclosures about its products and
services, geographical areas and major customers. The Company will adopt SFAS
131 in the fiscal year ending September 30, 1999. This Statement need not be
applied to interim financial periods in the initial year of application,
however, comparative information for interim financial statements in the year of
application will be reported in financial statements for interim periods in the
second year of application.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS 133 is effective for fiscal years beginning after June 15,
1999 and establishes a new model for accounting for derivatives and hedging
activities. The Company will adopt SFAS 133 beginning in the first quarter of
the fiscal year ending September 30, 2001.
Adoption of SFAS 131 and SFAS 133 are not expected to have a material impact
to the Company's consolidated financial position, results of operations or cash
flows, and any effect will be limited to the form and content of its
disclosures.
EFFECTS OF YEAR 2000
The year 2000 ("Y2K") issue is the result of computer programs being written
using two digits rather than four digits to define the applicable year. Certain
computer programs that have date-sensitive software and use two digits only may
recognize a date using "00" as the year 1900 rather than the year 2000.
The Company recognizes the need to ensure its operations will not be adversely
impacted by the Y2K software failures and has established a project team to
address the Y2K risks. The project team has coordinated the identification of,
and will coordinate the implementation of, changes to computer hardware and
software applications that will attempt to ensure availability and integrity of
the Company's information systems and the reliability of its operational systems
and manufacturing processes. The Company is also assessing the potential overall
impact of Y2K on its business, results of operations and financial position.
The Company has reviewed its information and operational systems and
manufacturing processes in order to identify those products, services or systems
that are not Y2K compliant. As a result of this review, the Company has
determined that it will be required to modify or replace certain information and
operational systems so that they will be Y2K compliant. These modifications and
replacements are being, and will continue to be, made in conjunction with the
Company's overall system initiatives. The total cost of these Y2K compliance
measures has not been, and is not anticipated to be, material to the Company's
financial position or its results of operations. The Company expects to complete
its Y2K project during fiscal year 1999. Based on available information, the
Company does not believe any material exposure to significant business
interruption exists as a result of Y2K compliance issues. Accordingly, the
Company has not adopted any formal contingency plan in the event its Y2K project
is not completed in a timely manner. These costs and the timing in which the
Company plans to complete its Y2K modifications and testing processes are based
on management's best estimates. However, there can be no assurance that the
Company will timely identify and remediate all significant Y2K problems, that
remedial efforts will not involve significant time and expense or that such
problems will not have a material adverse effect on the Company's business,
results of operations or financial position.
The Company also faces risks to the extent that suppliers of products,
services and systems purchased by the Company and others with whom the Company
transacts business do not comply with the Y2K requirements. The Company is
identifying significant suppliers and customers to determine the extent to which
the Company is vulnerable to these third parties' failure to remediate their own
Y2K issues. In the event any such third party cannot provide the Company the
products, services or systems that meet the Y2K requirements on a timely basis,
the Company's results of operations could be materially and adversely affected.
14
<PAGE>
To the extent Y2K issues cause significant delays in, or cancellation of,
decisions to purchase the Company's products or services, the Company's
business, results of operations or financial position would be materially
adversely affected.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
15
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings:
Not applicable.
Item 2. Changes in Securities and Use of Proceeds:
Not applicable.
Item 3. Defaults upon Senior Securities:
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
Not applicable.
Item 5. Other Information:
Not applicable.
Item 6 Exhibits and Reports on Form 8-K:
(a) Exhibits
10.21 Asset Purchase Agreement dated as of March 31, 1999 by and between HyComp,
Inc. and HyComp Acquisition Corp., a wholly-owned subsidiary of the
Registrant
10.22 Note Purchase Agreement dated as of June 22, 1999 by and among Beacon
Power Corporation, Perseus Capital, L.L.C., Duquesne Enterprises, Inc.,
Micro Generation Technology Fund, L.L.C. and the Registrant
10.23 Note and Warrant Purchase Agreement dated as of August 2, 1999 by and
among Beacon Power Corporation, Perseus Capital, L.L.C., Duquesne
Enterprises, Inc., Micro Generation Technology Fund, L.L.C. and the
Registrant
27 Financial Data Schedule
(b) Reports on Form 8-K
On May 19, 1999, the Registrant filed a Current Report on Form 8-K, dated May
12, 1999, in connection with the dismissal of PricewaterhouseCoopers LLP from
its position as the Registrant's independent auditors.
On May 28, 1999, the Registrant filed a Current Report on Form 8-K, dated May
25, 1999, in connection with the engagement of Arthur Andersen LLP as the
Registrant's independent auditors.
16
<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.
SATCON TECHNOLOGY CORPORATION
Date: August 16, 1999 By: /s/ Michael C. Turmelle
----------------------------------------------
Michael C. Turmelle, Vice President,
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
17
<PAGE>
EXHIBIT 10.21
ASSET PURCHASE AGREEMENT
Asset Purchase Agreement dated as of March 31, 1999 by and between
HyComp, Inc. of 165 Cedar Hill Street, Marlborough, Massachusetts 01752 (the
'Seller') and HyComp Acquisition Corp., c/o SatCon Technology Corporation, 161
First Street, Cambridge, Massachusetts 02141 (the 'Purchaser'), with reference
to the following RECITALS:
A. Seller is in the business of manufacturing of hybrid circuits, thin
film circuits and flip chip assembly;
B. Purchaser wishes to purchase certain equipment and other assets which
are used by Seller in its business operations, and Seller desires to
sell such assets.
NOW THEREFORE, in consideration of the recitals and of the respective covenants,
representations, warranties, and agreements herein contained, and intending to
be legally bound hereby, the parties hereby agree as follows:
1. PURCHASE AND SALE
1.1. Agreement to Sell. At the Closing hereunder ( as defined in
-----------------
Section 2.1) and except as specifically provided in Section 1.3, Seller shall
grant, sell, convey, assign, transfer and deliver to Purchaser, all right, title
and interest of Seller in and to (a) all of the tangible and intangible assets
of Seller including those more fully identified in Section 1.2, (b) the name
"HyComp" to the extent of the ownership rights of Seller, if any, and all of the
good will associated therewith; all of which shall be free and clear of all
mortgages, liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature whatsoever (collectively the "Assets").
1
<PAGE>
1.2 Included Assets. The Assets shall include, without limitation,
---------------
the following assets, properties and rights of the Seller, except as otherwise
set forth in Section 1.3 hereof.
(a) all machinery, equipment, tools, furniture, furnishings,
leasehold improvements, goods and other tangible personal
property owned by Seller, and shown on Schedule 1.2(a).
(b) all prepaid items as shown on Schedule 1.2(b).
(c) all supplies, raw materials, work in process, finished goods and
other inventory as shown on Schedule 1.2(c).
(d) all right title, and interest of the Seller in and to all
purchase orders as shown on Schedule 1.2(d).
(e) all of Seller's right, title and interest in and to the name
"HyComp", to the extent of the ownership rights of Seller, if
any, subject to the terms of Section 1.3(e) hereinafter;
(f) all rights under any trademark, service mark, trade name or
copyright, whether registered or unregistered, and any
applications therefore;
(g) all technologies, methods, formulations, data bases, trade
secrets, know-how, inventions, and other intellectual property
used in Seller's business or under development;
2
<PAGE>
(h) all information, files, records, data, plans, contracts and
recorded knowledge including customer and supplier lists, related
to the foregoing.
1.3 Excluded Assets. Notwithstanding the foregoing the Assets shall not
---------------
include any of the following (the 'Excluded Assets'):
(a) the corporate seal, Articles of Organization, minute books, stock
books, tax returns, books of account, accounting records or other
records of Seller;
(b) any cash in any of Seller's bank accounts or in transit other
than cash received by the Sellers on or after April 1, 1999 with
respect to receivables that arise on and after April 1, 1999,
which Seller shall remit to Buyer promptly after the receipt
thereof in accordance with that certain letter executed today
between Buyer and Seller;
(c) any accounts receivable of Seller as shown on Schedule 1.3(c)
other than accounts receivables which arose on and after April 1,
1999;
(d) any intercompany receivables of Seller as shown on Schedule
1.3(d);
(e) the legal entity, public entity of HyComp, Inc. or its capital
stock.
It is agreed that Seller, although selling the name "HyComp" herewith, may
continue to use the name "HyComp" in connection with the corporation HyComp,
Inc. so long as such corporation does not actively conduct business under such
name. At such time as Seller may dissolve its corporate entity it shall retain
no further right to the use of the name "HyComp".
3
<PAGE>
1.4 Assumption of Liability. At the Closing hereunder the Purchaser
-----------------------
shall assume and agree to pay, discharge or perform, as appropriate,
the following liabilities and obligations the Seller (the "Assumed
Liabilities"):
(a) all liabilities and obligations of Seller identified on Schedule
1.4(a). All liabilities shall be paid promptly by Purchaser and
in all events within the period in which each liability is due.
(b) [Intentionally Omitted];
(c) all liabilities under the purchase orders set forth in
Schedule 1.4(c);
(d) all taxes of Purchaser accruing subsequent to the Closing
Date (as defined in Section 2.1);
Purchaser shall not at the Closing assume or agree to perform, pay or
discharge, and Seller shall remain unconditionally liable for, all
obligations, liabilities and commitments, fixed or contingent, of
Seller (including without limitation, intercompany accounts payable
and notes payable to lenders), other than the Assumed Liabilities
(such liabilities, obligations and commitments shall hereinafter be
referred to as "Seller Liabilities").
(e) Liability under warranty for all rework and monetary payments to
the extent that in the aggregate, for all such liabilities and
payments shall be less than $25,000.00.
4
<PAGE>
1.5 Agreement to Purchase. At the Closing, Purchaser shall purchase the
---------------------
Assets from Seller in exchange for the purchase price payable under Section 1.6
and the assumption of liabilities and obligations of Seller to the extent and as
provided in Section 1.4 of this Agreement.
1.6 Purchase Price. As consideration for the Assets, Purchaser shall deliver
--------------
to Seller at the Closing:
(a) payment to the Seller of $750,000.00 by delivery of a certified
check or by wire transfer completed and with funds immediately
available as of the time of Closing (the 'Closing Payment');
(b) The Purchaser shall pay to Seller a royalty of 5% of all sales
made to customers of Seller who are not also customers as of the
Closing Date, of Purchaser ('Eligible Customers') for a period of
52 weeks (the "Royalty Period") subsequent to the Closing date.
The Eligible Customers are those identified on Schedule 1.6(b)
annexed hereto. During the Royalty Period, Purchaser shall
provide to Seller at least quarterly such records as Seller may
reasonably require to account for all such sales to Eligible
Customers. Payment shall be made by Purchaser to Seller after
receipt of payment from Eligible Customers by Purchaser on a
quarterly basis.
(c) Amounts identified on Schedule 1.4(a) to be paid at Closing,
shall be paid at Closing.
1.7 [Intentionally Omitted]
1.8 Notification to Customers. Purchaser shall make timely notification in
-------------------------
writing to all customers of Seller giving notice of Purchaser's purchase of
5
<PAGE>
assets pursuant to this agreement, such notification to be made no
later than two (2) weeks after the Date of Closing.
2. Closing.
-------
2.1 Time and Place of Closing. The closing (the "Closing") of the sale and
-------------------------
purchase of the Assets shall take place at 12:00 P.M., Monday, April 12, 1999
(the "Closing Date") at the offices of Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts 02109 or at such other time as may be mutually agreed upon
by Purchaser and Seller.
2.2 Items to be Delivered at Closing.
--------------------------------
(a) Purchaser shall deliver to Seller:
(i) The Closing Payment;
(ii) A certificate of vote evidencing approval of the transactions
contemplated herein; and
(iii) Such other documents as Seller may reasonably require;
(b) Seller shall deliver to Purchaser:
(i) A bill of sale in customary form;
(ii) A certificate of vote evidencing approval of the transactions
contemplated herein;
(iii) Such legal opinions from Seller's counsel as Purchaser shall
reasonably request; and
(iv) Such other documents as Purchaser may reasonably require.
6
<PAGE>
2.3 Delivery of Possession. At the Closing Seller shall put Purchaser in
----------------------
possession and operating control of the Assets, including but not limited to all
purchase orders, contracts, licenses, customer lists and all other documents,
books, records, files, data and property that are part of the Assets. Seller
shall execute and deliver such further documents and instruments as Purchaser
shall reasonably request from time to time in order to cause full possession and
control of the Assets to be transferred and delivered to Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Purchaser as follows:
3.1 Corporate Existence. Seller is a corporation duly organized,
-------------------
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts.
3.2 Corporate Power; Authorization; Enforceable Obligation. Seller
------------------------------------------------------
has the corporate power, authority and legal right to execute, deliver and
perform this Agreement. The execution, delivery and performance of this
Agreement by Seller have been duly authorized by all necessary corporate action.
This Agreement has been, and the other agreements, documents and instruments
required to be delivered by Seller in accordance with the provisions hereof
("Seller's Documents") will be, duly executed and delivered by Seller and this
Agreement constitutes, and Seller's Documents when executed and delivered will
constitute, the legal, valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms.
3.3 Validity of Contemplated Transactions, etc. The execution,
------------------------------------------
delivery and performance of this Agreement by Seller and the consummation of the
transactions contemplated hereby, does not and will not violate, conflict with
or result in the breach of any term, condition or provision of, or require the
7
<PAGE>
consent of any other person under, (a) any existing law, ordinance, or
governmental rule or regulation to which Seller is subject, (b) any judgment,
order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
Seller, (c) the Articles of Organization and By-Laws, each as amended to date,
of, or any securities issued by Seller, or (d) any mortgage, indenture,
agreement, contract, commitment, lease, plan, permit license, or other
instrument, document or understanding , oral or written, to which Seller is a
party, by which Seller may have rights or by which any of the Assets may be
bound or affected, or give any party, by which Seller may have rights or by
which any of the Assets may be bound or affected, or give any party the right
thereunder the right to terminate, modify, accelerate, cancel or otherwise
change the existing rights or obligations of Seller thereunder. Except as
disclosed by Seller and agreed to by Purchaser on or before the Closing Date no
authorization, approval or consent of, and no resignation or filing with, any
governmental or regulatory official, body or authority is required in connection
with the execution, delivery or performance of this Agreement by Seller.
3.4. Financial Statements.
--------------------
(a) Seller has also previously delivered to Purchaser its Current
unaudited Balance Sheet for February 28, 1999, (the Current
Financial Statement") attached as Schedule 3.4(a). The Current
Financial Statement will be prepared in accordance with generally
accepted accounting principles applied consistently with past
practice, and have been certified by the Seller's comptroller in
the case of the Current Financial Statements.
(b) The Financial Statements for February and March fairly present,
as of their respective dates, the financial condition of assets
and liabilities of Seller; with respect to the contracts and
commitments
8
<PAGE>
for the sale of goods or the provision of services by Seller, the
Financial Statements contain and reflect adequate reserves, which
are consistent with previous reserves taken, for all reasonably
anticipated material losses and costs and expenses.
3.5 Absence of Undisclosed Liabilities. Except as and to the extent
----------------------------------
(a) reflected and reserved in the Current Balance Sheet, (b) set forth on
Schedule 3.5 attached hereto or (c) incurred in the ordinary course of business
after the date of the Current Balance Sheet and not material in amount, either
individually or in the aggregate, Seller does not have any liability or
obligation, secured or unsecured, whether accrued, absolute, contingent,
unasserted or otherwise, affecting the Assets. For purposes of this Section 3.5
"material" means any amount in excess of $75,000.00.
3.6 Contracts and Commitments.
-------------------------
(a) Schedule 3.6 annexed hereto contains complete and correct list
and description of the following contracts and agreements,
whether written or oral (collectively, the "Contracts"):
(i) Delete
(ii) all pledges, conditional sale or title retention
agreements, security agreements, equipment obligations,
personal property leases and lease purchase agreements
relating to any of the Assets to which Seller is a party or
by which Seller or any of its property is bound.
(iii) all contracts, agreements, commitments, purchase orders or
other understandings or arrangements to which Seller is a
party or by which Seller or any of its property is bound
which (A) involve payments or receipts by Seller of more
than $5,000.00 in the case
9
<PAGE>
of any single contract, agreement, commitment,
understanding or arrangement under which full performance
(including payment) has not been rendered by all parties
thereto or (B) which may materially adversely affect the
condition (financial or otherwise) or the properties,
assets, business or prospects of Seller;
(iv) Delete
(v) all agency, distributor, sales representative and similar
agreement to which Seller is a party;
(vi) Delete
(vii) all leases, whether operating, capital or otherwise, under
which Seller is lessor or lessee;
(viii) any other material agreement or contract entered into by
Seller, including without limitation, the purchase orders
which have been committed to or accepted by Seller.
(b) Except as set forth on Schedule 3.6(b) annexed hereto:
(i) each Contract is a valid and binding agreement of Seller,
enforceable against Seller in accordance with its terms,
and Seller does not have any knowledge that any Contract
is not a valid and binding agreement of the other parties
thereto;
(ii) Delete
(iii) Seller is not in breach of or default under any Contract,
and no event has occurred which with the passage of time
or giving of
10
<PAGE>
notice or both would constitute such a default, result in a
loss of rights or result in the creation of any lien,
charge or encumbrance, thereunder or pursuant thereto;
(iv) to the best knowledge of Seller, there is no existing
breach or default by any other party to any Contract, and
no event has occurred which with the passage of time or
giving of notice or both would constitute a default by such
other party, result in a loss of rights or result in the
creation of any lien, charge or encumbrance thereunder or
pursuant thereto;
(v) Seller is not restricted by any Contract except by
government regulation as part of military specifications
under which certain products are manufactured from carrying
on its business anywhere in the world; and
(vi) Delete
(c) Delete
(d) True, correct and complete copies of all Contracts have
previously been delivered by Seller to Purchaser.
3.7 Compliance with Agreements of Laws. Seller has all requisite licenses,
----------------------------------
permits, and certificates, including environmental, health and safety permits,
from federal, state and local authorities necessary to conduct its business and
own and operate its assets (collectively, the "Permits"). Schedule 3.7 annexed
hereto sets forth a true, correct and complete list of all such Permits, copies
of which have previously been delivered by Seller to Purchaser. All Permits
shall inure to the benefit of Purchaser immediately following the Closing
without the requirement of obtaining any consent, giving Purchaser the same
rights as Seller immediately prior to the Closing.
11
<PAGE>
Except as set forth on Schedule 3.7 annexed hereto, Seller has not since
January 1, 1996 received any notice or communication from any federal, state or
local governmental or regulatory authority or otherwise of any such violation or
noncompliance.
3.8 Delete
3.9 Disclaimer of All Other Warranties. EXCEPT AS SET FORTH IN SECTIONS 3.1
----------------------------------
THROUGH 3.7 HEREOF, THE ASSETS ACQUIRED BY PURCHASER HEREUNDER ARE BEING SOLD
"AS IS" AND "WHERE IS" WITH ALL FAULTS THAT MAY EXIST THEREIN. SELLER DISCLAIMS
ANY WARRANTY OF ANY OTHER KIND, INCLUDING ANY WARRANTY THAT THE ASSETS ARE FIT
FOR A PARTICULAR PURPOSE.
3.10 Security Clearance. Seller received a Facility Security Clearance for
------------------
165 Cedar Hill Street, Marlborough, Massachusetts 01752 dated July 24, 1998 from
the Defense Investigating Service. This clearance is due to expire on July 23,
1999.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
-------------------------------------------
Purchaser represents and warrants to Seller as follows:
4.1 Corporate Existence. Purchaser is a corporation duly organized, validly
-------------------
existing and in good standing under the laws of the State of Delaware.
4.2 Corporate Power; Authorization; Enforceable Obligations. Purchaser has
--------------------------------------------------------
the corporate power, authority and legal right to execute, deliver and perform
this Agreement. The execution, delivery and performance of this Agreement by
Purchaser has been duly authorized by all necessary corporate action. This
Agreement has been, and the other agreements, documents and instruments required
to be delivered by Purchaser in accordance with the provisions hereof
("Purchaser's Documents") will be, duly executed and delivered by Purchaser, and
this Agreement constitutes, and
12
<PAGE>
Purchaser's Documents when executed and delivered will constitute, the legal,
valid and binding obligations of Purchaser; enforceable against Purchaser in
accordance with their respective terms.
4.3 Purchaser Objective. The Purchaser acknowledges that it is aware and has
--------------------
knowledge that shipments and backlog of business of the Seller has declined in
volume and that Seller shall have no liability arising from the sales or backlog
decline.
4.4. No Reliance. Purchaser represents that it has conducted its own due
------------
diligence and it is relying solely upon such due diligence with which it is
satisfied and it is not relying upon any representations of Seller other than
the representations contained herein.
5. CONDITIONS PRECEDENT TO THE CLOSING.
-----------------------------------
5.1 Lease Obligations. This Agreement is subject to Purchaser executing with
------------------
Seller's current landlord (the "Landlord"), on or before the Closing Date, a new
lease agreement for the period from the Closing Date to the end of the period of
Seller's present lease and an additional period of five (5) years thereafter,
for the premises located at 165 Cedar. Hill Street, Marlborough, Massachusetts
01752, and that Seller shall have no obligation to the Landlord during any term
of Purchaser's lease or extensions thereof as a result of Purchasers actions or
omissions post closing.
5.2 Employment Contract of George Riley. This Purchase Agreement is subject to
------------------------------------
the Purchaser executing with George Riley, on or before the Closing Date, an
employment contract on terms mutually agreeable to the Purchaser and to George
Riley. Further, it is a condition of this Agreement that the Purchaser assumes
all liability with respect to all employment benefits and obligations due to
George Riley and annexed hereto on Schedule 5.2.
13
<PAGE>
5.3 Conditions to Obligations of Seller. The obligations of Seller
------------------------------------
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction, on or before the Closing Date, of the following conditions:
(a) Representations and Warranties. The representations and
-------------------------------
warranties of Purchaser set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date.
(b) Performance by the Purchaser. On or before Closing Date,
----------------------------
Purchaser shall have performed and complied with all agreements and
conditions required by this Agreement.
(c) Form and Content of Documents. The form and content of all
------------------------------
documents, certificates and other instruments to be delivered by Purchaser
shall be reasonably satisfactory to Seller.
(d) Litigation Affecting Closing. No court order shall have
-----------------------------
been issued or entered which would be violated by the consummation of the
transactions contemplated by this Agreement. No person or entity shall have
commenced or threatened to commence any litigation seeking to restrain or
prohibit, or to obtain substantial damages in connection with this
Agreement or the transactions contemplated by this Agreement.
(e) Purchase Price. Seller shall have received the Closing
---------------
Payment constituting the purchase price for the Assets.
5.4 Conditions to Obligations of Purchaser. The obligations of
---------------------------------------
Purchaser to consummate the transactions contemplated by this Agreement are
subject to the satisfaction on or before the Closing Date of the following
conditions.
14
<PAGE>
(a) Representations and Warranties. The representations and
-------------------------------
warranties of Seller set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date.
(b) Performance by Seller. Seller shall have performed and
----------------------
complied with all agreements and conditions required by this Agreement.
(c) No Threatened or Pending Litigation. On or before the Closing Date,
------------------------------------
no suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened or pending before any court or governmental or
regulatory official, body or authority in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the consummation of the transactions contemplated hereby, and no
investigation that might result in any such suit, action or proceeding shall be
pending or threatened.
(d) Delete
(e) Form and Content Documents. The form and content of all
---------------------------
documents, certificates and other instruments to be delivered by Seller shall
be reasonably satisfactory to Purchaser.
(b) The transactions contemplated by this Agreement shall have
been approved by all necessary corporate and stockholder action by Seller.
6. NON COMPETITION. Seller on behalf of itself and its affiliates
----------------
agrees that neither Seller nor its affiliates will for a period of five (5)
years from the Closing Date either directly or indirectly engage in the hybrid
circuit business,
15
<PAGE>
the thin film circuit business or the flip chip assembly business, each of which
are businesses in which Seller is presently engaged.
7. TAXES. Seller will, on a timely basis, file all tax returns for and
-----
pay any and all taxes which shall become due or shall have accrued (i ) on
account of the operation of the business of Seller or the ownership of the
Assets during the period on or before the Closing Date or (ii) on account of the
sale of the Assets (including a pro-rata portion of all personal property and
excise taxes payable with respect to the Assets of Seller).
8. UNITED STATES GOVERNMENT PROPERTY. Purchaser acknowledges that certain
---------------------------------
equipment upon Seller's premises is the property of the United States
Government. Such equipment is listed on Schedule 8 annexed hereto. At Closing
Seller shall transfer all such property to the possession of Purchaser. However,
Seller makes no representation with regard to the final disposition of said
property including but not limited to the length of time it will remain in the
possession of Purchaser.
9. INDEMNIFICATION.
---------------
9.1 Seller hereby indemnifies and holds harmless Purchaser and its
affiliates and their respective officers, directors, employees and
agents against all claims, damages, losses, liabilities, costs and
expenses (including, without limitation, settlement costs and any
legal, accounting or other expenses for investigating or defending any
actions or threatened actions) reasonably incurred by such persons in
connection with each and all of the following:
(a) Any breach by Seller of any representation or warranty in this
Agreement;
16
<PAGE>
(b) Any breach of any covenant, agreement or obligation of Seller
contained in this Agreement or any other agreement, instrument or
document contemplated by this Agreement;
(c) Any liability or obligation relating to a Seller Liability or
otherwise relating to an Excluded Asset;
(d) Any violation by Seller of, or any failure by Seller to comply
with, any law, ruling, order, decree, regulation or zoning,
environmental or permit requirement applicable to Seller, the
Assets or its business, whether or not any such violation or
failure to comply has been disclosed to Purchaser.
(e) The failure of Purchaser to obtain the protections afforded by
compliance with the notification and other requirements of the
bulk sales laws in force in the jurisdictions in which such laws
may be applicable to either Seller or the transaction
contemplated by this Agreement;
(f) Any warranty claim or product liability claim relating to (I)
products manufactured or sold by Seller prior to the Closing Date
to the extent resulting in costs, expenses or liabilities to
Purchases in the aggregate in excess of $25,000.
(g) Any tax liabilities or obligations of Seller;
(h) Any mortgage, lien, pledge, security interest, charge, claim,
restriction or encumbrance of any nature whatsoever effecting or
encumbering the Assets; and
17
<PAGE>
(i) Any failure of Seller to comply with any applicable federal
or state securities laws or applicable laws relating to
shareholder appraisal rights.
9.2 By Purchaser. Purchaser hereby indemnifies and holds harmless
------------
Seller and its affiliates and their respective officers, directors, employees
and agents from any and all claims, damages, losses, liabilities, costs and
expenses (including, without limitation, settlement costs and any legal,
accounting or other expenses for investigating or defending any actions or
threatened actions) reasonably incurred by such persons, in connection with each
and all of the follows:
(a) Any breach by Purchaser of any representation or warranty in this
Agreement;
(b) Any breach of any covenant, agreement or obligation of Purchaser
contained in this Agreement or in any other agreement, instrument
or document contemplated by this Agreement;
(c) Any Assumed Liability; and
(d) Any liability relating to the operation of the business purchased
by Purchaser pursuant to this Agreement first arising after the
Closing Date (other than a liability resulting from a breach of a
representation by Seller or with respect to which Purchaser is
indemnified pursuant to Section 9.1 of this Agreement.
(e) Any liabilities arising out of the operation of the business by
Purchaser first occurring on or after the Closing Date relating
to any claims of vendors of Seller and any claims of Employees of
Seller who are hired by Purchaser.
18
<PAGE>
9.3 Claims for Indemnification. Whenever any claim shall arise for
--------------------------
indemnification hereunder the party seeking indemnification (the "Indemnified
Party"), shall promptly notify the party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third-party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to Indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
unless suit shall have been instituted against it and the Indemnifying Party
shall not have taken control of such suit after notification thereof as provided
in Section 9.4 of this Agreement.
9.4 Defense of Indemnifying Party. In connection with any claim giving rise
-----------------------------
to indemnity hereunder resulting from or arising out of any claim or legal
preceding by a person who is not a party to this Agreement the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding if it
acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within thirty (30) days after the date such claims is made,
(a) the Indemnified Party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling such
claim or litigation, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of any
such settlement, the Indemnifying Party
19
<PAGE>
shall have the burden to prove by a preponderance of the evidence that the
Indemnified Party did not defend or settle such third party claim in a
reasonably prudent manner.
9.5 Payment of Indemnification Obligation. All indemnification by Purchaser or
-------------------------------------
Seller hereunder shall be effected by payment of cash or delivery of a cashier's
or certified check in the amount of the indemnification liability.
9.6 Survival of Representations; Claims for Indemnification. All
-------------------------------------------------------
representations and warranties made by the parties herein or in any instrument
or document furnished in connection herewith shall survive the Closing and any
investigation at any time made by or on behalf of the parties hereto. All
claims for indemnification relating to a breach of a representation or warranty
shall be asserted prior to the end of the twelve month period commencing on the
Closing Date.
10. SELLER'S EMPLOYEES. As of the Closing Date, Purchaser shall offer
------------------
employment to the employees of Seller listed on Schedule 10 annexed hereto. As
of the Closing Date, all employees who are employed by Purchaser shall no longer
be considered employees of Seller for any purposes.
11. MISCELLANEOUS.
-------------
11.1 Amendment. This Agreement may only be amended by an instrument
---------
in writing signed on behalf of each of the parties hereto.
11.2 Extension Waiver. At any time prior to the Closing the parties
----------------
hereto may extend the time for the performance of any of the obligations or
other acts of the other parties hereto, waive any inaccuracies in the
representations and warranties contained herein or in any document
delivered pursuant hereto and waive compliance with any of the agreements
or conditions contained herein. Any agreement on the part of a party hereto
to any such extension or
20
<PAGE>
waiver shall be valid only if set forth in a written instrument signed on
behalf of both parties.
11.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed
by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
11.4 Governing Law. This Agreement shall be governed and construed
-------------
in accordance with the laws of the Commonwealth of Massachusetts. Each
party hereby irrevocably submits to the jurisdiction of the Superior Court
of the Commonwealth in respect of any suit, action or proceeding arising
out of this Agreement, and irrevocably accepts for themselves for and in
respect of their property, generally and unconditionally, the jurisdiction
of the aforesaid court.
11.5 Notice. Any notice, request, demand, waiver, consent, approval
------
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed given only if delivered personally or sent by
registered or certified mail, postage prepaid, as follows:
If to Seller, to:
HyComp, Inc.
C/o XIT Corporation
4290 East Brickell St.
Ontario, California 91761-1511
Attention: Carmine T. Oliva
21
<PAGE>
With a required copy to:
Gaffin & Waldstein
P.O. Box 886
1101 Worcester Rd.
Framingham, Massachusetts 01701
Attention: Thomas G. Waldstein, Esq.
If to Purchaser to:
HyComp Acquisition Corp.
c/o SatCon Technology Corporation
161 First Street
Cambridge, Massachusetts 02142
[Remainder of Page Intentionally Left Blank]
22
<PAGE>
Attention: David B. Eisenhaure
With a required copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Jeffrey N. Carp, Esq.
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein.
11.6 Assignment and Binding Effect. This Agreement may not be assigned prior
------------------------------
to the Closing by any party hereto without the prior written consent of the
other parties. Subject to the foregoing, all of the terms and provision of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successors and assigns of Seller and Purchaser.
11.7 Brokers and Finders Fees. Seller, on the one hand, and Purchaser, on the
-------------------------
other hand, each to the other represent and warrant that any and all broker's or
investment banker's fees due and payable as a result of this Agreement shall be
the sole and exclusive responsibility of the party who has engaged such broker
or investment banker on its behalf.
11.8 Severability. Any provision of this Agreement which is invalid
-------------
or unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement under
seal as of the date set forth above.
23
<PAGE>
HyComp, Inc.
By: /s/ Carmine T. Oliva
--------------------------------
Carmine T. Oliva
Chairman and CEO
HyComp Acquisition Corp.
By: /s/ David B. Eisenhaure
--------------------------------
David B. Eisenhaure
President and CEO
24
<PAGE>
Omitted Schedules
-----------------
Pursuant to Item 601(b)(2) of Regulation S-K promulgated by the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, SatCon Technology
Corporation has, with respect to the Asset Purchase Agreement by and between
HyComp, Inc. and HyComp Acquisition Corp., dated as of March 31, 1999, omitted
to file the related schedules (listed below). These schedules will be
supplementally furnished to the Commission upon request.
Schedules
1.2a Machinery and Equipment
1.2b Prepaid Items
1.2c Inventory
1.2d Purchase Orders
1.3c Accounts Receivable
1.3d Intercompany Receivables
1.4a February Balance Sheet
1.4c Liabilities Under Purchase Orders
1.6b Eligible Customers for Royalty
1.6c.i. Employee Severance
ii. Vacation Pay
iii. J. Madden Bonus
iv. C. O'Connell Reimbursement
v. Seller Expenses from March 31 to Closing
1.7 Allocation of Purchase Price
3.6a.ii. Pledges on Assets
a.iii. Contracts, Commitments, Purchase Orders
25
<PAGE>
a.v. Distributors/Sales Representatives
a.vii. Leases
3.6b Exceptions re: contracts
3.7 Permits
5.2 G. Riley Benefits and Obligations
8 United States Government Property
10 Purchaser Employees Hired
26
<PAGE>
EXHIBIT 10.22
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT (this "Agreement") made and entered into as of
June 22, 1999, by and among Beacon Power Corporation, a Delaware corporation
(the "Company"), Perseus Capital, L.L.C., a Delaware limited liability company
("Perseus"), Duquesne Enterprises, a Pennsylvania corporation ("Duquesne"),
Micro Generation Technology Fund, L.L.C., a Delaware limited liability company
("Micro"), and SatCon Technology Corporation, a Delaware corporation ("SatCon"
and together with Perseus, Duquesne and Micro, the "Purchasers"). Certain
capitalized terms used in this Agreement are defined in Exhibit A attached
hereto.
Recitals
A. Perseus, Duquesne and Micro acquired shares of the Company's Class D
Preferred Stock pursuant to a Securities Purchase Agreement dated as
of October 23, 1998 by and among the Company and the Purchasers (the
"October Agreement").
B. The Company plans to raise additional capital through a bridge
financing to be consummated promptly after the date hereof having
terms substantially as specified in Exhibit B hereto (the "Bridge
Financing").
C. The Company needs funds to operate its business operations prior to
completion of the Bridge Financing and in furtherance thereof
desires to issue and sell to each of the Purchasers one or more
promissory notes substantially in the form attached hereto as
Exhibit C with the respective principal amounts specified herein
(the "Notes"), and the Purchasers are willing to acquire the Notes,
all on the terms and subject to the conditions set forth in this
Agreement.
D. To induce the Purchasers to acquire the Notes, the Company has
agreed to issue to each Purchaser, under the circumstances specified
herein, a warrant to acquire shares of the Company's Common Stock,
par value $0.01 per share (the "Common Stock"), substantially in the
form attached hereto as Exhibit D (the "Warrants").
Agreement
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:
<PAGE>
1. Issuance of Securities.
1.1 Purchase and Sale of the Notes. (a) On the terms and subject to
the conditions hereof, at the First Closing, the Company shall issue and sell to
each of the Purchasers, and each of the Purchasers shall purchase from the
Company, a Note with the principal amount specified below for the purchase price
specified below:
- ---------------------------------------------------------------------
Purchaser Principal Amount Purchase Price
- --------- ---------------- --------------
Perseus $250,000 $250,000
- ---------------------------------------------------------------------
SatCon 125,000 125,000
- ---------------------------------------------------------------------
Micro 50,000 50,000
- ---------------------------------------------------------------------
Duquesne 50,000 50,000
- ---------------------------------------------------------------------
(b) In addition, on the terms and subject to the conditions hereof, at the
Second Closing, the Company shall issue and sell to SatCon, and SatCon shall
purchase from the Company, an additional Note with a principal amount of
$125,000 for a purchase price of $125,000.
1.2 Issuance of Warrants. In the event that the Notes are not repaid
or exchanged in full for Bridge Securities on or prior to September 22, 1999
(other than as a result of good faith computation errors), the Company shall
issue and deliver to each Purchaser a Warrant to acquire a number of shares of
Common Stock equal to the number of dollars constituting the original principal
amounts of such Purchaser's Notes (including in the case of SatCon, the Note
issued at the Second Closing). Notwithstanding the foregoing, the Company shall
not be required to issue any Warrants under this Section 1.2 to any Purchaser
that does not use reasonable efforts to consummate its share of the Bridge
Financing substantially on the terms set forth in Exhibit B hereto subject to
completion of definitive documentation and subject to there being no material
adverse change in the business of the Company after the date hereof.
2. Closings.
2.1 Closings. The sales and purchases contemplated by Section 1(a)
of this Agreement shall take place at a closing (the "First Closing") to be held
at the offices of Arnold & Porter, 555 Twelfth Street, N.W. Washington DC on
June 23, 1999, or at such other time, date and place as are mutually agreeable
to the Company and to the Purchasers. The sale and purchase contemplated by
Section 1(b) of this Agreement shall take place at a closing (the "Second
Closing") to be held at the principal executive offices of the Company at 10
a.m. local time on July 6, 1999, or at such other time, date and place as are
mutually agreeable to the Company and to the Purchasers. The date of the First
Closing is hereinafter referred to as the "First Closing Date."
2.2 Deliveries. At each Closing, the Company will deliver to each
Purchaser the Note to be issued to such Purchaser at such Closing fully executed
by the Company, and each Purchaser will deliver to the Company the purchase
price therefor by wire transfer thereof to the Company Account (or in the case
of Micro, by delivery to the Company of a check made payable to the order of the
Company). The parties shall also deliver all documents required to be delivered
at the First Closing pursuant to Section 2.3 hereof.
- 2 -
<PAGE>
2.3 Conditions to First Closing.
(a) Conditions to Obligations of the Purchaser. The
obligations of the Purchasers to purchase the Notes at the First Closing are
subject to the fulfillment on or prior to the First Closing Date of the
following conditions, any of which may be waived by the Purchasers:
(i) Representations and Warranties Correct: Performance
of Obligations. The representations and warranties made by the Company in
Section 3 hereof shall have been true and correct in all material respects when
made, and shall be true and correct in all material respects on the First
Closing Date with the same force and effect as if they had been made on and as
of such date, and the Company shall have performed all obligations, covenants
and agreements herein required to be performed by it on or prior to the First
Closing.
(ii) Consents and Waivers. The Company shall have
obtained any and all consents (including all governmental or regulatory
consents, approvals or authorizations required in connection with the valid
execution and delivery of this Agreement and the Related Agreements), permits
and waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement or any Related Agreement.
(iii) Perfection of Security Interests. The Company
shall have taken all actions requested by the Purchasers to perfect the security
interests granted under the Notes.
(iv) Compliance Certificate. The Company shall have
delivered to the Purchasers a certificate, executed by its President, dated as
of the First Closing Date, certifying the fulfillment of the conditions
specified in subsections (a)(i) and (ii) of this Section 2.3.
(v) Secretary's Certificate. The Company shall have
delivered to the Purchasers a certificate, executed by its Secretary, dated as
of the First Closing Date, certifying the authenticity of attached copies of
resolutions of its Board of Directors approving the transactions contemplated
hereby and by the Related Agreements.
(vi) Other Purchasers. The other Purchasers shall have
simultaneously consummated their purchases of Notes at the First Closing in
accordance with the terms hereof.
(vii) Other Documents. The Purchasers shall have
received such other certificates and documents as they shall have reasonably
requested.
(a) Conditions to Obligations of the Company. The Company's
obligations to issue and sell the Notes at the First Closing are subject to the
fulfillment on or prior to the First Closing Date of the following condition,
which may be waived by the Company: the representations and warranties made by
the Purchasers in Section 5 hereof shall have been true and
- 3 -
<PAGE>
correct when made, and shall be true and correct on such First Closing Date with
the same force and effect as if they had been made on and as of such date.
2.4 Conditions to Second Closing. The obligations of the Company and
SataCon to consummate the issuance, sale and purchase of the Note to be issued,
sold and purchased at the Second Closing shall be subject to satisfaction of the
following condition: the First Closing shall have occurred and the Notes to be
issued, sold and purchased at the First Closing shall have been issued, sold and
purchased. The obligations of the Company to consummate the issuance and sale of
the Note to be issued and sold at the Second Closing shall also be subject to
satisfaction of the following additional condition: the representations and
warranties made by SatCon in Section 5 hereof shall have been true and correct
when made, and shall be true and correct on such Second Closing Date with the
same force and effect as if they had been made on and as of such date.
2.5 Registration Rights. Any shares of Common Stock issued upon the
exercise or conversion of any Warrants shall constitute "Registrable Securities"
under the Registration Rights Statement attached as Exhibit F to the October
Agreement, and such definition is hereby amended in such respect.
3. Representations and Warranties Relating to the Company. Except as
otherwise set forth in the Disclosure Schedule attached hereto as Exhibit I to
the October Agreement, as supplemented by the Supplemental Disclosure Schedule
attached hereto as Exhibit E (collectively, the "Company Disclosure Schedule"),
the Company represents and warrants to the Purchasers as set forth below.
3.1 Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has full corporate power and authority to carry
on its business as now conducted and as it is proposed to be conducted, and is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the nature of its business or properties makes such
qualification or licensing necessary, except where the failure to so qualify or
be licensed would not have a Material Adverse Effect.
3.2 Power. Authorization and Validity. The Company has the corporate
power, legal capacity and corporate authority to enter into and perform its
obligations under this Agreement and each of the Related Agreements to which it
is a party. The execution, delivery and performance by the Company of this
Agreement and each of the Related Agreements to which it is a party have been
duly and validly approved and authorized by all necessary corporate action on
its part. No authorization, consent, or approval, governmental or otherwise, is
necessary to enable the Company to enter into the Agreement or any Related
Agreement to which it is a party and to perform its obligations hereunder or
thereunder. This Agreement is, and each of the Related Agreements to which it is
a party when executed and delivered by the Company will be, the valid and
binding obligations of the Company, enforceable in accordance with their
respective terms. Upon their issuance pursuant to the Warrants, all shares of
Common Stock issued pursuant to the Warrants shall be duly authorized, validly
issued, fully-paid and nonassessable.
- 4 -
<PAGE>
3.3 No Violation of Existing Agreements. Neither the execution and
delivery of this Agreement or any Related Agreement to which it is a party nor
the consummation of the transactions or performance of the Company's obligations
contemplated hereby or thereby will conflict with, result in a material breach
or violation of, or cause a default under, any provision of the Company's
Certificate of Incorporation or Bylaws, each as is currently in effect, any
instrument, contract or agreement that is material to the business of the
Company or any judgment, writ, decree, order, law, statute, ordinance, rule or
regulation applicable to the Company.
3.4 Financial Statements.
(a) The Company's unaudited consolidated balance sheets
as of December 31, 1998 and April 30, 1999 and statements of operations and cash
flows for the year ended December 31, 1998 and the four months ended April 30,
1999, including the notes thereto (collectively the "Company Financial
Statements"), all of which are attached to the Company Disclosure Schedule, have
been prepared in all material respects in accordance with GAAP (except that the
April 30, 1999 statements may not contain all footnotes required by GAAP). The
Company Financial Statements have been prepared in accordance with the books and
records of the Company and present fairly in all material respects the financial
position, results of operations, cash flows and equity transactions of the
Company as of and for the periods ending on their dates. Except and to the
extent reflected or reserved against in the Company Financial Statements, the
Company does not have, as of the dates of the Company Financial Statements, any
liabilities or obligations (absolute or contingent) of a nature required to be
or customarily reflected in a balance sheet (or the notes thereto) prepared in
accordance with GAAP. The reserves, if any, reflected on the Company Financial
Statements are adequate in light of the contingencies with respect to which they
are made. There has been no material change in the Company's accounting policies
except as described in the notes to the Company Financial Statements.
(b) The Company has no debts, liabilities, or
obligations in a material amount, either individually or in the aggregate, of
any nature, whether accrued, absolute, contingent, or otherwise, and whether due
or to become due, that is not reflected or reserved against in the Company
Financial Statements. All material debts, liabilities, and obligations incurred
after the date of the Company Financial Statements were incurred in the ordinary
course of business, and are usual and normal in amount, both individually and in
the aggregate. Since December 31, 1998, the Company has not experienced a
Material Adverse Change.
3.5 No Brokers. Neither the Company nor, to the Company's knowledge,
any Company shareholder is obligated for the payment of fees or expenses of any
broker or finder in connection with the origin, negotiation or execution of this
Agreement or any Related Agreement or in connection with any transaction
contemplated hereby or thereby.
3.6 Disclosure. The statements by the Company contained in this
Agreement, the exhibits hereto, and the certificates and documents required to
be delivered by the Company to the Purchasers under this Agreement, taken as a
whole, do not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements contained herein and
therein not misleading in light of the circumstances under which such statements
were
- 5 -
<PAGE>
made.
3.7 Securities Act. Subject to the accuracy of the Purchaser's
representations in Section 5 hereof, the offer, sale and issuance of the Notes
and the Warrants in conformity with the terms of this Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended, and the qualification or registration
requirements of any applicable state securities laws as such laws exist on the
date hereof.
3.8 Other Representations and Warranties. The representations and
warranties of the Company set forth in Section 3 of the October Agreement are
true and correct as of the date hereof in all material respects.
4. [INTENTIONALLY OMITTED.]
5. Representations and Warranties of the Purchasers and Restrictions on
Transfer Imposed by the Securities Act of 1933 and Applicable State Securities
Laws.
5.1 Representations and Warranties by the Purchaser. Each Purchaser
represents and warrants to the Company severally as to itself alone and not
jointly as follows:
(a) The Note to be issued to such Purchaser at each Closing
and any Warrants to be issued hereunder will be acquired by such Purchaser for
its own account, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act of 1933, as amended (the "Securities Act"), or applicable
state securities laws.
(b) Such Purchaser understands that (i) the Note to be issued
to it at such Closing and any Warrant issued hereunder have not been, and upon
their issuance will not be, registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) thereof and
have not been, and upon their issuance will not be, qualified under any state
securities laws on the grounds that the offering and sale of securities
contemplated by this Agreement are exempt from registration thereunder, and (ii)
the Company's reliance on such exemptions is predicated on such Purchaser's
representations set forth herein. Such Purchaser understands that the resale of
its Note and any Warrants may be restricted indefinitely, unless a subsequent
disposition thereof is registered under the Securities Act and registered under
any state securities law or is exempt from such registration.
(c) Such Purchaser is an "Accredited Investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act. Such
Purchaser is able to bear the economic risk of the purchase of its Note and any
Warrant pursuant to the terms of this Agreement, including a complete loss of
the Purchaser's investment therein.
(d) Such Purchaser has the full right, power and authority to
enter into and perform such Purchaser's obligations under this Agreement and
each Related Agreement to
- 6 -
<PAGE>
which it is or becomes a party, and this Agreement and each Related Agreement to
which it is or becomes a party constitute valid and binding obligations of such
Purchaser enforceable in accordance with their terms.
(e) No consent, approval or authorization of or designation,
declaration or filing with any Governmental Body on the part of such Purchaser
is required in connection with the valid execution and delivery of this
Agreement or any Related Agreement to which it or becomes a party.
5.2 Legend. The Notes and any Warrants may be endorsed with the
legends appearing on the first page thereof. The Company may instruct its
transfer agent not to register the transfer of the Note, unless the conditions
specified in the foregoing legends are satisfied.
5.3 Removal of Legend and Transfer Restrictions.
Any legend endorsed on any Note or Warrant pursuant to Section
5.2 relating to compliance with federal or state securities laws and the stop
transfer instructions with respect to the Notes and the Warrants relating
thereto shall be removed and the Company shall issue a new promissory note or
warrant, as the case may be, without such legend to the holder thereof (1) if
such Note or Warrant is registered under the Securities Act and a prospectus
meeting the requirements of Section 10 of the Securities Act is available, (2)
if such legend may be properly removed under the terms of Rule 144 promulgated
under the Securities Act, or (3) if such holder provides the Company with an
opinion of counsel for such holder, reasonably satisfactory to legal counsel for
the Company to the effect that a sale, transfer or assignment of the Note or
Warrant may be made without registration.
6. Additional Covenants.
6.1 Use of Proceeds. The Company hereby covenants and agrees that
all of the net proceeds received by it from the issuance and sale of the Notes
shall be used for the purpose of developing and conducting its business, which
is the development, manufacturing and marketing of flywheel energy storage
systems for use in energy storage applications, and no part of such net proceeds
shall be used to (i) repay any Person any funds expended by it or advanced by it
to the Company prior to the First Closing, unless agreed to in writing by the
Purchasers or (ii) pay any broker's fees or commissions or similar payments of
any kind.
6.2 Bridge Financing. Upon consummation of the Bridge Financing and
exchange of the Notes for the Bridge Securities, each Purchaser shall have all
of the rights that such Purchaser would have obtained if it had acquired such
Bridge Securities as part of the Bridge Financing, including without limitation
any security interests, guaranties, co-sale, preemptive, participation,
registration, voting, management or other rights, all representations,
warranties, and indemnities made to or in favor of an investor in the Bridge
Financing shall also be made to or in favor of such Purchaser, and such
Purchaser shall be entitled to rely on an opinion of counsel delivered in
connection with the Bridge Financing.
- 7 -
<PAGE>
7. Miscellaneous.
7.1 Waivers and Amendments. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
7.2 Arbitration. Any controversy or claim arising out of or relating
to this Agreement or any of the Related Agreements, or the breach hereof or
thereof, shall be settled by arbitration administered by the American
Arbitration Association under its Commercial Arbitration Rules, and judgment on
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Such arbitration shall be conducted by a panel of three
arbitrators, each party having the right to select one arbitrator with the third
arbitrator to be selected in accordance with the rules of the American
Arbitration Association.
7.3 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of New York without regards to the principles of
conflicts of laws thereof.
7.4 Survival. The representations, warranties, covenants and
agreements made herein shall survive the execution of this Agreement and the
Closing of the transactions contemplated hereby.
7.5 Successors and Assigns. Except as otherwise expressly provided
herein and subject to the Related Agreements and applicable law, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
7.6 Entire Agreement. This Agreement, the Related Agreements and
other exhibits to this Agreement and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
7.7 Notices, etc. All notices, requests and other communications
hereunder shall be in writing and shall be deemed to have been duly given at the
time of receipt if delivered by hand or by facsimile transmission or three days
after being mailed, registered or certified mail, return receipt requested, with
postage prepaid, to the address or facsimile number (as the case may be) listed
for each such party below or, if any party shall have designated a different
address or facsimile number by notice to the other party given as provided
above, then to the last address or facsimile number so designated.
- 8 -
<PAGE>
If to the Company:
Beacon Power Corporation
6D Gill Street
Woburn, MA 01801
Fax No.: (781) 938-9401
Attn: Chief Executive Officer
With a required copy to:
Albert L. Sokol
Edwards & Angell, LLP
101 Federal Street
Boston, MA 02110-1800
Fax No.: (617) 439-4170
If to the Perseus:
Perseus Capital, L.L.C.
The Army and Navy Club Building
1627 I Street, N.W.
Suite 610
Washington, D.C. 20006
Attn: Kenneth M. Socha
Fax No. (202) 463-6215
With a required copy to:
Arnold & Porter
555 l2th Street, N.W.
Washington, D.C. 20004
Attn: Robert B. Ott
Fax No.: (202) 942-5999
If to SatCon:
David Eisenhaure
President
161 First Street
Cambridge, MA 02142
Fax No.: (617) 661-3373
- 9 -
<PAGE>
With a required copy to:
Jeffrey N. Carp, Esq.
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Fax No.: (617) 526-5000
If to Duquesne:
Rachel Lorey
Vice President
One Northshore Center
Suite 100
12 Federal Street
Pittsburgh, PA 15212
Fax No: 412-231-2140
With a required copy to:
David J. Lehman, Esq.
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax No: 412-255-6501
If to Micro:
c/o Robert W. Shaw, Jr.
Arete Corporation
P.O. Box 1299
Center Harbor, New Hampshire 03226
Fax No.: (603) 253-9799
7.8 Separability. In case any provision of this Agreement shall be
declared invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
7.9 Expenses. The Company bear its expenses and legal fees incurred
with respect to this Agreement, each of the Related Agreements and the
transactions contemplated hereby and thereby. All reasonable costs and expenses
of the Purchasers relating to this Agreement, each of the Related Agreements and
the transactions contemplated hereby and thereby, including reasonable fees and
expenses of legal counsel, shall be promptly paid or reimbursed by the Company.
- 10 -
<PAGE>
7.10 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
7.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.12 Publicity. None of the parties to this Agreement, nor any of
their affiliates, shall issue any press release or otherwise make any public
announcement or disclosure with respect to this Agreement, any of the Related
Agreements or any of the transactions contemplated hereby or thereby without the
prior written consent of each of the Company, and the Purchasers, unless such
disclosure is required by applicable law.
- 11 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
BEACON POWER CORPORATION
By: /s/ William E. Stanton
----------------------------------
Name: William E. Stanton
--------------------------------
Title: President & CEO
-------------------------------
PERSEUS CAPITAL, L.L.C.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
SATCON TECHNOLOGY CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BEACON POWER CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
PERSEUS CAPITAL, L.L.C.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
SATCON TECHNOLOGY CORPORATION
By: /s/ David B. Eisenhaure
----------------------------------
Name: David B. Eisenhaure
--------------------------------
Title: President, SatCon
-------------------------------
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
BEACON POWER CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
PERSEUS CAPITAL, L.L.C.
By: /s/ Philip J. Deutch
----------------------------------
Name: Philip J. Deutch
--------------------------------
Title: Managing Director
-------------------------------
SATCON TECHNOLOGY CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
11
<PAGE>
DUQUESNE ENTERPRISES
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
MICRO-GENERATION
TECHNOLOGY FUND, L.L.C.
BY ARETE CORPORATION,
ITS MANAGER
By: /s/ Robert W. Shaw, Jr.
----------------------------------
Robert W. Shaw, Jr.
President
13
<PAGE>
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement to which this Exhibit A is attached, the
following terms have the following meanings:
"Bridge Securities" means the securities issued to investors as part of
the Bridge Financing, including without limitation any warranties, options or
rights to acquired additional securities of the Company or any of its
affiliates.
"Business Day" means any day other than a Saturday, Sunday or other day on
which the national or state banks located in the State of New York, the State of
Massachusetts, or the District of Columbia are authorized to be closed.
"Company Account" means an account of the Company designated in a written
notice delivered to the Purchasers at least two Business Days prior to the date
of any required payment by the Purchasers to the Company under the Agreement.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"Governmental Body" means any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or (c)
governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or entity and any court or other tribunal).
"Material Adverse Change" means a change which would have a Material
Adverse Effect.
"Material Adverse Effect." An event, violation or other matter will be
deemed to have a "Material Adverse Effect" on the Company if such event,
violation or other matter would be material in impact or amount to the Company's
business, intellectual property rights or condition, or, taken as a whole, its
assets, liabilities, operations, or financial performance.
"Person" means any individual, entity or Governmental Body.
"Related Agreements" means (a) the Notes; (b) any Warrants; and (c) any
other agreement or document entered into by any of the parties in connection
with the Agreement or any of the transactions contemplated thereby.
<PAGE>
EXHIBIT C
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
[Principal Amount] June 22, 1999
WOBURN, MA
FOR VALUE RECEIVED, Beacon Power Corporation, a Delaware corporation (the
"Company"), promises to pay to the order of ____________,or its registered
assigns (the "Holder"), the principal sum of $__________ or such lesser amount
as shall then equal the outstanding principal amount hereof, together with
interest from the date of issuance of this Note on the unpaid principal balance
hereof at a rate equal to twelve and one-half percent (12 1/2%) per annum,
computed on the basis of the actual number of days elapsed and a year of 365
days; provided that if this Note is not repaid in full on or prior to the
Maturity Date, such interest rate shall increase effective as of the close of
business on the Maturity Date to fifteen percent (15%) per annum. All unpaid
principal, together with any accrued but unpaid interest and other amounts
payable hereunder, shall be due and payable on the earlier of (i) September 22,
1999 (the "Maturity Date") or (ii) upon or after the occurrence of an Event of
Default (as defined below), when such amounts are declared due and payable by
the Holder or made automatically due and payable. Interest on this Note shall be
payable on the Maturity Date.
This Note is issued pursuant to the Note Purchase Agreement (the "Purchase
Agreement") dated as of June 22, 1999 by and among the Company, Perseus Capital,
L.L.C., Duquesne Enterprises, Micro Generation Technology Fund, L.L.C. and
SatCon Technology Corporation.
<PAGE>
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms have
the following meanings:
(a) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York are authorized to be closed.
(b) "Bridge Financing" has the meaning specified in the Purchase
Agreement.
(c) "Bridge Securities" has the meaning specified in the Purchase
Agreement.
(d) "Obligations" means the principal, interest and other amounts
payable under this Note.
(e) "Transaction Documents" shall mean this Note, the Purchase
Agreement, and any other promissory note issued pursuant to the Purchase
Agreement.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on this Note or (ii) any interest or other payment required
under the terms of this Note or any other Transaction Document within five
Business Days of its due date; or
(b) Breaches of Other Covenants. The Company shall materially fail
to observe or to perform any other covenant, obligation, condition or agreement
contained in this Note or the other Transaction Documents, other than those
specified in Section 2(a) hereof, and such failure shall continue for 30 days
after written notice thereof to the Company; or
(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it or (vii) take any action for the purpose of effecting any
of the foregoing; or
(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking
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liquidation, reorganization or other relief with respect to the Company or the
debts thereof under any bankruptcy, insolvency or other similar law now or
hereafter in effect shall be commenced and an order for relief entered, or such
case or proceeding shall not be dismissed or discharged within 45 days of
commencement; or
(e) Cross-Default. The Company or any of its subsidiaries shall
default under any bond, debenture, note or other evidence of indebtedness for
money borrowed (excluding any capital lease), under any guarantee or under any
mortgage, or indenture pursuant to which there shall be issued or by which there
shall be secured or evidenced any indebtedness for money borrowed by the Company
or any of its subsidiaries, whether such indebtedness now exists or shall
hereafter be created, which default shall have resulted in indebtedness of at
least $10,000 being due and payable prior to the date on which it would
otherwise become due and payable and shall not have been issued by the Company
or waived by the lender; or
(f) Undischarged Judgment. One or more judgments for the payment of
money in an amount in excess of $10,000 in the aggregate shall be rendered
against the Company or any of its subsidiaries (or any combination thereof) and
shall remain undischarged for a period of ten consecutive days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment.
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 2(c)
and 2(d) hereof) and at any time thereafter during the continuance of such Event
of Default, the Holder may declare all outstanding Obligations payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 2(c) and 2(d) hereof, immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any
other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
4. Collateral. To secure the Company's payment and performance of the
Obligations and to secure the Company's prompt, full and faithful performance
and observance of all of the provisions under this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest
in all of the Company's right, title and interest in and to the following,
whether now owned or hereafter acquired or existing and wherever located:
(a) All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(b) All accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind, and all
rights now or hereafter existing in
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and to all mortgages, security agreements, leases or other contracts securing or
otherwise relating to any of the same;
(c) All intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable
inventions and (i) the inventions and improvements described and claimed
therein; (ii) any continuation, division, renewal, extension, substitute or
reissue thereof or any legal equivalent in a foreign country for the full term
thereof or the terms for which the same may be granted; (iii) all rights to
income, royalties, profits, awards, damages and other rights relating to said
patents, applications and inventions, including the right to sue for past,
present and future infringement and (iv) any other rights and benefits relating
to said patents, applications and inventions including any rights as a licensor
or licensee of said patents, applications and inventions (the "Patents");
(ii) all trademarks, trademark registrations, trademark
applications, service marks, service mark registrations and service mark
applications, trade names, fictitious business name, tradestyles, and the
goodwill underlying those trademarks and service marks and (i) any similar marks
or amendments, modifications and renewals thereof and the goodwill represented
by those and any legal equivalent in a foreign country for the full term or
terms for which the same may be granted; (ii) all rights to income, royalties,
profits, damages and other rights relating to said trademarks and service marks
including the right to sue for past, present or future infringement and (iii)
any other rights and benefits relating to said trademarks and service marks
including any rights as a licensor or licensee of said trademark and service
mark (the "Trademarks");
(iii) all copyrights, copyright registrations and
copyright applications, including without limitation those copyrights for
computer programs, computer databases, flow diagrams, maskworks, maskwork
applications, source codes and object codes, computer software, technical
knowledge and processes, trade secrets, know-how, customer lists, franchises,
systems, inventions, designs, blueprints, formal or informal licensing
arrangements, and all property embodying or incorporating such copyrights and
(i) any similar rights or amendments, modifications and renewals thereof and any
legal equivalent in a foreign country for the full term or terms for which the
same may be granted; (ii) all rights to income, past, present and future
infringement and (iii) any other rights and benefits relating to said copyrights
(the "Copyrights");
(d) all substitutions and replacements for, and all rights to
exploit, all of the foregoing;
(e) all books and records pertaining to any of the foregoing; and
(f) all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
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The Company covenants and agrees with Holder that: (x) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (y) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by any means upon any
Collateral will not bar realization upon any other Collateral; and (z) the
security interest hereby created is a continuing security interest and will
cover and secure the payment of all Obligations both present and future of the
Company to Holder pursuant to this Note and the other Transaction Documents. The
Company further covenants and agrees to take all actions requested by the Holder
to establish or perfect the security interest granted under this Note.
5. Prepayment. This Note may be prepaid as a whole or in part at any time
prior to the Maturity Date upon at least ten Business Days prior written notice
to the Holder. Any such prepayment shall be applied first to the payment of
expenses due under this Note, second to interest accrued on this Note and third,
if the amount of prepayment exceeds the amount of all such expenses and accrued
interest, to the payment of principal of this Note. An exchange pursuant to
Section 6 hereof shall not constitute a prepayment for purposes of this Section
5.
6. Exchange.
(a) Exchange For Bridge Securities. Upon consummation of the Bridge
Financing, this Note shall automatically be exchanged for (without any action on
the part of the Company or the Holder) the number of Bridge Securities that an
investor in the Bridge Financing would acquire for an aggregate purchase price
equal to the sum of the then outstanding principal amount of this Note plus all
accrued but unpaid interest hereon.
(b) Mechanics and Effect of Exchange. No fractional shares of
capital stock of the Company shall be issued upon exchange of this Note. Upon
such exchange of all of the principal and accrued interest outstanding under
this Note, in lieu of the Company issuing any fractional shares to the Holder,
the Company shall pay to the Holder the amount of outstanding principal or
interest that is not so exchanged. Upon full exchange of this Note, the Company
shall be forever released from all its obligations and liabilities under this
Note.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified only as to the Holder of this Note upon the written consent of the
Company and the Holder.
9. Transfer of this Note or Securities Issuable on Conversion Hereof. This
Note may not be transferred in violation of any restrictive legend set forth
hereon. Each new Note issued upon transfer of this Note shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with such
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restrictions. Subject to the foregoing, transfers of this Note shall be
registered upon registration books maintained for such purpose by or on behalf
of the Company. Prior to presentation of this Note for registration of transfer,
the Company shall treat the registered holder hereof as the owner and holder of
this Note for the purpose of receiving all payments of principal and interest
hereon and for all other purposes whatsoever, whether or not this Note shall be
overdue and the Company shall not be affected by notice to the contrary.
10. Assignment by the Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by the Company, without the prior written
consent of the Holder.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in the Purchase Agreement or on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.
13. Expenses; Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflict of laws provisions
of the State of New York or of any other state. In the event of any dispute
among or between any of the parties to this Note arising out of the terms of
this Note, the parties hereby consent to the exclusive jurisdiction of the
federal and state courts located in the State of New York for resolution of such
dispute, and agree not to contest such exclusive jurisdiction or seek to
transfer any action relating to such dispute to any other jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
BEACON POWER COPORATION
By:
-----------------------------
Name:
---------------------------
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Title:
--------------------------
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EXHIBIT D
THE SECURITIES EVIDENCED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE SOLD, TRANSFERRED, OR ASSIGNED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
No.:
----
WARRANT
TO PURCHASE COMMON STOCK
OF
BEACON POWER CORPORATION
(void after September 23, 2005)
1. Issuance of Warrant. FOR VALUE RECEIVED, on and after the date of
issuance of this Warrant, and subject to the terms and conditions herein set
forth, the Holder (as defined below) is entitled to purchase from Beacon Power
Corporation, a Delaware corporation (the "Company"), at any time before 5:00
p.m. New York time on September 23, 2005 (the "Termination Date"), at a price
per share equal to the Warrant Price (as defined below and subject to adjustment
as described below), the Warrant Stock (as defined below and subject to
adjustment as described below) upon exercise of this warrant (this "Warrant")
pursuant to Section 6 hereof. This Note is issued pursuant to the Note and
Warrant Purchase Agreement (as defined below).
2. Definitions. As used in this Warrant, the following terms have the
definitions ascribed to them below:
<PAGE>
(a) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York or the District of Columbia are
authorized to be closed.
(b) "Change-In-Control Event" means the occurrence after the
Commencement Date of any of the following: (i) the acquisition of voting
securities of the Company by any person or group of persons that results in such
person or group, together with its affiliates, becoming, directly or indirectly,
the beneficial owner of in excess of 50% of the outstanding voting securities of
the Company; (ii) a merger or consolidation of the Company with any other
corporation or legal entity regardless of which entity is the survivor, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or being converted into voting securities of
the surviving entity) in excess of 50% of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation; or (iii) the sale or disposition of all or substantially all of
the Company's assets other than in a transaction in which holders of the voting
securities of the Company immediately prior to such transaction receive voting
securities of the acquiror of such assets or its affiliate that represent in
excess of 50% of the voting securities of such entity after consummation of such
transaction.
(c) "Commencement Date" means September 23, 1999.
(d) "Common Stock" means the common stock, par value $0.01 per
share, of the Company.
(e) "Holder" means _______________,or its assigns.
(f) "Note Purchase Agreement" means the Note Purchase Agreement
dated as of June 22, 1999 by and among the Company, Perseus Capital, L.L.C.,
Duquesne Enterprises, Micro Generation Technology Fund, L.L.C., and SatCon
Technology Corporation.
(g) "Warrant Price" means $1.00 per share, subject to adjustment as
described in Section 3 below.
(h) "Warrant Stock" means the shares of Common Stock (or other
securities) purchasable upon exercise of this Warrant or issuable upon
conversion of this Warrant. The total number of shares to be issued upon the
exercise of this Warrant shall be _______, subject to adjustment as described in
Section 3 below.
3. Adjustments and Notices. The Warrant Price and/or the number of shares
of Warrant Stock shall be subject to adjustment from time to time in accordance
with this Section 3. The Warrant Price and/or the number of Warrant Shares shall
be adjusted to reflect all of the following events that occur on or after June
22, 1999.
(a) Subdivision, Stock Dividends or Combinations. In case the
Company shall at any time subdivide the outstanding shares of Common Stock or
shall issue a stock dividend with
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respect to the Common Stock, the Warrant Price in effect immediately prior to
such subdivision or the issuance of such dividend shall be proportionately
decreased, and in case the Company shall at any time combine the outstanding
shares of the Common Stock, the Warrant Price in effect immediately prior to
such combination shall be proportionately increased, in each case effective at
the close of business on the date of such subdivision, dividend or combination,
as the case may be.
(b) Reclassification, Exchange, Substitution, In-Kind Distribution.
Upon any reclassifications, exchange, substitution or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant or upon the payment of a dividend in securities or
property other than shares of Common Stock, the Holder shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that Holder would have received if this Warrant had been
exercised or converted immediately before the record date for such
reclassification, exchange, substitution, or other event or immediately prior to
the record date for such dividend. The Company or its successor shall promptly
issue to Holder a new warrant for such new securities or other property. The new
warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise or conversion of the new warrant.
The provisions of this Section 3(b) shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events and successive
dividends.
(c) Reorganization, Merger etc. In case of any (i) merger or
consolidation of the Company into or with another corporation where the Company
is not the surviving corporation, (ii) sale, transfer or lease (but not
including a transfer or lease by pledge or mortgage to a bona fide lender) of
all or substantially all of the assets of the Company or (iii) sale by the
Company's shareholders of 50% or more of the Company's outstanding securities in
one or more related transactions, the Company, or such successor or purchasing
corporation, as the case may be, shall, as a condition to closing any such
reorganization, merger or sale, duly execute and deliver to the Holder hereof a
new warrant so that the Holder shall have the right to receive, at a total
purchase price not to exceed that payable upon the exercise or conversion of the
unexercised or unconverted portion of this Warrant, and in lieu of the shares of
the Common Stock theretofore issuable upon exercise or conversion of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such reorganization, merger or sale by the Holder of
the number of shares of Common Stock then purchasable under this Warrant. Such
new warrant shall provide for adjustments that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 3. The
provisions of this subparagraph (c) shall similarly apply to successive
reorganizations, mergers and sales.
(d) Dilutive Issuances. (i) If the Company, at any time or from time
to time after June 22, 1999, shall issue any Additional Stock (as defined below)
without consideration or for a consideration per Common Stock Equivalent Share
less than the Warrant Price in effect immediately prior to the issuance of such
Additional Stock, then the Warrant Price in effect immediately prior to each
such issuance shall forthwith be adjusted to a price determined by
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multiplying such Warrant Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock that the aggregate
consideration received by the Company for such issuance would purchase at such
Warrant Price; and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of such Additional Stock. For purposes of this clause (i), the number of
shares of Common Stock outstanding at a given time shall be deemed to be the
number of shares of Common Stock that are then issued and outstanding plus the
number of shares of Common Stock then issuable upon exercise of all then
outstanding warrants, options or similar rights to purchase Common Stock or
securities convertible into Common Stock plus the number of shares of Common
Stock then issuable upon conversion of such convertible securities and all other
convertible securities of the Company then outstanding.
(ii) In the case of the issuance of Common Stock for cash, the
consideration received therefor shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by the company for any underwriting or
otherwise in connection with the issuance and sale thereof.
(iii) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash received therefor shall be deemed to be the fair value thereof as
reasonably determined by the Board of Directors of the Company in its good faith
judgment irrespective of any accounting treatment.
(iv) In the case of the issuance, whether before, on or after
the Commencement Date, of options to purchase or rights to subscribe for Common
Stock, securities by their terms convertible into or exchangeable for Common
Stock or options to purchase or rights to subscribe for such convertible or
exchangeable securities (which are not excluded from the definition of
Additional Stock), the following provisions shall apply:
(A) The aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in clauses (ii) or (iii)), if any, received
by the Company upon the issuance of such options or rights plus the minimum
purchase price provided in such options or rights (without taking into account
potential anti-dilution adjustments) for the Common Stock covered thereby.
(B) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the
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<PAGE>
Company upon the conversion or exchange of such securities or the exercise of
any related options or rights (the consideration in each case to be determined
in the manner provided in clauses (ii) or (iii)).
(C) In the event of any change in the number of shares
of Common Stock deliverable or any increase in the consideration payable to this
corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Warrant Price obtained with respect to the adjustment that was made upon the
issuance of such options, rights or securities, and any subsequent adjustments
based thereon, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(D) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Warrant Price obtained with respect to the adjustment which was made upon
the issuance of such options, rights or securities or options or rights related
to such securities, and any subsequent adjustments based thereon, shall be
recomputed to reflect the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities. Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
only the number of shares of Common Stock actually issued upon the exercise of
such options or rights, upon the conversion or exchange of such securities or
upon the exercise of the options or rights related to such securities shall
continue to be deemed to be issued.
(E) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to clauses (iv)(A) and
(iv)(B) of this Section 3(d) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either clause (iv)(C)
or (iv)(D) of this Section 3(d).
(v) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to clause (iv) of this Section
3(d)) by the Company after June 22, 1999 other than shares of Common Stock
issued or issuable:
(A) to officers, directors, employees and consultants of
the Company directly or pursuant to a stock option plan or restricted stock plan
approved by the Board of Directors of the Company;
(B) upon conversion of the Class A, B, C or D Preferred
Stock of the Company or the exercise of the Warrants issued under the Securities
Purchase Agreement;
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<PAGE>
(C) to persons or entities with which the Company has
business relationships provided such issuances are for other than primarily
equity financing purposes and provided that at the time of any such issuance,
the aggregate of such issuance and similar issuances in the preceding
twelve-month period do not exceed 2% of the then outstanding Common Stock of the
Company (assuming full conversion and exercise of all convertible and
exercisable securities then outstanding) or such issuance is expressly approved
by a majority of the director representatives of the holders of Class D
Preferred Stock on the Company's Board of Directors.
(vi) "Common Stock Equivalent Share" means with respect to any
security that is ultimately convertible into shares of Common Stock or
ultimately exercisable for shares of Common Stock, the total number of shares of
Common Stock that may be acquired upon full exercise of all such rights.
(e) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Warrant Price, the Corporation, at its own expense, shall
cause its Chief Financial Officer to compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to the Holder. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. No adjustment of the Warrant Price shall be
required to be made unless it would result in an increase or decrease of at
least one cent, but any adjustments not made because of this sentence shall be
carried forward and taken into account in any subsequent adjustment otherwise
required hereunder.
(f) Adjustment to Number of Shares of Warrant Stock. In the event
the Warrant Price is adjusted under any provision of this Section 3, the number
of shares of Warrant Stock shall be simultaneously adjusted by multiplying the
number of shares of Warrant Stock by a fraction, the numerator of which is the
Warrant Price in effect immediately prior to such adjustment and the denominator
of which is the Warrant Price in effect immediately after such adjustment.
(g) No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through a 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 under this Warrant by the Company, but
shall at all times in good faith assist in carrying out all of the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment. If the
Company takes any action affecting the Common Stock other than as described
above that adversely affects the Holder's rights under this Warrant, the Warrant
Price shall be adjusted downward.
(h) Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded down to the nearest whole share. If a fractional share interest
arises upon any exercise or conversion of the
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<PAGE>
Warrant, the Company shall eliminate such fractional share interest by paying
the Holder an amount computed by multiplying the fractional interest by the fair
market value of a full share.
4. No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
5. Reservation of Stock. On and after the Commencement Date, the Company
will reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of Warrant Stock upon the exercise or
conversion of this Warrant. Issuance of this Warrant shall constitute full
authority to the Company's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Warrant Stock issuable upon the exercise or conversion of this Warrant.
6. Exercise of Warrant. This Warrant may be exercised as a whole or part
by the Holder, at any time after the date hereof prior to the termination of
this Warrant, by the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Attachments 1 and 2, respectively, duly completed and executed at the principal
office of the Company, specifying the portion of the Warrant to be exercised and
accompanied by payment in full of the Warrant Price in cash or by check with
respect to the shares of Warrant Stock being purchased. Alternatively, the
Holder may pay the Warrant Price as a whole or in part) by surrendering to the
Company all or a portion of any Note (as defined in the Note Purchase
Agreement), in which case the portion of the Note surrendered plus all accrued
but unpaid interest thereon shall be credited towards payment of the Warrant
Price. If less the entire Note is surrendered in payment of the Warrant Price,
the Company shall issue to the Holder a new promissory note identical to the
surrendered Note except that the principal amount thereof shall equal the
unsurrendered portion of the principal amount of the surrendered Note. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the shares of Warrant Stock issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable
after such date, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
full shares of Warrant Stock issuable upon such exercise. If this Warrant shall
be exercised for less than the total number of shares of Warrant Stock then
issuable upon exercise, promptly after surrender of this Warrant upon such
exercise, the Company will execute and deliver a new warrant, dated the date
hereof, evidencing the right of the Holder to the balance of this Warrant Stock
purchasable hereunder upon the same terms and conditions set forth herein.
7. Conversion. In lieu of exercising this Warrant or any portion hereof,
at any time after the occurrence of a Change-In-Control Event or the filing of a
registration statement for an initial underwritten public offering of securities
by the Company, the Holder hereof shall have the right to convert this Warrant
or any portion hereof into Warrant Stock by executing and delivering to the
Company at its principal office the written Notice of Conversion and Investment
-7-
<PAGE>
Representation Statement in the forms attached hereto as Attachments 2 and 3,
specifying the portion of the Warrant to be converted, and accompanied by this
Warrant. The number of shares of Warrant Stock to be issued to Holder upon such
conversion shall be computed using the following formula:
X=(P)(Y)(A-B)/A
where X = the number of shares of Common Stock to be issued to the
Holder for the portion of the Warrant being converted.
P = the portion of the Warrant being converted expressed as
a decimal fraction.
Y = the total number of shares of Common Stock issuable upon
exercise of the Warrant in full.
A = the fair market value of one share of Warrant Stock
which means (i) the fair market value of the Warrant
Stock as of the last Business Day immediately prior to
the date the notice of conversion is received by the
Company, as reported in the principal market for such
securities or, if no such market exists, as determined
in good faith by the Company's Board of Directors, or
(ii) if this Warrant is being converted in conjunction
with a public offering of stock the price to the public
per share pursuant to the offering.
B = the Warrant Price on the date of conversion.
Any portion of this Warrant that is converted shall be immediately canceled.
This Warrant or any portion hereof shall be deemed to have been converted
immediately prior to the close of business on the date of its surrender for
conversion as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such conversion shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable after such date, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of full shares of Warrant Stock issuable upon such conversion. If
the Warrant shall be converted for less than the total number of shares of
Warrant Stock then issuable upon conversion, promptly after surrender of the
Warrant upon such conversion, the Company will execute and deliver a new
warrant, dated the date hereof, evidencing the right of the Holder to the
balance of the Warrant Stock purchasable hereunder upon the same terms and
conditions set forth herein. If this Warrant is converted, as a whole or in
part, after the occurrence of a Change-In-Control Event as to which Section 3(c)
is applicable, the Holder shall receive the consideration contemplated by
Section 3(c) in lieu of Common Stock of the Company.
-8-
<PAGE>
8. Transfer of Warrant. This Warrant may be transferred or assigned by the
Holder hereof in whole or in part, provided that the transferor provides, at the
Company's request, an opinion of counsel satisfactory to the Company that such
transfer does not require registration under the Securities Act and the
securities law applicable with respect to any other applicable jurisdiction.
9. Termination. This Warrant shall terminate on 5:00 p.m. New York time on
the Termination Date.
10. Miscellaneous. This Warrant shall be governed by the laws of the State
of New York, as such laws are applied to contracts to be entered into and
performed entirely in New York by New York residents. In the event of any
dispute among the Holder and the Company arising out of the terms of this
Warrant, the parties hereby consent to the exclusive jurisdiction of the federal
and state courts located in the State of New York for resolution of such
dispute, and agree not to contest such exclusive jurisdiction or seek to
transfer any action relating to such dispute to any other jurisdiction. The
headings in this Warrant are for purposes of convenience and reference only, and
shall not be deemed to constitute a part hereof. Neither this Warrant nor any
term hereof may be changed or waived orally, but only by an instrument in
writing signed by the Company and the Holder of this Warrant. All notices and
other communications from the Company to the Holder of this Warrant shall be
delivered personally or by facsimile transmission or mailed by first class mail,
postage prepaid, to the address or facsimile number furnished to the Company in
writing by the last Holder of this Warrant who shall have furnished an address
or facsimile number to the Company in writing, and if mailed shall be deemed
given three days after deposit in the United States mail.
ISSUED: _______________
BEACON POWER CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
-9-
<PAGE>
Attachment 1
NOTICE OF EXERCISE
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to purchase ________________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
---------------------------------------
(Name)
---------------------------------------
(Address)
- ----------------------------------- --------------------------------------
(Date) (Name of Warrant Holder)
By:
-----------------------------------
Title:
--------------------------------
<PAGE>
Attachment 2
INVESTMENT REPRESENTATION STATEMENT
Shares of the Common Stock
(as defined in the attached Warrant) of
BEACON POWER CORPORATION
In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Beacon Power Corporation (the "Company") as
follows:
(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon exercise of
the Warrant at the time of issuance may not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Securities Act and state law exemptions relating to offers
and sales not by means of a public offering, and that the Company's reliance on
such exemptions is predicated on the undersigned's representations set forth
herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Warrant unless and until (i) it
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and Company's counsel to the
effect that (A) appropriate action necessary for compliance with the Securities
Act and any applicable state securities laws has been taken or an exemption from
the registration requirements of the Securities Act and such laws is available,
and (B) the proposed transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in the Company is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
<PAGE>
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company
(e) The undersigned acknowledges that the Securities issuable upon exercise or
conversion of the Warrant must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available. The undersigned is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold from the Company or any affiliate of the Company, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three month period not exceeding specified limitations.
Dated:
--------------------
--------------------------------------
(Typed or Printed Name)
By:
-----------------------------------
(Signature)
--------------------------------------
(Title)
-2-
<PAGE>
Attachment 3
NOTICE OF CONVERSION
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to acquire _______________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the attached
Warrant, by conversion of _________ percent (_____%) of the Warrant.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
---------------------------------------
(Name)
---------------------------------------
(Address)
- ----------------------------- --------------------------------------
(Date) (Name of Warrant Holder)
By:
-----------------------------------
Title:
--------------------------------
(Title and signature of authorized person)
<PAGE>
Beacon Power Corporation
Exhibit D to the Note Purchase Agreement
Supplemental Disclosure Schedule
[The following numbers correspond to the Section numbers in the Note Purchase
Agreement]
3.1 The Company is not in good standing in Massachusetts as it has not filed
its Annual Report. The Annual Report is currently being prepared by the
Company and will be filed upon completion.
3.4(b) The Company has experienced a Material Adverse Change since December 31,
1998 as it has exhausted all of its working capital.
3.8 Other Representations and Warranties
The following exceptions are taken to the representations and warranties
of the company set forth in Section 3 of the October Agreement and, where
applicable, certain representations and warranties made in the October Agreement
(each an "Original Representation and Warrant") have been eliminated and
superseded in their entirety by representations and warranties made in this Note
Purchase Agreement:
[The following numbers correspond to the Section numbers in the October
Agreement]
3.1 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.1 of this Note
Purchase Agreement.
3.2(b) The number of issued and outstanding shares of Common Stock
of the Company is 8,409.
3.3 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.2 of this Note
Purchase Agreement.
3.4 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.3 of this Note
Purchase Agreement.
3.7 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.4 of this Note
Purchase Agreement.
3.8(c) The Company has increased the compensation payable to certain
executive officers.
<PAGE>
3.8(d) The Company has declared and paid a $30,000 dividend to the
holders of Class C Preferred Stock.
3.8(j) The Company has entered into a real property lease relating
to approximately 4,000 square feet of office space.
3.12 The Company has entered into a Registration Rights Agreement,
dated as of May 28, 1997, with Duquesne Enterprises and executed
Registration Rights Statements on October 23, 1998 which are
attached as Exhibits F and G to the October Agreement.
3.20 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.5 of this Note
Purchase Agreement.
3.22 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.6 of this Note
Purchase Agreement.
3.23 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.7 of this Note
Purchase Agreement.
The following amendments are hereby made to the Company's Exhibit I
Disclosure Schedule originally delivered as part of the October Agreement.
[The following numbers correspond to the Section numbers in Exhibit I to the
October Agreement]
3.2(c)(i) The Company has increased the option pool to 1,500,000 shares by vote
of the Board of Directors. Of this amount options to purchase 806,438 have been
granted and approved by the Board of Directors.
3.2(d) SatCon Technology Corporation holds 1,671 shares of Common Stock on a
post-split basis (not 1,686). The total number of shares of Common Stock
outstanding on a post split-basis is 8,409 (not 8,424). Annex A is amended to
include new shares granted.
3.7 Relates to Section 3.4 of the Note Purchase Agreement and is hereby
renumbered to number 3.4.
3.7(b)(ii) Is eliminated in its entirety.
3.7(b)(iii) Is eliminated in its entirety.
-2-
<PAGE>
3.7(b)(iv) Is eliminated in its entirety
3.8(ii) Is eliminated in its entirety.
3.8(iv) Is eliminated in its entirety.
3.10(e) & 3.11 (ix) The Company has entered into Invention and/or Non-Disclosure
Agreements with the members of the Engineering Department and Senior Management.
3.11(x) Is eliminated in its entirety.
3.14 The Company's benefit providers have changed since the October Agreement,
however, the current providers provide comparable benefits.
3.15 Insurance coverage has increased since the October Agreement.
-3-
<PAGE>
EXHIBIT I
Beacon Power Corporation
Exhibit I
Beacon Disclosure Schedule
3.2 Capital Structure
(c) The outstanding warrants, options, conversion rights, pre-emptive and
subscription rights are as follows:
(i) The Company has established an option pool of 562,500 shares. Of this
amount options to purchase 393,750 shares of Common Stock have been granted and
options to purchase 25,313 are in the process of being granted.
(ii) A Warrant (the "Duquesne Warrant") held by Duquesne Enterprises
("Duquesne") to purchase 562,500 shares of Common Stock.
(iii) Duquesne has pre-emptive rights with respect to issuances of Common
Stock and securities convertible into Common Stock pursuant to the Duquesne
Warrant.
(d)
Outstanding Post 1:1.125 Split
----------- ------------------
Common Stock, $0.01 par value per share
- ---------------------------------------
SatCon Technology Corporation 1,499 1,686
James S. Bezreh 999 1,123
Russel S. Jackson 999 1,123
Russell A. Kelley 999 1,123
Stephen J. O'Connor 999 1,123
Jane E. O'Sullivan 999 1,123
Robert G. Wilkinson 999 1,123
-----
8,424
Class A Preferred Stock,
$0.01 par value per share
Convertible into Common Stock on a 1 to
1 basis (subject to adjustment)
-1-
<PAGE>
SatCon Technology Corporation 3,998,501 4,498,313
Class B Preferred Stock,
$0.01 par value per share
Convertible into Common Stock on a 1 to
1 basis (subject to adjustment)
No shares outstanding
Class C Preferred Stock,
$0.01 par value per share
Convertible into Common Stock on a 1 to
1 basis (Subject to adjustment)
James S. Bezreh 1 1
Russel S. Jackson 1 1
Russell A. Kelley 1 1
Stephen J. O'Connor 1 1
Jane E. O'Sullivan 1 1
Robert G. Wilkinson 1 1
The Duquesne Warrant entitles Duquesne to purchase up to 562,500 shares of
Common Stock.
The following person hold options to purchase Common Stock
Optionholder Number of Shares of Common Stock Issuable
- ------------ -----------------------------------------
See Annex A
3.5 Representations Regarding Preferred Shares
(i) Duquesne is entitled to pre-emptive rights pursuant to the Duquesne
Warrant.
3.7(b) Financial Statements
(i) The Company Financial Statements for the periods ended December 31,
1997 and July 31, 1998 are attached hereto as Annex B and C, respectively. The
Company notes that (i) the number of authorized shares reflected in the
financial
-2-
<PAGE>
statements is inaccurate, with the correct number being reflected in the Second
Amended and Restated Certificate of Incorporation and (ii) the 1:1.125 stock
split reflected in the financial statements did not take place until October 23,
1998.
(ii) At October 5, 1998, the outstanding indebtedness to Duquesne is
$400,000, all of which is outstanding pursuant to the loan agreement, dated July
17, 1998, between the Company and Duquesne. At October 5, 1998, an aggregate of
$668,949 (including the $70,000 referred to in (iii) below) of advances to the
Company were outstanding from SatCon Technology Corporation.
(iii) $70,000 of advances to the Company were outstanding for William
Stanton.
(iv) The Company has declared but not yet paid a dividend to holders of
Class C Preferred Stock on October 23, 1998 in the aggregate amount of $30,000.
3.8 Absence of Certain Changes and Events
(i) The Company's cash balance has declined and its financial condition
has declined since July 31, 1998.
(ii) The Company has declared but not yet paid a dividend to holders of
Class C Preferred Stock on October 23, 1998 in the aggregate amount of $30,000.
(iii) The Board of Directors and Stockholders of the Company have approved
a 1:1.125 stock split.
(iv) At October 5, 1998, the outstanding indebtedness to Duquesne is
$400,000, all of which is outstanding pursuant to the loan agreement, dated July
17, 1998, between the Company and Duquesne. In connection with such loan, the
Company granted a security interest in its assets to Duquesne. At October 5,
1998, an aggregate of $668,949 (including $70,000 advanced as a loan to Mr.
Stanton) of advances to the Company were outstanding from SatCon.
3.10 Proprietary Assets
(a)(i) None.
(a)(ii) See Exhibit A to the Amended and Restated License Agreement, dated May
28, 1997, between the Company and SatCon Technology Corporation.
(d) Pursuant to the Securities Purchase Agreement, dated as of May 28, 1997,
between Duquesne, SatCon and the Company:
-3-
<PAGE>
SatCon has granted to the Company a perpetual, world-wide, royalty free
license to all patents, patent applications, technical knowledge,
information and know-how in existence (May 97) which relate to the field
of flywheel energy storage products, systems and applications, but not for
satellite or other non-terrestrial, stationary applications.
The Company does not have the right to sublicense such technology other
than in connection with its manufacturing and distribution operations. The
Company has granted SatCon a perpetual, royalty free license to use any
improvements upon the flywheel energy storage technology for
non-terrestrial applications made by the Company.
(e) See Section 3.11 for a list of employees of the Company who have entered
into Invention and Non-Disclosure Agreements.
3.11 Contracts
(i) Amended and Restated License Agreement, dated as of May 28, 1998, between
the Company and SatCon.
(ii) Securities Purchase Agreement, dated as of May 28, 1997, among the Company,
SatCon and Duquesne.
(iii) Warrant, dated as of May 28, 1997, issued to Duquesne.
(iv) Registration Rights Agreement, dated May 28, 1997, between the Company and
Duquesne.
(v) The Company is in the process of entering into a registration rights
agreement with SatCon.
(vi) Consulting Agreement, dated May 28, 1997, between the Company and Duquesne.
(vii) Services Agreement, dated May 28, 1997, between SatCon and the Company.
(viii) Letter Agreement (relating to exclusive distribution rights granted by
the Company to Duquesne), dated May 28, 1997, between the Company and Duquesne.
(ix) Invention and Non-disclosure agreements between the Company and the
following individuals:
William Stanton
Joseph Saliba
-4-
<PAGE>
James O'Rourke
Richard Hockney
Maureen Lister
(x) Loan Agreement, dated July 17, 1998, between Duquesne and the Company.
(xi) The Company has obligations under a subcontract arrangement with SatCon on
a project for the Naval Surface Warfare Center (United States Marine Corp.
Contract)
(xii) San Diego Gas & Electric, beta site agreement dated December 4, 1996.
(xiii) Commercial Lease (as amended), dated December 1, 1997 between the Company
and Cummings Properties Management, Inc.
(xiv) ABB Power T&D Company, Inc. beta site agreement dated August 1, 1998.
(xv) Bell Atlantic beta site agreement dated June 1, 1998.
(xvi) GTE Mobile Communications Service Corporation beta site agreement, dated
September 3, 1998.
3.12 Registration Rights
The Company has granted registration rights to SatCon and Duquesne.
3.13 Tax Matters
The Company was included in the consolidated tax returns of SatCon until
September, 1997.
3.14 Employee Benefit Plans
The Company's benefit brochure is attached as Annex D
The Company has employment contracts with the following persons:
None
3.15 Insurance
Summary of the Company's insurance is attached as Annex E.
-5-
<PAGE>
3.18 Litigation
Certain of the Company's creditors have commenced collection proceedings.
3.21 Related Party Transaction
See Sections 3.7(b)(i) and 3.11(i)-(viii)
-6-
<PAGE>
Beacon Power Corporation
Exhibit J
SatCon Disclosure Schedule
4.2 SatCon may be obligated to reinstate and increase the number of shares
issuable under certain warrants issued to the underwriters in connection with
SatCon's initial public offering in November 1992. The maximum number of
additional shares issuable pursuant to such warrants will not exceed 100,000
shares of Common Stock.
4.6 Litigation matters referred to in SatCon's report under the Securities
Exchange Act of 1934, and incorporated by reference in this Schedule.
Immediately prior to the filing of SatCon's Form 10-Q for the quarter ended June
30, 1998, a person who sold his business to SatCon commenced litigation relating
to the value of certain assets received by SatCon in such transaction.
4.8 SatCon has granted registration rights to Duquesne and the holders of the
Warrants referred to in item 4.2 above.
-7-
<PAGE>
Annex A
Beacon Power
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Summary of Options
- --------------------------------------------------------------------------------------------------------------
Granted
- --------------------------------------------------------------------------------------------------------------
Pre-Split Post-Split In-Process
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Options Pool 500,000 562,500 562,500
- --------------------------------------------------------------------------------------------------------------
Options "Granted" 350,000 393,750 419,063
- --------------------------------------------------------------------------------------------------------------
Options available 150,000 168,750 143,438
- --------------------------------------------------------------------------------------------------------------
Strike Price $2.00 $1.78
- --------------------------------------------------------------------------------------------------------------
Prior Grants
- --------------------------------------------------------------------------------------------------------------
Granted Granted Granted
Pre-Split Post-Split Start Date
- --------------------------------------------------------------------------------------------------------------
Dick Hockney 50,000 56,250 6/1/97
- --------------------------------------------------------------------------------------------------------------
Omar Kabir 22,500 25,313 1/14/98
- --------------------------------------------------------------------------------------------------------------
Maureen Lister 40,000 45,000 3/9/98
- --------------------------------------------------------------------------------------------------------------
Pat McDonough 1,000 1,125 6/1/97
- --------------------------------------------------------------------------------------------------------------
Sharard Moghe 5,000 5,625 6/1/97
- --------------------------------------------------------------------------------------------------------------
Emil Muchnik 4,000 4,500 10/27/97
- --------------------------------------------------------------------------------------------------------------
Steve Mullen 2,000 2,250 11/1/97
- --------------------------------------------------------------------------------------------------------------
Jim O'Rourke 50,000 56,250 6/1/97
- --------------------------------------------------------------------------------------------------------------
John Pelligrino 22,500 25,313 7/28/97
- --------------------------------------------------------------------------------------------------------------
Joe Saliba 65,000 73,125 6/1/97
- --------------------------------------------------------------------------------------------------------------
John Shaw 0 0 7/21/97 5000 recovered: termination
- --------------------------------------------------------------------------------------------------------------
Bill Stanton 80,000 90,000 6/1/97
- --------------------------------------------------------------------------------------------------------------
Carlene Strangeways 2,000 2,250 11/1/97
- --------------------------------------------------------------------------------------------------------------
Pat Widtfeldt 2,000 2,250 11/1/97
- --------------------------------------------------------------------------------------------------------------
Nathan Woodard 4,000 4,500 1/14/98
- --------------------------------------------------------------------------------------------------------------
Options Granted 350,000 393,750
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
In-Process
- --------------------------------------------------------------------------------------------------------------
Micheal Calla 0 0 4/20/98
- --------------------------------------------------------------------------------------------------------------
Jennny Hezzell 2,000 2,250 2/17/98 Approved not granted
- --------------------------------------------------------------------------------------------------------------
David Hezzell 5,000 5,625 2/17/98 Approved not granted
- --------------------------------------------------------------------------------------------------------------
Martin Loys 0 0 5/18/98
- --------------------------------------------------------------------------------------------------------------
Steve Piela 4500 5,063 7/27/98 Offered not Approved
- --------------------------------------------------------------------------------------------------------------
Saad Putrus 2,000 2,250 3/9/98 Approved not granted
- --------------------------------------------------------------------------------------------------------------
Kevin Sicard 0 0 4/27/98
- --------------------------------------------------------------------------------------------------------------
Ken Tran 4,500 5,063 6/22/98 Offered not Approved
- --------------------------------------------------------------------------------------------------------------
Ahmed Zaki 4,500 5,063 9/28/98 Offered not Approved
- --------------------------------------------------------------------------------------------------------------
0
- --------------------------------------------------------------------------------------------------------------
0
- --------------------------------------------------------------------------------------------------------------
Total New Grants 22,500 25,313
- --------------------------------------------------------------------------------------------------------------
Total Grants 372,500 419,063
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Notes:
1. Awards do not account for the 9 for 8 stock split
o Grants have a $2.00 strike price
2. Following the stock split
o Stock amounts are increased by 9/8
o Strike price decreases by 8/9
<PAGE>
Annex B
BEACON POWER CORPORATION
FINANCIAL STATEMENTS
For the quarter ended December 31, 1997 and
the period May 8, 1997 (Inception) to September 30, 1997
(Unaudited)
<PAGE>
TABLE OF CONTENTS
Page
----
Balance Sheets ............................................. 3
Statements of Operations ................................... 4
Statements of Changes in Stockholders' Equity .............. 5
Statements of Cash Flows ................................... 6
Notes to Financial Statements .............................. 7
2
<PAGE>
BEACON POWER CORPORATION
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ................... $ 2,078,067 $ 2,929,718
Accounts receivable ......................... 31,437 174,733
Inventory ................................... 16,788 --
Prepaid expenses and other assets ........... 26,588 --
----------- -----------
Total current assets ..................... 2,152,880 3,104,451
Property and equipment, net ...................... 1,415,786 962,035
----------- -----------
Total assets ............................. $ 3,568,666 $ 4,066,486
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Customer Advances ............................ $ 95,000 $ 95,000
Accrued expenses ............................. 32,298 --
----------- -----------
Total current liabilities ................. 127,298 95,000
STOCKHOLDERS' EQUITY
Preferred stock; $.01 par value, 5,000,000(1)
and 1,000,000 shares authorized;
4,498,319(2) and 0 shares issued and
outstanding, at December 31, 1997
and September 30, 1997, respectively .......... 44,983 --
Common stock, $.01 par value, 20,000,000(1)
and 5,000,000 shares authorized; 8,424(2)
and 4,500,000(2) shares issued and
outstanding, at December 31, 1997
and September 30, 1997, respectively .......... 84 45,000
Additional paid-in capital ....................... 4,984,933 4,955,000
Retained earnings/(loss) ......................... (1,588,632) (1,028,514)
----------- -----------
Total stockholders' equity ................ 3,441,368 3,971,486
----------- -----------
Total liabilities and stockholders' ... $ 3,568,666 $ 4,066,486
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ---------------------
(1) Amounts have been adjusted to reflect increase in authorized capital (See
Note H).
(2) Amounts have been adjusted to reflect 1:1.125 stock split (See Note H).
3
<PAGE>
BEACON POWER CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the For the period For the period
Quarter May 8,1997 May 8,1997
ended (Inception) to (Inception) to
December 31, September 30, December 31,
1997 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenue .......................................... $ 1,090 $ 186,226 $ 187,316
----------- ----------- -----------
Cost of sales .................................... 982 160,812 161,794
Selling, general and administrative expenses ..... 363,846 733,190 1,097,036
Research and development expenses ................ 237,707 396,059 633,766
----------- ----------- -----------
Total operating expenses ......................... 602,535 1,290,061 1,892,596
----------- ----------- -----------
Operating loss ................................... (601,445) (1,103,835) (1,705,280)
Interest income, net ............................. 41,327 75,321 116,648
----------- ----------- -----------
Net loss ......................................... $ (560,118) $(1,028,514) $(1,588,632)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
BEACON POWER CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Since May 8, 1997 (Inception) to December 31,1997
(Unaudited)
<TABLE>
<CAPTION>
Additional Retained Total
Common Common Preferred Preferred Paid-In Earnings Stockholders'
Shares(1) Stock(1) Shares(1) Stock(1) Capital (Loss) Equity
---------- --------- --------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
May 8, 1997 .................. 4,499,999 $ 45,000 -- -- $ 4,955,000 -- $ 5,000,000
Net Loss ..................... $(1,028,514) (1,028,514)
---------- --------- --------- -------- ----------- ----------- -----------
Balance, September 30, 1997 .. 4,499,999 $ 45,000 -- -- $ 4,955,000 $(1,028,514) $ 3,971,486
Net Loss ..................... (560,118) (560,118)
Recapitalization ............. (4,491,575) $ (44,916) 4,498,319 $ 44,983 29,933 30,000
---------- --------- --------- -------- ----------- ----------- -----------
Balance, December 31, 1997 ... 8,424 $ 84 4,498,319 $ 44,983 $ 4,984,933 $(1,588,632) $ 3,441,368
========== ========= ========= ======== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------
(1) Amounts have been adjusted to reflect 1:1.125 stock split (See Note H).
5
<PAGE>
BEACON POWER CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the For the Period
Quarter May 8,1997
ended (Inception)
December to September
30, 1997 30, 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) .......................................... $ (560,118) $(1,028,514)
Adjustments to reconcile net income/(loss) to net
cash provided by/(used in) operating activities:
Depreciation ...................................... 1,283 126
Changes in operating assets and liabilities:
Accounts receivable ............................. 143,296 (174,733)
Prepaid expenses and other assets ............... (26,588) --
Inventory ....................................... (16,788) --
Accrued payroll and related expenses ............ 32,298 --
Deferred revenue ................................ -- 95,000
----------- -----------
Total adjustments ....................................... 93,501 (79,607)
----------- -----------
Net cash provided by/(used in) operating activities ........ (426,617) (1,108,121)
----------- -----------
Cash flows from investing activities:
Capital Expenditures .................................... (455,034) (962,161)
----------- -----------
Net cash provided by/(used in) investing activities ........ (455,034) (962,161)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of stock ......................... 30,000 5,000,000
----------- -----------
Net cash provided by financing activities .................. 30,000 5,000,000
----------- -----------
Net increase/(decrease) in cash ............................ (851,651) 2,929,718
Cash at beginning of period ................................ 2,929,718 --
----------- -----------
Cash and cash equivalents at end of period ................. $ 2,078,067 $ 2,929,718
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
BEACON POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies
Organization
Beacon Power Corporation (the "Company" or "Beacon"), an affiliate of SatCon
Technology Corporation ("SatCon") was incorporated in Delaware in May of 1997.
Beacon is engaged in the development, marketing and manufacturing of flywheel
devices for storing and transmitting kinetic energy. The Company intends
initially to market its flywheel energy storage devices and related products to
industries which require back-up sources of power to maintain services,
specifically the cable television ("cable") and telecommunications industries.
The Company believes these industries will accept a flywheel system as a
preferable alternative to battery based energy at remote locations. Once the
reliability of a flywheel system is demonstrated by its acceptance by cable and
telecommunication companies, the Company intends to expand its marketing efforts
to the larger uninterruptable power supply ("UPS") market and internationally.
Revenue Recognition
The Company designs and manufactures flywheel devices. Revenue from product
sales is recognized upon shipment.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits and highly
liquid investments with a maturity of three months or less when acquired.
Inventory
Inventories are stated at the lower of cost or market and costs are determined
based on the first-in, first-out method of accounting.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the asset's estimated useful life. The estimated
useful lives of property and equipment are as follows:
Estimated Lives
------------------------------
Computer equipment and software ........... 3 - 5 Years
Electronic laboratory and shop equipment .. 5 Years
Mechanical laboratory and shop equipment .. 10 Years
Sales and demonstration equipment ......... 3 - 10 Years
Furniture and fixtures .................... 7 - 10 Years
Leasehold improvements .................... Lesser of the life of the
lease or the useful life of
the improvement
When assets are retired or otherwise disposed of, the cost and related
depreciation are eliminated from the accounts and any resulting gain or loss is
reflected in other income.
7
<PAGE>
BEACON POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies (Continued)
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions and
disclosure of contingencies at the date of the financial statements. Actual
results could differ from these estimates.
Income Taxes
The Company accounts for income taxes in accordance with Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109), which requires a
balance sheet approach for accounting for income taxes. Under SPAS 109, deferred
tax assets and deferred tax liabilities are recognized based on temporary
differences between the basis of assets and liabilities using statutory rates.
The Company has, as required under the Internal Revenue Code, switched from the
cash to accrual method for tax reporting purposes.
Concentration of Credit Risk
Financial instruments which subject the Company to concentrations of credit risk
consist principally of cash equivalents.
The Company deposits its cash with a regional commercial bank. Credit exposure
to any one entity is limited by Company policy.
B. Inventory
At December 31, 1997, inventory consists of raw materials.
C. Property and Equipment
Property and equipment consist of the following:
December 31, September 30,
1997 1997
-------------- ---------------
Property and equipment, cost ...... $ 1,417,069 $ 962,161
Less accumulated depreciation ..... 1,283 126
-------------- ---------------
$ 1,415,786 $ 962,035
============== ===============
D. Preferred Stock
At December 31, 1997, the Company was authorized, subject to limitations
prescribed by law, to issue, from time to time, up to an aggregate of 4,498,320
shares of Preferred Stock, of which 4,498,313 had been designated Class A
Preferred Stock, $0.01 par value per share, one had been designated as Class B
Preferred Stock, $0.01 par value per share, and 6 had been designated as Class C
Preferred Stock, $0.01 par value per share. (See Note H for change in authorized
capital stock subsequent to December 31, 1997). Each series of preferred Stock
shall have such number of shares, designations, preferences, powers,
qualifications and special or relative rights or priveleges as shall be
determined by the Company, which may include, among others, dividend rights,
voting rights, redemption and sinking fund provisions, liquidation preferences,
conversion rights and preemptive rights.
8
<PAGE>
BEACON POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
E. Stock Warrant
The Company has issued a warrant (the "Warrant") to purchase 562,498 shares of
the Company's Common Stock and one share of Class B Preferred Stock at a
purchase price of approximately $5.33 per share. The warrant also grants the
holder the right to participate in future private equity offerings to the extent
necessary to permit the holder to maintain a 20% equity interest in the Company.
The Company has also agreed with the holder that as long as the holder maintains
50% of the shares aquired pursuant to the Warrant, the Company will not sell any
equity securities in a private transaction to any entity which, directly or
through an affiliate, derives revenues during the most recent year of $10
million or more through the distribution of electricity or natural gas. In
addition, the Company has agreed that while the holder maintains such an equity
interest in the Company, the Company shall not, without the holder's approval,
make any material change to its principal business activity or license its
flywheel energy storage technology.
F. Recapitalization
On December 24, 1997, the Company engaged in a recapitalization (the
"recapitalization") of the Company pursuant to which SatCon exchanged 4,498,313
shares of the Company's Common Stock for 4,498,313 shares of the Company's Class
A Preferred Stock, $0.01 par value per share.
In connection with the recapitalization, the Company issued 6,738 shares of the
Company's Common Stock, $0.01 par value per share and 6 shares of the Company's
Class C Preferred Stock, $0.01 par value per share, for an aggregate purchase
price of $30,000 and at a price of $5,000 per unit of 1,123 shares of Common
Stock and one share of Class C Preferred Stock.
G. Commitments and Contingencies
Operating Leases
The Company occupies approximately 10,439 square feet of executive and
administrative offices and light manufacturing space at 6-D Gill Street, Woburn,
Massachesetts under a primary lease expiring on November 30, 1999. The monthly
payment is $9,525.58 plus its pro rata share of operating expenses and real
estate taxes.
9
<PAGE>
BEACON POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
H. Subsequent Events
Stock Option
On January 30, 1998, the Company established an employee stock incentive plan
pursuant to which the Company may issue options to purchase up to 562,500 shares
of Common Stock. Through March 10, 1998, the Company has issued options to
purchase 399,375 shares of Common Stock to certain of its employees at an
average purchase price of approximately $1.78 per share. The options vest over a
period of three or four years. Options to purchase 163,125 share of Common Stock
remain available to issuance to future employees.
Stock Split
Effective March 11, 1998, the Company effected a 1:1.125 stock split. The
amounts presented in the Balance Sheets, Statements of Stockholders' Equity and
Notes to the Financial Statements reflect the effect of the stock split for each
period presented.
Authorized Capital Stock
Effective March ii, 1998, the Company's authorized capital stock consists of
20,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, $0.01
par value per share of which 4,498,313 shares have been designated Class A
Preferred Stock, $0.01 par value, 1 share has been designated Class B Preferred
Stock, $0.01 par value, and 6 shares have been designated Class C Preferred
Stock, $0.01 par value.
10
<PAGE>
Annex C
Beacon Power Corporation
Balance Sheet
as of July 31, 1998
ASSETS
------
Current Assets:
Cash $ 70,498
A/R 31,437
1 Intercompany 34,906
Inventory 16,788
Prepaid Expenses 29,500
Placement Fees 84,801
------------------
Total Current Assets: 267,931
------------------
Property and Equipment
Furniture & Fixtures 50,158
Equipment & Machinery 1,684,283
Computers & Telephone 56,723
LHI 1,741
------------------
Total Property & Equipment 1,792,905
------------------
Patents 7,088
------------------
Total Other Assets 7,088
------------------
TOTAL ASSETS: $ 2,067,924
==================
LIABILITIES & CAPITAL
Current Liabilities:
2 Accounts Payable $ 741,405
Accrued Expenses 54,497
Duquesne Loan 200,000
3 SatCon Loan 65,000
------------------
Total Current Liabilities 1,060,902
------------------
4 Walpole Co-op Lease 54,311
Peoples Heritage Lease 42,026
5 Deferred Revenue 95,000
------------------
Total Long Term Liabilities 191,338
------------------
------------------
TOTAL LIABILITIES 1,252,240
------------------
Preferred Stock 44,983
Common Stock 84
Paid in Capital 4,984,933
Retained Earnings (1,588,632)
Net Income (2,625,684)
------------------
Total Capital 815,684
------------------
TOTAL LIABILITIES & CAPITAL $ 2,067,924
==================
<PAGE>
Beacon Power Corporation
Balance Sheet-Notes
as of July 31, 1998
SIGNIFICANT ACCOUNTING POLICIES
Organization
Beacon Power Corp (the "Company" or "Beacon"), an affiliate of Satcon Technology
Corporation ("SatCon") was incorporated in Delaware in May of 1997. Beacon is
engaged in the development of flywheel devices for storing and transmitting
kinetic energy.
Cash and Cash Equivalent
Beacon considers investments purchased with a maturity of three months or less
to be cash equivalents.
Accounts receivable
Receivables are stated in the balance sheet at their expected realizable value.
Plant Assets and Depreciation
Plant assets are carried at cost. Maintenance and repairs are expensed as
incurred.
Inventories
Inventories are stated at the lower of cost or market.
1. Intercompany (Related Party Transactions)
Remaining balance of Capital Investment from Duquesne Enterprises. Balance
represents amounts due SatCon for support and expenditures for May 1998.
Balance @ 12/31/97 2,048,067.00
Cash Transfers to Beacon (1,600,000.00)
SatCon Expenditures & Support Jan thru April 1998 (413,161.00)
-------------
Remaining Balance 34,906.00
=============
2. Account Payable
Includes Related party transactions totaling $ 73.689.25. Amount represents
invoices for time and materials of engineering services provided by Satcon Corp.
from June 1998. An additional $ 35,000.00 is expected for August.
3. Loan from Satcon
12% interest bearing (same basis as DQE), Unsecured advances of working capital
from Satcon corp. Balance is expected to be paid in full upon receipt of
funding. An additional $ 240,000. of working capital has been advanced in August
and September.
4. Leases
Beacon has certain capital lease agreements
Amount of Capitalized Lease assets by Major category:
Telephone Equipment $22,688
Furniture & Fixtures $44,933
Computer & Machinery $44,198
Minimum monthly lease payments total $ 5,499.29
5. Deferred Revenue
Deferred revenue represents monies received for future delivery of a beta unit.
<PAGE>
- --------------------------------------------------------------------------------
Flexible
Reimbursement
Accounts
These programs let employees pay for health care expenses not covered
under the health plans, as well as dependent care expenses with pre-tax dollars.
Employee
Assistance
Program
Beacon Power recognizes its employees may experience problems of a
personal nature and that at times these problems may interfere with job
performance. When this occurs both the employee and Beacon Power suffer. To
address these mutual concerns we participate in an Employee Assistance Program
which provides problem assessment, short-term counseling, and referral services
through an independent counseling agency.
- --------------------------------------------------------------------------------
Note: Benefits described pertain to regular full-time employees. The
descriptions of the benefits and policies outlined here are summary
statements only and are not intended to be definitive. In all instances,
the full text of the plan, policy or other appropriate document must be
reviewed to determine the rights, benefits, and obligations of employees
and Bea-
Beacon Power Corporation
6 Gill Street
Woburn Industrial Park
Woburn, MA 01801-1721
Beacon
Power's
Benefits
in Brief
<PAGE>
- --------------------------------------------------------------------------------
Vacation
- -----------------------------
Length of Service
1 mo. but less than 2 yrs.:
5/6 of a day/mo. (10 days)
- -----------------------------
2 yrs. but less than 9 yrs.:
1-1/4 days/mo. (15 days)
- -----------------------------
9 yrs. or more:
1-2/3 days/mo. (20 days)
- -----------------------------
Holidays
Beacon Power observes 11 holidays per year. One of these is a floating
holiday designated by the employee.
Paid Sick Leave
Sick leave is a benefit provided to regular full-time employees to assist
them with paid time when illness or medical requirements prevent them from
working. A maximum of 10 days (accrued at a rate of 6 2/3 hours per month) per
calendar year is paid.
Long-Term
Disability
All regular full-time employees are eligible for LTD insurance. These
benefits are payable following three months of total disability. Eligible
employees receive a monthly disability benefit in the amount equal to 60% of
monthly base earnings at the time they become totally disabled, up to a maximum
monthly benefit of $7,500.
Medical Plan
Beacon Power offers two forms of health insurance. The options are:
o Blue Cross & Blue Shield Blue Choice New England
This Point of Service Plan (POS) combines the managed care full coverage
features of HMO Blue with the freedom of choice offered by the
Comprehensive Major Medical Plan.
o Harvard Community Health Plan
This HMO is a complete health care system offering coverage for all health
needs. All services are generally performed by or under the direction of a
primary care physician.
All health coverages:
Eligibility: First day actively at work.
Cost: Shared by you and Beacon Power.
Dental Plan
Delta Dental is the dental insurance offered at Beacon Power. The plan has
three benefit groups. Preventative benefits such as x-rays, regular exams and
fillings, are covered 100%. The basic benefits, which include bondings,
extractions, root canals, etc., are covered 80%. The third group, which includes
complete or partial dentures, fixed bridges and crowns, inlays and onlays, is
covered at 50%. With the exception of preventative services, dental services are
subject to a $50 deductible per person and a $150 maximum per family. There is a
$1,500 maximum per covered individual per calendar year. Orthodontia is not
covered.
Eligibility: First day actively at work.
Cost: Shared by you and Beacon Power.
401K Plan
Beacon Power offers a retirement plan allowing employees to defer up to
15% of salary each year on a tax favorable basis. Beacon Power typically makes a
Matching Contribution of .50 on a dollar up to an employee contribution of 6% in
any given plan quarter.
Eligibility: Plan covers all employees who are age 21 or older who have worked
for Beacon Power for at least six months (working 1000 or more
hours per year). Employees may participate in the plan on January
1st or July 1st after they meet the eligibility requirements.
Group Life
Insurance
Beacon Power will furnish regular full-time employees with a 2X annual
salary life insurance policy.
Eligibility: First day actively at work.
Cost: Company paid benefit.
Accidental Death
and
Dismemberment
Insurance
Benefit equal to the amount of your life insurance policy.
Eligibility: First day actively at work.
Cost: Company paid benefit.
- --------------------------------------------------------------------------------
<PAGE>
Annex E
----------------------------------------------------------------------------
Executive Risk Specialty Home Office: [GRAPHIC]
Insurance Company 82 Hopmeadow Street
Simsbury, Connecticut 06070-7883
-----------------------
DECLARATIONS POLICY NUMBER:
751-123394-98
-----------------------
THE POWER(SM)
DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICY
INCLUDING EMPLOYMENT PRACTICES LIABILITY COVERAGE
AND DEFENSE COST COVERAGE
NOTICE: THIS IS A CLAIMS MADE INDEMNITY POLICY WHICH APPLIES ONLY TO "CLAIMS"
FIRST MADE DURING THE "POLICY PERIOD," OR, IF PURCHASED, THE EXTENDED REPORTING
PERIOD. THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES OR SETTLEMENTS WILL BE
REDUCED- BY THE PAYMENT OF "DEFENSE EXPENSES," AND "DEFENSE EXPENSES" WILL BE
APPLIED AGAINST THE APPLICABLE RETENTION. THE COVERAGE AFFORDED UNDER THIS
POLICY DIFFERS IN SOME RESPECTS FROM THAT AFFORDED UNDER OTHER POLICIES. PLEASE
READ THE ENTIRE POLICY CAREFULLY.
OPTIONAL COVERAGE UNDER INSURING AGREEMENT (D) IS AVAILABLE UNDER THIS POLICY.
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
ITEM 1. PARENT CORPORATION - NAME AND PRINCIPAL ADDRESS: ITEM 2. POLICY PERIOD:
Beacon Power Corp (a) Inception Date: June 2, 1998
6D Gill Street (b) Expiration Date: June 2, 1999
Woburn, MA 01801 at 12:01 a.m. both dates at the Principal
Address in ITEM 1.
- ---------------------------------------------------------------------------------------------------------------------
ITEM 3. LIMITS OF LIABILITY (inclusive of Defense Expenses):
(a) $5,000,000.00 maximum aggregate limit of liability for all Claims made under Insuring Agreements (A),
(B) (1), (B)(2) and (C).
(b) $100,000.00 maximum aggregate limit of liability for all Claims made under Insuring Agreement (D).
(c) $5,000,000.00 maximum aggregate limit of liability for all Claims under this Policy.
- ---------------------------------------------------------------------------------------------------------------------
ITEM 4. PREMIUM:
$30,000.00 total prepaid premium.
- ---------------------------------------------------------------------------------------------------------------------
ITEM 5. RETENTIONS:
(a) $0.00 each Insured Person each Claim, but only for Loss as to which indemnification by the
Company Is not legally permissible or is not made solely by reason of the Company's
financial Insolvency.
(b) $25,000.00 each Claim, for Loss as to which indemnification by the Company is legally permissible.
(c) $25,000.00 each Claim under Insuring Agreement (B)(2).
(d) $5,000.00 each Claim under Insuring Agreement (D).
- ---------------------------------------------------------------------------------------------------------------------
ITEM 6. LENGTH OF EXTENDED ITEM 7. ADDITIONAL PREMIUM FOR EXTENDED
REPORTING PERIOD: REPORTING PERIOD: $22,500.00
365 day
- ---------------------------------------------------------------------------------------------------------------------
ITEM 8. NOTICE UNDER CONDITIONS (G)(1) AND (G)(2) MUST BE ADDRESSED TO:
Vice President of Claims
Executive Risk Management Associates
P.O. Box 2002
Simsbury, CT 06070-7683
- ---------------------------------------------------------------------------------------------------------------------
ITEM 9. ENDORSEMENTS ATTACHED AT ISSUANCE:
B22671 D25691
D25024 D26057
D25025
D25064
D25085
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
These Declarations, the signed and completed Application and the Policy, with
endorsements, will constitute the entire agreement between the Underwriter, the
Company and the Insured Persons.
- --------------------------------------------------------------------------------
EXECUTIVE RISK SPECIALTY INSURANCE COMPANY by (Authorized Company
Representative):
- --------------------------------------------------------------------------------
<PAGE>
ACORD(TM) CERTIFICATE OF LIABILITY INSURANCE DATE (MM/DD/YY)
03/12/1998
- --------------------------------------------------------------------------------
PRODUCER (617) 770-2200 FAX (617) 770-2323
Arthur J. Gallagher & Company
Harbor South Tower
100 Hancock Street
N. Quincy, MA 02171
Attn: Kathy Duchaney Ext: 348
- --------------------------------------------------------------------------------
INSURED
Beacon Power Corporation
a division of Satcon Technology Corp.
161 First Street
Cambridge, MA 02142
- --------------------------------------------------------------------------------
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS
UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER
THE COVERAGE AFFORDED BY THE POLICIES BELOW.
- --------------------------------------------------------------------------------
COMPANIES AFFORDING COVERAGE
- --------------------------------------------------------------------------------
COMPANY A St Paul Fire and Marine
- --------------------------------------------------------------------------------
COMPANY B General
- --------------------------------------------------------------------------------
COMPANY C
- --------------------------------------------------------------------------------
COMPANY D
- --------------------------------------------------------------------------------
[ILLEGIBLE]
- --------------------------------------------------------------------------------
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED
TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOT WITHSTANDING ANY
REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO
WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY
THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND
CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POLICY POLICY
EFFECTIVE EXPIRATION
CO DATE DATE
LTR TYPE OF INSURANCE POLICY NUMBER (MM/DD/YY) (MM/DD/YY) LIMITS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GENERAL LIABILITY GENERAL AGGREGATE $2,000,000
--------------------------------------
[X] COMMERCIAL GENERAL LIABILITY PRODUCTS - COMPROP AGG $2,000,000
--------------------------------------
[ ] CLAIMS MADE [X] OCCUR PERSONAL & ADV INJURY $1,000,000
--------------------------------------
A [ ] OWNERS & CONTRACTORS PROT TE06901001 10/30/1997 10/30/1998 EACH OCCURRENCE $1,000,000
--------------------------------------
[ ] FIRE DAMAGE (Any one ind) $ 250,000
---------------------------- --------------------------------------
[ ] MED EXP (Any one person) $ 10,000
- ----------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE LIABILITY The limits of
liability shown COMBINED SINGLE UNIT $
[ ] ANY AUTO reflect the limits at --------------------------------------
[ ] ALL OWNED AUTOS inception. Arthur L. BODILY INJURY
[ ] SCHEDULED AUTOS Gallager & Co. does (Per person) $
[ ] HIRED AUTOS not assume any --------------------------------------
[ ] NON-OWNED AUTOS responsibility for BODILY INJURY
[ ] notification in the (Per accident) $
-------------------------------- event of depletion of --------------------------------------
[ ] the aggregate. PROPERTY DAMAGE $
- ----------------------------------------------------------------------------------------------------------------------------------
GARAGE LIABILITY AUTO ONLY - EA ACCIDENT $
--------------------------------------
[ ] ANY AUTO OTHER THAN AUTO ONLY
--------------------------------------
[ ] EACH ACCIDENT $
-------------------------------- --------------------------------------
[ ] AGGREGATE $
- ----------------------------------------------------------------------------------------------------------------------------------
EXCESS LIABILITY TE06901001 10/30/1997 10/30/1998 EACH OCCURRENCE $4,000,000
--------------------------------------
A [X] UMBRELLA FORM AGGREGATE $4,000,000
--------------------------------------
[ ] OTHER THAN UMBRELLA FORM Retention $ 10,000
- ----------------------------------------------------------------------------------------------------------------------------------
WORKERS COMPENSATION AND [ ] WC STATU- [ ] OTH-
EMPLOYERS' LIABILITY TORY LIMITS ER
--------------------------------------
THE PROPRIETOR/ EL EACH ACCIDENT $
PARTNERS/EXECUTIVE [ ] INCL --------------------------------------
OFFICERS ARE [ ] EXCL EL DISEASE - POLICY LIMIT $
--------------------------------------
EL DISEASE - EA EMPLOYEE $
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER
- ----------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS & LOCATIONS/VEHICLES/SPECIAL ITEMS
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ILLEGIBLE]
- --------------------------------------------------------------------------------
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION
DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL 10 DAYS WRITTEN NOTICE
TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO MAIL SUCH NOTICE
SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS
OR REPRESENTATIVES.
- --------------------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE ARTHUR J. GALLAGHER & CO.
/s/ BJ Mann
AUTHORIZED SIGNATURE
- --------------------------------------------------------------------------------
<PAGE>
WORKERS COMPENSATION AND EMPLOYERS LIABILITY
COVERAGE CERTIFICATE
Massachusetts High Technology Self-Insurance Group, Inc.,
c/o Management Services, Inc.
INFORMATION PAGE - Certificate Number WP8-11B-251272-018
Date of Issue: February 2, 1998
1. Name of Member SatCon Technology Corporation
Mailing Address: 161 First Street
Cambridge, MA 02142
Form of Business Organization: Corporation
Workplace: 161 First Street Cambridge, MA 02142
Additional Insureds: K & D Magmotor Corporation
Additional Workplaces: P.0. Box 872, Worcester, MA 01613
Additional Insureds: Beacon Power Company
Additonal Workplaces: 6D Gill Street, Woburn, MA 01803
2. The certificate period is from 1/1/98 to 1/1/99, standard time at the
member's mailing address.
3. A. Workers Compensation Coverage: Part One of the Certificate applies
to the Workers Compensation Law of the Commonwealth of
Massachusetts.
B. Employers Liability Coverage: Part Two of the Certificate applies to
the workplace(s) listed under Item 1.
The limits of our liability under Part Two are:
Bodily Injury by Accident: $1,000,000 each accident
Bodily Injury by Disease: $1,000,000 each employee
Bodily Injury by Disease: $1,000,000 coverage limit
C. This certificate includes the Information Page and the following
endorsements and schedules: WC & Employers Liability Coverage,
Miscellaneous Duties, Massachusetts Limits Liability For Employers
Premium Discount, Voluntary Compensation & Employer Liability,
Premium Discount Redetermination, WC & Employers Liability Coverage
Policy, WC & Employers Liability Coverage Maritime Exclusion,
Longshore & Harbor Workers' Compensation Coverage, and Foreign
Coverage
4. The premium for this certificate will be determined by our Manuals of Rule
Classifications, Rates and Rating Plans. All information required is
subject verification and change by audit.
5. Total Estimated Annual Premium: $29,361.09
MASSACHUSETTS HIGH TECHNOLOGY SELF-INSURANCE GROUP, INC.
/s/ Charles R. Fuller BY: /s/ J. C. Durand
- ----------------------------------- --------------------------
Clerk President
1
<PAGE>
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
$250,000.00 June 23, 1999
WOBURN, MA
FOR VALUE RECEIVED. Beacon Power Corporation, a Delaware corporation (the
"Company"), promises to pay to the order of Perseus Capital, L.L.C., or its
registered assigns (the "Holder"), the principal sum of Two Hundred Fifty
Thousand Dollars or such lesser amount as shall then equal the outstanding
principal amount hereof, together with interest from the date of issuance of
this Note on the unpaid principal balance hereof at a rate equal to twelve and
one-half percent (12 1/2%) per annum, computed on the basis of the actual number
of days elapsed and a year of 365 days; provided that if this Note is not repaid
in full on or prior to the Maturity Date, such interest rate shall increase
effective as of the close of business on the Maturity Date to fifteen percent
(15%) per annum. All unpaid principal, together with any accrued but unpaid
interest and other amounts payable hereunder, shall be due and payable on the
earlier of(i) September 23, 1999 (the "Maturity Date") or (ii) upon or after the
occurrence of an Event of Default (as defined below), when such amounts are
declared due and payable by the Holder or made automatically due and payable.
Interest on this Note shall be payable on the Maturity Date.
This Note is issued pursuant to the Note Purchase Agreement (the "Purchase
Agreement") dated as of June 22, 1999 by and among the Company, Perseus Capital,
L.L.C., Duquesne Enterprises, Micro Generation Technology Fund, L.L.C. and
SatCon Technology Corporation.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms have
the
<PAGE>
1. Definitions. As used in this Note, the following capitalized terms have
the following meanings:
(a) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York are authorized to be closed.
(b) "Bridge Financing" has the meaning specified in the Purchase
Agreement.
(c) "Bridge Securities" has the meaning specified in the Purchase
Agreement.
(d) "Obligations" means the principal, interest and other amounts
payable under this Note.
(e) "Transaction Documents" shall mean this Note, the Purchase
Agreement, and any other promissory note issued pursuant to the Purchase
Agreement.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on this Note or (ii) any interest or other payment required
under the terms of this Note or any other Transaction Document within five
Business Days of its due date; or
(b) Breaches of Other Covenants. The Company shall materially fail
to observe or to perform any other covenant, obligation, condition or agreement
contained in this Note or the other Transaction Documents, other than those
specified in Section 2(a) hereof, and such failure shall continue for 30 days
after written notice thereof to the Company; or
(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it or (vii) take any action for the purpose of effecting any
of the foregoing; or
(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered, or such case or proceeding shall not
be dismissed or discharged
-2-
<PAGE>
within 45 days of commencement; or
(e) Cross-Default. The Company or any of its subsidiaries shall
default under any bond, debenture, note or other evidence of indebtedness for
money borrowed (excluding any capital lease), under any guarantee or under any
mortgage, or indenture pursuant to which there shall be issued or by which there
shall be secured or evidenced any indebtedness for money borrowed by the Company
or any of its subsidiaries, whether such indebtedness now exists or shall
hereafter be created, which default shall have resulted in indebtedness of at
least $10,000 being due and payable prior to the date on which it would
otherwise become due and payable and shall not have been issued by the Company
or waived by the lender; or
(f) Undischarged Judgment. One or more judgments for the payment of
money in an amount in excess of $10,000 in the aggregate shall be rendered
against the Company or any of its subsidiaries (or any combination thereof) and
shall remain undischarged for a period of ten consecutive days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment.
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 2(c)
and 2(d) hereof) and at any time thereafter during the continuance of such Event
of Default, the Holder may declare all outstanding Obligations payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 2(c) and 2(d) hereof, immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any
other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
4. Collateral. To secure the Company's payment and performance of the
Obligations and to secure the Company's prompt, full and faithful performance
and observance of all of the provisions under this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest
in all of the Company's right, title and interest in and to the following,
whether now owned or hereafter acquired or existing and wherever located:
(a) All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(b) All accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind, and all
rights now or hereafter existing in and to all mortgages, security agreements,
leases or other contracts securing or otherwise relating to any of the same;
-3-
<PAGE>
(c) All intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable inventions
and (i) the inventions and improvements described and claimed therein; (ii) any
continuation, division, renewal, extension, substitute or reissue thereof or any
legal equivalent in a foreign country for the full term thereof or the terms for
which the same may be granted; (iii) all rights to income, royalties, profits,
awards, damages and other rights relating to said patents, applications and
inventions, including the right to sue for past, present and future infringement
and (iv) any other rights and benefits relating to said patents, applications
and inventions including any rights as a licensor or licensee of said patents,
applications and inventions (the "Patents");
(ii) all trademarks, trademark registrations, trademark
applications, service marks, service mark registrations and service mark
applications, trade names, fictitious business name, tradestyles, and the
goodwill underlying those trademarks and service marks and (i) any similar marks
or amendments, modifications and renewals thereof and the goodwill represented
by those and any legal equivalent in a foreign country for the full term or
terms for which the same may be granted; (ii) all rights to income, royalties,
profits, damages and other rights relating to said trademarks and service marks
including the right to sue for past, present or future infringement and (iii)
any other rights and benefits relating to said trademarks and service marks
including any rights as a licensor or licensee of said trademark and service
mark (the "Trademarks");
(iii) all copyrights, copyright registrations and copyright
applications, including without limitation those copyrights for computer
programs, computer databases, flow diagrams, maskworks, maskwork applications,
source codes and object codes, computer software, technical knowledge and
processes, trade secrets, know-how, customer lists, franchises, systems,
inventions, designs, blueprints, formal or informal licensing arrangements, and
all property embodying or incorporating such copyrights and (i) any similar
rights or amendments, modifications and renewals thereof and any legal
equivalent in a foreign country for the full term or terms for which the same
may be granted; (ii) all rights to income, past, present and future infringement
and (iii) any other rights and benefits relating to said copyrights (the
"Copyrights");
(d) all substitutions and replacements for, and all rights to
exploit, all of the foregoing;
(e) all books and records pertaining to any of the foregoing; and
(f) all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
The Company covenants and agrees with Holder that: (x) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (y) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by
-4-
<PAGE>
any means upon any Collateral will not bar realization upon any other
Collateral; and (z) the security interest hereby created is a continuing
security interest and will cover and secure the payment of all Obligations both
present and future of the Company to Holder pursuant to this Note and the other
Transaction Documents. The Company further covenants and agrees to take all
actions requested by the Holder to establish or perfect the security interest
granted under this Note.
5. Prepayment. This Note may be prepaid as a whole or in part at any time
prior to the Maturity Date upon at least ten Business Days prior written notice
to the Holder. Any such prepayment shall be applied first to the payment of
expenses due under this Note, second to interest accrued on this Note and third,
if the amount of prepayment exceeds the amount of all such expenses and accrued
interest, to the payment of principal of this Note. An exchange pursuant to
Section 6 hereof shall not constitute a prepayment for purposes of this Section
5.
6. Exchange.
(a) Exchange For Bridge Securities. Upon consummation of the Bridge
Financing, this Note shall automatically be exchanged for (without any action on
the part of the Company or the Holder) the number of Bridge Securities that an
investor in the Bridge Financing would acquire for an aggregate purchase price
equal to the sum of the then outstanding principal amount of this Note plus all
accrued but unpaid interest hereon.
(b) Mechanics and Effect of Exchange. No fractional shares of
capital stock of the Company shall be issued upon exchange of this Note. Upon
such exchange of all of the principal and accrued interest outstanding under
this Note, in lieu of the Company issuing any fractional shares to the Holder,
the Company shall pay to the Holder the amount of outstanding principal or
interest that is not so exchanged. Upon full exchange of this Note, the Company
shall be forever released from all its obligations and liabilities under this
Note.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified only as to the Holder of this Note upon the written consent of the
Company and the Holder.
9. Transfer of this Note or Securities Issuable on Conversion Hereof. This
Note may not be transferred in violation of any restrictive legend set forth
hereon. Each new Note issued upon transfer of this Note shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. Subject to the foregoing, transfers of this
Note shall be registered upon registration books maintained for such purpose by
or on behalf of the Company. Prior to presentation of this Note for registration
of transfer, the Company shall treat the registered holder hereof as the
-5-
<PAGE>
principles, the Company will treat, account and report the Note as debt and not
equity for accounting purposes and with respect to any returns filed with
federal, state or local tax authorities.
12. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in the Purchase Agreement or on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.
13. Expenses: Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflict of laws provisions
of the State of New York or of any other state. In the event of any dispute
among or between any of the parties to this Note arising out of the terms of
this Note, the parties hereby consent to the exclusive jurisdiction of the
federal and state courts located in the State of New York for resolution of such
dispute, and agree not to contest such exclusive jurisdiction or seek to
transfer any action relating to such dispute to any other jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
BEACON POWER COPORATION
By: /s/ William E. Stanton
----------------------
Name: William E. Stanton
---------------------
Title: President & CEO
--------------------
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<PAGE>
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
$125,000.00 June 23, 1999
WOBURN, MA
FOR VALUE RECEIVED, Beacon Power Corporation, a Delaware corporation (the
"Company"), promises to pay to the order of SatCon Technology Corporation, or
its registered assigns (the "Holder"), the principal sum of One Hundred Twenty
Five Thousand Dollars or such lesser amount as shall then equal the outstanding
principal amount hereof, together with interest from the date of issuance of
this Note on the unpaid principal balance hereof at a rate equal to twelve and
one-half percent (12 1/2%) per annum, computed on the basis of the actual number
of days elapsed and a year of 365 days; provided that if this Note is not repaid
in full on or prior to the Maturity Date, such interest rate shall increase
effective as of the close of business on the Maturity Date to fifteen percent
(15%) per annum. All unpaid principal, together with any accrued but unpaid
interest and other amounts payable hereunder, shall be due and payable on the
earlier of(i) September 23, 1999 (the "Maturity Date") or (ii) upon or after the
occurrence of an Event of Default (as defined below), when such amounts are
declared due and payable by the Holder or made automatically due and payable.
Interest on this Note shall be payable on the Maturity Date.
This Note is issued pursuant to the Note Purchase Agreement (the "Purchase
Agreement") dated as of June 22, 1999 by and among the Company, Perseus
Capital, L.L.C., Duquesne Enterprises, Micro Generation Technology
Fund, L.L.C. and SatCon Technology Corporation.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms have
the following meanings:
(a) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York are authorized to be closed.
<PAGE>
(b) "Bridge Financing" has the meaning specified in the Purchase
Agreement.
(c) "Bridge Securities" has the meaning specified in the Purchase
Agreement.
(d) "Obligations" means the principal, interest and other amounts
payable under this Note.
(e) "Transaction Documents" shall mean this Note, the Purchase
Agreement, and any other promissory note issued pursuant to the Purchase
Agreement.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on this Note or (ii) any interest or other payment required
under the terms of this Note or any other Transaction Document within five
Business Days of its due date; or
(b) Breaches of Other Covenants. The Company shall materially fail
to observe or to perform any other covenant, obligation, condition or agreement
contained in this Note or the other Transaction Documents, other than those
specified in Section 2(a) hereof, and such failure shall continue for 30 days
after written notice thereof to the Company; or
(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it or (vii) take any action for the purpose of effecting any
of the foregoing; or
(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered, or such case or proceeding shall not
be dismissed or discharged within 45 days of commencement; or
(e) Cross-Default. The Company or any of its subsidiaries shall
default under any bond, debenture, note or other evidence of indebtedness for
money borrowed (excluding any capital lease), under any guarantee or under any
mortgage, or indenture pursuant to which there shall be issued or by which there
shall be secured or evidenced any indebtedness for money borrowed by the Company
or any of its subsidiaries, whether such indebtedness now exists or
-2-
<PAGE>
shall hereafter be created, which default shall have resulted in indebtedness of
at least $10,000 being due and payable prior to the date on which it would
otherwise become due and payable and shall not have been issued by the Company
or waived by the lender; or
(f) Undischarged Judgment. One or more judgments for the payment of
money in an amount in excess of $10,000 in the aggregate shall be rendered
against the Company or any of its subsidiaries (or any combination thereof) and
shall remain undischarged for a period of ten consecutive days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment.
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 2(c)
and 2(d) hereof) and at any time thereafter during the continuance of such Event
of Default, the Holder may declare all outstanding Obligations payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 2(c) and 2(d) hereof, immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any
other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
4. Collateral. To secure the Company's payment and performance of the
Obligations and to secure the Company's prompt, full and faithful performance
and observance of all of the provisions under this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest
in all of the Company's right, title and interest in and to the following,
whether now owned or hereafter acquired or existing and wherever located:
(a) All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(b) All accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind, and all
rights now or hereafter existing in and to all mortgages, security agreements,
leases or other contracts securing or otherwise relating to any of the same;
(c) All intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable
inventions and (i) the inventions and improvements described and claimed
therein; (ii) any continuation, division, renewal, extension, substitute or
reissue thereof or any legal equivalent in a foreign country for the full term
thereof or the terms for which the same may be granted; (iii) all rights to
income, royalties, profits, awards, damages and other rights relating to said
patents, applications
-3-
<PAGE>
and inventions, including the right to sue for past, present and future
infringement and (iv) any other rights and benefits relating to said patents,
applications and inventions including any rights as a licensor or licensee of
said patents, applications and inventions (the "Patents");
(ii) all trademarks, trademark registrations, trademark
applications, service marks, service mark registrations and service mark
applications, trade names, fictitious business name, tradestyles, and the
goodwill underlying those trademarks and service marks and (i) any similar marks
or amendments, modifications and renewals thereof and the goodwill represented
by those and any legal equivalent in a foreign country for the full term or
terms for which the same may be granted; (ii) all rights to income, royalties,
profits, damages and other rights relating to said trademarks and service marks
including the right to sue for past, present or future infringement and (iii)
any other rights and benefits relating to said trademarks and service marks
including any rights as a licensor or licensee of said trademark and service
mark (the "Trademarks");
(iii) all copyrights, copyright registrations and
copyright applications, including without limitation those copyrights for
computer programs, computer databases, flow diagrams, maskworks. maskwork
applications, source codes and object codes, computer software, technical
knowledge and processes, trade secrets, know-how, customer lists, franchises,
systems, inventions, designs, blueprints, formal or informal licensing
arrangements, and all property embodying or incorporating such copyrights and
(i) any similar rights or amendments, modifications and renewals thereof and any
legal equivalent in a foreign country for the full term or terms for which the
same may be granted; (ii) all rights to income, past, present and future
infringement and (iii) any other rights and benefits relating to said copyrights
(the "Copyrights");
(d) all substitutions and replacements for, and all rights to
exploit, all of the foregoing;
(e) all books and records pertaining to any of the foregoing; and
(f) all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
The Company covenants and agrees with Holder that: (x) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (y) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by any means upon any
Collateral will not bar realization upon any other Collateral; and (z) the
security interest hereby created is a continuing security interest and will
cover and secure the payment of all Obligations both present and future of the
Company to Holder pursuant to this Note and the other Transaction Documents. The
Company further covenants and agrees to take all actions requested by the Holder
to establish or perfect the security interest granted under this Note.
5. Prepayment. This Note may be prepaid as a whole or in part at any time
prior to
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<PAGE>
the Maturity Date upon at least ten Business Days prior written notice to the
Holder. Any such prepayment shall be applied first to the payment of expenses
due under this Note, second to interest accrued on this Note and third, if the
amount of prepayment exceeds the amount of all such expenses and accrued
interest, to the payment of principal of this Note. An exchange pursuant to
Section 6 hereof shall not constitute a prepayment for purposes of this Section
5.
6. Exchange.
(a) Exchange For Bridge Securities. Upon consummation of the Bridge
Financing, this Note shall automatically be exchanged for (without any action on
the part of the Company or the Holder) the number of Bridge Securities that an
investor in the Bridge Financing would acquire for an aggregate purchase price
equal to the sum of the then outstanding principal amount of this Note plus all
accrued but unpaid interest hereon.
(b) Mechanics and Effect of Exchange. No fractional shares of
capital stock of the Company shall be issued upon exchange of this Note. Upon
such exchange of all of the principal and accrued interest outstanding under
this Note, in lieu of the Company issuing any fractional shares to the Holder,
the Company shall pay to the Holder the amount of outstanding principal or
interest that is not so exchanged. Upon full exchange of this Note, the Company
shall be forever released from all its obligations and liabilities under this
Note.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified only as to the Holder of this Note upon the written consent of the
Company and the Holder.
9. Transfer of this Note or Securities Issuable on Conversion Hereof. This
Note may not be transferred in violation of any restrictive legend set forth
hereon. Each new Note issued upon transfer of this Note shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. Subject to the foregoing, transfers of this
Note shall be registered upon registration books maintained for such purpose by
or on behalf of the Company. Prior to presentation of this Note for registration
of transfer, the Company shall treat the registered holder hereof as the owner
and holder of this Note for the purpose of receiving all payments of principal
and interest hereon and for all other purposes whatsoever, whether or not this
Note shall be overdue and the Company shall not be affected by notice to the
contrary.
10. Assignment by the Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by the Company, without the prior written
consent of the Holder.
11. Treatment of Note. To the extent permitted by generally accepted
accounting
-5-
<PAGE>
principles, the Company will treat, account and report the Note as debt and not
equity for accounting purposes and with respect to any returns filed with
federal, state or local tax authorities.
12. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in the Purchase Agreement or on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.
13. Expenses; Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflict of laws provisions
of the State of New York or of any other state. In the event of any dispute
among or between any of the parties to this Note arising out of the terms of
this Note, the parties hereby consent to the exclusive jurisdiction of the
federal and state courts located in the State of New York for resolution of such
dispute, and agree not to contest such exclusive jurisdiction or seek to
transfer any action relating to such dispute to any other jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
BEACON POWER COPORATION
By: /s/ William E. Stanton
----------------------
Name: William E. Stanton
---------------------
Title: President & CEO
--------------------
-6-
<PAGE>
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
$50,000.00 June 23, 1999
WOBURN, MA
FOR VALUE RECEIVED, Beacon Power Corporation, a Delaware corporation (the
"Company"), promises to pay to the order of Duquesne Enterprises, or its
registered assigns (the "Holder"), the principal sum of Fifty Thousand Dollars
or such lesser amount as shall then equal the outstanding principal amount
hereof, together with interest from the date of issuance of this Note on the
unpaid principal balance hereof at a rate equal to twelve and one-half percent
(12 1/2%) per annum, computed on the basis of the actual number of days elapsed
and a year of 365 days; provided that if this Note is not repaid in full on or
prior to the Maturity Date, such interest rate shall increase effective as of
the close of business on the Maturity Date to fifteen percent (15%) per annum.
All unpaid principal, together with any accrued but unpaid interest and other
amounts payable hereunder, shall be due and payable on the earlier of(i)
September 23, 1999 (the "Maturity Date") or (ii) upon or after the occurrence of
an Event of Default (as defined below), when such amounts are declared due and
payable by the Holder or made automatically due and payable. Interest on this
Note shall be payable on the Maturity Date.
This Note is issued pursuant to the Note Purchase Agreement (the "Purchase
Agreement") dated as of June 22, 1999 by and among the Company, Perseus Capital,
L.L.C., Duquesne Enterprises, Micro Generation Technology Fund, L.L.C. and
SatCon Technology Corporation.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
<PAGE>
within 45 days of commencement; or
(e) Cross-Default. The Company or any of its subsidiaries shall
default under any bond, debenture, note or other evidence of indebtedness for
money borrowed (excluding any capital lease), under any guarantee or under any
mortgage, or indenture pursuant to which there shall be issued or by which there
shall be secured or evidenced any indebtedness for money borrowed by the Company
or any of its subsidiaries, whether such indebtedness now exists or shall
hereafter be created, which default shall have resulted in indebtedness of at
least $10,000 being due and payable prior to the date on which it would
otherwise become due and payable and shall not have been issued by the Company
or waived by the lender; or
(f) Undischarged Judgment. One or more judgments for the payment of
money in an amount in excess of $10,000 in the aggregate shall be rendered
against the Company or any of its subsidiaries (or any combination thereof) and
shall remain undischarged for a period of ten consecutive days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment.
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 2(c)
and 2(d) hereof) and at any time thereafter during the continuance of such Event
of Default, the Holder may declare all outstanding Obligations payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 2(c) and 2(d) hereof, immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any
other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
4. Collateral. To secure the Company's payment and performance of the
Obligations and to secure the Company's prompt, full and faithful performance
and observance of all of the provisions under this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest
in all of the Company's right, title and interest in and to the following,
whether now owned or hereafter acquired or existing and wherever located:
(a) All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(b) All accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind, and all
rights now or hereafter existing in and to all mortgages, security agreements,
leases or other contracts securing or otherwise relating to any of the same;
-3-
<PAGE>
(c) All intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable
inventions and (i) the inventions and improvements described and claimed
therein; (ii) any continuation, division, renewal, extension, substitute or
reissue thereof or any legal equivalent in a foreign country for the full term
thereof or the terms for which the same may be granted; (iii) all rights to
income, royalties, profits, awards, damages and other rights relating to said
patents, applications and inventions, including the right to sue for past,
present and future infringement and (iv) any other rights and benefits relating
to said patents, applications and inventions including any rights as a licensor
or licensee of said patents, applications and inventions (the "Patents");
(ii) all trademarks, trademark registrations, trademark
applications, service marks, service mark registrations and service mark
applications, trade names, fictitious business name, tradestyles, and the
goodwill underlying those trademarks and service marks and (i) any similar marks
or amendments, modifications and renewals thereof and the goodwill represented
by those and any legal equivalent in a foreign country for the full term or
terms for which the same may be granted; (ii) all rights to income, royalties,
profits, damages and other rights relating to said trademarks and service marks
including the right to sue for past, present or future infringement and (iii)
any other rights and benefits relating to said trademarks and service marks
including any rights as a licensor or licensee of said trademark and service
mark (the "Trademarks");
(iii) all copyrights, copyright registrations and
copyright applications, including without limitation those copyrights for
computer programs, computer databases, flow diagrams, maskworks, maskwork
applications, source codes and object codes, computer software, technical
knowledge and processes, trade secrets, know-how, customer lists, franchises,
systems, inventions, designs, blueprints, formal or informal licensing
arrangements, and all property embodying or incorporating such copyrights and
(i) any similar rights or amendments, modifications and renewals thereof and any
legal equivalent in a foreign country for the full term or terms for which the
same may be granted; (ii) all rights to income, past, present and future
infringement and (iii) any other rights and benefits relating to said copyrights
(the "Copyrights");
(d) all substitutions and replacements for, and all rights to
exploit, all of the foregoing;
(e) all books and records pertaining to any of the foregoing; and
(f) all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
The Company covenants and agrees with Holder that: (x) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (y) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by
-4-
<PAGE>
any means upon any Collateral will not bar realization upon any other
Collateral; and (z) the security interest hereby created is a continuing
security interest and will cover and secure the payment of all Obligations both
present and future of the Company to Holder pursuant to this Note and the other
Transaction Documents. The Company further covenants and agrees to take all
actions requested by the Holder to establish or perfect the security interest
granted under this Note.
5. Prepayment. This Note may be prepaid as a whole or in part at any time
prior to the Maturity Date upon at least ten Business Days prior written notice
to the Holder. Any such prepayment shall be applied first to the payment of
expenses due under this Note, second to interest accrued on this Note and third,
if the amount of prepayment exceeds the amount of all such expenses and accrued
interest, to the payment of principal of this Note. An exchange pursuant to
Section 6 hereof shall not constitute a prepayment for purposes of this Section
5.
6. Exchange.
(a) Exchange For Bridge Securities. Upon consummation of the Bridge
Financing, this Note shall automatically be exchanged for (without any action on
the part of the Company or the Holder) the number of Bridge Securities that an
investor in the Bridge Financing would acquire for an aggregate purchase price
equal to the sum of the then outstanding principal amount of this Note plus all
accrued but unpaid interest hereon.
(b) Mechanics and Effect of Exchange. No fractional shares of
capital stock of the Company shall be issued upon exchange of this Note. Upon
such exchange of all of the principal and accrued interest outstanding under
this Note, in lieu of the Company issuing any fractional shares to the Holder,
the Company shall pay to the Holder the amount of outstanding principal or
interest that is not so exchanged. Upon full exchange of this Note, the Company
shall be forever released from all its obligations and liabilities under this
Note.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified only as to the Holder of this Note upon the written consent of the
Company and the Holder.
9. Transfer of this Note or Securities Issuable on Conversion Hereof. This
Note may not be transferred in violation of any restrictive legend set forth
hereon. Each new Note issued upon transfer of this Note shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. Subject to the foregoing, transfers of this
Note shall be registered upon registration books maintained for such purpose by
or on behalf of the Company. Prior to presentation of this Note for registration
of transfer, the Company shall treat the registered holder hereof as the
-5-
<PAGE>
principles, the Company will treat, account and report the Note as debt and not
equity for accounting purposes and with respect to any returns filed with
federal, state or local tax authorities.
12. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in the Purchase Agreement or on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.
13. Expenses; Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflict of laws provisions
of the State of New York or of any other state. In the event of any dispute
among or between any of the parties to this Note arising out of the terms of
this Note, the parties hereby consent to the exclusive jurisdiction of the
federal and state courts located in the State of New York for resolution of such
dispute, and agree not to contest such exclusive jurisdiction or seek to
transfer any action relating to such dispute to any other jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
BEACON POWER COPORATION
By: /s/ William E. Stanton
----------------------
Name: William E. Stanton
---------------------
Title: President & CEO
--------------------
-6-
<PAGE>
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
$50,000.00 June 23,1999
WOBURN, MA
FOR VALUE RECEIVED, Beacon Power Corporation, a Delaware corporation (the
"Company"), promises to pay to the order of Micro Generation Technology Fund,
L.L.C., or its registered assigns (the "Holder"), the principal sum of Fifty
Thousand Dollars or such lesser amount as shall then equal the outstanding
principal amount hereof, together with interest from the date of issuance of
this Note on the unpaid principal balance hereof at a rate equal to twelve and
one-half percent (12 1/2%) per annum, computed on the basis of the actual number
of days elapsed and a year of 365 days; provided that if this Note is not repaid
in full on or prior to the Maturity Date, such interest rate shall increase
effective as of the close of business on the Maturity Date to fifteen percent
(15%) per annum. All unpaid principal, together with any accrued but unpaid
interest and other amounts payable hereunder, shall be due and payable on the
earlier of (i) September 23, 1999 (the "Maturity Date") or (ii) upon or after
the occurrence of an Event of Default (as defined below), when such amounts are
declared due and payable by the Holder or made automatically due and payable.
Interest on this Note shall be payable on the Maturity Date.
This Note is issued pursuant to the Note Purchase Agreement (the "Purchase
Agreement") dated as of June 22, 1999 by and among the Company, Perseus Capital,
L.L.C., Duquesne Enterprises, Micro Generation Technology Fund, L.L.C. and
SatCon Technology Corporation.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
<PAGE>
1. Definitions. As used in this Note, the following capitalized terms have
the following meanings:
(a) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York are authorized to be closed.
(b) "Bridge Financing" has the meaning specified in the Purchase
Agreement.
(c) "Bridge Securities" has the meaning specified in the Purchase
Agreement.
(d) "Obligations" means the principal, interest and other amounts
payable under this Note.
(e) "Transaction Documents" shall mean this Note, the Purchase
Agreement, and any other promissory note issued pursuant to the Purchase
Agreement.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on this Note or (ii) any interest or other payment required
under the terms of this Note or any other Transaction Document within five
Business Days of its due date; or
(b) Breaches of Other Covenants. The Company shall materially fail
to observe or to perform any other covenant, obligation, condition or agreement
contained in this Note or the other Transaction Documents, other than those
specified in Section 2(a) hereof, and such failure shall continue for 30 days
after written notice thereof to the Company; or
(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it or (vii) take any action for the purpose of effecting any
of the foregoing; or
(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered, or such case or proceeding shall not
be dismissed or discharged
-2-
<PAGE>
within 45 days of commencement; or
(e) Cross-Default. The Company or any of its subsidiaries shall
default under any bond, debenture, note or other evidence of indebtedness for
money borrowed (excluding any capital lease), under any guarantee or under any
mortgage, or indenture pursuant to which there shall be issued or by which there
shall be secured or evidenced any indebtedness for money borrowed by the Company
or any of its subsidiaries, whether such indebtedness now exists or shall
hereafter be created, which default shall have resulted in indebtedness of at
least $10,000 being due and payable prior to the date on which it would
otherwise become due and payable and shall not have been issued by the Company
or waived by the lender; or
(f) Undischarged Judgment. One or more judgments for the payment of
money in an amount in excess of $10,000 in the aggregate shall be rendered
against the Company or any of its subsidiaries (or any combination thereof) and
shall remain undischarged for a period of ten consecutive days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment.
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 2(c)
and 2(d) hereof) and at any time thereafter during the continuance of such Event
of Default, the Holder may declare all outstanding Obligations payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 2(c) and 2(d) hereof, immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any
other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
4. Collateral. To secure the Company's payment and performance of the
Obligations and to secure the Company's prompt, full and faithful performance
and observance of all of the provisions tinder this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest
in all of the Company's right, title and interest in and to the following,
whether now owned or hereafter acquired or existing and wherever located:
(a) All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(b) All accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind, and all
rights now or hereafter existing in and to all mortgages, security agreements,
leases or other contracts securing or otherwise relating to any of the same;
-3-
<PAGE>
(c) All intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable
inventions and (i) the inventions and improvements described and claimed
therein; (ii) any continuation, division, renewal, extension, substitute or
reissue thereof or any legal equivalent in a foreign country for the full term
thereof or the terms for which the same may be granted; (iii) all rights to
income, royalties, profits, awards, damages and other rights relating to said
patents, applications and inventions, including the right to sue for past,
present and future infringement and (iv) any other rights and benefits relating
to said patents, applications and inventions including any rights as a licensor
or licensee of said patents, applications and inventions (the "Patents");
(ii) all trademarks, trademark registrations, trademark
applications, service marks, service mark registrations and service mark
applications, trade names, fictitious business name, tradestyles, and the
goodwill underlying those trademarks and service marks and (i) any similar marks
or amendments, modifications and renewals thereof and the goodwill represented
by those and any legal equivalent in a foreign country for the full term or
terms for which the same may be granted; (ii) all rights to income, royalties,
profits, damages and other rights relating to said trademarks and service marks
including the right to sue for past, present or future infringement and (iii)
any other rights and benefits relating to said trademarks and service marks
including any rights as a licensor or licensee of said trademark and service
mark (the "Trademarks");
(iii) all copyrights, copyright registrations and
copyright applications, including without limitation those copyrights for
computer programs, computer databases, flow diagrams, maskworks, maskwork
applications, source codes and object codes, computer software, technical
knowledge and processes, trade secrets, know-how, customer lists, franchises,
systems, inventions, designs, blueprints, formal or informal licensing
arrangements, and all property embodying or incorporating such copyrights and
(i) any similar rights or amendments, modifications and renewals thereof and any
legal equivalent in a foreign country for the full term or terms for which the
same may be granted; (ii) all rights to income, past, present and future
infringement and (iii) any other rights and benefits relating to said copyrights
(the "Copyrights");
(d) all substitutions and replacements for, and all rights to
exploit, all o the foregoing;
(e) all books and records pertaining to any of the foregoing; and
(f) all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
The Company covenants and agrees with Holder that: (x) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (y) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by
-4-
<PAGE>
any means upon any Collateral will not bar realization upon any other
Collateral; and (z) the security interest hereby created is a continuing
security interest and will cover and secure the payment of all Obligations both
present and future of the Company to Holder pursuant to this Note and the other
Transaction Documents. The Company further covenants and agrees to take all
actions requested by the Holder to establish or perfect the security interest
granted under this Note.
5. Prepayment. This Note may be prepaid as a whole or in part at any time
prior to the Maturity Date upon at least ten Business Days prior written notice
to the Holder. Any such prepayment shall be applied first to the payment of
expenses due under this Note, second to interest accrued on this Note and third,
if the amount of prepayment exceeds the amount of all such expenses and accrued
interest, to the payment of principal of this Note. An exchange pursuant to
Section 6 hereof shall not constitute a prepayment for purposes of this Section
5.
6. Exchange.
(a) Exchange For Bridge Securities. Upon consummation of the Bridge
Financing, this Note shall automatically be exchanged for (without any action on
the part of the Company or the Holder) the number of Bridge Securities that an
investor in the Bridge Financing would acquire for an aggregate purchase price
equal to the sum of the then outstanding principal amount of this Note plus all
accrued but unpaid interest hereon.
(b) Mechanics and Effect of Exchange. No fractional shares of
capital stock of the Company shall be issued upon exchange of this Note. Upon
such exchange of all of the principal and accrued interest outstanding under
this Note, in lieu of the Company issuing any fractional shares to the Holder,
the Company shall pay to the Holder the amount of outstanding principal or
interest that is not so exchanged. Upon full exchange of this Note, the Company
shall be forever released from all its obligations and liabilities tinder this
Note.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified only as to the Holder of this Note upon the written consent of the
Company and the Holder.
9. Transfer of this Note or Securities Issuable on Conversion Hereof. This
Note may not be transferred in violation of any restrictive legend set forth
hereon. Each new Note issued upon transfer of this Note shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. Subject to the foregoing, transfers of this
Note shall be registered upon registration books maintained for such purpose by
or on behalf of the Company. Prior to presentation of this Note for registration
of transfer, the Company shall treat the registered holder hereof as the
-5-
<PAGE>
principles, the Company will treat, account and report the Note as debt and not
equity for accounting purposes and with respect to any returns filed with
federal, state or local tax authorities.
12. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in the Purchase Agreement or on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.
13. Expenses; Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflict of laws provisions
of the State of New York or of any other state. In the event of any dispute
among or between any of the parties to this Note arising out of the terms of
this Note, the parties hereby consent to the exclusive jurisdiction of the
federal and state courts located in the State of New York for resolution of such
dispute, and agree not to contest such exclusive jurisdiction or seek to
transfer any action relating to such dispute to any other jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
BEACON POWER COPORATION
By: /s/ William E. Stanton
----------------------
Name: William E. Stanton
---------------------
Title: President & CEO
--------------------
-6-
<PAGE>
EXHIBIT 10.23
NOTE AND WARRANT PURCHASE AGREEMENT
NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement") made and entered
into as of August 2, 1999, by and among Beacon Power Corporation, a Delaware
corporation (the "Company"), Perseus Capital, L.L.C., a Delaware limited
liability company ("Perseus"), Duquesne Enterprises, Inc. a Pennsylvania
corporation ("Duquesne"), Micro Generation Technology Fund, L.L.C., a Delaware
limited liability company ("Micro"), and SatCon Technology Corporation, a
Delaware corporation ("SatCon" and together with Perseus, Duquesne and Micro,
the "Purchasers"). Certain capitalized terms used in this Agreement are defined
in Exhibit A attached hereto.
Recitals
A. Perseus, Duquesne and Micro acquired shares of the Company's Class D
Preferred Stock pursuant to a Securities Purchase Agreement dated as of October
23, 1998 by and among the Company and the Purchasers (the "October Agreement").
B. The Purchasers acquired promissory notes from the Company on June 22, 1999
and July 6, 1999 (the "Tranche One Notes") pursuant to a Note Purchase Agreement
between the Company and the Purchasers dated June 22, 1999 (the "Tranche One
Note Purchase Agreement").
C. The Company needs funds to operate and expand its business operations and in
furtherance thereof desires to amend and restate the Tranche One Notes held by
each of the Purchasers, to read substantially as attached hereto as Exhibit B-1,
with the respective principal amounts specified herein (the "Notes"), and the
Purchasers are willing to acquire the Notes, all on the terms and subject to the
conditions set forth in this Agreement.
D. To induce the Purchasers to acquire the Notes, the Company has agreed to
issue to each Purchaser, under the circumstances specified herein, a warrant to
acquire shares of the Company's Class E Preferred Stock, the terms and
conditions of which will be negotiated at the time the conversion of the Notes
take place (the "Class E Preferred Stock"), substantially in the form attached
hereto as Exhibit C (the "Warrants").
Agreement
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:
1. Amendment, Restatement and Issuance of Securities. On the terms and
subject to the conditions hereof:
(a) At the First Closing (as defined below), the Company shall
amend, restate and issue and sell to each of the Purchasers, and each of the
Purchasers shall purchase from the Company, a Note with the amended principal
amount specified below for the net purchase price shown below, along with a
Warrant for the type of shares as specified in the Warrant, in such number of
shares as is specified below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Purchaser Tranche Amended/Restated Net Purchase Compute Number of Shares Covered
One Note Principal Amount Price by Warrant by dividing Warrant Price
Amount in Warrant into the Amount Shown Below:
(col. 1) (col. 2) (col. 3) (col. 4) (col. 5)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Perseus $250,000 $1,350,000.00 $1,100,000.00 $337,500.00
- --------------------------------------------------------------------------------------------------
SatCon 250,000 333,333.33 83,333.34 83,333.34
- --------------------------------------------------------------------------------------------------
Micro 50,000 150,000.00 100,000.00 37,500.00
- --------------------------------------------------------------------------------------------------
Duquesne 50,000 500,000.00 450,000.00 125,000.00
- --------------------------------------------------------------------------------------------------
Total: 600,000 2,333,333.33 1,733,333.34 583,333.34
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(b) At each Subsequent Closing (as defined below), the Company shall
issue and sell to SatCon, and SatCon shall purchase from the Company, a Note in
the form attached as Exhibit B-2, with the principal amount of $333,333.33 for
the price of $333,333.33 and a Warrant to purchase a number of shares computed
by dividing $83,333.34, by the Warrant Price defined in the Warrant, and
otherwise on terms as specified in such Warrant.
(c) At the Closing, the Purchasers shall surrender the Tranche One
Notes and in consideration thereof the new Notes shall be issued.
2. Closings.
2.1 Closings. The sales and purchases contemplated by Section 1 of this
Agreement shall take place at a closing (the "First Closing") to be held at the
offices of Arnold & Porter, 555 Twelfth Street, N.W. Washington DC as promptly
as practicable on or after the date hereof, or at such other time, date and
place as are mutually agreeable to the Company and to the Purchasers and at two
(2) subsequent closings (the "Subsequent Closings" and with the First Closing,
the "Closings") to be held at the principal executive offices of the Company at
10 a.m. local time no earlier than August 4 and October 1, 1999, respectively,
and no later than the earliest of (a) October 15, 1999 and November 15, 1999,
respectively, (b) two days after SatCon closes on a new equity or debt
securities financing after the date hereof, or (c) at such other times, dates
and places as are mutually agreeable to the Company and to SatCon. The date of
the First Closing is hereinafter referred to as the "First Closing Date" and the
date of a Subsequent Closing is hereinafter referred to as a "Subsequent Closing
Date."
2.2 Deliveries. At the First Closing (and in the case of SatCon, at each
Subsequent Closing), the Company will deliver to each Purchaser the Note and
Warrant to be issued to such Purchaser at the First Closing, in each case, fully
executed by the Company, and each Purchaser will deliver to the Company the
purchase price therefor by wire transfer thereof to the Company Account. The
parties shall also deliver all documents required to be delivered at the First
Closing pursuant to Section 2.3 hereof. Additionally, as provided in the Tranche
One Note Purchase Agreement, at the First Closing, the Tranche One Notes shall
be cancelled in exchange for Notes in substantially the form attached hereto as
Exhibit B-1.
2.3 Conditions to First Closing.
(a) Conditions to Obligations of the Purchaser. The obligations of
the Purchasers to purchase the Notes and Warrants at the First Closing are
subject to the fulfillment on or prior to the First Closing Date of the
following conditions, any of which may be waived by the Purchasers:
(i) Representations and Warranties Correct; Performance
of Obligations. The representations and warranties made by the Company in
Section 3 hereof shall have been true and correct in all material respects when
made, and shall be true and correct in all material respects on the First
Closing Date with the same force and effect as if they had been made on and as
of such date, and the Company shall have performed all obligations, covenants
and agreements herein required to be performed by it on or prior to the First
Closing.
(ii) Consents and Waivers. The Company shall have
obtained any and all consents (including all governmental or regulatory
consents, approvals or authorizations required in connection with the valid
execution and delivery of this Agreement and the Related Agreements), permits
and waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement or any Related Agreement.
(iii) Perfection of Security Interests. The Company
shall have taken all actions requested by the Purchasers to perfect the security
interests granted under the Notes.
(iv) Compliance Certificate. The Company shall have
delivered to the Purchasers a certificate, executed by its President, dated as
of the First Closing Date, certifying the fulfillment of the conditions
specified in subsections (a)(i) and (ii) of this Section 2.3.
-2-
<PAGE>
(v) Officers' Certificate. The Company shall have
delivered to the Purchasers a certificate, executed by one of its Officers,
dated as of the First Closing Date, certifying the authenticity of attached
copies of resolutions of its Board of Directors approving the transactions
contemplated hereby and by the Related Agreements.
(vi) Other Purchasers. The other Purchasers shall have
simultaneously consummated their purchases of Notes and Warrants at the First
Closing in accordance with the terms hereof.
(vii) Other Documents. The Purchasers shall have
received such other certificates and documents as they shall have reasonably
requested, including an opinion of Edwards & Angel, counsel to the Company, in
reasonable form and content.
(b) Conditions to Obligations of the Company. The Company's
obligations to issue and sell the Notes and Warrants at the First Closing are
subject to the fulfillment on or prior to the First Closing Date of the
following condition, which may be waived by the Company: the representations and
warranties made by the Purchasers in Section 5 hereof shall have been true and
correct when made, and shall be true and correct on such First Closing Date with
the same force and effect as if they had been made on and as of such date.
2.4 Conditions to Subsequent Closings. The obligations of the
Company and SatCon to consummate the issuance, sale and purchase of the Notes
and Warrants to be issued, sold and purchased at the Subsequent Closings shall
be subject to satisfaction of the following condition: the First Closing shall
have occurred and the Notes and Warrants to be issued, sold and purchased at the
First Closing shall have been issued, sold and purchased. The obligations of the
Company to consummate the issuance and sale of the Notes and Warrants to be
issued and sold at the Subsequent Closings shall also be subject to satisfaction
of the following additional condition: the representations and warranties made
by the SatCon in Section 5 hereof shall have been true and correct when made,
and shall be true and correct on such Subsequent Closing Dates with the same
force and effect as if they had been made on and as of such date.
2.5 Registration Rights. The holder of a Warrant for the issue of
shares of Class E Preferred Stock shall obtain registration rights (relating to
the registration of the Common Shares issuable upon conversion of the Class F
Preferred under the Securities Act of 1933) on a basis consistent with the
registration rights which are obtained by other purchasers of such Class E
Preferred Stock, so long as the holder signs the appropriate registration rights
agreement relating thereto. Moreover, if the Warrant becomes exercisable into
shares other than Class E Preferred, measures will be taken so that the Common
Shares issued upon exercise of the Warrant (or the Common Shares issued upon
conversion of whatever convertible security may be issuable upon such exercise)
will constitute "Registrable Securities" under the Registration Rights Statement
attached as Exhibit F to the October Agreement.
3. Representations and Warranties Relating to the Company. Except as
otherwise set forth in the Disclosure Schedule attached as Exhibit I to the
October Agreement, as supplemented by the Supplemental Disclosure Schedule
attached hereto as Exhibit D (collectively, the "Company Disclosure Schedule"),
the Company represents and warrants to the Purchasers as set forth below.
3.1 Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has full corporate power and authority to carry
on its business as now conducted and as it is proposed to be conducted, and is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the nature of its business or properties makes such
qualification or licensing necessary, except where the failure to so qualify or
be licensed would not have a Material Adverse Effect.
3.2 Power. Authorization and Validity. The Company has the corporate
power, legal capacity and corporate authority to enter into and perform its
obligations under this Agreement and each of the Related Agreements to which it
is a party. The execution, delivery and performance by the Company of this
Agreement and each of the Related Agreements to which it is a party have been
duly and validly approved and authorized by all necessary corporate action on
its part. No authorization, consent, or approval, governmental or otherwise, is
-3-
<PAGE>
necessary to enable the Company to enter into the Agreement or any Related
Agreement to which it is a party and to perform its obligations hereunder or
thereunder. This Agreement is, and each of the Related Agreements to which it is
a party when executed and delivered by the Company will be, the valid and
binding obligations of the Company, enforceable in accordance with their
respective terms. Upon their issuance pursuant to the Warrants, all shares of
Common Stock issued pursuant to the Warrants shall be duly authorized, validly
issued, fully paid and nonassessable.
3.3 No Violation of Existing Agreements. Neither the execution and
delivery of this Agreement or any Related Agreement to which it is a party nor
the consummation of the transactions or performance of the Company's obligations
contemplated hereby or thereby will conflict with, result in a material breach
or violation of, or cause a default under, any provision of the Company's
Certificate of Incorporation or Bylaws, each as is currently in effect, any
instrument, contract or agreement that is material to the business of the
Company or any judgment, writ, decree, order, law, statute, ordinance, rule or
regulation applicable to the Company.
3.4 Financial Statements.
(a) The Company's unaudited consolidated balance sheets
as of December 31, 1998 and June 30, 1999 and statements of operations and cash
flows for the year ended December 31, 1998 and the six months ended June 30,
1999, including the notes thereto (collectively the "Company Financial
Statements"), all of which are attached to the Company Disclosure Schedule (or
have previously been provided to the Purchasers), have been prepared in all
material respects in accordance with GAAP (except that the June 30, 1999
statements may not contain all footnotes required by GAAP). The Company
Financial Statements have been prepared in accordance with the books and records
of the Company and present fairly in all material respects the financial
position, results of operations, cash flows and equity transactions of the
Company as of and for the periods ending on their dates. Except and to the
extent reflected or reserved against in the Company Financial Statements, the
Company does not have, as of the dates of the Company Financial Statements, any
liabilities or obligations (absolute or contingent) of a nature required to be
or customarily reflected in a balance sheet (or the notes thereto) prepared in
accordance with GAAP. The reserves, if any, reflected on the Company Financial
Statements are adequate in light of the contingencies with respect to which they
are made. There has been no material change in the Company's accounting policies
except as described in the notes to the Company Financial Statements.
(b) The Company has no debts, liabilities, or
obligations in a material amount, either individually or in the aggregate, of
any nature, whether accrued, absolute, contingent, or otherwise, and whether due
or to become due, that is not reflected or reserved against in the Company
Financial Statements. All material debts, liabilities, and obligations incurred
after the date of the Company Financial Statements were incurred in the ordinary
course of business, and are usual and normal in amount, both individually and in
the aggregate. Since December 31, 1998, the Company has not experienced a
Material Adverse Change.
3.5 No Brokers. Neither the Company nor, to the Company's knowledge,
any Company shareholder is obligated for the payment of fees or expenses of any
broker or finder in connection with the origin, negotiation or execution of this
Agreement or any Related Agreement or in connection with any transaction
contemplated hereby or thereby.
3.6 Disclosure. The statements by the Company contained in this
Agreement, the exhibits hereto, and the certificates and documents required to
be delivered by the Company to the Purchasers under this Agreement, taken as a
whole, do not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements contained herein and
therein not misleading in light of the circumstances under which such statements
were made.
3.7 Securities Act. Subject to the accuracy of the Purchaser's
representations in Section 5 hereof, the offer, sale and issuance of the Notes
and the Warrants in conformity with the terms of this Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended, and the qualification or registration
requirements of any applicable state securities laws as such laws exist on the
date hereof.
-4-
<PAGE>
3.8 Other Representations and Warranties. The representations and
warranties of the Company set forth in Section 3 of the October Agreement are
true and correct as of the date hereof in all material respects.
4. [INTENTIONALLY OMITTED.]
5. Representations and Warranties of the Purchasers and Restrictions on
Transfer Imposed by the Securities Act of 1933 and Applicable State Securities
Laws.
5.1 Representations and Warranties by the Purchaser. Each Purchaser
represents and warrants to the Company severally as to itself alone and not
jointly as follows:
(a) The Note and Warrant to be issued to such Purchaser at
each Closing will be acquired by such Purchaser for its own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act
of 1933, as amended (the "Securities Act"), or applicable state securities laws.
(b) Such Purchaser understands that (i) the Notes and Warrants
to be issued to it at such Closing have not been, and upon their issuance will
not be, registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act pursuant to Section 4(2) thereof and have not been, and upon
their issuance will not be, qualified under any state securities laws on the
grounds that the offering and sale of securities contemplated by this Agreement
are exempt from registration thereunder, and (ii) the Company's reliance on such
exemptions is predicated on such Purchaser's representations set forth herein.
Such Purchaser understands that the resale of its Notes and Warrants may be
restricted indefinitely, unless a subsequent disposition thereof is registered
under the Securities Act and registered under any state securities law or is
exempt from such registration.
(c) Such Purchaser is an "Accredited Investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act. Such
Purchaser is able to bear the economic risk of the purchase of its Notes and
Warrant pursuant to the terms of this Agreement, including a complete loss of
the Purchaser's investment therein.
(d) Such Purchaser has the full right, power and authority to
enter into and perform such Purchaser's obligations under this Agreement and
each Related Agreement to which it is or becomes a party, and this Agreement and
each Related Agreement to which it is or becomes a party constitute valid and
binding obligations of such Purchaser enforceable in accordance with their
terms.
(e) No consent, approval or authorization of or designation,
declaration or filing with any Governmental Body on the part of such Purchaser
is required in connection with the valid execution and delivery of this
Agreement or any Related Agreement to which it or becomes a party.
5.2 Legend. The Notes and any Warrants may be endorsed with the
legends appearing on the first page thereof. The Company may instruct its
transfer agent not to register the transfer of any Note, unless the conditions
specified in the foregoing legends are satisfied.
5.3 Removal of Legend and Transfer Restrictions.
Any legend endorsed on any Note or Warrant pursuant to Section
5.2 relating to compliance with federal or state securities laws and the stop
transfer instructions with respect to the Notes and the Warrants relating
thereto shall be removed and the Company shall issue a new promissory note or
warrant, as the case may be, without such legend to the holder thereof (1) if
such Note or Warrant is registered under the Securities Act and a prospectus
meeting the requirements of Section 10 of the Securities Act is available, (2)
if such legend may be properly removed under the terms of Rule 144 promulgated
under the Securities Act, or (3) if such holder provides the Company with an
opinion of counsel for such holder, reasonably satisfactory to legal counsel for
the Company to the effect that a sale, transfer or assignment of the Note or
Warrant may be made without registration.
-5-
<PAGE>
6. Additional Covenants.
6.1 Use of Proceeds. The Company hereby covenants and agrees that
all of the net proceeds received by it from the issuance and sale of the Notes
and Warrants shall be used for the purpose of developing and conducting its
business, which is the development, manufacturing and marketing of flywheel
energy storage systems for use in energy storage applications, and no part of
such net proceeds shall be used to pay any broker's fees or commissions relating
to the transactions contemplated by this Agreement or similar payments of any
kind. The above net proceeds shall not be used to repay any obligation incurred
by the Company under the Tranche One Notes or the Tranche One Note Purchase
Agreement other than legal expenses incurred in connection therewith.
6.2 Special Approvals. Without the consent of 60% in economic
interest of the Notes, while the Notes are outstanding, the Company will not (1)
pay dividends on any class of its shares of common stock or any class of its
preferred stock (except stock dividends to holders of its preferred stock) or
(2) issue any securities or incur any indebtedness except for commercial bank
and institutional lender financings and equipment leases ranking equivalent or
senior to the Notes.
6.3 Best Efforts. The Company will use best efforts to: (a) identify
and hire a Chairman of the Company; (b) identify and begin negotiations with a
strategic partner; (c) negotiate a significant contract with Bell Atlantic or
another significant customer to purchase equipment from the Company; and (d)
identify and engage an investment banker with a view to preparing and
structuring the Company for an initial public offering within a reasonable
period.
7. Miscellaneous.
7.1 Waivers and Amendments. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
7.2 Arbitration. Any controversy or claim arising out of or relating
to this Agreement or any of the Related Agreements, or the breach hereof or
thereof, shall be settled by arbitration administered by the American
Arbitration Association under its Commercial Arbitration Rules, and judgment on
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Such arbitration shall be conducted by a panel of three
arbitrators, each party having the right to select one arbitrator with the third
arbitrator to be selected in accordance with the rules of the American
Arbitration Association.
7.3 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Commonwealth of Massachusetts without regards to the
principles of conflicts of laws thereof.
7.4 Survival. The representations, warranties, covenants and
agreements made herein shall survive the execution of this Agreement and the
Closings of the transactions contemplated hereby.
7.5 Successors and Assigns. Except as otherwise expressly provided
herein and subject to the Related Agreements and applicable law, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
7.6 Entire Agreement. This Agreement, the Related Agreements and
other exhibits to this Agreement and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
7.7 Notices, etc. All notices, requests and other communications
hereunder shall be in writing and shall be deemed to have been duly given at the
time of receipt if delivered by hand or by facsimile transmission or three days
after being mailed, registered or certified mail, return receipt requested, with
postage prepaid, to the address or facsimile number (as the case may be) listed
for each such party below or, if any party shall have
-6-
<PAGE>
designated a different address or facsimile number by notice to the other party
given as provided above, then to the last address or facsimile number so
designated.
If to the Company:
Beacon Power Corporation
6D Gill Street
Woburn, MA 01801
Fax No.: (781) 938-9401
Attn: William Stanton, Chief Executive Officer
With a required copy to:
Albert L. Sokol
Edwards & Angell, LLP
101 Federal Street
Boston, MA 02110-1800
Fax No.: (617) 439-4170
If to Perseus:
Perseus Capital, L.L.C.
The Army and Navy Club Building
1627 I Street, N.W.
Suite 610
Washington, D.C. 20006
Attn: Kenneth M. Socha
Fax No. (202) 463-6215
With a required copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004
Attn: Robert B. Ott
Fax No.: (202) 942-5999
If to SatCon:
David Eisenhaure
President
161 First Street
Cambridge, MA 02142
Fax No.: (617) 661-3373
With a required copy to:
Jeffrey N. Carp, Esq.
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Fax No.: (617) 526-5000
-7-
<PAGE>
If to Duquesne:
Rachel Lorey
Vice President
One Northshore Center
Suite 100
12 Federal Street
Pittsburgh, PA 15212
Fax No: 412-231-2140
With a required copy to:
David J. Lehman, Esq.
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax No: 412-255-6501
If to Micro:
c/o Robert W. Shaw, Jr.
Arete Corporation
P.O. Box 1299
Center Harbor, New Hampshire 03226
Fax No.: (603) 253-9799
7.8 Separability. In case any provision of this Agreement shall be
declared invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
7.9 Expenses. The Company shall bear its expenses and legal fees
incurred with respect to this Agreement, each of the Related Agreements and the
transactions contemplated hereby and thereby. All reasonable costs and expenses
of the Purchasers relating to this Agreement, each of the Related Agreements and
the transactions contemplated hereby and thereby, including reasonable fees and
expenses of legal counsel, shall be promptly paid or reimbursed by the Company
(but in no event shall the Company be responsible for aggregate expenses of more
than $25,000 per Purchaser).
7.10 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
7.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.l2 Publicity. None of the parties to this Agreement, nor any of
their affiliates, shall issue any press release or otherwise make any public
announcement or disclosure with respect to this Agreement, any of the Related
Agreements or any of the transactions contemplated hereby or thereby without the
prior written consent of each of the Company, and the Purchasers, unless such
disclosure is required by applicable law.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BEACON POWER CORPORATION DUQUESNE ENTERPRISES, INC.
By: /s/ William E. Stanton By:
---------------------- ----------------------
Name: William E. Stanton Name:
-------------------- --------------------
Title: President & CEO Title:
------------------- --------------------
PERSEUS CAPITAL, L.L.C. MICRO-GENERATION
TECHNOLOGY FUND, L.L.C.
By:
----------------------
Name: By: ARETE CORPORATION, Its Manager
---------------------
Title:
-------------------- By:
---------------------------
Robert W. Shaw, Jr., President
SATCON TECHNOLOGY CORPORATION
By:
----------------------
Name:
---------------------
Title:
--------------------
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BEACON POWER CORPORATION DUQUESNE ENTERPRISES, INC.
By: By:
---------------------- ----------------------
Name: Name:
-------------------- --------------------
Title: Title:
------------------- --------------------
PERSEUS CAPITAL, L.L.C. MICRO-GENERATION
TECHNOLOGY FUND, L.L.C.
By: /s/ Philip J. Deutch
----------------------
Name: Philip J. Deutch By: ARETE CORPORATION, Its Manager
---------------------
Title: Managing Director
-------------------- By:
---------------------------
Robert W. Shaw, Jr., President
SATCON TECHNOLOGY CORPORATION
By:
----------------------
Name:
---------------------
Title:
--------------------
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BEACON POWER CORPORATION DUQUESNE ENTERPRISES, INC.
By: By:
---------------------- ----------------------
Name: Name:
-------------------- --------------------
Title: Title:
------------------- --------------------
PERSEUS CAPITAL, L.L.C. MICRO-GENERATION
TECHNOLOGY FUND, L.L.C.
By:
----------------------
Name: By: ARETE CORPORATION, Its Manager
---------------------
Title:
-------------------- By:
---------------------------
Robert W. Shaw, Jr., President
SATCON TECHNOLOGY CORPORATION
By: /s/ David Eisenhaure
----------------------
Name: David Eisenhaure
---------------------
Title: President
--------------------
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BEACON POWER CORPORATION DUQUESNE ENTERPRISES, INC.
By: By: /s/ Eric R. Stoltz
---------------------- ----------------------
Name: Name: Eric R. Stoltz
-------------------- --------------------
Title: Title: Vice President & Treasurer
------------------- ---------------------------
PERSEUS CAPITAL, L.L.C. MICRO-GENERATION
TECHNOLOGY FUND, L.L.C.
By:
----------------------
Name: By: ARETE CORPORATION, Its Manager
---------------------
Title:
-------------------- By:
---------------------------
Robert W. Shaw, Jr., President
SATCON TECHNOLOGY CORPORATION
By:
----------------------
Name:
---------------------
Title:
--------------------
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BEACON POWER CORPORATION DUQUESNE ENTERPRISES, INC.
By: By:
---------------------- ----------------------
Name: Name:
-------------------- --------------------
Title: Title:
------------------- --------------------
PERSEUS CAPITAL, L.L.C. MICRO-GENERATION
TECHNOLOGY FUND, L.L.C.
By:
----------------------
Name: By: ARETE CORPORATION, Its Manager
---------------------
Title:
-------------------- By: /s/ Robert W. Shaw, Jr.
---------------------------
Robert W. Shaw, Jr., President
SATCON TECHNOLOGY CORPORATION
By:
----------------------
Name:
---------------------
Title:
--------------------
<PAGE>
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement to which this Exhibit A is attached, the
following terms have the following meanings:
"Business Day" means any day other than a Saturday, Sunday or other day on
which the national or state banks located in the State of New York, the
Commonwealth of Massachusetts, or the District of Columbia are authorized to be
closed.
"Company Account" means an account of the Company designated in a written
notice delivered to the Purchasers at least two Business Days prior to the date
of any required payment by the Purchasers to the Company under the Agreement.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"Governmental Body" means any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or (c)
governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or entity and any court or other tribunal).
"Material Adverse Change" means a change which would have a Material
Adverse Effect.
"Material Adverse Effect." An event, violation or other matter will be
deemed to have a "Material Adverse Effect" on the Company if such event,
violation or other matter would be material in impact or amount to the Company's
business, intellectual property rights or condition, or, taken as a whole, its
assets, liabilities, operations, or financial performance.
"Person" means any individual, entity or Governmental Body.
"Related Agreements" means (a) the Notes; (b) the Warrants; and (c) any
other agreement or document entered into by any of the parties in connection
with the Agreement or any of the transactions contemplated thereby.
<PAGE>
EXHIBIT B-1
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
[Principal Amount] August ___, 1999
WOBURN, MA
FOR VALUE RECEIVED, Beacon Power Corporation, a Delaware corporation (the
"Company"), promises to pay to the order of _________________, or its registered
assigns (the "Holder"), the principal sum of $__________ or such lesser amount
as shall then equal the outstanding principal amount hereof, together with
interest computed in the following fashion:
(a) Interest accrued to date on the note which this Note amends and
restates (and known in the Purchase Agreement referenced below as the Tranche
One Note), amounting to $____________; and
(b) Interest accruing from the date of issuance of this Note on the unpaid
principal balance hereof at a rate equal to twelve and one-half percent (12
1/2%) per annum, computed on the basis of the actual number of days elapsed and
a year of 365 days; provided that if the Funding Date does not occur within six
(6) months from the date hereof, such interest rate shall increase effective as
of the close of business on the such day to occur six (6) months from the date
hereof to fifteen percent (15%) per annum.
All unpaid principal, together with any accrued but unpaid interest and
other amounts payable hereunder, shall be due and payable on the earlier of (i)
the date of conversion (or, absent a conversion, demand by the holder) as
referenced below in Section 6 (the "Maturity Date") or (ii) upon or after the
occurrence of an Event of Default (as defined below), when such amounts are
declared due and payable by the Holder or made automatically due and payable.
This Note is issued pursuant to the Note and Warrant Purchase Agreement
(the "Purchase Agreement") dated as of August 2, 1999 by and among the Company,
Perseus Capital, L.L.C., Duquesne Enterprises, Inc., Micro Generation Technology
Fund, L.L.C. and SatCon Technology Corporation.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms have
the following meanings:
(a) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York are authorized to be closed.
<PAGE>
(b) "Funding Date" means the date on which all or any part of
funding of transactions contemplated by the Class E Preferred Commitment are
first consummated.
(c) "Obligations" means the principal, interest and other amounts
payable under this Note.
(d) "Class E Preferred Commitment" means a written commitment to the
Company by a strategic investor(s), made within four (4) months from the date
hereof, to purchase at least $5 million of the Class E Preferred Stock.
(e) "Transaction Documents" shall mean this Note, the Purchase
Agreement, and any other promissory note issued pursuant to the Purchase
Agreement.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on this Note or (ii) any interest or other payment required
under the terms of this Note or any other Transaction Document within five
Business Days of its due date; or
(b) Breaches of Other Covenants. The Company shall materially fail
to observe or to perform any other covenant, obligation, condition or agreement
contained in this Note or the other Transaction Documents, other than those
specified in Section 2(a) hereof, and such failure shall continue for 10 days
after written notice thereof to the Company; or
(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it or (vii) take any action for the purpose of effecting any
of the foregoing; or
(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered, or such case or proceeding shall not
be dismissed or discharged within 45 days of commencement; or
(e) Cross-Default. The Company or any of its subsidiaries shall
default under any bond, debenture, note or other evidence of indebtedness for
money borrowed (excluding any capital lease), under any guarantee or under any
mortgage, or indenture pursuant to which there shall be issued or by which there
shall be secured or evidenced any indebtedness for money borrowed by the Company
or any of its subsidiaries, whether such indebtedness now exists or shall
hereafter be created, which default shall have resulted in indebtedness of at
least $10,000 being due and payable prior to the date on which it would
otherwise become due and payable and shall not have been issued by the Company
or waived by the lender; or
(f) Undischarged Judgment. One or more judgments for the payment of
money in an amount in excess of $10,000 in the aggregate shall be rendered
against the Company or any of its subsidiaries (or any combination thereof) and
shall remain undischarged for a period of ten consecutive days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment.
-2-
<PAGE>
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 2(c)
and 2(d) hereof) and at any time thereafter during the continuance of such Event
of Default, the Holder may declare all outstanding Obligations payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 2(c) and 2(d) hereof, immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any
other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
4. Collateral. To secure the Company's payment and performance of the
Obligations and to secure the Company's prompt, full and faithful performance
and observance of all of the provisions under this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest,
senior to all other security interests except for any now or hereafter existing
commercial bank or institutional lender financings and equipment leases, in all
of the Company's right, title and interest in and to the following, whether now
owned or hereafter acquired or existing and wherever located:
(a) All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(b) All accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind, and all
rights now or hereafter existing in and to all mortgages, security agreements,
leases or other contracts securing or otherwise relating to any of the same;
(c) All intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable
inventions and (i) the inventions and improvements described and claimed
therein; (ii) any continuation, division, renewal, extension, substitute or
reissue thereof or any legal equivalent in a foreign country for the full term
thereof or the terms for which the same may be granted; (iii) all rights to
income, royalties, profits, awards, damages and other rights relating to said
patents, applications and inventions, including the right to sue for past,
present and future infringement and (iv) any other rights and benefits relating
to said patents, applications and inventions including any rights as a licensor
or licensee of said patents, applications and inventions (the "Patents");
(ii) all trademarks, trademark registrations,
trademark applications, service marks, service mark registrations and service
mark applications, trade names, fictitious business name, tradestyles, and the
goodwill underlying those trademarks and service marks and (i) any similar marks
or amendments, modifications and renewals thereof and the goodwill represented
by those and any legal equivalent in a foreign country for the full term or
terms for which the same may be granted; (ii) all rights to income, royalties,
profits, damages and other rights relating to said trademarks and service marks
including the right to sue for past, present or future infringement and (iii)
any other rights and benefits relating to said trademarks and service marks
including any rights as a licensor or licensee of said trademark and service
mark (the "Trademarks");
(iii) all copyrights, copyright registrations and
copyright applications, including without limitation those copyrights for
computer programs, computer databases, flow diagrams, maskworks, maskwork
applications, source codes and object codes, computer software, technical
knowledge and processes, trade secrets, know-how, customer lists, franchises,
systems, inventions, designs, blueprints, formal or informal licensing
arrangements, and all property embodying or incorporating such copyrights and
(i) any similar rights or amendments, modifications and renewals thereof and any
legal equivalent in a foreign country for the full term or terms for which the
same may be granted; (ii) all rights to income, past, present and future
infringement and (iii) any other rights and benefits relating to said copyrights
(the "Copyrights");
-3-
<PAGE>
(d) all substitutions and replacements for, and all rights to
exploit, all of the foregoing;
(e) all books and records pertaining to any of the foregoing; and
(f) all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
The Company covenants and agrees with Holder that: (x) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (y) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by any means upon any
Collateral will not bar realization upon any other Collateral; and (z) the
security interest hereby created is a continuing security interest and will
cover and secure the payment of all Obligations both present and future of the
Company to Holder pursuant to this Note and the other Transaction Documents. The
Company further covenants and agrees to take all actions requested by the Holder
to establish or perfect the security interest granted under this Note.
5. Prepayment. This Note may be prepaid as a whole or in part at any time
prior to the Maturity Date upon at least ten Business Days prior written notice
to the Holder, provided that nothing in this Section 5 shall limit the Holder's
conversion rights set forth in Section 6 herein during such notice period. Any
such prepayment shall be applied first to the payment of expenses due under this
Note, second to interest accrued on this Note and third, if the amount of
prepayment exceeds the amount of all such expenses and accrued interest, to the
payment of principal of this Note.
6. Conversion. If there is a Funding Date within six (6) months of the
date hereof, all outstanding principal and accrued interest under this Note will
be converted into Class E Preferred Stock on such Funding Date on terms
substantially the same as those issued pursuant to the Class E Preferred
Commitment.
If there is no Class E Preferred Commitment within four (4) months
of the date hereof or if a Funding Date does not occur within six (6) months of
the date hereof, then at the option of the Holder, (a) all outstanding principal
and accrued interest under this Note will convert to the Company's common or
preferred stock at a price and on terms to be negotiated at that time between
the Holder and the Company, or (b) if no agreement can be reached between the
Holder and the Company within 60 days of the expiration of the four (4) month or
six (6) month period, as the case may be, at the Holder's option, exercisable by
the Holder at any time after expiration of the 60 day period, the Holder may
declare in writing that such Note has become a demand obligation, and thereafter
may make demand for payment of the Note at any time thereafter. Any such demand
shall be in writing, and require payment by the Company no earlier than 10 days
after such demand.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified only as to the Holder of this Note upon the written consent of the
Company and the Holder.
9. Transfer of this Note or Securities Issuable on Conversion Hereof. This
Note may not be transferred in violation of any restrictive legend set forth
hereon. Each new Note issued upon transfer of this Note shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the
-4-
<PAGE>
Securities Act, unless in the opinion of counsel for the Company such legend is
not required in order to ensure compliance with the Securities Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions. Subject to the foregoing, transfers of this Note shall be
registered upon registration books maintained for such purpose by or on behalf
of the Company. Prior to presentation of this Note for registration of transfer,
the Company shall treat the registered holder hereof as the owner and holder of
this Note for the purpose of receiving all payments of principal and interest
hereon and for all other purposes whatsoever, whether or not this Note shall be
overdue and the Company shall not be affected by notice to the contrary.
10. Assignment by the Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, as a whole or in part, by the Company, without the prior written
consent of the Holder.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in the Purchase Agreement or on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.
13. Expenses: Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without regard to conflict of
laws provisions of the Commonwealth of Massachusetts or of any other state. In
the event of any dispute among or between any of the parties to this Note
arising out of the terms of this Note, the parties hereby consent to the
exclusive jurisdiction of the federal and state courts located in the
Commonwealth of Massachusetts for resolution of such dispute, and agree not to
contest such exclusive jurisdiction or seek to transfer any action relating to
such dispute to any other jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
BEACON POWER CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
-5-
<PAGE>
EXHIBIT B-2
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
$333,333.33 ____________ ___, 1999
WOBURN, MA
FOR VALUE RECEIVED, Beacon Power Corporation, a Delaware corporation (the
"Company"), promises to pay to the order of SatCon Technology Corporation or its
registered assigns (the "Holder"), the principal sum of $333,333.33 or such
lesser amount as shall then equal the outstanding principal amount hereof,
together with interest from the date of issuance of this Note on the unpaid
principal balance hereof at a rate equal to twelve and one-half percent (12
1/2%) per annum, computed on the basis of the actual number of days elapsed and
a year of 365 days; provided that if the Funding Date does not occur within six
(6) months from the date hereof, such interest rate shall increase effective as
of the close of business on the such day to occur six (6) months from the date
hereof to fifteen percent (15%) per annum.
All unpaid principal, together with any accrued but unpaid interest and
other amounts payable hereunder, shall be due and payable on the earlier of (i)
the date of conversion (or absent a conversion, demand by the holder) as
referenced below in Section 6 (the "Maturity Date") or (ii) upon or after the
occurrence of an Event of Default (as defined below), when such amounts are
declared due and payable by the Holder or made automatically due and payable.
This Note is issued pursuant to the Note and Warrant Purchase Agreement
(the "Purchase Agreement") dated as of August 2, 1999 by and among the Company,
Perseus Capital, L.L.C., Duquesne Enterprises, Inc., Micro Generation Technology
Fund, L.L.C. and SatCon Technology Corporation.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms have
the following meanings:
(a) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York are authorized to be closed.
(b) "Funding Date" means the date on which all or any part of
funding of transactions contemplated by the Class E Preferred Commitment are
first consummated.
(c) "Obligations" means the principal, interest and other amounts
payable under this Note.
<PAGE>
(d) "Class E Preferred Commitment" means a written commitment to the
Company by a strategic investor(s), made within four (4) months from the date
hereof, to purchase at least $5 million of the Class E Preferred Stock.
(e) "Transaction Documents" shall mean this Note, the Purchase
Agreement, and any other promissory note issued pursuant to the Purchase
Agreement.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on this Note or (ii) any interest or other payment required
under the terms of this Note or any other Transaction Document within five
Business Days of its due date; or
(b) Breaches of Other Covenants. The Company shall materially fail
to observe or to perform any other covenant, obligation, condition or agreement
contained in this Note or the other Transaction Documents, other than those
specified in Section 2(a) hereof, and such failure shall continue for 10 days
after written notice thereof to the Company; or
(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it or (vii) take any action for the purpose of effecting any
of the foregoing; or
(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered, or such case or proceeding shall not
be dismissed or discharged within 45 days of commencement; or
(e) Cross-Default. The Company or any of its subsidiaries shall
default under any bond, debenture, note or other evidence of indebtedness for
money borrowed (excluding any capital lease), under any guarantee or under any
mortgage, or indenture pursuant to which there shall be issued or by which there
shall be secured or evidenced any indebtedness for money borrowed by the Company
or any of its subsidiaries, whether such indebtedness now exists or shall
hereafter be created, which default shall have resulted in indebtedness of at
least $10,000 being due and payable prior to the date on which it would
otherwise become due and payable and shall not have been issued by the Company
or waived by the lender; or
(f) Undischarged Judgment. One or more judgments for the payment of
money in an amount in excess of $10,000 in the aggregate shall be rendered
against the Company or any of its subsidiaries (or any combination thereof) and
shall remain undischarged for a period of ten consecutive days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment.
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 2(c)
and 2(d) hereof) and at any time thereafter during the continuance of such Event
of Default, the Holder may declare all outstanding Obligations payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
-2-
<PAGE>
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 2(c) and 2(d) hereof, immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any
other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
4. Collateral. To secure the Company's payment and performance of the
Obligations and to secure the Company's prompt, full and faithful performance
and observance of all of the provisions under this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest,
senior to all other security interests except for any now or hereafter existing
commercial bank or institutional lender financings and equipment leases, in all
of the Company's right, title and interest in and to the following, whether now
owned or hereafter acquired or existing and wherever located:
(a) All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(b) All accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind, and all
rights now or hereafter existing in and to all mortgages, security agreements,
leases or other contracts securing or otherwise relating to any of the same;
(c) All intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable
inventions and (i) the inventions and improvements described and claimed
therein; (ii) any continuation, division, renewal, extension, substitute or
reissue thereof or any legal equivalent in a foreign country for the full term
thereof or the terms for which the same may be granted; (iii) all rights to
income, royalties, profits, awards, damages and other rights relating to said
patents, applications and inventions, including the right to sue for past,
present and future infringement and (iv) any other rights and benefits relating
to said patents, applications and inventions including any rights as a licensor
or licensee of said patents, applications and inventions (the "Patents");
(ii) all trademarks, trademark registrations, trademark
applications, service marks, service mark registrations and service mark
applications, trade names, fictitious business name, tradestyles, and the
goodwill underlying those trademarks and service marks and (i) any similar marks
or amendments, modifications and renewals thereof and the goodwill represented
by those and any legal equivalent in a foreign country for the full term or
terms for which the same may be granted; (ii) all rights to income, royalties,
profits, damages and other rights relating to said trademarks and service marks
including the right to sue for past, present or future infringement and (iii)
any other rights and benefits relating to said trademarks and service marks
including any rights as a licensor or licensee of said trademark and service
mark (the "Trademarks");
(iii) all copyrights, copyright registrations and
copyright applications, including without limitation those copyrights for
computer programs, computer databases, flow diagrams, maskworks, maskwork
applications, source codes and object codes, computer software, technical
knowledge and processes, trade secrets, know-how, customer lists, franchises,
systems, inventions, designs, blueprints, formal or informal licensing
arrangements, and all property embodying or incorporating such copyrights and
(i) any similar rights or amendments, modifications and renewals thereof and any
legal equivalent in a foreign country for the full term or terms for which the
same may be granted; (ii) all rights to income, past, present and future
infringement and (iii) any other rights and benefits relating to said copyrights
(the "Copyrights");
(d) all substitutions and replacements for, and all rights to
exploit, all of the foregoing;
(e) all books and records pertaining to any of the foregoing; and
(f) all proceeds of all of the foregoing and, to the extent not
otherwise included, all
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payments under insurance or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
The Company covenants and agrees with Holder that: (x) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (y) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by any means upon any
Collateral will not bar realization upon any other Collateral; and (z) the
security interest hereby created is a continuing security interest and will
cover and secure the payment of all Obligations both present and future of the
Company to Holder pursuant to this Note and the other Transaction Documents. The
Company further covenants and agrees to take all actions requested by the Holder
to establish or perfect the security interest granted under this Note.
5. Prepayment. This Note may be prepaid as a whole or in part at any time
prior to the Maturity Date upon at least ten Business Days prior written notice
to the Holder, provided that nothing in this Section 5 shall limit the Holder's
conversion rights set forth in Section 6 herein during such notice period. Any
such prepayment shall be applied first to the payment of expenses due under this
Note, second to interest accrued on this Note and third, if the amount of
prepayment exceeds the amount of all such expenses and accrued interest, to the
payment of principal of this Note.
6. Conversion.
If there is a Funding Date within six (6) months of the date hereof,
all outstanding principal and accrued interest under the Note will be converted
into Class E Preferred Stock on such Funding Date on terms substantially the
same as those issued pursuant to the Class E Preferred Commitment.
If there is no Class E Preferred Commitment within four (4) months
of the date hereof or if a Funding Date does not occur within six (6) months of
the date hereof, then at the option of the Holder, (a) all outstanding principal
and accrued interest under this Note will convert to the Company's common or
preferred stock at a price and on terms to be negotiated at that time between
the Holder and the Company, or (b) if no agreement can be reached between the
Holder and the Company within 60 days of the expiration of the four (4) month or
six (6) month period, as the case may be, at the Holder's option, exercisable by
the Holder at any time after expiration of the 60 day period, the Holder may
declare in writing that such Note has become a demand obligation, and thereafter
may make demand for payment of the Note at any time thereafter. Any such demand
shall be in writing, and require payment by the Company no earlier than 10 days
after such demand.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified only as to the Holder of this Note upon the written consent of the
Company and the Holder.
9. Transfer of this Note or Securities Issuable on Conversion Hereof. This
Note may not be transferred in violation of any restrictive legend set forth
hereon. Each new Note issued upon transfer of this Note shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. Subject to the foregoing, transfers of this
Note shall be registered upon registration books maintained for such purpose by
or on behalf of the Company. Prior to presentation of this Note for registration
of transfer, the Company shall treat the registered holder hereof as the owner
and holder of this Note for the purpose of receiving all payments of principal
and interest hereon and for all other purposes whatsoever, whether or not this
Note shall be overdue and the Company shall not be affected by notice to the
contrary.
10. Assignment by the Company. Neither this Note nor any of the rights,
interests or obligations
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hereunder may be assigned, by operation of law or otherwise, in whole or in
part, by the Company, without the prior written consent of the Holder.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in the Purchase Agreement or on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.
13. Expenses: Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without regard to conflict of
laws provisions of the Commonwealth of Massachusetts or of any other state. In
the event of any dispute among or between any of the parties to this Note
arising out of the terms of this Note, the parties hereby consent to the
exclusive jurisdiction of the federal and state courts located in the
Commonwealth of Massachusetts for resolution of such dispute, and agree not to
contest such exclusive jurisdiction or seek to transfer any action relating to
such dispute to any other jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
BEACON POWER CORPORATION
By:_______________________
Name:_____________________
Title:____________________
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EXHIBIT C
THE SECURITIES EVIDENCED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT'), AND MAY NOT
BE SOLD, TRANSFERRED, OR ASSIGNED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
No.:___
WARRANT
TO PURCHASE CLASS E PREFERRED STOCK
OF
BEACON POWER CORPORATION
(void after August 2, 2004)
1. Issuance of Warrant. FOR VALUE RECEIVED, on and after the date of
issuance of this Warrant, and subject to the terms and conditions herein set
forth, the Holder (as defined below) is entitled to purchase from Beacon Power
Corporation, a Delaware corporation (the "Company"), at any time before 5:00
p.m. New York time on August 2, 2004 (the "Termination Date"), at a price per
share equal to the Warrant Price (as defined below and subject to adjustment as
described below), the Warrant Stock (as defined below and subject to adjustment
as described below) upon exercise of this warrant (this "Warrant") pursuant to
Section 6 hereof. This Warrant is issued pursuant to the Note and Warrant
Purchase Agreement (as defined below).
2. Definitions. As used in this Warrant, the following terms have the
definitions ascribed to them below:
(a) "Additional Stock" is defined in Section 3(d)(iv).
(b) "Base Price" means as of August 2, 1999, $1.78 per share of
Common
<PAGE>
Stock, which shall be subject to adjustment as provided in Section 3(d).
(c) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York or the District of Columbia are
authorized to be closed.
(d) "Change-In-Control Event" means the occurrence after the
Commencement Date of any of the following: (i) the acquisition of voting
securities of the Company by any person or group of persons that results in such
person or group, together with its affiliates, becoming, directly or indirectly,
the beneficial owner of in excess of 50% of the outstanding voting securities of
the Company; (ii) a merger or consolidation of the Company with any other
corporation or legal entity regardless of which entity is the survivor, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or being converted into voting securities of
the surviving entity) in excess of 50% of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation; or (iii) the sale or disposition of all or substantially all of
the Company's assets other than in a transaction in which holders of the voting
securities of the Company immediately prior to such transaction receive voting
securities of the acquiror of such assets or its affiliate that represent in
excess of 50% of the voting securities of such entity after consummation of such
transaction.
(e) "Commencement Date" means the date of issue of this Warrant.
(f) "Common Stock" means the Company's Common Stock, $.0l par value
per share.
(g) "Holder" means ________________, or its assigns.
(h) "Note and Warrant Purchase Agreement" means the Note and Warrant
Purchase Agreement dated as of August 2, 1999 by and among the Company, Perseus
Capital, L.L.C., Duquesne Enterprises, Inc., Micro Generation Technology Fund,
L.L.C., and SatCon Technology Corporation (collectively, the "Purchasers"), and
"Note" means the Note issued to the holder pursuant to such Agreement.
(i) "Class E Preferred Stock" means the Class E Preferred Stock of
the Company proposed to be issued to the Purchasers as part of the equity
financing in which the Note is to be converted, as described in the Note and
Warrant Purchase Agreement.
(j) "Warrant Price" means, (i) in the event that a purchase of at
least $5 million of the Class E Preferred Stock is consummated within six (6)
months from the date hereof, the per share price at which such purchase is made,
or (ii) in the event that no such purchase is consummated, $2.50, in either
event subject to adjustment as described in Section 3 below.
(k) "Warrant Stock" means the shares of Company stock which are
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purchasable upon exercise or conversion of this Warrant, consisting of Class E
Preferred Stock (or other Company securities) into which the Note is converted
if such conversion actually occurs, or consisting of shares of Common Stock if
the Note is not so converted. The total number of shares to be issued upon the
exercise of this Warrant shall be computed by dividing $____________ by the
Warrant Price, subject to adjustment as described in Section 3 below.
(l) "Warrant Stock Definition Date" means the date on which the Note
is converted (or if not converted, then the date on which the holder of the Note
notifies the Company that it has become a demand note, as described in the Note.
3. Adjustments and Notices. The Warrant Price and/or the number of shares
of Warrant Stock shall be subject to adjustment from time to time in accordance
with this Section 3. The Warrant Price and/or the number of Warrant Shares shall
be adjusted to reflect all of the following events that occur on or after the
Commencement Date. However, if on the Warrant Stock Definition Date, the Warrant
Stock is determined to consist of preferred stock of the Company, then the
following provisions in Section 3 shall not apply to shares issued on or after
the Warrant Stock Definition Date.
(a) Subdivision, Stock Dividends or Combinations. In case the
Company shall at any time subdivide the outstanding shares of Warrant Stock or
shall issue a stock dividend with respect to the Warrant Stock, the Warrant
Price in effect immediately prior to such subdivision or the issuance of such
dividend shall be proportionately decreased, and in case the Company shall at
any time combine the outstanding shares of the Warrant Stock, the Warrant Price
in effect immediately prior to such combination shall be proportionately
increased, in each case effective at the close of business on the date of such
subdivision, dividend or combination, as the case may be.
(b) Reclassification, Exchange, Substitution, In-Kind Distribution.
Upon any reclassifications, exchange, substitution or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant or upon the payment of a dividend in securities or
property other than shares of Warrant Stock, the Holder shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that Holder would have received if this Warrant had been
exercised or converted immediately before the record date for such
reclassification, exchange, substitution, or other event or immediately prior to
the record date for such dividend. The Company or its successor shall promptly
issue to Holder a new warrant for such new securities or other property. The new
warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise or conversion of the new warrant.
The provisions of this Section 3(b) shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events and successive
dividends.
(c) Reorganization, Merger etc. In case of any Change-In-Control
Event, the Company, or such successor or purchasing corporation, as the case may
be, shall, as a condition
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to closing any such reorganization, merger or sale, duly execute and deliver to
the Holder hereof a new warrant so that the Holder shall have the right to
receive, at a total purchase price not to exceed that payable upon the exercise
or conversion of the unexercised or unconverted portion of this Warrant, and in
lieu of the shares of the Warrant Stock theretofore issuable upon exercise or
conversion of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reorganization, merger or
sale by the Holder of the number of shares of Warrant Stock then purchasable
under this Warrant. Such new warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 3. The provisions of this subparagraph (c) shall similarly apply to
successive Change-In-Control Events.
(d) Dilutive Issuances Adjustment of Number of Shares and Warrant
Price. In order to prevent dilution of the rights granted under this Warrant,
the number of shares of Warrant Stock obtainable upon exercise of this Warrant
and the Warrant Price shall be subject to adjustment from time to time as
provided in this Section 3(d).
(i) Adjustment of Warrant Price upon Issuance of Additional
Stock. If and whenever after the Commencement, the Company issues, or in
accordance with Section 3(d)(ii) is deemed to have issued, any Additional Stock
to any person for a consideration per share less than the Base Price then in
effect, then the Warrant Price in effect immediately before each such issuance
shall forthwith be adjusted to a price determined by multiplying such Warrant
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of Common Stock that the aggregate consideration received by the Company
for such issuance would purchase at such Warrant Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of such Additional Stock.
(ii) Effect of Certain Events. For purposes of determining
under Section (d)(i) the adjusted number of shares of Warrant Stock acquirable
upon exercise of this Warrant, the following shall be applicable:
(A) Issuance of Rights or Options. If the Company in any
manner issues, grants or sells (or otherwise becomes subject to) any
options, rights, or warrants (collectively, "Options") to purchase Common
Stock or securities that are convertible into or exchangeable for Common
Stock ("Convertible Securities"), then the total maximum number of shares
of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to
have been sold on the date of issuance, grant or sale of such Options and
to be outstanding, and the total maximum consideration receivable for such
issue, grant and sale of the Options, Convertible Securities and Common
Stock shall be deemed to have been received by the Company.
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<PAGE>
(B) Issuance of Convertible Securities. If the Company
in any manner grants, issues or sells (or otherwise becomes subject to)
any Convertible Securities, then the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities
shall be deemed to have been sold on the date of issuance, grant or sale
of such Convertible Securities and to be outstanding, and the total
maximum consideration receivable for such grant, issue and sale of the
Convertible Securities and Common Stock shall be deemed to have been
received by the Company.
(C) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible Securities
without the exercise of such Option or right, the number of shares of
Warrant Stock acquirable hereunder shall be adjusted to the number of
shares which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination, never
been issued and the consideration for such exercise never been received.
(D) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held
by or for the account of the Company or any Subsidiary, and the
disposition of any shares so owned or held shall be considered an issuance
or sale of Common Stock.
(E) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(iii) In the case of the issuance of Additional Stock for
cash, the consideration received therefor shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the company for any underwriting or
otherwise in connection with the issuance and sale thereof. In the case of the
issuance of Additional Stock for a consideration in whole or in part other than
cash, the consideration other than cash received therefor shall be deemed to be
the fair value thereof as reasonably determined by the Board of Directors of the
Company in its good faith judgment irrespective of any accounting treatment.
(iv) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to clause (ii) of this Section
3(d)) by the Company after the Commencement Date, other than shares of Common
Stock issued or issuable:
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<PAGE>
(A) to officers, directors, employees and consultants of
the Company directly or pursuant to a stock option plan or restricted
stock plan approved by the Board of Directors of the Company;
(B) upon conversion of the Class A, B, C, or D Preferred
Stock (or, if authorized, the Class E Preferred Stock) of the Company or
the exercise of warrants issued by the Company before or on the
Commencement Date;
(C) upon issue of Warrants to be issued to SatCon per
the Note and Warrant Purchase Agreement.
(v) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 3(d) but not expressly provided
for by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's board of directors shall make an appropriate adjustment in
the number of shares of Warrant Stock obtainable upon exercise of this Warrant
and in the Warrant Price so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall decrease the number of shares
of Warrant Stock obtainable as otherwise determined pursuant to this Section 3.
(e) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Warrant Price, the Corporation, at its own expense, shall
cause its Chief Financial Officer to compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to the Holder. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. No adjustment of the Warrant Price shall be
required to be made unless it would result in an increase or decrease of at
least one cent, but any adjustments not made because of this sentence shall be
carried forward and taken into account in any subsequent adjustment otherwise
required hereunder.
(f) No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through a 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 under this Warrant by the Company, but
shall at all times in good faith assist in carrying out all of the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment. If the
Company takes any action affecting the Class E Preferred Stock other than as
described above that adversely affects the Holder's rights under this Warrant,
the Warrant Price shall be adjusted downward.
(g) Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded down to the nearest whole share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying the Holder an
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amount computed by multiplying the fractional interest by the fair market value
of a full share.
4. No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
5. Reservation of Stock. On and after the Warrant Stock Definition Date,
the Company will reserve from its authorized and unissued stock a sufficient
number of shares to provide for the issuance of Warrant Stock upon the exercise
or conversion of this Warrant. Issuance of this Warrant shall constitute full
authority to the Company's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Warrant Stock issuable upon the exercise or conversion of this Warrant.
6. Exercise of Warrant. This Warrant may be exercised as a whole or part
by the Holder, at any time after the date hereof prior to the termination of
this Warrant, by the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Attachments 1 and 2, respectively, duly completed and executed at the principal
office of the Company, specifying the portion of the Warrant to be exercised and
accompanied by payment in full of the Warrant Price in cash or by check with
respect to the shares of Warrant Stock being purchased. Alternatively, the
Holder may pay the Warrant Price as a whole or in part) by surrendering to the
Company all or a portion of any Note (as defined in the Note and Warrant
Purchase Agreement), in which case the portion of the Note surrendered plus all
accrued but unpaid interest thereon shall be credited towards payment of the
Warrant Price. If less the entire Note is surrendered in payment of the Warrant
Price, the Company shall issue to the Holder a new promissory note identical to
the surrendered Note except that the principal amount thereof shall equal the
unsurrendered portion of the principal amount of the surrendered Note. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the shares of Warrant Stock issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable
after such date, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
full shares of Warrant Stock issuable upon such exercise. If this Warrant shall
be exercised for less than the total number of shares of Warrant Stock then
issuable upon exercise, promptly after surrender of this Warrant upon such
exercise, the Company will execute and deliver a new warrant, dated the date
hereof, evidencing the right of the Holder to the balance of this Warrant Stock
purchasable hereunder upon the same terms and conditions set forth herein.
7. Conversion. In lieu of exercising this Warrant or any portion
hereof, at any time after the occurrence of a Change-In-Control Event or the
filing of a registration statement for an initial underwritten public offering
of securities by the Company, the Holder hereof shall have the right to
convert this Warrant or any portion hereof into Warrant Stock by executing and
delivering to the Company at its principal office the written Notice of
Conversion and Investment Representation Statement in the forms attached
hereto as Attachments 2 and 3, specifying the portion of the Warrant to be
converted, and accompanied by this Warrant. The
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number of shares of Warrant Stock to be issued to Holder upon such conversion
shall be computed using the following formula:
X=(P)(Y)(A-B)/A
where X = the number of shares of Warrant Stock to be issued to the
Holder for the portion of the Warrant being converted.
P = the portion of the Warrant being converted expressed as
a decimal fraction.
Y = the total number of shares of Warrant Stock issuable
upon exercise of the Warrant in full.
A = the fair market value of one share of Warrant Stock
which means (i) the fair market value of the Warrant
Stock as of the last Business Day immediately prior to
the date the notice of conversion is received by the
Company, as reported in the principal market for such
securities or, if no such market exists, as determined
in good faith by the Company's Board of Directors, or
(ii) if this Warrant is being converted in conjunction
with a public offering of stock the price to the public
per share pursuant to the offering.
B = the Warrant Price on the date of conversion.
Any portion of this Warrant that is converted shall be immediately canceled.
This Warrant or any portion hereof shall be deemed to have been converted
immediately prior to the close of business on the date of its surrender for
conversion as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such conversion shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable after such date, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of full shares of Warrant Stock issuable upon such conversion. If
the Warrant shall be converted for less than the total number of shares of
Warrant Stock then issuable upon conversion, promptly after surrender of the
Warrant upon such conversion, the Company will execute and deliver a new
warrant, dated the date hereof, evidencing the right of the Holder to the
balance of the Warrant Stock purchasable hereunder upon the same terms and
conditions set forth herein. If this Warrant is converted, as a whole or in
part, after the occurrence of a Change-In-Control Event as to which Section 3(c)
is applicable, the Holder shall receive the consideration contemplated by
Section 3(c) in lieu of Warrants Stock of the Company.
8. Transfer of Warrant. This Warrant may be transferred or assigned by the
Holder hereof in whole or in part, provided that the transferor provides, at the
Company's request, an
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opinion of counsel satisfactory to the Company that such transfer does not
require registration under the Securities Act and the securities law applicable
with respect to any other applicable jurisdiction.
9. Termination. This Warrant shall terminate on 5:00 p.m. New York time on
the Termination Date.
10. Miscellaneous. This Warrant shall be governed by the laws of the
Commonwealth of Massachusetts, as such laws are applied to contracts to be
entered into and performed entirely in Massachusetts by Massachusetts residents.
In the event of any dispute among the Holder and the Company arising out of the
terms of this Warrant, the parties hereby consent to the exclusive jurisdiction
of the federal and state courts located in the Commonwealth of Massachusetts for
resolution of such dispute, and agree not to contest such exclusive jurisdiction
or seek to transfer any action relating to such dispute to any other
jurisdiction. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be
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deemed to constitute a part hereof. Neither this Warrant nor any term hereof may
be changed or waived orally, but only by an instrument in writing signed by the
Company and the Holder of this Warrant. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or
by facsimile transmission or mailed by first class mail, postage prepaid, to the
address or facsimile number furnished to the Company in writing by the last
Holder of this Warrant who shall have furnished an address or facsimile number
to the Company in writing, and if mailed shall be deemed given three days after
deposit in the United States mail.
ISSUED: ________________
BEACON POWER CORPORATION
By:____________________________________
Name:________________________________________
Title:_______________________________________
-10-
<PAGE>
Attachment 1
NOTICE OF EXERCISE
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to purchase ________________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
_________________________________ _________________________________
(Date) (Name of Warrant Holder)
By:__________________________
Title:_______________________
<PAGE>
Attachment 2
INVESTMENT REPRESENTATION STATEMENT
Shares of the Class E Preferred Stock
(as defined in the attached Warrant) of
BEACON POWER CORPORATION
In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Beacon Power Corporation (the "Company") as
follows:
(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon exercise of
the Warrant at the time of issuance may not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Securities Act and state law exemptions relating to offers
and sales not by means of a public offering, and that the Company's reliance on
such exemptions is predicated on the undersigned's representations set forth
herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Warrant unless and until (i) it
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and Company's counsel to the
effect that (A) appropriate action necessary for compliance with the Securities
Act and any applicable state securities laws has been taken or an exemption from
the registration requirements of the Securities Act and such laws is available,
and (B) the proposed transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in the Company is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
<PAGE>
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company
(e) The undersigned acknowledges that the Securities issuable upon exercise or
conversion of the Warrant must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available. The undersigned is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold from the Company or any affiliate of the Company, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three month period not exceeding specified limitations.
Dated:_______________
_________________________________
(Typed or Printed Name)
By:______________________________
(Signature)
_________________________________
(Title)
<PAGE>
Attachment 3
NOTICE OF CONVERSION
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to acquire ________________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the attached
Warrant, by conversion of __________ percent(____%) of the Warrant.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
_________________________________ _________________________________
(Date) (Name of Warrant Holder)
By:___________________________________________
Title:________________________________________
(Title and signature of authorized person)
<PAGE>
Beacon Power Corporation
Exhibit D to the Note and Warrant Purchase Agreement
Supplemental Disclosure Schedule
[The following numbers correspond to the Section numbers in the Note and
Warrant Purchase Agreement]
3.4(b) Delay in financing has materially delayed the completion of the
manufacturing composite laboratory, the hiring of key personnel, and the
pursuit of securing intellectual property protection (as detailed below),
because such matters could not be advanced without the money with which
to fund the company's activities. The IPR delays consist of having
temporarily halted (during April 1999) the writing of seven patents, and
having similarly halted efforts to file for foreign counterpart patents.
With the closing of this bridge financing, the Company has the funds with
which to recommence the patent work referenced above, and it has been
advised by patent counsel that sufficient time remains before the
applicable regulatory deadlines in order to complete the required work.
So long as such work is so completed, no Material Adverse Effect is
expected to result from such halt in such patent prosecution.
3.8 Other Representations and Warranties
The following exceptions are taken to the representations and warranties
of the company set forth in Section 3 of the October Agreement and, where
applicable, certain representations and warranties made in the October Agreement
(each an "Original Representation and Warrant") have been eliminated and
superseded in their entirety by representations and warranties made in this Note
and Warrant Purchase Agreement:
[The following numbers correspond to the Section numbers in the October
Agreement]
3.1 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.1 of this Note
and Warrant Purchase Agreement.
3.2(b) The number of issued and outstanding shares of Common Stock
of the Company is 8,409.
3.3 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.2 of this Note
and Warrant Purchase Agreement.
3.4 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.3 of this Note
and Warrant Purchase Agreement.
<PAGE>
3.7 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.4 of this Note
and Warrant Purchase Agreement.
3.8(c) The Company has increased the compensation payable to certain
executive officers.
3.8(d) The Company has declared and paid a $30,000 dividend to the
holders of Class C Preferred Stock.
3.8(j) The Company has entered into a real property lease relating
to approximately 4,000 square feet of office space.
3.12 The Company has entered into a Registration Rights Agreement,
dated as of May 28, 1997, with Duquesne Enterprises and executed
Registration Rights Statements on October 23, 1998 which are
attached as Exhibits F and G to the October Agreement.
3.20 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.5 of this Note
and Warrant Purchase Agreement.
3.22 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.6 of this Note
and Warrant Purchase Agreement.
3.23 The Original Representation and Warranty is superseded by the
representation and warranty contained in Section 3.7 of this Note
and Warrant Purchase Agreement.
The following amendments are hereby made to the Company's Exhibit I
Disclosure Schedule originally delivered as part of the October Agreement.
[The following numbers correspond to the Section numbers in Exhibit I to the
October Agreement]
3.2(c)(i) The Company has increased the option pool to 1,500,000 shares by vote
of the Board of Directors. Of this amount options to purchase 885,094 have been
granted and approved by the Board of Directors.
3.2(d) SatCon Technology Corporation holds 1,671 shares of Common Stock on a
post-split basis (not 1,686). The total number of shares of Common Stock
outstanding on a post split-basis is 8,409 (not 8,424). Annex A is amended to
include new shares granted.
-2-
<PAGE>
3.7 Relates to Section 3.4 of the Note and Warrant Purchase Agreement and is
hereby renumbered to number 3.4.
3.7(b)(ii) Is eliminated in its entirety.
3.7(b)(iii) Is eliminated in its entirety.
3.7(b)(iv) Is eliminated in its entirety
3.8(u) Is eliminated in its entirety.
3.8(iv) Is eliminated in its entirety.
3.10(e) & 3.11 (ix) The Company has entered into Invention and/or Non-Disclosure
Agreements with the members of the Engineering Department and Senior Management.
3.11(x) Is eliminated in its entirety.
3.14 The Company's benefit providers have changed since the October Agreement,
however, the current providers provide comparable benefits.
3.15 Insurance coverage has increased since the October Agreement.
-3-
<PAGE>
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
$333,333.33 August 2, 1999
WOBURN, MA
FOR VALUE RECEIVED, Beacon Power Corporation, a Delaware corporation (the
"Company"), promises to pay to the order of SatCon Technology Corporation, or
its registered assigns (the "Holder"), the principal sum of $333,333.33 or such
lesser amount as shall then equal the outstanding principal amount hereof,
together with interest computed in the following fashion:
(a) Interest accrued to date on the note which this Note amends and
restates (and known in the Purchase Agreement referenced below as the Tranche
One Note), amounting to $2,654.11; and
(b) Interest accruing from the date of issuance of this Note on the unpaid
principal balance hereof at a rate equal to twelve and one-half percent
(12 1/2%) per annum, computed on the basis of the actual number of days elapsed
and a year of 365 days; provided that if the Funding Date does not occur within
six (6) months from the date hereof, such interest rate shall increase effective
as of the close of business on the such day to occur six (6) months from the
date hereof to fifteen percent (15%) per annum.
All unpaid principal, together with any accrued but unpaid interest and
other amounts payable hereunder, shall be due and payable on the earlier of (i)
the date of conversion (or, absent a conversion, demand by the holder) as
referenced below in Section 6 (the "Maturity Date") or (ii) upon or after the
occurrence of an Event of Default (as defined below), when such amounts are
declared due and payable by the Holder or made automatically due and payable.
This Note is issued pursuant to the Note and Warrant Purchase Agreement
(the "Purchase Agreement") dated as of July 30, 1999 by and among the Company,
Perseus Capital, L.L.C., Duquesne Enterprises, Inc., Micro Generation Technology
Fund, L.L.C. and SatCon Technology Corporation.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms have
the following meanings:
(a) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York are authorized to be closed.
<PAGE>
(b) "Funding Date" means the date on which all or any part of
funding of transactions contemplated by the Class E Preferred Commitment are
first consummated.
(c) "Obligations" means the principal, interest and other amounts
payable under this Note.
(d) "Class E Preferred Commitment" means a written commitment to the
Company by a strategic investor(s), made within four (4) months from the date
hereof, to purchase at least $5 million of the Class E Preferred Stock.
(e) "Transaction Documents" shall mean this Note, the Purchase
Agreement, and any other promissory note issued pursuant to the Purchase
Agreement.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on this Note or (ii) any interest or other payment required
under the terms of this Note or any other Transaction Document within five
Business Days of its due date; or
(b) Breaches of Other Covenants. The Company shall materially fail
to observe or to perform any other covenant, obligation, condition or agreement
contained in this Note or the other Transaction Documents, other than those
specified in Section 2(a) hereof, and such failure shall continue for 10 days
after written notice thereof to the Company; or
(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it or (vii) take any action for the purpose of effecting any
of the foregoing; or
(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered, or such case or proceeding shall not
be dismissed or discharged within 45 days of commencement; or
(e) Cross-Default. The Company or any of its subsidiaries shall
default under any bond, debenture, note or other evidence of indebtedness for
money borrowed (excluding any capital lease), under any guarantee or under any
mortgage, or indenture pursuant to which there shall be issued or by which there
shall be secured or evidenced any indebtedness for money borrowed by the Company
or any of its subsidiaries, whether such indebtedness now exists or shall
hereafter be created, which default shall have resulted in indebtedness of at
least $10,000 being due and payable prior to the date on which it would
otherwise become due and payable and shall not have been issued by the Company
or waived by the lender; or
(f) Undischarged Judgment. One or more judgments for the payment of
money in an amount in excess of $10,000 in the aggregate shall be rendered
against the Company or any of its subsidiaries (or any combination thereof) and
shall remain undischarged for a period of ten consecutive days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment.
- 2 -
<PAGE>
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 2(c)
and 2(d) hereof) and at any time thereafter during the continuance of such Event
of Default, the Holder may declare all outstanding Obligations payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 2(c) and 2(d) hereof, immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any
other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
4. Collateral. To secure the Company's payment and performance of the
Obligations and to secure the Company's prompt, full and faithful performance
and observance of all of the provisions under this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest,
senior to all other security interests except for any now or hereafter existing
commercial bank or institutional lender financings and equipment leases, in all
of the Company's right, title and interest in and to the following, whether now
owned or hereafter acquired or existing and wherever located:
(a) All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(b) All accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind, and all
rights now or hereafter existing in and to all mortgages, security agreements,
leases or other contracts securing or otherwise relating to any of the same;
(c) All intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable inventions
and (i) the inventions and improvements described and claimed therein; (ii) any
continuation, division, renewal, extension, substitute or reissue thereof or any
legal equivalent in a foreign country for the full term thereof or the terms for
which the same may be granted; (iii) all rights to income, royalties, profits,
awards, damages and other rights relating to said patents, applications and
inventions, including the right to sue for past, present and future infringement
and (iv) any other rights and benefits relating to said patents, applications
and inventions including any rights as a licensor or licensee of said patents,
applications and inventions (the "Patents");
(ii) all trademarks, trademark registrations, trademark
applications, service marks, service mark registrations and service mark
applications, trade names, fictitious business name, tradestyles, and the
goodwill underlying those trademarks and service marks and (i) any similar marks
or amendments, modifications and renewals thereof and the goodwill represented
by those and any legal equivalent in a foreign country for the full term or
terms for which the same may be granted; (ii) all rights to income, royalties,
profits, damages and other rights relating to said trademarks and service marks
including the right to sue for past, present or future infringement and (iii)
any other rights and benefits relating to said trademarks and service marks
including any rights as a licensor or licensee of said trademark and service
mark (the "Trademarks");
(iii) all copyrights, copyright registrations and copyright
applications, including without limitation those copyrights for computer
programs, computer databases, flow diagrams, maskworks, maskwork applications,
source codes and object codes, computer software, technical knowledge and
processes, trade secrets, know-how, customer lists, franchises, systems,
inventions, designs, blueprints, formal or informal licensing arrangements, and
all property embodying or incorporating such copyrights and (i) any similar
rights or amendments, modifications and renewals thereof and any legal
equivalent in a foreign country for the full term or terms for which the same
may be granted; (ii) all rights to income, past, present and future infringement
and (iii) any other rights and benefits relating to said copyrights (the
"Copyrights");
- 3 -
<PAGE>
(d) all substitutions and replacements for, and all rights to
exploit, all of the foregoing;
(e) all books and records pertaining to any of the foregoing; and
(f) all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
The Company covenants and agrees with Holder that: (x) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (y) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by any means upon any
Collateral will not bar realization upon any other Collateral; and (z) the
security interest hereby created is a continuing security interest and will
cover and secure the payment of all Obligations both present and future of the
Company to Holder pursuant to this Note and the other Transaction Documents. The
Company further covenants and agrees to take all actions requested by the Holder
to establish or perfect the security interest granted under this Note.
5. Prepayment. This Note may be prepaid as a whole or in part at any time
prior to the Maturity Date upon at least ten Business Days prior written notice
to the Holder, provided that nothing in this Section 5 shall limit the Holder's
conversion rights set forth in Section 6 herein during such notice period. Any
such prepayment shall be applied first to the payment of expenses due under this
Note, second to interest accrued on this Note and third, if the amount of
prepayment exceeds the amount of all such expenses and accrued interest, to the
payment of principal of this Note.
6. Conversion. If there is a Funding Date within six (6) months of the
date hereof, all outstanding principal and accrued interest under this Note will
be converted into Class E Preferred Stock on such Funding Date on terms
substantially the same as those issued pursuant to the Class E Preferred
Commitment.
If there is no Class E Preferred Commitment within four (4) months
of the date hereof or if a Funding Date does not occur within six (6) months of
the date hereof, then at the option of the Holder, (a) all outstanding principal
and accrued interest under this Note will convert to the Company's common or
preferred stock at a price and on terms to be negotiated at that time between
the Holder and the Company, or (b) if no agreement can be reached between the
Holder and the Company within 60 days of the expiration of the four (4) month or
six (6) month period, as the case may be, at the Holder's option, exercisable by
the Holder at any time after expiration of the 60 day period, the Holder may
declare in writing that such Note has become a demand obligation, and thereafter
may make demand for payment of the Note at any time thereafter. Any such demand
shall be in writing, and require payment by the Company no earlier than 10 days
after such demand.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified only as to the Holder of this Note upon the written consent of the
Company and the Holder.
9. Transfer of this Note or Securities Issuable on Conversion Hereof. This
Note may not be transferred in violation of any restrictive legend set forth
hereon. Each new Note issued upon transfer of this Note shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. Subject to the foregoing, transfers of this
Note shall be registered upon registration books maintained for such purpose by
or on behalf of the Company. Prior to presentation of this Note
- 4 -
<PAGE>
for registration of transfer, the Company shall treat the registered holder
hereof as the owner and holder of this Note for the purpose of receiving all
payments of principal and interest hereon and for all other purposes whatsoever,
whether or not this Note shall be overdue and the Company shall not be affected
by notice to the contrary.
10. Assignment by the Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, as a whole or in part, by the Company, without the prior written
consent of the Holder.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in the Purchase Agreement or on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.
13. Expenses; Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without regard to conflict of
laws provisions of the Commonwealth of Massachusetts or of any other state. In
the event of any dispute among or between any of the parties to this Note
arising out of the terms of this Note, the parties hereby consent to the
exclusive jurisdiction of the federal and state courts located in the
Commonwealth of Massachusetts for resolution of such dispute, and agree not to
contest such exclusive jurisdiction or seek to transfer any action relating to
such dispute to any other jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
BEACON POWER CORPORATION
By: /s/ William E. Stanton
----------------------------------
Name: William E. Stanton
--------------------------------
Title: President & CEO
-------------------------------
- 5 -
<PAGE>
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
$1,350,000.00 August 2, 1999
WOBURN, MA
FOR VALUE RECEIVED, Beacon Power Corporation, a Delaware corporation (the
"Company"), promises to pay to the order of Perseus Capital, L.L.C., or its
registered assigns (the "Holder"), the principal sum of $1,350,000.00 or such
lesser amount as shall then equal the outstanding principal amount hereof,
together with interest computed in the following fashion:
(a) Interest accrued to date on the note which this Note amends and
restates (and known in the Purchase Agreement referenced below as the Tranche
One Note), amounting to $3,424.66; and
(b) Interest accruing from the date of issuance of this Note on the unpaid
principal balance hereof at a rate equal to twelve and one-half percent
(12 1/2%) per annum, computed on the basis of the actual number of days elapsed
and a year of 365 days; provided that if the Funding Date does not occur within
six (6) months from the date hereof, such interest rate shall increase effective
as of the close of business on the such day to occur six (6) months from the
date hereof to fifteen percent (15%) per annum.
All unpaid principal, together with any accrued but unpaid interest and
other amounts payable hereunder, shall be due and payable on the earlier of(i)
the date of conversion (or, absent a conversion, demand by the holder) as
referenced below in Section 6 (the "Maturity Date") or (ii) upon or after the
occurrence of an Event of Default (as defined below), when such amounts are
declared due and payable by the Holder or made automatically due and payable.
This Note is issued pursuant to the Note and Warrant Purchase Agreement
(the "Purchase Agreement") dated as of July 30, 1999 by and among the Company,
Perseus Capital, L.L.C., Duquesne Enterprises, Inc., Micro Generation Technology
Fund, L.L.C. and SatCon Technology Corporation.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms have
the following meanings:
(a) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York are authorized to be closed.
<PAGE>
(b) "Funding Date" means the date on which all or any part of
funding of transactions contemplated by the Class E Preferred Commitment are
first consummated.
(c) "Obligations" means the principal, interest and other amounts
payable under this Note.
(d) "Class E Preferred Commitment" means a written commitment to the
Company by a strategic investor(s), made within four (4) months from the date
hereof, to purchase at least $5 million of the Class E Preferred Stock.
(e) "Transaction Documents" shall mean this Note, the Purchase
Agreement, and any other promissory note issued pursuant to the Purchase
Agreement.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on this Note or (ii) any interest or other payment required
under the terms of this Note or any other Transaction Document within five
Business Days of its due date; or
(b) Breaches of Other Covenants. The Company shall materially fail
to observe or to perform any other covenant, obligation, condition or agreement
contained in this Note or the other Transaction Documents, other than those
specified in Section 2(a) hereof, and such failure shall continue for 10 days
after written notice thereof to the Company; or
(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it or (vii) take any action for the purpose of effecting any
of the foregoing; or
(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered, or such case or proceeding shall not
be dismissed or discharged within 45 days of commencement; or
(e) Cross-Default. The Company or any of its subsidiaries shall
default under any bond, debenture, note or other evidence of indebtedness for
money borrowed (excluding any capital lease), under any guarantee or under any
mortgage, or indenture pursuant to which there shall be issued or by which there
shall be secured or evidenced any indebtedness for money borrowed by the Company
or any of its subsidiaries, whether such indebtedness now exists or shall
hereafter be created, which default shall have resulted in indebtedness of at
least $10,000 being due and payable prior to the date on which it would
otherwise become due and payable and shall not have been issued by the Company
or waived by the lender; or
(f) Undischarged Judgment. One or more judgments for the payment of
money in an amount in excess of $10,000 in the aggregate shall be rendered
against the Company or any of its subsidiaries (or any combination thereof) and
shall remain undischarged for a period of ten consecutive days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment.
- 2 -
<PAGE>
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 2(c)
and 2(d) hereof) and at any time thereafter during the continuance of such Event
of Default, the Holder may declare all outstanding Obligations payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 2(c) and 2(d) hereof, immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any
other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
4. Collateral. To secure the Company's payment and performance of the
Obligations and to secure the Company's prompt, full and faithful performance
and observance of all of the provisions under this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest,
senior to all other security interests except for any now or hereafter existing
commercial bank or institutional lender financings and equipment leases, in all
of the Company's right, title and interest in and to the following, whether now
owned or hereafter acquired or existing and wherever located:
(a) All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(b) All accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind, and all
rights now or hereafter existing in and to all mortgages, security agreements,
leases or other contracts securing or otherwise relating to any of the same;
(c) All intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable inventions
and (i) the inventions and improvements described and claimed therein; (ii) any
continuation, division, renewal, extension, substitute or reissue thereof or any
legal equivalent in a foreign country for the full term thereof or the terms for
which the same may be granted; (iii) all rights to income, royalties, profits,
awards, damages and other rights relating to said patents, applications and
inventions, including the right to sue for past, present and future infringement
and (iv) any other rights and benefits relating to said patents, applications
and inventions including any rights as a licensor or licensee of said patents,
applications and inventions (the "Patents");
(ii) all trademarks, trademark registrations, trademark
applications, service marks, service mark registrations and service mark
applications, trade names, fictitious business name, tradestyles, and the
goodwill underlying those trademarks and service marks and (i) any similar marks
or amendments, modifications and renewals thereof and the goodwill represented
by those and any legal equivalent in a foreign country for the full term or
terms for which the same may be granted; (ii) all rights to income, royalties,
profits, damages and other rights relating to said trademarks and service marks
including the right to sue for past, present or future infringement and (iii)
any other rights and benefits relating to said trademarks and service marks
including any rights as a licensor or licensee of said trademark and service
mark (the "Trademarks");
(iii) all copyrights, copyright registrations and copyright
applications, including without limitation those copyrights for computer
programs, computer databases, flow diagrams, maskworks, maskwork applications,
source codes and object codes, computer software, technical knowledge and
processes, trade secrets, know-how, customer lists, franchises, systems,
inventions, designs, blueprints, formal or informal licensing arrangements, and
all property embodying or incorporating such copyrights and (i) any similar
rights or amendments, modifications and renewals thereof and any legal
equivalent in a foreign country for the full term or terms for which the same
may be granted; (ii) all rights to income, past, present and future infringement
and (iii) any other rights and benefits relating to said copyrights (the
"Copyrights");
- 3 -
<PAGE>
(d) all substitutions and replacements for, and all rights to
exploit, all of the foregoing;
(e) all books and records pertaining to any of the foregoing; and
(f) all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
The Company covenants and agrees with Holder that: (x) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (y) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by any means upon any
Collateral will not bar realization upon any other Collateral; and (z) the
security interest hereby created is a continuing security interest and will
cover and secure the payment of all Obligations both present and future of the
Company to Holder pursuant to this Note and the other Transaction Documents. The
Company further covenants and agrees to take all actions requested by the Holder
to establish or perfect the security interest granted under this Note.
5. Prepayment. This Note may be prepaid as a whole or in part at any time
prior to the Maturity Date upon at least ten Business Days prior written notice
to the Holder, provided that nothing in this Section 5 shall limit the Holder's
conversion rights set forth in Section 6 herein during such notice period. Any
such prepayment shall be applied first to the payment of expenses due under this
Note, second to interest accrued on this Note and third, if the amount of
prepayment exceeds the amount of all such expenses and accrued interest, to the
payment of principal of this Note.
6. Conversion. If there is a Funding Date within six (6) months of the
date hereof, all outstanding principal and accrued interest under this Note will
be converted into Class E Preferred Stock on such Funding Date on terms
substantially the same as those issued pursuant to the Class E Preferred
Commitment.
If there is no Class E Preferred Commitment within four (4) months
of the date hereof or if a Funding Date does not occur within six (6) months of
the date hereof, then at the option of the Holder, (a) all outstanding principal
and accrued interest under this Note will convert to the Company's common or
preferred stock at a price and on terms to be negotiated at that time between
the Holder and the Company, or (b) if no agreement can be reached between the
Holder and the Company within 60 days of the expiration of the four (4) month or
six (6) month period, as the case may be, at the Holder's option, exercisable by
the Holder at any time after expiration of the 60 day period, the Holder may
declare in writing that such Note has become a demand obligation, and thereafter
may make demand for payment of the Note at any time thereafter. Any such demand
shall be in writing, and require payment by the Company no earlier than 10 days
after such demand.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified only as to the Holder of this Note upon the written consent of the
Company and the Holder.
9. Transfer of this Note or Securities Issuable on Conversion Hereof. This
Note may not be transferred in violation of any restrictive legend set forth
hereon. Each new Note issued upon transfer of this Note shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. Subject to the foregoing, transfers of this
Note shall be registered upon registration books maintained for such purpose by
or on behalf of the Company. Prior to presentation of this Note
- 4 -
<PAGE>
for registration of transfer, the Company shall treat the registered holder
hereof as the owner and holder of this Note for the purpose of receiving all
payments of principal and interest hereon and for all other purposes whatsoever,
whether or not this Note shall be overdue and the Company shall not be affected
by notice to the contrary.
10. Assignment by the Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, as a whole or in part, by the Company, without the prior written
consent of the Holder.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. Any notice, request or other conununication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in the Purchase Agreement or on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.
13. Expenses; Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
counection with this Note shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without regard to conflict of
laws provisions of the Commonwealth of Massachusetts or of any other state. In
the event of any dispute among or between any of the parties to this Note
arising out of the terms of this Note, the parties hereby consent to the
exclusive jurisdiction of the federal and state courts located in the
Commonwealth of Massachusetts for resolution of such dispute, and agree not to
contest such exclusive jurisdiction or seek to transfer any action relating to
such dispute to any other jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
BEACON POWER CORPORATION
By: /s/ William E. Stanton
----------------------------------
Name: William E. Stanton
---------------------------------
Title: President & CEO
--------------------------------
- 5 -
<PAGE>
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
$500,000.00 August 2, 1999
WOBURN, MA
FOR VALUE RECEIVED, Beacon Power Corporation, a Delaware corporation (the
"Company"), promises to pay to the order of Duquesne Enterprises, Inc., or its
registered assigns (the "Holder"), the principal sum of $500,000.00 or such
lesser amount as shall then equal the outstanding principal amount hereof,
together with interest computed in the following fashion:
(a) Interest accrued to date on the note which this Note amends and
restates (and known in the Purchase Agreement referenced below as the Tranche
One Note), amounting to $684.93; and
(b) Interest accruing from the date of issuance of this Note on the unpaid
principal balance hereof at a rate equal to twelve and one-half percent
(12 1/2%) per annum, computed on the basis of the actual number of days elapsed
and a year of 365 days; provided that if the Funding Date does not occur within
six (6) months from the date hereof, such interest rate shall increase effective
as of the close of business on the such day to occur six (6) months from the
date hereof to fifteen percent (15%) per annum.
All unpaid principal, together with any accrued but unpaid interest and
other amounts payable hereunder, shall be due and payable on the earlier of(i)
the date of conversion (or, absent a conversion, demand by the holder) as
referenced below in Section 6 (the "Maturity Date") or (ii) upon or after the
occurrence of an Event of Default (as defined below), when such amounts are
declared due and payable by the Holder or made automatically due and payable.
This Note is issued pursuant to the Note and Warrant Purchase Agreement
(the "Purchase Agreement") dated as of July 30, 1999 by and among the Company,
Perseus Capital, L.L.C., Duquesne Enterprises, Inc., Micro Generation Technology
Fund, L.L.C. and SatCon Technology Corporation.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms have
the following meanings:
(a) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York are authorized to be closed.
<PAGE>
(b) "Funding Date" means the date on which all or any part of
funding of transactions contemplated by the Class E Preferred Commitment are
first consummated.
(c) "Obligations" means the principal, interest and other amounts
payable under this Note.
(d) "Class E Preferred Commitment" means a written commitment to the
Company by a strategic investor(s), made within four (4) months from the date
hereof, to purchase at least $5 million of the Class E Preferred Stock.
(e) "Transaction Documents" shall mean this Note, the Purchase
Agreement, and any other promissory note issued pursuant to the Purchase
Agreement.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on this Note or (ii) any interest or other payment required
under the terms of this Note or any other Transaction Document within five
Business Days of its due date; or
(b) Breaches of Other Covenants. The Company shall materially fail
to observe or to perform any other covenant, obligation, condition or agreement
contained in this Note or the other Transaction Documents, other than those
specified in Section 2(a) hereof, and such failure shall continue for 10 days
after written notice thereof to the Company; or
(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it or (vii) take any action for the purpose of effecting any
of the foregoing; or
(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered, or such case or proceeding shall not
be dismissed or discharged within 45 days of commencement; or
(e) Cross-Default. The Company or any of its subsidiaries shall
default under any bond, debenture, note or other evidence of indebtedness for
money borrowed (excluding any capital lease), under any guarantee or under any
mortgage, or indenture pursuant to which there shall be issued or by which there
shall be secured or evidenced any indebtedness for money borrowed by the Company
or any of its subsidiaries, whether such indebtedness now exists or shall
hereafter be created, which default shall have resulted in indebtedness of at
least $10,000 being due and payable prior to the date on which it would
otherwise become due and payable and shall not have been issued by the Company
or waived by the lender; or
(f) Undischarged Judgment. One or more judgments for the payment of
money in an amount in excess of $10,000 in the aggregate shall be rendered
against the Company or any of its subsidiaries (or any combination thereof) and
shall remain undischarged for a period of ten consecutive days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment.
- 2 -
<PAGE>
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 2(c)
and 2(d) hereof) and at any time thereafter during the continuance of such Event
of Default, the Holder may declare all outstanding Obligations payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 2(c) and 2(d) hereof, immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any
other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
4. Collateral. To secure the Company's payment and performance of the
Obligations and to secure the Company's prompt, full and faithful performance
and observance of all of the provisions under this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest,
senior to all other security interests except for any now or hereafter existing
commercial bank or institutional lender financings and equipment leases, in all
of the Company's right, title and interest in and to the following, whether now
owned or hereafter acquired or existing and wherever located:
(a) All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(b) All accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind, and all
rights now or hereafter existing in and to all mortgages, security agreements,
leases or other contracts securing or otherwise relating to any of the same;
(c) All intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable inventions
and (i) the inventions and improvements described and claimed therein; (ii) any
continuation, division, renewal, extension, substitute or reissue thereof or any
legal equivalent in a foreign country for the full term thereof or the terms for
which the same may be granted; (iii) all rights to income, royalties, profits,
awards, damages and other rights relating to said patents, applications and
inventions, including the right to sue for past, present and future infringement
and (iv) any other rights and benefits relating to said patents, applications
and inventions including any rights as a licensor or licensee of said patents,
applications and inventions (the "Patents");
(ii) all trademarks, trademark registrations, trademark
applications, service marks, service mark registrations and service mark
applications, trade names, fictitious business name, tradestyles, and the
goodwill underlying those trademarks and service marks and (i) any similar marks
or amendments, modifications and renewals thereof and the goodwill represented
by those and any legal equivalent in a foreign country for the full term or
terms for which the same may be granted; (ii) all rights to income, royalties,
profits, damages and other rights relating to said trademarks and service marks
including the right to sue for past, present or future infringement and (iii)
any other rights and benefits relating to said trademarks and service marks
including any rights as a licensor or licensee of said trademark and service
mark (the "Trademarks");
(iii) all copyrights, copyright registrations and copyright
applications, including without limitation those copyrights for computer
programs, computer databases, flow diagrams, maskworks, maskwork applications,
source codes and object codes, computer software, technical knowledge and
processes, trade secrets, know-how, customer lists, franchises, systems,
inventions, designs, blueprints, formal or informal licensing arrangements, and
all property embodying or incorporating such copyrights and (i) any similar
rights or amendments, modifications and renewals thereof and any legal
equivalent in a foreign country for the full term or terms for which the same
may be granted; (ii) all rights to income, past, present and future infringement
and (iii) any other rights and benefits relating to said copyrights (the
"Copyrights");
- 3 -
<PAGE>
(d) all substitutions and replacements for, and all rights to
exploit, all of the foregoing;
(e) all books and records pertaining to any of the foregoing; and
(f) all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
The Company covenants and agrees with Holder that: (x) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (y) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by any means upon any
Collateral will not bar realization upon any other Collateral; and (z) the
security interest hereby created is a continuing security interest and will
cover and secure the payment of all Obligations both present and future of the
Company to Holder pursuant to this Note and the other Transaction Documents. The
Company further covenants and agrees to take all actions requested by the Holder
to establish or perfect the security interest granted under this Note.
5. Prepayment. This Note may be prepaid as a whole or in part at any time
prior to the Maturity Date upon at least ten Business Days prior written notice
to the Holder, provided that nothing in this Section 5 shall limit the Holder's
conversion rights set forth in Section 6 herein during such notice period. Any
such prepayment shall be applied first to the payment of expenses due under this
Note, second to interest accrued on this Note and third, if the amount of
prepayment exceeds the amount of all such expenses and accrued interest, to the
payment of principal of this Note.
6. Conversion. If there is a Funding Date within six (6) months of the
date hereof, all outstanding principal and accrued interest under this Note will
be converted into Class E Preferred Stock on such Funding Date on terms
substantially the same as those issued pursuant to the Class E Preferred
Commitment.
If there is no Class E Preferred Commitment within four (4) months
of the date hereof or if a Funding Date does not occur within six (6) months of
the date hereof, then at the option of the Holder, (a) all outstanding principal
and accrued interest under this Note will convert to the Company's common or
preferred stock at a price and on terms to be negotiated at that time between
the Holder and the Company, or (b) if no agreement can be reached between the
Holder and the Company within 60 days of the expiration of the four (4) month or
six (6) month period, as the case may be, at the Holder's option, exercisable by
the Holder at any time after expiration of the 60 day period, the Holder may
declare in writing that such Note has become a demand obligation, and thereafter
may make demand for payment of the Note at any time thereafter. Any such demand
shall be in writing, and require payment by the Company no earlier than 10 days
after such demand.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified only as to the Holder of this Note upon the written consent of the
Company and the Holder.
9. Transfer of this Note or Securities Issuable on Conversion Hereof. This
Note may not be transferred in violation of any restrictive legend set forth
hereon. Each new Note issued upon transfer of this Note shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. Subject to the foregoing, transfers of this
Note shall be registered upon registration books maintained for such purpose by
or on behalf of the Company. Prior to presentation of this Note
- 4 -
<PAGE>
for registration of transfer, the Company shall treat the registered holder
hereof as the owner and holder of this Note for the purpose of receiving all
payments of principal and interest hereon and for all other purposes whatsoever,
whether or not this Note shall be overdue and the Company shall not be affected
by notice to the contrary.
10. Assignment by the Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, as a whole or in part, by the Company, without the prior written
consent of the Holder.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in the Purchase Agreement or on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.
13. Expenses; Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
counection with this Note shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without regard to conflict of
laws provisions of the Commonwealth of Massachusetts or of any other state. In
the event of any dispute among or between any of the parties to this Note
arising Out of the terms of this Note, the parties hereby consent to the
exclusive jurisdiction of the federal and state courts located in the
Commonwealth of Massachusetts for resolution of such dispute, and agree not to
contest such exclusive jurisdiction or seek to transfer any action relating to
such dispute to any other jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
BEACON POWER CORPORATION
By: /s/ William E. Stanton
-----------------------------------
Name: William E. Stanton
---------------------------------
Title: President & CEO
--------------------------------
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<PAGE>
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
$150,000.00 August 2, 1999
WOBURN, MA
FOR VALUE RECEIVED, Beacon Power Corporation, a Delaware corporation (the
"Company"), promises to pay to the order of Micro Generation Technology Fund,
L.L.C., or its registered assigns (the "Holder"), the principal sum of
$150,000.00 or such lesser amount as shall then equal the outstanding principal
amount hereof, together with interest computed in the following fashion:
(a) Interest accrued to date on the note which this Note amends and
restates (and known in the Purchase Agreement referenced below as the Tranche
One Note), amounting to $667.81;and
(b) Interest accruing from the date of issuance of this Note on the
unpaid principal balance hereof at a rate equal to twelve and one-half percent
(12 1/2%) per annum, computed on the basis of the actual number of days elapsed
and a year of 365 days; provided that if the Funding Date does not occur within
six (6) months from the date hereof, such interest rate shall increase effective
as of the close of business on the such day to occur six (6) months from the
date hereof to fifteen percent (15%) per annum.
All unpaid principal, together with any accrued but unpaid interest and
other amounts payable hereunder, shall be due and payable on the earlier of (i)
the date of conversion (or, absent a conversion, demand by the holder) as
referenced below in Section 6 (the "Maturity Date") or (ii) upon or after the
occurrence of an Event of Default (as defined below), when such amounts are
declared due and payable by the Holder or made automatically due and payable.
This Note is issued pursuant to the Note and Warrant Purchase Agreement
(the "Purchase Agreement") dated as of July 30, 1999 by and among the Company,
Perseus Capital, L.L.C., Duquesne Enterprises, Inc., Micro Generation Technology
Fund, L.L.C. and SatCon Technology Corporation.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms
have the following meanings:
(a) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York are authorized to be closed.
<PAGE>
(b) "Funding Date" means the date on which all or any part of
funding of transactions contemplated by the Class E Preferred Commitment are
first consummated.
(c) "Obligations" means the principal, interest and other amounts
payable under this Note.
(d) "Class E Preferred Commitment" means a written commitment to the
Company by a strategic investor(s), made within four (4) months from the date
hereof, to purchase at least $5 million of the Class E Preferred Stock.
(e) "Transaction Documents" shall mean this Note, the Purchase
Agreement, and any other promissory note issued pursuant to the Purchase
Agreement.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on this Note or (ii) any interest or other payment required
under the terms of this Note or any other Transaction Document within five
Business Days of its due date; or
(b) Breaches of Other Covenants. The Company shall materially fail
to observe or to perform any other covenant, obligation, condition or agreement
contained in this Note or the other Transaction Documents, other than those
specified in Section 2(a) hereof, and such failure shall continue for 10 days
after written notice thereof to the Company; or
(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it or (vii) take any action for the purpose of effecting any
of the foregoing; or
(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered, or such case or proceeding shall not
be dismissed or discharged within 45 days of commencement; or
(e) Cross-Default. The Company or any of its subsidiaries shall
default under any bond, debenture, note or other evidence of indebtedness for
money borrowed (excluding any capital lease), under any guarantee or under any
mortgage, or indenture pursuant to which there shall be issued or by which there
shall be secured or evidenced any indebtedness for money borrowed by the Company
or any of its subsidiaries, whether such indebtedness now exists or shall
hereafter be created, which default shall have resulted in indebtedness of at
least $10,000 being due and payable prior to the date on which it would
otherwise become due and payable and shall not have been issued by the Company
or waived by the lender; or
(f) Undischarged Judgment. One or more judgments for the payment of
money in an amount in excess of $10,000 in the aggregate shall be rendered
against the Company or any of its subsidiaries (or any combination thereof) and
shall remain undischarged for a period of ten consecutive days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment.
- 2 -
<PAGE>
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 2(c)
and 2(d) hereof) and at any time thereafter during the continuance of such Event
of Default, the Holder may declare all outstanding Obligations payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 2(c) and 2(d) hereof, immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the other Transaction Documents to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any
other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
4. Collateral. To secure the Company's payment and performance of the
Obligations and to secure the Company's prompt, full and faithful performance
and observance of all of the provisions under this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest,
senior to all other security interests except for any now or hereafter existing
commercial bank or institutional lender financings and equipment leases, in all
of the Company's right, title and interest in and to the following, whether now
owned or hereafter acquired or existing and wherever located:
(a) All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(b) All accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind, and all
rights now or hereafter existing in and to all mortgages, security agreements,
leases or other contracts securing or otherwise relating to any of the same;
(c) All intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable inventions
and (i) the inventions and improvements described and claimed therein; (ii) any
continuation, division, renewal, extension, substitute or reissue thereof or any
legal equivalent in a foreign country for the full term thereof or the terms for
which the same may be granted; (iii) all rights to income, royalties, profits,
awards, damages and other rights relating to said patents, applications and
inventions, including the right to sue for past, present and future infringement
and (iv) any other rights and benefits relating to said patents, applications
and inventions including any rights as a licensor or licensee of said patents,
applications and inventions (the "Patents");
(ii) all trademarks, trademark registrations, trademark
applications, service marks, service mark registrations and service mark
applications, trade names, fictitious business name, tradestyles, and the
goodwill underlying those trademarks and service marks and (i) any similar marks
or amendments, modifications and renewals thereof and the goodwill represented
by those and any legal equivalent in a foreign country for the full term or
terms for which the same may be granted; (ii) all rights to income, royalties,
profits, damages and other rights relating to said trademarks and service marks
including the right to sue for past, present or future infringement and (iii)
any other rights and benefits relating to said trademarks and service marks
including any rights as a licensor or licensee of said trademark and service
mark (the "Trademarks");
(iii) all copyrights, copyright registrations and copyright
applications, including without limitation those copyrights for computer
programs, computer databases, flow diagrams, maskworks, maskwork applications,
source codes and object codes, computer software, technical knowledge and
processes, trade secrets, know-how, customer lists, franchises, systems,
inventions, designs, blueprints, formal or informal licensing arrangements, and
all property embodying or incorporating such copyrights and (i) any similar
rights or amendments, modifications and renewals thereof and any legal
equivalent in a foreign country for the full term or terms for which the same
may be granted; (ii) all rights to income, past, present and future infringement
and (iii) any other rights and benefits relating to said copyrights (the
"Copyrights");
- 3 -
<PAGE>
(d) all substitutions and replacements for, and all rights to
exploit, all of the foregoing;
(e) all books and records pertaining to any of the foregoing; and
(f) all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
The Company covenants and agrees with Holder that: (x) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (y) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by any means upon any
Collateral will not bar realization upon any other Collateral; and (z) the
security interest hereby created is a continuing security interest and will
cover and secure the payment of all Obligations both present and future of the
Company to Holder pursuant to this Note and the other Transaction Documents. The
Company further covenants and agrees to take all actions requested by the Holder
to establish or perfect the security interest granted under this Note.
5. Prepayment. This Note may be prepaid as a whole or in part at any time
prior to the Maturity Date upon at least ten Business Days prior written notice
to the Holder, provided that nothing in this Section 5 shall limit the Holder's
conversion rights set forth in Section 6 herein during such notice period. Any
such prepayment shall be applied first to the payment of expenses due under this
Note, second to interest accrued on this Note and third, if the amount of
prepayment exceeds the amount of all such expenses and accrued interest, to the
payment of principal of this Note.
6. Conversion. If there is a Funding Date within six (6) months of the
date hereof, all outstanding principal and accrued interest under this Note will
be converted into Class E Preferred Stock on such Funding Date on terms
substantially the same as those issued pursuant to the Class E Preferred
Commitment.
If there is no Class E Preferred Commitment within four (4) months
of the date hereof or if a Funding Date does not occur within six (6) months of
the date hereof, then at the option of the Holder, (a) all outstanding principal
and accrued interest under this Note will convert to the Company's common or
preferred stock at a price and on terms to be negotiated at that time between
the Holder and the Company, or (b) if no agreement can be reached between the
Holder and the Company within 60 days of the expiration of the four (4) month or
six (6) month period, as the case may be, at the Holder's option, exercisable by
the Holder at any time after expiration of the 60 day period, the Holder may
declare in writing that such Note has become a demand obligation, and thereafter
may make demand for payment of the Note at any time thereafter. Any such demand
shall be in writing, and require payment by the Company no earlier than 10 days
after such demand.
7. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified only as to the Holder of this Note upon the written consent of the
Company and the Holder.
9. Transfer of this Note or Securities Issuable on Conversion Hereof. This
Note may not be transferred in violation of any restrictive legend set forth
hereon. Each new Note issued upon transfer of this Note shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. Subject to the foregoing, transfers of this
Note shall be registered upon registration books maintained for such purpose by
or on behalf of the Company. Prior to presentation of this Note
- 4 -
<PAGE>
for registration of transfer, the Company shall treat the registered holder
hereof as the owner and holder of this Note for the purpose of receiving all
payments of principal and interest hereon and for all other purposes whatsoever,
whether or not this Note shall be overdue and the Company shall not be affected
by notice to the contrary.
10. Assignment by the Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, as a whole or in part, by the Company, without the prior written
consent of the Holder.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in the Purchase Agreement or on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.
13. Expenses; Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and constmed in accordance with
the laws of the Commonwealth of Massachusetts, without regard to conflict of
laws provisions of the Commonwealth of Massachusetts or of any other state. In
the event of any dispute among or between any of the parties to this Note
arising out of the terms of this Note, the parties hereby consent to the
exclusive jurisdiction of the federal and state courts located in the
Commonwealth of Massachusetts for resolution of such dispute, and agree not to
contest such exclusive jurisdiction or seek to transfer any action relating to
such dispute to any other jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
BEACON POWER CORPORATION
By: /s/ William E. Stanton
------------------------------------
Name: William E. Stanton
----------------------------------
Title: President & CEO
---------------------------------
- 5 -
<PAGE>
THE SECURITIES EVIDENCED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE SOLD, TRANSFERRED, OR ASSIGNED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
No.: 1
WARRANT
TO PURCHASE CLASS E PREFERRED STOCK
OF
BEACON POWER CORPORATION
(void after August 2, 2004)
1. Issuance of Warrant. FOR VALUE RECEIVED, on and after the date of
issuance of this Warrant, and subject to the terms and conditions herein set
forth, the Holder (as defined below) is entitled to purchase from Beacon Power
Corporation, a Delaware corporation (the "Company"), at any time before 5:00
p.m. New York time on August 2, 2004 (the "Termination Date"), at a price per
share equal to the Warrant Price (as defined below and subject to adjustment as
described below), the Warrant Stock (as defined below and subject to adjustment
as described below) upon exercise of this warrant (this "Warrant") pursuant to
Section 6 hereof. This Warrant is issued pursuant to the Note and Warrant
Purchase Agreement (as defined below).
2. Definitions. As used in this Warrant, the following terms have the
definitions ascribed to them below:
(a) "Additional Stock" is defined in Section 3(d)(iv).
(b) "Base Price" means as of August 2, 1999, $1.78 per share of
Common Stock, which shall be subject to adjustment as provided in Section 3(d).
<PAGE>
(c) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York or the District of Columbia are
authorized to be closed.
(d) "Change-In-Control Event" means the occurrence after the
Commencement Date of any of the following: (i) the acquisition of voting
securities of the Company by any person or group of persons that results in such
person or group, together with its affiliates, becoming, directly or indirectly,
the beneficial owner of in excess of 50% of the outstanding voting securities of
the Company; (ii) a merger or consolidation of the Company with any other
corporation or legal entity regardless of which entity is the survivor, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or being converted into voting securities of
the surviving entity) in excess of 50% of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation; or (iii) the sale or disposition of all or substantially all of
the Company's assets other than in a transaction in which holders of the voting
securities of the Company immediately prior to such transaction receive voting
securities of the acquiror of such assets or its affiliate that represent in
excess of 50% of the voting securities of such entity after consummation of such
transaction.
(e) "Commencement Date" means the date of issue of this Warrant.
(f) "Common Stock" means the Company's Common Stock, $.01 par value
per share.
(g) "Holder" means Perseus Capital, L.L.C., or its assigns.
(h) "Note and Warrant Purchase Agreement" means the Note and Warrant
Purchase Agreement dated as of August 2, 1999 by and among the Company, Perseus
Capital, L.L.C., Duquesne Enterprises, Inc., Micro Generation Technology Fund,
L.L.C., and SatCon Technology Corporation (collectively, the "Purchasers"), and
"Note" means the Note issued to the holder pursuant to such Agreement.
(i) "Class E Preferred Stock" means the Class E Preferred Stock of
the Company proposed to be issued to the Purchasers as part of the equity
financing in which the Note is to be converted, as described in the above Note
and Warrant Purchase Agreement.
(j) "Warrant Price" means, (i) in the event that a purchase of at
least $5 million of the Class E Preferred Stock is consummated within six (6)
months from the date hereof, the per share price at which such purchase is made,
or (ii) in the event that no such purchase is consummated, $2.50, in either
event subject to adjustment as described in Section 3 below.
(k) "Warrant Stock" means the shares of Company stock which are
purchasable upon exercise or conversion of this Warrant, consisting of Class E
Preferred Stock (or other Company securities) into which the Note is converted
if such conversion actually
-2-
<PAGE>
occurs, or consisting of shares of Common Stock if the Note is not so converted.
The total number of shares to be issued upon the exercise of this Warrant shall
be computed by dividing $337,500.00 by the Warrant Price, subject to adjustment
as described in Section 3 below. The "Warrant Stock Definition Date" means the
date on which the Note is converted (or if not converted, then the date on which
the holder of the Note notifies the Company that it has become a demand note, as
described in the Note.
3. Adjustments and Notices. The Warrant Price and/or the number of shares
of Warrant Stock shall be subject to adjustment from time to time in accordance
with this Section 3. The Warrant Price and/or the number of Warrant Shares shall
be adjusted to reflect all of the following events that occur on or after the
Commencement Date. However, if the Warrant Stock becomes defined to be preferred
stock of the Company, then the following provisions in Section 3 shall not apply
to shares issued on or after the Warrant Stock Definition Date.
(a) Subdivision, Stock Dividends or Combinations. In case the
Company shall at any time subdivide the outstanding shares of Warrant Stock or
shall issue a stock dividend with respect to the Warrant Stock, the Warrant
Price in effect immediately prior to such subdivision or the issuance of such
dividend shall be proportionately decreased, and in case the Company shall at
any time combine the outstanding shares of the Warrant Stock, the Warrant Price
in effect immediately prior to such combination shall be proportionately
increased, in each case effective at the close of business on the date of such
subdivision, dividend or combination, as the case may be.
(b) Reclassification, Exchange, Substitution, In-Kind Distribution.
Upon any reclassifications, exchange, substitution or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant or upon the payment of a dividend in securities or
property other than shares of Warrant Stock, the Holder shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that Holder would have received if this Warrant had been
exercised or converted immediately before the record date for such
reclassification, exchange, substitution, or other event or immediately prior to
the record date for such dividend. The Company or its successor shall promptly
issue to Holder a new warrant for such new securities or other property. The new
warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise or conversion of the new warrant.
The provisions of this Section 3(b) shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events and successive
dividends.
(c) Reorganization, Merger etc. In case of any Change-In-Control
Event, the Company, or such successor or purchasing corporation, as the case may
be, shall, as a condition to closing any such reorganization, merger or sale,
duly execute and deliver to the Holder hereof a new warrant so that the Holder
shall have the right to receive, at a total purchase price not to exceed that
payable upon the exercise or conversion of the unexercised or unconverted
portion of this Warrant, and in lieu of the shares of the Warrant Stock
theretofore issuable upon exercise or
-3-
<PAGE>
conversion of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reorganization, merger or
sale by the Holder of the number of shares of Warrant Stock then purchasable
under this Warrant. Such new warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 3. The provisions of this subparagraph (c) shall similarly apply to
successive Change-In-Control Events. (d) Dilutive Issuances Adjustment of Number
of Shares and Warrant Price. In order to prevent dilution of the rights granted
under this Warrant, the number of shares of Warrant Stock obtainable upon
exercise of this Warrant and the Warrant Price shall be subject to adjustment
from time to time as provided in this Section 3(d).
(i) Adjustment of Warrant Price upon Issuance of Additional
Stock. If and whenever after the Commencement Date, the Company issues, or in
accordance with Section 3(d)(ii) is deemed to have issued, any Additional Stock
to any person for a consideration per share less than the Base Price then in
effect, then the Warrant Price in effect immediately before each such issuance
shall forthwith be adjusted to a price determined by multiplying such Warrant
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of Common Stock that the aggregate consideration received by the Company
for such issuance would purchase at such Warrant Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of such Additional Stock.
(ii) Effect of Certain Events. For purposes of determining
under Section (d)(i) the adjusted number of shares of Warrant Stock acquirable
upon exercise of this Warrant, the following shall be applicable:
(A) Issuance of Rights or Options. If the Company in any
manner issues, grants or sells (or otherwise becomes subject to) any
Options or Options for Convertible Securities, then the total maximum
number of shares of Common Stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been sold on the date of issuance, grant or sale of such
Options and to be outstanding.
(B) Issuance of Convertible Securities. If the Company
in any manner grants, issues or sells (or otherwise becomes subject to)
any Convertible Securities, then the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities
shall be deemed to have been sold on the date of issuance, grant or sale
of such Convertible Securities and to be outstanding.
(C) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible Securities
without the exercise of such Option or right, the number of shares of
Warrant Stock acquirable hereunder shall be adjusted to the number of
shares which would have been in effect at the time of such expiration or
termination
-4-
<PAGE>
had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
(D) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held
by or for the account of the Company or any Subsidiary, and the
disposition of any shares so owned or held shall be considered an issuance
or sale of Common Stock.
(E) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(iii) In the case of the issuance of Additional Stock for
cash, the consideration received therefor shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the company for any underwriting or
otherwise in connection with the issuance and sale thereof. In the case of the
issuance of Additional Stock for a consideration in whole or in part other than
cash, the consideration other than cash received therefor shall be deemed to be
the fair value thereof as reasonably determined by the Board of Directors of the
Company in its good faith judgment irrespective of any accounting treatment.
(iv) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to clause (ii) of this Section
3(d)) by the Company after the Commencement Date, other than shares of Common
Stock issued or issuable:
(A) to officers, directors, employees and consultants of
the Company directly or pursuant to a stock option plan or restricted
stock plan approved by the Board of Directors of the Company;
(B) upon conversion of the Class A, B, C, or D Preferred
Stock (or, if authorized, the Class E Preferred Stock) of the Company or
the exercise of warrants issued by the Company before or on the
Commencement Date;
(v) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 3(d) but not expressly provided
for by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's board of directors shall make an appropriate adjustment in
the number of shares of Warrant Stock obtainable upon exercise of this Warrant
and in the Warrant Price so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall decrease the number of shares
of Warrant Stock obtainable as otherwise
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<PAGE>
determined pursuant to this Section 3.
(e) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Warrant Price, the Corporation, at its own expense, shall
cause its Chief Financial Officer to compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to the Holder. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. No adjustment of the Warrant Price shall be
required to be made unless it would result in an increase or decrease of at
least one cent, but any adjustments not made because of this sentence shall be
carried forward and taken into account in any subsequent adjustment otherwise
required hereunder.
(f) No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through a 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 under this Warrant by the Company, but
shall at all times in good faith assist in carrying out all of the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment. If the
Company takes any action affecting the Class E Preferred Stock other than as
described above that adversely affects the Holder's rights under this Warrant,
the Warrant Price shall be adjusted downward.
(g) Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded down to the nearest whole share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying the Holder an amount computed
by multiplying the fractional interest by the fair market value of a full share.
4. No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
5. Reservation of Stock. On and after the Warrant Stock Definition Date,
the Company will reserve from its authorized and unissued stock a sufficient
number of shares to provide for the issuance of Warrant Stock upon the exercise
or conversion of this Warrant. Issuance of this Warrant shall constitute full
authority to the Company's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Warrant Stock issuable upon the exercise or conversion of this Warrant.
6. Exercise of Warrant. This Warrant may be exercised as a whole or part
by the Holder, at any time after the date hereof prior to the termination of
this Warrant, by the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Attachments 1 and 2, respectively, duly completed and executed at the principal
office of the Company, specifying the portion of the Warrant to be exercised and
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<PAGE>
accompanied by payment in full of the Warrant Price in cash or by check with
respect to the shares of Warrant Stock being purchased. Alternatively, the
Holder may pay the Warrant Price as a whole or in part) by surrendering to the
Company all or a portion of any Note (as defined in the Note and Warrant
Purchase Agreement), in which case the portion of the Note surrendered plus all
accrued but unpaid interest thereon shall be credited towards payment of the
Warrant Price. If less the entire Note is surrendered in payment of the Warrant
Price, the Company shall issue to the Holder a new promissory note identical to
the surrendered Note except that the principal amount thereof shall equal the
unsurrendered portion of the principal amount of the surrendered Note. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the shares of Warrant Stock issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable
after such date, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
full shares of Warrant Stock issuable upon such exercise. If this Warrant shall
be exercised for less than the total number of shares of Warrant Stock then
issuable upon exercise, promptly after surrender of this Warrant upon such
exercise, the Company will execute and deliver a new warrant, dated the date
hereof, evidencing the right of the Holder to the balance of this Warrant Stock
purchasable hereunder upon the same terms and conditions set forth herein.
7. Conversion, In lieu of exercising this Warrant or any portion hereof,
at any time after the occurrence of a Change-In-Control Event or the filing of a
registration statement for an initial underwritten public offering of securities
by the Company, the Holder hereof shall have the right to convert this Warrant
or any portion hereof into Warrant Stock by executing and delivering to the
Company at its principal office the written Notice of Conversion and Investment
Representation Statement in the forms attached hereto as Attachments 2 and 3,
specifying the portion of the Warrant to be converted, and accompanied by this
Warrant. The number of shares of Warrant Stock to be issued to Holder upon such
conversion shall be computed using the following formula:
X=(P)(Y)(A-B)/A
where X = the number of shares of Warrant Stock to be issued to the
Holder for the portion of the Warrant being converted.
P = the portion of the Warrant being converted expressed
as a decimal fraction.
Y = the total number of shares of Warrant Stock issuable
upon exercise of the Warrant in full.
A = the fair market value of one share of Warrant Stock
which means (i) the fair market value of the Warrant
Stock as of the last Business Day immediately prior to
the date the notice of
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<PAGE>
conversion is received by the Company, as reported in
the principal market for such securities or, if no such
market exists, as determined in good faith by the
Company's Board of Directors, or (ii) if this Warrant is
being converted in conjunction with a public offering of
stock the price to the public per share pursuant to the
offering.
B = the Warrant Price on the date of conversion.
Any portion of this Warrant that is converted shall be immediately canceled.
This Warrant or any portion hereof shall be deemed to have been converted
immediately prior to the close of business on the date of its surrender for
conversion as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such conversion shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable after such date, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of full shares of Warrant Stock issuable upon such conversion. If
the Warrant shall be converted for less than the total number of shares of
Warrant Stock then issuable upon conversion, promptly after surrender of the
Warrant upon such conversion, the Company will execute and deliver a new
warrant, dated the date hereof, evidencing the right of the Holder to the
balance of the Warrant Stock purchasable hereunder upon the same terms and
conditions set forth herein. If this Warrant is converted, as a whole or in
part, after the occurrence of a Change-In-Control Event as to which Section 3(c)
is applicable, the Holder shall receive the consideration contemplated by
Section 3(c) in lieu of Warrants Stock of the Company.
8. Transfer of Warrant. This Warrant may be transferred or assigned by the
Holder hereof in whole or in part, provided that the transferor provides, at the
Company's request, an opinion of counsel satisfactory to the Company that such
transfer does not require registration under the Securities Act and the
securities law applicable with respect to any other applicable jurisdiction.
9. Termination. This Warrant shall terminate on 5:00 p.m. New York time on
the Termination Date.
10. Miscellaneous. This Warrant shall be governed by the laws of the
Commonwealth of Massachusetts, as such laws are applied to contracts to be
entered into and performed entirely in Massachusetts by Massachusetts residents.
In the event of any dispute among the Holder and the Company arising out of the
terms of this Warrant, the parties hereby consent to the exclusive jurisdiction
of the federal and state courts located in the Commonwealth of Massachusetts for
resolution of such dispute, and agree not to contest such exclusive jurisdiction
or seek to transfer any action relating to such dispute to any other
jurisdiction. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be
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<PAGE>
deemed to constitute a part hereof. Neither this Warrant nor any term hereof may
be changed or waived orally, but only by an instrument in writing signed by the
Company and the Holder of this Warrant. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or
by facsimile transmission or mailed by first class mail, postage prepaid, to the
address or facsimile number furnished to the Company in writing by the last
Holder of this Warrant who shall have furnished an address or facsimile number
to the Company in writing, and if mailed shall be deemed given three days after
deposit in the United States mail.
ISSUED: August 2, 1999
BEACON POWER CORPORATION
By: /s/ Willian E. Stanton
-------------------------
Name: WILLIAM E. STANTON
-----------------------
Title: PRESIDENT & CEO
-----------------------
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<PAGE>
Attachment 1
NOTICE OF EXERCISE
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to purchase ________________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
________________________
(Name)
________________________
(Address)
___________________________________ ________________________________
(Date) (Name of Warrant Holder)
By:___________________________
Title:________________________
<PAGE>
Attachment 2
INVESTMENT REPRESENTATION STATEMENT
Shares of the Class E Preferred Stock
(as defined in the attached Warrant) of
BEACON POWER CORPORATION
In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Beacon Power Corporation (the "Company") as
follows:
(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon exercise of
the Warrant at the time of issuance may not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Securities Act and state law exemptions relating to offers
and sales not by means of a public offering, and that the Company's reliance on
such exemptions is predicated on the undersigned's representations set forth
herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Warrant unless and until (i) it
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and Company's counsel to the
effect that (A) appropriate action necessary for compliance with the Securities
Act and any applicable state securities laws has been taken or an exemption from
the registration requirements of the Securities Act and such laws is available,
and (B) the proposed transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in the Company is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
<PAGE>
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company
(e) The undersigned acknowledges that the Securities issuable upon exercise or
conversion of the Warrant must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available. The undersigned is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold from the Company or any affiliate of the Company, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three month period not exceeding specified limitations.
Dated:_________________________
_______________________________
(Typed or Printed Name)
By:____________________________
(Signature)
_______________________________
(Title)
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<PAGE>
Attachment 3
NOTICE OF CONVERSION
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to acquire ________________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the attached
Warrant, by conversion of _________ percent (____%) of the Warrant.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
________________________
(Name)
________________________
(Address)
___________________________________ ________________________________
(Date) (Name of Warrant Holder)
By:___________________________
Title:________________________
(Title and signature of authorized person)
<PAGE>
THE SECURITIES EVIDENCED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE SOLD, TRANSFERRED, OR ASSIGNED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
No.: 2
WARRANT
TO PURCHASE CLASS E PREFERRED STOCK
OF
BEACON POWER CORPORATION
(void after August 2, 2004)
1. Issuance of Warrant. FOR VALUE RECEIVED, on and after the date of
issuance of this Warrant, and subject to the terms and conditions herein set
forth, the Holder (as defined below) is entitled to purchase from Beacon Power
Corporation, a Delaware corporation (the "Company"), at any time before 5:00
p.m. New York time on August 2, 2004 (the "Termination Date"), at a price per
share equal to the Warrant Price (as defined below and subject to adjustment as
described below), the Warrant Stock (as defined below and subject to adjustment
as described below) upon exercise of this warrant (this "Warrant") pursuant to
Section 6 hereof. This Warrant is issued pursuant to the Note and Warrant
Purchase Agreement (as defined below).
2. Definitions. As used in this Warrant, the following terms have the
definitions ascribed to them below:
(a) "Additional Stock" is defined in Section 3(d)(iv).
(b) "Base Price" means as of August 2, 1999, $1.78 per share of
Common Stock, which shall be subject to adjustment as provided in Section 3(d).
<PAGE>
(c) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York or the District of Columbia are
authorized to be closed.
(d) "Change-In-Control Event" means the occurrence after the
Commencement Date of any of the following: (i) the acquisition of voting
securities of the Company by any person or group of persons that results in such
person or group, together with its affiliates, becoming, directly or indirectly,
the beneficial owner of in excess of 50% of the outstanding voting securities of
the Company; (ii) a merger or consolidation of the Company with any other
corporation or legal entity regardless of which entity is the survivor, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or being converted into voting securities of
the surviving entity) in excess of 50% of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation; or (iii) the sale or disposition of all or substantially all of
the Company's assets other than in a transaction in which holders of the voting
securities of the Company immediately prior to such transaction receive voting
securities of the acquiror of such assets or its affiliate that represent in
excess of 50% of the voting securities of such entity after consummation of such
transaction.
(e) "Commencement Date" means the date of issue of this Warrant.
(f) "Common Stock" means the Company's Common Stock, $.0l par value
per share.
(g) "Holder" means SatCon Technology Corporation, or its assigns.
(h) "Note and Warrant Purchase Agreement" means the Note and Warrant
Purchase Agreement dated as of August 2, 1999 by and among the Company, Perseus
Capital, L.L.C., Duquesne Enterprises, Inc., Micro Generation Technology Fund,
L.L.C., and SatCon Technology Corporation (collectively, the "Purchasers"), and
"Note" means the Note issued to the holder pursuant to such Agreement.
(i) "Class E Preferred Stock" means the Class E Preferred Stock of
the Company proposed to be issued to the Purchasers as part of the equity
financing in which the Note is to be converted, as described in the above Note
and Warrant Purchase Agreement.
(j) "Warrant Price" means, (i) in the event that a purchase of at
least $5 million of the Class E Preferred Stock is consummated within six (6)
months from the date hereof, the per share price at which such purchase is made,
or (ii) in the event that no such purchase is consummated, $2.50, in either
event subject to adjustment as described in Section 3 below.
(k) "Warrant Stock" means the shares of Company stock which are
purchasable upon exercise or conversion of this Warrant, consisting of Class E
Preferred Stock (or other Company securities) into which the Note is converted
if such conversion actually
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<PAGE>
occurs, or consisting of shares of Common Stock if the Note is not so converted.
The total number of shares to be issued upon the exercise of this Warrant shall
be computed by dividing $83,333.34 by the Warrant Price, subject to adjustment
as described in Section 3 below. The "Warrant Stock Definition Date" means the
date on which the Note is converted (or if not converted, then the date on which
the holder of the Note notifies the Company that it has become a demand note, as
described in the Note.
3. Adjustments and Notices. The Warrant Price and/or the number of shares
of Warrant Stock shall be subject to adjustment from time to time in accordance
with this Section 3. The Warrant Price and/or the number of Warrant Shares shall
be adjusted to reflect all of the following events that occur on or after the
Commencement Date. However, if the Warrant Stock becomes defined to be preferred
stock of the Company, then the following provisions in Section 3 shall not apply
to shares issued on or after the Warrant Stock Definition Date.
(a) Subdivision, Stock Dividends or Combinations. In case the
Company shall at any time subdivide the outstanding shares of Warrant Stock or
shall issue a stock dividend with respect to the Warrant Stock, the Warrant
Price in effect immediately prior to such subdivision or the issuance of such
dividend shall be proportionately decreased, and in case the Company shall at
any time combine the outstanding shares of the Warrant Stock, the Warrant Price
in effect immediately prior to such combination shall be proportionately
increased, in each case effective at the close of business on the date of such
subdivision, dividend or combination, as the case may be.
(b) Reclassification, Exchange, Substitution, In-Kind Distribution.
Upon any reclassifications, exchange, substitution or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant or upon the payment of a dividend in securities or
property other than shares of Warrant Stock, the Holder shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that Holder would have received if this Warrant had been
exercised or converted immediately before the record date for such
reclassification, exchange, substitution, or other event or immediately prior to
the record date for such dividend, The Company or its successor shall promptly
issue to Holder a new warrant for such new securities or other property. The new
warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise or conversion of the new warrant.
The provisions of this Section 3(b) shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events and successive
dividends.
(c) Reorganization, Merger etc. In case of any Change-In-Control
Event, the Company, or such successor or purchasing corporation, as the case may
be, shall, as a condition to closing any such reorganization, merger or sale,
duly execute and deliver to the Holder hereof a new warrant so that the Holder
shall have the right to receive, at a total purchase price not to exceed that
payable upon the exercise or conversion of the unexercised or unconverted
portion of this Warrant, and in lieu of the shares of the Warrant Stock
theretofore issuable upon exercise or
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<PAGE>
conversion of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reorganization, merger or
sale by the Holder of the number of shares of Warrant Stock then purchasable
under this Warrant. Such new warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 3. The provisions of this subparagraph (c) shall similarly apply to
successive Change-In-Control Events. (d) Dilutive Issuances Adjustment of Number
of Shares and Warrant Price. In order to prevent dilution of the rights granted
under this Warrant, the number of shares of Warrant Stock obtainable upon
exercise of this Warrant and the Warrant Price shall be subject to adjustment
from time to time as provided in this Section 3(d).
(i) Adjustment of Warrant Price upon Issuance of Additional
Stock. If and whenever after the Commencement Date, the Company issues, or in
accordance with Section 3(d)(ii) is deemed to have issued, any Additional Stock
to any person for a consideration per share less than the Base Price then in
effect, then the Warrant Price in effect immediately before each such issuance
shall forthwith be adjusted to a price determined by multiplying such Warrant
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of Common Stock that the aggregate consideration received by the Company
for such issuance would purchase at such Warrant Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of such Additional Stock.
(ii) Effect of Certain Events. For purposes of determining
under Section (d)(i) the adjusted number of shares of Warrant Stock acquirable
upon exercise of this Warrant, the following shall be applicable:
(A) Issuance of Rights or Options. If the Company in any
manner issues, grants or sells (or otherwise becomes subject to) any
Options or Options for Convertible Securities, then the total maximum
number of shares of Common Stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been sold on the date of issuance, grant or sale of such
Options and to be outstanding.
(B) Issuance of Convertible Securities. If the Company
in any manner grants, issues or sells (or otherwise becomes subject to)
any Convertible Securities, then the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities
shall be deemed to have been sold on the date of issuance, grant or sale
of such Convertible Securities and to be outstanding.
(C) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible Securities
without the exercise of such Option or right, the number of shares of
Warrant Stock acquirable hereunder shall be adjusted to the number of
shares which would have been in effect at the time of such expiration or
termination
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<PAGE>
had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
(D) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held
by or for the account of the Company or any Subsidiary, and the
disposition of any shares so owned or held shall be considered an issuance
or sale of Common Stock.
(E) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(iii) In the case of the issuance of Additional Stock for
cash, the consideration received therefor shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the company for any underwriting or
otherwise in connection with the issuance and sale thereof. In the case of the
issuance of Additional Stock for a consideration in whole or in part other than
cash, the consideration other than cash received therefor shall be deemed to be
the fair value thereof as reasonably determined by the Board of Directors of the
Company in its good faith judgment irrespective of any accounting treatment.
(iv) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to clause (ii) of this Section
3(d)) by the Company after the Commencement Date, other than shares of Common
Stock issued or issuable:
(A) to officers, directors, employees and consultants of
the Company directly or pursuant to a stock option plan or restricted
stock plan approved by the Board of Directors of the Company;
(B) upon conversion of the Class A, B, C, or D Preferred
Stock (or, if authorized, the Class E Preferred Stock) of the Company or
the exercise of warrants issued by the Company before or on the
Commencement Date;
(v) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 3(d) but not expressly provided
for by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's board of directors shall make an appropriate adjustment in
the number of shares of Warrant Stock obtainable upon exercise of this Warrant
and in the Warrant Price so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall decrease the number of shares
of Warrant Stock obtainable as otherwise
-5-
<PAGE>
determined pursuant to this Section 3.
(e) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Warrant Price, the Corporation, at its own expense, shall
cause its Chief Financial Officer to compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to the Holder. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. No adjustment of the Warrant Price shall be
required to be made unless it would result in an increase or decrease of at
least one cent, but any adjustments not made because of this sentence shall be
carried forward and taken into account in any subsequent adjustment otherwise
required hereunder.
(f) No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through a 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 under this Warrant by the Company, but
shall at all times in good faith assist in carrying out all of the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment. If the
Company takes any action affecting the Class E Preferred Stock other than as
described above that adversely affects the Holder's rights under this Warrant,
the Warrant Price shall be adjusted downward.
(g) Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded down to the nearest whole share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying the Holder an amount computed
by multiplying the fractional interest by the fair market value of a full share.
4. No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
5. Reservation of Stock. On and after the Warrant Stock Definition Date,
the Company will reserve from its authorized and unissued stock a sufficient
number of shares to provide for the issuance of Warrant Stock upon the exercise
or conversion of this Warrant. Issuance of this Warrant shall constitute full
authority to the Company's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Warrant Stock issuable upon the exercise or conversion of this Warrant.
6. Exercise of Warrant. This Warrant may be exercised as a whole or part
by the Holder, at any time after the date hereof prior to the termination of
this Warrant, by the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Attachments 1 and 2, respectively, duly completed and executed at the principal
office of the Company, specifying the portion of the Warrant to be exercised and
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<PAGE>
accompanied by payment in full of the Warrant Price in cash or by check with
respect to the shares of Warrant Stock being purchased. Alternatively, the
Holder may pay the Warrant Price as a whole or in part) by surrendering to the
Company all or a portion of any Note (as defined in the Note and Warrant
Purchase Agreement), in which case the portion of the Note surrendered plus all
accrued but unpaid interest thereon shall be credited towards payment of the
Warrant Price. If less the entire Note is surrendered in payment of the Warrant
Price, the Company shall issue to the Holder a new promissory note identical to
the surrendered Note except that the principal amount thereof shall equal the
unsurrendered portion of the principal amount of the surrendered Note. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the shares of Warrant Stock issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable
after such date, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
full shares of Warrant Stock issuable upon such exercise. If this Warrant shall
be exercised for less than the total number of shares of Warrant Stock then
issuable upon exercise, promptly after surrender of this Warrant upon such
exercise, the Company will execute and deliver a new warrant, dated the date
hereof, evidencing the right of the Holder to the balance of this Warrant Stock
purchasable hereunder upon the same terms and conditions set forth herein.
7. Conversion, In lieu of exercising this Warrant or any portion hereof,
at any time after the occurrence of a Change-In-Control Event or the filing of a
registration statement for an initial underwritten public offering of securities
by the Company, the Holder hereof shall have the right to convert this Warrant
or any portion hereof into Warrant Stock by executing and delivering to the
Company at its principal office the written Notice of Conversion and Investment
Representation Statement in the forms attached hereto as Attachments 2 and 3,
specifying the portion of the Warrant to be converted, and accompanied by this
Warrant. The number of shares of Warrant Stock to be issued to Holder upon such
conversion shall be computed using the following formula:
X=(P)(Y)(A-B)/A
where X = the number of shares of Warrant Stock to be issued to the
Holder for the portion of the Warrant being converted.
P = the portion of the Warrant being converted expressed
as a decimal fraction.
Y = the total number of shares of Warrant Stock issuable
upon exercise of the Warrant in full.
A = the fair market value of one share of Warrant Stock
which means (i) the fair market value of the Warrant
Stock as of the last Business Day immediately prior to
the date the notice of
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<PAGE>
conversion is received by the Company, as reported in
the principal market for such securities or, if no such
market exists, as determined in good faith by the
Company's Board of Directors, or (ii) if this Warrant is
being converted in conjunction with a public offering of
stock the price to the public per share pursuant to the
offering.
B = the Warrant Price on the date of conversion.
Any portion of this Warrant that is converted shall be immediately canceled.
This Warrant or any portion hereof shall be deemed to have been converted
immediately prior to the close of business on the date of its surrender for
conversion as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such conversion shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable after such date, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of full shares of Warrant Stock issuable upon such conversion. If
the Warrant shall be converted for less than the total number of shares of
Warrant Stock then issuable upon conversion, promptly after surrender of the
Warrant upon such conversion, the Company will execute and deliver a new
warrant, dated the date hereof, evidencing the right of the Holder to the
balance of the Warrant Stock purchasable hereunder upon the same terms and
conditions set forth herein. If this Warrant is converted, as a whole or in
part, after the occurrence of a Change-In-Control Event as to which Section 3(c)
is applicable, the Holder shall receive the consideration contemplated by
Section 3(c) in lieu of Warrants Stock of the Company.
8. Transfer of Warrant. This Warrant may be transferred or assigned by the
Holder hereof in whole or in part, provided that the transferor provides, at the
Company's request, an opinion of counsel satisfactory to the Company that such
transfer does not require registration under the Securities Act and the
securities law applicable with respect to any other applicable jurisdiction.
9. Termination. This Warrant shall terminate on 5:00 p.m. New York time on
the Termination Date.
10. Miscellaneous. This Warrant shall be governed by the laws of the
Commonwealth of Massachusetts, as such laws are applied to contracts to be
entered into and performed entirely in Massachusetts by Massachusetts residents.
In the event of any dispute among the Holder and the Company arising out of the
terms of this Warrant, the parties hereby consent to the exclusive jurisdiction
of the federal and state courts located in the Commonwealth of Massachusetts for
resolution of such dispute, and agree not to contest such exclusive jurisdiction
or seek to transfer any action relating to such dispute to any other
jurisdiction. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be
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<PAGE>
deemed to constitute a part hereof. Neither this Warrant nor any term hereof may
be changed or waived orally, but only by an instrument in writing signed by the
Company and the Holder of this Warrant. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or
by facsimile transmission or mailed by first class mail, postage prepaid, to the
address or facsimile number furnished to the Company in writing by the last
Holder of this Warrant who shall have furnished an address or facsimile number
to the Company in writing, and if mailed shall be deemed given three days after
deposit in the United States mail.
ISSUED: August 2, 1999
BEACON POWER CORPORATION
By: /s/ Willian E. Stanton
-------------------------
Name: WILLIAM E. STANTON
-----------------------
Title: PRESIDENT & CEO
-----------------------
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<PAGE>
Attachment 1
NOTICE OF EXERCISE
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to purchase ________________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
________________________
(Name)
________________________
(Address)
___________________________________ ________________________________
(Date) (Name of Warrant Holder)
By:___________________________
Title:________________________
<PAGE>
Attachment 2
INVESTMENT REPRESENTATION STATEMENT
Shares of the Class E Preferred Stock
(as defined in the attached Warrant) of
BEACON POWER CORPORATION
In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Beacon Power Corporation (the "Company") as
follows:
(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon exercise of
the Warrant at the time of issuance may not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Securities Act and state law exemptions relating to offers
and sales not by means of a public offering, and that the Company's reliance on
such exemptions is predicated on the undersigned's representations set forth
herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Warrant unless and until (i) it
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and Company's counsel to the
effect that (A) appropriate action necessary for compliance with the Securities
Act and any applicable state securities laws has been taken or an exemption from
the registration requirements of the Securities Act and such laws is available,
and (B) the proposed transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in the Company is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
<PAGE>
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company
(e) The undersigned acknowledges that the Securities issuable upon exercise or
conversion of the Warrant must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available. The undersigned is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold from the Company or any affiliate of the Company, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three month period not exceeding specified limitations.
Dated:_________________________
_______________________________
(Typed or Printed Name)
By:____________________________
(Signature)
_______________________________
(Title)
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<PAGE>
Attachment 3
NOTICE OF CONVERSION
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to acquire ________________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the attached
Warrant, by conversion of _________ percent (____%) of the Warrant.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
________________________
(Name)
________________________
(Address)
___________________________________ ________________________________
(Date) (Name of Warrant Holder)
By:___________________________
Title:________________________
(Title and signature of authorized person)
<PAGE>
THE SECURITIES EVIDENCED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE SOLD, TRANSFERRED, OR ASSIGNED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
No.: 3
WARRANT
TO PURCHASE CLASS E PREFERRED STOCK
OF
BEACON POWER CORPORATION
(void after August 2, 2004)
1. Issuance of Warrant. FOR VALUE RECEIVED, on and after the date of
issuance of this Warrant, and subject to the terms and conditions herein set
forth, the Holder (as defined below) is entitled to purchase from Beacon Power
Corporation, a Delaware corporation (the "Company"), at any time before 5:00
p.m. New York time on August 2, 2004 (the "Termination Date"), at a price per
share equal to the Warrant Price (as defined below and subject to adjustment as
described below), the Warrant Stock (as defined below and subject to adjustment
as described below) upon exercise of this warrant (this "Warrant") pursuant to
Section 6 hereof. This Warrant is issued pursuant to the Note and Warrant
Purchase Agreement (as defined below).
2. Definitions. As used in this Warrant, the following terms have the
definitions ascribed to them below:
(a) "Additional Stock" is defined in Section 3(d)(iv).
(b) "Base Price" means as of August 2, 1999, $1.78 per share of
Common Stock, which shall be subject to adjustment as provided in Section 3(d).
<PAGE>
(c) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York or the District of Columbia are
authorized to be closed.
(d) "Change-In-Control Event" means the occurrence after the
Commencement Date of any of the following: (i) the acquisition of voting
securities of the Company by any person or group of persons that results in such
person or group, together with its affiliates, becoming, directly or indirectly,
the beneficial owner of in excess of 50% of the outstanding voting securities of
the Company; (ii) a merger or consolidation of the Company with any other
corporation or legal entity regardless of which entity is the survivor, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or being converted into voting securities of
the surviving entity) in excess of 50% of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation; or (iii) the sale or disposition of all or substantially all of
the Company's assets other than in a transaction in which holders of the voting
securities of the Company immediately prior to such transaction receive voting
securities of the acquiror of such assets or its affiliate that represent in
excess of 50% of the voting securities of such entity after consummation of such
transaction.
(e) "Commencement Date" means the date of issue of this Warrant.
(f) "Common Stock" means the Company's Common Stock, $.01 par value
per share.
(g) "Holder" means Duquesne Enterprises, Inc., or its assigns.
(h) "Note and Warrant Purchase Agreement" means the Note and Warrant
Purchase Agreement dated as of August 2, 1999 by and among the Company, Perseus
Capital, L.L.C., Duquesne Enterprises, Inc., Micro Generation Technology Fund,
L.L.C., and SatCon Technology Corporation (collectively, the "Purchasers"), and
"Note" means the Note issued to the holder pursuant to such Agreement.
(i) "Class E Preferred Stock" means the Class E Preferred Stock of
the Company proposed to be issued to the Purchasers as part of the equity
financing in which the Note is to be converted, as described in the above Note
and Warrant Purchase Agreement.
(j) "Warrant Price" means, (i) in the event that a purchase of at
least $5 million of the Class E Preferred Stock is consummated within six (6)
months from the date hereof, the per share price at which such purchase is made,
or (ii) in the event that no such purchase is consummated, $2.50, in either
event subject to adjustment as described in Section 3 below.
(k) "Warrant Stock" means the shares of Company stock which are
purchasable upon exercise or conversion of this Warrant, consisting of Class E
Preferred Stock (or other Company securities) into which the Note is converted
if such conversion actually
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<PAGE>
occurs, or consisting of shares of Common Stock if the Note is not so converted.
The total number of shares to be issued upon the exercise of this Warrant shall
be computed by dividing $125,000.00 by the Warrant Price, subject to adjustment
as described in Section 3 below. The "Warrant Stock Definition Date" means the
date on which the Note is converted (or if not converted, then the date on which
the holder of the Note notifies the Company that it has become a demand note, as
described in the Note.
3. Adjustments and Notices. The Warrant Price and/or the number of shares
of Warrant Stock shall be subject to adjustment from time to time in accordance
with this Section 3. The Warrant Price and/or the number of Warrant Shares shall
be adjusted to reflect all of the following events that occur on or after the
Commencement Date. However, if the Warrant Stock becomes defined to be preferred
stock of the Company, then the following provisions in Section 3 shall not apply
to shares issued on or after the Warrant Stock Definition Date.
(a) Subdivision. Stock Dividends or Combinations. In case the
Company shall at any time subdivide the outstanding shares of Warrant Stock or
shall issue a stock dividend with respect to the Warrant Stock, the Warrant
Price in effect immediately prior to such subdivision or the issuance of such
dividend shall be proportionately decreased, and in case the Company shall at
any time combine the outstanding shares of the Warrant Stock, the Warrant Price
in effect immediately prior to such combination shall be proportionately
increased, in each case effective at the close of business on the date of such
subdivision, dividend or combination, as the case may be.
(b) Reclassification, Exchange, Substitution. In-Kind Distribution.
Upon any reclassifications, exchange, substitution or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant or upon the payment of a dividend in securities or
property other than shares of Warrant Stock, the Holder shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that Holder would have received if this Warrant had been
exercised or converted immediately before the record date for such
reclassification, exchange, substitution, or other event or immediately prior to
the record date for such dividend, The Company or its successor shall promptly
issue to Holder a new warrant for such new securities or other property. The new
warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise or conversion of the new warrant.
The provisions of this Section 3(b) shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events and successive
dividends.
(c) Reorganization. Merger etc. In case of any Change-In-Control
Event, the Company, or such successor or purchasing corporation, as the case may
be, shall, as a condition to closing any such reorganization, merger or sale,
duly execute and deliver to the Holder hereof a new warrant so that the Holder
shall have the right to receive, at a total purchase price not to exceed that
payable upon the exercise or conversion of the unexercised or unconverted
portion of this Warrant, and in lieu of the shares of the Warrant Stock
theretofore issuable upon exercise or
-3-
<PAGE>
conversion of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reorganization, merger or
sale by the Holder of the number of shares of Warrant Stock then purchasable
under this Warrant. Such new warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 3. The provisions of this subparagraph (c) shall similarly apply to
successive Change-In-Control Events. (d) Dilutive Issuances Adjustment of Number
of Shares and Warrant Price. In order to prevent dilution of the rights granted
under this Warrant, the number of shares of Warrant Stock obtainable upon
exercise of this Warrant and the Warrant Price shall be subject to adjustment
from time to time as provided in this Section 3(d).
(i) Adjustment of Warrant Price upon Issuance of Additional
Stock. If and whenever after the Commencement Date, the Company issues, or in
accordance with Section 3(d)(ii) is deemed to have issued, any Additional Stock
to any person for a consideration per share less than the Base Price then in
effect, then the Warrant Price in effect immediately before each such issuance
shall forthwith be adjusted to a price determined by multiplying such Warrant
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of Common Stock that the aggregate consideration received by the Company
for such issuance would purchase at such Warrant Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of such Additional Stock.
(ii) Effect of Certain Events. For purposes of determining
under Section (d)(i) the adjusted number of shares of Warrant Stock acquirable
upon exercise of this Warrant, the following shall be applicable:
(A) Issuance of Rights or Options. If the Company in any
manner issues, grants or sells (or otherwise becomes subject to) any
Options or Options for Convertible Securities, then the total maximum
number of shares of Common Stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been sold on the date of issuance, grant or sale of such
Options and to be outstanding.
(B) Issuance of Convertible Securities. If the Company
in any manner grants, issues or sells (or otherwise becomes subject to)
any Convertible Securities, then the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities
shall be deemed to have been sold on the date of issuance, grant or sale
of such Convertible Securities and to be outstanding.
(C) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible Securities
without the exercise of such Option or right, the number of shares of
Warrant Stock acquirable hereunder shall be adjusted to the number of
shares which would have been in effect at the time of such expiration or
termination
-4-
<PAGE>
had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
(D) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held
by or for the account of the Company or any Subsidiary, and the
disposition of any shares so owned or held shall be considered an issuance
or sale of Common Stock.
(E) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(iii) In the case of the issuance of Additional Stock for
cash, the consideration received therefor shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the company for any underwriting or
otherwise in connection with the issuance and sale thereof. In the case of the
issuance of Additional Stock for a consideration in whole or in part other than
cash, the consideration other than cash received therefor shall be deemed to be
the fair value thereof as reasonably determined by the Board of Directors of the
Company in its good faith judgment irrespective of any accounting treatment.
(iv) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to clause (ii) of this Section
3(d)) by the Company after the Commencement Date, other than shares of Common
Stock issued or issuable:
(A) to officers, directors, employees and consultants of
the Company directly or pursuant to a stock option plan or restricted
stock plan approved by the Board of Directors of the Company;
(B) upon conversion of the Class A, B, C, or D Preferred
Stock (or, if authorized, the Class E Preferred Stock) of the Company or
the exercise of warrants issued by the Company before or on the
Commencement Date;
(v) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 3(d) but not expressly provided
for by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's board of directors shall make an appropriate adjustment in
the number of shares of Warrant Stock obtainable upon exercise of this Warrant
and in the Warrant Price so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall decrease the number of shares
of Warrant Stock obtainable as otherwise
-5-
<PAGE>
determined pursuant to this Section 3.
(e) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Warrant Price, the Corporation, at its own expense, shall
cause its Chief Financial Officer to compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to the Holder. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. No adjustment of the Warrant Price shall be
required to be made unless it would result in an increase or decrease of at
least one cent, but any adjustments not made because of this sentence shall be
carried forward and taken into account in any subsequent adjustment otherwise
required hereunder.
(f) No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through a 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 under this Warrant by the Company, but
shall at all times in good faith assist in carrying out all of the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment. If the
Company takes any action affecting the Class E Preferred Stock other than as
described above that adversely affects the Holder's rights under this Warrant,
the Warrant Price shall be adjusted downward.
(g) Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded down to the nearest whole share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying the Holder an amount computed
by multiplying the fractional interest by the fair market value of a full share.
4. No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
5. Reservation of Stock. On and after the Warrant Stock Definition Date,
the Company will reserve from its authorized and unissued stock a sufficient
number of shares to provide for the issuance of Warrant Stock upon the exercise
or conversion of this Warrant. Issuance of this Warrant shall constitute full
authority to the Company's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Warrant Stock issuable upon the exercise or conversion of this Warrant.
6. Exercise of Warrant. This Warrant may be exercised as a whole or part
by the Holder, at any time after the date hereof prior to the termination of
this Warrant, by the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Attachments 1 and 2, respectively, duly completed and executed at the principal
office of the Company, specifying the portion of the Warrant to be exercised and
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<PAGE>
accompanied by payment in full of the Warrant Price in cash or by check with
respect to the shares of Warrant Stock being purchased. Alternatively, the
Holder may pay the Warrant Price as a whole or in part) by surrendering to the
Company all or a portion of any Note (as defined in the Note and Warrant
Purchase Agreement), in which case the portion of the Note surrendered plus all
accrued but unpaid interest thereon shall be credited towards payment of the
Warrant Price. If less the entire Note is surrendered in payment of the Warrant
Price, the Company shall issue to the Holder a new promissory note identical to
the surrendered Note except that the principal amount thereof shall equal the
unsurrendered portion of the principal amount of the surrendered Note. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the shares of Warrant Stock issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable
after such date, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
full shares of Warrant Stock issuable upon such exercise. If this Warrant shall
be exercised for less than the total number of shares of Warrant Stock then
issuable upon exercise, promptly after surrender of this Warrant upon such
exercise, the Company will execute and deliver a new warrant, dated the date
hereof, evidencing the right of the Holder to the balance of this Warrant Stock
purchasable hereunder upon the same terms and conditions set forth herein.
7. Conversion, In lieu of exercising this Warrant or any portion hereof,
at any time after the occurrence of a Change-In-Control Event or the filing of a
registration statement for an initial underwritten public offering of securities
by the Company, the Holder hereof shall have the right to convert this Warrant
or any portion hereof into Warrant Stock by executing and delivering to the
Company at its principal office the written Notice of Conversion and Investment
Representation Statement in the forms attached hereto as Attachments 2 and 3,
specifying the portion of the Warrant to be converted, and accompanied by this
Warrant. The number of shares of Warrant Stock to be issued to Holder upon such
conversion shall be computed using the following formula:
X=(P)(Y)(A-B)/A
where X = the number of shares of Warrant Stock to be issued to the
Holder for the portion of the Warrant being converted.
P = the portion of the Warrant being converted expressed
as a decimal fraction.
Y = the total number of shares of Warrant Stock issuable
upon exercise of the Warrant in full.
A = the fair market value of one share of Warrant Stock
which means (i) the fair market value of the Warrant
Stock as of the last Business Day immediately prior to
the date the notice of
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<PAGE>
conversion is received by the Company, as reported in
the principal market for such securities or, if no such
market exists, as determined in good faith by the
Company's Board of Directors, or (ii) if this Warrant is
being converted in conjunction with a public offering of
stock the price to the public per share pursuant to the
offering.
B = the Warrant Price on the date of conversion.
Any portion of this Warrant that is converted shall be immediately canceled.
This Warrant or any portion hereof shall be deemed to have been converted
immediately prior to the close of business on the date of its surrender for
conversion as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such conversion shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable after such date, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of full shares of Warrant Stock issuable upon such conversion. If
the Warrant shall be converted for less than the total number of shares of
Warrant Stock then issuable upon conversion, promptly after surrender of the
Warrant upon such conversion, the Company will execute and deliver a new
warrant, dated the date hereof, evidencing the right of the Holder to the
balance of the Warrant Stock purchasable hereunder upon the same terms and
conditions set forth herein. If this Warrant is converted, as a whole or in
part, after the occurrence of a Change-In-Control Event as to which Section 3(c)
is applicable, the Holder shall receive the consideration contemplated by
Section 3(c) in lieu of Warrants Stock of the Company.
8. Transfer of Warrant. This Warrant may be transferred or assigned by the
Holder hereof in whole or in part, provided that the transferor provides, at the
Company's request, an opinion of counsel satisfactory to the Company that such
transfer does not require registration under the Securities Act and the
securities law applicable with respect to any other applicable jurisdiction.
9. Termination. This Warrant shall terminate on 5:00 p.m. New York time on
the Termination Date.
10. Miscellaneous. This Warrant shall be governed by the laws of the
Commonwealth of Massachusetts, as such laws are applied to contracts to be
entered into and performed entirely in Massachusetts by Massachusetts residents.
In the event of any dispute among the Holder and the Company arising out of the
terms of this Warrant, the parties hereby consent to the exclusive jurisdiction
of the federal and state courts located in the Commonwealth of Massachusetts for
resolution of such dispute, and agree not to contest such exclusive jurisdiction
or seek to transfer any action relating to such dispute to any other
jurisdiction. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be
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<PAGE>
deemed to constitute a part hereof. Neither this Warrant nor any term hereof may
be changed or waived orally, but only by an instrument in writing signed by the
Company and the Holder of this Warrant. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or
by facsimile transmission or mailed by first class mail, postage prepaid, to the
address or facsimile number furnished to the Company in writing by the last
Holder of this Warrant who shall have furnished an address or facsimile number
to the Company in writing, and if mailed shall be deemed given three days after
deposit in the United States mail.
ISSUED: August 2, 1999
BEACON POWER CORPORATION
By: /s/ Willian E. Stanton
-------------------------
Name: WILLIAM E. STANTON
-----------------------
Title: PRESIDENT & CEO
-----------------------
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<PAGE>
Attachment 1
NOTICE OF EXERCISE
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to purchase ________________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
________________________
(Name)
________________________
(Address)
___________________________________ ________________________________
(Date) (Name of Warrant Holder)
By:___________________________
Title:________________________
<PAGE>
Attachment 2
INVESTMENT REPRESENTATION STATEMENT
Shares of the Class E Preferred Stock
(as defined in the attached Warrant) of
BEACON POWER CORPORATION
In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Beacon Power Corporation (the "Company") as
follows:
(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon exercise of
the Warrant at the time of issuance may not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Securities Act and state law exemptions relating to offers
and sales not by means of a public offering, and that the Company's reliance on
such exemptions is predicated on the undersigned's representations set forth
herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Warrant unless and until (i) it
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and Company's counsel to the
effect that (A) appropriate action necessary for compliance with the Securities
Act and any applicable state securities laws has been taken or an exemption from
the registration requirements of the Securities Act and such laws is available,
and (B) the proposed transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in the Company is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
<PAGE>
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company
(e) The undersigned acknowledges that the Securities issuable upon exercise or
conversion of the Warrant must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available. The undersigned is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold from the Company or any affiliate of the Company, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three month period not exceeding specified limitations.
Dated:_________________________
_______________________________
(Typed or Printed Name)
By:____________________________
(Signature)
_______________________________
(Title)
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<PAGE>
Attachment 3
NOTICE OF CONVERSION
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to acquire ________________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the attached
Warrant, by conversion of _________ percent (____%) of the Warrant.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
________________________
(Name)
________________________
(Address)
___________________________________ ________________________________
(Date) (Name of Warrant Holder)
By:___________________________
Title:________________________
(Title and signature of authorized person)
<PAGE>
THE SECURITIES EVIDENCED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE SOLD, TRANSFERRED, OR ASSIGNED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
THE SALE OR TRANSFER AND CERTAIN OTHER RIGHTS RELATING TO THE SECURITIES
REPRESENTED BY THIS DOCUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDER AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS
OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
No.: 4
WARRANT
TO PURCHASE CLASS E PREFERRED STOCK
OF
BEACON POWER CORPORATION
(void after August 2, 2004)
1. Issuance of Warrant. FOR VALUE RECEIVED, on and after the date of
issuance of this Warrant, and subject to the terms and conditions herein set
forth, the Holder (as defined below) is entitled to purchase from Beacon Power
Corporation, a Delaware corporation (the "Company"), at any time before 5:00
p.m. New York time on August 2, 2004 (the "Termination Date"), at a price per
share equal to the Warrant Price (as defined below and subject to adjustment as
described below), the Warrant Stock (as defined below and subject to adjustment
as described below) upon exercise of this warrant (this "Warrant") pursuant to
Section 6 hereof. This Warrant is issued pursuant to the Note and Warrant
Purchase Agreement (as defined below).
2. Definitions. As used in this Warrant, the following terms have the
definitions ascribed to them below:
(a) "Additional Stock" is defined in Section 3(d)(iv).
(b) "Base Price" means as of August 2, 1999, $1.78 per share of
Common Stock, which shall be subject to adjustment as provided in Section 3(d).
<PAGE>
(c) "Business Day" means any day other than a Saturday, Sunday or
other day on which the national or state banks located in the State of
Massachusetts or the State of New York or the District of Columbia are
authorized to be closed.
(d) "Change-In-Control Event" means the occurrence after the
Commencement Date of any of the following: (i) the acquisition of voting
securities of the Company by any person or group of persons that results in such
person or group, together with its affiliates, becoming, directly or indirectly,
the beneficial owner of in excess of 50% of the outstanding voting securities of
the Company; (ii) a merger or consolidation of the Company with any other
corporation or legal entity regardless of which entity is the survivor, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or being converted into voting securities of
the surviving entity) in excess of 50% of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation; or (iii) the sale or disposition of all or substantially all of
the Company's assets other than in a transaction in which holders of the voting
securities of the Company immediately prior to such transaction receive voting
securities of the acquiror of such assets or its affiliate that represent in
excess of 50% of the voting securities of such entity after consummation of such
transaction.
(e) "Commencement Date" means the date of issue of this Warrant.
(f) "Common Stock" means the Company's Common Stock, $.01 par value
per share.
(g) "Holder" means Micro Generation Technology Fund, L.L.C., or its
assigns.
(h) "Note and Warrant Purchase Agreement" means the Note and Warrant
Purchase Agreement dated as of August 2, 1999 by and among the Company, Perseus
Capital, L.L.C., Duquesne Enterprises, Inc., Micro Generation Technology Fund,
L.L.C., and SatCon Technology Corporation (collectively, the "Purchasers"), and
"Note" means the Note issued to the holder pursuant to such Agreement.
(i) "Class E Preferred Stock" means the Class E Preferred Stock of
the Company proposed to be issued to the Purchasers as part of the equity
financing in which the Note is to be converted, as described in the above Note
and Warrant Purchase Agreement.
(j) "Warrant Price" means, (i) in the event that a purchase of at
least $5 million of the Class E Preferred Stock is consummated within six (6)
months from the date hereof, the per share price at which such purchase is made,
or (ii) in the event that no such purchase is consummated, $2.50, in either
event subject to adjustment as described in Section 3 below.
(k) "Warrant Stock" means the shares of Company stock which are
purchasable upon exercise or conversion of this Warrant, consisting of Class E
Preferred Stock
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<PAGE>
(or other Company securities) into which the Note is converted if such
conversion actually occurs, or consisting of shares of Common Stock if the Note
is not so converted. The total number of shares to be issued upon the exercise
of this Warrant shall be computed by dividing $37,500.00 by the Warrant Price,
subject to adjustment as described in Section 3 below. The "Warrant Stock
Definition Date" means the date on which the Note is converted (or if not
converted, then the date on which the holder of the Note notifies the Company
that it has become a demand note, as described in the Note.
3. Adjustments and Notices. The Warrant Price and/or the number of shares
of Warrant Stock shall be subject to adjustment from time to time in accordance
with this Section 3. The Warrant Price and/or the number of Warrant Shares shall
be adjusted to reflect all of the following events that occur on or after the
Commencement Date. However, if the Warrant Stock becomes defined to be preferred
stock of the Company, then the following provisions in Section 3 shall not apply
to shares issued on or after the Warrant Stock Definition Date.
(a) Subdivision, Stock Dividends or Combinations. In case the
Company shall at any time subdivide the outstanding shares of Warrant Stock or
shall issue a stock dividend with respect to the Warrant Stock, the Warrant
Price in effect immediately prior to such subdivision or the issuance of such
dividend shall be proportionately decreased, and in case the Company shall at
any time combine the outstanding shares of the Warrant Stock, the Warrant Price
in effect immediately prior to such combination shall be proportionately
increased, in each case effective at the close of business on the date of such
subdivision, dividend or combination, as the case may be.
(b) Reclassification, Exchange, Substitution, In-Kind Distribution.
Upon any reclassifications, exchange, substitution or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant or upon the payment of a dividend in securities or
property other than shares of Warrant Stock, the Holder shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that Holder would have received if this Warrant had been
exercised or converted immediately before the record date for such
reclassification, exchange, substitution, or other event or immediately prior to
the record date for such dividend, The Company or its successor shall promptly
issue to Holder a new warrant for such new securities or other property. The new
warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise or conversion of the new warrant.
The provisions of this Section 3(b) shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events and successive
dividends.
(c) Reorganization, Merger etc. In case of any Change-In-Control
Event, the Company, or such successor or purchasing corporation, as the case may
be, shall, as a condition to closing any such reorganization, merger or sale,
duly execute and deliver to the Holder hereof a new warrant so that the Holder
shall have the right to receive, at a total purchase price not to exceed that
payable upon the exercise or conversion of the unexercised or unconverted
portion of
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<PAGE>
this Warrant, and in lieu of the shares of the Warrant Stock theretofore
issuable upon exercise or conversion of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reorganization, merger or sale by the Holder of the number of shares of Warrant
Stock then purchasable under this Warrant. Such new warrant shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 3. The provisions of this subparagraph
(c) shall similarly apply to successive Change-In-Control Events. (d) Dilutive
Issuances Adjustment of Number of Shares and Warrant Price. In order to prevent
dilution of the rights granted under this Warrant, the number of shares of
Warrant Stock obtainable upon exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time as provided in this Section
3(d).
(i) Adjustment of Warrant Price upon Issuance of Additional
Stock. If and whenever after the Commencement Date, the Company issues, or in
accordance with Section 3(d)(ii) is deemed to have issued, any Additional Stock
to any person for a consideration per share less than the Base Price then in
effect, then the Warrant Price in effect immediately before each such issuance
shall forthwith be adjusted to a price determined by multiplying such Warrant
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of Common Stock that the aggregate consideration received by the Company
for such issuance would purchase at such Warrant Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of such Additional Stock.
(ii) Effect of Certain Events. For purposes of determining
under Section (d)(i) the adjusted number of shares of Warrant Stock acquirable
upon exercise of this Warrant, the following shall be applicable:
(A) Issuance of Rights or Options. If the Company in any
manner issues, grants or sells (or otherwise becomes subject to) any
Options or Options for Convertible Securities, then the total maximum
number of shares of Common Stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been sold on the date of issuance, grant or sale of such
Options and to be outstanding.
(B) Issuance of Convertible Securities. If the Company
in any manner grants, issues or sells (or otherwise becomes subject to)
any Convertible Securities, then the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities
shall be deemed to have been sold on the date of issuance, grant or sale
of such Convertible Securities and to be outstanding.
(C) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible Securities
without the exercise of such Option or right, the number of shares of
Warrant Stock acquirable hereunder shall be adjusted to the number
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<PAGE>
of shares which would have been in effect at the time of such expiration
or termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination, never
been issued.
(D) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held
by or for the account of the Company or any Subsidiary, and the
disposition of any shares so owned or held shall be considered an issuance
or sale of Common Stock.
(E) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(iii) In the case of the issuance of Additional Stock for
cash, the consideration received therefor shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the company for any underwriting or
otherwise in connection with the issuance and sale thereof. In the case of the
issuance of Additional Stock for a consideration in whole or in part other than
cash, the consideration other than cash received therefor shall be deemed to be
the fair value thereof as reasonably determined by the Board of Directors of the
Company in its good faith judgment irrespective of any accounting treatment.
(iv) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to clause (ii) of this Section
3(d)) by the Company after the Commencement Date, other than shares of Common
Stock issued or issuable:
(A) to officers, directors, employees and consultants of
the Company directly or pursuant to a stock option plan or restricted
stock plan approved by the Board of Directors of the Company;
(B) upon conversion of the Class A, B, C, or D Preferred
Stock (or, if authorized, the Class E Preferred Stock) of the Company or
the exercise of warrants issued by the Company before or on the
Commencement Date;
(v) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 3(d) but not expressly provided
for by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's board of directors shall make an appropriate adjustment in
the number of shares of Warrant Stock obtainable upon exercise of this Warrant
and in the Warrant Price so as to protect the rights of the holders of the
Warrants; provided that
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<PAGE>
no such adjustment shall decrease the number of shares of Warrant Stock
obtainable as otherwise determined pursuant to this Section 3.
(e) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Warrant Price, the Corporation, at its own expense, shall
cause its Chief Financial Officer to compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to the Holder. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. No adjustment of the Warrant Price shall be
required to be made unless it would result in an increase or decrease of at
least one cent, but any adjustments not made because of this sentence shall be
carried forward and taken into account in any subsequent adjustment otherwise
required hereunder.
(f) No Impairment, The Company shall not, by amendment of its
Certificate of Incorporation or through a 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 under this Warrant by the Company, but
shall at all times in good faith assist in carrying out all of the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment. If the
Company takes any action affecting the Class E Preferred Stock other than as
described above that adversely affects the Holder's rights under this Warrant,
the Warrant Price shall be adjusted downward.
(g) Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded down to the nearest whole share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying the Holder an amount computed
by multiplying the fractional interest by the fair market value of a full share.
4. No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
5. Reservation of Stock. On and after the Warrant Stock Definition Date,
the Company will reserve from its authorized and unissued stock a sufficient
number of shares to provide for the issuance of Warrant Stock upon the exercise
or conversion of this Warrant. Issuance of this Warrant shall constitute full
authority to the Company's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Warrant Stock issuable upon the exercise or conversion of this Warrant.
6. Exercise of Warrant. This Warrant may be exercised as a whole or part
by the Holder, at any time after the date hereof prior to the termination of
this Warrant, by the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Attachments 1 and 2, respectively, duly completed and executed at
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<PAGE>
the principal office of the Company, specifying the portion of the Warrant to be
exercised and accompanied by payment in full of the Warrant Price in cash or by
check with respect to the shares of Warrant Stock being purchased.
Alternatively, the Holder may pay the Warrant Price as a whole or in part) by
surrendering to the Company all or a portion of any Note (as defined in the Note
and Warrant Purchase Agreement), in which case the portion of the Note
surrendered plus all accrued but unpaid interest thereon shall be credited
towards payment of the Warrant Price. If less the entire Note is surrendered in
payment of the Warrant Price, the Company shall issue to the Holder a new
promissory note identical to the surrendered Note except that the principal
amount thereof shall equal the unsurrendered portion of the principal amount of
the surrendered Note. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such exercise shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable after such date, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of full shares of Warrant Stock issuable upon such exercise. If
this Warrant shall be exercised for less than the total number of shares of
Warrant Stock then issuable upon exercise, promptly after surrender of this
Warrant upon such exercise, the Company will execute and deliver a new warrant,
dated the date hereof, evidencing the right of the Holder to the balance of this
Warrant Stock purchasable hereunder upon the same terms and conditions set forth
herein.
7. Conversion, In lieu of exercising this Warrant or any portion hereof,
at any time after the occurrence of a Change-In-Control Event or the filing of a
registration statement for an initial underwritten public offering of securities
by the Company, the Holder hereof shall have the right to convert this Warrant
or any portion hereof into Warrant Stock by executing and delivering to the
Company at its principal office the written Notice of Conversion and Investment
Representation Statement in the forms attached hereto as Attachments 2 and 3,
specifying the portion of the Warrant to be converted, and accompanied by this
Warrant. The number of shares of Warrant Stock to be issued to Holder upon such
conversion shall be computed using the following formula:
X=(P)(Y)(A-B)/A
where X = the number of shares of Warrant Stock to be issued to the
Holder for the portion of the Warrant being converted.
P = the portion of the Warrant being converted expressed
as a decimal fraction.
Y = the total number of shares of Warrant Stock issuable
upon exercise of the Warrant in full.
A = the fair market value of one share of Warrant Stock
which means (i) the fair market value of the Warrant
Stock as of the last
-7-
<PAGE>
Business Day immediately prior to the date the notice of
conversion is received by the Company, as reported in
the principal market for such securities or, if no such
market exists, as determined in good faith by the
Company's Board of Directors, or (ii) if this Warrant is
being converted in conjunction with a public offering of
stock the price to the public per share pursuant to the
offering.
B = the Warrant Price on the date of conversion.
Any portion of this Warrant that is converted shall be immediately canceled.
This Warrant or any portion hereof shall be deemed to have been converted
immediately prior to the close of business on the date of its surrender for
conversion as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such conversion shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable after such date, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of full shares of Warrant Stock issuable upon such conversion. If
the Warrant shall be converted for less than the total number of shares of
Warrant Stock then issuable upon conversion, promptly after surrender of the
Warrant upon such conversion, the Company will execute and deliver a new
warrant, dated the date hereof, evidencing the right of the Holder to the
balance of the Warrant Stock purchasable hereunder upon the same terms and
conditions set forth herein. If this Warrant is converted, as a whole or in
part, after the occurrence of a Change-In-Control Event as to which Section 3(c)
is applicable, the Holder shall receive the consideration contemplated by
Section 3(c) in lieu of Warrants Stock of the Company.
8. Transfer of Warrant. This Warrant may be transferred or assigned by the
Holder hereof in whole or in part, provided that the transferor provides, at the
Company's request, an opinion of counsel satisfactory to the Company that such
transfer does not require registration under the Securities Act and the
securities law applicable with respect to any other applicable jurisdiction.
9. Termination. This Warrant shall terminate on 5:00 p.m. New York time on
the Termination Date.
10. Miscellaneous. This Warrant shall be governed by the laws of the
Commonwealth of Massachusetts, as such laws are applied to contracts to be
entered into and performed entirely in Massachusetts by Massachusetts residents.
In the event of any dispute among the Holder and the Company arising out of the
terms of this Warrant, the parties hereby consent to the exclusive jurisdiction
of the federal and state courts located in the Commonwealth of Massachusetts for
resolution of such dispute, and agree not to contest such exclusive jurisdiction
or seek to transfer any action relating to such dispute to any other
jurisdiction. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be
-8-
<PAGE>
deemed to constitute a part hereof Neither this Warrant nor any term hereof may
be changed or waived orally, but only by an instrument in writing signed by the
Company and the Holder of this Warrant. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or
by facsimile transmission or mailed by first class mail, postage prepaid, to the
address or facsimile number furnished to the Company in writing by the last
Holder of this Warrant who shall have furnished an address or facsimile number
to the Company in writing, and if mailed shall be deemed given three days after
deposit in the United States mail.
ISSUED: August 2, 1999
BEACON POWER CORPORATION
By: /s/ Willian E. Stanton
-------------------------
Name: WILLIAM E. STANTON
-----------------------
Title: PRESIDENT & CEO
-----------------------
-9-
<PAGE>
Attachment 1
NOTICE OF EXERCISE
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to purchase ________________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
________________________
(Name)
________________________
(Address)
___________________________________ ________________________________
(Date) (Name of Warrant Holder)
By:___________________________
Title:________________________
<PAGE>
Attachment 2
INVESTMENT REPRESENTATION STATEMENT
Shares of the Class E Preferred Stock
(as defined in the attached Warrant) of
BEACON POWER CORPORATION
In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Beacon Power Corporation (the "Company") as
follows:
(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon exercise of
the Warrant at the time of issuance may not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Securities Act and state law exemptions relating to offers
and sales not by means of a public offering, and that the Company's reliance on
such exemptions is predicated on the undersigned's representations set forth
herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Warrant unless and until (i) it
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and Company's counsel to the
effect that (A) appropriate action necessary for compliance with the Securities
Act and any applicable state securities laws has been taken or an exemption from
the registration requirements of the Securities Act and such laws is available,
and (B) the proposed transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in the Company is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
<PAGE>
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company
(e) The undersigned acknowledges that the Securities issuable upon exercise or
conversion of the Warrant must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available. The undersigned is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold from the Company or any affiliate of the Company, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three month period not exceeding specified limitations.
Dated:_________________________
_______________________________
(Typed or Printed Name)
By:____________________________
(Signature)
_______________________________
(Title)
-2-
<PAGE>
Attachment 3
NOTICE OF CONVERSION
TO: BEACON POWER CORPORATION
1. The undersigned hereby elects to acquire ________________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the attached
Warrant, by conversion of _________ percent (____%) of the Warrant.
2. Please issue a certificate or certificates representing said shares of
Warrant Stock in the name of the undersigned or in such other name as is
specified below:
________________________
(Name)
________________________
(Address)
___________________________________ ________________________________
(Date) (Name of Warrant Holder)
By:___________________________
Title:________________________
(Title and signature of authorized person)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 516,610
<SECURITIES> 0
<RECEIVABLES> 3,223,577
<ALLOWANCES> 239,206
<INVENTORY> 3,851,679
<CURRENT-ASSETS> 8,646,484
<PP&E> 3,320,909<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,278,952
<CURRENT-LIABILITIES> 6,322,998
<BONDS> 0
0
0
<COMMON> 93,670
<OTHER-SE> 8,862,284
<TOTAL-LIABILITY-AND-EQUITY> 15,278,952
<SALES> 0
<TOTAL-REVENUES> 11,478,898
<CGS> 11,375,009
<TOTAL-COSTS> 19,223,459
<OTHER-EXPENSES> 150,464
<LOSS-PROVISION> 1,884,803
<INTEREST-EXPENSE> 42,150
<INCOME-PRETAX> (9,821,978)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,821,978)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,821,978)
<EPS-BASIC> (0.78)<F2>
<EPS-DILUTED> (0.78)<F2>
<FN>
<F1>PP&E is shown net of accumulated depreciation as reported within the Form 10-Q
on the Balance Sheet
<F2>In accordance with SFAS No. 128, "Earnings per share_Basic" is reported as the
value for the EPS-PRIMARY tag and "Earnings per share_Diluted" is reported as
the value for the EPS-DILUTED tag
</FN>
</TABLE>
