<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 25, 1999
---------------
SATCON TECHNOLOGY CORPORATION
----------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 001-11512 04-2857552
-------------------------------------------------------------
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
161 First Street, Cambridge, Massachusetts 02142
--------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (617) 661-0540
-------------
Not Applicable
--------------
(Former Name or Former Address, if Changed Since Last Report)
-1-
<PAGE>
Item 5. Other Events
On August 25, 1999, SatCon Technology Corporation (the "Registrant")
completed an $8 million private placement of 8,000 shares of its Series A
Convertible Preferred Stock, $0.01 par value per share (the "Series A Preferred
Stock"), with Brown Simpson Strategic Growth Funds ("Brown Simpson"). The Series
A Preferred Stock is initially convertible into 1,025,641 shares of the
Registrant's common stock, $0.01 par value per share (the "Common Stock"), at an
initial conversion price of $7.80 per share. At the option of Brown Simpson, the
conversion price resets to the average of the five bid prices of the Common
Stock on the five trading days immediately preceding the one year anniversary of
the closing. The reset conversion price may never be less than $5 and the reset
is void under certain agreed upon circumstances. The Series A Preferred Stock is
also subject to certain dilution protection for a period of three years. Under
certain circumstances, the Registrant has the option to cause the Series A
Preferred Stock to convert into shares of Common Stock or otherwise be redeemed.
At the end of seven years, the Registrant must redeem any remaining shares of
the Series A Preferred Stock for cash or, at the Registrant's option, Common
Stock with a then fair market value equal to the original purchase price of the
Series A Preferred Stock. The obligation at seven years to redeem any remaining
shares of the Series A Preferred Stock accelerates to the fourth anniversary of
the closing in the event the average bid price of SatCon's Common Stock for the
60 "trading day" period immediately preceding the fourth anniversary is $5 per
share or less. In the event of certain change in control events regarding the
Registrant or the Common Stock is delisted, Brown Simpson has the right to cause
the Series A Preferred Stock to be redeemed. In connection with the transaction,
Brown Simpson also received warrants to purchase up to 675,000 additional shares
of the Common Stock at $8.54 per share ("the Brown Simpson Warrants"). The Brown
Simpson Warrants expire on August 25, 2003.
The Registrant has agreed to register for resale under the Securities Act
of 1933, as amended (the "Securities Act"), the Common Stock issuable upon (i)
conversion of the Series A Preferred Stock; and (ii) exercise of the Brown
Simpson Warrants. The Registrant has also granted Brown Simpson under certain
instances piggy back registration rights and one demand registration right. The
Registrant is required to make certain cash and warrant payments in the event
that it is unable to meet its obligations in connection with the Series A
Preferred Stock and Brown Simpson Warrants, such as registration under the
Securities Act or issuance of shares of Common Stock upon conversion or
exercise.
H.C. Wainwright & Co., Inc. ("H.C. Wainwright") served as placement agent
for the transaction and received a commission of $560,000 and warrants to
purchase 120,000 shares of the Registrant's Common Stock at $7.80 per share.
These warrants expire on August 25, 2003. H.C. Wainwright will also receive a
future fee in the
-2-
<PAGE>
amount of 4% of any monies received by the Registrant upon the exercise of the
Brown Simpson Warrants.
The foregoing summary description is qualified in its entirety by reference
to the definitive transaction documents, copies of which are attached as
exhibits to this Current Report on Form 8-K.
This report may contain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended, which reflect the Registrant's current judgment on certain
issues. Because such statements apply to future events, they are subject to
risks and uncertainties that could cause the actual results to differ
materially. Important factors which could cause actual results to differ
materially are described in the Registrant's reports on Forms 10-K and 10-Q on
file with the Securities and Exchange Commission.
Item 7. Financial Statements and Exhibits
(a) Financial statements.
None.
(b) Pro forma financial information.
None.
(c) Exhibits.
The Exhibits to this report are listed in the Index to Exhibits
set forth on page 5 hereof.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
SATCON TECHNOLOGY CORPORATION
Date: August 25, 1999 By: /s/ David B. Eisenhaure
---------------------------------------
David B. Eisenhaure
President, Chief Executive Officer and
Chairman of the Board
-4-
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------- -------
3.1(1) Certificate of Incorporation of the Registrant.
3.2(1) Bylaws of the Registrant.
3.3(2) Certificate of Amendment of Certificate of Incorporation of the
Registrant, as filed with the Secretary of State of the State of
Delaware on May 12, 1997.
3.4(2) Bylaws Amendment of the Registrant.
3.5 Certificate of Amendment of Certificate of Incorporation of the
Registrant, as filed with the Secretary of State of the State of
Delaware on March 17, 1999.
3.6
Certificate of Designation of Series and Statement of Variations
of Relative Rights, Preferences and Limitations of Preferred
Stock, dated as of August 25, 1999, relating to the Series A
Preferred Stock.
10.25 Securities Purchase Agreement, dated as of August 25, 1999, among
the Registrant and the purchasers listed on Schedule I thereto.
10.26 Registration Rights Agreement, dated as of August 25, 1999, among
the Registrant and the investors named on the signature pages
thereof.
10.27 Form of Warrants issued on August 25, 1999 in connection with the
sale of the Series A Preferred Stock.
_______________
(1) Incorporated by reference to Exhibits to the Registrant's Registration
Statement on Form S-1 (File No. 33-49286).
(2) Incorporated by reference to Exhibits to the Registrant's Quarterly Report
on Form 10-Q for the period ended March 31, 1997.
-5-
<PAGE>
EXHIBIT 3.5
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SATCON TECHNOLOGY CORPORATION
Pursuant to Section 242
of the General Corporation Law
of the State of Delaware
------------------------------
SatCon Technology Corporation (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
The Board of Directors of the Corporation duly adopted a resolution by
Written Action dated December 22, 1998, pursuant to Sections 141 and 242 of the
General Corporation Law of the State of Delaware, setting forth an amendment to
the Certificate of Incorporation of the Corporation and declaring said amendment
to be advisable and directing that it be submitted to and considered by the
stockholders of the Corporation for approval. The stockholders of the
Corporation duly approved said proposed amendment at the Annual Meeting of
Stockholders held on March 17, 1999 in accordance with Section 242 of the
General Corporation Law of the State of Delaware. The resolution setting forth
the amendment is as follows:
RESOLVED: That the Board of Directors deems it advisable and in the best
- --------
interests of the Corporation and its stockholders that Article 4 of
the Certificate of Incorporation of the Corporation be, and hereby is,
deleted and is replaced in its entirety by the provisions attached
hereto as Appendix 1 in order to increase the authorized number of
----------
shares of Common Stock of the Corporation from 15,000,000 to
20,000,000.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
this 17th day of March, 1999.
SATCON TECHNOLOGY CORPORATION
By: /s/ David B. Eisenhaure
-------------------------
David B. Eisenhaure
President and Chief Executive Officer
<PAGE>
Appendix 1
----------
4. The total number of shares of stock which the Corporation shall have
authority to issue is twenty-one million (21,000,000) shares, twenty
million (20,000,000) of which shall be Common Stock, of the par value of
One Cent ($.01) per share; and one million (1,000,000) of which shall be
Preferred Stock, of the par value of One Cent ($.01) per share.
Additional voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of the shares of stock shall be
determined by the Board of Directors of the Corporation from time to time.
<PAGE>
EXHIBIT 3.6
SATCON TECHNOLOGY CORPORATION
CERTIFICATE OF DESIGNATION OF SERIES AND STATEMENT OF VARIATIONS
OF RELATIVE RIGHTS, PREFERENCES
AND LIMITATIONS OF PREFERRED STOCK
ARTICLE I
Designation, Amount, Par Value, Liquidation Value And Rank
1.1 The series of preferred stock shall be designated as Series A
Convertible Redeemable Preferred Stock, ("Series A Preferred Stock"), and the
------------------------
number of shares so designated shall be up to 10,000 (which shall not be subject
to increase without the consent of each of the holders of the Series A Preferred
Stock ("Holders")). Each share of Series A Preferred Stock, $.01 par value per
-------
share, shall have a liquidation value of $1,000 per share (the "Liquidation
-----------
Value").
- -----
1.2 The Series A Preferred Stock shall rank senior to the Junior
Securities as to dividends, distributions and upon liquidation, dissolution or
winding up. Except for a class of equity securities of the Company issued with
an exercise price, conversion price or strike price in excess of the Conversion
Price, no class of equity securities of the Company shall be senior to the
Series A Preferred Stock as to dividends, distributions and upon liquidation,
dissolution or winding up.
1.3 The Company shall not be required to pay dividends on the Series
A Preferred Stock.
ARTICLE II
Voting Rights
2.1 Except as otherwise provided herein and as otherwise required by
law, the Series A Preferred Stock shall have no voting rights. The outstanding
shares of Series A Preferred Stock shall be entitled to the number of votes
equal to the number of whole shares of Common Stock into which the shares of
Series A Preferred Stock held by such holder are then convertible (as adjusted
from time to time pursuant to Section 4 hereof), at each meeting of stockholders
of the Company (and written actions of stockholders in lieu of meetings) with
respect to any of the following matters presented to the stockholders of the
Company for their action or consideration: (a) sell all or substantially all of
its, or their, assets or (b) merge with or into another company, in the event
that the Company will not be the surviving entity. Without the approval of the
holders of 75% of the outstanding share of Series A Preferred Stock, the Company
shall not amend, alter or repeal the preferences, special rights or other powers
of the Series A Preferred Stock so as to affect adversely the Series A Preferred
Stock, which approval may be given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class.
<PAGE>
ARTICLE III
Liquidation
3.1 Upon any liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary (a "Liquidation"), the Holders shall be
-----------
entitled to receive out of the assets of the Company legally available therefor,
whether such assets are capital or surplus, for each share of Series A Preferred
Stock an amount equal to the Liquidation Value before any distribution or
payment shall be made to the Holders of any Junior Securities. If the assets of
the Company shall be insufficient to pay in full all amounts due to the Holders
and the holders of any other class of preferred stock ranking pari passu to the
Series A Preferred Stock then the entire assets to be distributed to the Holders
and the Holders of all securities ranking pari passu to the Series A Preferred
Stock ratably in accordance with the respective amounts that would be payable on
such shares if all amounts payable thereon were paid in full. A sale,
conveyance, lease, transfer or disposition of all or substantially all of the
assets of the Company or the consummation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, or a consolidation or merger of the Company with or into
any other company or companies shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Article VI. The Company shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each Holder.
ARTICLE IV
Conversion
4.1 Right of Holders to Convert Series A Preferred Stock into Common
Stock.
(a) Conversion Price. Subject to and upon compliance with the
----------------
provisions of this Section 4.1, each share of Series A Preferred Stock may, at
any time, be converted into duly authorized, validly issued, fully-paid and
nonassessable shares of Common Stock at a conversion price of $7.80 per share
subject to adjustment as set forth in Section 4.1(b), and subject to the
provisions of this Article IV (the "Conversion Price").
(b) Optional Reset. At the option of each Holder, the Conversion
--------------
Price shall be adjusted (subject to Section 4.1(c)) to the average of the
closing bid prices on the Five (5) Trading Days immediately preceding the one
(1) year anniversary of the Closing Date. Notwithstanding the forgoing, no
reset pursuant to this Section 4.1(b) shall be made with respect to the
Conversion Price which shall result in a Conversion Price of less than $5.00 per
share (subject to adjustment for stock spits, combinations, or similar
transactions).
(c) Termination of Optional Reset. The reset options set forth in
-----------------------------
Section 4.1(b) above shall terminate upon the earlier to occur of either of the
following events, provided, however, that notwithstanding the occurrence of
either such event, the reset rights shall not terminate unless and until a
Registration Statement covering the underlying shares of Common Stock granted
herein has been declared effective by the Securities and Exchange Commission:
2
<PAGE>
1. if the Closing Price of Common Stock is greater than $11.70 for
twenty (20) consecutive Trading Days; or
2. if the Company receives at least Two Million Five Hundred
Thousand Dollars ($2,500,000) in cash pursuant to the initial
tranche of a stock issuance in connection with the transaction
described in Schedule 2.1(c)(7) of the Purchase Agreement, in
which there shall be a second tranche consisting of a minimum
investment of Four Million Five Hundred Thousand ($4,500,000),
and which second tranche shall be subject to funding conditions
that have been approved by the Holders, which approval shall not
be unreasonably withheld.
If an adjustment in the Conversion Price and, if applicable, a change in
the securities or other property issuable upon conversion has taken place
pursuant to Articles IV or VI, then the conversion described in Section 4.1(a)
shall be at the applicable Conversion Price and in such securities or other
property as so adjusted.
(d) Notice of Conversion. The Purchaser desiring to make a conversion
--------------------
shall deliver to the Company, during usual business hours of the Company's
office, or, at the Purchaser's option, to the Company's transfer agent during
its usual business hours (with a copy to the Company), a written notice of
election to convert, as provided in the form attached hereto as Exhibit A (a
---------
"Notice of Conversion"), accompanied, if required, by the stock certificate(s)
- ---------------------
evidencing the shares of Series A Preferred Stock which are to be converted.
4.2 Issuance of Shares Upon Conversion.
(a) The Company shall use its best efforts to deliver or cause to be
delivered, within two (2) Trading Days after delivery of a Notice of Conversion
and, if required, the surrender, as herein provided, of any certificates for
shares of Series A Preferred Stock for conversion, to the Holder of the Series A
Preferred Stock delivering such Notice of Conversion, or such Holder's designee,
a certificate or certificates representing the number of duly authorized,
validly issued, fully-paid and nonassessable shares of Common Stock, into which
such shares of Series A Preferred Stock may be converted in accordance with the
provisions of this Article IV. Such conversion shall be deemed to have been
made at the time and on the date the Notice of Conversion is delivered to the
Company, as long as, if required, the shares of Series A Preferred Stock being
converted are promptly delivered to the Company. The rights of the Holder of
such Series A Preferred Stock (subject to the Company's satisfaction of its
obligations hereunder with respect to such conversion) shall cease at such time
with respect to the shares of Series A Preferred Stock so converted (the
"Converted Preferred Stock"). The Person or Persons entitled to receive the
- --------------------------
shares of Common Stock, upon conversion of such Series A Preferred Stock, shall
be treated for all purposes as having become the record holder or holders of
such shares of Common Stock at such time, and such conversion shall be at the
Conversion Price in effect at such time (the "Conversion Date"). Subject to
---------------
paragraph 4.3(b), if any certificated shares of Series A Preferred Stock are
converted in part only, upon such conversion the Company shall execute and
deliver to the Holder thereof, as requested by such Holder, a new Series A
Preferred Stock certificate for the number of shares of Series A Preferred Stock
equal to the unconverted portion of such Series A Preferred Stock certificate.
Without in any way
3
<PAGE>
limiting the Holder's right to pursue other remedies, including actual damages
and/or equitable relief, the parties hereto agree that if the Company fails to
deliver the shares of Common Stock required to be issued upon the conversion of
such shares of Series A Preferred Stock under this Section 4.2 within five (5)
Trading Days after delivery of the Notice Of Conversion, the Company shall pay
to the Holder upon demand an amount of cash (at the Holder's option) equal to
the product of (w) the number of shares of Common Stock required to be issued
upon the conversion of the Series A Preferred Stock, (x) the Per Share Market
Value of such shares on the Conversion Date, (y) the number of days after the
two (2) Trading Day period referred above that such shares are not delivered to
the Holder, and (z) 0.0025; provided that in no event shall the amount of the
penalty imposed by this sentence exceed $10,000 per Trading Day.
(b) Notwithstanding anything to the contrary set forth herein, upon
conversion of shares of Series A Preferred Stock in accordance with the terms
hereof, the Holder shall not be required to physically surrender its certificate
of Series A Preferred Stock to the Company unless the entire amount of shares of
Series A Preferred Stock is so converted. The Holder and the Company shall
maintain records showing the number of shares of Series A Preferred Stock
already converted and the dates of such conversions or shall use such other
method, reasonably satisfactory to the Holder and the Company, so as not to
require physical surrender of the Series A Preferred Stock certificate(s) upon
each such conversion. In the event of any dispute or discrepancy, such records
of the Company shall be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if any portion of shares of a Series A
Preferred Stock certificate is converted, the Holder may not transfer the Series
A Preferred Stock certificate unless the Holder first physically surrenders the
certificate to the Company, whereupon the Company shall promptly issue and
deliver upon the order of the Holder a new certificate of like tenor, registered
as the Holder (upon payment by the Holder of any applicable transfer taxes) may
request, representing the number of remaining unconverted shares of Series A
Preferred Stock. The Holder and any assignee, by acceptance of the Series A
Preferred Stock, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of a Series A Preferred Stock
certificate, the unpaid and unconverted shares of such Series A Preferred Stock
certificate may be less than the amount stated on the face thereof.
(c) In lieu of delivering physical certificates representing the
Conversion Shares, provided the Company's transfer agent is participating in the
Depositary Trust Company Fast Automated Securities Transfer ("FAST") program,
----
upon request of the Holder and in compliance with the provisions of Sections
4.1 and 4.2, the Company shall use its best efforts to cause its transfer agent
to electronically transmit the shares of Common Stock issuable upon conversion
of the Series A Preferred Stock to the Holder by crediting the account of the
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system. The time period for delivery described in the immediately preceding
paragraph shall apply to the electronic transmittals described herein.
(d) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder such certificate or certificates for
shares of Common Stock pursuant to Section 4.2(a) by the second (2nd) Trading
Day after the Conversion Date, and if after such second (2nd) Trading Day the
Holder purchases (in an open market transaction or otherwise) Common Stock to
deliver in satisfaction of a sale by such Holder of the Underlying Shares
4
<PAGE>
which the Holder was entitled to receive upon such conversion (a "Buy-In"), then
the Company shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
of Common Stock that such Holder was entitled to receive from the conversion at
issue multiplied by (2) the market price of the Common Stock at the time of the
sale giving rise to such purchase obligation and (B) at the option of the
Holder, either return the Series A Preferred Stock for which such conversion was
not honored or deliver to such Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its conversion and
delivery obligations under Section 4.2(a). For example, if the Holder purchases
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of Series A Preferred Stock with respect to
which the market price of the Underlying Shares on the date of conversion
totaled $10,000, under clause (A) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In.
ARTICLE V
Registration Requirements
5.1 Reservation of Shares. The Company at all times shall reserve a
sufficient number of shares of its authorized but unissued Common Stock to
provide for 1.2 times the full conversion of the outstanding Series A Preferred
Stock and exercise of the outstanding Warrants (the "Reserved Amount"). Shares
of Common Stock reserved for issuance upon conversion of the Series A Preferred
Stock and the exercise of the Warrants shall be allocated pro rata to each of
the Purchasers in accordance with the amount of Series A Preferred Stock and
Warrants issued and delivered to such Purchaser at the Closing. If at any time
the number of shares of Common Stock authorized and reserved for issuance is
insufficient to cover 120% of the number of Conversion Shares and Warrant Shares
issued and issuable upon conversion of the Series A Preferred Stock and exercise
of the Warrants (based on the Conversion Price of the Series A Preferred Stock
in effect from time to time and the Exercise Price of the Warrants in effect
from time to time) without regard to any limitation on conversions or exercises,
the Company will promptly take all corporate action necessary to authorize and
reserve 120% of such shares pursuant to Section 3(b) of the Registration Rights
Agreement, including, without limitation, calling a special meeting of
stockholders to authorize additional shares to meet the Company's obligations
under this Section 5.2, in the case of an insufficient number of authorized
shares, and using its best efforts to obtain stockholder approval of an increase
in such authorized number of shares.
5.2 The provisions of Section 2(d) of the Registration Rights
Agreement are incorporated herein by reference.
5
<PAGE>
ARTICLE VI
Adjustment of Conversion Price
6.1 Adjustment of Conversion Price. In addition to any adjustment to
the Conversion Price provided elsewhere in this Certificate of Designation, the
Conversion Price in effect at any time shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) Common Stock Dividends; Common Stock Splits. If the Company, at
-------------------------------------------
any time while the Series A Preferred Stock is outstanding, (a) shall pay a
stock dividend on its Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by reclassification of
shares of Common Stock any shares of Capital Stock of the Company, the
Conversion Price shall be multiplied by a fraction the numerator of which shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and the denominator of which shall be the number
of shares of Common Stock (excluding treasury shares) outstanding after such
event. Any adjustment made pursuant to this Section 6.1(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(b) Rights; Warrants. If the Company, at any time while the Series A
----------------
Preferred Stock is outstanding, shall issue rights or warrants to all of the
holders of Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Conversion Price, the Conversion
Price shall be multiplied by a fraction, the denominator of which shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and the numerator
of which shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at the Conversion Price. Such adjustment
shall be made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants.
(c) Subscription Rights. If the Company, at any time while the Series
-------------------
A Preferred Stock is outstanding, shall distribute to all of the holders of
Common Stock evidence of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
6.1(a) and (b) above), then in each such case the Conversion Price at which the
Series A Preferred Stock shall thereafter be exercisable shall be determined by
multiplying the Conversion Price in effect immediately prior to the record date
fixed for determination of shareholders entitled to receive such distribution by
a fraction, the denominator of which shall be the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and the numerator
of which shall be such Per Share Market Value of the Common Stock on such record
date less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one
6
<PAGE>
outstanding share of Common Stock as determined by the Board of Directors in
good faith; provided, however, that in the event of a distribution exceeding ten
-------- -------
percent (10%) of the net assets of the Company, such fair market value shall be
determined in accordance with the Appraisal Procedure. Such adjustment shall be
made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above. Notwithstanding the
foregoing, nothing set forth in this Section 6.1(c) shall be applicable with
respect to the implementation of a poison pill, any poison pill provisions of
any of the Company's stockholders' rights or similar agreements and any
securities or rights issued pursuant thereto.
(d) Rounding. All calculations under Section 6.1 shall be made to the
--------
nearest cent or the nearest l/l00th of a share, as the case may be.
(e) Notice of Adjustment. Whenever the Conversion Price is adjusted
--------------------
pursuant to paragraphs 6.1(a), (b) or (c), the Company shall promptly deliver to
the Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(f) Redemption Events. The following are "Redemption Events" under
----------------- -----------------
this Section 6.1(f): (A) any Change of Control or (B) any suspension from
listing or delisting of the Common Stock from the Nasdaq or any Subsequent
Market on which the Common Stock is listed for a period of five consecutive
days. The Company shall give the Holder written notice of the occurrence of any
Redemption Event as soon as practicable but in no event later than three (3)
Business Days after such Redemption Event. On and after the date of any
Redemption Event, the Holder shall have the option to require the Company to
redeem (the "Redemption Right"), for a period of thirty (30) Business Days after
----------------
the date of such notice, in cash and subject to the terms of payment provisions
set forth in Section 4.2, from funds legally available therefor at the time of
such redemption, the Holder's shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of such Holder's Series A
Preferred Stock at a price per share equal to the product of (i) the Average
Price immediately preceding the latest of the effective date, the date of the
closing, date of occurrence or the date of the announcement, as the case may be,
of the Redemption Event triggering such Redemption Right and (ii) the number of
shares of Common Stock of the Company into which the Series A Preferred Stock
could have been converted immediately prior to such Redemption Event. After the
occurrence of (A), the Holder shall have the right at his or its option, in lieu
of the Redemption Right, to convert the Series A Preferred Stock for shares of
stock and other securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such Redemption Event; the Holder
shall be entitled upon such event to receive such amount of securities, cash or
property as if the Holder had converted the shares of the Common Stock into
which the Series A Preferred Stock could have been converted immediately prior
to such Redemption Event (without taking into account any limitations or
restrictions on the convertibility of the Series A Preferred Stock). In the
case of a transaction specified in (A) in which holders of the Company's Common
Stock receive cash, the Holder shall have the right at his or its option, in
lieu of the Redemption Right, to convert the Series A Preferred Stock for such
number of shares of the surviving company equal to the amount of cash into which
the Series A Preferred Stock is convertible divided by the fair market value of
the shares of the surviving company on the effective date of the merger. In the
case of (A), the Company shall not
7
<PAGE>
effect any such Redemption Event unless, prior to the consummation thereof, each
Person (other than the Company) which may be required to deliver any stock,
securities, cash or property upon the conversion of the Series A Preferred Stock
as provided herein shall assume, by written instrument delivered and reasonably
satisfactory to, the Holder of the Series A Preferred Stock, (a) the obligations
of the Company under this Certificate of Designation (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Certificate of Designation), (b) the obligations of
the Company under the Purchase Agreement, the Warrant, this Certificate of
Designation, and the Registration Rights Agreement, and (c) the obligation to
deliver to the Registered Owner such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this Section 6.1(f),
the Holder may be entitled to receive. This provision shall similarly apply to
successive Redemption Events.
(g) Adjustment to Conversion Price.
------------------------------
(i) Prior to the third anniversary of the issuance of the Series
A Preferred Stock, if the Company, at any time while the Series A Preferred
Stock is outstanding, takes any of the actions described in this Section
6.1(g), then, in order to prevent dilution of the rights granted under this
Certificate of Designation, at any time prior to the Maturity Date, the
Conversion Price (without adjustment pursuant to Section 4.1(b)) will be
subject to adjustment from time to time as provided in this Section 6.1(g).
This Section 6.1(g) shall not apply to Exempt Securities.
(ii) Adjustment of Conversion Price upon Issuance of Common
------------------------------------------------------
Stock. If at any time, prior to the third anniversary of the issuance of
-----
the Series A Preferred Stock, while the Series A Preferred Stock is
outstanding the Company issues or sells, or is deemed to have issued or
sold, shares of Common Stock (other than Exempt Securities) for a
consideration per share less than the Conversion Price in effect
immediately prior to such issuance or sale, then immediately after such
issuance or sale the Conversion Price then in effect shall be reduced to an
amount equal to the Adjusted Price. For the purpose of determining the
adjusted Conversion Price under this Section 6.1(g), the following shall be
applicable:
(A) Issuance of Options. If at any time while the Series A
-------------------
Preferred Stock is outstanding the Company in any manner grants any
rights or options to subscribe for or to purchase Common Stock (other
than Exempt Securities) or any stock or other securities convertible
into or exchangeable for Common Stock (such rights or options being
herein called "Options" and such convertible or exchangeable stock or
-------
securities being herein called "Convertible Securities") and the price
----------------------
per share for which Common Stock is issuable upon the exercise of such
Options or upon conversion or exchange of such Convertible Securities
is less than the Conversion Price in effect immediately prior to such
grant, then the Conversion Price then in effect shall be reduced to
equal the Adjusted Price. No adjustment of the Conversion Price shall
be made upon the actual issuance of such Common Stock upon conversion
or exchange of such Options.
8
<PAGE>
(B) Issuance of Convertible Securities. If at any time
----------------------------------
while the Series A Preferred Stock is outstanding the Company in any
manner issues or sells any Convertible Securities and the price per
share for which Common Stock is issuable upon such conversion or
exchange (other than Exempt Securities) is less than the Conversion
Price in effect immediately prior to issuance or sale, then the
Conversion Price then in effect shall be reduced to an amount equal to
the Adjusted Price. No adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(C) Change in Option Price or Rate of Conversion. If there
--------------------------------------------
is a change at any time in (i) the Purchase Price provided for in any
Options, (ii) the additional consideration, if any, payable upon the
issue, conversion or exchange of any Convertible Securities or (iii)
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock, then immediately after such change in
option price or rate of conversion the Conversion Price in effect at
the time of such change shall be readjusted to the Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
Purchase Price, additional consideration or changed conversion rate,
as the case may be, at the time initially granted, issued or sold.
(D) Effect on Conversion Price of Certain Events. For
--------------------------------------------
purposes of determining the adjusted Conversion Price under Section
6.1(g)(ii), the following shall be applicable:
(I) Calculation of Consideration Received. If any
-------------------------------------
Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the amount
received by the Company therefor (net of any related brokerage
commissions) plus the amount to be received by the Company upon
the exercise or conversion of such securities. In case any
Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the
fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company will be the Average Price of such
security immediately preceding the date of receipt. In case any
Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger
in which the Company is the surviving entity the amount of
consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving
entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of
any consideration other than cash or securities will be
determined jointly by the Company and the
9
<PAGE>
Holders of Series A Preferred Stock representing a majority of
the aggregate number of shares of Series A Preferred Stock then
outstanding. If such parties are unable to reach agreement within
ten (10) days after the occurrence of an event requiring
valuation (a "Valuation Event"), the fair value of such
---------------
consideration will be determined in accordance with the Appraisal
Procedure.
(II) Integrated Transactions. In case any Option is
-----------------------
issued in connection with the issue or sale of other securities
of the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been
issued for an aggregate consideration of $.01, unless the
independent Board of Directors of the Company determine in good
faith that some other value should be ascribed to such Options.
(III) 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, and the disposition
of any shares so owned or held will be considered an issue or
sale of Common Stock.
(IV) Record Date. If the Company takes a record of
-----------
the holders of Common Stock for the purpose of entitling them (1)
to receive a dividend or other distribution payable in Common
Stock, Options or in Convertible Securities or (2) to subscribe
for or purchase Common Stock, Options or Convertible Securities,
then such record date will 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.
(E) Certain Events. If any event occurs of the type
--------------
contemplated by the provisions of Section 6.1(g) (subject to the
exceptions stated therein) 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 will make an
appropriate adjustment in the Conversion Price so as to protect the
rights of the Holder, or assigns, of the Series A Preferred Stock;
provided, however, that no such adjustment will increase the
Conversion Price as otherwise determined pursuant to this Section
6.1(g).
(F) Notices. The Company shall give the Holder written
-------
notice of the occurrence of any of the events specified in this
Section 6.1(g) as soon as practicable, but in no event later than
three (3) Business Days, after such event and shall publicly disclose
such event prior to or concurrently with the giving of such notice.
Such notice shall contain at least: (A) a description of the event,
(B) the adjusted Conversion Price with a reference to the applicable
paragraph in
10
<PAGE>
Section 6.1(g), and (C) the dates of the five (5) Trading Day period
during which the adjusted Conversion Price is in effect.
6.2 (i) Reclassification, Etc. If:
---------------------
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock; or
(b) the Company shall declare a special nonrecurring cash dividend on
or a redemption of its Common Stock; or
(c) the Company shall authorize the granting to the holders of the
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
(d) the approval of any shareholders of the Company shall be required
in connection with any reclassification of the Common Stock of the Company, any
consolidation or merger to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company, or any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or
property; or
(e) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of exercise of shares of Series A Preferred
Stock, and shall cause to be delivered to the Registered Owner, at least 5
Business Days prior to the applicable record or effective date hereinafter
specified, a notice (provided such notice shall not include any material
non-public information) stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y)
the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and
the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock for securities,
cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however,
-------- -------
that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
(f) Adjustment of Number of Shares. Upon each adjustment of the
------------------------------
Conversion Price as a result of the calculations made in this Section 6, each
share of Series A Preferred Stock shall thereafter evidence the right to
receive, at the adjusted Conversion Price, that number of shares of Common Stock
(calculated to the nearest one-hundredth) obtained by dividing (i) the product
of the aggregate number of shares covered by such share immediately prior to
such adjustment and the Conversion Price in effect immediately prior to such
adjustment
11
<PAGE>
of the Conversion Price by (ii) the Conversion Price in effect immediately after
such adjustment of the Conversion Price.
6.3 Restriction on Conversion by Either the Holder or the Company.
Notwithstanding anything herein to the contrary, except as set forth in Section
7.1 hereto and Section 8 of the Warrant, in no event shall any Holder have the
right or be required to convert any or all of the aggregate purchase price of
the Series A Preferred Stock if as a result of such conversion the aggregate
number of shares of Common Stock beneficially owned by such Holder and its
Affiliates would exceed 9.99% of the outstanding shares of the Common Stock
following such conversion. For purposes of this Section 6.3, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. The provisions of this Section 6.3 may be
waived by a Holder as to itself (and solely as to itself) upon not less than 65
days prior written notice to the Company, and the provisions of this Section 6.3
shall continue to apply until such 65th day (or later, if stated in the notice
of waiver).
6.4 Officer's Certificate. Whenever the number of shares purchasable
upon conversion shall be adjusted as required by the provisions of Section 6.1,
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of the
Company and by the secretary or any assistant secretary of the Company. Each
such officer's certificate shall be made available at all reasonable times for
inspection by any holder of the Series A Preferred Stock and the Company shall,
forthwith after each such adjustment, deliver a copy of such certificate to the
each of the Holders.
6.5 Compliance With Governmental Requirements. The Company covenants
that if any shares of Common Stock required to be reserved for purposes of
conversion of Series A Preferred Stock hereunder require registration with or
approval of any governmental authority under any Federal or state law, or any
national securities exchange, before such shares may be issued upon conversion,
the Company will use its best efforts to cause such shares to be duly registered
or approved, as the case may be.
6.6 Fractional Shares. Upon a conversion hereunder, the Company
shall not be required to issue stock certificates representing fractions of
shares of the Common Stock, but may if otherwise permitted, make a cash payment
in respect of any final fraction of a share based on the Per Share Market Value
at such time. If the Company elects not, or is unable, to make such a cash
payment, the holder shall be entitled to receive, in lieu of the final fraction
of a share, one whole share of Common Stock.
6.7 Payment of Tax Upon Issue or Transfer. The issuance of
certificates for shares of the Common Stock on conversion of the Series A
Preferred Stock shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the
12
<PAGE>
Holder of such Series A Preferred Stock so converted and the Company shall not
be required to issue or deliver such certificates unless or until the Person or
Persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
6.8 Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
8:00 p.m. EST where such notice is to be received), or the first Business Day
following such delivery (if received after 8:00 p.m. EST where such notice is to
be received) or (b) on the second Business Day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications are (i) if to the Company to SatCon Technology Corporation,
161 First Street, Cambridge, MA 02142-1221, Attn: President and Chief Executive
Officer, fax no. (617) 576-7455, with copies to Hale & Dorr LLP, 60 State
Street, Boston, MA 02109, Attn: Jeffrey N. Carp, Esq., fax no. (617) 526-5000
and (ii) if to any Purchaser to the address set forth on Schedule I hereto with
copies to those specified on the signature pages hereto and to Akin, Gump,
Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022,
Attn: James Kaye, Esq., fax no. (212) 872-1002 or such other address as may be
designated in writing hereafter, in the same manner, by such Person.
6.9 Nasdaq Limitation. If on any date (the "Determination Date") (a)
------------------
the Common Stock is listed for trading on Nasdaq or the Nasdaq SmallCap Market,
(b) (i) the Conversion Price then in effect is such that the aggregate number of
shares of Common Stock that would then be issuable upon conversion in full of
the then outstanding shares of Preferred Stock if all such shares were converted
on such Determination Date (without regard to any limitations on conversion) and
(ii) all other issuances of Common Stock, which under the requirements of Nasdaq
are required to be included with the shares of Common Stock described in the
preceding clause (i) for determining the need for stockholder approval for share
issuances, would equal or exceed 20% of the number of shares of the Common Stock
outstanding immediately prior to the closing date of the issuance and sale of
the Series A Preferred Stock (the "Issuable Maximum"), and (c) the Company shall
----------------
not have previously obtained any vote of the shareholders of the Company owning
a majority of the outstanding Common Stock (the "Shareholder Approval"), if any,
--------------------
as may be required by the applicable rules and regulations of Nasdaq (or any
successor entity) to approve the issuance of shares of Common Stock in excess of
the Issuable Maximum, then with respect to the aggregate number of shares of
Common Stock issuable upon the conversion of the shares of Preferred Stock then
held by the Registered Owners for which a conversion in accordance with the
Conversion Price would result in an issuance of shares of Common Stock in excess
of the Issuable Maximum (the "Excess Amount"), the Company may elect to redeem
-------------
the shares of Preferred Stock from the Registered Owners in an aggregate amount
in cash equal to the product of the Average Price on the Determination Date
multiplied by the number of shares of Common Stock that would be issued upon the
conversion of the shares of Preferred Stock resulting in the Excess Amount (the
"Prepayment Amount"). Any such election by the Company must be made in writing
-----------------
to the
13
<PAGE>
Registered Owners (x) within ten (10) Trading Days after any such Determination
Date or (y) or, if not made, must be made within two (2) Trading Days after the
date on the date on which a Registered Owner submits Preferred Stock for
conversion to the extent that such conversion will otherwise cause Common Stock
to be issued in excess of the Issuable Maximum. The payment of such Prepayment
Amount and the delivery for cancellation of the shares of Preferred Stock to be
redeemed must be made within ten (10) Trading Days after the date such election
is made. If the Company does not deliver timely a required notice of its
election to redeem under this section or shall, if it shall have delivered such
a notice, fail to redeem the Preferred Stock for the Prepayment Amount hereunder
within ten (10) Trading Days thereafter, then each Registered Owner shall have
the option by written notice to the Company within twenty (20) Trading Days of
the Determination Date, to, if applicable, declare any such notice given by the
Company, if given, to be null and void and require the Company to either: (i)
use its best efforts to obtain the Shareholder Approval applicable to such
issuance as soon as is possible, but in any event not later than the 90th day
after such request unless the Company has previously used its commercially
reasonable efforts to, but has failed to, obtain such approval, or (ii) purchase
the Excess Amount owned by such Holders for the Prepayment Amount, within five
(5) Trading Days of such Registered Owner's notice. Until the Company has
received the Shareholder Approval no Registered Owner of the shares of Preferred
Stock shall be issued, upon conversion of the Preferred Stock, shares of Common
Stock in an amount greater than the Issuable Maximum.
ARTICLE VII
Optional Redemption
7.1 Optional Redemption.
(a) The shares of Series A Preferred Stock are redeemable, in whole
or in part, at the option of the Company during the following time periods, from
time to time, under the following conditions and subject also to the conditions
set forth in Section 7.1(b) (the "Optional Redemption"):
-------------------
(i) The Company may redeem the shares of Series A Preferred Stock
subject to the other conditions herein, if the closing price of the
Company's Common Stock over twenty (20) consecutive Trading Days is greater
than $15.60 per share, as adjusted in accordance with Article VI.
(b) Subject to the conditions set forth in Section 7.1(a), so long as
(i) any Registration Statement required to be filed and be effective pursuant to
the Registration Rights Agreement has been filed and declared effective, and, if
this call option is being implemented prior to the second anniversary of the
Closing Date, such Registration Statement has been in effect and sales of all of
the Registrable Securities can be made thereunder for at least ten (10) days
prior to the Redemption Notice Date (as defined below), or such lesser number of
days to the extent days in such 10-day period are days contemplated by Sections
3(r) and 3(s) of the Registration Rights Agreement and (ii) the Company has a
sufficient number of authorized shares of Common Stock reserved for issuance
upon full conversion of the Series A Preferred Stock, upon ten (10) Business
Days prior written notice to the Holder (a "Redemption Notice"),
-----------------
14
<PAGE>
the full number of outstanding shares of Series A Preferred Stock may be
redeemed by the Company, in whole at a price equal to the original purchase
price of the Series A Preferred Stock (the "Redemption Price"), together with
----------------
other amounts due in respect thereof up to the Redemption Date (as defined
below).
7.2 Mechanics of Redemption. The Company shall exercise its right to
redeem by delivering its Redemption Notice by facsimile and overnight courier to
each Holder (such date that the notice is given, the "Redemption Notice Date").
----------------------
Such Redemption Notice shall indicate (A) the Redemption Price, (B) each
Holder's pro rata allocation of such maximum amount, and (C) a confirmation of
the date ("Redemption Date") that the Company shall effect the redemption, which
---------------
date shall be not less than ten (10) Business Days and not more than sixty (60)
calendar days after the Redemption Notice Date. Notwithstanding anything in this
Section 7.2, the Company shall convert any Series A Preferred Stock pursuant to
Article VII if the Conversion Notice for shares of Series A Preferred Stock
submitted for conversion is delivered before the Redemption Date. At any time
prior to the Redemption Date, the Company may issue to each Holder a written
notice canceling the Optional Redemption, in which case the Company shall not be
obligated to pay the Redemption Price and, at the option of each Holder, shall
return the shares of Series A Preferred Stock submitted for redemption or
conversion.
7.3 Payment of Redemption Price. The Company shall pay the
applicable Redemption Price to the Holder of the shares of Series A Preferred
Stock being redeemed in cash on the Redemption Date. Until the Company pays
such unpaid applicable Redemption Price in full to each Holder, each Holder of
shares of Series A Preferred Stock submitted for redemption pursuant to this
Article VII and for which the applicable Redemption Price has not been paid,
shall have the option, in lieu of redemption, (A) to require the Company to
promptly return to such Holder all of the shares of Series A Preferred Stock
that were submitted for redemption by such Holder under this Article VII and for
which the applicable Redemption Price has not been paid or (B) to convert those
shares of Series A Preferred Stock for which the applicable Redemption Price has
not been paid at a Conversion Price equal to the Conversion Price applicable to
such conversion on the Redemption Date (the "Void Redemption Notice"). Upon the
----------------------
Company's receipt of such Void Redemption Notice(s) requesting the return of the
shares of Series A Preferred Stock and prior to payment of the full applicable
Redemption Price to each Holder, (i) the redemption shall be null and void with
respect to those shares of Series A Preferred Stock submitted for redemption and
for which the applicable Redemption Price has not been paid, (ii) the Company
shall immediately return any Series A Preferred Stock certificates submitted to
the Company by each Holder for redemption under this Article VII and for which
the applicable Redemption Price has not been paid and (iii) the Conversion Price
of such returned shares of Series A Preferred Stock shall be adjusted to the
Conversion Price applicable to such conversion on the date on which such shares
of Series A Preferred Stock were originally presented for redemption. If the
Company fails to timely effect a redemption in accordance with this Article VII
(other than a redemption cancelled pursuant to Section 7.2 hereof), the Company
shall not be allowed to submit another Redemption Notice without the prior
written consent of Holders of at least two-thirds (2/3) of the number of shares
of Series A Preferred Stock then outstanding.
15
<PAGE>
ARTICLE VIII
Mandatory Redemption
8.1 Mandatory Redemption.
(a) On August 25, 2006 the Company shall redeem all of the then
outstanding Shares of Series A Preferred Stock held by the Holders at a value
per share equal to the Liquidation Value; provided, however that if on August
25, 2003 the average closing bid price of the Company's Common Stock over the
sixty (60) Trading Days immediately preceding August 25, 2003 is $5.00 (as
adjusted for stock splits, reclassifications and similar transactions) or less,
then the August 25, 2006 date shall accelerate to August 25, 2003. Any
aggregate amount (the "Mandatory Redemption Value") due shall be forwarded to
the Holders within five (5) Business Days.
(b) The Mandatory Redemption Value shall be paid in the form of cash,
Common Stock or a combination thereof at the election of the Company. Common
Stock shall be valued at the Average Price on August 25, 2003 or August 25,
2006, whichever date is applicable.
(c) Fifteen (15) days prior to August 25, 2003 or August 25, 2006,
whichever date is applicable, the Company shall provide the Holders with written
notice, which shall set forth whether the Company intends to pay the Mandatory
Redemption Value in the form of cash, Common Stock or a combination thereof.
(d) If the Mandatory Redemption Value is not paid to the Holders
within 60 days after August 25, 2003 or August 25, 2006, whichever date is
applicable, the Company shall pay to the Holders, in addition to the Mandatory
Redemption Value, interest which shall begin to accrue daily after the end of
such 60 day period at a rate of 12% per annum. The Company shall be obligated
to pay the Mandatory Redemption Value plus accrued interest.
ARTICLE IX
Definitions
9.1 Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Act" means the Securities Act of 1993, as amended.
---
"Adjusted Price" means the quotient determined by dividing (1) the
--------------
sum of (I) the product of (A) the Conversion Price in effect immediately before
the issuance or sale or grant multiplied by (B) the number of shares of Common
Stock Deemed Outstanding immediately prior to such issuance or sale or grant,
plus (II) the consideration, if any, received by the Company upon such issue or
sale, by (2) number of shares of Common Stock Deemed Outstanding immediately
after such issue or sale or grant.
16
<PAGE>
"Affiliate" of any Person means any other Person directly or
---------
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Appraisal Procedure" shall have the following meaning. The
-------------------
independent directors of the Company shall determine the fair market value. The
Holders shall have ten (10) Business Days to provide the Company with written
notice of its approval or disapproval of such determination. If the Holders do
not respond within such ten (10) Business Day period, they will be deemed to
have approved the fair market value determination of the independent directors.
If the Holders appropriately respond that they do not approve of the
determination and the independent directors and Holders collectively can not
agree on an appropriate fair market value within 30 Business Days, then the
Company, on the one hand, and the Holders, on the other hand shall each appoint
an Appraiser. A neutral Appraiser shall be appointed by the two party-appointed
Appraisers. The three Appraisers shall collectively ascertain the fair market
value, which valuation shall be binding upon all parties absent manifest error.
"Appraiser" means a nationally recognized or major regional investment
---------
banking firm or firm of independent certified public accountants of recognized
standing.
"Average Price" on any date means (x) the sum of the Per Share Market
-------------
Value for the ten (10) Trading Days immediately preceding such date minus (y)
the highest and lowest Per Share Market Value during the ten (10) Trading Days
immediately preceding such date, divided by (z) eight (8), or a similar
calculation if another figure for the number of Trading Days is set forth for
clause (x) of this definition.
"Business Day" means any day except a Saturday, Sunday or other day on
------------
which commercial banks in the City of New York are authorized or required by law
to close.
"Change of Control" means the occurrence of any of (i) an acquisition
-----------------
after the date hereof by an individual or legal entity or "group" (as described
in Section 13(d)(3) of the Exchange Act) of in excess of 40% of the voting
securities of the Issuer, (ii) a replacement of more than one-half of the
members of the Issuer's Board of Directors which is not approved by a majority
of those individuals who are members of the Board of Directors on the date
hereof, or their duly elected successors who are directors immediately prior to
such transaction, in one or a series of related transactions, (iii) the merger
of the Company with or into another entity, unless following such transaction,
the Holders of the Company's securities continue to hold at least 67% of such
securities following such transaction, (iv) the consolidation or sale of all or
substantially all of the assets of the Issuer in one or a series of related
transactions, or (v) the execution by the Issuer of an agreement to which the
Issuer is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii), (iii) or (iv).
"Closing Date" means the date of the closing of the purchase and sale
------------
of the Series A Preferred Stock.
17
<PAGE>
"Commission" means the United States Securities and Exchange
----------
Commission, or any successor to such agency.
"Common Stock" means the Company's common stock, $.01 par value per
------------
share, of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Common Stock Deemed Outstanding" means, at any given time, the number
-------------------------------
of shares of Common Stock issued and outstanding at such time, plus the number
of shares of Common Stock issuable upon the exercise or conversion of any
outstanding options, warrants or convertible securities.
"Conversion Date" has the meaning set forth in Section 4.2(a).
---------------
"Conversion Price" has the meaning set forth in Section 4.1.
----------------
"Conversion Shares" has the meaning set forth in the Purchase
-----------------
Agreement.
"Converted Preferred Stock" has the meaning set forth in Section
-------------------------
4.2(a).
"Convertible Securities" has the meaning set forth in Section
----------------------
6.1(g)(ii)(A).
"DTC" means the Depositary Trust Corporation.
---
"Excess Amount" has the meaning set forth in Section 5.2.
-------------
"Excess Shares" has the meaning set forth in Section 6.9
-------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Exempted Securities" shall mean issuances of Common Stock or other
-------------------
equity securities (a) at a price less than the Conversion Price in an amount not
to exceed 100,000 shares of Common Stock per year; (b) issuable upon the
conversion of the Preferred Stock or exercise of the Warrants; (c) shares of
Common Stock issuable in connection with any transaction set forth in Schedule
2.1(c) of the Purchase Agreement (including any securities issuable upon the
conversion, or exercise of securities issued in such transactions), (d) for
which any adjustment is made pursuant to Section 6.1(a), (b) or (c) or (e)
pursuant to (i) any option, warrant, convertible security or similar right or
contractual commitment outstanding on August 25, 1999, (ii) any stock option
plan or benefit plan approved by the Board of Directors of the Company, (iii) a
dividend, stock split, split-up or other distribution on shares of Common Stock,
(iv) any business acquisition by asset purchase, stock purchase, merger or
otherwise involving the Company or any of its Subsidiaries pursuant to which all
or a portion of the consideration is shares of Common Stock or other equity
securities of the Company, (v) warrants, in an amount not to exceed 200,000
shares of Common Stock per year and at an exercise price less than the
Conversion Price, granted to financial institutions in connection with any debt
financing (other than convertible debt) or loan, (vi) warrants or options, in an
amount not to exceed 200,000 shares of Common Stock per year and at an exercise
price less than the Conversion Price, approved by the independent directors of
the Board of Directors and issued to non-affiliates in
18
<PAGE>
connection with the provision of services, or (vii) any securities issued on the
conversion or exercise of any of the securities described in clauses (a) through
(e)(i) -(vi) hereof.
"Holder" or other similar terms means the registered holder of any
------
share of Series A Preferred Stock.
"Issuable Maximum" has the meaning set forth in Section 6.9
----------------
"Issuance Date" means the date of first issue of any shares of Series
-------------
A Preferred Stock.
"Junior Securities" means the Common Stock and all other equity
-----------------
securities of the Company which are junior in rights and liquidation preference
to Series A Preferred Stock.
"Liquidation Value" has the meaning set forth in Section 1.1.
-----------------
"Mandatory Redemption Value" has the meaning set forth in Section
--------------------------
8.1(a).
"Nasdaq" means the Nasdaq National Market.
------
"Notice of Conversion" has the meaning set forth in Section 4.1(c).
--------------------
"Options" has the meaning set forth in Section 6.1(g)(ii)(A).
-------
"Original Issue Date" shall mean the date of the first issuance of any
-------------------
shares of the Series A Preferred Stock regardless of the number of transfers of
any particular shares of Series A Preferred Stock and regardless of the number
of certificates which may be issued to evidence such Series A Preferred Stock.
"Per Share Market Value" means (i) on any particular date the closing
----------------------
bid price per share of the Common Stock on such date (as reported by Bloomberg
Information Services, Inc., or any successor reporting service) on Nasdaq or, if
the Common Stock is not then quoted on Nasdaq, any Subsequent Market on which
the Common Stock is then listed or if there is no such price on such date, then
the closing bid price on such exchange or quotation system on the date nearest
preceding such date or (ii) if the Common Stock is not listed then on Nasdaq or
any Subsequent Market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (iii) if the Common
Stock is not then publicly traded the fair market value of a share of Common
Stock as determined in accordance with the Appraisal Procedure. In addition,
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during such
period.
"Person" means a corporation, an association, a partnership,
------
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Prepayment Amount" has the meaning set forth in Section 6.9
-----------------
19
<PAGE>
"Purchase Agreement" means the Securities Purchase Agreement, dated as
------------------
of the Original Issue Date, among the Company and the original Holders of the
Series A Preferred Stock.
"Record Date" has the meaning set forth in Section 2.1.
-----------
"Redemption Date" has the meaning set forth in Section 7.2.
---------------
"Redemption Notice" has the meaning set forth in Section 7.1(b).
-----------------
"Redemption Notice Date" has the meaning set forth in Section 7.2.
----------------------
"Redemption Price" has the meaning set forth in Section 7.1(b).
----------------
"Registrable Securities" has the meaning set forth in the Registration
----------------------
Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holders.
"Registration Statement" has the meaning set forth in the Registration
----------------------
Rights Agreement.
"Reserved Amount" has the meaning set forth in Section 5.1.
---------------
"Reset Date" has the meaning set forth in Section 4.1(b).
----------
"Stock Option Plan" means any contract, plan or agreement which has
-----------------
been approved by the Board of Directors of the Company, pursuant to which the
Company's securities may be issued to any employee, officer, director or
consultant.
"Subsidiary" means, with respect to any Person, any corporation or
----------
other entity of which a majority of the Capital Stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Subsequent Market" means the New York Stock Exchange, American Stock
-----------------
Exchange or Nasdaq Smallcap Market.
"Trading Day" means (a) a day on which the Common Stock is traded on
-----------
Nasdaq or, if the Common Stock is not then designated on Nasdaq, on such
Subsequent Market on which the Common Stock is then listed or quoted or (b) if
the Common Stock is not listed on Nasdaq or a Subsequent Market, a day on which
the Common Stock is traded in the over-the-counter Market, as reported by the
OTC Bulletin Board, or (c) if the Stock is not quoted on the OTC Bulletin Board,
a day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions or reporting prices) provided,
however that in any event that the
20
<PAGE>
Common Stock is not listed or quoted as set forth in (a), (b), or (c) hereof,
then a Trading Day shall mean any Business Day.
"Underlying Shares" has the meaning set forth in the Purchase
-----------------
Agreement.
"Valuation Event" has the meaning set forth in Section
---------------
6.1(g)(ii)(D)(I).
"Void Redemption Notice" has the meaning set forth in Section 7.3.
----------------------
"Warrant" or "Warrants" has the meaning set forth in the Purchase
------- --------
Agreement.
"Warrant Shares" has the meaning set forth in the Purchase Agreement.
--------------
ARTICLE X
Miscellaneous
10.1 Modification of Certificate of Designation. This Certificate of
Designation may be modified without prior notice to any Holder upon the written
consent of the Company and the Holders of more than 75% of the shares of Series
A Preferred Stock then outstanding. The Holders of more than 75% of the shares
of Series A Preferred Stock then outstanding may waive compliance by the Company
with any provision of this Certificate of Designation without prior notice to
any Holder. However, without the consent of each Holder affected, an amendment,
supplement or waiver may not (1) reduce the number of shares of Series A
Preferred Stock whose Holders must consent to an amendment, supplement or
waiver, or (2) make any shares of Series A Preferred Stock payable in money or
property other than as stated in the Certificate of Designation.
10.2 Miscellaneous. This Certificate of Designation shall be governed
by and construed and enforced in accordance with the laws of the State of
Delaware without regard to the principles of conflicts of law thereof. Each of
the Company and any Holder hereby irrevocably submits to the nonexclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. The Holder of Series A Preferred Stock by acceptance of a share of
Series A Preferred Stock agrees to be bound by the provisions of this
Certificate of Designation which are expressly binding on such Holder.
10.3 Preferred Stock Owned by Company Deemed Not Outstanding. In
determining whether the holders of the requisite number of shares of Series A
Preferred Stock have concurred in any direction, consent or waiver under this
Certificate of Designation, shares of Series A Preferred Stock which are owned
by the Company or by any Person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Company shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination. Shares of Series A Preferred Stock so owned which have been
pledged in good
21
<PAGE>
faith may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Company the pledgee's right so to act with respect to such
shares of Series A Preferred Stock and that the pledgee is not the Company or
any other obligor upon the Series A Preferred Stock or any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any other obligor on the Series A Preferred Stock.
10.4 Notice to Holders Prior to Taking Certain Types of Action. In
case:
(a) the Company shall authorize the issuance, at any time from and
after the Original Issue Date, to all holders of any class or series of its
Capital Stock, of rights or warrants to subscribe for or purchase shares of its
capital stock or of any other right;
(b) the Company shall authorize, at any time from and after the
Original Issue Date, the distribution to all holders of any class or series of
its Capital Stock, of evidences of its indebtedness or assets;
(c) the Company shall declare a dividend (or other distribution) on
its Common Stock or the Company shall declare a special nonrecurring dividend on
or a redemption of its Common Stock;
(d) of any subdivision, combination or reclassification of any class
or series of Capital Stock of the Company at any time from and after the
Original Issue Date or of any consolidation or merger to which the Company is a
party and for which approval by the shareholders of the Company is required, or
of the sale or transfer of all or substantially all of the assets of the Company
or any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or property; or
(e) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the Holders, at their last
addresses as they shall appear upon the registration books of the Company, at
least 10 days prior to the applicable record date hereinafter specified, a
notice stating (i) the date as of which the holders of record of such class or
series of Capital Stock are to be entitled to receive any such rights, warrants
or distribution are to be determined, or (ii) the date on which any such
subdivision, combination, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or other action is expected to
become effective, and the date as of which it is expected that holders of record
of such class or series of Capital Stock record shall be entitled to exchange
their stock for securities or other property, if any, deliverable upon such
subdivision, combination, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or other action.
The failure to give the notice required by this Section 10.4 or any defect
therein shall not affect the legality or validity of any distribution, right,
warrant, subdivision, combination, reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation, winding up or other action, or the
vote upon any of the foregoing.
22
<PAGE>
10.5 Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10.6 References. References to Sections and Articles are to Sections
and Articles of this Certificate of Designation, unless otherwise expressly
provided.
10.7 Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
10.8 Lost or Stolen Certificates. Upon receipt by the Company of
evidence reasonably satisfactory to the Company (including any bond the
Company's transfer agent requires the Holders to post) of the loss, theft,
destruction or mutilation of any stock certificates representing Series A
Preferred Stock, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of such Series A
Preferred Stock certificate(s), the Company shall execute and deliver new
preferred stock certificate(s) of like tenor and date; provided, however, the
-------- -------
Company shall not be obligated to re-issue preferred stock certificates if the
Holder contemporaneously requests the Company to convert such Series A Preferred
Stock into Common Stock.
10.9 Remedies Characterized; Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Certificate of Designation
shall be cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation. The Company covenants to each Holder of Series A Preferred Stock
that there shall be no characterization concerning this instrument other than as
expressly provided herein. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or
the performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders of the Series A
Preferred Stock and that the remedy at law in the event of any such breach may
be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holders of the Series A Preferred Stock shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
10.10 Specific Shall Not Limit General; Construction. No specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision contained herein. This Certificate of Designation shall
be deemed to be jointly drafted by the
23
<PAGE>
Company and all Purchasers (as defined in this Purchase Agreement) and shall not
be construed against any person as the drafter hereof.
10.11 Failure or Indulgence Not Waiver. No failure or delay on the
part of a Holder of Series A Preferred Stock in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.
[SIGNATURE PAGE(S) TO FOLLOW]
24
<PAGE>
IN WITNESS WHEREOF SatCon Technology Corporation has caused this
Certificate of Designation to be signed by its President and Secretary on this
25th day of August, 1999.
By: /s/ Michael C. Turmelle
-------------------------------
Name: Michael C. Turmelle
-----------------------------
Chief Financial Officer
By: /s/ Michael C. Turmelle
-------------------------------
Name: Michael C. Turmelle
-----------------------------
Secretary
25
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder in order to convert shares of Series A
Convertible Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series A
Convertible Preferred Stock ("Series A Preferred Stock") indicated below, into
------------------------
shares of common stock, par value $.01 per share (the "Common Stock"), of SatCon
------------
Technology Corporation (the "Company") according to the conditions hereof, as of
-------
the date written below. If shares are to be issued in the name of a person other
than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
____________________________________________
Date to effect conversion
____________________________________________
Number of shares of Series A Preferred Stock to be
converted
____________________________________________
Number of shares of Common Stock to be issued
____________________________________________
Applicable Conversion Price
____________________________________________
Signature
____________________________________________
Name
____________________________________________
Address
26
<PAGE>
EXHIBIT 10.25
================================================================================
SECURITIES PURCHASE AGREEMENT
Among
SATCON TECHNOLOGY CORPORATION,
and
THE PURCHASERS LISTED ON SCHEDULE I
Dated as of August 25, 1999
================================================================================
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of
---------
August 25, 1999, among SatCon Technology Corporation, a Delaware corporation
(the "Company"), and the various purchasers identified and listed on Schedule I
-------
hereto (each referred to herein as a "Purchaser" and, collectively, the
---------
"Purchasers.")
- -----------
WHEREAS, the Company and the Purchasers are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 under Regulation D as promulgated by the United States
Securities and Exchange Commission (the "Commission") under Section 4(2) of the
----------
Securities Act of 1933, as amended (the "Securities Act");
--------------
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell 10,000 shares of the Company's
Series A Convertible Redeemable Preferred Stock, par value $0.01 per share,
liquidation value $1,000 per share (the "Preferred Stock" or "Securities"), in
the form of Exhibit A annexed hereto, and stock purchase warrants (the
---------
"Warrants") to purchase up to 675,000 shares of the Company's common stock, par
--------
value $.01 per share (the "Common Stock"), in the form of Exhibit B annexed
------------ ---------
hereto; and
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Purchasers desire to acquire from the Company, 8,000 shares of
the Preferred Stock at an aggregate purchase price of $8,000,000 and Warrants to
purchase up to 675,000 shares of the Company's Common Stock; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form of Exhibit C attached hereto (the
---------
"Registration Rights Agreement") pursuant to which the Company has agreed to
- ------------------------------
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws; and
NOW THEREFORE, in consideration of the promises and mutual covenants
and agreements hereinafter, the Company and the Purchasers hereby agree as
follows:
ARTICLE I.
PURCHASE AND SALE OF THE SECURITIES AND WARRANTS
1.1 Purchase and Sale. Subject to the terms and conditions set forth
--- -----------------
herein, the Company shall issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, shall purchase from the Company, on the Closing Date,
the shares of Preferred Stock as set forth on Schedule I and a Warrant or
----------
Warrants exercisable for the amount of Common Stock as set forth on Schedule I
----------
for such Purchaser. The aggregate purchase price of the shares of Preferred
Stock purchased by the Purchasers shall be $8,000,000 and the aggregate number
of Common Stock for which the Warrant or Warrants will be exercisable shall be
675,000 shares of Common
<PAGE>
Stock. The Preferred Stock shall have the respective rights, preferences and
privileges set forth in the Certificate of Designation of Series and a Statement
of Variations of Relative Rights, Preferences and Limitations (the "Certificate
-----------
of Designation"), the form of which is attached hereto as Exhibit A, which shall
- --------------
be approved by the Purchasers and the Company's Board of Directors and filed on
or prior to the Closing by the Company with the Secretary of State of Delaware.
1.2 Closings.
--- --------
a. The Closing. The closing of the purchase and sale of the
-- -----------
Securities and Warrants (the "Closing") shall take place at the offices of Akin,
-------
Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York
10022, or by transmission by facsimile and overnight courier, immediately
following the execution hereof or such later date or different location as the
parties shall agree, but not prior to the date that the conditions set forth in
Section 4.1 have been satisfied or waived by the appropriate party (the "Closing
-------
Date"). At the Closing:
- ----
(i) Each Purchaser shall deliver, as directed by the Company, its
portion of the purchase price as set forth next to its name on Schedule I in
----------
United States dollars in immediately available funds to an account or accounts
designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser a certificate
evidencing the number of shares of Preferred Stock purchased by such Purchaser
as set forth on Schedule I hereto;
----------
(iii) The Company shall deliver to each Purchaser a Warrant, in
the form of Exhibit B hereto, representing the right to acquire the number of
---------
shares of Common Stock purchased by such Purchaser as set forth on Schedule I
----------
hereto; and
(iv) The parties shall execute and deliver each of the documents
referred to in Section 4.1 hereof.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
--- ---------------------------------------------------------
Company hereby makes the following representations and warranties to each of the
Purchasers:
a. Organization and Qualification. The Company is a corporation
-- ------------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Except for Beacon Power Corporation or ("Beacon") and as set forth
on Schedule 2.1(a), the Company has no subsidiaries (collectively, the
----------------
"Subsidiaries"); it being agreed that for purpose of this Agreement Beacon is
- -------------
not a subsidiary of the Company. Each of the Subsidiaries (which, except as
provided in the prior sentence, for purposes of this Agreement means any entity
in which the Company, directly or indirectly, owns the majority of such entity's
capital stock or holds an equivalent equity or similar interest) is a
corporation duly incorporated, validly existing and in good standing under the
laws of the
2
<PAGE>
jurisdiction of its incorporation or organization (as applicable), with the full
corporate power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of any of this Agreement or the
Transaction Documents (as defined in Section 2.1(b)) or any of the material
transactions contemplated hereby or thereby, (y) have or result in a material
adverse effect on the results of operations, assets, or financial condition of
the Company and its Subsidiaries, taken as a whole or (z) impair the Company's
ability to perform in all material respects on a timely basis its material
obligations under any Transaction Document (any of (x), (y) or (z), being a
"Material Adverse Effect"). The Company has on file with the Securities Exchange
-----------------------
Commission true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
-----------
of Incorporation"), and the Company's Bylaws, as in effect on the date hereof
- ----------------
(the "Bylaws").
------
b. Authorization; Enforcement. The Company has the requisite
--------------------------
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Certificate of Designation, the Warrants
and the Registration Rights Agreement (collectively, the "Transaction
-----------
Documents"), and otherwise to carry out its obligations hereunder and
- ---------
thereunder. The execution and delivery of each of this Agreement and the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action. This Agreement has been duly executed by the Company
and the Warrants and Registration Rights Agreement at the Closing will be duly
executed by the Company. When delivered in accordance with the terms hereof the
Transaction Documents will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application and except that rights to
indemnification and contribution may be limited by Federal or state securities
laws or public policy relating thereto. Neither the Company nor any Subsidiary
is in any material violation of any of the provisions of its respective
certificate of incorporation, bylaws or other charter documents such that any
right of a holder of the Securities would be affected. Prior to the Closing Date
the Certificate of Designation has been filed with the Secretary of State of
Delaware and will be in full force and effect, enforceable against the Company
in accordance with the terms thereof, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application and except that rights to indemnification and contribution may be
limited by Federal or state securities laws or public policy relating thereto.
c. Capitalization. As of the date hereof, the authorized capital
--------------
stock of the Company is as set forth in Schedule 2.1(c). All of such
---------------
outstanding shares of capital stock, except as disclosed in the SEC Documents
(as defined in Section 2.1(k)) have been, or upon issuance will be, validly
authorized and issued, fully paid and nonassessable and were issued in
accordance with the registration or qualification provisions of the Securities
Act, or pursuant to valid exemptions therefrom. Except as disclosed in Schedule
--------
2.1(c) or in the SEC Documents,
- ------
3
<PAGE>
(i) no shares of the Company's capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company, nor is any holder of the Common Stock entitled to preemptive or
similar rights arising out of any agreement or understanding with the Company by
virtue of any Transaction Document, (ii) there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, or giving any Person (as defined below) any right to subscribe for or
acquire, any shares of capital stock of the Company or any of its Subsidiaries,
or contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its Subsidiaries or options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries, (iii) there are no outstanding
debt securities of the Company or any of its Subsidiaries, (iv) there are no
agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the Securities
Act (except the Registration Rights Agreement), (v) there are no outstanding
securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, (vi) there are no securities or instruments containing anti-
dilution or similar provisions that will be triggered by the issuance of the
shares of Preferred Stock, Warrants or shares of Common Stock as described in
this Agreement or upon the conversion of the Preferred Stock or upon the
exercise of the Warrants, (vii) the Company does not have any stock appreciation
rights or "phantom stock" plans or agreements or any similar plan or agreement
and (viii) except for the put rights granted to the holders of the Class D
Preferred Stock of Beacon and except as specifically disclosed in the SEC
Documents (as defined in Section 2.1(k) hereof), to the knowledge of the Company
no Person (as defined below) or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) or has the right to acquire by
------------
agreement with or by obligation binding upon the Company beneficial ownership of
in excess of 5% of the Common Stock. "Person" means an individual or
------
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
d. Authorization and Validity; Issuance of Shares. Subject to
----------------------------------------------
amendments that may be required in the future due to the reset or adjustment to
the number of shares issuable or exercise price on the shares of Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants
(collectively, the "Underlying Shares"), the Underlying Shares are and will at
-----------------
all times hereafter continue to be duly authorized and reserved for issuance and
the shares of Common Stock issued upon conversion of the Securities (the
"Conversion Shares") and exercise of the Warrants (the "Warrant Shares") will be
----------------- --------------
validly issued, fully paid and non-assessable, free and clear of all liens,
encumbrances and Company rights of first refusal, other than liens and
encumbrances created by the Purchasers (collectively, "Liens") and will not be
-----
subject to any preemptive or similar rights. Assuming the accuracy of the
Purchaser's representation in Section 2.2, the issuance by the Company of the
Preferred Stock, the Warrants and the Underlying Shares is exempt from
registration under the Securities Act.
e. No Conflicts. The execution, delivery and performance of this
------------
Agreement and each of the Transaction Documents by the Company and the
consummation by the Company
4
<PAGE>
of the transactions contemplated hereby and thereby (including the issuance of
the Underlying Shares) do not and will not (i) conflict with or violate any
provision of the Certificate of Incorporation, Bylaws or other organizational
documents of the Company or any of the Subsidiaries, (ii) subject to obtaining
the consents referred to in Section 2.1(f), conflict with, or constitute a
breach or a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument (evidencing a Company or Subsidiary debt or
otherwise) to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or any Subsidiary is subject (including Federal and state
securities laws and regulations and the rules and regulations of the principal
market or exchange on which the Common Stock is traded or listed) applicable to
the Company or any of its Subsidiaries (except for any shareholder approval that
may be required pursuant to the rules of the NASDAQ), or by which any material
property or asset of the Company or any Subsidiary is bound or affected except,
in each such case, for any violation, conflict, default or breach which is not
reasonably expected to have a Material Adverse Effect.
f. Consents and Approvals. Except as specifically set forth on
----------------------
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
- ---------------
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal or state governmental
authority, regulatory or self regulatory agency, or other Person in connection
with the execution, delivery and performance by the Company of this Agreement or
the Transaction Documents, other than (i) the filing of a registration statement
with the Commission, which shall be filed in accordance with and in the time
periods set forth in the Registration Rights Agreement, (ii) the application(s)
or any letter(s) acceptable to the National Market System of Nasdaq Stock Market
("Nasdaq") for the listing of the Underlying Shares with Nasdaq (and with any
------
other national securities exchange or market on which the Common Stock is then
listed), (iii) any filings, notices or registrations under applicable state
securities laws, (iv) the filing of a form D with the Commission, (v) the
approval of the Company's Board of Directors and (vi) the filings of the
Certificates of Designation with the Secretary of State of Delaware, which
filing and approval shall be effected on or prior to the Closing Date (together
with the consents, waivers, authorizations, orders, notices and filings referred
to on Schedule 2.1(f), the "Required Approvals").
--------------- ------------------
g. Litigation; Proceedings. Except as specifically set forth on
-----------------------
Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or
- ---------------
investigation pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties or assets before or by any
court, governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) which (i) adversely affects or challenges the
legality, validity or enforceability of any of this Agreement or the Transaction
Documents or (ii) could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
h. No Default or Violation. Except as specifically set forth on
-----------------------
Schedule 2.1(h), neither the Company nor any Subsidiary (i) is in default under
or in violation of any indenture, loan or other credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties or assets is bound and which is required to be included as an exhibit
to any SEC Document (as defined in Section 2.1(k) hereof) or will be
5
<PAGE>
required to be included as an exhibit to the Company's next filing under either
the Securities Act or Exchange Act, (ii) is in violation of any order of any
court, arbitrator or governmental body applicable to it, (iii) is in violation
of any statute, rule or regulation of any governmental authority to which it is
subject, (iv) is in default under or in violation of its Certificate of
Incorporation, Bylaws or other organizational documents, respectively, or (v) is
in default under or in violation of any of the listing requirements of Nasdaq as
in effect on the date hereof and is not aware of any facts which would
reasonably lead to delisting or suspension of the Common Stock by Nasdaq in the
foreseeable future except, in each such case, for any violation or default which
is not reasonably expected to have a Materially Adverse Effect. The business of
the Company and its Subsidiaries is not being conducted, and has not been
conducted, in violation of any law, ordinance, rule or regulation of any
governmental entity, except where such violations have not resulted or would not
reasonably result, individually or in the aggregate, in a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is in breach of any
agreement where such breach, individually or in the aggregate, would have a
Material Adverse Effect
i. Disclosure; Absence of Certain Changes. None of this Agreement,
--------------------------------------
the Schedules to this Agreement, the Transaction Documents, the SEC Documents
(as amended to date) contained as of their respective dates, any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements made herein and therein, in light of the
circumstances under which they were made, not misleading. Except as disclosed on
Schedule 2.1(i) or in SEC Documents filed on EDGAR through the date hereof,
- ---------------
since the filing of the Company's quarterly report on Form 10-Q on August 16,
1999, there has been no material adverse change and no material adverse
development in the business, properties, operations, financial condition,
liabilities or results of operations of the Company or the Subsidiaries. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
any of its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings.
j. Private Offering. The Company and all Persons acting on its
----------------
behalf have not made within the six months preceding the Closing Date, directly
or indirectly, and will not make, offers or sales of any securities or solicited
any offers to buy any security at any time within six months after the Closing
Date under circumstances that would require registration of the Securities, the
Warrants or the Underlying Shares or the issuance of such securities under the
Securities Act.
k. SEC Documents; Financial Statements. The Common Stock of the
-----------------------------------
Company is registered pursuant to Section 12(g) of the Exchange Act. The
Company has filed during its current fiscal year all reports, schedules, forms,
statements and other documents required to be filed by it with the Commission
pursuant to the reporting requirements of the Exchange Act, including pursuant
to Section 13, 14 or 15(d) thereof (the foregoing materials and financial
statements and schedules thereto being collectively referred to herein as the
"SEC Documents"), on a timely basis or has received a valid extension of such
-------------
time of filing and has filed any such SEC Documents prior to the expiration of
any such extension. The Company has delivered to each of the Purchasers or its
representatives true, complete and accurate copies of the SEC Documents that
were not filed pursuant to EDGAR. As of their respective dates and giving effect
to all amendments thereto filed with the Commission, the financial statements of
the Company included in the SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission
6
<PAGE>
with respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved, except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, year-end audit adjustments. The Company
acknowledges that the Purchasers will be trading in the securities of the
Company in reliance on the foregoing representation and warranty.
l. Investment Company. The Company is not, and is not controlled
------------------
by or under common control with an affiliate (an "Affiliate") of an "investment
---------
company" within the meaning of the Investment Company Act of 1940, as amended.
m. Broker's Fees. No fees or commissions or similar payments with
-------------
respect to the transactions contemplated by this Agreement or the Transaction
Documents have been paid or will be payable by the Company to any broker,
financial advisor, finder, investment banker, or bank, other than as set forth
in Schedule 2.1(m). The Purchasers shall have no obligation with respect to any
---------------
fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section 2.1(m) that may be due in connection
with the transactions contemplated by this Agreement and the Transaction
Documents.
n. Form S-3 Eligibility. The Company is, and at the Closing Date
--------------------
will be, eligible to register securities (including the Underlying Shares) for
resale with the Commission under Form S-3 (or any successor form) promulgated
under the Securities Act.
o. Listing and Maintenance Requirements Compliance. The principal
-----------------------------------------------
market on which the Common Stock is currently traded is Nasdaq. Except as
disclosed on Schedule 2.1(o), the Company has not in the three years preceding
---------------
the date hereof received notice (written or oral) from Nasdaq (or any stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted)) to the effect that the Company is not
in compliance with the listing or maintenance requirements of such market or
exchange. The Company is not aware of any facts which would reasonably lead to
delisting or suspension of the Common Stock by Nasdaq. After giving effect to
the transactions contemplated by this Agreement and the Transaction Documents,
the Company is and will be in compliance with all such maintenance requirements
except for any approval required under the NASD rules.
p. Intellectual Property Rights. To the best of the knowledge of
----------------------------
the Company, the Company owns or possesses, or can obtain by payment of
royalties in amounts which, in the aggregate, will not have a Material Adverse
Effect, all of the patents, trademarks, service marks, trade names, copyrights,
proprietary rights, trade secrets, and licenses or rights to the foregoing,
necessary for the conduct of the business of the Company as currently conducted.
To the best of the Company's knowledge, the business of the Company does not
cause the Company to infringe or violate any of the patents, trademarks, service
marks, trade names, copyrights, licenses or proprietary rights of any person or
entity.
q. Registration Rights; Rights of Participation. Except as
--------------------------------------------
described on Schedule 2.1(q) hereto, (i) the Company has not granted or agreed
---------------
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied
7
<PAGE>
and (ii) no Person, including, but not limited to, current or former
stockholders of the Company, underwriters, brokers or agents, has any right of
first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement or any
Transaction Document.
r. Tax Status; Firpta. Except as set forth on Schedule 2.1(r), the
------------------ ---------------
Company and each of the Subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith (which are set forth on
Schedule 2.1(r) hereof), and has set aside on it books provisions reasonably
- ---------------
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company is not a "United States real property holding corporation"
within the meaning of Section 847(c)(2) of the Internal Revenue Code of 1986, as
amended.
s. Transactions With Affiliates. Except as set forth on Schedule
---------------------------- --------
2.1(c) or Schedule 2.1(s), none of the officers, directors, or employees of the
- ------ ---------------
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
t. Application to Takeover Protection. The Company and its Board
----------------------------------
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Certificate of Incorporation, Bylaws
or the laws of the state of incorporation which is or could become applicable to
the Purchasers or the Transaction Documents as a result of the transactions
contemplated by this Agreement or the Transaction Documents. None of the
transactions contemplated by this Agreement or the Transaction Documents,
including the conversion of the Securities and the exercise of the Warrants,
will trigger any poison pill provisions of any of the Company's stockholders'
rights or similar agreements.
u. Solicitation Materials. The Company has not (i) distributed any
----------------------
offering materials in connection with the offering and sale of the Securities or
the Warrants, other than the SEC Documents, the Schedules to this Agreement, any
amendments and supplements thereto, material or information requested by the
Purchasers or their representatives in connection with the transaction
contemplated by this Agreement, and the materials listed on Schedule 2.1(u), or
---------------
(ii) solicited any offer to buy or sell the Securities or the Warrants by means
of any form of general solicitation or advertising. Neither the Company, nor any
of its Affiliates, nor any Person acting on its or their behalf, has engaged or
will engage in any form of general
8
<PAGE>
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of the Securities or
Warrants.
v. Acknowledgement of Dilution. The Company understands and
---------------------------
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the
Securities or exercise of the Warrants. The Company further acknowledges that
its obligation to issue Conversion Shares and Warrant Shares upon conversion of
the Securities or exercise of the Warrants in accordance with this Agreement,
the Certificate of Designation and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
w. Acknowledgement Regarding Purchasers' Purchase of Securities.
------------------------------------------------------------
The Company acknowledges and agrees that the Purchasers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Purchasers' purchase of the securities. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
x. Seniority; Exclusivity. Except for a class of equity securities
----------------------
of the Company issued with an exercise price, conversion price or strike price
in excess of the Conversion Price (as defined in the Certificate of
Designation), no class of equity securities of the Company will be senior to the
Securities in right of payment, whether upon liquidation, dissolution or
otherwise. So long as any Securities issued hereunder remains outstanding, the
Company shall not exchange, redeem or convert any of the Company's capital stock
for indebtedness, including convertible debt, of the Company. The Company shall
not issue and sell any Securities, other than to the Purchasers pursuant to this
Agreement, without the prior written consent of each of the Purchasers; provided
however, that within thirty (30) days of the Closing Date the Company may sell
up to 2,000 shares of Preferred Stock to purchasers for an aggregate purchase
price of $2,000,000 and subject to terms approved by the Purchasers, which
approval shall not be unreasonably withheld.
y. Other Agreements. The Company has not, directly or indirectly,
----------------
made any agreements with any Purchasers relating to the terms and conditions of
the transactions contemplated by the Transaction Documents except as set forth
in the Transaction Documents.
Any information furnished in the schedules to Section 2.1 (a "Disclosure
Schedule") shall be deemed to modify all of the Company's representations and
warranties. The inclusion of any information in the Disclosure Schedule shall
not be deemed to be an admission or acknowledgment, in and of itself, that such
information is required by the terms hereof to be disclosed, is material to the
company, has or would have a Material Adverse Effect. For purposes of this
Agreement, the terms "to the Company's knowledge," "known by the Company" or
other words of similar meaning shall mean the actual knowledge of David
9
<PAGE>
Eisenhaure or Michael Turmelle without any obligation of investigation, and
shall not refer to the knowledge of any other person or entity.
2.2 Representations and Warranties of the Purchasers. Each of the
------------------------------------------------
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
a. Organization; Authority. Such Purchaser is a corporation or a
-----------------------
limited duration company or a limited liability company or limited partnership
duly formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with the requisite power and
authority, corporate or otherwise, to enter into and to consummate the
transactions contemplated hereby and by the Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The purchase by such
Purchaser of the Securities and the Warrants hereunder has been duly authorized
by all necessary action on the part of such Purchaser. Each of this Agreement
and the Registration Rights Agreement has been duly executed and delivered by
such Purchaser and constitutes the valid and legally binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
b. Investment Intent. Such Purchaser is acquiring the Securities
-----------------
and the Warrants for its own account and not with a present view to or for
distributing or reselling the Securities, the Warrants, the Conversion Shares or
the Warrant Shares or any part thereof or interest therein in violation of the
Securities Act; provided, however, that by making the representations herein,
-----------------
such Purchaser does not agree to hold any of the Securities, the Warrants, the
Conversion Shares or the Warrant Shares for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the
Securities Act.
c. Purchaser Status. At the time such Purchaser was offered the
----------------
Securities and the Warrants, and at the Closing Date, (i) it was and will be an
"accredited investor" as defined in Rule 501 under the Securities Act and (ii)
such Purchaser, either alone or together with its representatives, had and will
have such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities and the Warrants.
d. Reliance. Such Purchaser understands and acknowledges that
--------
(i) the Securities and the Warrants are being offered and sold to such Purchaser
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the representations set forth in this
Section 2.2 and such Purchaser hereby consents to such reliance.
e. Information. Such Purchaser and its advisors, if any, have
-----------
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities and Warrants which have been requested by such Purchaser or its
advisors. Such Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence
10
<PAGE>
investigation conducted by Purchaser or any of its advisors or representatives
shall modify, amend or affect Purchaser's right to rely on the Company's
representations and warranties contained in Section 2.1 above. Such Purchaser
understands that its investment in the Securities and Warrants involves a
significant degree of risk.
f. Governmental Review. Such Purchaser understands that no
-------------------
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities or Warrants.
g. Residency. Such Purchaser is a resident of the jurisdiction
---------
set forth immediately below such Purchaser's name on Schedule II hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
---------------------
a. If any Purchaser should decide to dispose of the Securities,
the Warrants, the Conversion Shares or the Warrant Shares held by it, such
Purchaser understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from the registration requirements of the Securities Act,
including Rule 144 promulgated under the Securities Act ("Rule 144"). In
--------
connection with any transfer of any Securities, Warrants, Conversion Shares or
Warrant Shares other than pursuant to an effective registration statement, Rule
144 or to the Company, the Company may require the transferor thereof to provide
to the Company a written opinion of counsel experienced in the area of United
States securities laws selected by the transferor, the form and substance of
which opinion shall be customary for opinions of counsel in comparable
transactions, to the effect that such transfer does not require registration of
such transferred securities under the Securities Act; provided, however, that if
-------- -------
the Securities, Warrants, Conversion Shares or Warrant Shares may be sold
pursuant to Rule 144(k), no written opinion of counsel shall be required from
the Purchaser if such Purchaser provides reasonable assurances that such
security can be sold pursuant to Rule 144(k). Notwithstanding the foregoing, the
Company hereby consents to and agrees to register any transfer by any Purchaser
to an Affiliate of such Purchaser, provided that the transferee certifies to the
Company that it is an "accredited investor" as defined in Rule 501(a) under the
Securities Act. Any such transferee shall agree in writing to be bound by the
terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Transaction Documents. If a Purchaser provides the Company
with an opinion of counsel, the form and substance of which opinion shall be
customary for opinions of counsel in comparable transactions, to the effect that
a public sale, assignment or transfer of the Securities, the Conversion Shares,
the Warrants and the Warrant Shares may be made without registration under the
Securities Act or the Purchaser provides the Company with reasonable assurances
that the Warrants, the Conversion Shares and the Warrant Shares can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold, the Company
shall permit the transfer, and, in the case of the
11
<PAGE>
Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by such Purchaser and without any restrictive legend. Notwithstanding
the foregoing or anything else contained herein to the contrary, the securities
may be pledged as collateral in connection with a bona fide margin account or
---- ----
other lending arrangement
b. Each Purchaser agrees to the imprinting by the Company, so
long as is required by this Section 3.1(b), of the following legend on the
Securities, the Warrants, the Conversion Shares and the Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
Neither the Securities, the Warrants, the Conversion Shares, nor
the Warrant Shares shall be required to contain the legend set forth above (or
any other legend) (i) at any time after transfer pursuant to a registration
statement is effective under the Securities Act covering such security, (ii) if
in the written opinion of counsel to the Company or the Purchasers experienced
in the area of United States securities laws such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) or
(iii) if such Securities, Warrants, Conversion Shares or Warrant Shares are sold
pursuant to Rule 144. When requested, which request will be accompanied by the
certificate representing such shares, the Company agrees that it will provide
each Purchaser with a certificate or certificates representing Securities,
Warrants, Conversion Shares or Warrant Shares, free from such legend at such
time as such legend is no longer required hereunder. If such certificate or
certificates had previously been issued with such a legend or any other legend,
the Company shall, upon request, receive such certificate or certificates free
of any legend.
c. Notwithstanding the foregoing, the Purchaser's disposition of
the Conversion Shares and the Warrant Shares shall be subject to Suspension
Periods (as defined in the Registration Rights Agreement) set forth in Section
3(r) of the Registration Rights Agreement.
3.2 Stop Transfer Instruction. The Company may not make any notation
-------------------------
on its records or give instructions to any transfer agent of the Company which
enlarge the restrictions on transfer set forth in Section 3.1, except as
contemplated by the Certificate of Designation.
3.3 Furnishing of Information. Until the Securities, the Warrants, the
-------------------------
Conversion Shares or the Warrant Shares have been sold pursuant to a
registration statement under the Securities Act or are eligible for sale
pursuant to Rule 144(k), the Company will cause the Common Stock to continue at
all times to be registered under Section 12(g) of the Exchange Act, will timely
file (or obtain extensions in respect thereof and file within the applicable
grace
12
<PAGE>
period) all reports required to be filed by the Company after the date hereof
pursuant to Section 13, 14 or 15(d) of the Exchange Act and, unless filed by
EDGAR, promptly furnish, but in no event later than two (2) business days after
the filing thereof with the Commission, the Purchasers with true and complete
copies of all such filings, and will not take any action or file any document
(whether or not permitted by the Exchange Act or the rules thereunder) to
terminate or suspend such reporting and filing obligations. Until the
Securities, the Warrants, the Conversion Shares or the Warrant Shares have been
sold pursuant to a registration statement under the Securities Act or are
eligible for sale pursuant to Rule 144(k), if the Company is not required to
file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby, in
the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any holder of the Securities, the Warrants, the Conversion
Shares or the Warrant Shares may reasonably request, all to the extent required
from time to time to enable such Person to sell the Securities, the Warrants,
the Conversion Shares, or the Warrant Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in Section 3.1(b).
3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement,
-------------
the Company shall (i) qualify the Conversion Shares and the Warrant Shares under
the securities or "blue sky" laws of such jurisdictions as the Purchasers may
request (or to obtain an exemption from such qualification), (ii) shall provide
evidence of any such action so taken to each Purchaser on or prior to the
Closing Date and (iii) shall continue such qualification at all times through
the resale of all Conversion Shares or Warrant Shares, but in any event not past
the 2/nd/ anniversary of the Closing Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
-----------
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities, the Warrants, the Conversion Shares or the Warrant Shares in
a manner that would require the registration under the Securities Act of the
sale of the Securities, the Warrants, the Conversion Shares or the Warrant
Shares to any Purchaser or cause the offering of such securities to be
integrated with any other offering of securities by the Company for the purpose
of any stockholder approval provision applicable to the Company or its
securities.
3.6 Listing and Reservation of Conversion Shares and Warrant Shares.
---------------------------------------------------------------
a. The Company shall (i) not later than three (3) business days
after the Closing Date prepare and file with Nasdaq (as well as any other
national securities exchange or market on which the Common Stock is then listed)
an additional shares listing application or a letter acceptable to Nasdaq
covering and listing a number of shares of Common Stock which is at least equal
to 1.2 times the maximum number of Underlying Shares then issuable, (ii) take
all steps necessary to cause the Underlying Shares to be approved for listing on
Nasdaq (as well as on any other national securities exchange or market on which
the Common Stock is then listed) as soon as possible thereafter, (iii) maintain,
so long as any other shares of Common Stock shall
13
<PAGE>
be so listed, such listing of all such Underlying Shares, and (iv) provide to
the Purchasers evidence of such listing. Neither the Company nor any of its
Subsidiaries shall take any action which may result in the delisting or
suspension of the Common Stock on Nasdaq. Prior to the effectiveness of the
Initial Registration Statement (as defined in the Registration Rights
Agreement), the Company shall promptly provide to each Purchaser copies of any
notices it receives from Nasdaq regarding the continued eligibility of the
Common Stock for listing on such automated quotation system, so long as such
notice does not include material, nonpublic information. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 3.6(a).
b. The Company at all times shall reserve a sufficient number of shares
of its authorized but unissued Common Stock to provide for 1.2 times the full
conversion of the outstanding Securities and exercise of the outstanding
Warrants. Shares of Common Stock reserved for issuance upon conversion of the
Securities and the exercise of the Warrants shall be allocated pro rata to each
of the Purchasers in accordance with the amount of Securities and Warrants
issued and delivered to such Purchaser at the Closing. If at any time the number
of shares of Common Stock authorized and reserved for issuance is insufficient
to cover 120% of the number of Conversion Shares and Warrant Shares issued and
issuable upon conversion of the Securities and exercise of the Warrants (based
on the Conversion Price (as defined in the Certificate of Designation) of the
Securities in effect from time to time and the Exercise Price (as defined in the
Warrants) of the Warrants in effect from time to time) without regard to any
limitation on conversions or exercises, the Company will promptly take all
corporate action necessary to authorize and reserve 120% of such shares pursuant
to Section 3(b) of the Registration Rights Agreement, including, without
limitation, calling a special meeting of stockholders to authorize additional
shares to meet the Company's obligations under this Section 3.6(b), in the case
of an insufficient number of authorized shares, and using its best efforts to
obtain stockholder approval of an increase in such authorized number of shares.
In addition, upon the occurrence of an adjustment or reset of the Conversion
Price (as defined in the Certificate of Designation) or Exercise Price (as
defined in the Warrant), the Company shall be required to file, within ten (10)
business days of such event, a registration statement covering the product of
1.05 and the number Underlying Shares, less the number of Underlying Shares for
which a registration statement is then effective. The Company shall use its best
efforts to cause such registration statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event on or prior to that date which is one hundred and twenty (120) days after
the filing date thereof. All calculations of the above amount shall be made
without regard to any limitation on conversions of Securities or exercises of
Warrants.
3.7 Notice of Breaches.
------------------
a. The Company and each Purchaser shall give prompt written notice
to the other of any breach by it of any representation, warranty or other
agreement contained in this Agreement or in the Transaction Documents. However,
no disclosure by either party pursuant to this Section 3.7 shall be deemed to
cure any breach of any representation, warranty or other agreement contained
herein or in the Transaction Documents.
b. Notwithstanding the generality of Section 3.7(a), the Company
shall promptly notify, provided such notification will not constitute material
non-public information, each Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company or any Subsidiary to the effect
that the consummation of the transactions contemplated
14
<PAGE>
hereby and by the Registration Rights Agreement violates or would violate any
written agreement or understanding between such lender and the Company or any
Subsidiary, and the Company shall promptly furnish by facsimile to the
Purchasers a copy of any written statement in support of or relating to such
claim or notice.
c. The default by any Purchaser of any of its obligations,
representations or warranties under this Agreement or the Transaction Documents
shall not be imputed to, and shall have no effect upon, any other Purchaser or
affect the Company's obligations under this Agreement or any Transaction
Document to any non-defaulting Purchaser.
3.8 Form D. The Company agrees to file a Form D with respect to the
------
Securities and Warrants as required by Rule 506 under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing.
3.9 Future Financings. At any time prior to the third anniversary of the
-----------------
Closing Date, as long as shares of the Preferred Stock are outstanding, except
for (i) Exempted Securities as defined in the Certificate of Designation; or
(ii) shares issued in a transaction registered under the Securities Act, if the
Company agrees to issue shares of Common Stock or other securities convertible
into or exchangeable or exercisable for Common Stock (the "New Security") while
------------
any shares of Preferred Stock are outstanding at an effective price per share
which is less (including, without limitation, any security which is convertible
into or exchangeable or exercisable for Common Stock at a price which may change
with the market price of the Common Stock) than the Conversion Price (as defined
in the Certificate of Designation) of the shares of Preferred Stock as of the
date thereof (a "Future Financing"), the Company shall provide to the Purchasers
----------------
by 5:00 p.m. (New York time) on or before the third (3/rd/) Trading Day (as
defined below) after the decision to issue the New Security has been made,
written notice of the Future Financing containing in reasonable detail (i) the
proposed terms of the Future Financing, (ii) the amount of the proceeds that
will be raised and (iii) the Person with whom such Future Financing shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto (the "Future Financing Notice"). Upon receiving the Future
-----------------------
Financing Notice, each Purchaser shall have the pro rata right (based on the
purchase price of the shares of Preferred Stock held by such Purchaser relative
to the aggregate purchase price of shares of Preferred Stock outstanding) to
purchase, on the same terms as the Future Financing, an amount of New Securities
(in addition to the New Securities being issued in the Future Financing) having
a purchase price which shall not exceed the aggregate purchase price of the New
Securities being issued in the Future Financing. In the event a Purchaser
desires to exercise the right granted under this Section 3.9, such Purchaser
must notify the Company on or prior to the fifth (5/th/)Trading Day after such
Purchaser has received the Future Financing Notice. In the event the terms and
conditions of a proposed Future Financing are amended in any material respect
after delivery of the Future Financing Notice but prior to the closing of the
proposed Future Financing to which such Future Financing Notice relates, the
Company shall deliver a new notice to each Purchaser describing the amended
terms and conditions of the proposed Future Financing and each Purchaser
thereafter shall have an option during the two (2) Trading Days period following
delivery of such new notice to purchase its pro rata share (based on the
Purchaser's percentage of the aggregate purchase price of the outstanding shares
of Preferred Stock such Purchaser owns) of the New Securities being offered on
the same terms as contemplated by such proposed Future Financing, as amended, or
to withdraw its election to exercise such right. The foregoing sentence shall
apply to successive amendments to the terms and conditions of any proposed
Future Financing. At the closing for such Future Financing, the
15
<PAGE>
transactions contemplated by this Section 3.9 shall close, subject to the
completion of mutually satisfactory documentation, and the Company shall tender
to each Purchaser certificates representing the New Securities that it agreed to
purchase and the Purchasers shall make payment for the entire purchase price in
immediately available funds at the closing of such sale; provided, however, that
-------- -------
each Purchaser, in lieu of providing cash as consideration for the purchase
price, may retire all or a portion of the outstanding number of and any
dividends owing on the shares of Preferred Stock as payment of the purchase
price for the shares of Common Stock that it desires to purchase pursuant to
this Section 3.9. "Trading Day" shall mean a day on which the Nasdaq (or in the
-----------
event the Common Stock is not traded on Nasdaq, such other securities market on
which the Common Stock is listed) is open for trading.
3.10 Use of Proceeds. The Company shall use the proceeds from the sale of
---------------
the Securities and the exercise of the Warrants for the repayment of short-term
indebtedness, working capital, acquisitions or other corporate purpose including
the financing of Beacon.
3.11 Transactions with Affiliates. So long as any Securities or Warrants
----------------------------
are outstanding, the Company shall not, and shall cause each of its Subsidiaries
not to, enter into, amend, modify or supplement, or permit any Subsidiary to
enter into, amend, modify or supplement, any agreement, transaction, commitment
or arrangement with any of its or any Subsidiary's officers, directors or
persons who were officers or directors at any time during the previous two
years, stockholders who beneficially own 5% or more of the Common Stock, or
Affiliates or any individual related by blood, marriage or adoption to any such
individual or with any entity in which any such entity or individual owns a 5%
or more beneficial interest (each a "Related Party"), except for (a) customary
-------------
employment arrangements and benefit programs on reasonable terms, (b) any
agreement, transaction, commitment or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
Person other than such Related Party, or (c) any agreement, transaction,
commitment or arrangement which is approved by a majority of the disinterested
directors of the Company. For purposes hereof, any director who is also an
officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes of this section only means,
---------
with respect to any person or entity, another person or entity that, directly or
indirectly, (i) has a 5% or more equity interest in that person or entity, (ii)
has 5% or more common ownership with that person or entity, (iii) controls that
person or entity, or (iv) shares common control with that person or entity.
"Control" or "Controls" for purposes of this section means that a person or
- -------- --------
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity.
3.12 Transfer Agent Instructions. At the Closing the Company shall issue
---------------------------
irrevocable instructions to its transfer agent (and shall issue to any
subsequent transfer agent as required), to issue certificates, registered in the
name of each such Purchaser or its respective nominee(s), for the Conversion
Shares and/or the Warrant Shares in such amounts as specified from time to time
by each Purchaser to the Company in a form acceptable to such Purchasers (the
"Irrevocable Transfer Agent Instructions"). So long as required pursuant to
---------------------------------------
Section 3.1(b), all such certificates shall bear the restrictive legend
specified in Section 3.1(b) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.12, and stop transfer instructions to give effect to Section
3.1 hereof (in the case of the Conversion Shares and the Warrant Shares, prior
to registration of the Conversion Shares under the Securities Act) will be given
by the Company to its transfer agent and that the Securities, the Warrants, the
Conversion Shares and the Warrant Shares shall
16
<PAGE>
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Transaction Documents. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Purchasers by violating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 3.12 will be
inadequate and agrees, in the event of a beach or threatened breach by the
Company of the provisions of this Section 3.12, that the Purchasers, shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
3.13 Press Release; Filing of Form 8-K. Subject to the provisions of
---------------------------------
Section 6.10 hereof, prior to the opening of Nasdaq on August 28, 1999, the
Company shall file a press release in form and substance acceptable to the
Purchasers. On or before the 3/rd/ business day following the Closing Date, the
Company shall file a Form 8-K with the Commission describing the terms of the
transaction contemplated by this Agreement and the Transaction Documents in the
form required by the Exchange Act.
3.14 Ordinary Course Brokerage and Trading. Each Purchaser represents and
-------------------------------------
agrees that neither Purchaser, nor any affiliate of any Purchaser nor any person
that is required by internal policy to pre-clear securities transactions with
any Purchaser or its affiliates will, enter into any short sales of the
Company's Common Stock, except in connection with an intended sale of Common
Stock, and in such event, only to the extent covered within seven (7) Trading
Days of such short sale. In addition, each Purchaser represents and agrees on
behalf of itself and each of the persons identified in the preceding sentence
that it will not establish a short position or sell any of the Conversion Shares
or Warrant Shares during (i) the twenty (20) Trading Day period prior to the one
(1) year anniversary of the Closing Date or (ii) the seventy five (75) Trading
Day period ending on August 26, 2003 and August 26, 2006.
ARTICLE IV.
CONDITIONS
4.1 Closing Conditions.
------------------
a. Conditions Precedent to the Obligation of the Company to Sell.
-------------------------------------------------------------
The obligation of the Company to sell the Securities and the Warrants hereunder
is subject to the satisfaction or waiver (with prior written notice to each
Purchaser) by the Company, at or before the Closing, of each of the following
conditions:
(i) Accuracy of the Purchasers' Representations and Warranties.
----------------------------------------------------------
The representations and warranties of each Purchaser in this Agreement shall be
true and correct in all material respects as of the date when made (except for
representations and warranties that speak as of a specific date) and as of the
Closing Date;
(ii) Performance by the Purchasers. Each Purchaser shall have
-----------------------------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing; and
17
<PAGE>
(iii) No Injunction. No statute, rule, regulation, executive
-------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents.
b. Conditions Precedent to the Obligation of the Purchasers to
-----------------------------------------------------------
Purchase. The obligation of each Purchaser hereunder to acquire and pay for the
- --------
Securities and Warrants is subject to the satisfaction or waiver (with prior
written notice to the Company and each other Purchaser) by such Purchaser, at or
before the Closing, of each of the following conditions:
(i) Accuracy of the Company's Representations and Warranties.
--------------------------------------------------------
The representations and warranties of the Company set forth in this Agreement
shall be true and correct in all respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date);
(ii) Performance by the Company. The Company shall have
--------------------------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing ;
(iii) No Injunction. No statute, rule, regulation, executive
-------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement and the Transaction Documents;
(iv) No Suspensions of Trading in Common Stock. The trading in
-----------------------------------------
the Common Stock shall not have been suspended by the Commission or on Nasdaq
(except for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company);
(v) Listing of Common Stock. The Common Stock shall have been
-----------------------
at all times since the date hereof, and on the Closing Date shall be, listed for
trading on Nasdaq;
(vi) Required Approvals. All Required Approvals shall have
------------------
been obtained and copies thereof delivered to such Purchaser;
(vii) Shares of Common Stock. The Company shall have duly
----------------------
reserved the number of Underlying Shares required by this Agreement and the
Transaction Documents to be reserved for issuance upon conversion of the
Securities and the exercise of the Warrants;
(viii) Change of Control. No Change of Control shall have
-----------------
occurred between the date hereof and the Closing Date. "Change of Control" means
-----------------
the occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Purchasers or any of their
Affiliates, of in excess of 40% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's Board of
Directors which is not approved by those individuals who are members of the
Board of Directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of
18
<PAGE>
related transactions, or (v) the execution by the Company of an agreement to
which the Company is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii) , (iii), (iv) or (v);
(ix) Transfer Agent Instructions. The Irrevocable Transfer
---------------------------
Agent Instructions, in a form acceptable to the Purchasers, shall have been
delivered to and acknowledged in writing by the Company's transfer agent with a
copy forwarded to each Purchaser;
(x) Resolutions. The Board of Directors of the Company shall
-----------
have adopted resolutions consistent with Section 2.1(b) and in a form reasonably
acceptable to each Purchaser (the "Resolutions");
-----------
(xi) Litigation. No litigation shall have been instituted or
----------
threatened against the Company which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect; and
(xii) Adverse Changes. Since the date of the financial
---------------
statements included in the Company's Quarterly Report on Form 10-Q or Annual
Report on Form 10-K, whichever is more recent, last filed prior to the date of
this Agreement, no event which had a Material Adverse Effect shall have occurred
which is not disclosed in the Schedules hereto (for purposes hereof, changes in
the market price of the Common Stock may be considered in determining whether
there has occurred an event which has had a Material Adverse Effect).
c. Documents and Certificates. At the Closing, the Company shall
--------------------------
have delivered to the Purchasers the following in form and substance reasonably
satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal counsel in the
-------
form attached hereto as Exhibit D dated as of the Closing Date;
---------
(ii) Preferred Stock Certificate. A Preferred Stock
---------------------------
Certificate(s) representing the number of shares of Preferred Stock purchased by
such Purchaser as set forth next to such Purchaser's name on Schedule I,
----------
registered in the name of such Purchaser, each in form satisfactory to
the Purchaser;
(iii) Warrant. A Warrant(s) representing the Warrants purchased
-------
by such Purchaser as set forth next to such Purchaser's name on Schedule I,
----------
registered in the name of such Purchaser;
(iv) Registration Rights. The Company shall have executed and
-------------------
delivered the Registration Rights Agreement;
(v) Officer's Certificate. An Officer's Certificate dated the
---------------------
Closing Date and signed by an executive officer of the Company confirming the
accuracy of the Company's representations, warranties and covenants as of the
Closing Date and confirming the compliance by the Company with the conditions
precedent set forth in this Section 4.1 as of the Closing Date;
19
<PAGE>
(vi) Secretary's Certificate. A Secretary's Certificate dated
-----------------------
the Closing Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Closing Date,
(B) that attached thereto is a true and complete copy of the by-laws of the
Company, as in effect on the Closing Date and (C) that attached thereto is a
true and complete copy of the Resolutions duly adopted by the Board of Directors
of the Company authorizing the execution, delivery and performance of this
Agreement and of the Transaction Documents, and that such Resolutions have not
been modified, rescinded or revoked;
(vii) Certificates of Incorporation. The Company shall have
-----------------------------
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary, in such
corporation's state of incorporation issued by the Secretary of State of such
state of incorporation as of a date within ten days of the Closing Date. The
Company shall have delivered to each of the Purchasers a copy of its Certificate
of Incorporation as certified by the Secretary of State of the State of Delaware
within ten days of the Closing Date;
(viii) Certificates of Designation. The Certificate of
---------------------------
Designation shall have been duly approved by the Company's Board of Directors
and filed with the Secretary of State of Delaware, and the Company shall have
delivered a copy thereof to the Purchaser certified as filed by the office of
the Secretary of State of Delaware;
(ix) Transfer Agent Letter. The Company shall have delivered
---------------------
to each Purchaser a letter from the Company's transfer agent certifying the
number of shares of Common Stock outstanding as of a date within five days of
the Closing Date; and
(x) Other Documents. The Company shall have delivered to each
---------------
Purchaser such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchasers or its counsel may reasonably request.
ARTICLE V.
INDEMNIFICATION
5.1 Indemnification. In addition to all of the Company's other
---------------
obligations under this Agreement and the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless each Purchaser, its past and
present Affiliates and their successors and assigns (in accordance with the
provisions of Section 6.5 hereof), each other holder of the Underlying Shares
and all of their stockholders, officers, directors, employees and direct or
indirect investors and any of the foregoing Person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnities") from and against any and all actions, causes of action, suits,
- ------------
claims, losses, proceedings, costs (as incurred), penalties, fees (including
legal fees and expenses), liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnity is a party to the action
for which indemnification hereunder is sought), and including interest,
penalties and attorneys' fees and disbursements (the "Indemnified Liabilities"),
-----------------------
incurred by any Indemnity as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or in the Transaction
20
<PAGE>
Documents, or any other certificate, instrument or document contemplated hereby
or thereby or (b) any breach of any covenant, agreement or obligation of the
Company contained in this Agreement or the Transaction Documents, or any other
certificate, instrument or document contemplated hereby or thereby. The
indemnification obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliate of the Purchasers and
partners, directors, agents, employees and controlling Persons (if any), as the
case may be, of the Purchasers and any such affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling Persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
this Agreement or any of the Transaction Documents except to the extent that any
losses, claims, damages, liabilities or expenses incurred by the Company result
from the gross negligence or willful misconduct of such Purchaser or entity in
connection with the transactions contemplated by this Agreement or the
Transaction Documents. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
5.2 Procedures.
----------
a. If a third party shall notify an indemnified party (the
"Indemnified Party") with respect to any matter that may give rise to a claim
for indemnification under the indemnity set forth above in Section 5.1, the
procedure set forth below shall be followed.
(i) Notice. The Indemnified Party shall give to the party
------
providing indemnification (the "Indemnifying Party") written notice of any
claim, suit, judgment or matter for which indemnity may be sought under Section
6.1 promptly but in any event within thirty days after the Indemnified Party
receives notice thereof; provided, however, that failure by the Indemnified
-------- -------
Party to give such notice shall not relieve the Indemnifying Party from any
liability it shall otherwise have pursuant to this Agreement except to the
extent that the Indemnifying Party is actually prejudiced by such failure. Such
notice shall set forth in reasonable detail (i) the basis for such potential
claim and (ii) the dollar amount of such claim.
(ii) Defense of Claim. With respect to a claim by a third
----------------
party against an Indemnified Party for which indemnification may be sought under
this Agreement, the Indemnifying Party shall have the right, at its option, to
be represented by counsel of its choice and to assume the defense or otherwise
control the handling of any claim, suit, judgment or matter for which indemnify
is sought, which is set forth in the notice sent by the Indemnified Party, by
notifying the Indemnified Party in writing to such effect within fifteen days of
receipt of such notice; provided, however, that the Indemnified Party shall have
-------- -------
the right to employ counsel to represent it if, in the Indemnified Party's
reasonable judgment based upon the advice of counsel, it is advisable in light
of the separate interests of the Indemnified Party, to be represented by
separate counsel, and in that event the reasonable fees and expenses of such
separate counsel shall be paid by the Indemnifying Party. If the Indemnifying
Party does not give timely notice in accordance with the preceding sentence, the
Indemnifying Party shall be deemed to have given notice that it does not wish to
control the handling of such claim, suit or
21
<PAGE>
judgment. In the event the Indemnifying Party elects (by notice in writing
within such fifteen day period) to assume the defense of or otherwise control
the handling of any such claim, suit, judgment or matter for which indemnity is
sought, the Indemnifying Party shall indemnify and hold harmless the Indemnified
Party from and against any and all reasonable professional fees (including
attorneys' fees, accountants, consultants and engineering fees) and
investigation expenses incurred by the Indemnifying Party prior to such
election, notwithstanding the fact that the Indemnifying Party may not have been
so liable to the Indemnified Party had the Indemnifying Party not elected to
assume the defense of or to otherwise control the handling of such claim, suit,
judgment or other matter. In the event that the Indemnifying Party does not
assume the defense or otherwise control the handling of such matter, the
Indemnified Party may retain counsel, as an indemnification expense, to defend
such claim, suit, judgment or matter.
(iii) Final Authority. The parties shall cooperate in the
---------------
defense of any such claim or litigation and each shall make available all books
and records which are relevant in connection with such claim or litigation. In
connection with any claim, suit or other proceeding with respect to which the
Indemnifying Party has assumed the defense or control, the Indemnifying Party
will not consent to the entry of any judgment or enter into any settlement with
respect to any matter which does not include a provision whereby the plaintiff
or claimant in the matter releases the Indemnified Party from all liability with
respect thereto, without the written consent of the Indemnified Party. In
connection with any claim, suit or other proceeding with respect to which the
Indemnifying Party has not assumed the defense or control, the Indemnified Party
may not compromise or settle such claim without the consent of the Indemnifying
Party, which shall not be unreasonably withheld and shall be deemed to have been
given if the Indemnified Party provides the Indemnifying Party with a written
notice setting forth the material terms of such compromise or settlement and the
Indemnifying Party does not object thereto in writing within ten days of its
receipt of such notice.
ARTICLE VI.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the Exhibits and
----------------
Schedules hereto and the Transaction Documents contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
6.2 Notices. Any notices, consents, waivers or other communications
-------
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party (if received by 7:00 p.m. EST where such
notice is received) or the first business day following such delivery (if
received after 7:00 p.m. EST where such notice is received); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
22
<PAGE>
If to the Company:
SatCon Technology Corporation
161 First Street
Cambridge, MA 02142-1221
Telephone: (617)
Facsimile: (617) 576-7455
Attention: President and Chief Executive Officer
With a copy to:
Hale & Dorr LLP
60 State Street
Boston, MA 02109
Telephone: (617) 526-6468
Facsimile: (617) 526-5000
Attention: Jeffrey N. Carp, Esq.
If to the Transfer Agent:
If to Brown Simpson Strategic Growth Fund, Ltd. to:
152 West 57th Street, 40th Floor
New York, New York 10029
Telephone: (212) 247-8200
Facsimile: (212) 247-1329
Attention: Paul Gustus
If to Brown Simpson Strategic Growth Fund, L.P. to:
152 West 57th Street, 40th Floor
New York, New York 10029
Telephone: (212) 247-8200
Facsimile: (212) 247-1329
Attention: Paul Gustus
With a copy, in the case of Notice to Brown Simpson Strategic Growth
Fund, Ltd. or Brown Simpson Strategic Growth Fund, L.P. to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Telephone: (212) 872-1000
Facsimile: (212) 872-1002
Attention: James Kaye
23
<PAGE>
Each party shall provide written notice to the other party of any change in
address or facsimile number in accordance with the provisions hereof.
6.3 Amendments; Waivers. No provision of this Agreement may be waived
-------------------
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and each of the Purchasers or, in the case of a waiver, by
the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter. The Company shall not
offer or pay any consideration to a Purchaser for consenting to such an
amendment or waiver unless the same consideration is offered to each Purchaser
and the same consideration is paid to each Purchaser which consents to such
amendment or waiver.
6.4 Headings. The headings herein are for convenience only, do not
--------
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
6.5 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. The Purchasers may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, provided, that any assignees must make the
representations and warranties set forth in Section 2.2, in writing to the
Company, and otherwise comply with the terms of this Agreement otherwise
applicable to its assignor. This provision shall not limit a Purchaser's right
to transfer securities in accordance with all of the terms of this Agreement or
the Transaction Documents.
6.6 No Third-Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
6.7 Governing Law. This Agreement shall be governed by and construed
-------------
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER
24
<PAGE>
OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
6.8 Survival. The representations and warranties of the Company and
--------
the Purchasers contained in Sections 2.1 and 2.2, the agreements and covenants
set forth in Section 3, and the indemnification provisions set forth in Section
5, shall survive the Closing and any conversion of the Securities or exercise of
the Warrants regardless of any investigation made by or on behalf of the such
Purchaser or by or on behalf of the Company, except that, in the case of
representations, warranties and indemnities such survival shall be limited to
the period of three (3) years following the Closing Date on which they were made
or deemed to have been made. This section shall have no effect on the survival
of the indemnification provisions of the Registration Rights Agreement.
6.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
6.10 Publicity. The Company and the Purchasers shall consult with each
---------
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior written consent. Subject to the Company's
review and approval, the Purchasers and their affiliated companies shall,
without further cost, have the right to use in its advertising, marketing or
other similar materials, the Company's logo and trademarks and all or parts of
the Company's press releases that focus on the Transaction forming the subject
matter of this Agreement or which make reference to the Transaction; provided,
however, that Company approval is not required with regard to formal newspaper
announcements of transactions or "tombstones." The Purchasers understand that
this grant by the Company only waives objections that the Company might have to
the use of such materials by the Purchasers and in no way constitutes a
representation by the Company that references in such materials to the
activities of third-parties have been cleared or constitute a fair use.
6.11 Severability. In case any one or more of the provisions of this
------------
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
6.12 Remedies. In addition to being entitled to exercise all rights
--------
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific
25
<PAGE>
performance of the obligations of the Company under this Agreement or the
Transaction Documents without the showing of economic loss and without any bond
or other security being required. Each of the Company and the Purchasers
(severally and not jointly) agree that monetary damages would not be adequate
compensation for any loss incurred by reason of any breach of its obligations
described in the foregoing sentence and hereby agree to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
6.13 Independent Nature of Purchasers' Obligations and Rights. The
--------------------------------------------------------
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
6.14 Further Assurances. Each party shall do and perform, or cause to
------------------
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.15 Fees and Expenses. Except as set forth in the Registration Rights
-----------------
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement; provided, however, that the Company shall pay the
-------- -------
Purchasers an aggregate fee of $60,000 at the Closing. The Company shall pay
all stamp and other taxes and duties levied in connection with the issuance of
the Conversion Shares and the Warrant Shares pursuant hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
SATCON TECHNOLOGY CORPORATION
By: /s/ Michael C. Turmelle
----------------------------------------------
Name: Michael C. Turmelle
Title:Vice President, Chief Financial Officer
26
<PAGE>
BROWN SIMPSON STRATEGIC
GROWTH FUND, LTD.
By: /s/ James R. Simpson
______________________________________________
Name: James R. Simpson
Title: Principal
BROWN SIMPSON STRATEGIC
GROWTH FUND, L.P.
By: /s/ James R. Simpson
______________________________________________
Name: James R. Simpson
Title: Principal
<PAGE>
Schedule I
<TABLE>
<CAPTION>
Principal Amount of Number of Shares Nos. of shares underlying
Name of Purchaser Securities at Closing Date of Preferred Stock Warrants
- ----------------- -------------------------- ------------------ --------
<S> <C> <C> <C>
Brown Simpson Strategic $5 ,400,000 5,400 452,250
Growth Fund, Ltd.
Brown Simpson Strategic $2,600,000 2,600 222,750
Growth Fund, L.P.
</TABLE>
1
<PAGE>
Schedule II
<TABLE>
<CAPTION>
Name of Purchaser Address
- ----------------- -------
<S> <C>
Brown Simpson Strategic Growth Fund, Ltd. 152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Residence: Grand Cayman, Cayman
Islands
Brown Simpson Strategic Growth Fund, L.P. 152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Residence: New York, New York
</TABLE>
<PAGE>
EXHIBIT 10.26
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made and
---------
entered into as of August 25, 1999, among SatCon Technology Corporation, a
Delaware corporation (the "Company"), and the parties who have executed this
-------
Agreement and whose names appear on Schedule I hereto (each party listed on
Schedule I hereto is sometimes individually referred to herein as a "Purchaser"
---------
and all such parties are sometimes collectively referred to herein as the
"Purchasers").
- -----------
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof among the Company and the Purchasers (the "Purchase
--------
Agreement").
- ---------
The Company and the Purchasers hereby agree as follows:
1. Definitions
-----------
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Advice" has meaning set forth in Section 3(o) hereof.
------
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
-------
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," controlling" and "controlled" have meanings
---------- ----------- ----------
correlative to the foregoing.
"Aggregate Price" has the meaning set forth in Section 2(d) hereof.
---------------
"AMEX" shall mean the American Stock Exchange.
----
"Business Day" means any day except Saturday, Sunday and any day which
------------
shall be a legal holiday or a day on which banking institutions in the State of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" shall mean the Closing Date as defined in the Purchase
------------
Agreement.
"Commission" means the Securities and Exchange Commission.
----------
<PAGE>
"Common Stock" means the Company's Common Stock, par value $0.01 per
------------
share.
"Effectiveness Date" means the earlier of (i) the 120th day following
------------------
the Closing Date, or (ii) the fifth day after the Company has received notice
(written or oral) from the Commission that the Commission Staff will not be
reviewing the Registration Statement or has no further comments on the
Registration Statement.
"Effectiveness Period" has the meaning set forth in Section 2(a)
--------------------
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Event" has the meaning set forth in Section 2(d) hereof.
-----
"Filing Date" means as soon as practicable but in no event later than
-----------
the 30th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may be,
------ -------
from time to time of Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 5(c) hereof.
-----------------
"Indemnifying Party" has the meaning set forth in Section 5(c) hereof.
------------------
"Initial Registration Statement" has the meaning set forth in Section
------------------------------
2(a) hereof.
"Losses" has the meaning set forth in Section 5(a) hereof.
------
"Nasdaq" shall mean the Nasdaq Stock Market.
------
"NYSE" shall mean the New York Stock Exchange.
----
"Person" means an individual or a corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
----------
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
----------
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the
2
<PAGE>
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.
"Registrable Securities" means the shares of Common Stock issued or
----------------------
issuable upon (i) conversion of or with respect to the Securities, (ii) payment
of interest or any other payments in respect of the Securities, (iii) exercise
of the Warrants, and (iv) any shares of the Company's capital stock issued with
respect to (i), (ii) or (iii) as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise; provided, that
Registrable Securities shall not include any such shares that are eligible for
sale under Rule 144(k).
"Registration Delay Payment" has the meaning set forth in Section 2(d)
--------------------------
hereof.
"Registration Statement" means the Initial Registration Statement and
----------------------
any additional registration statements contemplated by Sections 2(a), 2(b) and
7(d), including (in each case) the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference in
such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities" means the Company's Convertible Redeemable Preferred
----------
Stock issuable pursuant to the Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Special Counsel" means one special counsel to the Holders, for which
---------------
the Holders will be reimbursed by the Company to the extent provided in Section
4.
"Standstill Notice" has the meaning set forth in Section 2(e).
-----------------
"Standstill Period" has the meaning set forth in Section 2(e).
-----------------
"Trading Day" means a day on which the Nasdaq (or in the event the
-----------
Common Stock is not traded on Nasdaq, such other securities market on which the
Common Stock is listed) is open for trading.
3
<PAGE>
"Underlying Shares" means the shares of Common Stock issuable upon
-----------------
conversion of the Securities and exercise of the Warrants.
"Underwritten Registration or Underwritten Offering" means a
--------------------------------------------------
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means the warrants issuable pursuant to the Purchase
--------
Agreement.
2. Registration Requirements
-------------------------
(a) Filing and Effectiveness Obligations. On or prior to the Filing
------------------------------------
Date, the Company shall prepare and file with the Commission a Registration
Statement (the "Initial Registration Statement") which shall cover all
------------------------------
Registrable Securities for an offering to be made on a continuous basis pursuant
to a "Shelf" registration statement under Rule 415. The Initial Registration
Statement shall be on Form S-3 or any successor form (except if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith, subject to the reasonable consent of the original Holders
of the Registrable Securities). The Company shall (i) not permit any securities
other than the Registrable Securities and securities with respect to which there
are outstanding demand or "piggy-back" registration rights as of the date of
this Agreement to be included in the Initial Registration Statement and (ii) use
commercially reasonable efforts to cause the Initial Registration Statement to
be declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event on or prior to the Effectiveness Date, and,
except as provided herein, to keep such Initial Registration Statement
continuously effective under the Securities Act until the date which is two
years after the date that such Initial Registration Statement is declared
effective by the Commission or such earlier date when all Registrable Securities
covered by such Initial Registration Statement have been sold or may be sold
without volume restrictions pursuant to Rule 144 as determined by counsel to the
Company pursuant to a written opinion letter, addressed to the Holders and the
Company's transfer agent to such effect (the "Effectiveness Period"). The
--------------------
number of shares of Common Stock initially included in the Initial Registration
Statement shall be no less than 1.2 times the sum of the number of Securities
and Warrants that are then issuable upon conversion of the Securities (based on
the Conversion Price (as defined in the Securities) as would then be in effect
at such time) and the exercise of the Warrants, without regard to any limitation
on the Investor's ability to convert the Securities or exercise the Warrants.
If at any time the number of shares of Common Stock issuable pursuant to the
Securities is adjusted pursuant to the Certificate of Designation, or to the
Warrant is adjusted in accordance with the terms thereof, and more shares are
issuable pursuant to the Securities and Warrants then remain available for sale
pursuant to the Initial Registration Statement, the Company shall immediately,
but in no more than five (5) Business Days, file a Registration Statement
sufficient to register such additional shares of Common Stock.
(b) Underwritten Offering. Prior to the third anniversary of the
---------------------
Closing Date, in addition to the Initial Registration Statement, if the Holders
of a majority of the Registrable Securities covered by a Registration Statement
so elect, an offering of Registrable Securities
4
<PAGE>
pursuant to such Registration Statement may be effected on one (1) occasion in
the form of an Underwritten Offering, provided that the offering is at least
fifteen million dollars ($15,000,000), with net proceeds to the Company of at
least five million dollars ($5,000,000). In such event, and if the managing
underwriters advise the Company and such Holders in writing that in their
opinion the amount of Registrable Securities proposed to be sold in such
Underwritten Offering exceeds the amount of Registrable Securities which can be
sold in such Underwritten Offering, so long as the offering is at least fifteen
million dollars ($15,000,000), with net proceeds to the Company of at least five
million dollars ($5,000,000), there shall be included in such Underwritten
Offering the amount of such Registrable Securities which in the opinion of such
managing underwriters can be sold, and such amount shall be allocated pro rata
--- ----
among the Holders proposing to sell Registrable Securities in such Underwritten
Offering.
(c) Underwriter. If any of the Registrable Securities are to be sold
-----------
in an Underwritten Offering, the investment banker in interest that will
administer the offering will be selected by the Holders of a majority of the
Registrable Securities included in such offering, provided that such investment
banker is reasonably satisfactory to the Company. No Holder may participate in
any Underwritten Offering hereunder unless such Holder (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting agreements
approved by the Persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
arrangements.
(d) Penalties. Subject to Sections 3(r) and 3(s) hereof, if (i) the
---------
Initial Registration Statement covering all the applicable Registrable
Securities and required to be filed by the Company pursuant to this Agreement is
not filed with the Commission on or before the Filing Date or (B) declared
effective by the Commission on or before the applicable Effectiveness Date, (ii)
on any day after the Registration Statement has been declared effective by the
Commission (A) sales of all the Registrable Securities required to be included
on a Registration Statement cannot be made pursuant to the Registration
Statement (including, without limitation, because of a failure to keep the
Registration Statement effective, to disclose such information as is necessary
for sales to be made pursuant to the Registration Statement, or to register
sufficient shares of Common Stock) or (iii) the Company shall otherwise fail to
file a Registration Statement required by Section 2(a) hereof, (each such event
specified in (i), (ii) and (iii) above, an "Event"), then, as partial relief for
-----
the damages to any Holder by reason of any such delay in or reduction of its
ability to sell the Registrable Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity) after a 60-day period
commencing on the date of the Event], the Company shall pay to each Holder an
amount in cash (a "Registration Delay Payment") equal to the purchase price of
--------------------------
Securities as set forth in Schedule I the Purchase Agreement (the "Aggregate
---------
Price") multiplied by one hundredth (.010) times the sum of: (i) the number of
- -----
months (prorated for partial months) after the end of the Effectiveness Date and
prior to the date the Registration Statement is declared effective by the
Commission, provided, however, that there shall be excluded from such period any
-------- -------
delays which are solely attributable to changes required by the Purchasers in
the Registration Statement with respect to information relating to the
Purchasers, or to the failure of the Purchasers to conduct their review of the
Registration Statement pursuant to Section 3(a); and (ii) the number of months
(prorated for partial months) that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective (including, without
5
<PAGE>
limitation, when sales cannot be made by reason of the Company's failure to
properly supplement or amend the Prospectus in accordance with the terms of this
Agreement, or otherwise, but excluding when such sales cannot be made solely by
reason of any act or omission solely attributable to the Purchasers or by reason
of the circumstances contemplated by Section 3(r) or 3(s) hereof). The Company
shall pay any Required Registration Delay Payments to each Holder in cash on the
last Business Day of each month during which an Event has occurred and is
continuing. In the event the Company fails to make a Registration Delay Payment
in a timely manner, such Registration Delay Payment shall bear interest at the
rate of 1.0% per month (prorated for partial months) until paid in full.
Notwithstanding anything in this Agreement to the contrary, in lieu of the
Registration Delay Payment during the sixty (60) day period described below, if
the Event is the Company's failure to file the Initial Registration Statement on
or before the Filing Date, the Company shall issue to the Holders Warrants to
purchase additional 33,750 shares of Common Stock for each 30-day period that
passes following the Filing Date up to a maximum of two such 30-day periods, if
the Event is the failure to have the Registration Statement declared effective
on or before the Effectiveness Date, the Company shall issue to the Holders
Warrants to purchase an additional 33,750 shares of Common Stock for each 30-day
period that passes following the Effectiveness Date up to a maximum of two such
30-day periods. The Warrant issued to each Holder shall be to purchase a portion
of the aggregate number of shares of Common Stock on a pro rata basis equal to
its percentage ownership of the then outstanding number of shares of Preferred
Stock. The exercise price, expiration date and other terms of the warrants
(other than the number of shares of common stock for which it is exercisable)
shall be substantially identical to the Warrants issued to the Holders on the
Closing Date.
(e) Form S-3 Eligibility. The Company represents and warrants that it
--------------------
currently meets the registrant eligibility and transaction requirements for the
use of Form S-3 (for primary and secondary offerings) for the registration of
the sale of Registrable Securities by the Purchasers and any other Holders and
the Company shall file all reports required to be filed by the Company with the
Commission in a timely manner so as to maintain such eligibility for the use of
Form S-3.
3. Registration Procedures
-----------------------
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Preparation of Registration Statement. Prepare and file with the
-------------------------------------
Commission on or prior to the Filing Date a Registration Statement on Form S-3
or its successor form (or if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3 such registration shall be on
another appropriate form in accordance herewith (which shall include a Plan of
Distribution substantially in the form of Exhibit A annexed hereto, unless in
---------
connection with an Underwritten Offering) or in connection with an Underwritten
Offering hereunder, such other form agreed to by the Company and by a majority-
in-interest of Holders of Registrable Securities to be covered by such
Registration Statement) (except if otherwise directed by the Holders), and cause
the Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than three (3) Business Days prior to
-------- -------
the filing of the Registration Statement or any related Prospectus or any
amendment or
6
<PAGE>
supplement thereto (including any document that would be incorporated therein by
reference), the Company shall, if reasonably practicable (i) furnish to the
Holders, their Special Counsel and any managing underwriters, copies of all such
documents proposed to be filed (including documents incorporated by reference),
which documents will be subject to the review of such Holders, their Special
Counsel and such managing underwriters, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to such Holders and such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities, their Special Counsel or any managing underwriters shall reasonably
object, and will not request acceleration of such Registration Statement without
prior notice to such counsel; provided, however, any failure of the Company to
file such a Registration Statement or amendment or to request acceleration
following an objection by any such person should not constitute a breach of the
Company's obligation under this Agreement or cause the imposition of any
penalties set forth herein. The sections of such Registration Statement covering
information with respect to the Holders, the Holder's beneficial ownership of
securities of the Company or the Holders intended method of disposition of
Registrable Securities shall conform to the information provided to the Company
by each of the Holders.
(b) Amendments. (i) Prepare and file with the Commission such
----------
amendments, including post-effective amendments, to the Registration Statement
as may be necessary to keep the Registration Statement continuously effective
for the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the Securities Act; (iii)
respond as promptly as possible to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto and as
promptly as possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) Notifications. Notify the Holders of Registrable Securities to be
-------------
sold, their Special Counsel and any managing underwriters as promptly as
possible (and, in the case of (i)(A) below, not less than five (5) days prior to
such filing and, in the case of (i)(C) below, not later than the first Business
Day after effectiveness) and (if requested by any such Person) confirm such
notice in writing no later than one (1) Business Day following the day (i)(A)
when a Prospectus or any Prospectus supplement or post-effective amendment to
the Registration Statement is proposed to be filed; (B) when the Commission
notifies the Company whether there will be a "review" of such Registration
Statement and whenever the Commission comments in writing on such Registration
Statement and (C) with respect to the Registration Statement or any post-
effective amendment, when the same has become effective; (ii) of any request by
the
7
<PAGE>
Commission or any other Federal or state governmental authority for amendments
or supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (vi) of the occurrence of
any event that makes any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(d) Suspensions. Use its reasonable efforts to avoid the issuance
-----------
of, or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) Supplements and Post-Effective Amendments. If requested by any
-----------------------------------------
managing underwriter or the Holders of a majority in interest of the Registrable
Securities to be sold in connection with an Underwritten Offering, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the Company reasonably agrees should
be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided, however, that the
-------- -------
Company shall not be required to take any action pursuant to this Section 3(e)
that would, in the opinion of counsel for the Company, violate applicable law or
if the Holders of a majority of the Registrable Securities consent to the delay
in taking, or the failure to take, any such action, which consent shall not be
unreasonably withheld.
(f) Copies of Registration Statement. Furnish to each Holder, their
--------------------------------
Special Counsel, and any managing underwriters, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
(g) Copies of Prospectus. Promptly deliver to each Holder, their
--------------------
Special Counsel, and any underwriters, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request; and the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders and any underwriters in
8
<PAGE>
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
(h) Blue Sky. Prior to any public offering of Registrable Securities,
---------
use commercially reasonable efforts to register or qualify or cooperate with the
selling Holders, any underwriters and their Special Counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be
-------- -------
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or subject
the Company to any material tax in any such jurisdiction where it is not then so
subject.
(i) Certificates. Cooperate with the Holders and any managing
------------
underwriters to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to a Registration
Statement, which certificates shall be free, to the extent permitted by
applicable law and the Purchase Agreement, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and registered in
such names as any such managing underwriters or Holders may request at least two
(2) Business Days prior to any sale of Registrable Securities.
(j) Supplements and Amendments. Upon the occurrence of any event
--------------------------
contemplated by Section 3(c)(vi), as promptly as possible, prepare a supplement
or amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statement
nor such Prospectus will contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Listing. Cause all Registrable Securities relating to such
-------
Registration Statement to be listed on Nasdaq and any other securities exchange,
quotation system, market or over-the-counter bulletin board, if any, on which
similar securities issued by the Company are then listed as and when required
pursuant to the Purchase Agreement.
(l) Underwriting Agreement. Enter into such underwriting agreements
----------------------
in form, scope and substance as is customary in Underwritten Offerings and
pursuant thereto to, (i) make such representations and warranties to such
underwriters as are customarily made by issuers to underwriters in underwritten
public offerings, obtain and deliver copies thereof to the managing
underwriters, of opinions of counsel to the Company addressed to each such
underwriter, in form, scope and substance reasonably satisfactory to any such
managing underwriters covering the matters customarily covered in opinions
requested in Underwritten
9
<PAGE>
Offerings; (iii) immediately prior to the effectiveness of the Registration
Statement, and, at the time of delivery of any Registrable Securities sold
pursuant thereto, and, in the case of non-Underwritten Offerings, obtain and
deliver copies to the managing underwriters, if any, of "cold comfort" letters
and updates thereof from the independent certified public accountants of the
Company (and, if required, any other independent certified public accountants of
any subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is required to be, included
in the Registration Statement), addressed to each of the underwriters, in form
and substance as are customary in connection with Underwritten Offerings; (iv)
indemnification provisions and procedures no less favorable to the underwriters,
if any, than those set forth in Section 5 (or such other provisions and
procedures acceptable to the managing underwriters, and (v) deliver such
documents and certificates as may be reasonably requested by any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 3(1)(i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(m) Due Diligence. Make available for inspection by the selling
-------------
Holders, any representative of such Holders, any underwriter participating in
any disposition of Registrable Securities, and any attorney or accountant
retained by such selling Holders or underwriters, at the offices where normally
kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors, agents and employees of the
Company and its subsidiaries to supply all information in each case reasonably
requested by any such Holder, representative, underwriter, attorney or
accountant in connection with the Registration Statement; provided, however,
-------- -------
that if any information is determined in good faith by the Company in writing to
be of a confidential nature at the time of delivery of such information, then
prior to delivery of such information, the Company and the Holders shall enter
into a confidentiality agreement reasonably acceptable to the Company and the
Holders providing that such information shall be kept confidential, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities (provided,
--------
however, that the Company shall be given notice of any such pending disclosure
- -------
so that the Company may seek a protective order); (ii) disclosure of such
information, in the opinion of counsel to such Person, is required by law; (iii)
such information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard by such Person; or (iv) such
information becomes available to such Person from a source other than the
Company and such source is not known by such Person to be bound by a
confidentiality agreement with the Company.
(n) Earnings Statement. Comply in all material respects with all
------------------
applicable rules and regulations of the Commission and make generally available
to its securityholders earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 not later than 45 days after the end of
any 12-month period (or 90 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm commitment or
best efforts Underwritten Offering and (ii) if not sold to underwriters in such
an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
10
<PAGE>
(o) Information. The Company may require each selling Holder to
-----------
furnish to the Company information regarding such Holder and the distribution of
such Registrable Securities as is required by law to be disclosed in the
Registration Statement, and the Company may exclude from such registration the
Registrable Securities of any such Holder who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company unless (i) disclosure of
such information, in the opinion of counsel to the Company, is required by law,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) disclosure of such
information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities (provided, however, that the
-------- -------
Holder shall be given notice of any such pending disclosure so that the Holder
may seek a protective order), or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning a Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Holder prior to making such disclosure, and allow the Holder, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "Advice")
------
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. Notwithstanding anything to the
11
<PAGE>
contrary, the Company shall cause its transfer agent to deliver unlegended
shares of Common Stock to a transferee of a Holder in accordance with the terms
of the Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Holder has entered into a contract for sale
prior to the Holder's receipt of a notice from the Company of the happening of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi) and for which the Holder has not yet settled.
(p) Responses to the Commission. The Company agrees to respond
---------------------------
fully and completely to any and all comments on a Registration Statement
received from the Commission staff as promptly as possible but, for non-
Underwritten Offerings, in no event later than ten (10) Business Days of the
receipt of such comments, regardless of whether such comments are in oral or
written form.
(q) Confirmation of Effectiveness. Within two (2) Business Days
-----------------------------
after a Registration Statement which covers applicable
Registrable Securities is ordered effective by the Commission,
the Company shall deliver, and shall cause legal counsel for
the Company to deliver, to the transfer agent for such
Registrable Securities (with copies to the Holders whose
Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has
been declared effective by the Commission in the form attached
hereto as Exhibit B.
---------
(r) Notwithstanding any other provision of this Section 3, the
Company may delay the filing or effectiveness of any
Registration Statement or any amendment or supplement thereto
and suspend the right of the Holders to effect sales of
Registrable Securities thereunder for one or more periods
(each a "Suspension Period") of up to 60 calendar days in the
aggregate per twelve (12) month period in the event that such
filing, effectiveness or sale would require the Company to
disclose any non-public information that the Company is not
otherwise required to disclose or to file any financial
statements that the Company is not otherwise required to file,
provided however, that no Suspension Period shall exceed 45
consecutive calendar days.
(s) Notwithstanding any other provision of this Section 3, the
Holders shall not be permitted to effect sales of the
Registrable Securities under a Registration Statement during a
period in which the Company is engaged in the process of
registering under the Securities Act an underwritten offering,
for as long as the underwriter reasonably considers is
necessary.
4. Registration Expenses
---------------------
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company,
whether or not pursuant to an Underwritten Offering and whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
12
<PAGE>
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with Nasdaq
and each other securities exchange or market on which Registrable Securities are
required hereunder to be listed and (B) in compliance with state securities or
Blue Sky laws (including, without limitation, fees and disbursements of counsel
for the Holders in connection with Blue Sky qualifications of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriters, if any,
or by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
reasonable fees and disbursements of counsel for the Company and Special Counsel
for the Holders, (v) Securities Act liability insurance, if the Company so
desires such insurance, and (vi) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. The Company shall not be required to
pay selling concessions, discounts or other compensation paid to brokers,
underwriters or other agents in connection with the sale of any Registrable
Securities, whether or not incurred in an Underwritten Offering, or fees and
expenses incurred by a Holder that are not specified in this Section.
5. Indemnification
---------------
(a) Indemnification by the Company. The Company shall,
------------------------------
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all joint or several losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, "Losses"), as incurred, arising out of or
------
relating to (i) any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
Prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made),
except to the extent, but only to the extent, that such untrue statements or
omissions are based upon and in conformity with
13
<PAGE>
information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or (ii) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any other law, including,
without limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of Registrable Securities, provided,
however, that the Company shall not be required to indemnify any person with
respect to a loss arising out of a sale of any Registrable Securities during any
period during which the Company has advised the Holders to suspend sales
pursuant to a registration statement. The Company shall not, however, be liable
for any Losses to any Holder with respect to any untrue or alleged untrue
statement of material fact or omission or alleged omission of material fact if
such statement or omission was made in a preliminary Prospectus and such Holder
did not receive a copy of the final Prospectus (or any amendment or supplement
thereto) at or prior to the confirmation of the sale of the Registrable
Securities in any case where such delivery is required by the Securities Act and
the untrue or alleged untrue statement of material fact or omission or alleged
omission of material fact contained in such preliminary Prospectus was corrected
in the final Prospectus (or any amendment or supplement thereto), unless the
failure to deliver such final Prospectus (as amended or supplemented) was a
result of noncompliance by the Company with Section 3(g) of this Agreement. The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and
--------------------------
not jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon (i) any untrue statement of
a material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the extent, that
such untrue statement or omission is contained in any information so furnished
in writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of prospectus or (ii) any violation or alleged violation
by the Holders of the Securities Act, the Exchange Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of Registrable Securities;
provided, however, that the indemnity agreement contained in this Section 5(b)
- -------- -------
shall not apply to amounts paid in settlement of any Losses if such settlement
is effected without the prior written consent of such Holder. In no event shall
the liability of any selling Holder hereunder be greater in amount than the
dollar amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
14
<PAGE>
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
--------------------------------------
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
-----------------
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
------------------
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided,
--------
however, that the failure of any Indemnified Party to give such notice shall not
- -------
relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a)
------------
or 5(b) is unavailable to an Indemnified Party because of a failure or refusal
of a court of competent jurisdiction to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of
15
<PAGE>
such Losses, in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying Party
or Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms. In no
event shall any selling Holder be required to contribute an amount under this
Section 5(d) in excess of the net proceeds received by such Holder upon sale of
the Registrable Securities pursuant to the Registration Statement giving rise to
such contribution obligation.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Rule 144
--------
During the Effectiveness Period, as long as any Holder owns
Registrable Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
Section 13(a) or l5(d) of the Exchange Act. During the Effectiveness Period, as
long as any Holder owns Registrable Securities, if the Company is not required
to file reports pursuant to Section 13(a) or l5(d) of the Exchange Act, it will
prepare and furnish to the Holders and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby, in
the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will use
commercially reasonable efforts to take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Person to sell Underlying Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including requesting of its counsel
16
<PAGE>
to provide any legal opinions referred to in the Purchase Agreement. Upon the
request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements of this Section 6.
7. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company or by a
--------
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
--------------------------
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with or limits the
provisions hereof. Except as disclosed in Schedule 2.1(r) of the Purchase
Agreement, neither the Company nor any of its subsidiaries has previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person. This Agreement, together with the Purchase
Agreement, contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
(c) Piggy-Back Registrations. Except as provided herein if, at any
------------------------
time when there is not an effective Registration Statement covering the
Registrable Securities, the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to each Holder of Registrable Securities
written notice of such determination and, if within ten (10) days after receipt
of such notice, any such Holder shall so request in writing, (which request
shall specify the Registrable Securities intended to be disposed of by the
Purchasers), the Company will use reasonable efforts to effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the Holder, to the extent requisite to permit
the disposition of the Registrable Securities so to be registered, provided that
if at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to such Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable
17
<PAGE>
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 7(d) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered; provided, however, that the
-------- -------
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the managing
underwriter(s) or underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the Company
after consultation with the Underwriter's representative should reasonably
determine that the inclusion of such Registrable Securities would materially
adversely affect the offering contemplated in such registration statement, and
based on such determination recommends inclusion in such registration statement
of fewer Registrable Securities then proposed to be sold by the Holders, then
(x) the number of Registrable Securities of the Holders and other holders of
piggy-back registration rights included in such registration statement shall be
reduced pro rata among such Holders and other holders of piggy-back registration
rights (based upon the number of Registrable Securities requested to be included
in the registration) or, in the case of other holders of piggy-back registration
rights, in the manner provided for in that applicable agreement, or (y) none of
the Registrable Securities of the Holders shall be included in such registration
statement if the Company, after consultation with the underwriter(s), recommends
the inclusion of none of such Registrable Securities; provided, however, that if
-------- -------
securities are being offered for the account of other persons or entities as
well as the Company, such reduction shall not represent a greater fraction of
the number of Registrable Securities intended to be offered by the Holders than
the fraction of similar reductions imposed on such other persons or entities
(other than the Company). Notwithstanding the foregoing, the Company shall not
file any registration statement under the Securities Act (other than on Form S-4
or Form S-8) relating to the offer and sale of any equity securities of the
Company, or offer or sell any equity securities of the Company in a transaction
exempt from registration pursuant to Regulation S under the Securities Act,
until such time as the Initial Registration Statement has been effective for a
period of sixty (60) Trading Days, which period shall be tolled if the
effectiveness of the Initial Registration Statement is suspended for any reason
whatsoever.
(d) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two thirds of the then outstanding Registrable
Securities; provided, however, that for the purposes of this sentence,
-------- -------
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
-------- -------
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
18
<PAGE>
(e) Notices. Any notice or other communication required or permitted
-------
to be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
5:00 p.m. eastern time where such notice is to be received), or the first
Business Day following such delivery (if received after 5:00 p.m. eastern time
where such notice is to be received) or (b) on the second Business Day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications are (i) if to the Company to SatCon
Technology Corporation, 161 First Street, Cambridge, MA 02142-1221, Attn:
President and Chief Executive Officer, fax no. (617) 576-7455, with copies to
Hale & Dorr LLP, 60 State Street, Boston, MA 02109, Attn: Jeffrey N. Carp, Esq.,
fax no. (617) 526-5000 and (ii) if to any Purchaser to the address set forth on
Schedule I hereto with copies to those specified on the signature pages hereto
and to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York,
New York 10022, Attn: James Kaye, Esq., fax no. (212) 872-1002 or such other
address as may be designated in writing hereafter, in the same manner, by such
Person.
(f) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign its rights hereunder in the manner and to
the Persons as permitted under the Purchase Agreement. In addition, the rights
of each Holder hereunder, including the right to have the Company register for
resale Registrable Securities in accordance with the terms of this Agreement,
shall be automatically assignable by each Holder if: (i) the Holder agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
of this Agreement, and (v) such transfer shall have been made in accordance with
the applicable requirements of the Purchase Agreement. The rights to assignment
shall apply to the Holders (and to subsequent) successors and assigns.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.
19
<PAGE>
(h) Governing Law. The corporate laws of the State of Delaware shall
-------------
govern all issues concerning the relative rights of the Company and the
Purchasers as its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, without regard to principles of conflicts of law. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consent to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
(i) Cumulative Remedies. The remedies provided herein are cumulative
-------------------
and not exclusive of any remedies provided by law.
(j) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(k) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(l) Shares Held by The Company and its Affiliates. Whenever the
---------------------------------------------
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(m) Revision of SEC Position on Warrants. In the event the rules and
------------------------------------
regulations of the Commission or the policies of the staff of the Commission are
modified and as a result thereof the Company determines in good faith that it
may be practicable and in the interests of the Company and the Holders to
register the exercise of the Warrants so that the Warrant Shares may be freely
resold without maintaining an effective registration statement under the
Securities Act for resales, the Company and the Holders agree to cooperate in
good faith to effect such amendments to this Agreement as may be appropriate to
provide that the Company may fulfill its obligations hereunder with respect to
the Warrants and the Warrant
20
<PAGE>
Shares by maintaining an effective registration statement under the Securities
Act covering the exercise of the Warrants rather than the resale of the Warrant
Shares.
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
SATCON TECHNOLOGY CORPORATION
By: /s/ Michael C. Turmelle
---------------------------------
Name:Michael C. Turmelle
Title:Vice President, Chief Financial Officer
22
<PAGE>
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
By: /s/ James R. Simpson
--------------------------------------
Name: James R. Simpson
Title: Principal
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
By: /s/ James R. Simpson
--------------------------------------
Name: James R. Simpson
Title: Principal
23
<PAGE>
SCHEDULE I
-----------
Company
- -------
SatCon Technology Corporation
161 First Street
Cambridge, MA 02142-1221
Attn: President and Chief Executive Officer
Fax: (617) 576-7455
Purchasers:
- ----------
Brown Simpson Strategic Growth Fund, L.P.
152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Brown Simpson Strategic Growth Fund, Ltd.
152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
24
<PAGE>
EXHIBIT A
PLAN OF DISTRIBUTION
Our company is registering the shares of common stock on behalf of the
selling stockholders. All costs, expenses and fees in connection with the
registration of the shares offered by this prospectus will be borne by the
Company, other than brokerage commissions and similar selling expenses, if any,
attributable to the sale of shares which will be borne by the selling
stockholders. Sales of shares may be effected by selling stockholders from time
to time in one or more types of transactions (which may include block
transactions) on the Nasdaq National Market, in the over-the-counter market, in
negotiated transactions, through put or call options transactions relating to
the shares, through short sales of shares, or a combination of such methods of
sale, at market prices prevailing at the time of sale, or at negotiated prices.
Such transactions may or may not involve brokers or dealers. The selling
stockholders have advised our company that they have not entered into any
agreements, understandings or arrangements with any underwriters or broker-
dealers regarding the sale of their securities, nor is there an underwriter or
coordinated broker acting in connection with the proposed sale of shares by the
selling stockholders.
The selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with such
transactions, broker-dealers or other financial institutions may engage in short
sales of the shares or of securities convertible into or exchangeable for the
shares in the course of hedging positions they assume with selling stockholders.
The selling stockholders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealers or other financial institutions of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as amended or supplemented to reflect such
transaction).
The selling stockholders may make these transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular broker-
dealer might be in excess of customary commissions).
The selling stockholders and any broker-dealers that act in connection
with the sale of shares are "underwriters" within the meaning of Section 2(11)
of the Securities Act, and any commissions received by such broker-dealers or
any profit on the resale of the shares sold by them while acting as principals
might be deemed to be underwriting discounts or commissions under the Securities
Act. The selling stockholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares
against certain liabilities, including liabilities arising under the Securities
Act.
25
<PAGE>
Because selling stockholders are "underwriters" within the meaning of
Section 2(11) of the Securities Act, the selling stockholders will be subject to
the prospectus delivery requirements of the Securities Act. Our company has
informed the selling stockholders that the anti-manipulative provisions of
Regulation M promulgated under the Exchange Act may apply to their sales in the
market.
Selling stockholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of Rule 144.
Upon our company being notified by a selling stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
. the name of each such selling stockholder and of the
participating broker-dealer(s);
. the number of shares involved;
. the initial price at which such shares were sold;
. the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
. that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus; and
. other facts material to the transactions.
In addition, upon our company being notified by a selling stockholder that a
donee or pledgee intends to sell more than 500 shares, a supplement to this
prospectus will be filed.
26
<PAGE>
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn.:
Re: SatCon Technology Corporation
Ladies and Gentlemen:
We are counsel to SatCon Technology Corporation, a Delaware corporation
(the "Company"), and have represented the Company in connection with that
certain Securities Purchase Agreement (the "Purchase Agreement") entered into by
and among the Company and the buyers named therein (collectively, the "Holders")
pursuant to which the Company issued to the Holders its [Insert Security (the
"Securities")] convertible into shares of the Company's common stock, par value
$0.01 per share (the "Common Stock"), and Warrants (the "the Warrants") to
acquire shares of Common Stock. Pursuant to the Purchase Agreement, the Company
also has entered into a Registration Rights Agreement with the Holders (the
"Registration Rights Agreement") pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Securities and exercise of the Warrants, under the
Securities Act of 1933, as amended (the "1933 Act"). In connection with the
Company's obligations under the Registration Rights Agreement, on
_______________, 1999, the Company filed a Registration Statement on Form S-3
(File No. 333-_____________) (the "Registration Statement") with the Securities
and Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
cc: [LIST NAMES OF HOLDERS]
27
<PAGE>
EXHIBIT 10.27
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
August 25, 1999
__________ shares Warrant No.__
SATCON TECHNOLOGY CORPORATION
STOCK PURCHASE WARRANT
Registered Owner: ____________________________
This certifies that, for value received, SatCon Technology Corporation, a
Delaware corporation, the ("Company") grants the following rights to the
-------
Registered Owner, or assigns, of this Warrant:
1. Issue. Upon tender (in accordance with Section 6 hereof) to the
Company, the Company, within three (3) Business Days of the date thereof, shall
issue to the Registered Owner, or assigns, up to the number of shares specified
in Section 2 hereof of fully paid and nonassessable shares of Common Stock that
the Registered Owner, or assigns, is otherwise entitled to purchase.
2. Number of Shares. The total number of shares of Common Stock that the
Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant (the "Warrant Shares") is ________ shares, subject to
--------------
adjustment from time to time as to the number and kind of securities for which
this Warrant is exercisable, all as set forth in Section 7 hereof. The Company
shall at all times reserve and hold available out of its authorized and unissued
shares of Common Stock or other securities, as the case may be, sufficient
shares of Common Stock to satisfy all conversion and purchase rights represented
by outstanding convertible securities, options and warrants, including this
Warrant. The Company covenants and agrees that all shares of Common Stock or
other securities, as the case may be, that may be issued upon the exercise of
this Warrant shall, upon issuance, be duly and validly issued, fully paid and
nonassessable, free from all taxes, liens and charges with respect to the
purchase and the issuance of the shares, and shall not have any legend or
restrictions on resale, expect as required by Section 3.2(b) of the Purchase
Agreement.
3. Exercise Price. The per share exercise price of this Warrant,
representing the price per share at which the shares of stock issuable upon
exercise of this Warrant may be
<PAGE>
purchased, is eight dollars and fifty-four cents ($8.54), subject to adjustment
from time to time pursuant to the provisions of Section 7 hereof (the "Exercise
--------
Price").
- ------
4. Exercise Period. This Warrant may be exercised from the Closing Date
(as defined in the Purchase Agreement) up to and including August 25, 2003 (the
"Exercise Period"). If not exercised during this period, this Warrant and all
---------------
rights granted under this Warrant shall expire and lapse.
5. Replacement Warrants. To the extent that Warrant Shares are issued
pursuant to Section 8, the Company shall issue to the Registered Owner a
replacement warrant (a "Replacement Warrant"), subject to the terms set forth
herein, equal to the number of Warrant Shares received or the number of shares
of Common Stock issuable upon the exercise of the Warrant so redeemed, subject
to the following qualifications:
a. the exercise price shall equal $12.81;
b. the exercise period of any such Replacement Warrant shall be five
(4) years from the date if issuance; and
c. this Section 5. shall not be incorporated into any such warrant.
6. Tender; Issuance of Certificates.
a. Subject to Section 17 hereof, this Warrant may be exercised, in
whole or in part, by (i) actual delivery of (a) the Exercise Price in cash,
(b) a duly executed Warrant Exercise Form, a copy of which is attached to
this Warrant as Exhibit A, properly executed by the Registered Owner, or
---------
assigns, of this Warrant, and (c) by surrender of this Warrant. The
Warrant Shares so purchased shall be deemed to be issued to the Registered
Owner as of the close of business on the date on which the last of the
following shall have occurred: (i) this Warrant shall have been surrendered
and (ii) the completed Warrant Exercise Form shall have been delivered and
payment shall have been made for such shares as set forth above. The
payment and Warrant Exercise Form must be delivered to the registered
office of the Company either in person or as set for in Section 14 hereof.
b. In lieu of physical delivery of the Warrant, provided the
Company's transfer agent is participating in the Depositary Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program, upon request
--- ----
of the Registered Owner and in compliance with the provisions hereof, the
Company shall use its best efforts to cause its transfer agent to
electronically transmit the Warrant Shares to the Registered Owner by
crediting the account of the Registered Owner's Prime Broker with DTC
through its Deposit Withdrawal Agent Commission system. The time period
for delivery described herein shall apply to the electronic transmittals
described herein.
c. Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in the Warrant Exercise Form, and any
cash payments due under Section 16 hereof shall be delivered to the
Registered Owner within
2
<PAGE>
a reasonable time, not exceeding three (3) Business Days, after this
Warrant shall have been so exercised. The certificates so delivered shall
be in such denominations as may be requested by the Registered Owner and
shall be registered in the name of the Registered Owner or such other name
as shall be designated by such Registered Owner. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the
Company shall, at its expense, at the time of delivery of such
certificates, deliver to the Registered Owner a new Warrant representing
the number of shares with respect to which this Warrant shall not then have
been exercised.
7. Adjustment of Exercise Price.
a. Common Stock Dividends; Common Stock Splits; Reverse Common Stock
-----------------------------------------------------------------
Splits. If the Company, at any time while this Warrant is outstanding, (a)
------
shall pay a stock dividend on its Common Stock, (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine
outstanding shares of Common Stock into a smaller number of shares or (d)
issue by reclassification of shares of Common Stock any shares of capital
stock of the Company, then (i) the Exercise Price shall be multiplied by a
fraction the numerator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event and
the denominator of which shall be the number of shares of Common Stock
outstanding (excluding treasury shares, if any) after such event and (ii)
the number of Warrant Shares shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding after such event and the denominator
of which shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event. Any adjustment made
pursuant to this paragraph (6)(a) shall become effective immediately after
the record date for the determination of shareholders entitled to receive
such dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination or re-
classification.
b. Rights; Options; Warrants or Other Securities. If the Company, at
---------------------------------------------
any time while this Warrant is outstanding, shall fix a record date for the
issuance of rights, options, warrants or other securities to all of the
holders of Common Stock entitling them to subscribe for or purchase,
convert to, exchange for or otherwise acquire shares of Common Stock for no
consideration or at a price per share less than the Exercise Price, the
Exercise Price shall be multiplied by a fraction, the denominator of which
shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding on the date of issuance of such rights, options,
warrants or other securities plus the number of additional shares of Common
Stock offered for subscription, purchase, conversion, exchange or
acquisition and the numerator of which shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such rights, options, warrants or other securities plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at the Exercise Price. Such adjustment
shall be made whenever such rights, options, warrants or other securities
are issued, and shall become effective immediately after the record
3
<PAGE>
date for the determination of shareholders entitled to receive such rights,
options, warrants or other securities.
c. Subscription Rights. If the Company, at any time while this
-------------------
Warrant is outstanding, shall fix a record date for the distribution to all
of the holders of Common Stock evidence of its indebtedness or assets or
rights, options, warrants or other security entitling them to subscribe for
or purchase, convert to, exchange for or otherwise acquire any security
(excluding those referred to in paragraphs 6(a) and (b) above), then in
each such case the Exercise Price at which the Warrant shall thereafter be
exercisable shall be determined by multiplying the Exercise Price in effect
immediately prior to the record date fixed for determination of
shareholders entitled to receive such distribution by a fraction, the
denominator of which shall be the Per Share Market Value of Common Stock
determined as of the record date mentioned above, and the numerator of
which shall be such Per Share Market Value of the Common Stock on such
record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of Common Stock as determined by the
Board of Directors in good faith; provided, however, that in the event of a
-------- -------
distribution exceeding ten percent (10%) of the net assets of the Company,
such fair market value shall be determined in accordance with the Appraisal
Procedure. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.
d. Rounding. All calculations under this Section 7 shall be made to
--------
the nearest cent or the nearest l/l00th of a share, as the case may be.
e. Notice of Adjustment. Whenever the Exercise Price is adjusted
--------------------
pursuant to paragraphs 6(a), (b) or (c), the Company shall promptly deliver
to the Registered Owner a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
f. Redemption Events. The following are "Redemption Events" under
----------------- -----------------
this Section 7(f): (A) any Change of Control or (B) any suspension from
listing or delisting of the Common Stock from the Nasdaq or any Subsequent
Market on which the Common Stock is listed for a period of five consecutive
days. On and after the date of any Redemption Event, the Registered Owner
shall have the option to require the Company to redeem (the "Redemption
----------
Right"), for a period of thirty (30) days after the Registered Owner
-----
receives notice of Redemption Event, in cash and subject to the terms of
payment provisions set forth in Section 8, the Registered Owner's shares of
Common Stock immediately theretofore acquirable and receivable upon the
exercise of such Registered Owner's Warrant at a price per share equal to
the product of (i) the amount by which, if any, the Average Price
immediately preceding the latest of the effective date, the date of the
closing, date of occurrence or the date of the announcement, as the case
may be, of the Redemption Event triggering such Redemption Right exceeds
the Exercise Price and (ii) the number of shares of Common Stock issuable
upon exercise of the Warrant immediately prior to such Redemption Event.
After the occurrence of (A), the Registered Owner shall have the right at
his or its option, in lieu of the Redemption Right, to exercise the Warrant
for shares of stock and other securities, cash and property receivable
4
<PAGE>
upon or deemed to be held by holders of Common Stock following such
Redemption Event; the Registered Owner shall be entitled upon such event to
receive such amount of securities, cash or property as if the Registered
Owner had exercised the Warrant of the shares of the Common Stock issuable
upon exercise of the Warrant immediately prior to such Redemption Event
(without taking into account any limitations or restrictions on the
exercise of the Warrant). In the case of a transaction specified in (A) in
which holders of the Company's Common Stock receive cash, the Registered
Owner shall have the right at his or its option, in lieu of the Redemption
Right, to exercise the Warrant for such number of shares of the surviving
company equal to the amount of cash into which the Warrant is exercisable
divided by the fair market value of the shares of the surviving company on
the effective date of the merger. In the case of (A), the Company shall not
effect any such Redemption Event unless, prior to the consummation thereof,
each Person (other than the Company) which may be required to deliver any
stock, securities, cash or property upon the exercise of the Warrant as
provided herein shall assume, by written instrument delivered and
reasonably satisfactory to, the Registered Owner, (a) the obligations of
the Company under the Warrant (and if the Company shall survive the
consummation of such transaction, such assumption shall be in addition to,
and shall not release the Company from, any continuing obligations of the
Company under this Warrant), (b) the obligations of the Company under the
Purchase Agreement, the Warrant, the Certificate of Designation, and the
Registration Rights Agreement, and (c) the obligation to deliver to the
Registered Owner such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this Section 7(f), the
Registered Owner may be entitled to receive. Nothing in this Section 7(f)
shall be deemed to authorize the Company to enter into any transaction not
otherwise permitted by the Purchase Agreement. This provision shall
similarly apply to successive Redemption Events.
g. Notice of Certain Events. If:
------------------------
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to the holders of
the Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; or
(iv) the approval of any shareholders of the Company shall be
required in connection with any reclassification of the Common Stock
of the Company, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all of the assets
of the Company, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; or
5
<PAGE>
(v) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of exercise of this Warrant, and shall cause to be delivered to the
Registered Owner, at least 10 Business Days prior to the applicable record or
effective date hereinafter specified, a notice (provided such notice shall not
include any material non-public information) stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
h. Adjustment of Number of Shares. Upon each adjustment of the
------------------------------
Exercise Price as a result of the calculations made in this Section 7, this
Warrant shall thereafter evidence the right to receive, at the adjusted
Exercise Price, that number of shares of Common Stock (calculated to the
nearest one-hundredth) obtained by dividing (i) the product of the
aggregate number of shares covered by this Warrant immediately prior to
such adjustment and the Exercise Price in effect immediately prior to such
adjustment of the Exercise Price by (ii) the Exercise Price in effect
immediately after such adjustment of the Exercise Price.
8. Call Option. If, at any time during the Exercise Period, the Per
Share Market Value equals or exceeds $12.81 for any twenty (20) consecutive
Trading Days, then so long as (i) any Registration Statement required to be
filed and be effective pursuant to the Registration Rights Agreement has been
filed and declared effective, and, if this call option is being implemented
prior to the second anniversary of the Closing Date, such Registration Statement
has been in effect and sales of all of the Registrable Securities can be made
thereunder for at least ten (10) days prior to the Call Notice Date (as defined
below), or such lesser number of days to the extent that in such 10-day period
are days contemplated by Sections 3(r) and 3(s) of the Registration Rights
Agreement and (ii) the Company has a sufficient number of authorized shares of
Common Stock reserved for issuance upon full exercise of the Warrants, the
Company shall have the right during the two month period commencing on the first
business day after such 20-day period, upon written notice to the Registered
Owner, to cause such Registered Owner to exercise this Warrant in full in
accordance with the provisions of Section 6 hereof within the period of ten (10)
business days commencing on the Registered Owner's receipt of such notice (the
"Call Notice Date").
- -----------------
9. Restriction on Conversion by Either the Registered Owner or the
Company. Notwithstanding anything herein to the contrary, except as set forth
in Section 7.1 to the Certificate of Designation and Section 8 hereof, in no
event shall any Registered Owner have the right or be required to exercise this
Warrant if as a result of such conversion the aggregate
6
<PAGE>
number of shares of Common Stock beneficially owned by such Registered Owner and
its Affiliates would exceed 9.99% of the outstanding shares of the Common Stock
following such exercise. For purposes of this Section 9, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended. The provisions of this Section 9 may be waived by a
Registered Owner as to itself (and solely as to itself) upon not less than 65
days prior written notice to the Company, and the provisions of this Section 9
shall continue to apply until such 65th day (or later, if stated in the notice
of waiver).
10. Officer's Certificate. Whenever the number of shares purchasable upon
exercise shall be adjusted as required by the provisions of Section 7, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price, number of shares or
other securities determined as herein provided, setting forth in reasonable
detail the facts requiring such adjustment and the manner of computing such
adjustment. Each such officer's certificate shall be signed by the chairman,
president or chief financial officer of the Company and by the secretary or any
assistant secretary of the Company. Each such officer's certificate shall be
made available at all reasonable times for inspection by any Registered Owner of
the Warrants and the Company shall, forthwith after each such adjustment,
deliver a copy of such certificate to the each of the Registered Owners.
11. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Purchase Agreement.
As used in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
-------
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
---------- ----------- ----------
correlative to the foregoing.
"Appraisal Procedure" shall have the following meaning. The independent
-------------------
directors of the Company shall determine the fair market value. The Holders
shall have ten (10) Business Days to provide the Company with written notice of
its approval or disapproval of such determination. If the Holders do not
respond within such ten (10) Business Day period, they will be deemed to have
approved the fair market value determination of the independent directors. If
the Holders appropriately respond that they do not approve of the determination
and the independent directors and Holders collectively can not agree on an
appropriate fair market value within 30 Business Days, then the Company, on the
one hand, and the Holders, on the other hand shall each appoint an Appraiser. A
neutral Appraiser shall be appointed by the two party-appointed Appraisers. The
three Appraisers shall collectively ascertain the fair market value, which
valuation shall be binding upon all parties absent manifest error.
"Appraiser" shall mean a nationally recognized or major regional
---------
investment banking firm or firm of independent certified public accountants of
recognized standing.
7
<PAGE>
"Average Price" on any date means (x) the sum of the Per Share Market Value
-------------
for the ten (10) Trading Days immediately preceding such date minus (y) the
highest and lowest Per Share Market Value during the ten (10) Trading Days
immediately preceding such date, divided by (z) eight (8), or a similar
calculation if another figure for the number of Trading Days is set forth for
clause (x) of this definition.
"Business Day" means any day except Saturday, Sunday and any day which
------------
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Change of Control" has the meaning set forth in the Purchase Agreement.
-----------------
"Closing" has the meaning set forth in Section 1.2 of the Purchase
-------
Agreement.
"Common Stock" means the shares of the Company's Common Stock, par value
------------
$0.01 per share.
"Company" means SatCon Technology Corporation, a Delaware corporation.
-------
"Exercise Period" has the meaning assigned to it the Section 4 hereof.
---------------
"Exercise Price" has the meaning assigned to it in Section 3 hereof
--------------
"Per Share Market Value" means on any particular date (i) the closing bid
----------------------
price per share of the Common Stock on such date on the National Market System
of the Nasdaq Stock Market or other registered national stock exchange on which
the Common Stock is then listed or if there is no such price on such date, then
the closing bid price on such exchange or quotation system on the date nearest
preceding such date, or (ii) if the Common Stock is not listed then on the
National Market System of the Nasdaq Stock Market or any registered national
stock exchange, the closing bid price for a share of Common Stock in the over-
the-counter market, as reported by the National Quotation Bureau Incorporated
(or similar organization or agency succeeding to its functions of reporting
prices) at the close of business on such date, or (iii) if the Common Stock is
not then publicly traded the fair market value of a share of Common Stock as
determined in accordance with the Appraisal Procedure. In addition, all
determinations of the Per Share Market Value shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions during such
period.
"Purchase Agreement" means that certain Securities Purchase Agreement,
------------------
dated August 25, 1999, among the Company and the Purchasers.
"Purchaser" has the meaning set forth in the Purchase Agreement.
---------
"Redemption Event" has the meaning assigned to it in Section 6(f) hereof.
----------------
"Redemption Right" has the meaning assigned to it in Section 6(f) hereof.
----------------
8
<PAGE>
"Registered Owner" means the person identified on the face of this Warrant
----------------
as the registered owner hereof or such other person as shown on the records of
the Company as being the registered owner of this Warrant or their assigns.
"Registration Rights Agreement" means that certain Registration Rights
-----------------------------
Agreement, dated August 25, 1999, among the Company and the Purchasers.
"Trading Day(s)" means any day on which the primary market on which shares
--------------
of Common Stock are listed is open for trading.
"Underlying Shares" has the meaning set forth in the Purchase Agreement.
-----------------
"Warrant(s)" means the warrants issuable at the Closing.
----------
12. Registration Rights. The Warrant Shares are subject to the
Registration Rights Agreement.
13. Reservation of Underlying Shares; Listing. The Company covenants that
it will at all times reserve and keep available out of its authorized shares of
Common Stock, free from preemptive rights, solely for the purpose of issue upon
exercise of the Warrants as herein provided, such number of shares of the Common
Stock as shall then be issuable upon the exercise of all outstanding Warrants
into Common Stock. The Company covenants that all shares of the Common Stock
issued upon exercise of the Warrant which shall be so issuable shall, when
issued, be duly and validly issued and fully paid and non-assessable. The
Company shall promptly secure the listing of the shares of Common Stock issuable
upon exercise of the Warrant upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon exercise of this Warrant) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock form time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and shall
maintain such listing of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any shares of the
same class shall be listed on such national securities exchange or automated
quotation system.
14. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 5:00 p.m.
eastern time where such notice is to be received), or the first Business Day
following such delivery (if received after 5:00 p.m. eastern time where such
notice is to be received) or (b) on the second Business Day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications are (i) if to the Company to SatCon Technology
Corporation, 161 First Street, Cambridge, MA 02142-1221, Attn: President and
Chief Executive Officer, fax no. (617) 576-7455, with copies to Hale & Dorr LLP,
60 State Street, Boston, MA 02109, Attn: Jeffrey N. Carp, Esq., fax no. (617)
526-5000 and (ii) if to any
9
<PAGE>
Purchaser to the address set forth on Schedule I hereto with copies to those
specified on the signature pages hereto and to Akin, Gump, Strauss, Hauer &
Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye,
Esq., fax no. (212) 872-1002 or such other address as may be designated in
writing hereafter, in the same manner, by such Person.
15. Compliance With Governmental Requirements. The Company covenants that
if any shares of Common Stock required to be reserved for purposes of exercise
of Warrants hereunder require registration with or approval of any governmental
authority under any Federal or state law, or any national securities exchange,
before such shares may be issued upon exercise, the Company will use its best
efforts to cause such shares to be duly registered or approved, as the case may
be.
16. Fractional Shares. Upon any exercise hereunder, the Company shall not
be required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
Registered Owner shall be entitled to receive, in lieu of the final fraction of
a share, one whole share of Common Stock.
17. Payment of Tax Upon Issue of Transfer. The issuance of certificates
for shares of the Common Stock upon exercise of the Warrants shall be made
without charge to the Registered Owners thereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon exercise in a name other than that of the
Registered Owner of such Warrant so converted and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
18. Warrants Owned by Company Deemed Not Outstanding. In determining
whether the holders of the outstanding Warrants have concurred in any direction,
consent or waiver under this Warrant, warrants which are owned by the Company or
by any person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding for the purpose of any such determination.
Warrants so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Company the
pledgee's right so to act with respect to such warrants and that the pledgee is
not the Company or any other obligor upon the securities or any Affiliate of the
Company or any other obligor on the warrants.
19. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
20. No Rights as Stockholder. This Warrant shall not entitle the
Registered Owner to any rights as a stockholder of the Company, including
without limitation, the right to vote, to receive dividends and other
distributions, or to receive notice of, or to attend, meetings of
10
<PAGE>
stockholders or any other proceedings of the Company, unless and to the extent
converted into shares of Common Stock in accordance with the terms hereof.
21. Certain Actions Prohibited. The Company will not, by amendment of its
charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, subject to Section 8 hereof.
22. Shareholder Rights Plan. Notwithstanding the foregoing, in the event
that the Company shall distribute "poison pill" rights pursuant to a "poison
pill" shareholder rights plan (the "Rights"), the Company shall, in lieu of
------
making any adjustment pursuant to Section 7 hereof, make proper provision so
that each Registered Owner who exercises a Warrant after the record date for
such distribution and prior to the expiration or redemption of the Rights shall
be entitled to receive upon such exercise, in addition to the shares of Common
Stock issuable upon such exercise, a number of Rights to be determined as
follows: (i) if such exercise occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder of
-----------------
a number of shares of Common Stock equal to the number of shares of Common Stock
issuable upon such exercise at the time of such exercise would be entitled in
accordance with the terms and provisions of and applicable to the Rights; and
(ii) if such exercise occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares into which the Warrant to
exercised was exercisable immediately prior to the Distribution Date would have
been entitled on the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights, and in each case subject to the
terms and conditions of the Rights.
23. Successors and Assigns. This Warrant shall be binding upon and inure
to the benefit of the Registered Owners and its assigns, and shall be binding
upon any entity succeeding to the Company by merger or acquisition of all or
substantially all the assets of the Company. The Company may not assign this
Warrant or any rights or obligations hereunder without the prior written consent
of the Registered Owner. The Registered Owner may assign this Warrant without
the prior written consent of the Company.
24. Transfers. The Company shall maintain a register (the "Register")
containing the name and address of the Registered Owner of this Warrant, which
Register can be relied upon by the Company as conclusive evidence of the
Registered Owner. If the Registered Owner transfers or assigns this Warrant it
shall promptly notify the Company in writing of the name and address of the
person to which such transfer or assignation was made. Upon receipt of such
notice the Company shall immediately update the Register to incorporate the new
Registered Owner.
11
<PAGE>
25. Governing Law. This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Warrant and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of the date first set forth above.
SATCON TECHNOLOGY CORPORATION
By: /s/ Michael C. Turmelle
-------------------------------------------
Name: Michael C. Turmelle
------------------------------------------
Title: Vice President, Chief Financial Officer
-----------------------------------------
12
<PAGE>
EXHIBIT A
Warrant Exercise Form
---------------------
TO: [INSERT COMPANY NAME]
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of [Insert Company Name], pursuant to
Warrant No. ___ heretofore issued to ___________________ on ____________,
199__; (2) encloses either (a) a cash payment of $__________ of (b) a Warrant
representing _____ shares of Common Stock valued at the Per Share Market Price
of $ _____ on ________, 199_, for these shares at a price of $____ per share (as
adjusted pursuant to the provisions of the Warrant); and (3) requests that a
certificate for the shares be issued in the name of the undersigned and
delivered to the undersigned at the address specified below.
Date: ___________________________
Investor Name: ___________________________
Taxpayer Identification ___________________________
Number: ___________________________
By: ___________________________
Printed Name: ___________________________
Title: ___________________________
Address: ___________________________
___________________________
___________________________
Note: The above signature should correspond exactly with the name on the
face of this Warrant Certificate or with the name of assignee appearing in
assignment form below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash and delivered to the address stated above.
13
