<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Satcon Technology Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
SATCON TECHNOLOGY CORPORATION
161 FIRST STREET
CAMBRIDGE, MASSACHUSETTS 02142
______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
______________
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of SATCON TECHNOLOGY CORPORATION (the "Corporation"), a Delaware
corporation, will be held on Wednesday, March 15, 2000 at 9:00 a.m. at the
offices of the Corporation, 161 First Street, Cambridge, Massachusetts 02142, to
consider and act upon the following matters:
1. To elect two (2) Class III Directors for the ensuing three years;
2. To approve an amendment to the Corporation's Certificate of
Incorporation increasing from 20,000,000 to 25,000,000 the number of
authorized shares of Common Stock;
3. To approve the Corporation's 1999 Stock Incentive Plan;
4. To ratify the selection of Arthur Andersen LLP as independent auditors
for the Corporation for the fiscal year ending September 30, 2000; and
5. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on January 24, 2000
as the record date for the determination of stockholders entitled to receive
notice of and vote at the Annual Meeting and any adjournment thereof. The stock
transfer books of the Corporation will remain open for the purchase and sale of
the Corporation's common stock.
We hope that all stockholders will be able to attend the Annual Meeting in
person. In order to ensure that a quorum is present at the Annual Meeting,
please date, sign and promptly return the enclosed Proxy whether or not you
expect to attend the Annual Meeting. A postage-prepaid envelope, addressed to
EquiServe, the Corporation's transfer agent and registrar, has been enclosed for
your convenience. If you attend the Annual Meeting, your Proxy will, upon your
written request, be returned to you and you may vote your shares in person.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
MICHAEL C. TURMELLE
Secretary
Cambridge, Massachusetts
February __, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>
SATCON TECHNOLOGY CORPORATION
161 FIRST STREET
CAMBRIDGE, MASSACHUSETTS 02142
______________
PROXY STATEMENT
______________
for the 2000 Annual Meeting of Stockholders
to be held on March 15, 2000
The enclosed Proxy is solicited by the Board of Directors of SATCON
TECHNOLOGY CORPORATION (the "Corporation"), a Delaware corporation, for use at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Wednesday, March 15, 2000 at 9:00 a.m. at the offices of the Corporation, 161
First Street, Cambridge, Massachusetts 02142, and at any adjournment or
adjournments thereof.
All Proxies will be voted in accordance with the instructions contained
therein, and if no choice is specified, the Proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any Proxy may be
revoked by a stockholder at any time before it is exercised by delivery of
written revocation to the Secretary of the Corporation.
The Corporation's Annual Report to Stockholders for the fiscal year ended
September 30, 1999 ("Fiscal 1999") is being mailed to stockholders with the
mailing of this Notice and Proxy Statement on or about February __, 2000.
A copy of the Corporation's Annual Report on Form 10-K for the fiscal year
ended September 30, 1999 as filed with the Securities and Exchange Commission,
except for exhibits, will be furnished without charge to any stockholder upon
written request to the Chief Financial Officer of the Corporation, SatCon
Technology Corporation, 161 First Street, Cambridge, Massachusetts 02142.
Voting Securities and Votes Required
Stockholders of record at the close of business on January 24, 2000 will be
entitled to notice of and to vote at the Annual Meeting and at any adjournment
or adjournments thereof. On that date, __________ shares of the Corporation's
common stock, $.01 par value per share (the "Common Stock"), were issued and
outstanding.
Each share of Common Stock entitles the holder to one vote with respect to
all matters submitted to stockholders at the Annual Meeting. The representation
in person or by Proxy of at least a majority of the shares of Common Stock
entitled to vote at the Annual Meeting is necessary to establish a quorum for
the transaction of business.
Directors are elected by a plurality of votes cast by stockholders entitled
to vote at the Annual Meeting. All other matters being submitted to stockholders
require the affirmative vote of the majority of shares present in person or
represented by Proxy at the Annual Meeting. The Corporation has no other
securities entitled to vote at the Annual Meeting.
Shares held in "street name" by brokers or nominees who indicate on their
Proxies that they do not have discretionary authority to vote such shares as to
a particular matter will not be considered as present and entitled to vote with
respect to a particular matter and will have no effect on the voting on such
matter.
<PAGE>
Stockholders may vote in person or by Proxy. Execution of a Proxy will not
in any way affect a stockholder's right to attend the Annual Meeting and vote in
person. Any stockholder voting by Proxy has the right to revoke it at any time
before it is exercised by giving written notice to the Secretary of the
Corporation prior to the Annual Meeting, or by giving to the Secretary of the
Corporation a duly executed Proxy bearing a later date than the Proxy being
revoked at any time before such Proxy is voted, or by appearing at the Annual
Meeting and voting in person. The shares represented by all properly executed
Proxies received in time for the Annual Meeting will be voted as specified
therein. If a stockholder does not specify in the Proxy how the shares are to be
voted, they will be voted in favor of the election as directors of those persons
named in this Proxy Statement and in favor of all other items set forth herein.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1999, certain
information concerning the beneficial ownership of the Corporation's Common
Stock by (i) each person known by the Corporation to own beneficially five
percent (5%) or more of the outstanding shares of the Corporation's Common
Stock; (ii) each of the Corporation's executive officers and directors; and
(iii) all executive officers and directors as a group.
The number of shares beneficially owned by each 5% stockholder, director or
executive officer is determined under rules of the Securities and Exchange
Commission (the "SEC"), and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual or entity has sole or
shared voting power or investment power and also any shares which the individual
or entity has the right to acquire on or before February 29, 2000 through the
exercise of any stock option, warrant or other right. Unless otherwise
indicated, each person or entity has sole investment and voting power (or shares
such power with his or her spouse) with respect to the shares set forth in the
following table. The inclusion herein of any shares deemed beneficially owned
does not constitute an admission of beneficial ownership of those shares.
<TABLE>
<CAPTION>
Number of Percentage of
Name and Address Shares Beneficially Outstanding
of Beneficial Owner(1) Owned(2) Common Stock
- --------------------- ------- ------------
<S> <C> <C>
Brown Simpson Strategic Growth Funds(3).................. 675,000 5.6%
152 West 57th Street
40th Floor
New York, NY 10019
Duquesne Enterprises..................................... 798,138 7.0%
One Northshore Center
Suite 100
12 Federal Street
Pittsburgh, PA 15212
Mechanical Technology Incorporated(4).................... 1,176,800 10.3%
325 Washington Avenue Extension
Albany, NY 12205
Northrop Grumman Corporation(5).......................... 678,761 5.9%
1840 Century Park East
Los Angeles, CA 90067
Marshall J. Armstrong.................................... 18,400 *
David B. Eisenhaure...................................... 2,931,422 25.6%
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Alan P. Goldberg (6).................................................. 1,176,800 10.3%
c/o Mechanical Technology Incorporated
325 Washington Avenue Extension
Albany, NY 12205
James L. Kirtley, Jr.................................................. 48,068 *
John P. O'Sullivan.................................................... 68,780 *
Michael C. Turmelle................................................... 166,071 1.5%
Thomas A. Hurkmans(7)................................................. 798,138 7.0%
c/o Duquesne Enterprises
One Northshore Center
Suite 100
12 Federal Street
Pittsburgh, PA 15212
All Executive Officers and Directors as a Group
(seven persons) (6)(7).............................................. 5,207,679 44.7%
</TABLE>
______________
* Less than 1%
(1) The address for all executive officers and directors, other than
Mr. Goldberg and Mr. Hurkmans, is c/o SatCon Technology Corporation, 161
First Street, Cambridge, Massachusetts 02142.
(2) Includes the following number of shares of Common Stock issuable upon the
exercise of outstanding stock options which may be exercised on or before
February 29, 2000: Mr. Armstrong: 18,400; Mr. Eisenhaure: 54,668; Dr.
Kirtley: 45,068; Mr. O'Sullivan: 18,400; Mr. Turmelle: 85,418; all
Executive Officers and Directors as a Group: 221,954.
(3) Consists of 452,250 shares of Common Stock issuable upon exercise of a
warrant held by Brown Simpson Strategic Growth Fund, Ltd. and 222,750
shares of Common Stock issuable upon exercise of a warrant held by Brown
Simpson Strategic Growth Fund, L.P.
(4) Includes 36,000 shares of Common Stock issuable upon exercise of a warrant
held by Mechanical Technology Incorporated.
(5) Includes 100,000 shares of Common Stock issuable upon exercise of a warrant
held by Northrop Grumman Corporation.
(6) Consists of 1,140,800 shares of Common Stock held by Mechanical Technology
Incorporated and 36,000 shares of Common Stock issuable upon exercise of a
warrant held by Mechanical Technology Incorporated. Mr. Goldberg is a
director of Mechanical Technology Incorporated and disclaims beneficial
ownership of these shares.
(7) Consists of 798,138 shares of Common Stock held by Duquesne Enterprises, of
which Mr. Hurkmans is the President and Chief Executive Officer.
Mr. Hurkmans disclaims beneficial ownership of these shares.
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<PAGE>
ELECTION OF DIRECTORS
The Corporation has a classified Board of Directors consisting of three
Class I Directors, two Class II Directors and two Class III Directors. At each
Annual Meeting of Stockholders, directors are elected for a full term of three
years to succeed those whose terms are expiring. The persons named in the
enclosed Proxy will vote to elect, as Class III Directors, Marshall J. Armstrong
and Thomas A. Hurkmans, the two director nominees named below, unless the Proxy
is marked otherwise. Each Class III Director will be elected to hold office
until the 2003 Annual Meeting of Stockholders and until his successor is elected
and qualified.
If a stockholder returns a Proxy without contrary instructions, the persons
named as Proxies will vote to elect as directors the nominees named below, each
of whom is currently a member of the Board of Directors of the Corporation. The
nominees have indicated their willingness to serve, if elected; however, if
either nominee should be unable to serve, the shares of Common Stock represented
by Proxies may be voted for a substitute nominee designated by the Board of
Directors. The Board of Directors has no reason to believe that either nominee
will be unable to serve if elected.
For each member of the Board of Directors, including those who are nominees
for election as Class III Directors, there follows information given by each
concerning his principal occupation and business experience for the past five
years, the name of other publicly held companies of which he serves as a
director and his age and length of service as a director of the Corporation.
With the exception of Mr. Eisenhaure, who is married to Mr. O'Sullivan's
first cousin, no director or executive officer is related by blood, marriage or
adoption to any other director or executive officer.
Pursuant to the Securities Purchase Agreement (the "1997 Securities
Purchase Agreement"), dated as of May 28, 1997, by and among the Corporation,
Beacon Power Corporation ("Beacon"), a subsidiary of the Corporation, and
Duquesne Enterprises ("Duquesne"), Anthony J. Villiotti was elected to the
Corporation's Board of Directors on June 30, 1997. On January 13, 2000, Mr.
Villiotti resigned from his position as a director of the Corporation, and the
Board of Directors appointed Mr. Thomas A. Hurkmans, as the representative of
Duquesne, to fill the vacancy resulting from the resignation of Mr. Villiotti.
Pursuant to the terms of the 1997 Securities Purchase Agreement, as long as
Duquesne owns five percent (5%) of the Corporation's Common Stock, the
Corporation must recommend that the Corporation's stockholders vote for
Duquesne's representative and cause to be voted for such representative the
shares of Common Stock for which the Corporation's management or Board of
Directors holds proxies or are otherwise entitled to vote.
Pursuant to the Securities Purchase Agreement (the "1999 Securities
Purchase Agreement"), dated as of October 21, 1999, between the Corporation and
Mechanical Technology Incorporated ("MTI"), Mr. Goldberg was elected to the
Corporation's Board of Directors as of November 15, 1999. Pursuant to the terms
of the 1999 Securities Purchase Agreement, as long as MTI owns five percent (5%)
of the Corporation's Common Stock, the Corporation must recommend that the
Corporation's stockholders vote for MTI's representative. The Corporation has
also agreed to appoint an additional member to its Board of Directors based on
recommendations by MTI.
Nominees for Terms Expiring in 2003 (Class III Directors)
Marshall J. Armstrong, age 64, became a Director in 1994.
From 1992 through 1997, Mr. Armstrong served as Chief Executive Officer and
Chairman of the Board of Thermo Power Corporation ("TPC"). TPC provides research
and development relating to engines, cogeneration and refrigeration equipment to
the marine, food processing, transportation, power generating, petrochemical and
pharmaceutical industries. Since January 1998, Mr. Armstrong has served as
Senior Vice President of Thermo Electron Corporation ("Thermo") where he has
been employed since 1968 in various
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<PAGE>
capacities and presently manages Thermo's government affairs. Mr. Armstrong also
serves as a Director of TPC and Thermo Sentron, Inc. Mr. Armstrong holds an M.S.
degree from George Washington University and a B.S. degree in Mechanical
Engineering from the University of Vermont.
Thomas A. Hurkmans, age 34, became a Director in 2000.
Since 1995, Mr. Hurkmans has served as the President of Duquesne
Enterprises, Inc., a wholly-owned subsidiary of DQE, Inc. which acquires and
develops businesses involved in energy-services and technologies, communications
and electronic commerce. From 1991 through 1995, Mr. Hurkmans served as a Vice
President of Duquesne Enterprises, Inc. Prior to joining Duquesne Enterprises,
Mr. Hurkmans founded and served as the President of Organization Technologies
Group, a computer software company. In addition, he was employed as an
investment banker with Merrill Lynch & Co., Inc., where he advised energy and
communications companies on strategic and financial matters including
acquisitions, divestitures and capital formation. Mr. Hurkmans received a B.A.
degree in Economics from Bates College.
Directors Whose Terms Expire in 2001 (Class I Directors)
David B. Eisenhaure, age 54, became a Director in 1985.
Mr. Eisenhaure has served as President, Chief Executive Officer and
Chairman of the Board of Directors of the Corporation since 1985. Prior to
founding the Corporation, Mr. Eisenhaure was associated with the Charles Stark
Draper Laboratory, Incorporated from 1974 to 1985, and with its predecessor, the
Massachusetts Institute of Technology's Instrumentation Laboratory, from 1967 to
1974. Mr. Eisenhaure holds S.B. and S.M. degrees in Mechanical Engineering, as
well as a Mechanical Engineers Degree, from the Massachusetts Institute of
Technology ("M.I.T."). In addition to his duties at the Corporation,
Mr. Eisenhaure holds an academic position at M.I.T., serving as a lecturer in
the Department of Mechanical Engineering.
James L. Kirtley, Jr., Ph.D., age 54, became a Director in 1992.
From 1985 to 1998, Dr. Kirtley was a consultant to the Corporation. On
March 1, 1998, Dr. Kirtley commenced employment with the Corporation on a
full-time basis as the Vice President and General Manager of the Corporation's
Technology Center. Dr. Kirtley is also a Professor of Electrical Engineering at
M.I.T. and became a member of the M.I.T. faculty in 1971. Dr. Kirtley received
his S.B., S.M., E.E. and Ph.D. degrees in Electrical Engineering from M.I.T.
Alan P. Goldberg, age 54, became a Director in 1999.
Mr. Goldberg has served as President and Co-Chief Executive Officer and
as a Director of First Albany Corporation, an investment bank, since 1993.
Mr. Goldberg also serves on the board of directors of Mechanical Technology
Incorporated. Mr. Goldberg is active in industry and civic organizations and
serves on the board of several non-profit institutions. He received a B.A.
degree in Government from Tufts University.
Directors Whose Terms Expire in 2002 (Class II Directors)
John P. O'Sullivan, age 57, became a Director in 1985.
From October 1994 through December 23, 1997, Mr. O'Sullivan served as Chief
Financial Officer of Brunswick Technologies, Inc. ("Brunswick"), a manufacturer
of fiberglass reinforcements. On December 23, 1997, Mr. O'Sullivan resigned from
his position with Brunswick. From 1979 through April 1994, Mr. O'Sullivan was
employed by Bangor Hydro-Electric Company, an energy provider, of which he was
also a Director and Vice President of Finance and Administration. Mr. O'Sullivan
was Commissioner of Finance and Administration for the State of Maine from 1975
through 1979. He received a B.A. degree in Economics from the College of the
Holy Cross and an M.B.A. degree from the Amos Tuck School of Business
Administration at Dartmouth College.
Michael C. Turmelle, age 40, became a Director in 1993.
Mr. Turmelle has served as the Corporation's Secretary since June 1993, and
as a Vice President, Chief Financial Officer and Treasurer since 1991.
Mr. Turmelle joined the Corporation in 1987 as Controller.
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<PAGE>
From 1982 to 1984 he was employed by the aerospace division of General Electric
Corporation, and held several positions, including internal auditor.
Mr. Turmelle holds a B.A. degree in Economics from Amherst College.
For information relating to Executive Officers of the Corporation, see
disclosure regarding Messrs. Eisenhaure and Turmelle and Dr. Kirtley set forth
under the heading "Election of Directors."
For information relating to shares of Common Stock owned by each of the
Directors and Executive Officers of the Corporation, see "Security Ownership of
Certain Beneficial Owners and Management."
Board and Committee Meetings
The Board of Directors met thirteen times during Fiscal 1999. During Fiscal
1999, each of the Corporation's directors attended at least 75% of the aggregate
of the total number of meetings of the Board of Directors of the Corporation and
the total number of meetings held by all committees of the Board of Directors of
the Corporation on which he served.
The Corporation does not have a standing nominating committee or a
committee performing similar functions.
In Fiscal 1999, Messrs. Armstrong, O'Sullivan and Villiotti served as the
members of the Audit Committee. On January 13, 2000, Mr. Hurkmans was appointed
by the Board of Directors to fill the vacancy on the Audit Committee resulting
from the resignation of Mr. Villiotti. The Audit Committee was established for
the purposes of (i) recommending the selection of the Corporation's independent
auditors; (ii) reviewing the effectiveness of the Corporation's accounting
policies and practices, financial reporting and internal controls; (iii)
reviewing any transactions that involve a potential conflict of interest; and
(iv) reviewing the scope of independent audit coverages and the fees charged by
the independent accountants. The Audit Committee met once during Fiscal 1999.
In Fiscal 1999, Messrs. Armstrong, O'Sullivan and Villiotti served as the
members of the Compensation Committee. On January 13, 2000, Mr. Hurkmans was
appointed by the Board of Directors to fill the vacancy on the Compensation
Committee resulting from the resignation of Mr. Villiotti. The Compensation
Committee was established to set and administer the policies that govern annual
compensation for the Corporation's executives. Following review and approval by
the Compensation Committee of the compensation policies, all issues pertaining
to executive compensation are submitted to the Board of Directors for approval.
The Compensation Committee approves compensation arrangements for officers,
consultants and directors of the Corporation including but not limited to the
grant of options to purchase the Corporation's Common Stock pursuant to the
Corporation's stock option plans or other plans that may be established. The
Compensation Committee met two times during Fiscal 1999.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's directors, executive officers and holders of more than 10% of
the Corporation's Common Stock to file with the SEC initial reports of ownership
of the Corporation's Common Stock and other equity securities on a Form 3 and
reports of changes in such ownership on a Form 4 or Form 5. Officers, directors
and 10% stockholders are required by SEC regulations to furnish the Corporation
with copies of all Section 16(a) forms they file.
To the Corporation's knowledge, based solely on a review of the
Corporation's records and written representations by the persons required to
file such reports, the filing requirements of Section 16(a) were satisfied with
respect to the Corporation's most recent fiscal year other than the following
filings which were not made on a timely basis: (i) a filing of a Form 5 by
Mr. Eisenhaure with respect to a stock option grant;
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<PAGE>
(ii) a filing of a Form 5 by Mr. Turmelle with respect to a stock option grant;
and (iii) a filing of a Form 5 by Dr. Kirtley with respect to a stock option
grant.
Compensation of Directors
Since November 1992, each of the Corporation's directors has received a fee
of $200 for each Board of Directors meeting attended, as well as a retainer of
$300 per month.
Certain Relationships and Related Transactions
Pursuant to the terms of the Securities Purchase Agreement (the "1998
Securities Purchase Agreement"), dated as of October 23, 1998, by and among
Beacon, Perseus Capital, L.L.C. ("Perseus"), Duquesne, Micro Generation
Technology Fund, L.L.C. ("Micro," and together with Perseus and Duquesne, the
"Purchasers") and the Corporation, (i) the Purchasers purchased from Beacon and
Beacon issued, sold and delivered to the Purchasers 1,900,000 shares (the
"Beacon Shares") of Beacon's Class D Preferred Stock, $.01 par value per share;
(ii) the Purchasers have the right to receive certain warrants to purchase
shares of Beacon's common stock, $.01 par value per share ("Beacon's Common
Stock") unless Beacon completes additional financings meeting certain criteria;
and (iii) the Corporation granted the Purchasers the right (the "Put Right") to
cause the Corporation, in the circumstances and for the consideration described
below, to purchase all of the Beacon Shares and all of Beacon's Common Stock
issuable upon conversion of the Beacon Shares. Upon exercise of the Put Right by
a Purchaser, the Corporation must pay the stated value of the Beacon Shares
acquired by such Purchaser plus accrued and unpaid dividends, in shares of the
Corporation's Common Stock. For this purpose, the Corporation's Common Stock
would be valued at the average fair market value for the fifteen trading days
before and after notice of exercise of the Put Right. The Put Right is
exercisable within sixty days of the second, third, fourth and fifth anniversary
of the closing date of the transaction, upon certain events of bankruptcy of
Beacon and upon the occurrence of certain going private transactions involving
the Corporation. The Beacon Shares were not registered under the Securities Act
of 1933, as amended, but the Purchasers entered into registration rights
agreements with the Corporation and Beacon. The aggregate consideration received
by Beacon was $4,750,000. Of the 1,900,000 Beacon Shares issued pursuant to the
1998 Securities Purchase Agreement, Duquesne purchased 400,000 of the Beacon
Shares for an aggregate purchase price of $1,000,000.
Pursuant to the terms of a Letter Agreement (the "Letter Agreement"), dated
as of October 23, 1998, Mr. Eisenhaure has agreed with the Purchasers that, in
the event that at any time on or prior to the full exercise or expiration of the
Put Right, the number of authorized shares of Common Stock that are legally
available for issuance in satisfaction of the Put Right is less than 1,000,000
more than the total number of shares required to satisfy the Corporation's
obligations under the Put Right, then Mr. Eisenhaure will take all action under
his control to so increase the number of authorized shares of Common Stock.
The terms of the 1998 Securities Purchase Agreement were determined on the
basis of arms-length negotiations. Prior to the execution of the 1998 Securities
Purchase Agreement, neither the Corporation nor Beacon had any material
relationship with Perseus or Micro. In May 1997, Duquesne made an investment in
the Corporation and received warrants to purchase shares of Beacon's Common
Stock. In connection with that transaction, Duquesne entered into agreements
with the Corporation and Beacon pursuant to which, among other things, Duquesne
will act as exclusive distributor of Beacon's products, subject to certain
exceptions, in seven Mid-Atlantic States and the District of Columbia. Beacon
has also entered into a consulting agreement with Duquesne pursuant to which
Duquesne is compensated by Beacon in the amount of $150,000 per annum in
exchange for certain consulting services provided by Duquesne to Beacon. On
October 23, 1998, Beacon and Duquesne modified this consulting arrangement such
that Beacon must pay for Duquesne's consulting services in shares of Beacon's
common stock.
Beacon was organized by the Corporation in May 1997 to continue the
development and distribution of the stationary, on-ground applications of the
Corporation's fly-wheel energy storage technology. Duquesne owns of record more
than five percent of the Corporation's Common Stock. In
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addition, Mr. Villiotti is the Vice President and Chief Financial Officer of
AquaSource, Inc. and was a member of the Board of Directors of the Corporation
until January 13, 2000. On January 13, 2000, Mr. Hurkmans was appointed by the
Board of Directors to fill the vacancy created by Mr. Villiotti's resignation.
In October 1999, the Corporation acquired Ling Electronics, Inc. and Ling
Electronics, Ltd. (collectively, "Ling Electronics") from MTI in connection with
an investment by MTI in the Corporation. In consideration for the acquisition of
Ling Electronics and MTI's investment, MTI received a total of 1,140,800 shares
of the Corporation's Common Stock and a warrant to purchase an additional 36,000
shares of the Corporation's Common Stock at an exercise price of $8.80 per
share. On October 21, 1999, MTI funded $2,570,000 of its investment in the
Corporation and issued a warrant to the Corporation to purchase 36,000 shares
of MTI's common stock at an exercise price of $37.66 per share. Pursuant to the
terms of the 1999 Securities Purchase Agreement, in the event the Corporation
achieves certain milestones (or MTI waives the requirement) prior to January 31,
2000, the Corporation is obligated to issue to MTI 659,200 shares of its Common
Stock and a warrant to purchase an additional 64,000 shares of the Corporation's
Common Stock at an exercise price of $8.80 per share in exchange for $4,500,000
in cash and a warrant to purchase 64,000 shares of MTI's common stock at an
exercise price of $37.66 per share. In connection with these transactions, Alan
P. Goldberg, a director of MTI and co-Chief Executive Officer of First Albany
Corporation, was elected a member of the Corporation's Board of Directors on
November 15, 1999. The Corporation has also agreed to appoint an additional
member to its Board of Directors based on recommendations by MTI, and MTI has
agreed to appoint Mr. Eisenhaure to its board of directors at its next annual
meeting.
In October 1999 and December 1999, the Corporation loaned $85,000 to
Mr. Turmelle, who serves as a Director of the Corporation and as the
Corporation's Vice President, Chief Financial Officer, Treasurer and Secretary.
The loan is represented by two promissory notes for $10,000 and $75,000,
respectively. The loan bears interest at 5.74% per annum, and principal and
interest is due and payable in full on December 15, 2000. As of December 31,
1999, $85,430 of the principal amount of the loan plus accrued interest was
outstanding.
For executive officer compensation and option exercise information, see
"Compensation of Executive Officers" and "Compensation Committee Report on
Executive Compensation."
Compensation of Executive Officers
Summary Compensation Table. The following table sets forth information
concerning the annual and long-term compensation for services rendered to the
Corporation for the fiscal years ended September 30, 1999, 1998 and 1997 of
those persons who were at September 30, 1999 (i) the chief executive officer of
the Corporation and (ii) each other executive officer of the Corporation whose
annual compensation exceeded $100,000.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------ ------------
Awards
-----------
Securities
Other Annual Underlying All Other
Name and Fiscal Compensation Options Compensation
Principal Position Year Salary($) Bonus($) ($) (#) ($)
- ------------------------------ ------ --------- -------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
David B. Eisenhaure 1999 $225,500 -- $ 5,400(2) 40,000 $ 9,787(3)
President, Chief Executive 1998 $215,250 -- $ 4,400(2) 40,000 $ 9,787(3)
Officer and Chairman 1997 $205,000 -- $ 5,200(2) 13,500 $ 9,787(3)
of the Board
Michael C. Turmelle 1999 $148,500 -- $ 5,400(2) 40,000 $ 7,995(3)
Vice President, Chief 1998 $141,750 -- $ 4,400(2) 40,000 $ 7,995(3)
Financial Officer, 1997 $135,000 -- $ 10,392(2) 13,500 $ 7,995(3)
Treasurer, Secretary and
Director
James L. Kirtley, Jr. (1) 1999 $149,231 -- $ 5,200(2) 40,000 --
Vice President, General 1998 $ 63,081 -- $ 4,400(2) 40,000 --
Manger and Director
</TABLE>
_______________________
(1) On March 1, 1998, Dr. Kirtley was named Vice President and General
Manager of the Corporation's Cambridge-based Technology Center. He
continues to serve the Corporation in the capacity of a Director, a
position he has held since 1992.
(2) Amounts include (i) accrued vacation benefit payouts to the executive
officer and (ii) Board of Director fees paid to the executive officer
in his capacity as a Director of the Corporation.
(3) Amounts include the dollar value of term life insurance premiums paid
by the Corporation on a $1,000,000 term life insurance policy of which
members of the executive officers' families are the beneficiaries.
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<PAGE>
Option Grants Table. The following table sets forth information concerning
individual grants of options to purchase the Corporation's Common Stock made to
the executive officers named in the Summary Compensation Table during Fiscal
1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation For
Individual Grants Option Term(3)
------------------------------------------------- ---------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise or
Granted in Fiscal Base Price Expiration
Name (#)(1) Year(2) ($/Share) Date 5%($) 10%($)
----- ------ ------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
David B. Eisenhaure... 40,000 4.74% $5.88 1/26/09 $135,574 $355,076
Michael C. Turmelle... 40,000 4.74% $5.69 1/15/09 $143,074 $362,576
James L. Kirtley, Jr.. 40,000 4.74% $5.69 1/15/09 $143,074 $362,576
</TABLE>
______________________
(1) Mr. Eisenhaure's options were granted on January 26, 1999, and Mr.
Turmelle's and Mr. Kirtley's options were granted on January 15, 1999, all
of which vest over a three-year period.
(2) In Fiscal 1999, options to purchase a total of 844,000 shares of Common
Stock were granted to employees of the Corporation, including executive
officers.
(3) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%)
on the Corporation's Common Stock over the term of the options. These
numbers are calculated based on rules promulgated by the SEC and do not
reflect the Corporation's estimate of future stock price growth. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the timing of such exercise and the future performance of the
Corporation's Common Stock.
Aggregated Option Exercises and Fiscal Year-End Option Value Table. The
following table sets forth certain information regarding stock options exercised
during Fiscal 1999 and held as of September 30, 1999 by the executive officers
named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised In-The-Money
Options at Options
Year-End (#) at Year-End($)(2)
-------------- ----------------------
Shares Acquired Value Realized Exercisable/ Exercisable/
--------------- --------------
Name on Exercise (#) ($)(1) Unexercisable Unexercisable
---- --------------- -------------- -------------- ----------------------
<S> <C> <C> <C> <C>
David B. Eisenhaure ........ -- $ -- $ 41,333/71,167 $ 16,500/$169,500
Michael C. Turmelle ........ -- $ -- $ 72,083/71,167 $227,749/$119,501
James L. Kirtley, Jr........ -- $ -- $ 31,733/66,667 $ 9,375/172,500
</TABLE>
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<PAGE>
____________
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(2) Value is based on the closing sales price of the Corporation's Common Stock
on September 30, 1999, the last trading day of Fiscal 1999 ($10.00), less
the applicable option exercise price.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
The Corporation has entered into Key Employee Agreements (the "Employee
Agreements") with Messrs. Eisenhaure and Turmelle which expire on June 30, 2001.
The Employee Agreements provide for automatic renewal for three-year periods
unless written notice of termination is given by either party not less than
three months prior to the expiration date. In addition, pursuant to the Employee
Agreements, each of Messrs. Eisenhaure and Turmelle is entitled to receive
benefits offered to the Corporation's employees generally as well as a severance
payment equal to 100% of his annual salary, payable in twelve equal monthly
installments if (i) the Corporation or a substantial portion of the Corporation
is acquired without the approval of the Board of Directors of the Corporation;
(ii) his employment is terminated without cause; or (iii) without his consent,
his salary is reduced, there is a substantial change in his position, there is a
change in his principal place of employment from the greater Boston,
Massachusetts area or the Employee Agreement is not renewed following the
expiration of its term. The Employee Agreements also contain provisions
prohibiting Messrs. Eisenhaure and Turmelle from competing with the Corporation
for a one-year period following termination of employment.
Compensation Committee Report on Executive Compensation
The Corporation's executive compensation program is administered by the
Compensation Committee. This committee, composed in Fiscal 1999 of Messrs.
Armstrong, O'Sullivan and Villiotti, is responsible for establishing the
policies that govern base salary, as well as short and long-term incentives for
the Corporation's senior management team.
The Committee believes that the primary objectives of the Corporation's
compensation policies are to attract and retain a management team that can
effectively implement and execute the Corporation's strategic business plan.
These compensation policies include (i) an overall management compensation
program that is competitive with management compensation programs at companies
of similar sizes and lines of business; (ii) short-term bonus incentives, which
may be put in place, for management to meet the Corporation's net income
performance goals; and (iii) long-term incentive compensation in the form of
stock options which will encourage management to continue to focus on
stockholder return.
The Committee's goal is to use compensation policies to closely align the
interests of management with the interests of stockholders in building long-term
value for the Corporation's stockholders. The Committee will review its
compensation policies from time to time in order to determine the reasonableness
of the Corporation's compensation programs and to take into account factors
which are unique to the Corporation.
As described above, Messrs. Eisenhaure and Turmelle have signed Employee
Agreements with the Corporation defining the executive officer's duties, salary,
severance arrangements and restrictions on competition with the Corporation.
Base Salary. The Committee's goal is not only to assure a base level
sufficient to attract and retain key executives, but also to balance that goal
with long-term incentives which assure that a significant portion of annual
compensation is dependent upon the financial performance of the Corporation.
Base salaries for executive officers increased by 4.8% from Fiscal 1998 to
Fiscal 1999. Base salaries for
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<PAGE>
executive officers may increase in the future as the Corporation advances in
size and profitability.
Bonus. During Fiscal 1999, the Committee adopted an incentive bonus plan,
pursuant to which certain executive officers of the Corporation are eligible for
an annual bonus award based on certain performance-based criteria. This plan is
designed to (i) attract and retain highly qualified executives and other
personnel by providing competitive annual incentive opportunities; (ii) provide
performance-leveraged incentives which motivate and reward superior managerial
performance and the profitable growth of the Corporation; and (iii) support a
performance-oriented environment that differentiates individual rewards based on
performance and results. Although this plan has been adopted, it is not
currently in effect.
Stock Options. In examining stock option, equity incentive, phantom stock
and other plans typically provided to senior management in publicly held
corporations, the Compensation Committee determined that the Corporation should
provide equity incentives to its senior management. Stock options have been
issued in recognition of the performance of the senior management team to date
in improving the Corporation's financial position, establishing important
strategic relationships with manufacturers and distributors, and developing and
bringing to market innovative new technologies. The Committee also believes that
the granting of stock options is a valuable incentive tool for management to
continue to focus on realizing strategic goals and in building value for all
stockholders. Most of the option grants vest over a multi-year period.
Compensation of Chief Executive Officer. In Fiscal 1999, the Corporation's
Chief Executive Officer, David Eisenhaure, received salary compensation of
$225,500, representing an increase of 4.8% over his salary in Fiscal 1998. This
increase in compensation for Mr. Eisenhaure was based upon careful analysis of
other comparable public companies' Chief Executive Officer's compensation and
the performance of the Corporation, including continued development and
commercialization of the Corporation's technology and the revenue growth of the
Corporation and its subsidiaries. The increase was also based upon Mr.
Eisenhaure's efforts in locating appropriate product acquisition candidates.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code, enacted in 1994, generally disallows a tax deduction to
public companies for compensation over $1 million paid to the Corporation's
Chief Executive Officer and the four other most highly compensated executive
officers. Qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. The Corporation intends to
structure stock option grants to its executive officers to comply with the
statute to mitigate any disallowance of deductions and, in any event, does not
expect Section 162(m) to apply to the compensation paid by the Corporation to
its executive officers.
COMPENSATION COMMITTEE
MARSHALL J. ARMSTRONG
JOHN P. O'SULLIVAN
ANTHONY J. VILLIOTTI
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<PAGE>
Compensation Committee Interlocks and Insider Participation
During Fiscal 1999, Messrs. Armstrong, O'Sullivan and Villiotti served as
members of the Compensation Committee. For information regarding Mr.
Villiotti's relationship with Duquesne, see "Certain Relationships and Related
Transactions."
Comparative Stock Performance Graph
The comparative stock performance graph below compares the cumulative total
stockholder return (assuming reinvestment of dividends, if any) from investing
$100 on September 30, 1994, and plotted at the end of each fiscal year, in each
of (i) the Corporation's Common Stock; (ii) the Nasdaq National Market Index of
U.S. Companies ("Nasdaq Index"); and (iii) a peer group index of four companies
that provide similar services to those of the Corporation (Ballard Power
Systems, Inc., Kollmorgen Corp., Unique Mobility, Inc. and Mechanical Technology
Incorporated (the "Peer Group Index")). The Peer Group Index differs from the
one used for the immediately preceding fiscal year in that Aura Systems, Inc.,
Noise Cancellation Technologies, Inc. and Andrea Electronics Corp. have been
removed and Ballard Power Systems, Inc., Kollmorgen Corp. and Mechanical
Technology Incorporated have been added. The Corporation believes the four
companies in the current Peer Group Index are more representative of companies
whose business is similar to that of the Corporation and whose stock has been
publicly traded for at least one year.
COMPARISON OF CUMULATIVE RETURN
AMONG SATCON TECHNOLOGY CORPORATION,
NASDAQ INDEX AND PEER GROUP INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement
Period SatCon Peer Group Peer Group
(Fiscal Year Technology Nasdaq Index for Fiscal Index for Fiscal
Covered) Corporation Index 1999 1998(1)
- -------------- ----------- ----- ---------------- ----------------
<S> <C> <C> <C> <C>
09/30/94 $100.00 $100.00 $100.00 $100.00
09/30/95 $ 83.90 $121.41 $112.70 $ 77.92
09/29/96 $ 62.44 $141.75 $132.28 $ 70.11
09/30/97 $ 99.51 $192.67 $224.51 $209.41
09/30/98 $ 43.90 $200.23 $294.55 $ 68.90
09/30/99 $ 78.05 $323.92 $343.25 $ 67.86
</TABLE>
(1) Since Aura Systems, Inc. and Noise Cancellation Technologies, Inc. were
delisted in the past year, the calculations for the "Peer Group Index for
Fiscal 1998" were determined using only Andrea Electronics Corp. and Unique
Mobility, Inc.
INCREASE IN
AUTHORIZED COMMON STOCK
The Board of Directors has approved, and has recommended that the
stockholders of the Corporation approve, an amendment to the Corporation's
Certificate of Incorporation providing for an increase from 20,000,000 to
25,000,000 in the number of authorized shares of Common Stock. As of December
31, 1999, the Company had a total of 11,396,570 shares of Common Stock
outstanding (including
-14-
<PAGE>
44,500 shares held in treasury), 1,688,394 shares of Common Stock reserved for
future issuance under its stock incentive plans and 1,031,000 shares of Common
Stock reserved for issuance upon exercise of warrants. The amendment is
contained in Exhibit A to this Proxy Statement.
---------
If the amendment is approved, the additional 5,000,000 authorized shares of
Common Stock would be available for issuance in the future for corporate
purposes, including, without limitation, financings, acquisitions, stock splits,
stock dividends and management incentive and employee benefit plans, as the
Board of Directors may deem advisable, without the necessity of further
stockholder action.
The issuance of additional shares of Common Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, would have the effect of diluting the Corporation's current
stockholders and could have the effect of making it more difficult for a third
party to acquire, or discouraging a third party from attempting to acquire,
control of the Corporation. The Corporation is not aware of any attempts on the
part of a third party to effect a change of control of the Corporation and the
amendment has been proposed for the reasons stated above and not for any
possible anti-takeover effects it may have.
Board Recommendation
The Board of Directors believes that the approval of the amendment
increasing the number of shares of authorized Common Stock is in the best
interests of the Corporation and its stockholders and recommends a vote FOR this
proposal.
APPROVAL OF 1999 STOCK INCENTIVE PLAN
On July 28, 1999, the Board of Directors of the Corporation adopted,
subject to stockholder approval, the 1999 Stock Incentive Plan (the "1999
Plan"). Up to 1,500,000 shares of Common Stock (subject to adjustment in the
event of stock splits and other similar events) may be issued pursuant to awards
granted under the 1999 Plan. The 1999 Plan is contained in Exhibit B to this
---------
Proxy Statement.
The Board of Directors believes that the future success of the Corporation
depends, in large part, upon the ability of the Corporation to maintain a
competitive position in attracting, retaining and motivating key personnel.
Accordingly, the Board of Directors believes adoption of the 1999 Plan is in the
best interests of the Corporation and its stockholders and recommends a vote FOR
this proposal.
Summary of the 1999 Plan
The following is a brief summary of the 1999 Plan. The 1999 Plan is
contained in Exhibit B to this Proxy Statement. The following summary is
---------
qualified in its entirety by reference to the 1999 Plan.
Description of Awards
The 1999 Plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), nonstatutory stock options, restricted stock awards and other stock-
based awards, including the grant of shares based upon certain conditions, the
grant of securities convertible into Common Stock and the grant of stock
appreciation rights (collectively "Awards").
Incentive Stock Options and Nonstatutory Stock Options. Optionees receive
the right to purchase a specified number of shares of Common Stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. Options may be granted at an
exercise price which may be less than, equal to or greater than the fair market
value of the Common Stock on the date of
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<PAGE>
grant. Under present law, however, incentive stock options and options intended
to qualify as performance-based compensation under Section 162(m) of the Code
may not be granted at an exercise price less than the fair market value of the
Common Stock on the date of grant (or less than 110% of the fair market value in
the case of incentive stock options granted to optionees holding more than 10%
of the voting power of the Corporation). The 1999 Plan permits the Board to
determine the manner of payment of the exercise price of options, including
through payment by cash, check or in connection with a "cashless exercise"
through a broker, by surrender to the Corporation of shares of Common Stock, by
delivery to the Corporation of a promissory note, or by any other lawful means.
Restricted Stock Awards. Restricted stock Awards entitle recipients to
acquire shares of Common Stock, subject to the right of the Corporation to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable Award are not satisfied prior to the end
of the applicable restriction period established for such Award.
Other Stock-Based Awards. Under the 1999 Plan, the Board has the right to
grant other Awards based upon the Common Stock having such terms and conditions
as the Board may determine, including the grant of shares based upon certain
conditions, the grant of securities convertible into Common Stock and the grant
of stock appreciation rights.
Eligibility to Receive Awards
Officers, employees, directors, consultants and advisors of the Corporation
and its subsidiaries are eligible to be granted Awards under the 1999 Plan.
Under present law, however, incentive stock options may only be granted to
employees. The maximum number of shares with respect to which an Award may be
granted to any participant under the 1999 Plan may not exceed 100,000 shares per
calendar year.
As of December 31, 1999, approximately 231 persons were eligible to receive
Awards under the 1999 Plan, including the Corporation's three executive officers
and four non-employee directors. The granting of Awards under the 1999 Plan is
discretionary and the Corporation cannot now determine the number or type of
Awards to be granted in the future to any particular person or group. During
Fiscal 1999, Mr. Turmelle and Dr. Kirtley each received a stock option grant for
the right to purchase 40,000 shares of Common Stock at an exercise price of
$5.69 per share. In addition, during Fiscal 1999, Mr. Eisenhaure received a
stock option grant for the right to purchase 40,000 shares of Common Stock at an
exercise price of $5.88 per share.
On December 31, 1999, the last reported sale price of the Corporation's
Common Stock on the Nasdaq National Market was $8.344.
Administration
The 1999 Plan is administered by the Board of Directors. The Board has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the 1999 Plan and to interpret the provisions of the 1999
Plan. Pursuant to the terms of the 1999 Plan, the Board of Directors may
delegate authority under the 1999 Plan to one or more committees of the Board,
and subject to certain limitations, to one or more executive officers of the
Corporation. The Board has authorized the Compensation Committee to administer
certain aspects of the 1999 Plan, including the granting of options to executive
officers. Subject to any applicable limitations contained in the 1999 Plan, the
Board of Directors, the Compensation Committee, or any other committee or
executive officer to whom the Board delegates authority, as the case may be,
selects the recipients of Awards and determines (i) the number of shares of
Common Stock covered by options and the dates upon which such options become
exercisable, (ii) the exercise price of options, (iii) the duration of options,
and (iv) the number of shares of Common Stock subject to any restricted stock or
other stock-based Awards and the terms and conditions of such Awards, including
conditions for repurchase, issue price and repurchase price.
The Board of Directors is required to make appropriate adjustments in
connection with the 1999 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. In the
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<PAGE>
event of a merger, liquidation or other Acquisition Event (as defined in the
1999 Plan), the Board of Directors is authorized to provide for outstanding
Options or other stock-based Awards to be assumed or substituted for, to
accelerate the Awards to make them fully exercisable prior to consummation of
the Acquisition Event or to provide for a cash out of the value of any
outstanding options. Upon the occurrence of an Acquisition Event also
constituting a Change in Control Event (as defined in the 1999 Plan), the
vesting of approximately 50% of each optionee's unvested Options will accelerate
and vest. In addition, if an employee is terminated without Cause (as defined in
the 1999 Plan) or leaves the Corporation for Good Reason (as defined in the 1999
Plan) within 12 months of an Acquisition Event also constituting a Change in
Control Event, all of such employee's unvested Options will accelerate and vest.
If any Award expires or is terminated, surrendered, canceled or forfeited, the
unused shares of Common Stock covered by such Award will again be available for
grant under the 1999 Plan.
Amendment or Termination
No Award may be made under the 1999 Plan after July 28, 2009, but Awards
previously granted may extend beyond that date. The Board of Directors may at
any time amend, suspend or terminate the 1999 Plan, except that no Award
designated as subject to Section 162(m) of the Code by the Board of Directors
after the date of such amendment shall become exercisable, realizable or vested
(to the extent such amendment was required to grant such Award) unless and until
such amendment shall have been approved by the Corporation's stockholders.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1999 Plan and with respect to the sale of Common Stock acquired under the 1999
Plan.
Incentive Stock Options
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option, however, may subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more
than one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a long-
term capital loss if the participant has held the ISO Stock for more than one
year prior to the date of sale.
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<PAGE>
Nonstatutory Stock Options
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the Exercise Date
over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
a long-term gain or loss if the participant has held the NSO Stock for more than
one year prior to the date of the sale.
Restricted Stock Awards
A participant will not recognize taxable income upon the grant of a
restricted stock Award, unless the participant makes an election under Section
83(b) of the Code (a "Section 83(b) Election"). If the participant makes a
Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary income, for the year in which the Award is
granted, in an amount equal to the difference between the fair market value of
the Common Stock at the time the Award is granted and the purchase price paid
for the Common Stock. If a Section 83(b) Election is not made, the participant
will recognize ordinary income, at the time that the forfeiture provisions or
restrictions on transfer lapse, in an amount equal to the difference between the
fair market value of the Common Stock at the time of such lapse and the original
purchase price paid for the Common Stock. The participant will have a basis in
the Common Stock acquired equal to the sum of the price paid and the amount of
ordinary compensation income recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock Award, the participant will recognize a capital gain or loss equal to the
difference between the sale price of the Common Stock and the participant's
basis in the Common Stock. The gain or loss will be a long-term gain or loss if
the shares are held for more than one year. For this purpose, the holding period
shall begin just after the date on which the forfeiture provisions or
restrictions lapse if a Section 83(b) Election is not made, or just after the
Award is granted if a Section 83(b) Election is made.
Other Stock-Based Awards
The tax consequences associated with any other stock-based Award granted
under the 1999 Plan will vary depending on the specific terms of such Award.
Among the relevant factors are whether or not the Award has a readily
ascertainable fair market value, whether or not the Award is subject to
forfeiture provisions or restrictions on transfer, the nature of the property to
be received by the participant under the Award and the participant's holding
period and tax basis for the Award or underlying Common Stock.
Tax Consequences to the Corporation
The grant of an Award under the 1999 Plan will have no tax consequences to
the Corporation. Moreover, in general, neither the exercise of an incentive
stock option nor the sale of any Common Stock acquired under the 1999 Plan will
have any tax consequences to the Corporation. The Corporation generally will be
entitled to a business-expense deduction, however, with respect to any ordinary
compensation income recognized by a participant under the 1999 Plan, including
in connection with a restricted stock Award or as a result of the exercise of a
nonstatutory stock option or a Disqualifying Disposition. Any such deduction
will be subject to the limitations of Section 162(m) of the Code.
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<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
On May 12, 1999, the Corporation dismissed PricewaterhouseCoopers LLP
("PwC") from its position as the Corporation's independent auditors. The
decision to change accountants was recommended by the Corporation's Audit
Committee and approved by the Corporation's Board of Directors. None of the
reports of PwC on the financial statements of the Corporation for either of the
past two fiscal years contained an adverse opinion or a disclaimer of opinion,
or was qualified or modified as to uncertainty, audit scope or accounting
principles. During the Corporation's two most recent fiscal years and the
subsequent interim period immediately preceding the date of the dismissal of
PwC, the Corporation had no disagreements with PwC on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement(s), if not resolved to the satisfaction of PwC,
would have caused PwC to make reference to the subject matter of the
disagreement(s) in connection with its reports on the financial statements of
the Corporation. None of the reportable events listed in Item 304 (a) (1) (v) of
Regulation S-K under the Securities Exchange Act of 1934, as amended, occurred
with respect to the Corporation's two most recent fiscal years or the subsequent
interim period preceding the dismissal of PwC.
On May 25, 1999, the Corporation engaged Arthur Andersen LLP as its
independent auditors. The decision to engage Arthur Andersen LLP was based on
recommendations by the Corporation's Audit Committee and approved by the
Corporation's Board of Directors. During the Corporation's two most recent
fiscal years, and any subsequent interim period prior to engaging Arthur
Andersen LLP, (i) neither the Corporation nor anyone on its behalf consulted
Arthur Andersen LLP regarding the application of accounting principles to a
specific completed or proposed transaction or the type of audit opinion that
might be rendered on the Corporation's financial statements; and (ii) no written
report or oral advice concerning the same was provided to the Corporation that
Arthur Andersen LLP concluded was an important factor considered by the
Corporation in reaching a decision as to any accounting, auditing or financial
reporting issue.
The persons named in the enclosed Proxy will vote to ratify the selection
of Arthur Andersen LLP as independent auditors for the fiscal year ending
September 30, 2000 unless otherwise directed by the stockholders. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting and will have the opportunity to make a statement and answer questions
from stockholders if he or she so desires. If the stockholders do not ratify the
selection of Arthur Andersen LLP as the Corporation's independent auditors, the
selection of such independent auditors will be reconsidered by the Audit
Committee and the Board of Directors.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
to the Annual Meeting, it is the intention of the persons named in the
accompanying Proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
SOLICITATION OF PROXIES
The cost of solicitation of Proxies will be borne by the Corporation. In
addition to the solicitation of Proxies by mail, officers and employees of the
Corporation may solicit Proxies in person or by telephone. The Corporation may
reimburse brokers or persons holding stock in their names, or in the names of
their nominees, for their expenses in sending Proxies and Proxy material to
beneficial owners.
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<PAGE>
REVOCATION OF PROXY
Subject to the terms and conditions set forth herein, all Proxies received
by the Corporation will be effective, notwithstanding any transfer of the shares
to which such Proxies relate, unless at or prior to the Annual Meeting the
Corporation receives a written notice of revocation signed by the person who, as
of the record date, was the registered holder of such shares. The Notice of
Revocation must indicate the certificate number and numbers of the shares to
which such revocation relates and the aggregate number of shares represented by
such certificate(s).
STOCKHOLDER PROPOSALS
In order to be included in Proxy material for the 2001 Annual Meeting of
Stockholders, stockholders' proposed resolutions must be received by the
Corporation at its offices, 161 First Street, Cambridge, Massachusetts 02142 on
or before November 30, 2000. The Corporation suggests that proponents submit
their proposals by certified mail, return receipt requested, addressed to the
Secretary of the Corporation.
If a stockholder of the Corporation wishes to present a proposal before the
2001 Annual Meeting of Stockholders, but does not wish to have the proposal
considered for inclusion in the Corporation's proxy statement and proxy card,
such stockholder must also give written notice to the Secretary of the
Corporation at the address noted above. The Secretary must receive such notice
by January 13, 2001. If a stockholder fails to provide timely notice of a
proposal to be presented at the 2001 Annual Meeting of Stockholders, the proxies
designated by the Board of Directors of the Corporation will have discretionary
authority to vote on any such proposal.
By Order of the Board of Directors
MICHAEL C. TURMELLE
Secretary
Cambridge, Massachusetts
February ___, 2000
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE,
SIGN, AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT
RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR
COOPERATION WILL BE APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE
THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
-20-
<PAGE>
Exhibit A
---------
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 January 13, 2000, 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 15, 2000 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 20,000,000 to 25,000,000.
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 _____ day of March, 2000.
SATCON TECHNOLOGY CORPORATION
By: -------------------------
David B. Eisenhaure
Chief Executive Officer
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<PAGE>
Appendix 1
----------
4. The total number of shares of stock which the Corporation shall have
authority to issue is twenty-six million (26,000,000) shares, twenty-
five million (25,000,000) 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.
-22-
<PAGE>
Exhibit B
---------
SATCON TECHNOLOGY CORPORATION
1999 STOCK INCENTIVE PLAN
-------------------------
1. Purpose
-------
The purpose of this 1999 Stock Incentive Plan (the "Plan") of SatCon
Technology Corporation, a Delaware corporation (the "Company"), is to advance
the interests of the Company's stockholders by enhancing the Company's ability
to attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any of the Company's present or future subsidiary corporations of as defined in
Section 424(f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the "Code").
2. Eligibility
-----------
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant."
3. Administration, Delegation
--------------------------
(a) Administration by Board of Directors. The Plan will be administered by
------------------------------------
the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
(b) Delegation to Executive Officers. To the extent permitted by
--------------------------------
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
(c) Appointment of Committees. To the extent permitted by applicable law,
-------------------------
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.
-23-
<PAGE>
4. Stock Available for Awards
--------------------------
(a) Number of Shares. Subject to adjustment under Section 8, Awards may be
----------------
made under the Plan for up to 1,500,000 shares of common stock, $0.01 par value
per share, of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 8, for
---------------------
Awards granted after the Common Stock is registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), the maximum number of shares of
Common Stock with respect to which an Award may be granted to any Participant
under the Plan shall be 100,000 shares per calendar year. The per-Participant
limit described in this Section 4(b) shall be construed and applied consistently
with Section 162(m) of the Code.
5. Stock Options
-------------
(a) General. The Board may grant options to purchase Common Stock (each,
-------
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive
Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option."
(b) Incentive Stock Options. An Option that the Board intends to be an
-----------------------
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
--------------
time each Option is granted and specify it in the applicable option agreement.
(d) Duration of Options. Each Option shall be exercisable at such times
-------------------
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
(e) Exercise of Option. Options may be exercised by delivery to the
------------------
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
---------------------
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise provide
in an option agreement, by (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price or (ii) delivery by the
-24-
<PAGE>
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price;
(3) when the Common Stock is registered under the Exchange Act, by
delivery of shares of Common Stock owned by the Participant valued at their fair
market value as determined by (or in a manner approved by) the Board in good
faith ("Fair Market Value"), provided (i) such method of payment is then
permitted under applicable law and (ii) such Common Stock was owned by the
Participant at least six months prior to such delivery;
(4) to the extent permitted by the Board, in its sole discretion by
(i) delivery of a promissory note of the Participant to the Company on terms
determined by the Board, or (ii) payment of such other lawful consideration as
the Board may determine; or
(5) by any combination of the above permitted forms of payment.
6. Restricted Stock
----------------
(a) Grants. The Board may grant Awards entitling recipients to acquire
------
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
--------------------
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. Other Stock-Based Awards
------------------------
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. Adjustments for Changes in Common Stock and Certain Other Events
----------------------------------------------------------------
(a) Changes in Capitalization. In the event of any stock split, reverse
-------------------------
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in
-25-
<PAGE>
good faith, that such an adjustment (or substitution) is necessary and
appropriate. If this Section 8(a) applies and Section 8(c) also applies to any
event, Section 8(c) shall be applicable to such event, and this Section 8(a)
shall not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation or
--------------------------
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted Stock Award or other Award granted under the Plan
at the time of the grant of such Award.
(c) Acquisition and Change in Control Events
----------------------------------------
(1) Definitions
-----------
(a) An "Acquisition Event" shall mean:
(i) any merger or consolidation of the Company with or into
another entity as a result of which the Common Stock is
converted into or exchanged for the right to receive
cash, securities or other property; or
(ii) any exchange of shares of the Company for cash,
securities or other property pursuant to a statutory
share exchange transaction.
(b) A "Change in Control Event" shall mean:
(i) the acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership
of any capital stock of the Company if, after such
acquisition, such Person beneficially owns (within the
meaning of Rule 13d-3 promulgated under the Exchange
Act) 40% or more of either (x) the then-outstanding
shares of common stock of the Company (the "Outstanding
Company Common Stock") or (y) the combined voting power
of the then-outstanding securities of the Company
entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection
-------- -------
(i), the following acquisitions shall not constitute a
Change in Control Event; (A) any acquisition directly
from the Company (excluding an acquisition pursuant to
the exercise, conversion or exchange of any security
exercisable for, convertible into or exchangeable for
common stock or voting securities of the Company,
unless the Person exercising, converting or exchanging
such security acquired such security directly from the
Company or an underwriter or agent of the Company), (B)
any acquisition by any employee benefit plan (or
related trust)
-26-
<PAGE>
sponsored or maintained by the Company or any
corporation controlled by the Company, (C) any
acquisition by any corporation pursuant to a Business
Combination (as defined below) which complies with
clauses (x) and (y) of subsection (iii) of this
definition, or (D) any acquisition by David B.
Eisenhaure (including his heirs) (each such party is
referred to herein as an "Exempt Person") of any shares
of Common Stock; provided that, after such acquisition,
such Exempt Person does not beneficially own more than
50% of either (i) the Outstanding Company Common Stock
or (ii) the Outstanding Company Voting Securities; or
(ii) such time as the Continuing Directors (as defined
below) do not constitute a majority of the Board (or,
if applicable, the Board of Directors of a successor
corporation to the Company), where the term "Continuing
Director" means at any date a member of the Board (x)
who was a member of the Board on the date of the
initial adoption of this Plan by the Board or (y) who
was nominated or elected subsequent to such date by at
least a majority of the directors who were Continuing
Directors at the time of such nomination or election or
whose election to the Board was recommended or endorsed
by at least a majority of the directors who were
Continuing Directors at the time of such nomination or
election; provided, however, that there shall be
-------- -------
be excluded from this clause (y) any individual whose
initial assumption of office occurred as a result of an
actual or threatened election contest with respect to
the election or removal of directors or other actual or
threatened solicitation of proxies or consents, by or
on behalf of a person other than the Board; or
(iii) the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share
exchange involving the Company or a sale or other
disposition of all or substantially all of the assets
of the Company (a "Business Combination"), unless,
immediately following such Business Combination, each
of the following two conditions is satisfied: (x) all
or substantially all of the individuals and entities
who were the beneficial owners of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
more than 50% of the then outstanding shares of common
stock and the combined voting power of the then-
outstanding securities entitled to vote generally in
the election of directors, respectively, of the
resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a
corporation which as a result of such transaction owns
the Company or substantially all of the Company's
assets either directly or through one or more
subsidiaries) (such resulting or acquiring corporation
is referred to herein as the "Acquiring Corporation")
in substantially the same proportions as their
ownership of the Outstanding
-27-
<PAGE>
Company Common Stock and Outstanding Company Voting
Securities, respectively, immediately prior to such
Business Combination and (y) no Person (excluding the
Acquiring Corporation or any employee benefit plan (or
related trust) maintained or sponsored by the Company
or by the Acquiring Corporation or any Exempt Person)
beneficially owns, directly or indirectly, 40% or more
of the then-outstanding shares of common stock of the
Acquiring Corporation, or of the combined voting power
of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior
to the Business Combination).
(c) "Good Reason" shall mean any significant diminution in the
Participant's title, authority, or responsibilities from and
after such Acquisition Event or Change in Control Event, as
the case may be, or any reduction in the annual cash
compensation payable to the Participant from and after such
Acquisition Event or Change in Control Event, as the case
may be, or the relocation of the place of business at which
the Participant is principally located to a location that is
greater than 50 miles from the current site.
(d) "Cause" shall mean any (i) willful failure by the
Participant, which failure is not cured within 30 days of
written notice to the Participant from the Company, to
perform his or her material responsibilities to the Company
or (ii) willful misconduct by the Participant which affects
the business reputation of the Company. The Participant
shall be considered to have been discharged for "Cause" if
the Company determines, within 30 days after the
Participant's resignation, that discharge for Cause was
warranted.
(2) Effect on Options
-----------------
(a) Acquisition Event. Upon the occurrence of an Acquisition
-----------------
Event (regardless of whether such event also constitutes a
Change in Control Event), or the execution by the Company of
any agreement with respect to an Acquisition Event
(regardless of whether such event will result in a Change in
Control Event), the Board shall provide that all outstanding
Options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or
an affiliate thereof); provided that if such Acquisition
-------- ----
Event also constitutes a Change in Control Event, except to
the extent specifically provided to the contrary in the
instrument evidencing any Option or any other agreement
between a Participant and the Company (A) one-half of the
number of shares subject to the Option which were not
already vested shall be exercisable upon the occurrence of
such Acquisition Event and, subject to (B) below, the
remaining one-half of such number of shares shall continue
to become vested in accordance with the original vesting
schedule set forth in such option, with one-half of the
number of shares that would otherwise have first become
vested becoming so vested on each subsequent vesting date in
accordance with the original schedule and (B) such assumed
or substituted options shall become immediately
-28-
<PAGE>
exercisable in full if, on or prior to the first anniversary
of the date of the consummation of the Acquisition Event,
the Participant's employment with the Company or the
acquiring or succeeding corporation is terminated for Good
Reason by the Participant or is terminated without Cause by
the Company or the acquiring or succeeding corporation. For
purposes hereof, an Option shall be considered to be assumed
if, following consummation of the Acquisition Event, the
Option confers the right to purchase, for each share of
Common Stock subject to the Option immediately prior to the
consummation of the Acquisition Event, the consideration
(whether cash, securities or other property) received as a
result of the Acquisition Event by holders of Common Stock
for each share of Common Stock held immediately prior to the
consummation of the Acquisition Event (and if holders were
offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding
shares of Common Stock); provided, however, that if the
consideration received as a result of the Acquisition Event
is not solely common stock of the acquiring or succeeding
corporation (or an affiliate thereof), the Company may, with
the consent of the acquiring or succeeding corporation,
provide for the consideration to be received upon the
exercise of Options to consist solely of common stock of the
acquiring or succeeding corporation (or an affiliate
thereof) equivalent in fair market value to the per share
consideration received by holders of outstanding shares of
Common Stock as a result of the Acquisition Event.
Notwithstanding the foregoing, if the acquiring or
succeeding corporation (or an affiliate thereof) does not
agree to assume, or substitute for, such Options, then the
Board shall, upon written notice to the Participants,
provide that all then unexercised Options will become
exercisable in full as of a specified time prior to the
Acquisition Event and will terminate immediately prior to
the consummation of such Acquisition Event, except to the
extent exercised by the Participants before the consummation
of such Acquisition Event; provided, however, that in the
event of an Acquisition Event under the terms of which
holders of Common Stock will receive upon consummation
thereof a cash payment for each share of Common Stock
surrendered pursuant to such Acquisition Event (the
"Acquisition Price"), then the Board may instead provide
that all outstanding Options shall terminate upon
consummation of such Acquisition Event and that each
Participant shall receive, in exchange therefor, a cash
payment equal to the amount (if any) by which (A) the
Acquisition Price multiplied by the number of shares of
Common Stock subject to such outstanding Options (whether or
not then exercisable), exceeds (B) the aggregate exercise
price of such Options.
(b) Change in Control Event that is not an Acquisition Event.
--------------------------------------------------------
Upon the occurrence of a Change in Control Event that does
not also constitute an Acquisition Event, except to the
extent specifically provided to the contrary in the
instrument evidencing any Option or any other agreement
between a Participant and the Company, the vesting schedule
of such Option shall be accelerated in part so that one-half
of the number of shares that would otherwise have first
become vested on
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<PAGE>
any date after the date of the Change in Control Event shall
immediately become exercisable. The remaining one-half of
such number of shares shall continue to become vested in
accordance with the original vesting schedule set forth in
such Option, with one-half of the number of shares that
would otherwise have first become vested becoming so vested
on each subsequent vesting date in accordance with the
original schedule; provided, however, that each such Option
shall be immediately exercisable in full if, on or prior to
the first anniversary of the date of the consummation of the
Change in Control Event, the Participant's employment with
the Company or the acquiring or succeeding corporation is
terminated for Good Reason by the Participant or is
terminated without Cause by the Company or the acquiring or
succeeding corporation.
(3) Effect on Restricted Stock Awards.
----------------------------------
(a) Acquisition Event that is not a Change in Control Event.
-------------------------------------------------------
Upon the occurrence of an Acquisition Event that is not a
Change in Control Event, the repurchase and other rights of
the Company under each outstanding Restricted Stock Award
shall inure to the benefit of the Company's successor and
shall apply to the cash, securities or other property which
the Common Stock was converted into or exchanged for
pursuant to such Acquisition Event in the same manner and to
the same extent as they applied to the Common Stock subject
to such Restricted Stock Award.
(b) Change in Control Event. Upon the occurrence of a Change in
-----------------------
Control Event (regardless of whether such event also
constitutes an Acquisition Event), except to the extent
specifically provided to the contrary in the instrument
evidencing any Restricted Stock Award or any other agreement
between a Participant and the Company, the vesting schedule
of all Restricted Stock Awards shall be accelerated in part
so that one-half of the number of shares that would
otherwise have first become free from conditions or
restrictions on any date after the date of the Change in
Control Event shall immediately become free from conditions
or restrictions. Subject to the following sentence, the
remaining one-half of such number of shares shall continue
to become free from conditions or restrictions in accordance
with the original schedule set forth in such Restricted
Stock Award, with one-half of the number of shares that
would otherwise have first become free from conditions or
restrictions becoming free from conditions or restrictions
on each subsequent vesting date in accordance with the
original schedule. In addition, each such Restricted Stock
Award shall immediately become free from all conditions or
restrictions if, on or prior to the first anniversary of the
date of the consummation of the Change in Control Event, the
Participant's employment with the Company or the acquiring
or succeeding corporation is terminated for Good Reason by
the Participant or is terminated without Cause by the
Company or the acquiring or succeeding corporation.
-30-
<PAGE>
(4) Effect on Other Awards
----------------------
(a) Acquisition Event that is not a Change in Control Event.
-------------------------------------------------------
The Board shall specify the effect of an Acquisition Event
that is not a Change in Control Event on any other Award
granted under the Plan at the time of the grant of such
Award.
(b) Change in Control Event. Upon the occurrence of a Change in
-----------------------
Control Event (regardless of whether such event also
constitutes an Acquisition Event), except to the extent
specifically provided to the contrary in the instrument
evidencing any Award or any other agreement between a
Participant and the Company, the vesting schedule of all
other Awards shall be accelerated in part so that one-half
of the number of shares that would otherwise have first
become exercisable, realizable, vested or free from
conditions or restrictions on any date after the date of the
Change in Control Event shall immediately become
exercisable, realizable, vested or free from conditions or
restrictions. Subject to the following sentence, the
remaining one-half of such number of shares shall continue
to become exercisable, realizable, vested or free from
conditions or restrictions in accordance with the original
schedule set forth in such Award, with one-half of the
number of shares that would otherwise have first become
exercisable, realizable, vested or free from conditions or
restrictions becoming so exercisable, realizable, vested or
free from conditions or restrictions on each subsequent
vesting date in accordance with the original schedule. In
addition, each such Award shall immediately become fully
exercisable, realizable, vested or free from conditions or
restrictions if, on or prior to the first anniversary of the
date of the consummation of the Change in Control Event, the
Participant's employment with the Company or the acquiring
or succeeding corporation is terminated for Good Reason by
the Participant or is terminated without Cause by the
Company or the acquiring or succeeding corporation.
9. General Provisions Applicable to Awards
---------------------------------------
(a) Transferability of Awards. Except as the Board may otherwise determine
-------------------------
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) Documentation. Each Award shall be evidenced by a written instrument
-------------
in such form as the Board shall determine. Each Award may contain terms and
conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each Award
----------------
may be made alone or in addition or in relation to any other Award. The terms
of each Award need not be identical, and the Board need not treat Participants
uniformly.
(d) Termination of Status. The Board shall determine the effect on an
---------------------
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other
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<PAGE>
status of a Participant and the extent to which, and the period during which,
the Participant, the Participant's legal representative, conservator, guardian
or Designated Beneficiary may exercise rights under the Award.
(e) Withholding. Each Participant shall pay to the Company, or make
-----------
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, when the Common Stock is registered under the Exchange Act,
Participants may, to the extent then permitted under applicable law, satisfy
such tax obligations in whole or in part by delivery of shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(f) Amendment of Award. The Board may amend, modify or terminate any
------------------
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) Conditions on Delivery of Stock. The Company will not be obligated to
-------------------------------
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) Acceleration. The Board may at any time provide that any Options shall
------------
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of restrictions in full or in part or that any other Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
10. Miscellaneous
-------------
(a) No Right To Employment or Other Status. No person shall have any claim
--------------------------------------
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
------------------------
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with
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<PAGE>
respect to the shares of Common Stock acquired upon such Option exercise,
notwithstanding the fact that such shares were not outstanding as of the close
of business on the record date for such stock dividend.
(c) Effective Date and Term of Plan. The Plan shall become effective on
-------------------------------
the date on which it is adopted by the Board, but no Award granted to a
Participant designated by the Board as subject to Section 162(m) of the Code by
the Board shall become exercisable, vested or realizable, as applicable to such
Award, unless and until the Plan has been approved by the Company's stockholders
to the extent stockholder approval is required by Section 162(m) in the manner
required under Section 162(m) (including the vote required under Section
162(m)). No Awards shall be granted under the Plan after the completion of ten
years from the earlier of (i) the date on which the Plan was adopted by the
Board or (ii) the date the Plan was approved by the Company's stockholders, but
Awards previously granted may extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
-----------------
or any portion thereof at any time, provided that to the extent required by
Section 162(m) of the Code, no Award granted to a Participant designated as
subject to Section 162(m) by the Board after the date of such amendment shall
become exercisable, realizable or vested, as applicable to such Award (to the
extent that such amendment to the Plan was required to grant such Award to a
particular Participant), unless and until such amendment shall have been
approved by the Company's stockholders as required by Section 162(m) (including
the vote required under Section 162(m)).
(e) Governing Law. The provisions of the Plan and all Awards made
-------------
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
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<PAGE>
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
- --------------------------------------------------------
SATCON TECHNOLOGY CORPORATION
- --------------------------------------------------------
<TABLE>
<S> <C>
1 To elect the following two (2) nominees as Class III
Directors of the Corporation
For all With- For all
Nominees hold Except
Mark box at right if an address change or [_] (01) Marshall J. Armstrong [_] [_] [_]
comment has been noted on the reverse side of this card (02) Thomas A. Hurkmans [_] [_] [_]
INSTRUCTIONS: To withhold authority to vote for any
individual member, mark the "For All Except" box and
strike a line through the name of the nominee for whom
you do not wish to vote. Your shares will be voted for
the remaining nominee.
CONTROL NUMBER:
RECORD DATE SHARES: For Against Abstain
2 To approve an amendment to [_] [_] [_]
the Corporation's Certificate
of Incorporation increasing
from 20,000,000 to 25,000,000
the number of authorized shares
of Common Stock.
3 To approve the Corporation's [_] [_] [_]
1999 Stock Incentive Plan.
4 To ratify the selection of [_] [_] [_]
Arthur Andersen LLP as
independent auditors for the
Corporation for the fiscal year
ending September 30, 2000.
------------
Please be sure to sign and date this Proxy. Date 5 To transact such other business as may properly come
- -------------------------------------------------------------------- before the meeting or any adjournments or adjournments
thereof.
[----- Stockholder sign here_________________Co-owner sign here-----]
DETACH CARD DETACH CARD
</TABLE>
<PAGE>
SATCON TECHNOLOGY CORPORATION
Proxy for Annual Meeting of Stockholders to be Held on March 15, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints David B. Eisenhaure
and Michael C. Turmelle as Proxies with full power of substitution to each, to
vote for and on behalf of the Undersigned at the 2000 Annual Meeting of
Stockholders of SATCON TECHNOLOGY CORPORATION (the "Corporation") to be held at
the offices of the Corporation, 161 First Street, Cambridge, Massachusetts 02142
on Wednesday, March 15, 2000 at 9:00 a.m. and at any adjournment or adjournments
thereof. The undersigned hereby directs the said David B. Eisenhaure and Michael
C. Turmelle to vote in accordance with their best judgment on any matters which
may properly come before the Annual Meeting, all as indicated in the Notice of
the Annual Meeting, receipt of which is hereby acknowledged, and to act on the
matters set forth in such Notice so specified by the undersigned.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is given, this proxy will be
voted FOR proposals 1, 2, 3, 4 and 5. Attendance of the undersigned at the
Annual Meeting or at any adjournment thereof will not be deemed to revoke the
proxy unless the undersigned revokes this proxy in writing.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If the person named on the stock certificate has died, please submit
evidence of your authority. If a corporation, please sign in full corporate name
by the President or other authorized officer and indicate the signer's office.
If a partnership, please sign in partnership names by all authorized persons,
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_________________________________________ ___________________________________
_________________________________________ ___________________________________
_________________________________________ ___________________________________
