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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
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 under Rule 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)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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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</TABLE>
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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, February 21, 2001 at 9:00 a.m. at the
offices of the Corporation, 161 First Street, Cambridge, Massachusetts
02142-1221, to consider and act upon the following matters:
1. To elect three (3) Class I Directors for the ensuing three years;
2. To approve an amendment to the Corporation's Certificate of
Incorporation increasing from 25,000,000 to 50,000,000 the number of
authorized shares of Common Stock;
3. To approve the Corporation's 2000 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, 2001; 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 5, 2001 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, L.P., 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
January , 2001
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 2001 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FEBRUARY 21, 2001
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, February 21, 2001 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, 2000 ("Fiscal 2000") is being mailed to stockholders with the
mailing of these proxy materials on or about January 24, 2001.
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 2000 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
EXCEPT FOR EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON
WRITTEN OR ORAL REQUEST TO THE INVESTOR RELATIONS DEPARTMENT OF THE CORPORATION,
SATCON TECHNOLOGY CORPORATION, 161 FIRST STREET, CAMBRIDGE, MASSACHUSETTS 02142,
TELEPHONE: (617) 661-0540.
VOTING SECURITIES AND VOTES REQUIRED
Stockholders of record at the close of business on January 5, 2001 will be
entitled to notice of and to vote at the Annual Meeting and at any adjournment
or adjournments thereof. On that date, 13,892,185 shares of the Corporation's
common stock, $0.01 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.
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.
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 2000, 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, 2001 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 SHARES
BENEFICIALLY PERCENTAGE OF COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2) BENEFICIALLY OWNED
--------------------------------------- ---------------- --------------------------
<S> <C> <C>
Brown Simpson Partners I, Ltd.(3).................... 1,246,900 8.6 %
152 West 57th Street, 40th Floor
New York, NY 10019
DQE Enterprises(4)................................... 813,138 5.8
One Northshore Center, Suite 100
12 Federal Street
Pittsburgh, PA 15212
Mechanical Technology Incorporated(5)................ 1,900,000 13.6
325 Washington Avenue Extension
Albany, NY 12205
Marshall J. Armstrong................................ 26,000 *
David B. Eisenhaure(6)............................... 4,562,588 32.4
Alan P. Goldberg(7).................................. 1,915,000 13.7
c/o Mechanical Technology Incorporated
325 Washington Avenue Extension
Albany, NY 12205
Thomas A. Hurkmans(8)................................ 813,138 5.8
c/o DQE Enterprises
One Northshore Center, Suite 100
12 Federal Street
Pittsburgh, PA 15212
James L. Kirtley, Jr................................. 59,933 *
Sean F. Moran........................................ 33,000 *
Michael C. Turmelle.................................. 114,861 *
Gerald L. Wilson..................................... 15,000 *
All Executive Officers and Directors as a Group
(eight persons)(6)(7)(8)........................... 5,639,520 39.4 %
</TABLE>
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* Less than 1%
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(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, 2001: Mr. Armstrong: 26,000; Mr. Eisenhaure: 85,834; Mr.
Goldberg: 15,000; Mr. Hurkmans: 15,000; Dr. Kirtley: 56,733; Mr. Moran:
30,000; Mr. Turmelle: 79,966; Dr. Wilson: 15,000; all executive officers and
directors as a group: 323,533.
(3) Consists of 520,800 shares of Common Stock held by Brown Simpson Partners
I, Ltd. and 675,000 shares of Common Stock issuable upon exercise of a
warrant held by Brown Simpson Partners I, Ltd.
(4) Includes 15,000 shares of Common Stock issuable upon exercise of a stock
option held by Mr. Hurkmans. DQE Enterprises and Mr. Hurkmans have entered
into an arrangement by which DQE Enterprises will receive the financial
benefits of such option. Mr. Hurkmans disclaims beneficial ownership of
these shares.
(5) Includes 100,000 shares of Common Stock issuable upon exercise of warrants
held by Mechanical Technology Incorporated.
(6) Includes 1,800,000 shares of Common Stock held by Mechanical Technology
Incorporated and 100,000 shares of Common Stock issuable upon exercise of
warrants held by Mechanical Technology Incorporated. Mr. Eisenhaure is a
director of Mechanical Technology Incorporated and disclaims beneficial
ownership of these shares.
(7) Includes 1,800,000 shares of Common Stock held by Mechanical Technology
Incorporated and 100,000 shares of Common Stock issuable upon exercise of
warrants held by Mechanical Technology Incorporated. Mr. Goldberg is a
director of Mechanical Technology Incorporated and disclaims beneficial
ownership of these shares.
(8) Includes 798,138 shares of Common Stock held by DQE Enterprises, of which
Mr. Hurkmans is the President. Also includes 15,000 shares of Common Stock
issuable upon exercise of a stock option held by Mr. Hurkmans. DQE
Enterprises and Mr. Hurkmans have entered into an arrangement by which DQE
Enterprises will receive the financial benefit of such option. Mr. Hurkmans
disclaims beneficial ownership of these shares.
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 I Directors, David B. Eisenhaure,
James L. Kirtley, Jr. and Alan P. Goldberg, the three director nominees named
below, unless the Proxy is marked otherwise. Each Class I Director will be
elected to hold office until the 2004 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 any
of the nominees 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 any of
the nominees will be unable to serve if elected.
For each member of the Board of Directors, including those who are nominees
for election as Class I Directors, there follows information given by each
concerning his principal occupation and
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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.
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 Power"), an affiliate of the Corporation, and DQE
Enterprises, 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 DQE Enterprises, to fill the
vacancy resulting from the resignation of Mr. Villiotti. Mr. Hurkmans was
elected to the Corporation's Board of Directors by the stockholders on
March 15, 2000. Pursuant to the terms of the 1997 Securities Purchase Agreement,
as long as DQE Enterprises owns five percent (5%) of the Corporation's Common
Stock, the Corporation must recommend that the Corporation's stockholders vote
for DQE Enterprises' 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, 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 Mechanical Technology
Incorporated owns five percent (5%) of the Corporation's Common Stock, the
Corporation must recommend that the Corporation's stockholders vote for
Mechanical Technology Incorporated's representative. The Corporation has also
agreed to appoint an additional member to its Board of Directors based on
recommendations by Mechanical Technology Incorporated.
NOMINEES FOR TERMS EXPIRING IN 2004 (CLASS I DIRECTORS)
DAVID B. EISENHAURE, age 55, became a Director in 1985.
DAVID B. EISENHAURE joined SatCon as President, Chief Executive Officer and
Chairman of the Board of Directors in 1985. Prior to founding SatCon, 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., S.M. and an Engineer's Degree in Mechanical Engineering from the
Massachusetts Institute of Technology ("M.I.T."). In addition to his duties at
SatCon, Mr. Eisenhaure holds an academic position at M.I.T., serving as a
lecturer in the Department of Mechanical Engineering. Mr. Eisenhaure also serves
on the board of directors of Mechanical Technology Incorporated and Beacon
Power.
ALAN P. GOLDBERG, age 55, became a Director in 1999.
ALAN P. GOLDBERG joined SatCon as a director in 1999. Mr. Goldberg has
served as President and Co-Chief Executive Officer and as a Director of First
Albany Companies Inc., an investment bank, since 1993. Mr. Goldberg also serves
on the board of directors of Mechanical Technology Incorporated and Beacon
Power. 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.
JAMES L. KIRTLEY, JR., PH.D., age 55, became a Director in 1992.
JAMES L. KIRTLEY, JR., PH.D., joined SatCon as a consultant in 1985 and
became a director in 1992. On March 1, 1998, Dr. Kirtley commenced employment
with SatCon on a full-time basis as the Vice President and General Manager of
the Corporation's Technology Center. In February 2000, Dr. Kirtley was promoted
to Vice President and Chief Scientist at SatCon. Dr. Kirtley is also a Professor
of
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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.
DIRECTORS WHOSE TERMS EXPIRE IN 2002 (CLASS II DIRECTORS)
MICHAEL C. TURMELLE, age 41, became a Director in 1993.
MICHAEL C. TURMELLE joined SatCon in September 1987, where he served as
Controller from September 1987 until November 1991, as Secretary since
June 1993 and as Vice President, Chief Financial Officer and Treasurer from
November 1991 until January 2000. Mr. Turmelle became a director in June 1993.
In January 2000, Mr. Turmelle was promoted from Chief Financial Officer to Chief
Operating Officer. From July 1984 to August 1987, Mr. Turmelle held several
positions with HADCO Corporation, a manufacturer of circuit boards. From
February 1982 to June 1984, Mr. Turmelle 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.
GERALD L. WILSON, age 61, became a Director in 2000.
GERALD L. WILSON joined SatCon as a director in July 2000. Dr. Wilson is the
former Dean of the School of Engineering at M.I.T. and the Vannevar Bush
Professor of Engineering at M.I.T. Dr. Wilson has served on M.I.T.'s faculty
since 1965 and currently serves as a Professor of Electrical and Mechanical
Engineering. Dr. Wilson also serves as the Chairman of the Science Advisory
Boards of General Motors Corporation and Pratt and Whitney, a division of United
Technologies Corporation, and as a member of the science advisory board for
Cummins Engine Company, Inc. He is a director of Analogic Corporation and NSTAR,
a company formed by the merger of BEC Energy and Commonwealth Energy System.
DIRECTORS WHOSE TERMS EXPIRE IN 2003 (CLASS III DIRECTORS)
MARSHALL J. ARMSTRONG, age 65, became a Director in 1994.
MARSHALL J. ARMSTRONG joined SatCon as a director in 1994. Mr. Armstrong
previously served as Chief Executive Officer and Chairman of the Board of Thermo
Power Corporation from 1992 through 1997. Thermo Power provided research and
development relating to engines, cogeneration and refrigeration equipment to the
marine, food processing, transportation, power generating, petrochemical and
pharmaceutical industries. From January 1998 to September 1999, Mr. Armstrong
served as Senior Vice President of Thermo Electron Corporation, where he has
been employed since 1968 in various capacities including management of Thermo
Electron's government affairs. Mr. Armstrong also served as a Director of 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 35, became a Director in 2000.
THOMAS A. HURKMANS joined SatCon as a director in January 2000. Since 1995,
Mr. Hurkmans has served as the President of DQE 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 DQE
Enterprises. Prior to joining DQE 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.
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EXECUTIVE OFFICERS OF THE CORPORATION
SEAN F. MORAN, age 42, became an Executive Officer in 2000.
SEAN F. MORAN joined SatCon in January 2000 and has served as Vice President
of Finance, Chief Financial Officer and Treasurer since February 2000. Prior to
joining SatCon, Mr. Moran served as Vice President of Finance, Chief Financial
Officer and Treasurer of Anika Therapeutics, Inc., a biotechnology company,
since February 1993. He served as Treasurer of MedChem Products, Inc., a
manufacturer of medical devices, from May 1991 to February 1993. Mr. Moran also
served as Controller of MedChem Products, Inc. from September 1990 to May 1991.
Mr. Moran received a B.S. in Business Administration and an M.B.A. from Babson
College.
For additional 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 eight times during Fiscal 2000. During Fiscal
2000, 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.
The Audit Committee consists of Messrs. Armstrong, Goldberg and Hurkmans,
each of whom is independent, as defined by the applicable listing standards of
the National Association of Securities Dealers. 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; (iv) reviewing the scope of independent audit coverages
and the fees charged by the independent accountants; and (v) reviewing the
independence of such accountants from the Corporation's management. The Audit
Committee also reviews other matters with respect to its accounting, auditing
and financial reporting practices and procedures as it may find appropriate or
may be brought to its attention. The Audit Committee met three times during
Fiscal 2000. On June 9, 2000, the Board of Directors adopted a written charter
for the Audit Committee, a copy of which is attached as EXHIBIT A to this Proxy
Statement.
Messrs. Goldberg and Hurkmans serve as the members of the Corporation's
Compensation Committee. 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 four
times during Fiscal 2000.
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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, all filing
requirements of Section 16(a) were satisfied with respect to the Corporation's
most recent fiscal year.
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
$900 per quarter.
During Fiscal 2000, the Corporation granted stock options to purchase shares
of the Corporation's Common Stock to the members of the Board of Directors as
follows: Mr. Armstrong: 26,000; Mr. Eisenhaure: 100,000; Mr. Goldberg: 15,000;
Mr. Hurkmans: 15,000; Dr. Kirtley: 76,600; Mr. Turmelle: 81,750; and
Dr. Wilson: 15,000. The stock option exercise price for Messrs. Armstrong,
Goldberg and Hurkmans is $17.563 per share, and these stock options were
immediately exercisable upon grant. The stock option exercise price for
Dr. Wilson is $31.25 per share, and this stock option was immediately
exercisable upon grant. The stock option exercise price for Messrs. Eisenhaure
and Turmelle and Dr. Kirtley is $17.563 per share, and these stock options vest
over four years.
In addition, on November 8, 2000, the Corporation's Board of Directors
adopted a director stock option program, pursuant to which (i) each individual
who first becomes a non-employee director of the Corporation will receive a
nonstatutory stock option to purchase 15,000 shares of the Corporation's Common
Stock on the date of his or her initial election to the Board of Directors; and
(ii) on the date of each Annual Meeting of Stockholders of the Corporation
commencing with the Annual Meeting (other than a director who is initially
elected to the Corporation's Board of Directors at any such Annual Meeting of
Stockholders or, if previously, at any time after the prior year's Annual
Meeting of Stockholders), provided that he or she is serving as a director
immediately following the date of such Annual Meeting of Stockholders, (a) each
non-employee director will be granted a nonstatutory stock option to purchase
5,000 shares of the Corporation's Common Stock and (b) each non-employee
director who is serving as chairman of the Corporation's Audit Committee or
Compensation Committee will be granted a nonstatutory stock option to purchase
an additional 1,000 shares of the Corporation's Common Stock. These nonstatutory
stock options will be immediately exercisable and will have exercise prices
equal to the closing price of the Corporation's Common Stock on the Nasdaq
National Market on the date of grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BEACON POWER AND DQE ENTERPRISES
Pursuant to the terms of a securities purchase agreement, dated October 23,
1998, between Beacon Power, Perseus Capital, L.L.C., DQE Enterprises, Micro
Generation Technology Fund, L.L.C. and the Corporation:
- Beacon Power sold to these investors 1,900,000 shares of Beacon Power's
class D preferred stock,
- the investors received warrants to purchase an aggregate of 2,227,500
shares of Beacon Power's common stock, and
- the Corporation granted the investors the right to cause the Corporation,
in the circumstances and for the consideration described below, to
purchase all of their shares of Beacon Power's
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class D preferred stock and all of their shares of Beacon Power's common
stock issuable upon conversion of their shares of class D preferred stock.
Upon exercise of this "put right" by a class D preferred stock investor, the
Corporation would have been required to pay the stated value of the shares of
Beacon Power's class D preferred stock acquired by that investor plus accrued
and unpaid dividends, in shares of the Corporation's Common Stock. For this
purpose, the Corporation's Common Stock would have been valued at the average
fair market value for the 15 trading days before and after notice of exercise of
the put right. The put right was exercisable within 60 days of the second,
third, fourth and fifth anniversary of the closing date of the transaction, upon
events relating to the bankruptcy of Beacon Power, upon the occurrence of going
private transactions involving the Corporation and upon the deregistration of
the Corporation's Common Stock by the SEC or the delisting or other removal of
the Corporation's Common Stock from trading on the Nasdaq National Market. The
put right terminated on November 17, 2000, the date of the listing of Beacon
Power's common stock on the Nasdaq National Market.
The shares of Beacon Power's class D preferred stock were not registered
under the Securities Act of 1933, as amended, but the investors entered into
registration rights agreements with Beacon Power and the Corporation. The
aggregate consideration received by Beacon Power was $4,750,000. Of the
1,900,000 shares of Beacon Power's class D preferred stock issued pursuant to
this securities purchase agreement, DQE Enterprises purchased 400,000 shares of
Beacon Power's class D preferred stock for an aggregate purchase price of
$1,000,000. DQE Enterprises also received warrants to purchase 450,000 shares of
Beacon Power's common stock.
From June 1999 through March 31, 2000, Beacon Power was financed through the
issuance of approximately $4.7 million of bridge notes and warrants to the
investors, including $890,000 from DQE Enterprises. On April 7, 2000, pursuant
to the terms of a second securities purchase agreement, Beacon Power issued
1,226,141 shares of its class E preferred stock and warrants to purchase 306,535
shares of its class E preferred stock in exchange for the conversion of all of
its outstanding bridge notes. In this transaction, DQE Enterprises received
204,797 shares of Beacon Power's class E preferred stock and a warrant to
purchase 51,199 shares of its class E preferred stock.
On April 21, 2000, Beacon Power raised an additional $4.1 million through
the sale of additional bridge notes and warrants to purchase shares of Beacon
Power's common stock. On May 23, 2000, pursuant to the terms of a third
securities purchase agreement, Beacon Power issued 6,785,711 shares of its
class F preferred stock and additional warrants to purchase shares of Beacon
Power's common stock. The exercise price and the number of shares subject to
these additional warrants were based on the initial public offering price of
Beacon Power's common stock. The shares of class F preferred stock and the
additional warrants were issued in consideration for the cancellation of
$5.2 million in bridge notes and an additional $23.3 million cash investment by
existing and new investors. DQE Enterprises received 476,190 shares of Beacon
Power's class F preferred stock and a warrant to purchase shares of Beacon
Power's common stock in exchange for the cancellation of a $300,000 bridge
note and an additional cash investment of $1.7 million.
Pursuant to the terms of a letter agreement, dated October 23, 1998, Mr.
Eisenhaure 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 the Corporation's Common Stock that were legally available
for issuance in satisfaction of the put right was less than 1,000,000 more than
the total number of shares of the Corporation's Common Stock required to satisfy
the Corporation's obligations under the put right, then Mr. Eisenhaure would
take all action under his control to increase the number of authorized shares of
the Corporation's Common Stock.
The terms of the securities purchase agreements were determined on the basis
of arms-length negotiations. Prior to the execution of the 1998 securities
purchase agreement, neither the Corporation nor Beacon Power had any material
relationship with Perseus Capital, L.L.C. or Micro Generation
8
<PAGE>
Technology Fund, L.L.C. In May 1997, DQE Enterprises made an investment in the
Corporation and received warrants to purchase shares of Beacon Power's common
stock. In connection with that transaction, DQE Enterprises entered into
agreements with the Corporation and Beacon Power pursuant to which, among other
things, DQE Enterprises acts as exclusive distributor of Beacon Power's
products, subject to certain exceptions, in seven Mid-Atlantic States and the
District of Columbia. Beacon Power also entered into a consulting agreement with
DQE Enterprises pursuant to which DQE Enterprises was compensated by Beacon
Power in the amount of $150,000 per annum in exchange for consulting services
provided by DQE Enterprises to Beacon Power. On October 23, 1998, Beacon Power
and DQE Enterprises modified this consulting arrangement so that Beacon Power
was obligated to pay for DQE Enterprises' consulting services in shares of
Beacon Power's common stock. On November 1, 1999, this agreement was further
modified to provide for payment by Beacon Power to DQE Enterprises in shares of
Beacon Power's class A preferred stock. In addition, the shares of Beacon
Power's common stock that had been issued to DQE Enterprises under the
consulting agreement were cancelled and shares of Beacon Power's class A
preferred stock were issued to DQE Enterprises. On October 31, 2000, the
consulting agreement was terminated, and Beacon Power issued 60,000 shares of
its class A preferred stock to DQE Enterprises as a final payment.
Beacon Power was organized by the Corporation in May 1997 to continue the
development and distribution of the stationary, terrestrial applications of the
Corporation's flywheel energy storage technology. DQE Enterprises owns of record
more than five percent of the Corporation's Common Stock, and Mr. Hurkmans, the
President of DQE Enterprises, serves on the Corporation's Board of Directors.
BEACON POWER AND MECHANICAL TECHNOLOGY INCORPORATED
On April 21, 2000, in connection with Beacon Power's bridge note and warrant
financing, Mechanical Technology Incorporated loaned $1.2 million to Beacon
Power and received a warrant to purchase 12,000 shares of Beacon Power's common
stock. On May 23, 2000, pursuant to the terms of the third securities purchase
agreement described above, Beacon Power issued 1,428,571 shares of its class F
preferred stock and an additional warrant to purchase shares of Beacon Power's
common stock to Mechanical Technology Incorporated. The exercise price of $2.25
and the number of shares subject to this additional warrant (1,333,333) were
based on the initial public offering price of Beacon Power's common stock. In
December 2000, Mechanical Technology Incorporated exercised this additional
warrant pursuant to a cashless exercise provision contained in the warrant and
received 985,507 shares of Beacon Power's common stock. The shares of class F
preferred stock and the additional warrant were issued in consideration for the
cancellation of the $1.2 million represented by the bridge note and an
additional $4.8 million cash investment by Mechanical Technology Incorporated.
On August 25, 2000, Mechanical Technology Incorporated exercised its warrant for
12,000 shares of Beacon Power's common stock in full for an aggregate exercise
price of $50,400. Mechanical Technology Incorporated owns of record more than
five percent of the Corporation's Common Stock, and Mr. Goldberg, a director of
Mechanical Technology Incorporated and co-chief executive officer of First
Albany Companies Inc., serves on the Corporation's Board of Directors. Mr.
Goldberg also serves on Beacon Power's board of directors.
ACQUISITION OF LING ELECTRONICS AND INVESTMENT BY MECHANICAL TECHNOLOGY
INCORPORATED
In October 1999, the Corporation acquired Ling Electronics, Inc. and Ling
Electronics, Ltd. from Mechanical Technology Incorporated. In consideration for
the acquisition of Ling Electronics and an investment by Mechanical Technology
Incorporated in the Corporation, Mechanical Technology Incorporated received a
total of 1,800,000 shares of the Corporation's Common Stock and warrants to
purchase an additional 100,000 shares of the Corporation's Common Stock at an
exercise price of $8.80 per share. On October 21, 1999, Mechanical Technology
Incorporated funded $2,570,000 of its
9
<PAGE>
investment in the Corporation and received 370,800 shares of Common Stock and
issued a warrant to the Corporation to purchase 108,000 shares of Mechanical
Technology Incorporated's common stock at an exercise price of $12.56 per share.
At a second closing of Mechanical Technology Incorporated's investment, on
January 31, 2000, the Corporation issued to Mechanical Technology Incorporated
659,200 shares of the Corporation's 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
192,000 shares of Mechanical Technology Incorporated's common stock at an
exercise price of $12.56 per share. In connection with these transactions, Alan
P. Goldberg, a director of Mechanical Technology Incorporated and co-chief
executive officer of First Albany Companies Inc., 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 Mechanical Technology Incorporated, and Mechanical Technology
Incorporated agreed to appoint Mr. Eisenhaure to its board of directors. Mr.
Eisenhaure currently serves on the board of directors of Mechanical Technology
Incorporated.
PLUG POWER AND BEACON POWER
As of December 31, 2000, Mechanical Technology Incorporated owned 1,800,000
shares of the Corporation's Common Stock and warrants to purchase 100,000 shares
of the Corporation's Common Stock. As of December 31, 2000, Mechanical
Technology Incorporated owned 13,704,315 shares, or 31.4%, of Plug Power's
common stock. The Corporation sells electronic components to Plug Power, and the
Corporation believes these transactions are on an arms-length basis. Sales
transactions with Plug Power accounted for $53,000 and $34,000 in revenues in
fiscal years 1999 and 2000, respectively. In addition, the Corporation performs
funded research and development and sells power electronic boards and components
to Beacon Power, and the Corporation believes these transactions are also on an
arms-length basis. Sales transactions with Beacon Power accounted for $424,000,
$73,000 and $471,000 in revenues in fiscal years 1998, 1999 and 2000,
respectively.
LOANS TO MICHAEL C. TURMELLE
In October 1999 and December 1999, the Corporation loaned an aggregate of
$85,000 to Mr. Turmelle. The loans were represented by two promissory notes for
$10,000 and $75,000, respectively. Under the terms of the promissory notes, the
loans bore interest at 5.74% per annum, and principal and interest was due and
payable in full on December 15, 2000. On April 1, 2000, Mr. Turmelle repaid to
the Corporation $86,569, the entire principal amount of the loans plus all
outstanding accrued interest. Mr. Turmelle is the Corporation's Vice President,
Chief Operating Officer and Secretary and is one of its Directors.
CONSULTING AGREEMENT WITH MARSHALL J. ARMSTRONG
On July 19, 2000, the Corporation entered into a consulting agreement with
Marshall J. Armstrong, one of its Directors. In consideration for Mr. Armstrong
providing consulting, advisory and related services under the consulting
agreement, the Corporation has agreed to pay Mr. Armstrong $2,000 per day (which
amount will be proportionately less for partial days) for services performed as
well as reimbursement of reasonable and necessary expenses incurred by Mr.
Armstrong in connection with the consulting agreement. As of December 31, 2000,
the Corporation has paid Mr. Armstrong $3,000 under the terms of the consulting
agreement.
The Corporation believes that each of the transactions described above,
other than the loan to Mr. Turmelle, was carried out on terms that were no less
favorable to the Corporation than those that would have been obtained from
unaffiliated third parties. The Corporation believes that the loan to Mr.
Turmelle was a reasonable employee benefit based on Mr. Turmelle's tenure and
position with the Corporation.
For executive officer compensation and option exercise information, see
"Compensation of Executive Officers" and "Compensation Committee Report on
Executive Compensation."
10
<PAGE>
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, 2000, 1999 and 1998, of
those persons who were at September 30, 2000 (i) the chief executive officer of
the Corporation and (ii) each other executive officer of the Corporation whose
annual compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ------------
AWARDS
------------
OTHER ANNUAL SECURITIES ALL OTHER
FISCAL COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) OPTIONS (#) ($)
--------------------------- -------- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
David B. Eisenhaure................ 2000 $225,500 -- $3,900(3) 100,000 $9,787(4)
President, Chief Executive 1999 $225,500 -- $5,400(3) 40,000 $9,787(4)
Officer and Chairman of the Board 1998 $215,254 -- $4,400(3) 40,000 $9,787(4)
Michael C. Turmelle(1)............. 2000 $148,500 -- $3,900(3) 81,750 $7,995(4)
Vice President, Chief Operating 1999 $148,500 -- $5,400(3) 40,000 $7,995(4)
Officer, Secretary and Director 1998 $141,750 -- $4,400(3) 40,000 $7,995(4)
Sean F. Moran(2)................... 2000 $111,457 -- -- 150,000 --
Vice President, Chief Financial
Officer and Treasurer
</TABLE>
------------------------
(1) In January 2000, Mr. Turmelle was promoted from Chief Financial Officer to
Chief Operating Officer.
(2) Mr. Moran joined the Corporation in January 2000 and has served as Vice
President of Finance, Chief Financial Officer and Treasurer since
February 2000.
(3) Amounts consist of Board of Director fees paid to Messrs. Eisenhaure and
Turmelle in their capacity as Directors of the Corporation of $900 per
quarter and $200 per Board of Directors meeting attended.
(4) Amounts include the dollar value of term life insurance premiums paid by the
Corporation on a $1,000,000 term life insurance policy of which members of
the executive officers' families are the beneficiaries.
OPTION GRANTS TABLE. The following table sets forth information concerning
individual grants of stock options to purchase the Corporation's Common Stock
made to the executive officers named in the Summary Compensation Table during
Fiscal 2000.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM(3)
OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME (#)(1) FISCAL YEAR(2) ($/SHARE) DATE 5% ($) 10% ($)
---- --------------- --------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David B. Eisenhaure.......... 100,000 12.19% $17.56 4/14/10 $1,104,528 $2,799,090
Michael C. Turmelle.......... 81,750 9.97% $17.56 4/14/10 $ 902,951 $2,288,256
Sean F. Moran................ 150,000 18.29% $17.56 1/19/10 $1,656,791 $4,198,635
</TABLE>
------------------------
(1) Mr. Eisenhaure's and Mr. Turmelle's stock options were granted on April 14,
2000 and vest over four-year periods. Mr. Moran's stock option was granted
on January 19, 2000 and vests in equal annual increments over a five-year
period.
11
<PAGE>
(2) In Fiscal 2000, stock options to purchase a total of 826,350 shares of
Common Stock were granted to employees of the Corporation, including
executive officers.
(3) Amounts reported in these columns represent amounts that may be realized
upon exercise of the stock options immediately prior to the expiration of
their term assuming the specified compounded rates of appreciation (5% and
10%) on the Corporation's Common Stock over the term of the stock options.
These numbers are calculated based on rules promulgated by the SEC and do
not reflect the Corporation's estimate of future stock price growth. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the timing of such exercise and the future performance of the
Corporation's Common Stock.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE. The
following table sets forth certain information regarding stock options exercised
during Fiscal 2000 and held as of September 30, 2000 by the executive officers
named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT FISCAL THE-MONEY OPTIONS AT
YEAR-END(#) FISCAL YEAR-END($)(2)
----------------- ------------------------
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------------- ------------------------
<S> <C> <C> <C> <C>
David B. Eisenhaure............... -- -- 72,501/139,999 $1,883,650/$2,942,005
Michael C. Turmelle............... 30,750 $580,560 69,566/115,884 $1,797,922/$2,438,770
Sean F. Moran..................... -- -- -- /150,000 $ -- /$2,728,050
</TABLE>
------------------------
(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 sale price of the Corporation's Common Stock
on September 29, 2000, the last trading day of Fiscal 2000 ($35.75), 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.
12
<PAGE>
In addition, on March 22, 2000, the Corporation entered into a Change in
Control Letter Agreement (the "Change in Control Agreement") with Mr. Moran
pursuant to which Mr. Moran is entitled to receive severance payments equal to
100% of his annual salary in the event of the termination of Mr. Moran's
employment (including a material adverse change in his authority, duties or
compensation without his prior consent or the relocation of his place of work
more than 100 miles from the Corporation's executive offices) within one year of
the occurrence of a "change in control event" (as defined in the Change in
Control Agreement). As a condition to receiving these severance payments, Mr.
Moran must deliver a general release to the Corporation within 60 days of his
termination.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's executive compensation program is administered by the
Compensation Committee. This committee, composed of Messrs. Goldberg and
Hurkmans, 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 reviews 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. In
addition, Mr. Moran has entered into the Change in Control Agreement (as
described above).
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 did not increase from the fiscal year ended
September 30, 1999 ("Fiscal 1999") to Fiscal 2000. Base salaries for executive
officers may increase in the future if 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
13
<PAGE>
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 stock option grants vest
over a multi-year period.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. In Fiscal 2000, the Corporation's
Chief Executive Officer, David B. Eisenhaure, received salary compensation of
$225,500, representing no change from his salary in Fiscal 1999. The
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, and 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 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 Committee periodically reviews the
potential consequences of Section 162(m) and may structure the performance-based
portions of its executive compensation to comply with certain exemptions to
Section 162(m). However, the Committee reserves the right to use its judgment to
authorize compensation payments that do not comply with the exemptions to
Section 162(m) when the Committee believes that such payments are appropriate
and in the best interests of the stockholders, after taking into consideration
changing business conditions or the officer's performance.
COMPENSATION COMMITTEE
ALAN P. GOLDBERG
THOMAS A. HURKMANS
14
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During Fiscal 2000, Messrs. Armstrong, Goldberg, Hurkmans, John P.
O'Sullivan, Jr. and Villiotti served as members of the Compensation Committee.
For information regarding Mr. Goldberg's relationship with Mechanical Technology
Incorporated and Mr. Hurkmans' relationship with DQE Enterprises, see "Certain
Relationships and Related Transactions."
AUDIT COMMITTEE REPORT
In connection with the preparation and filing of the Corporation's Annual
Report on Form 10-K for the year ended September 30, 2000, the Audit Committee
(i) reviewed and discussed the audited financial statements with the
Corporation's management, (ii) discussed with Arthur Andersen LLP, the
Corporation's independent auditors, the matters required to be discussed by
Statement of Auditing Standards 61 (as modified or supplemented) and (iii)
received the written disclosures and the letter from Arthur Andersen LLP
required by Independence Standards Board Standard No. 1 (as modified or
supplemented) and discussed the independence of Arthur Andersen LLP with Arthur
Andersen LLP. Based on the review and discussions referred to above, among other
things, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Corporation's Annual Report on
Form 10-K for the year ended September 30, 2000.
AUDIT COMMITTEE
MARSHALL J. ARMSTRONG
ALAN P. GOLDBERG
THOMAS A. HURKMANS
15
<PAGE>
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 29, 1995, and plotted at the end of the last trading day 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., IMPCO Technologies, Inc., Mechanical
Technology Incorporated and Unique Mobility, Inc. (the "Peer Group Index")). The
Peer Group Index differs from the one used for the immediately preceding fiscal
year in that Kollmorgen Corp. has been removed and IMPCO Technologies, Inc. has
been added. Kollmorgen Corp. merged out of existence during Fiscal 2000.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG SATCON TECHNOLOGY CORPORATION,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
SATCON
MEASUREMENT PERIOD TECHNOLOGY NASDAQ PEER GROUP
(FISCAL YEAR COVERED) CORPORATION INDEX INDEX
----------------------------------------------------- ----------- -------- ----------
<S> <C> <C> <C>
09/29/95............................................. $100.00 $100.00 $100.00
09/30/96............................................. $ 74.42 $116.75 $ 85.57
09/30/97............................................. $118.60 $158.69 $148.88
09/30/98............................................. $ 52.33 $164.91 $217.15
09/30/99............................................. $ 93.02 $266.79 $264.77
09/29/00............................................. $332.56 $364.95 $801.22
</TABLE>
16
<PAGE>
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 25,000,000 to
50,000,000 in the number of authorized shares of Common Stock. As of
December 31, 2000, the Company had a total of 13,892,185 shares of Common Stock
outstanding, 1,388,950 shares of Common Stock reserved for future issuance under
its stock incentive plans and 977,000 shares of Common Stock reserved for
issuance upon exercise of warrants. The amendment is attached as EXHIBIT B to
this Proxy Statement.
If the amendment is approved, the additional 25,000,000 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.
17
<PAGE>
APPROVAL OF 2000 STOCK INCENTIVE PLAN
On November 8, 2000, the Board of Directors of the Corporation adopted,
subject to stockholder approval, the 2000 Stock Incentive Plan (the "2000
Plan"). Up to 1,200,000 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 2000 Plan. If stockholder approval is not obtained, incentive
stock options may not be issued under the 2000 Plan, options may not be issued
to executive officers of the Corporation and compensation attributable to awards
under the 2000 Plan could not qualify for the qualifying performance-based
compensation exemption to Section 162(m). The 2000 Plan is attached as
EXHIBIT C 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 2000 PLAN IS IN THE
BEST INTERESTS OF THE CORPORATION AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR
THIS PROPOSAL.
SUMMARY OF THE 2000 PLAN
The following is a brief summary of the 2000 Plan. The following summary is
qualified in its entirety by reference to the 2000 Plan.
DESCRIPTION OF AWARDS
The 2000 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 and restricted stock awards (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 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 total combined voting
power of the Corporation or its parent or subsidiary corporations). The 2000
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.
ELIGIBILITY TO RECEIVE AWARDS
Officers, employees, directors, consultants and advisors of the Corporation
and its subsidiaries, including any business ventures in which the Corporation
has a significant interest, as determined by the Board of Directors, are
eligible to be granted Awards under the 2000 Plan. Under present law, however,
incentive stock options may only be granted to employees of the Corporation or
its parent or subsidiary corporations. The maximum number of shares with respect
to which an Award may be granted to any participant under the 2000 Plan may not
exceed 500,000 shares per calendar year.
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As of December 31, 2000, approximately 265 persons were eligible to receive
Awards under the 2000 Plan, including the Corporation's four executive officers
and four non-employee directors. The granting of Awards under the 2000 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 2000, (i) Mr. Eisenhaure received a stock option grant for the right to
purchase 100,000 shares of Common Stock at an exercise price of $17.563 per
share; (ii) Mr. Turmelle received a stock option grant for the right to purchase
81,750 shares of Common Stock at an exercise price of $17.563 per share; (iii)
Mr. Moran received a stock option grant for the right to purchase 150,000 shares
of Common Stock at an exercise price of $17.563 per share; and (iv) Dr. Kirtley
received a stock option grant for the right to purchase 76,600 shares of Common
Stock at an exercise price of $17.563 per share. Each of these grants was made
under the Corporation's 1999 Stock Incentive Plan.
On January 5, 2001, the last reported sale price of the Corporation's Common
Stock on the Nasdaq National Market was $11.50.
ADMINISTRATION
The 2000 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 2000 Plan and to interpret the provisions of the 2000
Plan. Pursuant to the terms of the 2000 Plan, the Board of Directors may
delegate authority under the 2000 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 2000 Plan, including the granting of options to executive
officers. Subject to any applicable limitations contained in the 2000 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 option or
restricted stock award and the terms and conditions of such Awards, including
conditions for repurchase, issue price and repurchase price. In addition, Mr.
Eisenhaure is authorized to grant stock options to employees and non-executive
officers in accordance with the Corporation's past practices, provided that the
maximum number of shares subject to such stock options for any one participant
is 50,000 per year.
The Board of Directors is required to make appropriate adjustments in
connection with the 2000 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. In the event of a merger,
liquidation or other Acquisition Event (as defined in the 2000 Plan), the Board
of Directors is authorized to provide for outstanding Options 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 2000 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 2000 Plan) or leaves the Corporation for Good Reason (as defined in the 2000
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 2000 Plan subject, however, in the case of incentive stock
options, to any limitations under the Code.
AMENDMENT OR TERMINATION
No Award may be made under the 2000 Plan after November 8, 2010, but Awards
previously granted may extend beyond that date. The Board of Directors may at
any time amend, suspend or
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terminate the 2000 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
2000 Plan and with respect to the sale of Common Stock acquired under the 2000
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.
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.
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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 on the day after the date on which the forfeiture provisions or
restrictions lapse if a Section 83(b) Election is not made, or on the day after
the Award is granted if a Section 83(b) Election is made.
TAX CONSEQUENCES TO THE CORPORATION
The grant of an Award under the 2000 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 2000 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 2000 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.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
On May 12, 1999, the Corporation dismissed PricewaterhouseCoopers LLP
("PwC") from its position as the Corporation's independent public accountants.
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 public accountants. The decision to engage Arthur Andersen LLP was
recommended by the Corporation's Audit Committee and approved by the
Corporation's Board of Directors. During the Corporation's two
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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, 2001 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 appropriate
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.
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 shares to which
such revocation relates and the aggregate number of shares represented by such
certificate(s).
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STOCKHOLDER PROPOSALS
In order to be included in Proxy material for the 2002 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 October 23, 2001. 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
2002 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 4, 2002. If a stockholder fails to provide timely notice of a
proposal to be presented at the 2002 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
January , 2001
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.
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EXHIBIT A
AUDIT COMMITTEE CHARTER
I. Membership
A. NUMBER. The Audit Committee shall consist of at least three independent,
financially literate members of the board of directors meeting the
requirements set forth in Sections I.B and I.C. below.
B. INDEPENDENCE. A director is independent if he or she is not an officer
or employee of the Company or its subsidiaries, if he or she has no
relationship which, in the opinion of the Company's board of directors,
would interfere with his or her exercise of independent judgment in
carrying out the responsibilities of a director, and if he or she:
1. Has not been an employee of the Company or any affiliate of the
Company in the current year or in any of the past three years;
2. Has no immediate family member who has been employed by the Company
or an affiliate of the Company in any of the past three years (an
immediate family member includes a person's spouse, parents,
children, siblings, mother-in-law, father-in-law, brother-in-law,
sister-in-law, son-in-law, daughter-in-law, and anyone who resides in
a person's home);
3. Is not employed as an executive of an entity other than the Company
having a compensation committee which includes any of the Company's
executives;
4. Did not within the last fiscal year receive from the Company or any
affiliate of the Company compensation--other than benefits under at
tax qualified retirement plan, compensation for director service or
nondiscretionary compensation--greater than $60,000; and
5. Has not in any of the past three years been a partner in, or
controlling shareholder or executive of, a for profit business
organization to which the Company made or from which the Company
received payment (other than payment arising solely from investments
in the Company's securities) that exceeds the greater of: (i)
$200,000; or (ii) more than 5% of the Company's or business
organization's consolidated gross revenues.
Under exceptional and limited circumstances, one director who has a
relationship making him or her not independent, and who is not a Company
employee or an immediate family member of a Company employee, may serve
on the Audit Committee if the board of directors determines that the
director's membership on the Audit Committee is required by the best
interests of the Company and its shareholders, and discloses in the next
annual proxy statement after such determination the nature of the
relationship and the reasons for the determination.
C. FINANCIAL LITERACY. Each member of the Audit Committee must be able to
read and understand fundamental financial statements, including the
Company's balance sheet, income statement, and cash flow statement, or
must become able to do so within a reasonable time after his or her
appointment to the Audit Committee. At least one member of the Audit
Committee must have past employment experience in finance or accounting,
professional certification in accounting, or other comparable experience
or background which result in the member having financial sophistication
(such as being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight
responsibilities).
D. CHAIRMAN. Unless a Chairman is elected by the board of directors, the
Audit Committee shall elect a Chairman by majority vote.
<PAGE>
II. Responsibilities of the Audit Committee
The Audit Committee shall assist the board of directors in fulfilling their
responsibilities to shareholders concerning the Company's accounting and
reporting practices, and shall facilitate open communication between the Audit
Committee, board of directors, outside auditors, and management. The Audit
Committee shall discharge its responsibilities, and shall assess the information
provided by the Company's management and the outside auditor, in accordance with
its business judgment. The responsibilities set forth herein do not reflect or
create any duty or obligation of the Audit Committee to plan, conduct, oversee
or determine the appropriate scope of any audit, or to determine that the
Company's financial statements are complete, accurate, fairly presented, or in
accordance with Generally Accepted Accounting Principles or applicable law. In
exercising its business judgment, the Audit Committee shall rely on the
information and advice provided by the Company's management and/or its outside
auditor.
A. The Audit Committee shall review and reassess the adequacy of this
charter at least annually.
B. The outside auditor shall be accountable to the Audit Committee and the
board of directors, which together shall have the ultimate authority and
responsibility to nominate the outside auditor to be proposed for
shareholder approval in any proxy statement, and to select, evaluate, and
(where appropriate) replace the outside auditor.
C. The Audit Committee shall ensure that they receive from the outside
auditor the written disclosures and letter from the outside auditor
required by Independence Standards Board Standard No. 1.
D. The Audit Committee shall discuss with the outside auditor its
independence, and shall actively engage in a dialogue with the outside
auditor regarding any disclosed relationships or services that might
impact the objectivity and independence of the auditor. The Audit
Committee shall take, or recommend that the full board of directors take,
appropriate action to oversee the independence of the outside auditor.
E. The Audit Committee shall review and discuss with the Company's
management the Company's audited financial statements.
F. The Audit Committee shall discuss with the outside auditor the matters
about which Statement on Auditing Standards No. 61 requires discussion.
G. Based upon its discharge of its responsibilities pursuant to Sections
II.C through II.F and any other information, discussion or communication
that the Audit Committee in its business judgment deems relevant, the
Audit Committee shall consider whether they will recommend to the board
of directors that the Company's audited financial statements be included
in the Company's annual reports on Forms 10-K.
H. The Audit Committee shall prepare for inclusion where necessary in a
proxy or information statement of the Company relating to an annual
meeting of security holders at which directors are to be elected (or
special meeting or written consents in lieu of such meeting), the report
described in Item 306 of Regulation S-K.
I. The Audit Committee shall annually inform the outside auditor, the Chief
Financial Officer, the Controller, and the most senior other person, if
any, responsible for the internal audit activities, that they should
promptly contact the Audit Committee or its Chairman about any
significant issue or disagreement concerning the Company's accounting
practices or financial statements that is not resolved to their
satisfaction. Where such communications are made to the Chairman, he or
she shall confer with the outside auditor concerning any such
communications, and shall notify the other members of the Audit Committee
of any communications which the outside auditor or the Chairman in the
exercise of his or her
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business judgment believes should be considered by the Audit Committee
prior to its next scheduled meeting.
J. The Audit Committee shall direct the outside auditor to use its best
efforts to perform all reviews of interim financial information prior to
disclosure by the Company of such information, and to discuss promptly
with the Chairman of the Audit Committee and the Chief Financial Officer
any matters identified in connection with the auditor's review of interim
financial information which are required to be discussed by Statement on
Auditing Standards No. 61. The Chairman of the Audit Committee shall
discuss any such matters with the outside auditor, and shall notify the
other members of the Audit Committee of any discussions which the outside
auditor or the Chairman in the exercise of his or her business judgment
believes should be considered by the Audit Committee prior to disclosure
or filing of the interim financial information, or the Audit Committee's
next scheduled meeting.
K. The Audit Committee shall direct management to advise the Audit
Committee in the event that the Company proposes to disclose or
file interim financial information prior to completion of review by the
outside auditor.
L. The Audit Committee shall meet privately at least once per year with:
(i) the outside auditor; (ii) the Chief Financial Officer; (iii) the
Controller; and (iv) the most senior person (if any) responsible for the
internal audit activities of the Company.
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EXHIBIT B
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 November 8, 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 February 21, 2001 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 25,000,000
to 50,000,000.
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 February, 2001.
<TABLE>
<S> <C> <C>
SATCON TECHNOLOGY CORPORATION
By:
-----------------------------------------
David B. Eisenhaure
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE>
APPENDIX 1
4. The total number of shares of stock which the Corporation shall have
authority to issue is fifty-one million (51,000,000) shares, fifty million
(50,000,000) of which shall be Common Stock, of the par value of one cent
($0.01) per share; and one million (1,000,000) of which shall be Preferred
Stock, of the par value of one cent ($0.01) 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.
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EXHIBIT C
SATCON TECHNOLOGY CORPORATION
2000 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this 2000 Stock Incentive Plan (the "Plan") of SatCon
Technology Corporation, a Delaware corporation ("SatCon" or 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 SatCon's present or future parent or subsidiary
corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code
of 1986, as amended, and any regulations promulgated thereunder (the "Code") and
any other business venture (including, without limitation, joint venture or
limited liability company) in which SatCon has a significant interest, as
determined by the Board of Directors of SatCon (the "Board").
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 or restricted stock 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 AND DELEGATION
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered by
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 CHIEF EXECUTIVE OFFICER. To the extent permitted by
applicable law, the Board may delegate to David B. Eisenhaure in his capacity as
Chairman of the Board, President and Chief Executive Officer of SatCon 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 for
any one Participant to be made by such executive officer.
(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) above to the extent that the
Board's powers or authority under the Plan have been delegated to such Committee
or executive officer.
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 1,200,000 shares of common stock, $0.01 par value
per share, of SatCon (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 (including as the result of shares of Common Stock
subject
<PAGE>
to such Award being repurchased by the Company at the original issuance price
pursuant to a contractual repurchase right) 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 limitations 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 7, the
maximum number of shares of Common Stock with respect to which Awards may be
granted to any Participant under the Plan shall be 500,000 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 ("Section 162(m)").
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 SatCon and its parent and
subsidiary corporations as defined in Sections 424(e) and 424(f) of the Code,
respectively, 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
and any required tax withholding or (ii) delivery by the 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 and any
required tax withholding;
(3) when the Common Stock is registered under the Securities Exchange Act
of 1934, as amended (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
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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, if acquired directly from the Company 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.
(g) SUBSTITUTE OPTIONS. In connection with a merger or consolidation of an
entity with the Company or the acquisition by the Company of property or stock
of an entity, the Board may grant Options in substitution for any options or
other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Options may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Options
contained in the other sections of this Section 5 or in Section 2.
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.
(c) STOCK CERTIFICATES. 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. 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, and (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award shall be appropriately adjusted by the Company (or
substituted Awards may be made, if applicable) to the extent the Board shall
determine, in good faith, that such an adjustment (or substitution) is necessary
and appropriate. If this Section 7(a) applies and Section 7(c) also applies to
any event, Section 7(c) shall be applicable to such event, and this
Section 7(a) shall not be applicable.
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<PAGE>
(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) REORGANIZATION AND CHANGE IN CONTROL EVENTS
(1) DEFINITIONS
(a) A "Reorganization 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 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 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) 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
C-4
<PAGE>
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 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 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 Company
Common Stock and Outstanding Company Voting Securities,
respectively, immediately prior to such Business
Combination and (y) no Person (excluding any Exempt Person,
the Acquiring Corporation or any employee benefit plan (or
related trust) maintained or sponsored by the Company or by
the Acquiring Corporation) 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 Reorganization 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 Reorganization
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.
C-5
<PAGE>
(2) EFFECT ON OPTIONS
(a) REORGANIZATION EVENT. Upon the occurrence of a Reorganization
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 a Reorganization 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 Reorganization 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 Reorganization 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 become vested on each subsequent
vesting date in accordance with the original schedule becoming
vested on each subsequent vesting date and (B) such assumed or
substituted options shall become immediately exercisable in full
if, on or prior to the first anniversary of the date of the
consummation of the Reorganization 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
Reorganization 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 Reorganization Event, the
consideration (whether cash, securities or other property)
received as a result of the Reorganization Event by holders of
Common Stock for each share of Common Stock held immediately
prior to the consummation of the Reorganization 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 Reorganization
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
Reorganization 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 Reorganization Event and will
terminate immediately prior to the consummation of such
Reorganization Event, except to the extent exercised by the
Participants before the consummation of such Reorganization
Event; provided, however, that in the event of a Reorganization
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 Reorganization Event
(the "Acquisition Price"), then the Board may instead provide
that all outstanding Options shall terminate upon consummation of
such Reorganization Event and that each Participant shall
C-6
<PAGE>
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 A REORGANIZATION EVENT. Upon
the occurrence of a Change in Control Event that does not also
constitute a Reorganization 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 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 become vested
on each subsequent vesting date in accordance with the original
schedule becoming vested on each such subsequent vesting date;
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) REORGANIZATION EVENT THAT IS NOT A CHANGE IN CONTROL EVENT. Upon
the occurrence of a Reorganization 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 Reorganization 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
a Reorganization 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 become free from conditions or
restrictions on each subsequent vesting date in accordance with
the original schedule becoming free from conditions or
restrictions on each subsequent vesting date. 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.
C-7
<PAGE>
(4) LIMITATIONS. Notwithstanding the foregoing provisions of this
Section 7(c), if the Change in Control Event is intended to be accounted for
as a "pooling of interests" for financial accounting purposes, and if the
acceleration to be effected by the foregoing provisions of this
Section 7(c) would preclude accounting for the Change in Control Event as a
"pooling of interests" for financial accounting purposes, then no such
acceleration shall occur upon the Change in Control Event.
8. 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 in such form (written,
electronic or otherwise) 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 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 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; provided, however, that the
total tax withholding where stock is being used to satisfy such tax obligations
cannot exceed the Company's minimum statutory withholding obligations (based on
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to such supplemental taxable
income). 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
C-8
<PAGE>
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 Award shall
become immediately exercisable in full or in part, free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.
9. 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 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 that is intended to comply with Section 162(m) 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), no Award granted to a Participant that is intended to comply
with Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, 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.
C-9
<PAGE>
SATCON TECHNOLOGY
CORPORATION
C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398
DETACH HERE
Please mark
/X/ votes as in
this example.
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SATCON TECHNOLOGY CORPORATION
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1. To elect the following three (3) nominees as Class I Directors of the
Corporation.
For All With- For All
Nominees hold Except
(01) David B. Eisenhaure
(02) Alan P. Goldberg / / / / / /
(03) James L. Kirtley, Jr.
INSTRUCTION: To withhold authority to vote for any individual nominee, 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(s).
FOR AGAINST ABSTAIN
2. To approve an amendment to the Corporation's
Certificate of Incorporation increasing from / / / / / /
25,000,000 to 50,000,000 the number of
authorized shares of Common Stock.
FOR AGAINST ABSTAIN
3. To approve the Corporation's 2000 Stock
Incentive Plan. / / / / / /
FOR AGAINST ABSTAIN
4. To ratify the selection of Arthur Andersen LLP
as independent auditors for the Corporation for / / / / / /
the fiscal year ending September 30, 2001.
5. To transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
Mark box at right if an address change or comment has been noted / /
on the reverse side of this card.
Signature: Date
------------------------------------ --------------------
Signature: Date
------------------------------------ --------------------
<PAGE>
DETACH HERE
SATCON TECHNOLOGY CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FEBRUARY 21, 2001
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 2001 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, February 21, 2001 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 as 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 AND 4. 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.
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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.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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