EXHIBIT 10.1
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT
DATED AS OF FEBRUARY 18, 2003
AMONG
SATCON TECHNOLOGY CORPORATION
AND
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
PAGE
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ARTICLE I Purchase and Sale of Preferred Stock................................................................1
Section 1.1 Purchase and Sale of Stock.................................................................1
Section 1.2 The Conversion Shares......................................................................1
Section 1.3 Purchase Price and Closing.................................................................2
ARTICLE II Representations and Warranties.....................................................................2
Section 2.1 Representations and Warranties of the Company..............................................2
Section 2.2 Representations and Warranties of the Purchasers..........................................13
ARTICLE III Covenants........................................................................................15
Section 3.1 Securities Compliance.....................................................................15
Section 3.2 Registration and Listing..................................................................15
Section 3.3 Inspection Rights.........................................................................16
Section 3.4 Compliance with Laws......................................................................16
Section 3.5 Keeping of Records and Books of Account...................................................16
Section 3.6 Reporting Requirements....................................................................16
Section 3.7 Status of Dividends.......................................................................17
Section 3.7 Amendments................................................................................17
Section 3.8 Other Agreements..........................................................................18
Section 3.9 Distributions.............................................................................18
Section 3.10 Status of Dividends.......................................................................18
Section 3.11 Intentionally Omitted.....................................................................19
Section 3.12 Future Financings; Right of First Offer and Refusal.......................................17
Section 3.13 Reservation of Shares.....................................................................18
Section 3.14 Transfer Agent Instructions...............................................................19
Section 3.15 Disposition of Assets.....................................................................19
Section 3.16 Form S-3 Eligibility......................................................................20
Section 3.17 Stockholder Approval......................................................................20
Section 3.18 Silicon Valley Bank.......................................................................20
ARTICLE IV Conditions........................................................................................21
Section 4.1 Conditions Precedent to the Obligation of the Company to Sell the Shares .................21
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the Shares...........22
ARTICLE V Intentionally Omitted..............................................................................24
ARTICLE VI Stock Certificate Legend..........................................................................24
Section 6.1 Legend....................................................................................24
ARTICLE VII Intentionally Omitted............................................................................25
ARTICLE VIII Indemnification.................................................................................25
Section 8.1 General Indemnity.........................................................................25
Section 8.2 Indemnification Procedure.................................................................25
ARTICLE IX Miscellaneous.....................................................................................26
Section 9.1 Fees and Expenses.........................................................................26
Section 9.2 Specific Enforcement, Consent to Jurisdiction.............................................27
Section 9.3 Entire Agreement; Amendment...............................................................27
Section 9.4 Notices...................................................................................28
Section 9.5 Waivers...................................................................................28
Section 9.6 Headings..................................................................................29
Section 9.7 Successors and Assigns....................................................................29
Section 9.8 No Third Party Beneficiaries..............................................................29
Section 9.9 Governing Law.............................................................................29
Section 9.10 Survival..................................................................................29
Section 9.11 Counterparts..............................................................................29
Section 9.12 Publicity.................................................................................29
Section 9.13 Severability..............................................................................30
Section 9.14 Further Assurances........................................................................30
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SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is dated as of February 18, 2003 by and among
SatCon Technology
Corporation, a Delaware corporation (the "Company"), and each of the Purchasers
of shares of Series A Convertible Preferred Stock of the Company whose names are
set forth on EXHIBIT A hereto (individually, a "Purchaser" and collectively, the
"Purchasers").
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK
Section 1.1 PURCHASE AND SALE OF STOCK. Upon the following terms
and conditions, the Company shall issue and sell to the Purchasers and each of
the Purchasers shall purchase from the Company, the number of shares of the
Company's Series A Convertible Preferred Stock, par value $.01 per share (the
"Preferred Shares"), at a purchase price of $12,500 per share, set forth
opposite such Purchaser's name on EXHIBIT A hereto. Upon the following terms and
conditions, each of the Purchasers shall be issued Series A Warrants, in
substantially the form attached hereto as EXHIBIT B-1 (the "Series A Warrants"),
and Series B Warrants, in substantially the form attached hereto as EXHIBIT B-2
(the "Series B Warrants" and, together with the Series A Warrants, the
"Warrants"), to purchase the number of shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock") set forth opposite such Purchaser's
name on EXHIBIT A hereto. The aggregate purchase price for the Preferred Shares
and the Warrants shall be $3,172,500. The designation, rights, preferences and
other terms and provisions of the Series A Convertible Preferred Stock are set
forth in the Certificate of Designation of the Relative Rights and Preferences
of the Series A Convertible Preferred Stock attached hereto as EXHIBIT C (the
"Certificate of Designation"). The Company and the Purchasers are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded by Rule 506 of Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act") or Section 4(2) of the Securities Act.
Section 1.2 THE CONVERSION SHARES. The Company has authorized and
has reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, such number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all of the Preferred Shares and exercise of the Warrants then outstanding;
PROVIDED that the number of shares of Common Stock so reserved shall at no time
be less than 120% of its authorized but unissued shares of its Common Stock, to
effect the conversion of the Preferred Shares and exercise of the Warrants. Any
shares of Common Stock issuable upon conversion of the Preferred Shares and
exercise of the Warrants (and such shares when issued) are herein referred to as
the "Conversion Shares" and the "Warrant Shares", respectively. The Preferred
Shares, the Conversion Shares and the Warrant
Shares are sometimes collectively referred to as the "Shares".
Section 1.3 PURCHASE PRICE AND CLOSING. The Company agrees to
issue and sell to the Purchasers and, in consideration of and in express
reliance upon the representations, warranties, covenants, terms and conditions
of this Agreement, the Purchasers, severally but not jointly, agree to purchase
that number of the Preferred Shares and Warrants set forth opposite their
respective names on Exhibit A. The aggregate purchase price of the Preferred
Shares and Warrants being acquired by each Purchaser is set forth opposite such
Purchaser's name on Exhibit A (for each such purchaser, the "Purchase Price" and
collectively referred to as the "Purchase Prices"). The closing of the purchase
and sale of the Preferred Shares and Warrants shall take place at the offices of
Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, The Chrysler Building, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Closing") at 1:00 p.m. (eastern time)
upon the satisfaction of each of the conditions set forth in Article IV hereof
(the "Closing Date"). Funding with respect to the Closing shall take place by
wire transfer of immediately available funds on or prior to the Closing Date.
Section 1.4 WARRANTS. The Company agrees to issue to each of the
Purchasers Series A Warrants and Series B Warrants to purchase the number of
shares of Common Stock set forth opposite such Purchaser's name on EXHIBIT A
hereto. The Purchasers shall be issued Series A Warrants to purchase 5,000
shares of Common Stock for each Preferred Share purchased at the Closing. The
Series A Warrants shall have an exercise price equal to $.01 and shall be
exercised within one business day of the Closing Date. The Purchasers shall be
issued Series B Warrants to purchase 5,000 shares of Common Stock for each
Preferred Share purchased at the Closing. The Series B Warrants shall have an
exercise price equal to the Warrant Price (as defined in the Series B Warrant)
and shall expire five (5) years from the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchasers, except as set forth in the Company's disclosure schedule delivered
with this Agreement as follows:
(a) ORGANIZATION, GOOD STANDING AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any subsidiaries except as set
forth in the Company's Form 10-K for the year ended September 30, 2002,
including the accompanying financial statements (the "Form 10-K"), or in the
Company's Form 10-Q for the fiscal quarters ended December 29, 2001, March 30,
2002 or June 29, 2002 (collectively, the "Form 10-Q"), or on SCHEDULE 2.1(a)
hereto. The Company and each such subsidiary is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect (as defined in Section 2.1(c) hereof) on the Company's financial
condition.
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(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement attached hereto as EXHIBIT D (the "Registration
Rights Agreement"), the Irrevocable Transfer Agent Instructions (as defined in
Section 3.14), the Certificate of Designation, and the Warrants (collectively,
the "Transaction Documents") and to issue and sell the Shares and the Warrants
in accordance with the terms hereof. The execution, delivery and performance of
the Transaction Documents by the Company and, except as disclosed on SCHEDULE
2.1(b) hereto, the consummation by it of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action, and no further consent or authorization of the Company or its Board of
Directors or stockholders is required. This Agreement has been duly executed and
delivered by the Company. The other Transaction Documents will have been duly
executed and delivered by the Company at the Closing. Each of the Transaction
Documents constitutes, or shall constitute when executed and delivered, a valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) CAPITALIZATION. The authorized capital stock of the Company
and the shares thereof currently issued and outstanding as of December 31, 2002
are set forth on SCHEDULE 2.1(c) hereto. All of the outstanding shares of the
Company's Common Stock and Series A Convertible Preferred Stock have been duly
and validly authorized. Except as set forth in this Agreement and the
Registration Rights Agreement and as set forth on SCHEDULE 2.1(c) hereto, no
shares of Common Stock are entitled to preemptive rights or registration rights
and there are no outstanding options, warrants, scrip, rights to subscribe to,
call or commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Company.
Furthermore, except as set forth in this Agreement and the Registration Rights
Agreement or on SCHEDULE 2.1(c), there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company in order to sell restricted securities or as set forth on
SCHEDULE 2.1(c) hereto, the Company is not a party to any agreement granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities. The Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of the Company. Except as set forth on SCHEDULE 2.1(c) hereto,
the offer and sale of all capital stock, convertible securities, rights,
warrants, or options of the Company issued prior to the Closing complied with
all applicable Federal and state securities laws, and no stockholder has a right
of rescission or claim for damages with respect thereto which would have a
Material Adverse Effect (as defined below) on the Company's financial condition
or operating results. The Company has furnished or made available to the
Purchasers true and correct copies of the Company's Certificate of Incorporation
as in effect on the date hereof (the "Certificate"), and the Company's Bylaws as
in effect on the date hereof (the "Bylaws"). For the purposes of this Agreement,
"Material Adverse Effect" means any material adverse effect on the business,
operations, properties, prospects, or financial condition of the
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Company and its subsidiaries, taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to perform any of its obligations under this
Agreement in any material respect.
(d) ISSUANCE OF SHARES. Except as disclosed on SCHEDULE 2.1(d)
hereto, the Preferred Shares and the Warrants to be issued at the Closing have
been duly authorized by all necessary corporate action and the Preferred Shares,
when paid for or issued in accordance with the terms hereof, shall be validly
issued and outstanding, fully paid and nonassessable and entitled to the rights
and preferences set forth in the Certificate of Designation. Except as disclosed
on SCHEDULE 2.1(d) hereto, when the Conversion Shares and the Warrant Shares are
issued in accordance with the terms of the Certificate of Designation and the
Warrants, respectively, such shares will be duly authorized by all necessary
corporate action and validly issued and outstanding, fully paid and
nonassessable, and the holders shall be entitled to all rights accorded to a
holder of Common Stock.
(e) NO CONFLICTS. Except as disclosed on SCHEDULE 2.1(e) hereto,
the execution, delivery and performance of the Transaction Documents by the
Company, the performance by the Company of its obligations under the Certificate
of Designation and the consummation by the Company of the transactions
contemplated herein and therein do not and will not (i) violate any provision of
the Company's Certificate or Bylaws, (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is a
party or by which it or its properties or assets are bound, (iii) create or
impose a lien, mortgage, security interest, charge or encumbrance of any nature
on any property of the Company under any agreement or any commitment to which
the Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including Federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries or by which any property or asset of
the Company or any of its subsidiaries are bound or affected, except, in all
cases other than violations pursuant to clauses (i) and (iv) above, for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its subsidiaries is not being
conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in the
aggregate do not and will not have a Material Adverse Effect. The Company is not
required under Federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under the Transaction Documents, or issue and sell the
Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares in
accordance with the terms hereof or thereof (other than any filings which may be
required to be made by the Company with the Commission or state securities
administrators subsequent to the Closing, any registration statement which may
be filed pursuant hereto, and the Certificate of Designation); PROVIDED that,
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Purchasers
4
herein.
(f) COMMISSION DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and, since September 30, 2002, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
"Commission Documents"). The Company has delivered or made available to each of
the Purchasers true and complete copies of the Commission Documents filed with
the Commission since September 30, 2002. The Company has not provided to the
Purchasers any material non-public information or other information which,
according to applicable law, rule or regulation, was required to have been
disclosed publicly by the Company but which has not been so disclosed, other
than with respect to the transactions contemplated by this Agreement. As of
their respective dates, the Form 10-K and the Form 10-Q complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such documents, and, as of their
respective dates, none of the Form 10-K and the Form 10-Q contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the Commission Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company and its
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(g) SUBSIDIARIES. SCHEDULE 2.1(g) hereto sets forth each
subsidiary of the Company, showing the jurisdiction of its incorporation or
organization. The Company owns, directly or indirectly, all of the outstanding
stock or other interests of such subsidiary. For the purposes of this Agreement,
"subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
outstanding shares of capital stock of each subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any subsidiary for the purchase
or acquisition of any shares of capital stock of any subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
subsidiary is
5
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of the capital stock of any subsidiary or any
convertible securities, rights, warrants or options of the type described in the
preceding sentence. Neither the Company nor any subsidiary is party to, nor has
any knowledge of, any agreement restricting the voting or transfer of any shares
of the capital stock of any subsidiary.
(h) NO MATERIAL ADVERSE CHANGE. Since September 30, 2002, the
Company has not experienced or suffered any Material Adverse Effect, except as
disclosed on SCHEDULE 2.1(h) hereto or in the Commission Documents.
(i) NO UNDISCLOSED LIABILITIES. Except as set forth on
SCHEDULE 2.1(i) hereto or in the Form 10-K, neither the Company nor any of its
subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) other than those incurred in the ordinary course of the Company's
or its subsidiaries respective businesses since September 30, 2002 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company or its subsidiaries.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Except as set forth on
SCHEDULE 2.1(j) hereto, no event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.
(k) INDEBTEDNESS. The Form 10-K, Form 10-Q or SCHEDULE 2.1(k)
hereto sets forth as of a recent date all outstanding secured and unsecured
Indebtedness of the Company or any subsidiary, or for which the Company or any
subsidiary has commitments. For the purposes of this Agreement, "Indebtedness"
shall mean (a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Except as set forth on SCHEDULE 2.1(k),
neither the Company nor any subsidiary is in default with respect to any
Indebtedness.
(l) TITLE TO ASSETS. Each of the Company and the subsidiaries has
good and marketable title to all of its real and personal property reflected in
the Form 10-K, free and clear of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated in the Form
10-K, Form 10-Q or on SCHEDULE 2.1(l) hereto or such that, individually or in
the aggregate, do not cause a Material Adverse Effect on the Company's financial
condition or operating results. All said leases of the Company and each of its
subsidiaries are valid and subsisting and in full force and effect.
(m) ACTIONS PENDING. There is no action, suit, claim,
investigation, arbitration,
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alternate dispute resolution proceeding or any other proceeding pending or, to
the knowledge of the Company, threatened against the Company or any subsidiary
which questions the validity of this Agreement or any of the other Transaction
Documents or the transactions contemplated hereby or thereby or any action taken
or to be taken pursuant hereto or thereto. Except as set forth in the Form 10-K,
Form 10-Q or on SCHEDULE 2.1(m) hereto, there is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or any other
proceeding pending or, to the knowledge of the Company, threatened, against or
involving the Company, any subsidiary or any of their respective properties or
assets which could, if there were an unfavorable decision, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Except as set forth in the Form 10-K, Form 10-Q or SCHEDULE 2.1(m)
hereto, there are no outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against the
Company or any subsidiary or any officers or directors of the Company or
subsidiary in their capacities as such.
(n) COMPLIANCE WITH LAW. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Form 10-K, Form 10-Q, or such that,
individually or in the aggregate, do not cause a Material Adverse Effect. The
Company and each of its subsidiaries have all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless
the failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(o) TAXES. Except as set forth in the Form 10-K or in the Form
10-Q, the Company and each of the subsidiaries has accurately prepared and filed
all federal, state and other material tax returns required by law to be filed by
it, has paid or made provisions for the payment of all taxes shown to be due and
all additional assessments, and adequate provisions have been and are reflected
in the financial statements of the Company and the subsidiaries for all material
current taxes and other charges to which the Company or any subsidiary is
subject and which are not currently due and payable. None of the federal income
tax returns of the Company or any subsidiary have been audited by the Internal
Revenue Service. The Company has no knowledge of any additional assessments,
adjustments or contingent tax liability (whether federal or state) of any nature
whatsoever, whether pending or threatened against the Company or any subsidiary
for any period, nor of any basis for any such assessment, adjustment or
contingency.
(p) CERTAIN FEES. Except as set forth in this Agreement or on
SCHEDULE 2.1(p) hereto, no brokers, finders or financial advisory fees or
commissions will be payable by the Company or any subsidiary or any Purchaser
with respect to the transactions contemplated by this Agreement.
(q) DISCLOSURE. To the best of the Company's knowledge, neither
this Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchasers by or on behalf of the Company or any
subsidiary in connection with
7
the transactions contemplated by this Agreement contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
(r) OPERATION OF BUSINESS. Except as set forth in the Form 10-K,
the Company and each of the subsidiaries owns or possesses all patents,
trademarks, domain names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations that are necessary or material for use
in connection with their respective businesses as described in the Form 10-K and
which the failure to so have could, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any subsidiary has received a written notice that the foregoing
intellectual property rights used by the Company or any subsidiary violates or
infringes upon the rights of any other party.
(s) ENVIRONMENTAL COMPLIANCE. The Company and each of its
subsidiaries have obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under any
Environmental Laws. The Form 10-K or Form 10-Q describes all material permits,
licenses and other authorizations issued under any Environmental Laws to the
Company or its subsidiaries. "Environmental Laws" shall mean all applicable laws
relating to the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. The Company has all necessary material governmental approvals
required under all Environmental Laws and used in its business or in the
business of any of its subsidiaries. The Company and each of its subsidiaries
are also in material compliance with all other limitations, restrictions,
conditions, standards, requirements, schedules and timetables required or
imposed under all Environmental Laws. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect, there are no
past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its subsidiaries
that violate or may violate any Environmental Law after the Closing Date or that
may give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
(t) BOOKS AND RECORD INTERNAL ACCOUNTING CONTROLS. The books and
records of the Company and its subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and the
subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of
8
the Company or any subsidiary. The Company and each of its subsidiaries maintain
a system of internal accounting controls sufficient, in the judgment of the
Company, to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions is taken with respect to any differences.
(u) MATERIAL AGREEMENTS. Except as set forth in the Form 10-K,
Form 10-Q or on SCHEDULE 2.1(u) hereto, neither the Company nor any subsidiary
is a party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission as an exhibit to a registration statement on Form S-3 or
applicable form (collectively, "Material Agreements") if the Company or any
subsidiary were registering securities under the Securities Act. Except as set
forth on SCHEDULE 2.1(u) or in the Commission Documents, the Company and each of
its subsidiaries has in all material respects performed all the obligations
required to be performed by them to date under the foregoing agreements, have
received no notice of default and, to the best of the Company's knowledge are
not in default under any Material Agreement now in effect, the result of which
could cause a Material Adverse Effect. Except as set forth on SCHEDULE 2.1(u) or
in the Commission Documents, no written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement of the Company or of any subsidiary
limits or shall limit the payment of dividends on the Company's Preferred
Shares, other Preferred Stock, if any, or its Common Stock.
(v) TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Commission Documents or on SCHEDULE 2.1(v) hereto, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions between (a) the Company or any subsidiary on
the one hand, and (b) on the other hand, any officer or director of the Company,
or any of its subsidiaries, or any person owning any capital stock of the
Company or any subsidiary or any member of the immediate family of such officer
or director or any corporation or other entity controlled by such officer,
director or stockholder, or a member of the immediate family of such officer,
director or stockholder.
(w) SECURITIES ACT OF 1933. Based in material part upon the
representations herein of the Purchasers, the Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Shares and the Warrants hereunder. Neither
the Company nor anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy any of the Shares, the Warrants or
similar securities to, or solicit offers with respect thereto from, or enter
into any preliminary conversations or negotiations relating thereto with, any
person, or has taken or will take any action so as to bring the issuance and
sale of any of the Shares and the Warrants under the registration provisions of
the Securities Act and applicable state securities laws, and neither the Company
nor any of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer
or sale of any of the Shares and the Warrants.
9
(x) GOVERNMENTAL APPROVALS. Except as set forth in the Form 10-K
or Form 10-Q, and except for the filing of any notice prior or subsequent to the
Closing Date that may be required under applicable state and/or Federal
securities laws (which if required, shall be filed on a timely basis), including
the filing of a Form D and a registration statement or statements pursuant to
the Registration Rights Agreement, and the filing of the Certificate of
Designation with the Secretary of State for the State of Delaware, no
authorization, consent, approval, license, exemption of, filing or registration
with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Preferred Shares and the
Warrants, or for the performance by the Company of its obligations under the
Transaction Documents.
(y) EMPLOYEES. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the Form 10-K or Form 10-Q. Except as set forth in the
Form 10-K or the Form 10-Q, neither the Company nor any subsidiary has any
employment contract, agreement regarding proprietary information,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to
the right of any officer or employee to be employed by the Company or such
subsidiary. Since September 30, 2002, no officer or key employee of the Company
or any subsidiary whose termination, either individually or in the aggregate,
could have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment with the
Company or any subsidiary.
(z) ABSENCE OF CERTAIN DEVELOPMENTS. Except as provided on
SCHEDULE 2.1(z) hereto or in the Commission Documents, since September 30, 2002,
neither the Company nor any subsidiary has:
(i) issued any stock, bonds or other corporate securities
or any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to
any liabilities (absolute or contingent) except current liabilities incurred in
the ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or
paid any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash
or other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;
10
(v) sold, assigned or transferred any other tangible
assets, or canceled any debts or claims, except in the ordinary course of
business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
(vii) suffered any substantial losses or waived any rights
of material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in
the ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(x) entered into any other transaction other than in the
ordinary course of business, or entered into any other material transaction,
whether or not in the ordinary course of business;
(xi) made charitable contributions or pledges in excess of
$25,000;
(xii) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment;
(xiv) effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company or its subsidiaries; or
(xv) entered into an agreement, written or otherwise, to
take any of the foregoing actions.
(aa) USE OF PROCEEDS. The proceeds from the sale of the Preferred
Shares will be used by the Company for working capital and general corporate
purposes.
(bb) PUBLIC UTILITY HOLDING COMPANY ACT AND INVESTMENT COMPANY ACT
STATUS. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon the Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
11
(cc) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its subsidiaries which is or would be materially adverse to the Company and its
subsidiaries. The execution and delivery of this Agreement and the issuance and
sale of the Preferred Shares will not involve any transaction which is subject
to the prohibitions of Section 406 of ERISA or in connection with which a tax
could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986,
as amended, provided that, if any of the Purchasers, or any person or entity
that owns a beneficial interest in any of the Purchasers, is an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) with respect
to which the Company is a "party in interest" (within the meaning of Section
3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(ac), the term "Plan" shall mean
an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or any subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any subsidiary, is
under common control, as described in Section 414(b) or (c) of the Code.
(dd) DILUTIVE EFFECT. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Preferred Shares
and the Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue Conversion Shares upon conversion of the Preferred Shares in accordance
with this Agreement and the Certificate of Designation and its obligations to
issue the Warrant Shares upon the exercise of the Warrants in accordance with
this Agreement and the Warrants, is, in each case, absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interest of other stockholders of the Company.
(ee) INDEPENDENT NATURE OF PURCHASERS. The Company acknowledges
that the obligations of each Purchaser under the Transaction Documents are
several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser under the Transaction Documents. The decision of each
Purchaser to purchase Shares pursuant to this Agreement has been made by such
Purchaser independently of any other purchase and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its subsidiaries
which may have made or given by any other Purchaser or by any agent or employee
of any other Purchaser, and no Purchaser or any of its agents or employees shall
have any liability to any Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. The Company
further acknowledges that nothing contained herein, or in any Transaction
Document, and no action taken by any Purchaser pursuant hereto or thereto, shall
be deemed to constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Documents. Each Purchaser
shall be entitled to independently protect and enforce its rights, including
without limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
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Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
of the Purchasers hereby makes the following representations and warranties to
the Company with respect solely to itself and not with respect to any other
Purchaser:
(a) ORGANIZATION AND STANDING OF THE PURCHASERS. If the Purchaser
is an entity, such Purchaser is a corporation or partnership duly incorporated
or organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
(b) AUTHORIZATION AND POWER. The Purchaser has the requisite power
and authority to enter into and perform this Agreement and to purchase the
Preferred Shares and Warrants being sold to it hereunder. The execution,
delivery and performance of this Agreement and the Registration Rights Agreement
by such Purchaser and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate or
partnership action, and no further consent or authorization of such Purchaser or
its Board of Directors, stockholders, or partners, as the case may be, is
required. Each of this Agreement and the Registration Rights Agreement has been
duly authorized, executed and delivered by such Purchaser and constitutes, or
shall constitute when executed and delivered, a valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with the terms
thereof.
(c) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the consummation by such
Purchaser of the transactions contemplated hereby and thereby or relating hereto
do not and will not (i) result in a violation of such Purchaser's charter
documents or bylaws or other organizational documents or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Purchaser is a party or by which its
properties or assets are bound, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on such Purchaser). Such Purchaser is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or the
Registration Rights Agreement or to purchase the Preferred Shares or acquire the
Warrants in accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, such Purchaser is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
(d) ACQUISITION FOR INVESTMENT. Such Purchaser is acquiring the
Preferred Shares and the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with distribution.
Such Purchaser does not have a present intention to sell the Preferred Shares or
the Warrants, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of the Preferred Shares or the Warrants to
or through any person or entity; PROVIDED, HOWEVER, that by making the
representations herein and subject to Section 2.2(f) below, such Purchaser does
not agree to hold the Shares or the
13
Warrants for any minimum or other specific term and reserves the right to
dispose of the Shares or the Warrants at any time in accordance with Federal and
state securities laws applicable to such disposition. Such Purchaser
acknowledges that it is able to bear the financial risks associated with an
investment in the Preferred Shares and the Warrants and that it has been given
full access to such records of the Company and the subsidiaries and to the
officers of the Company and the subsidiaries and received such information as it
has deemed necessary or appropriate to conduct its due diligence investigation
and has sufficient knowledge and experience in investing in companies similar to
the Company in terms of the Company's stage of development so as to be able to
evaluate the risks and merits of its investment in the Company.
(e) STATUS OF PURCHASERS. Such Purchaser is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act. Such
Purchaser is not required to be registered as a broker-dealer under Section 15
of the Exchange Act.
(f) OPPORTUNITIES FOR ADDITIONAL INFORMATION. Each Purchaser
acknowledges that such Purchaser has had the opportunity to ask questions of and
receive answers from, or obtain additional information from, the executive
officers of the Company concerning the financial and other affairs of the
Company, and to the extent deemed necessary in light of such Purchaser's
personal knowledge of the Company's affairs, such Purchaser has asked such
questions and received answers to the full satisfaction of such Purchaser, and
such Purchaser desires to invest in the Company.
(g) NO GENERAL SOLICITATION. Each Purchaser acknowledges that the
Preferred Shares and the Warrants were not offered to such Purchaser by means of
any form of general or public solicitation or general advertising, or publicly
disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio, or
(ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications.
(h) RULE 144. Such Purchaser understands that the Shares must be
held indefinitely unless such Shares are registered under the Securities Act or
an exemption from registration is available. Such Purchaser acknowledges that
such Purchaser is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such person has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Shares without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(i) GENERAL. Such Purchaser understands that the Shares are being
offered and sold in reliance on a transactional exemption from the registration
requirement of Federal and state securities laws and the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Shares.
14
(j) INDEPENDENT INVESTMENT. No Purchaser has agreed to act with
any other Purchaser for the purpose of acquiring, holding, voting or disposing
of the Shares purchased hereunder for purposes of Section 13(d) under the
Exchange Act, and each Purchaser is acting independently with respect to its
investment in the Shares.
ARTICLE III
COVENANTS
The Company covenants with each of the Purchasers as follows, which
covenants are for the benefit of the Purchasers and their permitted assignees
(as defined herein).
Section 3.1 SECURITIES COMPLIANCE. (a) The Company shall notify
the Commission in accordance with their rules and regulations, of the
transactions contemplated by any of the Transaction Documents, including filing
a Form D with respect to the Preferred Shares, Warrants, Conversion Shares and
Warrant Shares as required under Regulation D, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Preferred
Shares, the Warrants, the Conversion Shares and the Warrant Shares to the
Purchasers or subsequent holders.
(b) Unless waived by a Purchaser by means of providing sixty-one
(61) days notice to the Company, in connection with a Voluntary Conversion (as
such term is defined in the Certificate of Designation) or the exercise of the
Warrants, the Company covenants and agrees that upon receipt of a Conversion
Notice pursuant to Section 5(b)(ii) of the Certificate of Designation or
Exercise Form pursuant to Section 2(b) of the Warrants that it will not convert
such number of shares that, when aggregated with all other shares of Common
Stock then owned by a Purchaser beneficially or deemed beneficially owned by a
Purchaser, would result in a Purchaser owning more than 4.99% of all of such
Common Stock as would be outstanding on such date of conversion or such date of
exercise of the Warrant, as determined in accordance with Section 16 of the
Exchange Act and the regulations promulgated thereunder; PROVIDED, HOWEVER, that
if pursuant to this Section the Company does not convert or issue the number of
shares requested under the applicable Conversion Notice or Exercise Form, the
Company will not be subject to Section 5(b)(v) of the Certificate of Designation
as a result of such failure to convert.
Section 3.2 REGISTRATION AND LISTING. The Company will cause its
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under the Exchange Act, will comply with all requirements related to
any registration statement filed pursuant to this Agreement or the Registration
Rights Agreement, and will not take any action or file any document (whether or
not permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock on the Nasdaq SmallCap Market, or if such
listing is no longer available, on the over-the-counter
15
electronic bulletin board.
Section 3.3 INSPECTION RIGHTS. The Company shall permit, during
normal business hours and upon reasonable request and reasonable notice, each
Purchaser or any employees, agents or representatives thereof, so long as such
Purchaser shall be obligated hereunder to purchase the Preferred Shares or shall
beneficially own any Preferred Shares, or shall own Conversion Shares which, in
the aggregate, represent more than 2% of the total combined voting power of all
voting securities then outstanding, for purposes reasonably related to such
Purchaser's interests as a stockholder to examine and make reasonable copies of
and extracts from the records and books of account of, and visit and inspect the
properties, assets, operations and business of the Company and any subsidiary,
and to discuss the affairs, finances and accounts of the Company and any
subsidiary with any of its officers, consultants, directors, and key employees.
Prior to any Purchaser exercising its right under this Section 3.3, the
Purchaser and the Company shall enter into a confidentiality agreement in a form
acceptable to the parties.
Section 3.4 COMPLIANCE WITH LAWS. The Company shall comply, and
cause each subsidiary to comply, with all applicable laws, rules, regulations
and orders, noncompliance with which could have a Material Adverse Effect.
Section 3.5 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company
shall keep and cause each subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 3.6 REPORTING REQUIREMENTS. If the Commission ceases
making periodic reports filed under Section 13 of the Exchange Act available via
its Election Data Gathering Retrieval and Analysis System, then at a Purchaser's
request the Company shall furnish the following to such Purchaser so long as
such Purchaser shall be obligated hereunder to purchase the Preferred Shares or
shall beneficially own any Preferred Shares, or shall own Conversion Shares
which, in the aggregate, represent more than 2% of the total combined voting
power of all voting securities then outstanding:
(a) Quarterly Reports filed with the Commission on Form 10-Q as
soon as practical after the document is filed with the Commission, and in any
event within fifty-five (55) days after the end of each of the first three
fiscal quarters of the Company;
(b) Annual Reports filed with the Commission on Form 10-K as soon
as practical after the document is filed with the Commission, and in any event
within one hundred (100) days after the end of each fiscal year of the Company;
and
(c) Copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to holders of shares of Common Stock, contemporaneously with the
delivery of such notices or information to such holders of Common Stock.
16
Section 3.7 AMENDMENTS. The Company shall not amend or waive any
provision of the Certificate or Bylaws of the Company in any way that would
adversely affect the liquidation preferences, dividends rights, conversion
rights, voting rights or redemption rights of the Preferred Shares; PROVIDED,
HOWEVER, that any creation and issuance of another series of Junior Stock (as
defined in the Certificate of Designation) or any other class or series of
equity securities which by its terms shall rank on parity with the Preferred
Shares shall not be deemed to materially and adversely affect such rights,
preferences or privileges.
Section 3.8 OTHER AGREEMENTS. The Company shall not enter into any
agreement in which the terms of such agreement would materially restrict or
impair the right or ability to perform of the Company or any subsidiary under
any Transaction Document.
Section 3.9 DISTRIBUTIONS. Except with the vote or consent of at
least 80% of the Preferred Shares then outstanding, the Company agrees that it
shall not (i) effect any distribution with respect to Junior Stock or (ii)
purchase or otherwise acquire for value, directly or indirectly, any Common
Stock or other equity security of the Company.
Section 3.10 STATUS OF DIVIDENDS. The Company covenants and agrees
that (i) no Federal income tax return or claim for refund of Federal income tax
or other submission to the Internal Revenue Service will adversely affect the
Preferred Shares, any other series of its Preferred Stock, or the Common Stock,
and any deduction shall not operate to jeopardize the availability to Purchasers
of the dividends received deduction provided by Section 243(a)(1) of the Code or
any successor provision, (ii) in no report to shareholders or to any
governmental body having jurisdiction over the Company or otherwise will it
treat the Preferred Shares other than as equity capital or the dividends paid
thereon other than as dividends paid on equity capital unless required to do so
by a governmental body having jurisdiction over the accounts of the Company or
by a change in generally accepted accounting principles required as a result of
action by an authoritative accounting standards setting body, and (iii) other
than pursuant to this Agreement or the Certificate of Designation, it will take
no action which would result in the dividends paid by the Company on the
Preferred Shares out of the Company's current or accumulated earnings and
profits being ineligible for the dividends received deduction provided by
Section 243(a)(1) of the Code. The preceding sentence shall not be deemed to
prevent the Company from designating the Preferred Stock as "Convertible
Preferred Stock" in its annual and quarterly financial statements in accordance
with its prior practice concerning other series of preferred stock of the
Company. Notwithstanding the foregoing, the Company shall not be required to
restate or modify its tax returns for periods prior to the Closing Date. In the
event that the Purchasers have reasonable cause to believe that dividends paid
by the Company on the Preferred Shares out of the Company's current or
accumulated earnings and profits will not be treated as eligible for the
dividends received deduction provided by Section 243(a)(1) of the Code, or any
successor provision, the Company will, at the reasonable request of the
Purchasers of 51% of the outstanding Preferred Shares, join with the Purchasers
in the submission to the Service of a request for a ruling that dividends paid
on the Shares will be so eligible for Federal income tax purposes, at the
Purchasers expense. In addition, the Company will reasonably cooperate with the
Purchasers (at Purchasers' expense) in any litigation, appeal or other
proceeding challenging or contesting any ruling, technical advice, finding or
determination that earnings and profits are not eligible for the dividends
received deduction provided by Section 243(a)(1)
17
of the Code, or any successor provision to the extent that the position to be
taken in any such litigation, appeal, or other proceeding is not contrary to any
provision of the Code or incurred in connection with any such submission,
litigation, appeal or other proceeding. Notwithstanding the foregoing, nothing
herein contained shall be deemed to preclude the Company from claiming a
deduction with respect to such dividends if (i) the Code shall hereafter be
amended, or final Treasury regulations thereunder are issued or modified, to
provide that dividends on the Preferred Shares or Conversion Shares should not
be treated as dividends for Federal income tax purposes or that a deduction with
respect to all or a portion of the dividends on the Shares is allowable for
Federal income tax purposes, or (ii) in the absence of such an amendment,
issuance or modification and after a submission of a request for ruling or
technical advice, the service shall rule or advise that dividends on the shares
should not be treated as dividends for Federal income tax purposes. If the
Service determines that the Preferred Shares or Conversion Shares constitute
debt, the Company may file protective claims for refund.
Section 3.11 INTENTIONALLY OMITTED.
Section 3.12 FUTURE FINANCINGS; RIGHT OF FIRST OFFER AND REFUSAL.
(a) For purposes of this Agreement, a "Subsequent Financing" shall be defined as
any subsequent offer or sale to, or exchange with (or other type of distribution
to), any third party of Common Stock or any securities convertible, exercisable
or exchangeable into Common Stock, including debt securities so convertible, in
a private transaction (collectively, the "Financing Securities") other than a
Permitted Financing (as defined hereinafter). For purposes of this Agreement,
"Permitted Financing" shall mean any transaction involving (i) the Company's
issuance of any Financing Securities (other than for cash) in connection with a
merger and/or acquisition, consolidation, sale or disposition of all or
substantially all of the Company's assets, (ii) the Company's issuance of
Financing Securities in connection with strategic license agreements so long as
such issuances are not for the purpose of raising capital, (iii) the Company's
issuance of Financing Securities in connection with underwritten public
offerings of its securities, (iv) the Company's issuance of Common Stock or the
issuance or grants of options to purchase Common Stock pursuant to the Company's
stock option plans and employee stock purchase plans outstanding on the date
hereof or the issuance of Common Stock or the issuance or grants of options to
purchase Common Stock pursuant to amendments to existing stock incentive or
employee stock purchase plans or new stock incentive or employee stock purchase
plans adopted after the date of this Agreement which are approved by the Board
of Directors as long as such issuances in the aggregate do not exceed 1,700,000
shares of Common Stock, (v) any transaction where the first use of proceeds from
such transaction would be used to redeem all of the Preferred Shares in
accordance with Section 8(h) of the Certificate of Designation, (vi) as a result
of the exercise of options or warrants or conversion of convertible notes or
preferred stock which are granted or issued as of the date of this Agreement,
(vii) the issuance of any Financing Securities contemplated by Section 5(e)(x)
of the Certificate of Designation, (viii) any issuances of Common Stock pursuant
to Company 401(k) matches, or (ix) the issuance of secured convertible
promissory notes and warrants pursuant to the Note and Warrant Purchase
Agreement dated as of the date hereof by and among the Company and the investors
named therein and the issuance of Common Stock upon conversion, redemption or
exercise thereof.
(b) During the period commencing on the Closing Date and ending on
the first
18
(1st) anniversary of the Closing Date, the Company covenants and agrees to
promptly notify (in no event later than five (5) days after making or receiving
an applicable offer) in writing (a "Rights Notice") the Purchasers of the terms
and conditions of any proposed Subsequent Financing. The Rights Notice shall
describe, in reasonable detail, the proposed Subsequent Financing, the proposed
closing date of the Subsequent Financing, which shall be within thirty (30)
calendar days from the date of the Rights Notice, including, without limitation,
all of the terms and conditions thereof. The Rights Notice shall provide the
Purchasers an option (the "Rights Option") during the five (5) trading days
following delivery of the Rights Notice (the "Option Period") to inform the
Company whether the Purchasers will purchase all or part of the securities being
offered in such Subsequent Financing on the same, absolute terms and conditions
as contemplated by such Subsequent Financing (the "First Refusal Rights").
Delivery of any Rights Notice constitutes a representation and warranty by the
Company that there are no other material terms and conditions, arrangements,
agreements or otherwise except for those disclosed in the Rights Notice, to
provide additional compensation to any party participating in any proposed
Subsequent Financing, including, but not limited to, additional compensation
based on changes in the Purchase Price or any type of reset or adjustment of a
purchase or conversion price or to issue additional securities at any time after
the closing date of a Subsequent Financing. If the Company does not receive
notice of exercise of the Rights Option from the Purchasers within the Option
Period, the Company shall have the right to close the Subsequent Financing on
the scheduled closing date with a third party; PROVIDED that all of the material
terms and conditions of the closing are the same as those provided to the
Purchasers in the Rights Notice. If the closing of the proposed Subsequent
Financing does not occur on that date, any closing of the contemplated
Subsequent Financing or any other Subsequent Financing shall be subject to all
of the provisions of this Section 3.12, including, without limitation, the
delivery of a new Rights Notice. The provisions of this Section 3.12(b) shall
not apply to issuances of Financing Securities in a Permitted Financing.
(c) During the period commencing on the Closing Date and ending on
the second (2nd) anniversary of the Closing Date, if the Company enters into any
Subsequent Financing on terms more favorable than the terms governing the
Preferred Shares, then the Purchasers in their sole discretion may exchange the
Preferred Shares, valued at their stated value, together with accrued but unpaid
dividends (which dividends shall be payable, at the sole option of the
Purchasers, (i) either in cash or in the form of the new securities to be issued
in the Subsequent Financing, at the sole option of the Company or (ii) either in
cash or in shares of Common Stock, at the sole option of the Company) for the
securities issued or to be issued in the Subsequent Financing. The Company
covenants and agrees to promptly notify in writing the Purchasers of the terms
and conditions of any such proposed Subsequent Financing.
Section 3.13 RESERVATION OF SHARES. So long as any of the Preferred
Shares or Warrants remain outstanding, the Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 120% of the aggregate number of shares of Common Stock
needed to provide for the issuance of the Conversion Shares and the Warrant
Shares.
Section 3.14 TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates,
19
registered in the name of each Purchaser or its respective nominee(s), for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by each Purchaser to the Company upon conversion of the Preferred Shares
or exercise of the Warrants in the form of EXHIBIT E attached hereto (the
"Irrevocable Transfer Agent Instructions"). Prior to registration of the
Conversion Shares and the Warrant Shares under the Securities Act, all such
certificates shall bear the restrictive legend specified in Section 6.1 of this
Agreement. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 3.14 will be given by
the Company to its transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section 3.14 shall affect in any way each Purchaser's obligations and
agreements set forth in Section 6.1 to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Shares. If a Purchaser
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Shares may be
made without registration under the Securities Act or the Purchaser provides the
Company with reasonable assurances that the Shares can be sold pursuant to Rule
144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Conversion Shares and the Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Purchaser and without any
restrictive legend. The Company acknowledges that a breach by it of its
obligations under this Section 3.14 will cause irreparable harm to the
Purchasers by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 3.14 will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 3.14, that the Purchasers shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
Section 3.15 DISPOSITION OF ASSETS. So long as the Preferred Shares
remain outstanding, neither the Company nor any Subsidiary shall sell, transfer
or otherwise dispose of any of its properties, assets and rights including,
without limitation, its software and intellectual property, to any person except
for sales to customers in the ordinary course of business or with the prior
written consent of the holders of a majority of the Preferred Shares then
outstanding, except for the sale of (i) patents and other technology associated
with Smart Predictive Line Controller, (ii) shares of stock of Beacon Power
Corporation held by the Company, (iii) all or any portion of the ▇▇▇▇▇▇▇▇
Grumman hybrid electric vehicle patent portfolio, or (iv) assets, properties or
rights which in the aggregate have a book value of less than $2,000,000.
Section 3.16 FORM S-3 ELIGIBILITY. The Company meets the
requirements for the use of Form S-3 under the Securities Act to register for
re-sale the shares of Common Stock pursuant to the Registration Rights
Agreement.
Section 3.17 STOCKHOLDER APPROVAL. The Company covenants and agrees
to solicit in its Proxy Statement and Notice of Annual Meeting stockholder
approval (the "Stockholder Approval") to authorize the issuance of shares of
Common Stock upon conversion
20
of the Preferred Shares and/or exercise of the Warrants in excess of 19.99% of
the number of shares of Common Stock outstanding immediately prior to the date
hereof (the "Cap Amount"). If Stockholder Approval is not obtained by June 15,
2003, each Purchaser shall have the option to require redemption of such portion
of its Preferred Shares in excess of the Cap Amount at a redemption price equal
to the stated value of such Preferred Shares plus accrued and unpaid dividends
and upon payment in full, the Purchasers shall surrender certificates
representing such redeemed Preferred Shares for cancellation. The redemption
price shall be paid by the Company within three (3) business days of a
Purchaser's request.
Section 3.18 SILICON VALLEY BANK. The Company shall not incur any
indebtedness other than under the Company's senior credit facility with Silicon
Valley Bank as the same may be amended from time to time.
ARTICLE IV
CONDITIONS
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
TO SELL THE SHARES. The obligation hereunder of the Company to issue and sell
the Preferred Shares and the Warrants to the Purchasers is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) ACCURACY OF EACH PURCHASER'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each Purchaser shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) PERFORMANCE BY THE PURCHASERS. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) DELIVERY OF PURCHASE PRICE. The Purchase Price for the
Preferred Shares and Warrants has been delivered to the Company at the Closing
Date.
(e) DELIVERY OF TRANSACTION DOCUMENTS. The Transaction Documents
have been duly executed and delivered by the Purchasers to the Company.
(f) NO PROCEEDING OR LITIGATION. No action, suit or proceeding
shall have
21
been commenced or investigation threatened by any governmental authority against
the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
PURCHASERS TO PURCHASE THE SHARES. The obligation hereunder of each Purchaser to
acquire and pay for the Preferred Shares and the Warrants is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for each Purchaser's sole benefit and may be
waived by such Purchaser at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. Each
of the representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that are
expressly made as of a particular date), which shall be true and correct in all
material respects as of such date.
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(c) NO SUSPENSION, ETC. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the
Commission (except for any suspension of trading of limited duration agreed to
by the Company, which suspension shall be terminated prior to the Closing), and,
at any time prior to the Closing, trading in securities generally as reported by
Bloomberg Financial Markets ("Bloomberg") shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by Bloomberg, or on the
New York Stock Exchange, nor shall a
banking moratorium have been declared either by the United States or
New York
State authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis
of such magnitude in its effect on, or any material adverse change in any
financial market which, in each case, in the judgment of such Purchaser, makes
it impracticable or inadvisable to purchase the Preferred Shares.
(d) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) NO PROCEEDINGS OR LITIGATION. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
22
(f) CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES. Prior to
the Closing, the Certificate of Designation in the form of EXHIBIT C attached
hereto shall have been filed with the Secretary of State of Delaware.
(g) OPINION OF COUNSEL, ETC. At the Closing, the Purchasers shall
have received an opinion of counsel to the Company, dated the date of the
Closing, in the form of EXHIBIT F hereto, and such other certificates and
documents as the Purchasers or its counsel shall reasonably require incident to
the Closing.
(h) REGISTRATION RIGHTS AGREEMENT. At the Closing, the Company
shall have executed and delivered the Registration Rights Agreement to each
Purchaser.
(i) CERTIFICATES. The Company shall have executed and delivered to
the Purchasers the certificates (in such denominations as such Purchaser shall
request) for the Preferred Shares and Warrants being acquired by such Purchaser
at the Closing.
(j) RESOLUTIONS. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) above in a form reasonably
acceptable to such Purchaser (the "Resolutions").
(k) RESERVATION OF SHARES. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Preferred Shares and the exercise
of the Warrants, a number of shares of Common Stock equal to at least 120% of
the aggregate number of Conversion Shares issuable upon conversion of the
Preferred Shares outstanding on the Closing Date and the number of Warrant
Shares issuable upon exercise of the number of Warrants assuming such Warrants
were granted on the Closing Date (after giving effect to the Preferred Shares
and the Warrants to be issued on the Closing Date and assuming all such
Preferred Shares and Warrants were fully convertible or exercisable on such date
regardless of any limitation on the timing or amount of such conversions or
exercises).
(l) TRANSFER AGENT INSTRUCTIONS. The Irrevocable Transfer Agent
Instructions, in the form of EXHIBIT E attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
(m) SECRETARY'S CERTIFICATE. The Company shall have delivered to
such Purchaser a secretary's certificate, dated as of the Closing Date, as to
(i) the Resolutions, (ii) the Certificate, (iii) the Bylaws, (iv) the
Certificate of Designation, each as in effect at the Closing, and (iv) the
authority and incumbency of the officers of the Company executing the
Transaction Documents and any other documents required to be executed or
delivered in connection therewith.
(n) OFFICER'S CERTIFICATE. The Company shall have delivered to the
Purchasers a certificate of an executive officer of the Company, dated as of the
Closing Date, confirming the accuracy of the Company's representations,
warranties and covenants as of the Closing Date and
23
confirming the compliance by the Company with the conditions precedent set forth
in this Section 4.2 as of the Closing Date.
(o) MATERIAL ADVERSE EFFECT. No Material Adverse Effect shall have
occurred at or before the Closing Date.
(p) CREDIT FACILITY. Except as set forth in the disclosure
schedules to this Agreement, the Company shall be in full compliance with the
terms and conditions of the Company's senior credit facility with Silicon Valley
Bank as the same may be amended from time to time.
(q) CONSENT OF SILICON VALLEY BANK. The Company shall have
received the consent of Silicon Valley Bank to enter into the transactions
contemplated by this Agreement.
(r) APPLIED MATERIALS, INC. The Company shall have provided notice
to Applied Materials, Inc. in accordance with the Global Supply Agreement
between the Company and Applied Materials, Inc. dated as of November 21, 2002 in
connection with the consummation of the transactions contemplated by this
Agreement.
(s) EXECUTION OF NOTE AND WARRANT PURCHASE AGREEMENT. The Note and
Warrant Purchase Agreement by and among the Company and the investors named
therein shall have been executed by the parties thereto.
ARTICLE V
INTENTIONALLY OMITTED
ARTICLE VI
STOCK CERTIFICATE LEGEND
Section 6.1 LEGEND. Each certificate representing the Preferred
Shares and the Warrants, and, if appropriate, securities issued upon conversion
thereof, shall be stamped or otherwise imprinted with a legend substantially in
the following form (in addition to any legend required by applicable state
securities or "blue sky" laws):
THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR
SATCON
TECHNOLOGY CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS
COUNSEL THAT REGISTRATION OF SUCH
24
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS
OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The Company agrees to reissue certificates representing the Shares without
the legend set forth above if at such time, prior to making any transfer of any
Shares or Shares, such holder thereof shall give written notice to the Company
describing the manner and terms of such transfer and removal as the Company may
reasonably request, and (x) the Shares have been registered for sale under the
Securities Act and the holder is selling such shares and is complying with its
prospectus delivery requirement under the Securities Act, (y) the holder is
selling such Shares in compliance with the provisions of Rule 144 or (z) the
provisions of paragraph (k) of Rule 144 apply to such Shares.
ARTICLE VII
INTENTIONALLY OMITTED.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 GENERAL INDEMNITY. The Company agrees to indemnify and
hold harmless the Purchasers and any finder (and their respective directors,
officers, affiliates, agents, successors and assigns) from and against any and
all losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys' fees, charges and disbursements)
incurred by the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. Each
Purchaser severally but not jointly agrees to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys' fees, charges
and disbursements) incurred by the Company as result of any inaccuracy in or
breach of the representations, warranties or covenants made by such Purchaser
herein. The maximum aggregate liability of each Purchaser pursuant to its
indemnification obligations under this Article 8 shall not exceed the portion of
the Purchase Price paid by such Purchaser hereunder.
Section 8.2 INDEMNIFICATION PROCEDURE. Any party entitled to
indemnification under this Article VIII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VIII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, to assume the
25
defense thereof with counsel reasonably satisfactory to the indemnified party.
In the event that the indemnifying party advises an indemnified party that it
will contest such a claim for indemnification hereunder, or fails, within thirty
(30) days of receipt of any indemnification notice to notify, in writing, such
person of its election to defend, settle or compromise, at its sole cost and
expense, any action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the indemnified party may, at its
option, defend, settle or otherwise compromise or pay such action or claim. In
any event, unless and until the indemnifying party elects in writing to assume
and does so assume the defense of any such claim, proceeding or action, the
indemnified party's costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The indemnified party shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VIII to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VIII shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
ARTICLE IX
MISCELLANEOUS
Section 9.1 FEES AND EXPENSES. Except as otherwise set forth in
this Agreement, the Registration Rights Agreement or the Certificate of
Designation, each party shall pay the fees and expenses of its advisors,
counsel, accountants and other experts, if any, and all other expenses, incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement, PROVIDED that the Company shall pay, at the
Closing (i) all actual attorneys' fees and expenses (exclusive of disbursements
and out-of-pocket expenses) incurred by the Purchasers up to $40,000 in
connection with the preparation, negotiation, execution and delivery of this
Agreement, the Registration Rights Agreement and the transactions contemplated
thereunder, and (ii) in connection with the filing and declaration of
26
effectiveness by the Commission of the Registration Statement (as defined in the
Registration Rights Agreement) and any amendments, modifications or waivers of
this Agreement or any of the other Transaction Documents. In addition, the
Company shall pay all reasonable fees and expenses incurred by the Purchasers in
connection with the enforcement of this Agreement or any of the other
Transaction Documents, including, without limitation, all reasonable attorneys'
fees and expenses. The Company shall pay all stamp or other similar taxes and
duties levied in connection with issuance of the Preferred Shares pursuant
hereto.
Section 9.2 SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement, the Certificate of Designation or the Registration Rights Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement or the Registration Rights Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
(b) Each of the Company and the Purchasers (i) hereby irrevocably
submits to the jurisdiction of the United States District Court sitting in the
Southern District of
New York and the courts of the State of
New York located in
New York county for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Transaction Documents or
the transactions contemplated hereby or thereby and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the
Purchasers consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 9.2 shall affect or limit any right to serve process in any other manner
permitted by law.
Section 9.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement contains
the entire understanding of the parties with respect to the matters covered
hereby and, except as specifically set forth herein or in the Transaction
Documents or the Certificate of Designation, neither the Company nor any of the
Purchasers makes any representations, warranty, covenant or undertaking with
respect to such matters and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the holders of at least two-thirds (2/3) of
the Preferred Shares then outstanding, and no provision hereof may be waived
other than by an a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought. No such amendment shall
be effective to the extent that it applies to less than all of the holders of
the Preferred Shares then outstanding. No consideration shall be offered or paid
to any person to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents or the Certificate
27
of Designation unless the same consideration is also offered to all of the
parties to the Transaction Documents or holders of Preferred Shares, as the case
may be.
Section 9.4 NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company:
SatCon Technology Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Carp, Esq.
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Purchaser: At the address of such Purchaser set
forth on Exhibit A to this Agreement,
with copies to Purchaser's counsel as
set forth on Exhibit A or as specified
in writing by such Purchaser with copies
to:
Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 9.5 WAIVERS. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing
28
waiver in the future or a waiver of any other provisions, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter.
Section 9.6 HEADINGS. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section 9.7 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. After the Closing, the assignment by a party to this Agreement of any
rights hereunder shall not affect the obligations of such party under this
Agreement.
Section 9.8 NO THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
Section 9.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
New York, without
giving effect to the choice of law provisions. This Agreement shall not
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.
Section 9.10 SURVIVAL. The representations and warranties of the
Company and the Purchasers contained in Sections 2.1(o) and (s) should survive
indefinitely and those contained in Article II, with the exception of Sections
2.1(o) and (s), shall survive the execution and delivery hereof and the Closing
until the date three (3) years from the Closing Date, and the agreements and
covenants set forth in Articles I, III, VIII and IX of this Agreement shall
survive the execution and delivery hereof and the Closing hereunder until the
Purchasers in the aggregate beneficially own (determined in accordance with Rule
13d-3 under the Exchange Act) less than 10% of the total combined voting power
of all voting securities then outstanding, provided, that Sections 3.1, 3.2,
3.4, 3.5, 3.7, 3.8, 3.9, 3.10, 3.12, 3.13 and 3.14 shall not expire until the
Registration Statement required by Section 2 of the Registration Rights
Agreement is no longer required to be effective under the terms and conditions
of Registration Rights Agreement.
Section 9.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section 9.12 PUBLICITY. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchasers without the consent of the Purchasers unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.
29
Section 9.13 SEVERABILITY. The provisions of this Agreement, the
Certificate of Designation and the Registration Rights Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement, the Certificate of Designation or the Registration Rights Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement, the Certificate of
Designation or the Registration Rights Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.
Section 9.14 FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of any Purchaser or the Company, each of the Company
and the Purchasers shall execute and deliver such instrument, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement, the
Preferred Shares, the Conversion Shares, the Warrants, the Warrant Shares, the
Certificate of Designation, and the Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
SATCON TECHNOLOGY CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice-Pres. & CFO
PURCHASER
SDS MERCHANT FUND, LP
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: General Counsel
PURCHASER
ALPHA CAPITAL AG
By: /s/ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Director
PURCHASER
RHP Master Fund, Ltd.
By: Rock Hill Investment
Management, L.P.
By: RHP General Partner LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Partner
PURCHASER
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------
Name:
Title:
PURCHASER
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title:
PURCHASER
By: Crestview Capital Offshore Fund Inc.
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Managing Partner
PURCHASER
DMG LEGACY FUND LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer
DMG LEGACY INSTITUTIONAL FUND LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer
DMG LEGACY INTERNATIONAL LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer
PURCHASER
By: /s/ Illegible
-------------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇
Title: President
PURCHASER
By: Crestview Capital Fund II L.P.
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Managing Partner
PURCHASER
By: Crestview Capital Fund I L.P.
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Managing Partner
PURCHASER
OTAPE LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. Cougne
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Cougne
Title: General Counsel
PURCHASER
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
PURCHASER
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title:
PURCHASER
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title:
PURCHASER
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Illegible
PURCHASER
▇▇▇▇▇ ENTERPRISES
By: Illegible
-------------------------------------
Name: Illegible
Title: Director
PURCHASER
By: /s/ Illegible
-------------------------------------
Name:
Title:
PURCHASER
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President of the General
Partner
PURCHASER
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: Cass ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Member
EXHIBIT A TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
FOR
SATCON TECHNOLOGY CORPORATION
NUMBER OF PREFERRED SHARES
& WARRANTS PURCHASED /
NUMBER OF SHARES OF COMMON
NAMES AND ADDRESSES STOCK ISSUABLE TO EACH PURCHASER DOLLAR AMOUNT OF
OF PURCHASERS UP TO THE ISSUABLE MAXIMUM (19.99%) INVESTMENT
------------------- ----------------------------------- ----------------
▇▇▇▇▇ ▇▇▇▇▇▇ Revocable Trust Preferred Shares: 2.0 $ 25,000
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇. Series A Warrants: 10,000
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 10,000
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇ Issuable Maximum:
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ Preferred Shares: 2.4 $ 30,000
▇▇▇ ▇. ▇▇▇▇ ▇▇. ▇▇▇. ▇▇ Series A Warrants: 12,000
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 12,000
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇ Issuable Maximum:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Preferred Shares: 2.0 $ 25,000
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇. Series A Warrants: 10,000
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 10,000
Fax No.: N/A Issuable Maximum:
▇▇▇ ▇▇▇▇▇▇▇▇ Preferred Shares: 2.0 $ 25,000
1599 Boulevard Series A Warrants: 10,000
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 10,000
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇ Issuable Maximum:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, MD Inc. Preferred Shares: 6.0 $ 75,000
▇▇▇ ▇▇▇▇ ▇▇. Series A Warrants: 30,000
▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 30,000
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Issuable Maximum:
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
OTAPE LLC Preferred Shares: 16.0 $ 200,000
One Manhattanville Rd. Series A Warrants: 80,000
Purchase, N.Y. 10527 Series B Warrants: 80,000
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇ Issuable Maximum:
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
MRT, L.P. Preferred Shares: 14.4 $ 180,000
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Series A Warrants: 72,000
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 72,000
Attention: ▇▇▇ ▇▇▇▇▇▇▇ Issuable Maximum:
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Crestview Capital Fund I Preferred Shares: 17.864 $ 223,300
▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇ Series A Warrants: 89,320
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 89,320
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇ Issuable Maximum:
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Crestview Capital Fund II Preferred Shares: 47.936 $ 599,200
▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇ Series A Warrants: 239,680
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 239,680
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇ Issuable Maximum:
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Crestview Capital Offshore Inc. Preferred Shares: 4.2 $ 52,500
▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇ Series A Warrants: 21,000
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 21,000
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇ Issuable Maximum:
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ Preferred Shares: 2 $ 25,000
▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇▇ Series A Warrants: 10,000
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 10,000
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇ Issuable Maximum:
▇▇▇▇▇▇▇▇▇▇▇ Limited Partnership Preferred Shares: 16 $ 200,000
c/o Canaccord Capital Series A Warrants: 80,000
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Series B Warrants: 80,000
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇ Issuable Maximum:
Attention: ▇▇▇▇▇▇ ▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
RHP Master Fund, Ltd. Preferred Shares: 9 $ 112,500
c/o Rock Hill Investment Series A Warrants: 45,000
Management, L.P. Series B Warrants: 45,000
Three Bala Plaza-East, Suite 585 Issuable Maximum:
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
DMG Legacy Fund LLC Preferred Shares: 1.4 $ 17,500
c/o DMG Advisors LLC Series A Warrants: 7,000
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Series B Warrants: 7,000
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Issuable Maximum:
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
DMG Legacy Institutional Fund Ltd. Preferred Shares: 13.02 $ 162,750
c/o DMG Advisors LLC Series A Warrants: 65,100
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Series B Warrants: 65,100
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Issuable Maximum:
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
DMG Legacy International Ltd. Preferred Shares: 13.58 $ 169,750
c/o DMG Advisors LLC Series A Warrants: 67,900
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Series B Warrants: 67,900
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Issuable Maximum:
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
SDS Merchant Fund, L.P. Preferred Shares: 28 $ 350,000
c/o SDS Capital Partners, LLC Series A Warrants: 140,000
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Series B Warrants: 140,000
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Issuable Maximum:
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ Hill Holdings LLC Preferred Shares: 2 $ 25,000
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Series A Warrants: 10,000
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 10,000
Attention: Cass ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Issuable Maximum:
Fax No.: N/A
Alpha Capital AG Preferred Shares: 40 $ 500,000
c/o L.H. Financial Series A Warrants: 200,000
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Series B Warrants: 200,000
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ Issuable Maximum:
Attention: ▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ Enterprises Inc. Preferred Shares: 8 $ 100,000
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ North Series A Warrants: 40,000
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 40,000
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇ Issuable Maximum:
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ Preferred Shares: 6 $ 75,000
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Series A Warrants: 30,000
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Series B Warrants: 30,000
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇ Issuable Maximum:
EXHIBIT B-1 TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
SATCON TECHNOLOGY CORPORATION
FORM OF SERIES A WARRANT
EXHIBIT B-2 TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
SATCON TECHNOLOGY CORPORATION
FORM OF SERIES B WARRANT
EXHIBIT C TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
SATCON TECHNOLOGY CORPORATION
FORM OF CERTIFICATE OF DESIGNATION
EXHIBIT D TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
SATCON TECHNOLOGY CORPORATION
FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT E TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
SATCON TECHNOLOGY CORPORATION
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
SATCON TECHNOLOGY CORPORATION
as of February 18, 2003
[Name and address of Transfer Agent]
Attn: _____________
LADIES AND GENTLEMEN:
Reference is made to that certain
Series A Convertible Preferred Stock
Purchase Agreement (the "Purchase Agreement"), dated as of February 18, 2003, by
and among SatCon Technology Corporation, a Delaware corporation (the "COMPANY"),
and the purchasers named therein (collectively, the "PURCHASERS") pursuant to
which the Company is issuing to the Purchasers shares of its Series A
Convertible Preferred Stock, par value $.01 per share, (the "PREFERRED SHARES")
and warrants (the "WARRANTS") to purchase shares of the Company's common stock,
par value $.01 per share (the "COMMON STOCK"). This letter shall serve as our
irrevocable authorization and direction to you (subject to Section 3.1(a) of the
Purchase Agreement and provided that you are the transfer agent of the Company
at such time) to issue shares of Common Stock upon conversion of the Preferred
Shares (the "CONVERSION SHARES") and exercise of the Warrants (the "WARRANT
SHARES") to or upon the order of a Purchaser from time to time upon (i)
surrender to you of a properly completed and duly executed Conversion Notice or
Exercise Notice, as the case may be, in the form attached hereto as Exhibit I
and Exhibit II, respectively, (ii) in the case of the conversion of Preferred
Shares, a copy of the certificates (with the original certificates delivered to
the Company) representing Preferred Shares being converted or, in the case of
Warrants being exercised, a copy of the Warrants (with the original Warrants
delivered to the Company) being exercised (or, in each case, an indemnification
undertaking with respect to such share certificates or the warrants in the case
of their loss, theft or destruction), and (iii) delivery of a treasury order or
other appropriate order duly executed by a duly authorized officer of the
Company. So long as you have previously received (x) written confirmation from
counsel to the Company that a registration statement covering resales of the
Conversion Shares or Warrant Shares, as applicable, has been declared effective
by the Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT"), and no subsequent notice by the Company or
its counsel of the suspension or termination of its effectiveness and (y) a copy
of such registration statement, and if the Purchaser represents in writing that
the Conversion Shares or the Warrant Shares, as the case may be, were sold
pursuant to the Registration Statement, then certificates representing the
Conversion Shares and the Warrant Shares, as the case may be, shall not bear any
legend restricting transfer of the Conversion Shares and the Warrant Shares, as
the case may be, thereby and should not be subject to any stop-transfer
restriction. Provided, however, that if you have not previously received (i)
written confirmation from counsel to the Company that a registration statement
covering resales of the Conversion Shares or Warrant Shares, as applicable, has
been declared effective by the SEC under the 1933 Act, and (ii) a copy of such
registration statement, then the certificates for the Conversion Shares and the
Warrant Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE SECURITIES ACT"), OR ANY STATE SECURITIES LAWS
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE
STATE SECURITIES LAWS, OR SATCON TECHNOLOGY CORPORATION
SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED."
and, provided further, that the Company may from time to time notify you to
place stop-transfer restrictions on the certificates for the Conversion Shares
and the Warrant Shares in the event a registration statement covering the
Conversion Shares and the Warrant Shares is subject to amendment for events then
current.
A form of written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares and the Warrant
Shares has been declared effective by the SEC under the 1933 Act is attached
hereto as Exhibit III.
Please be advised that the Purchasers are relying upon this letter as an
inducement to enter into the Securities Purchase Agreement and, accordingly,
each Purchaser is a third party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at ___________.
Very truly yours,
SATCON TECHNOLOGY CORPORATION
By:
---------------------------------
Name:
-------------------------
Title:
------------------------
ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
Date:
-------------------------------
EXHIBIT I
SATCON TECHNOLOGY CORPORATION
CONVERSION NOTICE
Reference is made to the Certificate of Designation of the Relative Rights and
Preferences of the Series A Preferred Stock of SatCon Technology Corporation
(the "Certificate of Designation"). In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to convert the number
of shares of Series A Preferred Stock, par value $.01 per share (the "Preferred
Shares"), of SatCon Technology Corporation, a Delaware corporation (the
"Company"), indicated below into shares of Common Stock, par value $.01 per
share (the "Common Stock"), of the Company, by tendering the stock
certificate(s) representing the share(s) of Preferred Shares specified below as
of the date specified below.
Date of Conversion: _______________________________
Number of Preferred Shares to be converted: ______
Stock certificate no(s). of Preferred Shares to be converted: ______
The Common Stock have been sold pursuant to the Registration Statement (as
defined in the Registration Rights Agreement): YES ____ NO____
Please confirm the following information:
Conversion Price: _______________________________
Number of shares of Common Stock
to be issued: _______________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion: _________________________
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to: _______________________________
_______________________________
Facsimile Number: _______________________________
Authorization: _______________________________
By:
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Title:
------------------------
Dated:
PRICES ATTACHED
EXHIBIT II
FORM OF EXERCISE NOTICE
EXERCISE FORM
SATCON TECHNOLOGY CORPORATION
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of SatCon
Technology Corporation covered by the within Warrant.
Dated: _________________ Signature
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Address
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Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature
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Address
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PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature
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Address
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FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
EXHIBIT III
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Name and address of Transfer Agent]
Attn: _____________
Re: SATCON TECHNOLOGY CORPORATION
Ladies and Gentlemen:
We are counsel to SatCon Technology Corporation, a Delaware corporation
(the "COMPANY"), and have represented the Company in connection with that
certain Series A Convertible Preferred Stock Purchase Agreement (the "PURCHASE
AGREEMENT"), dated as of February 18, 2003, by and among the Company and the
purchasers named therein (collectively, the "PURCHASERS") pursuant to which the
Company issued to the Purchasers shares of its Series A Convertible Preferred
Stock, par value $.01 per share, (the "PREFERRED SHARES") and warrants (the
"WARRANTS") to purchase shares of the Company's common stock, par value $.01 per
share (the "COMMON STOCK"). Pursuant to the Purchase Agreement, the Company has
also entered into a Registration Rights Agreement with the Purchasers (the
"REGISTRATION RIGHTS AGREEMENT"), dated as of February 18, 2003, pursuant to
which the Company agreed, among other things, to register the Registrable
Securities (as defined in the Registration Rights Agreement), including the
shares of Common Stock issuable upon conversion of the Preferred Shares and
exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the Registration
Rights Agreement, on ________________, 2003, the Company filed a Registration
Statement on Form S-3 (File No. 333-________) (the "REGISTRATION STATEMENT")
with the Securities and Exchange Commission (the "SEC") relating to the resale
of the Registrable Securities which names each of the present Purchasers as a
selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and accordingly, the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
Very truly yours,
[COMPANY COUNSEL]
By:
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cc: [LIST NAMES OF PURCHASERS]
EXHIBIT F TO THE
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
SATCON TECHNOLOGY CORPORATION
FORM OF OPINION OF COUNSEL
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of Delaware and has
the requisite corporate power to own, lease and operate its properties and
assets, and to carry on its business as presently conducted. The company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary.
2. The Company has the requisite corporate power and authority to
enter into and perform its obligations under the Transaction Documents and to
issue the Preferred Stock, the Warrants and the Common Stock issuable upon
conversion of the Preferred Stock and exercise of the Warrants. The execution,
delivery and performance of each of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated thereby have been duly
and validly authorized by all necessary corporate action and no further consent
or authorization of the Company or its Board of Directors or stockholders is
required. Each of the Transaction Documents have been duly executed and
delivered, and the Preferred Stock and the Warrants have been duly executed,
issued and delivered by the Company and each of the Transaction Documents
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms. The Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants are
not subject to any preemptive rights under the Certificate of Incorporation or
the Bylaws.
3. The Preferred Stock and the Warrants have been duly authorized
and, when delivered against payment in full as provided in the Purchase
Agreement, will be validly issued, fully paid and nonassessable. The shares of
Common Stock issuable upon conversion of the Preferred Stock and exercise of the
Warrants, have been duly authorized and reserved for issuance, and, when
delivered upon conversion or against payment in full as provided in the
Certificate of Designation and the Warrants, as applicable, will be validly
issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with
the terms of the Transaction Documents and the issuance of the Preferred Stock,
the Warrants and the Common Stock issuable upon conversion of the Preferred
Stock and exercise of the Warrants do not (i) violate any provision of the
Certificate of Incorporation or Bylaws, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party, (iii) create or impose a lien, charge or
encumbrance on any property of the Company under any agreement or any commitment
to which the Company is a party or by which the Company is bound or by which any
of its respective properties or assets are bound, or (iv) (a) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment, injunction or decree (including Federal and state securities
laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected, except, in all cases other than
violations pursuant to clause (i) above, for such conflicts, default,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect.
5. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required under Federal, state or local law, rule
or regulation in connection with the valid execution and delivery of the
Transaction Documents, or the offer, sale or issuance of the Preferred Stock,
the Warrants or the Common Stock issuable upon conversion of the Preferred Stock
and exercise of the Warrants other than the Certificate of Designation and the
Registration Statement.
6. There is no action, suit, claim, investigation or proceeding
pending or threatened against the Company which questions the validity of this
Agreement or the transactions contemplated hereby or any action taken or to be
taken pursuant hereto or thereto. There is no action, suit, claim, investigation
or proceeding pending, or to our knowledge, threatened, against or involving the
Company or any of its properties or assets and which, if adversely determined,
is reasonably likely to result in a Material Adverse Effect. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.
7. The offer, issuance and sale of the Preferred Stock and the
Warrants and the offer, issuance and sale of the shares of Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants pursuant to
the Purchase Agreement, the Certificate of Designation and the Warrants, as
applicable, are exempt from the registration requirements of the Securities Act.
8. The Company is not, and as a result of and immediately upon
Closing will not be, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Very truly yours,