EXHIBIT 10.5
NOTE AND WARRANT 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 Notes and Warrants...........................................1
Section 1.1 Purchase and Sale of Notes and Warrants.................................1
Section 1.2 Purchase Price and Closing .............................................1
Section 1.3 Warrants................................................................2
Section 1.4 Conversion Shares / Warrant Shares......................................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 Amendments.............................................................17
Section 3.8 Other Agreements.......................................................17
Section 3.9 Distributions..........................................................17
Section 3.10 Intentionally Omitted..................................................17
Section 3.11 Intentionally Omitted..................................................17
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......................................................................20
Section 4.1 Conditions Precedent to the Obligation of the Company to
Sell the Notes and Warrants.................................................20
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Notes and Warrants.............................................21
ARTICLE V Intentionally Omitted............................................................24
ARTICLE VI Stock Certificate Legend........................................................24
Section 6.1 Legend.................................................................24
ARTICLE VII Intentionally Omitted..........................................................24
ARTICLE VIII Indemnification...............................................................24
Section 8.1 General Indemnity......................................................24
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..........................26
Section 9.3 Entire Agreement; Amendment............................................27
Section 9.4 Notices................................................................27
Section 9.5 Waivers................................................................28
Section 9.6 Headings...............................................................28
Section 9.7 Successors and Assigns.................................................28
Section 9.8 No Third Party Beneficiaries...........................................28
Section 9.9 Governing Law..........................................................28
Section 9.10 Survival...............................................................28
Section 9.11 Counterparts...........................................................29
Section 9.12 Publicity..............................................................29
Section 9.13 Severability...........................................................29
Section 9.14 Further Assurances.....................................................29
ii
NOTE AND WARRANT PURCHASE AGREEMENT
This
NOTE AND WARRANT PURCHASE AGREEMENT is dated as of February 18, 2003
(this "AGREEMENT") by and among
SatCon Technology Corporation, a Delaware
corporation (the "COMPANY"), and the purchasers listed on EXHIBIT A hereto (each
a "PURCHASER" and collectively, the "PURCHASERS").
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES AND WARRANTS
Section 1.1 PURCHASE AND SALE OF NOTES AND WARRANTS. Upon the
following terms and conditions, the Company shall issue and sell to the
Purchasers, and the Purchasers shall purchase from the Company, secured
convertible promissory notes in the aggregate principal amount of Eight Hundred
Thirty-Two Thousand Five Hundred Dollars ($832,500) bearing interest at the rate
of ten percent (10%) per annum increasing to twelve percent (12%) per annum on
January 1, 2004, convertible into shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), in substantially the form attached
hereto as EXHIBIT B (the "Notes"). Upon the following terms and conditions, each
of the Purchasers shall be issued Series A Warrants, in substantially the form
attached hereto as EXHIBIT C-1 (the "Series A Warrants"), and Series B Warrants,
in substantially the form attached hereto as EXHIBIT C-2 (the "Series B
Warrants" and, together with the Series A Warrants, the "Warrants"), to purchase
such number of shares of Common Stock set forth with respect to such Purchaser
on EXHIBIT A hereto. 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 Section 4(2) of the U.S. Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), including Regulation D ("Regulation D"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
Section 1.2 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 agree to purchase the Notes and Warrants for
an aggregate purchase price of Eight Hundred Thirty-Two Thousand Five Hundred
Dollars ($832,500) (the "Purchase Price"), which shall be payable as soon as
practicable but in no event later than five (5) business days after the
Securities and Exchange Commission (the "Commission") declares the Registration
Statement (as defined in the Registration Rights Agreement attached hereto as
EXHIBIT E (the "Registration Rights Agreement")) effective (the "Effectiveness
Date"), subject to the satisfaction (or waiver) of the applicable conditions set
forth in Article IV hereof with respect to the purchase of the Notes and
Warrants. The closing of the execution and delivery of this Agreement shall
occur upon delivery by facsimile of executed signature pages of this Agreement
and all other documents, instruments and writings required to be delivered
pursuant to this Agreement to the offices of Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
LLP, The Chrysler Building, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the
"Closing"), at 10:00 a.m.,
New York time (i) on the date on which the last to be
fulfilled or waived of the conditions set forth in Article IV hereof and
applicable to such Closing shall be fulfilled or waived in accordance herewith
or (ii) at such other time and place or on such date as the Purchaser and the
Company may agree upon (the "Closing Date"). Funding shall take place by wire
transfer of immediately available funds to the Company no later than five (5)
business days following the Effectiveness Date. The Notes shall be dated as of
the date that the Company receives all of the funds from the Purchasers.
Section 1.3 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 $12,500 principal amount of Notes 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 $12,500 principal amount of Notes 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.
Section 1.4 CONVERSION SHARES / WARRANT 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, a number
of its authorized but unissued shares of its Common Stock equal to at least 120%
of the aggregate number of shares of Common Stock to effect the conversion of
the principal amount of the Notes and any interest accrued and outstanding
thereon and exercise of the Warrants. Any shares of Common Stock issuable upon
conversion of the principal amount of the Notes and any interest accrued and
outstanding thereon and exercise of the Warrants (and such shares when issued)
are herein referred to as the "Conversion Shares" and the "Warrant Shares,"
respectively. The Notes, the Warrants, the Conversion Shares and the Warrant
Shares are sometimes collectively referred to herein as the "Securities".
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
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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.
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Security Agreement attached hereto as EXHIBIT D (the "Security Agreement"), the
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as
defined in Section 3.14), the Notes and the Warrants (collectively, the
"Transaction Documents") and to issue and sell the Securities in accordance with
the terms hereof and the Notes and the Warrants, as applicable. 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, Series A Convertible Preferred Stock and any other
security of the Company 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
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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 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 SECURITIES. Except as disclosed on SCHEDULE 2.1(d)
hereto, the Notes and the Warrants to be issued at the Closing have been duly
authorized by all necessary corporate action and, when paid for or issued in
accordance with the terms hereof, the Notes shall be validly issued and
outstanding, free and clear of all liens, encumbrances and rights of refusal of
any kind. Except as disclosed on SCHEDULE 2.1(d) hereto, when the Conversion
Shares and Warrant Shares are issued and paid for in accordance with the terms
of this Agreement and as set forth in the Notes and Warrants, such shares will
be duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of refusal of any kind 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 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 Notes,
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
4
statement which may be filed pursuant hereto); 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 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
5
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 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.
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(m) ACTIONS PENDING. 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 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
7
furnished to the Purchasers by or on behalf of the Company or any subsidiary in
connection with 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
8
assets, and the nature of all transactions giving rise to the obligations or
accounts receivable of 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 interest on the Notes, or dividends on 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 Notes, the Warrants, the Conversion Shares
and the Warrant Shares 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 Securities, 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 Securities 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 Securities.
9
(x) GOVERNMENTAL APPROVALS. Except as set forth in the Form 10-K
or Form 10-Q, and except for the filing of a UCC-1 financing statement with the
Secretary of State of the State of Delaware, the filing of any documents or
notices in the office of any governmental agency with respect to any
intellectual property and 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, 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
Notes 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 Notes and
the Warrant 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.
(cc) ERISA. No liability to the Pension Benefit Guaranty
Corporation has
11
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 Notes,
the Warrants, the Conversion Shares and the Warrant 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 Notes 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 Notes in accordance with this Agreement
and the Notes 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 Securities 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.
12
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. Each Purchaser has the requisite
power and authority to enter into and perform this Agreement and to purchase the
Notes and Warrants being sold to it hereunder. The execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the
Security 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 such Purchaser enforceable against
such 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 Notes, the Warrants, the
Conversion Shares and the Warrant Shares in accordance with the terms hereof or
thereof, 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
Notes 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 Securities, nor a
present arrangement (whether or not legally binding) or intention to effect any
distribution of the Securities 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 Securities for any minimum or
other specific term and reserves the right to
13
dispose of the Securities 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
Securities 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
Securities 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 Securities must
be held indefinitely unless such Securities 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 Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(i) GENERAL. Such Purchaser understands that the Securities 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 Securities.
(j) INDEPENDENT INVESTMENT. No Purchaser has agreed to act with
any other
14
Purchaser for the purpose of acquiring, holding, voting or disposing of the
Securities 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 Securities.
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 Notes, 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 Notes, 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 Notes) or the exercise of the Warrants, the Company
covenants and agrees that upon receipt of a Conversion Notice pursuant to
Section 3.1(a) of the Notes 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
3.3 of the Notes 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 electronic bulletin
board.
15
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 Notes or shall
beneficially own the Notes, or shall own Conversion Shares, Warrant Shares or
the Warrants to purchase Warrant Shares which, in the aggregate, represent more
than two percent (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 Notes or shall
beneficially own the Notes or Warrants, or shall own Conversion Shares or
Warrant 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 exercise rights, voting rights, conversion rights, prepayment
rights or redemption rights of the holder of the Notes.
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 Notes then outstanding, the Company agrees that it shall not
(i) declare or pay any dividends (other than a stock dividend or stock split) or
make any distributions to any holder(s) of Common 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 INTENTIONALLY OMITTED.
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 shares of Series A
Convertible Preferred Stock of the Company in accordance with Section 8(h) of
the Certificate of Designation of the Series A Convertible Preferred Stock of
the Company, (vi) as a result of the exercise of options or warrants or
conversion of convertible notes 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 of the Series A Convertible
Preferred Stock of the Company, (viii) any issuances of Common Stock pursuant to
Company 401(k) matches, or (ix) the issuance of shares of Series A Convertible
Preferred Stock of the Company issued in connection with the Series A
Convertible Preferred Stock Purchase Agreement dated as of the
17
date hereof by and among the Company and the investors named therein (the
"Series A Preferred Stock Purchase Agreement") and the issuance of Common Stock
upon conversion or redemption thereof.
(b) During the period commencing on the Closing Date and ending on
the first (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 Notes,
then the Purchasers in their sole discretion may exchange the Notes, together
with accrued but unpaid interest (which interest 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 Notes 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
18
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, 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 Notes or exercise of the Warrants in the form of EXHIBIT F
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 Conversion Shares and Warrant 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 Conversion Shares and the Warrant 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 Conversion
Shares or Warrant Shares may be made without registration under the Securities
Act or the Purchaser provides the Company with reasonable assurances that the
Conversion Shares or Warrant Shares can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold, the Company shall permit the transfer, and, in the
case of the 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 Notes 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 principal amount of the Notes 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.
19
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 of the Notes 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
repayment of such portion of its Notes in excess of the Cap Amount at a
repayment price equal to the principal amount of such Notes plus accrued and
unpaid interest and upon payment in full, the Purchasers shall surrender the
Notes representing such portion of the prepaid Notes for cancellation. The
repayment 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 NOTES AND WARRANTS. The obligation hereunder of the Company to issue
and sell the Notes 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.
20
(d) DELIVERY OF PURCHASE PRICE. The Purchase Price for the Notes
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 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 NOTES AND WARRANTS. The obligation hereunder of each
Purchaser to acquire and pay for the Notes 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 Notes.
(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.
21
(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.
(f) 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 G hereto, and such other certificates and
documents as the Purchasers or its counsel shall reasonably require incident to
the Closing.
(g) REGISTRATION RIGHTS AGREEMENT. At the Closing, the Company
shall have executed and delivered the Registration Rights Agreement to each
Purchaser.
(h) WARRANTS AND NOTES. At the Closing, the Company shall have
delivered the originally executed Warrants (in such denominations as each
Purchaser may request) to the Purchasers. At the Closing, the Company shall have
delivered the originally executed Notes (in such denominations as each Purchaser
may request) to the Purchasers being acquired by the Purchasers at the Closing.
(i) 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").
(j) 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 Notes 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 Notes
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 Notes and the Warrants to be issued on
the Closing Date and assuming all such Notes and Warrants were fully convertible
or exercisable on such date regardless of any limitation on the timing or amount
of such conversions or exercises).
(k) TRANSFER AGENT INSTRUCTIONS. The Irrevocable Transfer Agent
Instructions, in the form of EXHIBIT F attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
(l) 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, 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.
22
(m) 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 confirming the compliance by
the Company with the conditions precedent set forth in this Section 4.2 as of
the Closing Date.
(n) MATERIAL ADVERSE EFFECT. No Material Adverse Effect shall have
occurred at or before the Closing Date.
(o) 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.
(p) 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.
(q) 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.
(r) SECURITY AGREEMENT. As of the Closing Date, the parties shall
have entered into the security agreement in the form of EXHIBIT D attached
hereto.
(s) UCC-1 FINANCING STATEMENT. A UCC-1 financing statement in form
and substance satisfactory to the Purchasers shall be filed with the Secretary
of State of the State of Delaware to create a valid and perfected security
interest in the Collateral (as defined in the Security Agreement).
(t) JUDGMENT, LIEN AND UCC SEARCH. A judgment, lien and UCC
financing statement search shall have been completed by the Purchasers.
(u) STOCKHOLDER APPROVAL. The Company shall have received
Stockholder Approval in accordance with the terms of Section 3.17 hereof.
(v) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement (as defined in the Registration Rights Agreement) shall have been
declared effective by the Commission.
(w) CONSUMMATION OF SERIES A PREFERRED STOCK PURCHASE AGREEMENT.
The transactions contemplated by the Series A Preferred Stock Purchase Agreement
shall have been consummated.
23
ARTICLE V
INTENTIONALLY OMITTED
ARTICLE VI
STOCK CERTIFICATE LEGEND
Section 6.1 LEGEND. Each certificate representing the Notes 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 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 Securities
without the legend set forth above if at such time, prior to making any transfer
of any Securities, 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 Notes, the Conversion Shares, the Warrants and
the Warrant Shares have been registered for sale under the Securities Act and
the holder is selling such Securities and is complying with its prospectus
delivery requirement under the Securities Act, (y) the holder is selling such
Securities in compliance with the provisions of Rule 144 or (z) the provisions
of paragraph (k) of Rule 144 apply to such Securities.
ARTICLE VII
INTENTIONALLY OMITTED.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 GENERAL INDEMNITY. The Company agrees to indemnify and
hold
24
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 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
25
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 Security Agreement,
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 $20,000 in connection
with the preparation, negotiation, execution and delivery of this Agreement, the
Registration Rights Agreement, the Security Agreement and the transactions
contemplated thereunder, and (ii) in connection with the filing and declaration
of 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.
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 Registration Rights Agreement or the Security 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, the
Registration Rights Agreement or the Security 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
26
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, 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 principal amount of
the Notes 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 Notes 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 unless the same consideration is also offered to all of the parties to
the Transaction Documents.
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.: (▇▇▇) ▇▇▇-▇▇▇▇
27
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 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
28
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.
Section 9.13 SEVERABILITY. The provisions of this Agreement, the
Registration Rights Agreement and the Security 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 Registration Rights Agreement or the Security 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 Registration Rights Agreement or
the Security 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
Notes, the Conversion Shares, the Warrants, the Warrant Shares, the Registration
Rights Agreement and the Security Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
29
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
DMG LEGACY FUND LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer
PURCHASER
DMG LEGACY INSTITUTIONAL FUND LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title Chief Financial Officer
PURCHASER
DMG LEGACY INTERNATIONAL LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title Chief Financial Officer
PURCHASER
SDS MERCHANT FUND, LP
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: General Counsel
PURCHASER
OTAPE LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: General Counsel
PURCHASER
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President of the
General Partner
PURCHASER
Crestview Capital Fund I, LP
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Managing Member
PURCHASER
Crestview Capital Fund II, LP
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Managing Member
PURCHASER
Crestview Capital Offshore
Fund Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Secretary
PURCHASER
RHP Master Fund, Ltd.
By: Rock Hill Investment
Management, L.P.
By: RHP General Partner, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Its Managing Partner
EXHIBIT A TO THE
NOTE AND WARRANT PURCHASE AGREEMENT
FOR
SATCON TECHNOLOGY CORPORATION
NUMBER OF 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
------------- ----------------------------------- ----------
OTAPE LLC Series A Warrants: 20,000 $ 50,000
One Manhattanville Rd. Series B Warrants: 20,000
Purchase, N.Y. 10527 Issuable Maximum:
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
MRT, L.P. Series A Warrants: 28,000 $ 70,000
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Series B Warrants: 28,000
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ Issuable Maximum:
Attention: ▇▇▇ ▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Crestview Capital Fund I Series A Warrants: 38,280 $ 95,700
▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇ Warrants: 38,280
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Issuable Maximum:
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Crestview Capital Fund II Series A Warrants: 102,720 $ 256,800
▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇ Warrants: 102,720
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Issuable Maximum:
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Crestview Capital Offshore Inc. Series A Warrants: 9,000 $ 22,500
▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇ Warrants: 9,000
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Issuable Maximum:
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
RHP Master Fund, Ltd. Series A Warrants: 15,000 $ 37,500
c/o Rock Hill Investment Series B Warrants: 15,000
Management, L.P. Issuable Maximum:
Three ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
DMG Legacy Fund LLC Series A Warrants: 3,000 $ 7,500
c/o DMG Advisors LLC Series B Warrants: 3,000
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Issuable Maximum:
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
DMG Legacy Institutional Fund Ltd. Series A Warrants: 27,900 $ 69,750
c/o DMG Advisors LLC Series B Warrants: 27,900
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Issuable Maximum:
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
DMG Legacy International Ltd. Series A Warrants: 29,100 $ 72,750
c/o DMG Advisors LLC Series B Warrants: 29,100
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Issuable Maximum:
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
SDS Merchant Fund, L.P. Series A Warrants: 60,000 $ 150,00
c/o SDS Capital Partners, LLC Series B Warrants: 60,000
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Issuable Maximum:
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT B TO THE
NOTE AND WARRANT PURCHASE AGREEMENT FOR
SATCON TECHNOLOGY CORPORATION
FORM OF NOTE
EXHIBIT C-1 TO THE
NOTE AND WARRANT PURCHASE AGREEMENT FOR
SATCON TECHNOLOGY CORPORATION
FORM OF SERIES A WARRANT
EXHIBIT C-2 TO THE
NOTE AND WARRANT PURCHASE AGREEMENT FOR
SATCON TECHNOLOGY CORPORATION
FORM OF SERIES B WARRANT
EXHIBIT D TO THE
NOTE AND WARRANT PURCHASE AGREEMENT FOR
SATCON TECHNOLOGY CORPORATION
FORM OF SECURITY AGREEMENT
EXHIBIT E TO THE
NOTE AND WARRANT PURCHASE AGREEMENT FOR
SATCON TECHNOLOGY CORPORATION
FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT F TO THE
NOTE AND WARRANT 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 Note and Warrant 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 secured convertible promissory notes (the
"NOTES") 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
Notes (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 Notes, a
copy of the Note (with the original delivered to the Company) representing the
Notes 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 Notes 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 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
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. ___ into shares of Common Stock of SATCON
TECHNOLOGY CORPORATION (the "Maker") according to the conditions hereof, as of
the date written below.
Date of Conversion _________________________________________________________
Applicable Conversion Price __________________________________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion: _________________________
Signature
------------------------------------------------------------
[Name]
Address:
-----------------------------------------------------------
-----------------------------------------------------------
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
----------------------
Address
------------------
------------------
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
----------------------
Address
------------------
------------------
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
----------------------
Address
------------------
------------------
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 Note and Warrant 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 secured convertible promissory notes (the "NOTES") 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 Notes 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:
-----------------------------
cc: [LIST NAMES OF PURCHASERS]
EXHIBIT G TO THE
NOTE AND WARRANT 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 Notes, the Warrants and the Common Stock issuable upon conversion of
the Notes 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 Notes 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 Notes and
exercise of the Warrants are not subject to any preemptive rights under the
Certificate of Incorporation or the Bylaws.
3. The Notes 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 Notes 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 Notes 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 Notes, the
Warrants and the Common Stock issuable upon conversion of the Notes 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 Notes, the Warrants
or the Common Stock issuable upon conversion of the Notes and exercise of the
Warrants other than 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 Notes and the Warrants and
the offer, issuance and sale of the shares of Common Stock issuable upon
conversion of the Notes and exercise of the Warrants pursuant to the Purchase
Agreement, the Notes 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,