-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PNef2Meqnk1vDJL+n4yhxqz6Hh6I4jPcYVAVDghIc0ERVU3yN2I1cIJrvj9xZ1uW SnoWSG9YwNuoDDkQ6FapUw== 0000927016-99-003105.txt : 19990827 0000927016-99-003105.hdr.sgml : 19990827 ACCESSION NUMBER: 0000927016-99-003105 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990825 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990826 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SATCON TECHNOLOGY CORP CENTRAL INDEX KEY: 0000889423 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 042857552 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11512 FILM NUMBER: 99699884 BUSINESS ADDRESS: STREET 1: 161 FIRST STREET CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6176610540 MAIL ADDRESS: STREET 1: 161 FIRST STREET CITY: CAMBRIDGE STATE: MA ZIP: 02142 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): August 25, 1999 --------------- SATCON TECHNOLOGY CORPORATION ---------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 001-11512 04-2857552 ------------------------------------------------------------- (State or Other (Commission (IRS Employer Jurisdiction of File Number) Identification No.) Incorporation) 161 First Street, Cambridge, Massachusetts 02142 -------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (617) 661-0540 ------------- Not Applicable -------------- (Former Name or Former Address, if Changed Since Last Report) -1- Item 5. Other Events On August 25, 1999, SatCon Technology Corporation (the "Registrant") completed an $8 million private placement of 8,000 shares of its Series A Convertible Preferred Stock, $0.01 par value per share (the "Series A Preferred Stock"), with Brown Simpson Strategic Growth Funds ("Brown Simpson"). The Series A Preferred Stock is initially convertible into 1,025,641 shares of the Registrant's common stock, $0.01 par value per share (the "Common Stock"), at an initial conversion price of $7.80 per share. At the option of Brown Simpson, the conversion price resets to the average of the five bid prices of the Common Stock on the five trading days immediately preceding the one year anniversary of the closing. The reset conversion price may never be less than $5 and the reset is void under certain agreed upon circumstances. The Series A Preferred Stock is also subject to certain dilution protection for a period of three years. Under certain circumstances, the Registrant has the option to cause the Series A Preferred Stock to convert into shares of Common Stock or otherwise be redeemed. At the end of seven years, the Registrant must redeem any remaining shares of the Series A Preferred Stock for cash or, at the Registrant's option, Common Stock with a then fair market value equal to the original purchase price of the Series A Preferred Stock. The obligation at seven years to redeem any remaining shares of the Series A Preferred Stock accelerates to the fourth anniversary of the closing in the event the average bid price of SatCon's Common Stock for the 60 "trading day" period immediately preceding the fourth anniversary is $5 per share or less. In the event of certain change in control events regarding the Registrant or the Common Stock is delisted, Brown Simpson has the right to cause the Series A Preferred Stock to be redeemed. In connection with the transaction, Brown Simpson also received warrants to purchase up to 675,000 additional shares of the Common Stock at $8.54 per share ("the Brown Simpson Warrants"). The Brown Simpson Warrants expire on August 25, 2003. The Registrant has agreed to register for resale under the Securities Act of 1933, as amended (the "Securities Act"), the Common Stock issuable upon (i) conversion of the Series A Preferred Stock; and (ii) exercise of the Brown Simpson Warrants. The Registrant has also granted Brown Simpson under certain instances piggy back registration rights and one demand registration right. The Registrant is required to make certain cash and warrant payments in the event that it is unable to meet its obligations in connection with the Series A Preferred Stock and Brown Simpson Warrants, such as registration under the Securities Act or issuance of shares of Common Stock upon conversion or exercise. H.C. Wainwright & Co., Inc. ("H.C. Wainwright") served as placement agent for the transaction and received a commission of $560,000 and warrants to purchase 120,000 shares of the Registrant's Common Stock at $7.80 per share. These warrants expire on August 25, 2003. H.C. Wainwright will also receive a future fee in the -2- amount of 4% of any monies received by the Registrant upon the exercise of the Brown Simpson Warrants. The foregoing summary description is qualified in its entirety by reference to the definitive transaction documents, copies of which are attached as exhibits to this Current Report on Form 8-K. This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Registrant's current judgment on certain issues. Because such statements apply to future events, they are subject to risks and uncertainties that could cause the actual results to differ materially. Important factors which could cause actual results to differ materially are described in the Registrant's reports on Forms 10-K and 10-Q on file with the Securities and Exchange Commission. Item 7. Financial Statements and Exhibits (a) Financial statements. None. (b) Pro forma financial information. None. (c) Exhibits. The Exhibits to this report are listed in the Index to Exhibits set forth on page 5 hereof. -3- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SATCON TECHNOLOGY CORPORATION Date: August 25, 1999 By: /s/ David B. Eisenhaure --------------------------------------- David B. Eisenhaure President, Chief Executive Officer and Chairman of the Board -4- INDEX TO EXHIBITS EXHIBIT NUMBER EXHIBIT - ------- ------- 3.1(1) Certificate of Incorporation of the Registrant. 3.2(1) Bylaws of the Registrant. 3.3(2) Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on May 12, 1997. 3.4(2) Bylaws Amendment of the Registrant. 3.5 Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on March 17, 1999. 3.6 Certificate of Designation of Series and Statement of Variations of Relative Rights, Preferences and Limitations of Preferred Stock, dated as of August 25, 1999, relating to the Series A Preferred Stock. 10.25 Securities Purchase Agreement, dated as of August 25, 1999, among the Registrant and the purchasers listed on Schedule I thereto. 10.26 Registration Rights Agreement, dated as of August 25, 1999, among the Registrant and the investors named on the signature pages thereof. 10.27 Form of Warrants issued on August 25, 1999 in connection with the sale of the Series A Preferred Stock. _______________ (1) Incorporated by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File No. 33-49286). (2) Incorporated by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 1997. -5- EX-3.5 2 AMENDMENT OF CERFICATE OF INCORPORATION EXHIBIT 3.5 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF SATCON TECHNOLOGY CORPORATION Pursuant to Section 242 of the General Corporation Law of the State of Delaware ------------------------------ SatCon Technology Corporation (hereinafter called the "Corporation"), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows: The Board of Directors of the Corporation duly adopted a resolution by Written Action dated December 22, 1998, pursuant to Sections 141 and 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Certificate of Incorporation of the Corporation and declaring said amendment to be advisable and directing that it be submitted to and considered by the stockholders of the Corporation for approval. The stockholders of the Corporation duly approved said proposed amendment at the Annual Meeting of Stockholders held on March 17, 1999 in accordance with Section 242 of the General Corporation Law of the State of Delaware. The resolution setting forth the amendment is as follows: RESOLVED: That the Board of Directors deems it advisable and in the best - -------- interests of the Corporation and its stockholders that Article 4 of the Certificate of Incorporation of the Corporation be, and hereby is, deleted and is replaced in its entirety by the provisions attached hereto as Appendix 1 in order to increase the authorized number of ---------- shares of Common Stock of the Corporation from 15,000,000 to 20,000,000. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed hereto and this Certificate of Amendment to be signed by its President this 17th day of March, 1999. SATCON TECHNOLOGY CORPORATION By: /s/ David B. Eisenhaure ------------------------- David B. Eisenhaure President and Chief Executive Officer Appendix 1 ---------- 4. The total number of shares of stock which the Corporation shall have authority to issue is twenty-one million (21,000,000) shares, twenty million (20,000,000) of which shall be Common Stock, of the par value of One Cent ($.01) per share; and one million (1,000,000) of which shall be Preferred Stock, of the par value of One Cent ($.01) per share. Additional voting powers, designations, preferences, rights and qualifications, limitations or restrictions of the shares of stock shall be determined by the Board of Directors of the Corporation from time to time. EX-3.6 3 CERTIFICATE OF DESIGNATION EXHIBIT 3.6 SATCON TECHNOLOGY CORPORATION CERTIFICATE OF DESIGNATION OF SERIES AND STATEMENT OF VARIATIONS OF RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF PREFERRED STOCK ARTICLE I Designation, Amount, Par Value, Liquidation Value And Rank 1.1 The series of preferred stock shall be designated as Series A Convertible Redeemable Preferred Stock, ("Series A Preferred Stock"), and the ------------------------ number of shares so designated shall be up to 10,000 (which shall not be subject to increase without the consent of each of the holders of the Series A Preferred Stock ("Holders")). Each share of Series A Preferred Stock, $.01 par value per ------- share, shall have a liquidation value of $1,000 per share (the "Liquidation ----------- Value"). - ----- 1.2 The Series A Preferred Stock shall rank senior to the Junior Securities as to dividends, distributions and upon liquidation, dissolution or winding up. Except for a class of equity securities of the Company issued with an exercise price, conversion price or strike price in excess of the Conversion Price, no class of equity securities of the Company shall be senior to the Series A Preferred Stock as to dividends, distributions and upon liquidation, dissolution or winding up. 1.3 The Company shall not be required to pay dividends on the Series A Preferred Stock. ARTICLE II Voting Rights 2.1 Except as otherwise provided herein and as otherwise required by law, the Series A Preferred Stock shall have no voting rights. The outstanding shares of Series A Preferred Stock shall be entitled to the number of votes equal to the number of whole shares of Common Stock into which the shares of Series A Preferred Stock held by such holder are then convertible (as adjusted from time to time pursuant to Section 4 hereof), at each meeting of stockholders of the Company (and written actions of stockholders in lieu of meetings) with respect to any of the following matters presented to the stockholders of the Company for their action or consideration: (a) sell all or substantially all of its, or their, assets or (b) merge with or into another company, in the event that the Company will not be the surviving entity. Without the approval of the holders of 75% of the outstanding share of Series A Preferred Stock, the Company shall not amend, alter or repeal the preferences, special rights or other powers of the Series A Preferred Stock so as to affect adversely the Series A Preferred Stock, which approval may be given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. ARTICLE III Liquidation 3.1 Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a "Liquidation"), the Holders shall be ----------- entitled to receive out of the assets of the Company legally available therefor, whether such assets are capital or surplus, for each share of Series A Preferred Stock an amount equal to the Liquidation Value before any distribution or payment shall be made to the Holders of any Junior Securities. If the assets of the Company shall be insufficient to pay in full all amounts due to the Holders and the holders of any other class of preferred stock ranking pari passu to the Series A Preferred Stock then the entire assets to be distributed to the Holders and the Holders of all securities ranking pari passu to the Series A Preferred Stock ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A sale, conveyance, lease, transfer or disposition of all or substantially all of the assets of the Company or the consummation by the Company of a transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, or a consolidation or merger of the Company with or into any other company or companies shall not be treated as a Liquidation, but instead shall be subject to the provisions of Article VI. The Company shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder. ARTICLE IV Conversion 4.1 Right of Holders to Convert Series A Preferred Stock into Common Stock. (a) Conversion Price. Subject to and upon compliance with the ---------------- provisions of this Section 4.1, each share of Series A Preferred Stock may, at any time, be converted into duly authorized, validly issued, fully-paid and nonassessable shares of Common Stock at a conversion price of $7.80 per share subject to adjustment as set forth in Section 4.1(b), and subject to the provisions of this Article IV (the "Conversion Price"). (b) Optional Reset. At the option of each Holder, the Conversion -------------- Price shall be adjusted (subject to Section 4.1(c)) to the average of the closing bid prices on the Five (5) Trading Days immediately preceding the one (1) year anniversary of the Closing Date. Notwithstanding the forgoing, no reset pursuant to this Section 4.1(b) shall be made with respect to the Conversion Price which shall result in a Conversion Price of less than $5.00 per share (subject to adjustment for stock spits, combinations, or similar transactions). (c) Termination of Optional Reset. The reset options set forth in ----------------------------- Section 4.1(b) above shall terminate upon the earlier to occur of either of the following events, provided, however, that notwithstanding the occurrence of either such event, the reset rights shall not terminate unless and until a Registration Statement covering the underlying shares of Common Stock granted herein has been declared effective by the Securities and Exchange Commission: 2 1. if the Closing Price of Common Stock is greater than $11.70 for twenty (20) consecutive Trading Days; or 2. if the Company receives at least Two Million Five Hundred Thousand Dollars ($2,500,000) in cash pursuant to the initial tranche of a stock issuance in connection with the transaction described in Schedule 2.1(c)(7) of the Purchase Agreement, in which there shall be a second tranche consisting of a minimum investment of Four Million Five Hundred Thousand ($4,500,000), and which second tranche shall be subject to funding conditions that have been approved by the Holders, which approval shall not be unreasonably withheld. If an adjustment in the Conversion Price and, if applicable, a change in the securities or other property issuable upon conversion has taken place pursuant to Articles IV or VI, then the conversion described in Section 4.1(a) shall be at the applicable Conversion Price and in such securities or other property as so adjusted. (d) Notice of Conversion. The Purchaser desiring to make a conversion -------------------- shall deliver to the Company, during usual business hours of the Company's office, or, at the Purchaser's option, to the Company's transfer agent during its usual business hours (with a copy to the Company), a written notice of election to convert, as provided in the form attached hereto as Exhibit A (a --------- "Notice of Conversion"), accompanied, if required, by the stock certificate(s) - --------------------- evidencing the shares of Series A Preferred Stock which are to be converted. 4.2 Issuance of Shares Upon Conversion. (a) The Company shall use its best efforts to deliver or cause to be delivered, within two (2) Trading Days after delivery of a Notice of Conversion and, if required, the surrender, as herein provided, of any certificates for shares of Series A Preferred Stock for conversion, to the Holder of the Series A Preferred Stock delivering such Notice of Conversion, or such Holder's designee, a certificate or certificates representing the number of duly authorized, validly issued, fully-paid and nonassessable shares of Common Stock, into which such shares of Series A Preferred Stock may be converted in accordance with the provisions of this Article IV. Such conversion shall be deemed to have been made at the time and on the date the Notice of Conversion is delivered to the Company, as long as, if required, the shares of Series A Preferred Stock being converted are promptly delivered to the Company. The rights of the Holder of such Series A Preferred Stock (subject to the Company's satisfaction of its obligations hereunder with respect to such conversion) shall cease at such time with respect to the shares of Series A Preferred Stock so converted (the "Converted Preferred Stock"). The Person or Persons entitled to receive the - -------------------------- shares of Common Stock, upon conversion of such Series A Preferred Stock, shall be treated for all purposes as having become the record holder or holders of such shares of Common Stock at such time, and such conversion shall be at the Conversion Price in effect at such time (the "Conversion Date"). Subject to --------------- paragraph 4.3(b), if any certificated shares of Series A Preferred Stock are converted in part only, upon such conversion the Company shall execute and deliver to the Holder thereof, as requested by such Holder, a new Series A Preferred Stock certificate for the number of shares of Series A Preferred Stock equal to the unconverted portion of such Series A Preferred Stock certificate. Without in any way 3 limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, the parties hereto agree that if the Company fails to deliver the shares of Common Stock required to be issued upon the conversion of such shares of Series A Preferred Stock under this Section 4.2 within five (5) Trading Days after delivery of the Notice Of Conversion, the Company shall pay to the Holder upon demand an amount of cash (at the Holder's option) equal to the product of (w) the number of shares of Common Stock required to be issued upon the conversion of the Series A Preferred Stock, (x) the Per Share Market Value of such shares on the Conversion Date, (y) the number of days after the two (2) Trading Day period referred above that such shares are not delivered to the Holder, and (z) 0.0025; provided that in no event shall the amount of the penalty imposed by this sentence exceed $10,000 per Trading Day. (b) Notwithstanding anything to the contrary set forth herein, upon conversion of shares of Series A Preferred Stock in accordance with the terms hereof, the Holder shall not be required to physically surrender its certificate of Series A Preferred Stock to the Company unless the entire amount of shares of Series A Preferred Stock is so converted. The Holder and the Company shall maintain records showing the number of shares of Series A Preferred Stock already converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of the Series A Preferred Stock certificate(s) upon each such conversion. In the event of any dispute or discrepancy, such records of the Company shall be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of shares of a Series A Preferred Stock certificate is converted, the Holder may not transfer the Series A Preferred Stock certificate unless the Holder first physically surrenders the certificate to the Company, whereupon the Company shall promptly issue and deliver upon the order of the Holder a new certificate of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing the number of remaining unconverted shares of Series A Preferred Stock. The Holder and any assignee, by acceptance of the Series A Preferred Stock, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of a Series A Preferred Stock certificate, the unpaid and unconverted shares of such Series A Preferred Stock certificate may be less than the amount stated on the face thereof. (c) In lieu of delivering physical certificates representing the Conversion Shares, provided the Company's transfer agent is participating in the Depositary Trust Company Fast Automated Securities Transfer ("FAST") program, ---- upon request of the Holder and in compliance with the provisions of Sections 4.1 and 4.2, the Company shall use its best efforts to cause its transfer agent to electronically transmit the shares of Common Stock issuable upon conversion of the Series A Preferred Stock to the Holder by crediting the account of the Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission system. The time period for delivery described in the immediately preceding paragraph shall apply to the electronic transmittals described herein. (d) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates for shares of Common Stock pursuant to Section 4.2(a) by the second (2nd) Trading Day after the Conversion Date, and if after such second (2nd) Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares 4 which the Holder was entitled to receive upon such conversion (a "Buy-In"), then the Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the market price of the Common Stock at the time of the sale giving rise to such purchase obligation and (B) at the option of the Holder, either return the Series A Preferred Stock for which such conversion was not honored or deliver to such Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its conversion and delivery obligations under Section 4.2(a). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of Series A Preferred Stock with respect to which the market price of the Underlying Shares on the date of conversion totaled $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. ARTICLE V Registration Requirements 5.1 Reservation of Shares. The Company at all times shall reserve a sufficient number of shares of its authorized but unissued Common Stock to provide for 1.2 times the full conversion of the outstanding Series A Preferred Stock and exercise of the outstanding Warrants (the "Reserved Amount"). Shares of Common Stock reserved for issuance upon conversion of the Series A Preferred Stock and the exercise of the Warrants shall be allocated pro rata to each of the Purchasers in accordance with the amount of Series A Preferred Stock and Warrants issued and delivered to such Purchaser at the Closing. If at any time the number of shares of Common Stock authorized and reserved for issuance is insufficient to cover 120% of the number of Conversion Shares and Warrant Shares issued and issuable upon conversion of the Series A Preferred Stock and exercise of the Warrants (based on the Conversion Price of the Series A Preferred Stock in effect from time to time and the Exercise Price of the Warrants in effect from time to time) without regard to any limitation on conversions or exercises, the Company will promptly take all corporate action necessary to authorize and reserve 120% of such shares pursuant to Section 3(b) of the Registration Rights Agreement, including, without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Company's obligations under this Section 5.2, in the case of an insufficient number of authorized shares, and using its best efforts to obtain stockholder approval of an increase in such authorized number of shares. 5.2 The provisions of Section 2(d) of the Registration Rights Agreement are incorporated herein by reference. 5 ARTICLE VI Adjustment of Conversion Price 6.1 Adjustment of Conversion Price. In addition to any adjustment to the Conversion Price provided elsewhere in this Certificate of Designation, the Conversion Price in effect at any time shall be subject to adjustment from time to time upon the happening of certain events, as follows: (a) Common Stock Dividends; Common Stock Splits. If the Company, at ------------------------------------------- any time while the Series A Preferred Stock is outstanding, (a) shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of Capital Stock of the Company, the Conversion Price shall be multiplied by a fraction the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and the denominator of which shall be the number of shares of Common Stock (excluding treasury shares) outstanding after such event. Any adjustment made pursuant to this Section 6.1(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. (b) Rights; Warrants. If the Company, at any time while the Series A ---------------- Preferred Stock is outstanding, shall issue rights or warrants to all of the holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion Price, the Conversion Price shall be multiplied by a fraction, the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at the Conversion Price. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants. (c) Subscription Rights. If the Company, at any time while the Series ------------------- A Preferred Stock is outstanding, shall distribute to all of the holders of Common Stock evidence of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 6.1(a) and (b) above), then in each such case the Conversion Price at which the Series A Preferred Stock shall thereafter be exercisable shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of shareholders entitled to receive such distribution by a fraction, the denominator of which shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and the numerator of which shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one 6 outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding ten -------- ------- percent (10%) of the net assets of the Company, such fair market value shall be determined in accordance with the Appraisal Procedure. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. Notwithstanding the foregoing, nothing set forth in this Section 6.1(c) shall be applicable with respect to the implementation of a poison pill, any poison pill provisions of any of the Company's stockholders' rights or similar agreements and any securities or rights issued pursuant thereto. (d) Rounding. All calculations under Section 6.1 shall be made to the -------- nearest cent or the nearest l/l00th of a share, as the case may be. (e) Notice of Adjustment. Whenever the Conversion Price is adjusted -------------------- pursuant to paragraphs 6.1(a), (b) or (c), the Company shall promptly deliver to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. (f) Redemption Events. The following are "Redemption Events" under ----------------- ----------------- this Section 6.1(f): (A) any Change of Control or (B) any suspension from listing or delisting of the Common Stock from the Nasdaq or any Subsequent Market on which the Common Stock is listed for a period of five consecutive days. The Company shall give the Holder written notice of the occurrence of any Redemption Event as soon as practicable but in no event later than three (3) Business Days after such Redemption Event. On and after the date of any Redemption Event, the Holder shall have the option to require the Company to redeem (the "Redemption Right"), for a period of thirty (30) Business Days after ---------------- the date of such notice, in cash and subject to the terms of payment provisions set forth in Section 4.2, from funds legally available therefor at the time of such redemption, the Holder's shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such Holder's Series A Preferred Stock at a price per share equal to the product of (i) the Average Price immediately preceding the latest of the effective date, the date of the closing, date of occurrence or the date of the announcement, as the case may be, of the Redemption Event triggering such Redemption Right and (ii) the number of shares of Common Stock of the Company into which the Series A Preferred Stock could have been converted immediately prior to such Redemption Event. After the occurrence of (A), the Holder shall have the right at his or its option, in lieu of the Redemption Right, to convert the Series A Preferred Stock for shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such Redemption Event; the Holder shall be entitled upon such event to receive such amount of securities, cash or property as if the Holder had converted the shares of the Common Stock into which the Series A Preferred Stock could have been converted immediately prior to such Redemption Event (without taking into account any limitations or restrictions on the convertibility of the Series A Preferred Stock). In the case of a transaction specified in (A) in which holders of the Company's Common Stock receive cash, the Holder shall have the right at his or its option, in lieu of the Redemption Right, to convert the Series A Preferred Stock for such number of shares of the surviving company equal to the amount of cash into which the Series A Preferred Stock is convertible divided by the fair market value of the shares of the surviving company on the effective date of the merger. In the case of (A), the Company shall not 7 effect any such Redemption Event unless, prior to the consummation thereof, each Person (other than the Company) which may be required to deliver any stock, securities, cash or property upon the conversion of the Series A Preferred Stock as provided herein shall assume, by written instrument delivered and reasonably satisfactory to, the Holder of the Series A Preferred Stock, (a) the obligations of the Company under this Certificate of Designation (and if the Company shall survive the consummation of such transaction, such assumption shall be in addition to, and shall not release the Company from, any continuing obligations of the Company under this Certificate of Designation), (b) the obligations of the Company under the Purchase Agreement, the Warrant, this Certificate of Designation, and the Registration Rights Agreement, and (c) the obligation to deliver to the Registered Owner such shares of stock, securities, cash or property as, in accordance with the foregoing provisions of this Section 6.1(f), the Holder may be entitled to receive. This provision shall similarly apply to successive Redemption Events. (g) Adjustment to Conversion Price. ------------------------------ (i) Prior to the third anniversary of the issuance of the Series A Preferred Stock, if the Company, at any time while the Series A Preferred Stock is outstanding, takes any of the actions described in this Section 6.1(g), then, in order to prevent dilution of the rights granted under this Certificate of Designation, at any time prior to the Maturity Date, the Conversion Price (without adjustment pursuant to Section 4.1(b)) will be subject to adjustment from time to time as provided in this Section 6.1(g). This Section 6.1(g) shall not apply to Exempt Securities. (ii) Adjustment of Conversion Price upon Issuance of Common ------------------------------------------------------ Stock. If at any time, prior to the third anniversary of the issuance of ----- the Series A Preferred Stock, while the Series A Preferred Stock is outstanding the Company issues or sells, or is deemed to have issued or sold, shares of Common Stock (other than Exempt Securities) for a consideration per share less than the Conversion Price in effect immediately prior to such issuance or sale, then immediately after such issuance or sale the Conversion Price then in effect shall be reduced to an amount equal to the Adjusted Price. For the purpose of determining the adjusted Conversion Price under this Section 6.1(g), the following shall be applicable: (A) Issuance of Options. If at any time while the Series A ------------------- Preferred Stock is outstanding the Company in any manner grants any rights or options to subscribe for or to purchase Common Stock (other than Exempt Securities) or any stock or other securities convertible into or exchangeable for Common Stock (such rights or options being herein called "Options" and such convertible or exchangeable stock or ------- securities being herein called "Convertible Securities") and the price ---------------------- per share for which Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities is less than the Conversion Price in effect immediately prior to such grant, then the Conversion Price then in effect shall be reduced to equal the Adjusted Price. No adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Options. 8 (B) Issuance of Convertible Securities. If at any time ---------------------------------- while the Series A Preferred Stock is outstanding the Company in any manner issues or sells any Convertible Securities and the price per share for which Common Stock is issuable upon such conversion or exchange (other than Exempt Securities) is less than the Conversion Price in effect immediately prior to issuance or sale, then the Conversion Price then in effect shall be reduced to an amount equal to the Adjusted Price. No adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities. (C) Change in Option Price or Rate of Conversion. If there -------------------------------------------- is a change at any time in (i) the Purchase Price provided for in any Options, (ii) the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock, then immediately after such change in option price or rate of conversion the Conversion Price in effect at the time of such change shall be readjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed Purchase Price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. (D) Effect on Conversion Price of Certain Events. For -------------------------------------------- purposes of determining the adjusted Conversion Price under Section 6.1(g)(ii), the following shall be applicable: (I) Calculation of Consideration Received. If any ------------------------------------- Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the amount received by the Company therefor (net of any related brokerage commissions) plus the amount to be received by the Company upon the exercise or conversion of such securities. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Average Price of such security immediately preceding the date of receipt. In case any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the 9 Holders of Series A Preferred Stock representing a majority of the aggregate number of shares of Series A Preferred Stock then outstanding. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (a "Valuation Event"), the fair value of such --------------- consideration will be determined in accordance with the Appraisal Procedure. (II) Integrated Transactions. In case any Option is ----------------------- issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for an aggregate consideration of $.01, unless the independent Board of Directors of the Company determine in good faith that some other value should be ascribed to such Options. (III) Treasury Shares. The number of shares of Common --------------- Stock outstanding at any given time does not include shares owned or held by or for the account of the Company, and the disposition of any shares so owned or held will be considered an issue or sale of Common Stock. (IV) Record Date. If the Company takes a record of ----------- the holders of Common Stock for the purpose of entitling them (1) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (2) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (E) Certain Events. If any event occurs of the type -------------- contemplated by the provisions of Section 6.1(g) (subject to the exceptions stated therein) but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder, or assigns, of the Series A Preferred Stock; provided, however, that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 6.1(g). (F) Notices. The Company shall give the Holder written ------- notice of the occurrence of any of the events specified in this Section 6.1(g) as soon as practicable, but in no event later than three (3) Business Days, after such event and shall publicly disclose such event prior to or concurrently with the giving of such notice. Such notice shall contain at least: (A) a description of the event, (B) the adjusted Conversion Price with a reference to the applicable paragraph in 10 Section 6.1(g), and (C) the dates of the five (5) Trading Day period during which the adjusted Conversion Price is in effect. 6.2 (i) Reclassification, Etc. If: --------------------- (a) the Company shall declare a dividend (or any other distribution) on its Common Stock; or (b) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (c) the Company shall authorize the granting to the holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or (d) the approval of any shareholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (e) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of exercise of shares of Series A Preferred Stock, and shall cause to be delivered to the Registered Owner, at least 5 Business Days prior to the applicable record or effective date hereinafter specified, a notice (provided such notice shall not include any material non-public information) stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, however, -------- ------- that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. (f) Adjustment of Number of Shares. Upon each adjustment of the ------------------------------ Conversion Price as a result of the calculations made in this Section 6, each share of Series A Preferred Stock shall thereafter evidence the right to receive, at the adjusted Conversion Price, that number of shares of Common Stock (calculated to the nearest one-hundredth) obtained by dividing (i) the product of the aggregate number of shares covered by such share immediately prior to such adjustment and the Conversion Price in effect immediately prior to such adjustment 11 of the Conversion Price by (ii) the Conversion Price in effect immediately after such adjustment of the Conversion Price. 6.3 Restriction on Conversion by Either the Holder or the Company. Notwithstanding anything herein to the contrary, except as set forth in Section 7.1 hereto and Section 8 of the Warrant, in no event shall any Holder have the right or be required to convert any or all of the aggregate purchase price of the Series A Preferred Stock if as a result of such conversion the aggregate number of shares of Common Stock beneficially owned by such Holder and its Affiliates would exceed 9.99% of the outstanding shares of the Common Stock following such conversion. For purposes of this Section 6.3, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. The provisions of this Section 6.3 may be waived by a Holder as to itself (and solely as to itself) upon not less than 65 days prior written notice to the Company, and the provisions of this Section 6.3 shall continue to apply until such 65th day (or later, if stated in the notice of waiver). 6.4 Officer's Certificate. Whenever the number of shares purchasable upon conversion shall be adjusted as required by the provisions of Section 6.1, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted number of shares determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. Each such officer's certificate shall be signed by the chairman, president or chief financial officer of the Company and by the secretary or any assistant secretary of the Company. Each such officer's certificate shall be made available at all reasonable times for inspection by any holder of the Series A Preferred Stock and the Company shall, forthwith after each such adjustment, deliver a copy of such certificate to the each of the Holders. 6.5 Compliance With Governmental Requirements. The Company covenants that if any shares of Common Stock required to be reserved for purposes of conversion of Series A Preferred Stock hereunder require registration with or approval of any governmental authority under any Federal or state law, or any national securities exchange, before such shares may be issued upon conversion, the Company will use its best efforts to cause such shares to be duly registered or approved, as the case may be. 6.6 Fractional Shares. Upon a conversion hereunder, the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not, or is unable, to make such a cash payment, the holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. 6.7 Payment of Tax Upon Issue or Transfer. The issuance of certificates for shares of the Common Stock on conversion of the Series A Preferred Stock shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the 12 Holder of such Series A Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 6.8 Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been received (a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct answer back received), telecopy or facsimile (with transmission confirmation report) at the address or number designated below (if received by 8:00 p.m. EST where such notice is to be received), or the first Business Day following such delivery (if received after 8:00 p.m. EST where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications are (i) if to the Company to SatCon Technology Corporation, 161 First Street, Cambridge, MA 02142-1221, Attn: President and Chief Executive Officer, fax no. (617) 576-7455, with copies to Hale & Dorr LLP, 60 State Street, Boston, MA 02109, Attn: Jeffrey N. Carp, Esq., fax no. (617) 526-5000 and (ii) if to any Purchaser to the address set forth on Schedule I hereto with copies to those specified on the signature pages hereto and to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye, Esq., fax no. (212) 872-1002 or such other address as may be designated in writing hereafter, in the same manner, by such Person. 6.9 Nasdaq Limitation. If on any date (the "Determination Date") (a) ------------------ the Common Stock is listed for trading on Nasdaq or the Nasdaq SmallCap Market, (b) (i) the Conversion Price then in effect is such that the aggregate number of shares of Common Stock that would then be issuable upon conversion in full of the then outstanding shares of Preferred Stock if all such shares were converted on such Determination Date (without regard to any limitations on conversion) and (ii) all other issuances of Common Stock, which under the requirements of Nasdaq are required to be included with the shares of Common Stock described in the preceding clause (i) for determining the need for stockholder approval for share issuances, would equal or exceed 20% of the number of shares of the Common Stock outstanding immediately prior to the closing date of the issuance and sale of the Series A Preferred Stock (the "Issuable Maximum"), and (c) the Company shall ---------------- not have previously obtained any vote of the shareholders of the Company owning a majority of the outstanding Common Stock (the "Shareholder Approval"), if any, -------------------- as may be required by the applicable rules and regulations of Nasdaq (or any successor entity) to approve the issuance of shares of Common Stock in excess of the Issuable Maximum, then with respect to the aggregate number of shares of Common Stock issuable upon the conversion of the shares of Preferred Stock then held by the Registered Owners for which a conversion in accordance with the Conversion Price would result in an issuance of shares of Common Stock in excess of the Issuable Maximum (the "Excess Amount"), the Company may elect to redeem ------------- the shares of Preferred Stock from the Registered Owners in an aggregate amount in cash equal to the product of the Average Price on the Determination Date multiplied by the number of shares of Common Stock that would be issued upon the conversion of the shares of Preferred Stock resulting in the Excess Amount (the "Prepayment Amount"). Any such election by the Company must be made in writing ----------------- to the 13 Registered Owners (x) within ten (10) Trading Days after any such Determination Date or (y) or, if not made, must be made within two (2) Trading Days after the date on the date on which a Registered Owner submits Preferred Stock for conversion to the extent that such conversion will otherwise cause Common Stock to be issued in excess of the Issuable Maximum. The payment of such Prepayment Amount and the delivery for cancellation of the shares of Preferred Stock to be redeemed must be made within ten (10) Trading Days after the date such election is made. If the Company does not deliver timely a required notice of its election to redeem under this section or shall, if it shall have delivered such a notice, fail to redeem the Preferred Stock for the Prepayment Amount hereunder within ten (10) Trading Days thereafter, then each Registered Owner shall have the option by written notice to the Company within twenty (20) Trading Days of the Determination Date, to, if applicable, declare any such notice given by the Company, if given, to be null and void and require the Company to either: (i) use its best efforts to obtain the Shareholder Approval applicable to such issuance as soon as is possible, but in any event not later than the 90th day after such request unless the Company has previously used its commercially reasonable efforts to, but has failed to, obtain such approval, or (ii) purchase the Excess Amount owned by such Holders for the Prepayment Amount, within five (5) Trading Days of such Registered Owner's notice. Until the Company has received the Shareholder Approval no Registered Owner of the shares of Preferred Stock shall be issued, upon conversion of the Preferred Stock, shares of Common Stock in an amount greater than the Issuable Maximum. ARTICLE VII Optional Redemption 7.1 Optional Redemption. (a) The shares of Series A Preferred Stock are redeemable, in whole or in part, at the option of the Company during the following time periods, from time to time, under the following conditions and subject also to the conditions set forth in Section 7.1(b) (the "Optional Redemption"): ------------------- (i) The Company may redeem the shares of Series A Preferred Stock subject to the other conditions herein, if the closing price of the Company's Common Stock over twenty (20) consecutive Trading Days is greater than $15.60 per share, as adjusted in accordance with Article VI. (b) Subject to the conditions set forth in Section 7.1(a), so long as (i) any Registration Statement required to be filed and be effective pursuant to the Registration Rights Agreement has been filed and declared effective, and, if this call option is being implemented prior to the second anniversary of the Closing Date, such Registration Statement has been in effect and sales of all of the Registrable Securities can be made thereunder for at least ten (10) days prior to the Redemption Notice Date (as defined below), or such lesser number of days to the extent days in such 10-day period are days contemplated by Sections 3(r) and 3(s) of the Registration Rights Agreement and (ii) the Company has a sufficient number of authorized shares of Common Stock reserved for issuance upon full conversion of the Series A Preferred Stock, upon ten (10) Business Days prior written notice to the Holder (a "Redemption Notice"), ----------------- 14 the full number of outstanding shares of Series A Preferred Stock may be redeemed by the Company, in whole at a price equal to the original purchase price of the Series A Preferred Stock (the "Redemption Price"), together with ---------------- other amounts due in respect thereof up to the Redemption Date (as defined below). 7.2 Mechanics of Redemption. The Company shall exercise its right to redeem by delivering its Redemption Notice by facsimile and overnight courier to each Holder (such date that the notice is given, the "Redemption Notice Date"). ---------------------- Such Redemption Notice shall indicate (A) the Redemption Price, (B) each Holder's pro rata allocation of such maximum amount, and (C) a confirmation of the date ("Redemption Date") that the Company shall effect the redemption, which --------------- date shall be not less than ten (10) Business Days and not more than sixty (60) calendar days after the Redemption Notice Date. Notwithstanding anything in this Section 7.2, the Company shall convert any Series A Preferred Stock pursuant to Article VII if the Conversion Notice for shares of Series A Preferred Stock submitted for conversion is delivered before the Redemption Date. At any time prior to the Redemption Date, the Company may issue to each Holder a written notice canceling the Optional Redemption, in which case the Company shall not be obligated to pay the Redemption Price and, at the option of each Holder, shall return the shares of Series A Preferred Stock submitted for redemption or conversion. 7.3 Payment of Redemption Price. The Company shall pay the applicable Redemption Price to the Holder of the shares of Series A Preferred Stock being redeemed in cash on the Redemption Date. Until the Company pays such unpaid applicable Redemption Price in full to each Holder, each Holder of shares of Series A Preferred Stock submitted for redemption pursuant to this Article VII and for which the applicable Redemption Price has not been paid, shall have the option, in lieu of redemption, (A) to require the Company to promptly return to such Holder all of the shares of Series A Preferred Stock that were submitted for redemption by such Holder under this Article VII and for which the applicable Redemption Price has not been paid or (B) to convert those shares of Series A Preferred Stock for which the applicable Redemption Price has not been paid at a Conversion Price equal to the Conversion Price applicable to such conversion on the Redemption Date (the "Void Redemption Notice"). Upon the ---------------------- Company's receipt of such Void Redemption Notice(s) requesting the return of the shares of Series A Preferred Stock and prior to payment of the full applicable Redemption Price to each Holder, (i) the redemption shall be null and void with respect to those shares of Series A Preferred Stock submitted for redemption and for which the applicable Redemption Price has not been paid, (ii) the Company shall immediately return any Series A Preferred Stock certificates submitted to the Company by each Holder for redemption under this Article VII and for which the applicable Redemption Price has not been paid and (iii) the Conversion Price of such returned shares of Series A Preferred Stock shall be adjusted to the Conversion Price applicable to such conversion on the date on which such shares of Series A Preferred Stock were originally presented for redemption. If the Company fails to timely effect a redemption in accordance with this Article VII (other than a redemption cancelled pursuant to Section 7.2 hereof), the Company shall not be allowed to submit another Redemption Notice without the prior written consent of Holders of at least two-thirds (2/3) of the number of shares of Series A Preferred Stock then outstanding. 15 ARTICLE VIII Mandatory Redemption 8.1 Mandatory Redemption. (a) On August 25, 2006 the Company shall redeem all of the then outstanding Shares of Series A Preferred Stock held by the Holders at a value per share equal to the Liquidation Value; provided, however that if on August 25, 2003 the average closing bid price of the Company's Common Stock over the sixty (60) Trading Days immediately preceding August 25, 2003 is $5.00 (as adjusted for stock splits, reclassifications and similar transactions) or less, then the August 25, 2006 date shall accelerate to August 25, 2003. Any aggregate amount (the "Mandatory Redemption Value") due shall be forwarded to the Holders within five (5) Business Days. (b) The Mandatory Redemption Value shall be paid in the form of cash, Common Stock or a combination thereof at the election of the Company. Common Stock shall be valued at the Average Price on August 25, 2003 or August 25, 2006, whichever date is applicable. (c) Fifteen (15) days prior to August 25, 2003 or August 25, 2006, whichever date is applicable, the Company shall provide the Holders with written notice, which shall set forth whether the Company intends to pay the Mandatory Redemption Value in the form of cash, Common Stock or a combination thereof. (d) If the Mandatory Redemption Value is not paid to the Holders within 60 days after August 25, 2003 or August 25, 2006, whichever date is applicable, the Company shall pay to the Holders, in addition to the Mandatory Redemption Value, interest which shall begin to accrue daily after the end of such 60 day period at a rate of 12% per annum. The Company shall be obligated to pay the Mandatory Redemption Value plus accrued interest. ARTICLE IX Definitions 9.1 Definitions. For the purposes hereof, the following terms shall have the following meanings: "Act" means the Securities Act of 1993, as amended. --- "Adjusted Price" means the quotient determined by dividing (1) the -------------- sum of (I) the product of (A) the Conversion Price in effect immediately before the issuance or sale or grant multiplied by (B) the number of shares of Common Stock Deemed Outstanding immediately prior to such issuance or sale or grant, plus (II) the consideration, if any, received by the Company upon such issue or sale, by (2) number of shares of Common Stock Deemed Outstanding immediately after such issue or sale or grant. 16 "Affiliate" of any Person means any other Person directly or --------- indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Appraisal Procedure" shall have the following meaning. The ------------------- independent directors of the Company shall determine the fair market value. The Holders shall have ten (10) Business Days to provide the Company with written notice of its approval or disapproval of such determination. If the Holders do not respond within such ten (10) Business Day period, they will be deemed to have approved the fair market value determination of the independent directors. If the Holders appropriately respond that they do not approve of the determination and the independent directors and Holders collectively can not agree on an appropriate fair market value within 30 Business Days, then the Company, on the one hand, and the Holders, on the other hand shall each appoint an Appraiser. A neutral Appraiser shall be appointed by the two party-appointed Appraisers. The three Appraisers shall collectively ascertain the fair market value, which valuation shall be binding upon all parties absent manifest error. "Appraiser" means a nationally recognized or major regional investment --------- banking firm or firm of independent certified public accountants of recognized standing. "Average Price" on any date means (x) the sum of the Per Share Market ------------- Value for the ten (10) Trading Days immediately preceding such date minus (y) the highest and lowest Per Share Market Value during the ten (10) Trading Days immediately preceding such date, divided by (z) eight (8), or a similar calculation if another figure for the number of Trading Days is set forth for clause (x) of this definition. "Business Day" means any day except a Saturday, Sunday or other day on ------------ which commercial banks in the City of New York are authorized or required by law to close. "Change of Control" means the occurrence of any of (i) an acquisition ----------------- after the date hereof by an individual or legal entity or "group" (as described in Section 13(d)(3) of the Exchange Act) of in excess of 40% of the voting securities of the Issuer, (ii) a replacement of more than one-half of the members of the Issuer's Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the date hereof, or their duly elected successors who are directors immediately prior to such transaction, in one or a series of related transactions, (iii) the merger of the Company with or into another entity, unless following such transaction, the Holders of the Company's securities continue to hold at least 67% of such securities following such transaction, (iv) the consolidation or sale of all or substantially all of the assets of the Issuer in one or a series of related transactions, or (v) the execution by the Issuer of an agreement to which the Issuer is a party or by which it is bound, providing for any of the events set forth above in (i), (ii), (iii) or (iv). "Closing Date" means the date of the closing of the purchase and sale ------------ of the Series A Preferred Stock. 17 "Commission" means the United States Securities and Exchange ---------- Commission, or any successor to such agency. "Common Stock" means the Company's common stock, $.01 par value per ------------ share, of the Company and stock of any other class into which such shares may hereafter have been reclassified or changed. "Common Stock Deemed Outstanding" means, at any given time, the number ------------------------------- of shares of Common Stock issued and outstanding at such time, plus the number of shares of Common Stock issuable upon the exercise or conversion of any outstanding options, warrants or convertible securities. "Conversion Date" has the meaning set forth in Section 4.2(a). --------------- "Conversion Price" has the meaning set forth in Section 4.1. ---------------- "Conversion Shares" has the meaning set forth in the Purchase ----------------- Agreement. "Converted Preferred Stock" has the meaning set forth in Section ------------------------- 4.2(a). "Convertible Securities" has the meaning set forth in Section ---------------------- 6.1(g)(ii)(A). "DTC" means the Depositary Trust Corporation. --- "Excess Amount" has the meaning set forth in Section 5.2. ------------- "Excess Shares" has the meaning set forth in Section 6.9 ------------- "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ "Exempted Securities" shall mean issuances of Common Stock or other ------------------- equity securities (a) at a price less than the Conversion Price in an amount not to exceed 100,000 shares of Common Stock per year; (b) issuable upon the conversion of the Preferred Stock or exercise of the Warrants; (c) shares of Common Stock issuable in connection with any transaction set forth in Schedule 2.1(c) of the Purchase Agreement (including any securities issuable upon the conversion, or exercise of securities issued in such transactions), (d) for which any adjustment is made pursuant to Section 6.1(a), (b) or (c) or (e) pursuant to (i) any option, warrant, convertible security or similar right or contractual commitment outstanding on August 25, 1999, (ii) any stock option plan or benefit plan approved by the Board of Directors of the Company, (iii) a dividend, stock split, split-up or other distribution on shares of Common Stock, (iv) any business acquisition by asset purchase, stock purchase, merger or otherwise involving the Company or any of its Subsidiaries pursuant to which all or a portion of the consideration is shares of Common Stock or other equity securities of the Company, (v) warrants, in an amount not to exceed 200,000 shares of Common Stock per year and at an exercise price less than the Conversion Price, granted to financial institutions in connection with any debt financing (other than convertible debt) or loan, (vi) warrants or options, in an amount not to exceed 200,000 shares of Common Stock per year and at an exercise price less than the Conversion Price, approved by the independent directors of the Board of Directors and issued to non-affiliates in 18 connection with the provision of services, or (vii) any securities issued on the conversion or exercise of any of the securities described in clauses (a) through (e)(i) -(vi) hereof. "Holder" or other similar terms means the registered holder of any ------ share of Series A Preferred Stock. "Issuable Maximum" has the meaning set forth in Section 6.9 ---------------- "Issuance Date" means the date of first issue of any shares of Series ------------- A Preferred Stock. "Junior Securities" means the Common Stock and all other equity ----------------- securities of the Company which are junior in rights and liquidation preference to Series A Preferred Stock. "Liquidation Value" has the meaning set forth in Section 1.1. ----------------- "Mandatory Redemption Value" has the meaning set forth in Section -------------------------- 8.1(a). "Nasdaq" means the Nasdaq National Market. ------ "Notice of Conversion" has the meaning set forth in Section 4.1(c). -------------------- "Options" has the meaning set forth in Section 6.1(g)(ii)(A). ------- "Original Issue Date" shall mean the date of the first issuance of any ------------------- shares of the Series A Preferred Stock regardless of the number of transfers of any particular shares of Series A Preferred Stock and regardless of the number of certificates which may be issued to evidence such Series A Preferred Stock. "Per Share Market Value" means (i) on any particular date the closing ---------------------- bid price per share of the Common Stock on such date (as reported by Bloomberg Information Services, Inc., or any successor reporting service) on Nasdaq or, if the Common Stock is not then quoted on Nasdaq, any Subsequent Market on which the Common Stock is then listed or if there is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such date or (ii) if the Common Stock is not listed then on Nasdaq or any Subsequent Market, the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (iii) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined in accordance with the Appraisal Procedure. In addition, all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. "Person" means a corporation, an association, a partnership, ------ organization, a business, an individual, a government or political subdivision thereof or a governmental agency. "Prepayment Amount" has the meaning set forth in Section 6.9 ----------------- 19 "Purchase Agreement" means the Securities Purchase Agreement, dated as ------------------ of the Original Issue Date, among the Company and the original Holders of the Series A Preferred Stock. "Record Date" has the meaning set forth in Section 2.1. ----------- "Redemption Date" has the meaning set forth in Section 7.2. --------------- "Redemption Notice" has the meaning set forth in Section 7.1(b). ----------------- "Redemption Notice Date" has the meaning set forth in Section 7.2. ---------------------- "Redemption Price" has the meaning set forth in Section 7.1(b). ---------------- "Registrable Securities" has the meaning set forth in the Registration ---------------------- Rights Agreement. "Registration Rights Agreement" means the Registration Rights ----------------------------- Agreement, dated as of the Original Issue Date, by and among the Company and the original Holders. "Registration Statement" has the meaning set forth in the Registration ---------------------- Rights Agreement. "Reserved Amount" has the meaning set forth in Section 5.1. --------------- "Reset Date" has the meaning set forth in Section 4.1(b). ---------- "Stock Option Plan" means any contract, plan or agreement which has ----------------- been approved by the Board of Directors of the Company, pursuant to which the Company's securities may be issued to any employee, officer, director or consultant. "Subsidiary" means, with respect to any Person, any corporation or ---------- other entity of which a majority of the Capital Stock or other ownership interests having ordinary voting power to elect a majority of the Board of Directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "Subsequent Market" means the New York Stock Exchange, American Stock ----------------- Exchange or Nasdaq Smallcap Market. "Trading Day" means (a) a day on which the Common Stock is traded on ----------- Nasdaq or, if the Common Stock is not then designated on Nasdaq, on such Subsequent Market on which the Common Stock is then listed or quoted or (b) if the Common Stock is not listed on Nasdaq or a Subsequent Market, a day on which the Common Stock is traded in the over-the-counter Market, as reported by the OTC Bulletin Board, or (c) if the Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions or reporting prices) provided, however that in any event that the 20 Common Stock is not listed or quoted as set forth in (a), (b), or (c) hereof, then a Trading Day shall mean any Business Day. "Underlying Shares" has the meaning set forth in the Purchase ----------------- Agreement. "Valuation Event" has the meaning set forth in Section --------------- 6.1(g)(ii)(D)(I). "Void Redemption Notice" has the meaning set forth in Section 7.3. ---------------------- "Warrant" or "Warrants" has the meaning set forth in the Purchase ------- -------- Agreement. "Warrant Shares" has the meaning set forth in the Purchase Agreement. -------------- ARTICLE X Miscellaneous 10.1 Modification of Certificate of Designation. This Certificate of Designation may be modified without prior notice to any Holder upon the written consent of the Company and the Holders of more than 75% of the shares of Series A Preferred Stock then outstanding. The Holders of more than 75% of the shares of Series A Preferred Stock then outstanding may waive compliance by the Company with any provision of this Certificate of Designation without prior notice to any Holder. However, without the consent of each Holder affected, an amendment, supplement or waiver may not (1) reduce the number of shares of Series A Preferred Stock whose Holders must consent to an amendment, supplement or waiver, or (2) make any shares of Series A Preferred Stock payable in money or property other than as stated in the Certificate of Designation. 10.2 Miscellaneous. This Certificate of Designation shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law thereof. Each of the Company and any Holder hereby irrevocably submits to the nonexclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. The Holder of Series A Preferred Stock by acceptance of a share of Series A Preferred Stock agrees to be bound by the provisions of this Certificate of Designation which are expressly binding on such Holder. 10.3 Preferred Stock Owned by Company Deemed Not Outstanding. In determining whether the holders of the requisite number of shares of Series A Preferred Stock have concurred in any direction, consent or waiver under this Certificate of Designation, shares of Series A Preferred Stock which are owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding for the purpose of any such determination. Shares of Series A Preferred Stock so owned which have been pledged in good 21 faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Company the pledgee's right so to act with respect to such shares of Series A Preferred Stock and that the pledgee is not the Company or any other obligor upon the Series A Preferred Stock or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Series A Preferred Stock. 10.4 Notice to Holders Prior to Taking Certain Types of Action. In case: (a) the Company shall authorize the issuance, at any time from and after the Original Issue Date, to all holders of any class or series of its Capital Stock, of rights or warrants to subscribe for or purchase shares of its capital stock or of any other right; (b) the Company shall authorize, at any time from and after the Original Issue Date, the distribution to all holders of any class or series of its Capital Stock, of evidences of its indebtedness or assets; (c) the Company shall declare a dividend (or other distribution) on its Common Stock or the Company shall declare a special nonrecurring dividend on or a redemption of its Common Stock; (d) of any subdivision, combination or reclassification of any class or series of Capital Stock of the Company at any time from and after the Original Issue Date or of any consolidation or merger to which the Company is a party and for which approval by the shareholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (e) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be mailed to the Holders, at their last addresses as they shall appear upon the registration books of the Company, at least 10 days prior to the applicable record date hereinafter specified, a notice stating (i) the date as of which the holders of record of such class or series of Capital Stock are to be entitled to receive any such rights, warrants or distribution are to be determined, or (ii) the date on which any such subdivision, combination, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation, winding up or other action is expected to become effective, and the date as of which it is expected that holders of record of such class or series of Capital Stock record shall be entitled to exchange their stock for securities or other property, if any, deliverable upon such subdivision, combination, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation, winding up or other action. The failure to give the notice required by this Section 10.4 or any defect therein shall not affect the legality or validity of any distribution, right, warrant, subdivision, combination, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation, winding up or other action, or the vote upon any of the foregoing. 22 10.5 Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 10.6 References. References to Sections and Articles are to Sections and Articles of this Certificate of Designation, unless otherwise expressly provided. 10.7 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 10.8 Lost or Stolen Certificates. Upon receipt by the Company of evidence reasonably satisfactory to the Company (including any bond the Company's transfer agent requires the Holders to post) of the loss, theft, destruction or mutilation of any stock certificates representing Series A Preferred Stock, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of such Series A Preferred Stock certificate(s), the Company shall execute and deliver new preferred stock certificate(s) of like tenor and date; provided, however, the -------- ------- Company shall not be obligated to re-issue preferred stock certificates if the Holder contemporaneously requests the Company to convert such Series A Preferred Stock into Common Stock. 10.9 Remedies Characterized; Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Certificate of Designation shall be cumulative and in addition to all other remedies available under this Certificate of Designation, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit a Holder's right to pursue actual damages for any failure by the Company to comply with the terms of this Certificate of Designation. The Company covenants to each Holder of Series A Preferred Stock that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders of the Series A Preferred Stock and that the remedy at law in the event of any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holders of the Series A Preferred Stock shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. 10.10 Specific Shall Not Limit General; Construction. No specific provision contained in this Certificate of Designation shall limit or modify any more general provision contained herein. This Certificate of Designation shall be deemed to be jointly drafted by the 23 Company and all Purchasers (as defined in this Purchase Agreement) and shall not be construed against any person as the drafter hereof. 10.11 Failure or Indulgence Not Waiver. No failure or delay on the part of a Holder of Series A Preferred Stock in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. [SIGNATURE PAGE(S) TO FOLLOW] 24 IN WITNESS WHEREOF SatCon Technology Corporation has caused this Certificate of Designation to be signed by its President and Secretary on this 25th day of August, 1999. By: /s/ Michael C. Turmelle ------------------------------- Name: Michael C. Turmelle ----------------------------- Chief Financial Officer By: /s/ Michael C. Turmelle ------------------------------- Name: Michael C. Turmelle ----------------------------- Secretary 25 EXHIBIT A NOTICE OF CONVERSION AT THE ELECTION OF HOLDER (To be Executed by the Registered Holder in order to convert shares of Series A Convertible Preferred Stock) The undersigned hereby elects to convert the number of shares of Series A Convertible Preferred Stock ("Series A Preferred Stock") indicated below, into ------------------------ shares of common stock, par value $.01 per share (the "Common Stock"), of SatCon ------------ Technology Corporation (the "Company") according to the conditions hereof, as of ------- the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any. Conversion calculations: ____________________________________________ Date to effect conversion ____________________________________________ Number of shares of Series A Preferred Stock to be converted ____________________________________________ Number of shares of Common Stock to be issued ____________________________________________ Applicable Conversion Price ____________________________________________ Signature ____________________________________________ Name ____________________________________________ Address 26 EX-10.25 4 SECURITIES PURCHASE AGREEMENT EXHIBIT 10.25 ================================================================================ SECURITIES PURCHASE AGREEMENT Among SATCON TECHNOLOGY CORPORATION, and THE PURCHASERS LISTED ON SCHEDULE I Dated as of August 25, 1999 ================================================================================ SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of --------- August 25, 1999, among SatCon Technology Corporation, a Delaware corporation (the "Company"), and the various purchasers identified and listed on Schedule I ------- hereto (each referred to herein as a "Purchaser" and, collectively, the --------- "Purchasers.") - ----------- WHEREAS, the Company and the Purchasers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 under Regulation D as promulgated by the United States Securities and Exchange Commission (the "Commission") under Section 4(2) of the ---------- Securities Act of 1933, as amended (the "Securities Act"); -------------- WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell 10,000 shares of the Company's Series A Convertible Redeemable Preferred Stock, par value $0.01 per share, liquidation value $1,000 per share (the "Preferred Stock" or "Securities"), in the form of Exhibit A annexed hereto, and stock purchase warrants (the --------- "Warrants") to purchase up to 675,000 shares of the Company's common stock, par -------- value $.01 per share (the "Common Stock"), in the form of Exhibit B annexed ------------ --------- hereto; and WHEREAS, subject to the terms and conditions set forth in this Agreement, the Purchasers desire to acquire from the Company, 8,000 shares of the Preferred Stock at an aggregate purchase price of $8,000,000 and Warrants to purchase up to 675,000 shares of the Company's Common Stock; and WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form of Exhibit C attached hereto (the --------- "Registration Rights Agreement") pursuant to which the Company has agreed to - ------------------------------ provide certain registration rights under the Securities Act and the rules and regulations promulgated thereunder, and applicable state securities laws; and NOW THEREFORE, in consideration of the promises and mutual covenants and agreements hereinafter, the Company and the Purchasers hereby agree as follows: ARTICLE I. PURCHASE AND SALE OF THE SECURITIES AND WARRANTS 1.1 Purchase and Sale. Subject to the terms and conditions set forth --- ----------------- herein, the Company shall issue and sell to each Purchaser, and each Purchaser, severally and not jointly, shall purchase from the Company, on the Closing Date, the shares of Preferred Stock as set forth on Schedule I and a Warrant or ---------- Warrants exercisable for the amount of Common Stock as set forth on Schedule I ---------- for such Purchaser. The aggregate purchase price of the shares of Preferred Stock purchased by the Purchasers shall be $8,000,000 and the aggregate number of Common Stock for which the Warrant or Warrants will be exercisable shall be 675,000 shares of Common Stock. The Preferred Stock shall have the respective rights, preferences and privileges set forth in the Certificate of Designation of Series and a Statement of Variations of Relative Rights, Preferences and Limitations (the "Certificate ----------- of Designation"), the form of which is attached hereto as Exhibit A, which shall - -------------- be approved by the Purchasers and the Company's Board of Directors and filed on or prior to the Closing by the Company with the Secretary of State of Delaware. 1.2 Closings. --- -------- a. The Closing. The closing of the purchase and sale of the -- ----------- Securities and Warrants (the "Closing") shall take place at the offices of Akin, ------- Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, or by transmission by facsimile and overnight courier, immediately following the execution hereof or such later date or different location as the parties shall agree, but not prior to the date that the conditions set forth in Section 4.1 have been satisfied or waived by the appropriate party (the "Closing ------- Date"). At the Closing: - ---- (i) Each Purchaser shall deliver, as directed by the Company, its portion of the purchase price as set forth next to its name on Schedule I in ---------- United States dollars in immediately available funds to an account or accounts designated in writing by the Company; (ii) The Company shall deliver to each Purchaser a certificate evidencing the number of shares of Preferred Stock purchased by such Purchaser as set forth on Schedule I hereto; ---------- (iii) The Company shall deliver to each Purchaser a Warrant, in the form of Exhibit B hereto, representing the right to acquire the number of --------- shares of Common Stock purchased by such Purchaser as set forth on Schedule I ---------- hereto; and (iv) The parties shall execute and deliver each of the documents referred to in Section 4.1 hereof. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1 Representations, Warranties and Agreements of the Company. The --- --------------------------------------------------------- Company hereby makes the following representations and warranties to each of the Purchasers: a. Organization and Qualification. The Company is a corporation -- ------------------------------ duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Except for Beacon Power Corporation or ("Beacon") and as set forth on Schedule 2.1(a), the Company has no subsidiaries (collectively, the ---------------- "Subsidiaries"); it being agreed that for purpose of this Agreement Beacon is - ------------- not a subsidiary of the Company. Each of the Subsidiaries (which, except as provided in the prior sentence, for purposes of this Agreement means any entity in which the Company, directly or indirectly, owns the majority of such entity's capital stock or holds an equivalent equity or similar interest) is a corporation duly incorporated, validly existing and in good standing under the laws of the 2 jurisdiction of its incorporation or organization (as applicable), with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, (x) adversely affect the legality, validity or enforceability of any of this Agreement or the Transaction Documents (as defined in Section 2.1(b)) or any of the material transactions contemplated hereby or thereby, (y) have or result in a material adverse effect on the results of operations, assets, or financial condition of the Company and its Subsidiaries, taken as a whole or (z) impair the Company's ability to perform in all material respects on a timely basis its material obligations under any Transaction Document (any of (x), (y) or (z), being a "Material Adverse Effect"). The Company has on file with the Securities Exchange ----------------------- Commission true and correct copies of the Company's Certificate of Incorporation, as amended and as in effect on the date hereof (the "Certificate ----------- of Incorporation"), and the Company's Bylaws, as in effect on the date hereof - ---------------- (the "Bylaws"). ------ b. Authorization; Enforcement. The Company has the requisite -------------------------- corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and the Certificate of Designation, the Warrants and the Registration Rights Agreement (collectively, the "Transaction ----------- Documents"), and otherwise to carry out its obligations hereunder and - --------- thereunder. The execution and delivery of each of this Agreement and the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action. This Agreement has been duly executed by the Company and the Warrants and Registration Rights Agreement at the Closing will be duly executed by the Company. When delivered in accordance with the terms hereof the Transaction Documents will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application and except that rights to indemnification and contribution may be limited by Federal or state securities laws or public policy relating thereto. Neither the Company nor any Subsidiary is in any material violation of any of the provisions of its respective certificate of incorporation, bylaws or other charter documents such that any right of a holder of the Securities would be affected. Prior to the Closing Date the Certificate of Designation has been filed with the Secretary of State of Delaware and will be in full force and effect, enforceable against the Company in accordance with the terms thereof, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application and except that rights to indemnification and contribution may be limited by Federal or state securities laws or public policy relating thereto. c. Capitalization. As of the date hereof, the authorized capital -------------- stock of the Company is as set forth in Schedule 2.1(c). All of such --------------- outstanding shares of capital stock, except as disclosed in the SEC Documents (as defined in Section 2.1(k)) have been, or upon issuance will be, validly authorized and issued, fully paid and nonassessable and were issued in accordance with the registration or qualification provisions of the Securities Act, or pursuant to valid exemptions therefrom. Except as disclosed in Schedule -------- 2.1(c) or in the SEC Documents, - ------ 3 (i) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company, nor is any holder of the Common Stock entitled to preemptive or similar rights arising out of any agreement or understanding with the Company by virtue of any Transaction Document, (ii) there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, or giving any Person (as defined below) any right to subscribe for or acquire, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, (iii) there are no outstanding debt securities of the Company or any of its Subsidiaries, (iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except the Registration Rights Agreement), (v) there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries, (vi) there are no securities or instruments containing anti- dilution or similar provisions that will be triggered by the issuance of the shares of Preferred Stock, Warrants or shares of Common Stock as described in this Agreement or upon the conversion of the Preferred Stock or upon the exercise of the Warrants, (vii) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement and (viii) except for the put rights granted to the holders of the Class D Preferred Stock of Beacon and except as specifically disclosed in the SEC Documents (as defined in Section 2.1(k) hereof), to the knowledge of the Company no Person (as defined below) or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or has the right to acquire by ------------ agreement with or by obligation binding upon the Company beneficial ownership of in excess of 5% of the Common Stock. "Person" means an individual or ------ corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. d. Authorization and Validity; Issuance of Shares. Subject to ---------------------------------------------- amendments that may be required in the future due to the reset or adjustment to the number of shares issuable or exercise price on the shares of Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants (collectively, the "Underlying Shares"), the Underlying Shares are and will at ----------------- all times hereafter continue to be duly authorized and reserved for issuance and the shares of Common Stock issued upon conversion of the Securities (the "Conversion Shares") and exercise of the Warrants (the "Warrant Shares") will be ----------------- -------------- validly issued, fully paid and non-assessable, free and clear of all liens, encumbrances and Company rights of first refusal, other than liens and encumbrances created by the Purchasers (collectively, "Liens") and will not be ----- subject to any preemptive or similar rights. Assuming the accuracy of the Purchaser's representation in Section 2.2, the issuance by the Company of the Preferred Stock, the Warrants and the Underlying Shares is exempt from registration under the Securities Act. e. No Conflicts. The execution, delivery and performance of this ------------ Agreement and each of the Transaction Documents by the Company and the consummation by the Company 4 of the transactions contemplated hereby and thereby (including the issuance of the Underlying Shares) do not and will not (i) conflict with or violate any provision of the Certificate of Incorporation, Bylaws or other organizational documents of the Company or any of the Subsidiaries, (ii) subject to obtaining the consents referred to in Section 2.1(f), conflict with, or constitute a breach or a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument (evidencing a Company or Subsidiary debt or otherwise) to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or any Subsidiary is subject (including Federal and state securities laws and regulations and the rules and regulations of the principal market or exchange on which the Common Stock is traded or listed) applicable to the Company or any of its Subsidiaries (except for any shareholder approval that may be required pursuant to the rules of the NASDAQ), or by which any material property or asset of the Company or any Subsidiary is bound or affected except, in each such case, for any violation, conflict, default or breach which is not reasonably expected to have a Material Adverse Effect. f. Consents and Approvals. Except as specifically set forth on ---------------------- Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain - --------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal or state governmental authority, regulatory or self regulatory agency, or other Person in connection with the execution, delivery and performance by the Company of this Agreement or the Transaction Documents, other than (i) the filing of a registration statement with the Commission, which shall be filed in accordance with and in the time periods set forth in the Registration Rights Agreement, (ii) the application(s) or any letter(s) acceptable to the National Market System of Nasdaq Stock Market ("Nasdaq") for the listing of the Underlying Shares with Nasdaq (and with any ------ other national securities exchange or market on which the Common Stock is then listed), (iii) any filings, notices or registrations under applicable state securities laws, (iv) the filing of a form D with the Commission, (v) the approval of the Company's Board of Directors and (vi) the filings of the Certificates of Designation with the Secretary of State of Delaware, which filing and approval shall be effected on or prior to the Closing Date (together with the consents, waivers, authorizations, orders, notices and filings referred to on Schedule 2.1(f), the "Required Approvals"). --------------- ------------------ g. Litigation; Proceedings. Except as specifically set forth on ----------------------- Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or - --------------- investigation pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties or assets before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which (i) adversely affects or challenges the legality, validity or enforceability of any of this Agreement or the Transaction Documents or (ii) could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. h. No Default or Violation. Except as specifically set forth on ----------------------- Schedule 2.1(h), neither the Company nor any Subsidiary (i) is in default under or in violation of any indenture, loan or other credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties or assets is bound and which is required to be included as an exhibit to any SEC Document (as defined in Section 2.1(k) hereof) or will be 5 required to be included as an exhibit to the Company's next filing under either the Securities Act or Exchange Act, (ii) is in violation of any order of any court, arbitrator or governmental body applicable to it, (iii) is in violation of any statute, rule or regulation of any governmental authority to which it is subject, (iv) is in default under or in violation of its Certificate of Incorporation, Bylaws or other organizational documents, respectively, or (v) is in default under or in violation of any of the listing requirements of Nasdaq as in effect on the date hereof and is not aware of any facts which would reasonably lead to delisting or suspension of the Common Stock by Nasdaq in the foreseeable future except, in each such case, for any violation or default which is not reasonably expected to have a Materially Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and has not been conducted, in violation of any law, ordinance, rule or regulation of any governmental entity, except where such violations have not resulted or would not reasonably result, individually or in the aggregate, in a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in breach of any agreement where such breach, individually or in the aggregate, would have a Material Adverse Effect i. Disclosure; Absence of Certain Changes. None of this Agreement, -------------------------------------- the Schedules to this Agreement, the Transaction Documents, the SEC Documents (as amended to date) contained as of their respective dates, any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements made herein and therein, in light of the circumstances under which they were made, not misleading. Except as disclosed on Schedule 2.1(i) or in SEC Documents filed on EDGAR through the date hereof, - --------------- since the filing of the Company's quarterly report on Form 10-Q on August 16, 1999, there has been no material adverse change and no material adverse development in the business, properties, operations, financial condition, liabilities or results of operations of the Company or the Subsidiaries. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings. j. Private Offering. The Company and all Persons acting on its ---------------- behalf have not made within the six months preceding the Closing Date, directly or indirectly, and will not make, offers or sales of any securities or solicited any offers to buy any security at any time within six months after the Closing Date under circumstances that would require registration of the Securities, the Warrants or the Underlying Shares or the issuance of such securities under the Securities Act. k. SEC Documents; Financial Statements. The Common Stock of the ----------------------------------- Company is registered pursuant to Section 12(g) of the Exchange Act. The Company has filed during its current fiscal year all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act, including pursuant to Section 13, 14 or 15(d) thereof (the foregoing materials and financial statements and schedules thereto being collectively referred to herein as the "SEC Documents"), on a timely basis or has received a valid extension of such ------------- time of filing and has filed any such SEC Documents prior to the expiration of any such extension. The Company has delivered to each of the Purchasers or its representatives true, complete and accurate copies of the SEC Documents that were not filed pursuant to EDGAR. As of their respective dates and giving effect to all amendments thereto filed with the Commission, the financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission 6 with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments. The Company acknowledges that the Purchasers will be trading in the securities of the Company in reliance on the foregoing representation and warranty. l. Investment Company. The Company is not, and is not controlled ------------------ by or under common control with an affiliate (an "Affiliate") of an "investment --------- company" within the meaning of the Investment Company Act of 1940, as amended. m. Broker's Fees. No fees or commissions or similar payments with ------------- respect to the transactions contemplated by this Agreement or the Transaction Documents have been paid or will be payable by the Company to any broker, financial advisor, finder, investment banker, or bank, other than as set forth in Schedule 2.1(m). The Purchasers shall have no obligation with respect to any --------------- fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 2.1(m) that may be due in connection with the transactions contemplated by this Agreement and the Transaction Documents. n. Form S-3 Eligibility. The Company is, and at the Closing Date -------------------- will be, eligible to register securities (including the Underlying Shares) for resale with the Commission under Form S-3 (or any successor form) promulgated under the Securities Act. o. Listing and Maintenance Requirements Compliance. The principal ----------------------------------------------- market on which the Common Stock is currently traded is Nasdaq. Except as disclosed on Schedule 2.1(o), the Company has not in the three years preceding --------------- the date hereof received notice (written or oral) from Nasdaq (or any stock exchange, market or trading facility on which the Common Stock is or has been listed (or on which it has been quoted)) to the effect that the Company is not in compliance with the listing or maintenance requirements of such market or exchange. The Company is not aware of any facts which would reasonably lead to delisting or suspension of the Common Stock by Nasdaq. After giving effect to the transactions contemplated by this Agreement and the Transaction Documents, the Company is and will be in compliance with all such maintenance requirements except for any approval required under the NASD rules. p. Intellectual Property Rights. To the best of the knowledge of ---------------------------- the Company, the Company owns or possesses, or can obtain by payment of royalties in amounts which, in the aggregate, will not have a Material Adverse Effect, all of the patents, trademarks, service marks, trade names, copyrights, proprietary rights, trade secrets, and licenses or rights to the foregoing, necessary for the conduct of the business of the Company as currently conducted. To the best of the Company's knowledge, the business of the Company does not cause the Company to infringe or violate any of the patents, trademarks, service marks, trade names, copyrights, licenses or proprietary rights of any person or entity. q. Registration Rights; Rights of Participation. Except as -------------------------------------------- described on Schedule 2.1(q) hereto, (i) the Company has not granted or agreed --------------- to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority which has not been satisfied 7 and (ii) no Person, including, but not limited to, current or former stockholders of the Company, underwriters, brokers or agents, has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement or any Transaction Document. r. Tax Status; Firpta. Except as set forth on Schedule 2.1(r), the ------------------ --------------- Company and each of the Subsidiaries has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith (which are set forth on Schedule 2.1(r) hereof), and has set aside on it books provisions reasonably - --------------- adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company is not a "United States real property holding corporation" within the meaning of Section 847(c)(2) of the Internal Revenue Code of 1986, as amended. s. Transactions With Affiliates. Except as set forth on Schedule ---------------------------- -------- 2.1(c) or Schedule 2.1(s), none of the officers, directors, or employees of the - ------ --------------- Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. t. Application to Takeover Protection. The Company and its Board ---------------------------------- of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination or other similar anti-takeover provision under the Certificate of Incorporation, Bylaws or the laws of the state of incorporation which is or could become applicable to the Purchasers or the Transaction Documents as a result of the transactions contemplated by this Agreement or the Transaction Documents. None of the transactions contemplated by this Agreement or the Transaction Documents, including the conversion of the Securities and the exercise of the Warrants, will trigger any poison pill provisions of any of the Company's stockholders' rights or similar agreements. u. Solicitation Materials. The Company has not (i) distributed any ---------------------- offering materials in connection with the offering and sale of the Securities or the Warrants, other than the SEC Documents, the Schedules to this Agreement, any amendments and supplements thereto, material or information requested by the Purchasers or their representatives in connection with the transaction contemplated by this Agreement, and the materials listed on Schedule 2.1(u), or --------------- (ii) solicited any offer to buy or sell the Securities or the Warrants by means of any form of general solicitation or advertising. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf, has engaged or will engage in any form of general 8 solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Securities or Warrants. v. Acknowledgement of Dilution. The Company understands and --------------------------- acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares and Warrant Shares upon conversion of the Securities or exercise of the Warrants. The Company further acknowledges that its obligation to issue Conversion Shares and Warrant Shares upon conversion of the Securities or exercise of the Warrants in accordance with this Agreement, the Certificate of Designation and the Warrants is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company. w. Acknowledgement Regarding Purchasers' Purchase of Securities. ------------------------------------------------------------ The Company acknowledges and agrees that the Purchasers are acting solely in the capacity of arm's length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by any Purchaser or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Purchasers' purchase of the securities. The Company further represents to each Purchaser that the Company's decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives. x. Seniority; Exclusivity. Except for a class of equity securities ---------------------- of the Company issued with an exercise price, conversion price or strike price in excess of the Conversion Price (as defined in the Certificate of Designation), no class of equity securities of the Company will be senior to the Securities in right of payment, whether upon liquidation, dissolution or otherwise. So long as any Securities issued hereunder remains outstanding, the Company shall not exchange, redeem or convert any of the Company's capital stock for indebtedness, including convertible debt, of the Company. The Company shall not issue and sell any Securities, other than to the Purchasers pursuant to this Agreement, without the prior written consent of each of the Purchasers; provided however, that within thirty (30) days of the Closing Date the Company may sell up to 2,000 shares of Preferred Stock to purchasers for an aggregate purchase price of $2,000,000 and subject to terms approved by the Purchasers, which approval shall not be unreasonably withheld. y. Other Agreements. The Company has not, directly or indirectly, ---------------- made any agreements with any Purchasers relating to the terms and conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Any information furnished in the schedules to Section 2.1 (a "Disclosure Schedule") shall be deemed to modify all of the Company's representations and warranties. The inclusion of any information in the Disclosure Schedule shall not be deemed to be an admission or acknowledgment, in and of itself, that such information is required by the terms hereof to be disclosed, is material to the company, has or would have a Material Adverse Effect. For purposes of this Agreement, the terms "to the Company's knowledge," "known by the Company" or other words of similar meaning shall mean the actual knowledge of David 9 Eisenhaure or Michael Turmelle without any obligation of investigation, and shall not refer to the knowledge of any other person or entity. 2.2 Representations and Warranties of the Purchasers. Each of the ------------------------------------------------ Purchasers, severally and not jointly, hereby represents and warrants to the Company as follows: a. Organization; Authority. Such Purchaser is a corporation or a ----------------------- limited duration company or a limited liability company or limited partnership duly formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with the requisite power and authority, corporate or otherwise, to enter into and to consummate the transactions contemplated hereby and by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The purchase by such Purchaser of the Securities and the Warrants hereunder has been duly authorized by all necessary action on the part of such Purchaser. Each of this Agreement and the Registration Rights Agreement has been duly executed and delivered by such Purchaser and constitutes the valid and legally binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity. b. Investment Intent. Such Purchaser is acquiring the Securities ----------------- and the Warrants for its own account and not with a present view to or for distributing or reselling the Securities, the Warrants, the Conversion Shares or the Warrant Shares or any part thereof or interest therein in violation of the Securities Act; provided, however, that by making the representations herein, ----------------- such Purchaser does not agree to hold any of the Securities, the Warrants, the Conversion Shares or the Warrant Shares for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. c. Purchaser Status. At the time such Purchaser was offered the ---------------- Securities and the Warrants, and at the Closing Date, (i) it was and will be an "accredited investor" as defined in Rule 501 under the Securities Act and (ii) such Purchaser, either alone or together with its representatives, had and will have such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities and the Warrants. d. Reliance. Such Purchaser understands and acknowledges that -------- (i) the Securities and the Warrants are being offered and sold to such Purchaser without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act under Section 4(2) of the Securities Act or Regulation D promulgated thereunder and (ii) the availability of such exemption depends in part on, and the Company will rely upon the accuracy and truthfulness of, the representations set forth in this Section 2.2 and such Purchaser hereby consents to such reliance. e. Information. Such Purchaser and its advisors, if any, have ----------- been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities and Warrants which have been requested by such Purchaser or its advisors. Such Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence 10 investigation conducted by Purchaser or any of its advisors or representatives shall modify, amend or affect Purchaser's right to rely on the Company's representations and warranties contained in Section 2.1 above. Such Purchaser understands that its investment in the Securities and Warrants involves a significant degree of risk. f. Governmental Review. Such Purchaser understands that no ------------------- United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities or Warrants. g. Residency. Such Purchaser is a resident of the jurisdiction --------- set forth immediately below such Purchaser's name on Schedule II hereto. The Company acknowledges and agrees that the Purchasers make no representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 2.2. ARTICLE III. OTHER AGREEMENTS 3.1 Transfer Restrictions. --------------------- a. If any Purchaser should decide to dispose of the Securities, the Warrants, the Conversion Shares or the Warrant Shares held by it, such Purchaser understands and agrees that it may do so only pursuant to an effective registration statement under the Securities Act, to the Company or pursuant to an available exemption from the registration requirements of the Securities Act, including Rule 144 promulgated under the Securities Act ("Rule 144"). In -------- connection with any transfer of any Securities, Warrants, Conversion Shares or Warrant Shares other than pursuant to an effective registration statement, Rule 144 or to the Company, the Company may require the transferor thereof to provide to the Company a written opinion of counsel experienced in the area of United States securities laws selected by the transferor, the form and substance of which opinion shall be customary for opinions of counsel in comparable transactions, to the effect that such transfer does not require registration of such transferred securities under the Securities Act; provided, however, that if -------- ------- the Securities, Warrants, Conversion Shares or Warrant Shares may be sold pursuant to Rule 144(k), no written opinion of counsel shall be required from the Purchaser if such Purchaser provides reasonable assurances that such security can be sold pursuant to Rule 144(k). Notwithstanding the foregoing, the Company hereby consents to and agrees to register any transfer by any Purchaser to an Affiliate of such Purchaser, provided that the transferee certifies to the Company that it is an "accredited investor" as defined in Rule 501(a) under the Securities Act. Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Transaction Documents. If a Purchaser provides the Company with an opinion of counsel, the form and substance of which opinion shall be customary for opinions of counsel in comparable transactions, to the effect that a public sale, assignment or transfer of the Securities, the Conversion Shares, the Warrants and the Warrant Shares may be made without registration under the Securities Act or the Purchaser provides the Company with reasonable assurances that the Warrants, the Conversion Shares and the Warrant Shares can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold, the Company shall permit the transfer, and, in the case of the 11 Conversion Shares and the Warrant Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by such Purchaser and without any restrictive legend. Notwithstanding the foregoing or anything else contained herein to the contrary, the securities may be pledged as collateral in connection with a bona fide margin account or ---- ---- other lending arrangement b. Each Purchaser agrees to the imprinting by the Company, so long as is required by this Section 3.1(b), of the following legend on the Securities, the Warrants, the Conversion Shares and the Warrant Shares: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. Neither the Securities, the Warrants, the Conversion Shares, nor the Warrant Shares shall be required to contain the legend set forth above (or any other legend) (i) at any time after transfer pursuant to a registration statement is effective under the Securities Act covering such security, (ii) if in the written opinion of counsel to the Company or the Purchasers experienced in the area of United States securities laws such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) or (iii) if such Securities, Warrants, Conversion Shares or Warrant Shares are sold pursuant to Rule 144. When requested, which request will be accompanied by the certificate representing such shares, the Company agrees that it will provide each Purchaser with a certificate or certificates representing Securities, Warrants, Conversion Shares or Warrant Shares, free from such legend at such time as such legend is no longer required hereunder. If such certificate or certificates had previously been issued with such a legend or any other legend, the Company shall, upon request, receive such certificate or certificates free of any legend. c. Notwithstanding the foregoing, the Purchaser's disposition of the Conversion Shares and the Warrant Shares shall be subject to Suspension Periods (as defined in the Registration Rights Agreement) set forth in Section 3(r) of the Registration Rights Agreement. 3.2 Stop Transfer Instruction. The Company may not make any notation ------------------------- on its records or give instructions to any transfer agent of the Company which enlarge the restrictions on transfer set forth in Section 3.1, except as contemplated by the Certificate of Designation. 3.3 Furnishing of Information. Until the Securities, the Warrants, the ------------------------- Conversion Shares or the Warrant Shares have been sold pursuant to a registration statement under the Securities Act or are eligible for sale pursuant to Rule 144(k), the Company will cause the Common Stock to continue at all times to be registered under Section 12(g) of the Exchange Act, will timely file (or obtain extensions in respect thereof and file within the applicable grace 12 period) all reports required to be filed by the Company after the date hereof pursuant to Section 13, 14 or 15(d) of the Exchange Act and, unless filed by EDGAR, promptly furnish, but in no event later than two (2) business days after the filing thereof with the Commission, the Purchasers with true and complete copies of all such filings, and will not take any action or file any document (whether or not permitted by the Exchange Act or the rules thereunder) to terminate or suspend such reporting and filing obligations. Until the Securities, the Warrants, the Conversion Shares or the Warrant Shares have been sold pursuant to a registration statement under the Securities Act or are eligible for sale pursuant to Rule 144(k), if the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as any holder of the Securities, the Warrants, the Conversion Shares or the Warrant Shares may reasonably request, all to the extent required from time to time to enable such Person to sell the Securities, the Warrants, the Conversion Shares, or the Warrant Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including the legal opinion referenced above in Section 3.1(b). 3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement, ------------- the Company shall (i) qualify the Conversion Shares and the Warrant Shares under the securities or "blue sky" laws of such jurisdictions as the Purchasers may request (or to obtain an exemption from such qualification), (ii) shall provide evidence of any such action so taken to each Purchaser on or prior to the Closing Date and (iii) shall continue such qualification at all times through the resale of all Conversion Shares or Warrant Shares, but in any event not past the 2/nd/ anniversary of the Closing Date. 3.5 Integration. The Company shall not sell, offer for sale or solicit ----------- offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities, the Warrants, the Conversion Shares or the Warrant Shares in a manner that would require the registration under the Securities Act of the sale of the Securities, the Warrants, the Conversion Shares or the Warrant Shares to any Purchaser or cause the offering of such securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities. 3.6 Listing and Reservation of Conversion Shares and Warrant Shares. --------------------------------------------------------------- a. The Company shall (i) not later than three (3) business days after the Closing Date prepare and file with Nasdaq (as well as any other national securities exchange or market on which the Common Stock is then listed) an additional shares listing application or a letter acceptable to Nasdaq covering and listing a number of shares of Common Stock which is at least equal to 1.2 times the maximum number of Underlying Shares then issuable, (ii) take all steps necessary to cause the Underlying Shares to be approved for listing on Nasdaq (as well as on any other national securities exchange or market on which the Common Stock is then listed) as soon as possible thereafter, (iii) maintain, so long as any other shares of Common Stock shall 13 be so listed, such listing of all such Underlying Shares, and (iv) provide to the Purchasers evidence of such listing. Neither the Company nor any of its Subsidiaries shall take any action which may result in the delisting or suspension of the Common Stock on Nasdaq. Prior to the effectiveness of the Initial Registration Statement (as defined in the Registration Rights Agreement), the Company shall promptly provide to each Purchaser copies of any notices it receives from Nasdaq regarding the continued eligibility of the Common Stock for listing on such automated quotation system, so long as such notice does not include material, nonpublic information. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 3.6(a). b. The Company at all times shall reserve a sufficient number of shares of its authorized but unissued Common Stock to provide for 1.2 times the full conversion of the outstanding Securities and exercise of the outstanding Warrants. Shares of Common Stock reserved for issuance upon conversion of the Securities and the exercise of the Warrants shall be allocated pro rata to each of the Purchasers in accordance with the amount of Securities and Warrants issued and delivered to such Purchaser at the Closing. If at any time the number of shares of Common Stock authorized and reserved for issuance is insufficient to cover 120% of the number of Conversion Shares and Warrant Shares issued and issuable upon conversion of the Securities and exercise of the Warrants (based on the Conversion Price (as defined in the Certificate of Designation) of the Securities in effect from time to time and the Exercise Price (as defined in the Warrants) of the Warrants in effect from time to time) without regard to any limitation on conversions or exercises, the Company will promptly take all corporate action necessary to authorize and reserve 120% of such shares pursuant to Section 3(b) of the Registration Rights Agreement, including, without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Company's obligations under this Section 3.6(b), in the case of an insufficient number of authorized shares, and using its best efforts to obtain stockholder approval of an increase in such authorized number of shares. In addition, upon the occurrence of an adjustment or reset of the Conversion Price (as defined in the Certificate of Designation) or Exercise Price (as defined in the Warrant), the Company shall be required to file, within ten (10) business days of such event, a registration statement covering the product of 1.05 and the number Underlying Shares, less the number of Underlying Shares for which a registration statement is then effective. The Company shall use its best efforts to cause such registration statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event on or prior to that date which is one hundred and twenty (120) days after the filing date thereof. All calculations of the above amount shall be made without regard to any limitation on conversions of Securities or exercises of Warrants. 3.7 Notice of Breaches. ------------------ a. The Company and each Purchaser shall give prompt written notice to the other of any breach by it of any representation, warranty or other agreement contained in this Agreement or in the Transaction Documents. However, no disclosure by either party pursuant to this Section 3.7 shall be deemed to cure any breach of any representation, warranty or other agreement contained herein or in the Transaction Documents. b. Notwithstanding the generality of Section 3.7(a), the Company shall promptly notify, provided such notification will not constitute material non-public information, each Purchaser of any notice or claim (written or oral) that it receives from any lender of the Company or any Subsidiary to the effect that the consummation of the transactions contemplated 14 hereby and by the Registration Rights Agreement violates or would violate any written agreement or understanding between such lender and the Company or any Subsidiary, and the Company shall promptly furnish by facsimile to the Purchasers a copy of any written statement in support of or relating to such claim or notice. c. The default by any Purchaser of any of its obligations, representations or warranties under this Agreement or the Transaction Documents shall not be imputed to, and shall have no effect upon, any other Purchaser or affect the Company's obligations under this Agreement or any Transaction Document to any non-defaulting Purchaser. 3.8 Form D. The Company agrees to file a Form D with respect to the ------ Securities and Warrants as required by Rule 506 under Regulation D and to provide a copy thereof to each Purchaser promptly after such filing. 3.9 Future Financings. At any time prior to the third anniversary of the ----------------- Closing Date, as long as shares of the Preferred Stock are outstanding, except for (i) Exempted Securities as defined in the Certificate of Designation; or (ii) shares issued in a transaction registered under the Securities Act, if the Company agrees to issue shares of Common Stock or other securities convertible into or exchangeable or exercisable for Common Stock (the "New Security") while ------------ any shares of Preferred Stock are outstanding at an effective price per share which is less (including, without limitation, any security which is convertible into or exchangeable or exercisable for Common Stock at a price which may change with the market price of the Common Stock) than the Conversion Price (as defined in the Certificate of Designation) of the shares of Preferred Stock as of the date thereof (a "Future Financing"), the Company shall provide to the Purchasers ---------------- by 5:00 p.m. (New York time) on or before the third (3/rd/) Trading Day (as defined below) after the decision to issue the New Security has been made, written notice of the Future Financing containing in reasonable detail (i) the proposed terms of the Future Financing, (ii) the amount of the proceeds that will be raised and (iii) the Person with whom such Future Financing shall be effected, and attached to which shall be a term sheet or similar document relating thereto (the "Future Financing Notice"). Upon receiving the Future ----------------------- Financing Notice, each Purchaser shall have the pro rata right (based on the purchase price of the shares of Preferred Stock held by such Purchaser relative to the aggregate purchase price of shares of Preferred Stock outstanding) to purchase, on the same terms as the Future Financing, an amount of New Securities (in addition to the New Securities being issued in the Future Financing) having a purchase price which shall not exceed the aggregate purchase price of the New Securities being issued in the Future Financing. In the event a Purchaser desires to exercise the right granted under this Section 3.9, such Purchaser must notify the Company on or prior to the fifth (5/th/)Trading Day after such Purchaser has received the Future Financing Notice. In the event the terms and conditions of a proposed Future Financing are amended in any material respect after delivery of the Future Financing Notice but prior to the closing of the proposed Future Financing to which such Future Financing Notice relates, the Company shall deliver a new notice to each Purchaser describing the amended terms and conditions of the proposed Future Financing and each Purchaser thereafter shall have an option during the two (2) Trading Days period following delivery of such new notice to purchase its pro rata share (based on the Purchaser's percentage of the aggregate purchase price of the outstanding shares of Preferred Stock such Purchaser owns) of the New Securities being offered on the same terms as contemplated by such proposed Future Financing, as amended, or to withdraw its election to exercise such right. The foregoing sentence shall apply to successive amendments to the terms and conditions of any proposed Future Financing. At the closing for such Future Financing, the 15 transactions contemplated by this Section 3.9 shall close, subject to the completion of mutually satisfactory documentation, and the Company shall tender to each Purchaser certificates representing the New Securities that it agreed to purchase and the Purchasers shall make payment for the entire purchase price in immediately available funds at the closing of such sale; provided, however, that -------- ------- each Purchaser, in lieu of providing cash as consideration for the purchase price, may retire all or a portion of the outstanding number of and any dividends owing on the shares of Preferred Stock as payment of the purchase price for the shares of Common Stock that it desires to purchase pursuant to this Section 3.9. "Trading Day" shall mean a day on which the Nasdaq (or in the ----------- event the Common Stock is not traded on Nasdaq, such other securities market on which the Common Stock is listed) is open for trading. 3.10 Use of Proceeds. The Company shall use the proceeds from the sale of --------------- the Securities and the exercise of the Warrants for the repayment of short-term indebtedness, working capital, acquisitions or other corporate purpose including the financing of Beacon. 3.11 Transactions with Affiliates. So long as any Securities or Warrants ---------------------------- are outstanding, the Company shall not, and shall cause each of its Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary's officers, directors or persons who were officers or directors at any time during the previous two years, stockholders who beneficially own 5% or more of the Common Stock, or Affiliates or any individual related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a 5% or more beneficial interest (each a "Related Party"), except for (a) customary ------------- employment arrangements and benefit programs on reasonable terms, (b) any agreement, transaction, commitment or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a Person other than such Related Party, or (c) any agreement, transaction, commitment or arrangement which is approved by a majority of the disinterested directors of the Company. For purposes hereof, any director who is also an officer of the Company or any Subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment or arrangement. "Affiliate" for purposes of this section only means, --------- with respect to any person or entity, another person or entity that, directly or indirectly, (i) has a 5% or more equity interest in that person or entity, (ii) has 5% or more common ownership with that person or entity, (iii) controls that person or entity, or (iv) shares common control with that person or entity. "Control" or "Controls" for purposes of this section means that a person or - -------- -------- entity has the power, direct or indirect, to conduct or govern the policies of another person or entity. 3.12 Transfer Agent Instructions. At the Closing the Company shall issue --------------------------- irrevocable instructions to its transfer agent (and shall issue to any subsequent transfer agent as required), to issue certificates, registered in the name of each such Purchaser or its respective nominee(s), for the Conversion Shares and/or the Warrant Shares in such amounts as specified from time to time by each Purchaser to the Company in a form acceptable to such Purchasers (the "Irrevocable Transfer Agent Instructions"). So long as required pursuant to --------------------------------------- Section 3.1(b), all such certificates shall bear the restrictive legend specified in Section 3.1(b) of this Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 3.12, and stop transfer instructions to give effect to Section 3.1 hereof (in the case of the Conversion Shares and the Warrant Shares, prior to registration of the Conversion Shares under the Securities Act) will be given by the Company to its transfer agent and that the Securities, the Warrants, the Conversion Shares and the Warrant Shares shall 16 otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Transaction Documents. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchasers by violating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 3.12 will be inadequate and agrees, in the event of a beach or threatened breach by the Company of the provisions of this Section 3.12, that the Purchasers, shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. 3.13 Press Release; Filing of Form 8-K. Subject to the provisions of --------------------------------- Section 6.10 hereof, prior to the opening of Nasdaq on August 28, 1999, the Company shall file a press release in form and substance acceptable to the Purchasers. On or before the 3/rd/ business day following the Closing Date, the Company shall file a Form 8-K with the Commission describing the terms of the transaction contemplated by this Agreement and the Transaction Documents in the form required by the Exchange Act. 3.14 Ordinary Course Brokerage and Trading. Each Purchaser represents and ------------------------------------- agrees that neither Purchaser, nor any affiliate of any Purchaser nor any person that is required by internal policy to pre-clear securities transactions with any Purchaser or its affiliates will, enter into any short sales of the Company's Common Stock, except in connection with an intended sale of Common Stock, and in such event, only to the extent covered within seven (7) Trading Days of such short sale. In addition, each Purchaser represents and agrees on behalf of itself and each of the persons identified in the preceding sentence that it will not establish a short position or sell any of the Conversion Shares or Warrant Shares during (i) the twenty (20) Trading Day period prior to the one (1) year anniversary of the Closing Date or (ii) the seventy five (75) Trading Day period ending on August 26, 2003 and August 26, 2006. ARTICLE IV. CONDITIONS 4.1 Closing Conditions. ------------------ a. Conditions Precedent to the Obligation of the Company to Sell. ------------------------------------------------------------- The obligation of the Company to sell the Securities and the Warrants hereunder is subject to the satisfaction or waiver (with prior written notice to each Purchaser) by the Company, at or before the Closing, of each of the following conditions: (i) Accuracy of the Purchasers' Representations and Warranties. ---------------------------------------------------------- The representations and warranties of each Purchaser in this Agreement shall be true and correct in all material respects as of the date when made (except for representations and warranties that speak as of a specific date) and as of the Closing Date; (ii) Performance by the Purchasers. Each Purchaser shall have ----------------------------- performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Purchaser at or prior to the Closing; and 17 (iii) No Injunction. No statute, rule, regulation, executive ------------- order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement or the Transaction Documents. b. Conditions Precedent to the Obligation of the Purchasers to ----------------------------------------------------------- Purchase. The obligation of each Purchaser hereunder to acquire and pay for the - -------- Securities and Warrants is subject to the satisfaction or waiver (with prior written notice to the Company and each other Purchaser) by such Purchaser, at or before the Closing, of each of the following conditions: (i) Accuracy of the Company's Representations and Warranties. -------------------------------------------------------- The representations and warranties of the Company set forth in this Agreement shall be true and correct in all respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date); (ii) Performance by the Company. The Company shall have -------------------------- performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing ; (iii) No Injunction. No statute, rule, regulation, executive ------------- order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement and the Transaction Documents; (iv) No Suspensions of Trading in Common Stock. The trading in ----------------------------------------- the Common Stock shall not have been suspended by the Commission or on Nasdaq (except for any suspension of trading of limited duration solely to permit dissemination of material information regarding the Company); (v) Listing of Common Stock. The Common Stock shall have been ----------------------- at all times since the date hereof, and on the Closing Date shall be, listed for trading on Nasdaq; (vi) Required Approvals. All Required Approvals shall have ------------------ been obtained and copies thereof delivered to such Purchaser; (vii) Shares of Common Stock. The Company shall have duly ---------------------- reserved the number of Underlying Shares required by this Agreement and the Transaction Documents to be reserved for issuance upon conversion of the Securities and the exercise of the Warrants; (viii) Change of Control. No Change of Control shall have ----------------- occurred between the date hereof and the Closing Date. "Change of Control" means ----------------- the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act), other than the Purchasers or any of their Affiliates, of in excess of 40% of the voting securities of the Company, (ii) a replacement of more than one-half of the members of the Company's Board of Directors which is not approved by those individuals who are members of the Board of Directors on the date hereof in one or a series of related transactions, (iii) the merger of the Company with or into another entity, consolidation or sale of all or substantially all of the assets of the Company in one or a series of 18 related transactions, or (v) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) , (iii), (iv) or (v); (ix) Transfer Agent Instructions. The Irrevocable Transfer --------------------------- Agent Instructions, in a form acceptable to the Purchasers, shall have been delivered to and acknowledged in writing by the Company's transfer agent with a copy forwarded to each Purchaser; (x) Resolutions. The Board of Directors of the Company shall ----------- have adopted resolutions consistent with Section 2.1(b) and in a form reasonably acceptable to each Purchaser (the "Resolutions"); ----------- (xi) Litigation. No litigation shall have been instituted or ---------- threatened against the Company which could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect; and (xii) Adverse Changes. Since the date of the financial --------------- statements included in the Company's Quarterly Report on Form 10-Q or Annual Report on Form 10-K, whichever is more recent, last filed prior to the date of this Agreement, no event which had a Material Adverse Effect shall have occurred which is not disclosed in the Schedules hereto (for purposes hereof, changes in the market price of the Common Stock may be considered in determining whether there has occurred an event which has had a Material Adverse Effect). c. Documents and Certificates. At the Closing, the Company shall -------------------------- have delivered to the Purchasers the following in form and substance reasonably satisfactory to the Purchasers: (i) Opinion. An opinion of the Company's legal counsel in the ------- form attached hereto as Exhibit D dated as of the Closing Date; --------- (ii) Preferred Stock Certificate. A Preferred Stock --------------------------- Certificate(s) representing the number of shares of Preferred Stock purchased by such Purchaser as set forth next to such Purchaser's name on Schedule I, ---------- registered in the name of such Purchaser, each in form satisfactory to the Purchaser; (iii) Warrant. A Warrant(s) representing the Warrants purchased ------- by such Purchaser as set forth next to such Purchaser's name on Schedule I, ---------- registered in the name of such Purchaser; (iv) Registration Rights. The Company shall have executed and ------------------- delivered the Registration Rights Agreement; (v) Officer's Certificate. An Officer's Certificate dated the --------------------- Closing Date and signed by an executive officer of the Company confirming the accuracy of the Company's representations, warranties and covenants as of the Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.1 as of the Closing Date; 19 (vi) Secretary's Certificate. A Secretary's Certificate dated ----------------------- the Closing Date and signed by the Secretary or Assistant Secretary of the Company certifying (A) that attached thereto is a true and complete copy of the Certificate of Incorporation of the Company, as in effect on the Closing Date, (B) that attached thereto is a true and complete copy of the by-laws of the Company, as in effect on the Closing Date and (C) that attached thereto is a true and complete copy of the Resolutions duly adopted by the Board of Directors of the Company authorizing the execution, delivery and performance of this Agreement and of the Transaction Documents, and that such Resolutions have not been modified, rescinded or revoked; (vii) Certificates of Incorporation. The Company shall have ----------------------------- delivered to each of the Purchasers a copy of a certificate evidencing the incorporation and good standing of the Company and each Subsidiary, in such corporation's state of incorporation issued by the Secretary of State of such state of incorporation as of a date within ten days of the Closing Date. The Company shall have delivered to each of the Purchasers a copy of its Certificate of Incorporation as certified by the Secretary of State of the State of Delaware within ten days of the Closing Date; (viii) Certificates of Designation. The Certificate of --------------------------- Designation shall have been duly approved by the Company's Board of Directors and filed with the Secretary of State of Delaware, and the Company shall have delivered a copy thereof to the Purchaser certified as filed by the office of the Secretary of State of Delaware; (ix) Transfer Agent Letter. The Company shall have delivered --------------------- to each Purchaser a letter from the Company's transfer agent certifying the number of shares of Common Stock outstanding as of a date within five days of the Closing Date; and (x) Other Documents. The Company shall have delivered to each --------------- Purchaser such other documents relating to the transactions contemplated by the Transaction Documents as the Purchasers or its counsel may reasonably request. ARTICLE V. INDEMNIFICATION 5.1 Indemnification. In addition to all of the Company's other --------------- obligations under this Agreement and the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless each Purchaser, its past and present Affiliates and their successors and assigns (in accordance with the provisions of Section 6.5 hereof), each other holder of the Underlying Shares and all of their stockholders, officers, directors, employees and direct or indirect investors and any of the foregoing Person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Indemnities") from and against any and all actions, causes of action, suits, - ------------ claims, losses, proceedings, costs (as incurred), penalties, fees (including legal fees and expenses), liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnity is a party to the action for which indemnification hereunder is sought), and including interest, penalties and attorneys' fees and disbursements (the "Indemnified Liabilities"), ----------------------- incurred by any Indemnity as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or in the Transaction 20 Documents, or any other certificate, instrument or document contemplated hereby or thereby or (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or the Transaction Documents, or any other certificate, instrument or document contemplated hereby or thereby. The indemnification obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliate of the Purchasers and partners, directors, agents, employees and controlling Persons (if any), as the case may be, of the Purchasers and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the Purchasers and any such affiliate and any such Person. The Company also agrees that neither the Purchasers nor any such Affiliates, partners, directors, agents, employees or controlling Persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company in connection with or as a result of the consummation of this Agreement or any of the Transaction Documents except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company result from the gross negligence or willful misconduct of such Purchaser or entity in connection with the transactions contemplated by this Agreement or the Transaction Documents. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. 5.2 Procedures. ---------- a. If a third party shall notify an indemnified party (the "Indemnified Party") with respect to any matter that may give rise to a claim for indemnification under the indemnity set forth above in Section 5.1, the procedure set forth below shall be followed. (i) Notice. The Indemnified Party shall give to the party ------ providing indemnification (the "Indemnifying Party") written notice of any claim, suit, judgment or matter for which indemnity may be sought under Section 6.1 promptly but in any event within thirty days after the Indemnified Party receives notice thereof; provided, however, that failure by the Indemnified -------- ------- Party to give such notice shall not relieve the Indemnifying Party from any liability it shall otherwise have pursuant to this Agreement except to the extent that the Indemnifying Party is actually prejudiced by such failure. Such notice shall set forth in reasonable detail (i) the basis for such potential claim and (ii) the dollar amount of such claim. (ii) Defense of Claim. With respect to a claim by a third ---------------- party against an Indemnified Party for which indemnification may be sought under this Agreement, the Indemnifying Party shall have the right, at its option, to be represented by counsel of its choice and to assume the defense or otherwise control the handling of any claim, suit, judgment or matter for which indemnify is sought, which is set forth in the notice sent by the Indemnified Party, by notifying the Indemnified Party in writing to such effect within fifteen days of receipt of such notice; provided, however, that the Indemnified Party shall have -------- ------- the right to employ counsel to represent it if, in the Indemnified Party's reasonable judgment based upon the advice of counsel, it is advisable in light of the separate interests of the Indemnified Party, to be represented by separate counsel, and in that event the reasonable fees and expenses of such separate counsel shall be paid by the Indemnifying Party. If the Indemnifying Party does not give timely notice in accordance with the preceding sentence, the Indemnifying Party shall be deemed to have given notice that it does not wish to control the handling of such claim, suit or 21 judgment. In the event the Indemnifying Party elects (by notice in writing within such fifteen day period) to assume the defense of or otherwise control the handling of any such claim, suit, judgment or matter for which indemnity is sought, the Indemnifying Party shall indemnify and hold harmless the Indemnified Party from and against any and all reasonable professional fees (including attorneys' fees, accountants, consultants and engineering fees) and investigation expenses incurred by the Indemnifying Party prior to such election, notwithstanding the fact that the Indemnifying Party may not have been so liable to the Indemnified Party had the Indemnifying Party not elected to assume the defense of or to otherwise control the handling of such claim, suit, judgment or other matter. In the event that the Indemnifying Party does not assume the defense or otherwise control the handling of such matter, the Indemnified Party may retain counsel, as an indemnification expense, to defend such claim, suit, judgment or matter. (iii) Final Authority. The parties shall cooperate in the --------------- defense of any such claim or litigation and each shall make available all books and records which are relevant in connection with such claim or litigation. In connection with any claim, suit or other proceeding with respect to which the Indemnifying Party has assumed the defense or control, the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to any matter which does not include a provision whereby the plaintiff or claimant in the matter releases the Indemnified Party from all liability with respect thereto, without the written consent of the Indemnified Party. In connection with any claim, suit or other proceeding with respect to which the Indemnifying Party has not assumed the defense or control, the Indemnified Party may not compromise or settle such claim without the consent of the Indemnifying Party, which shall not be unreasonably withheld and shall be deemed to have been given if the Indemnified Party provides the Indemnifying Party with a written notice setting forth the material terms of such compromise or settlement and the Indemnifying Party does not object thereto in writing within ten days of its receipt of such notice. ARTICLE VI. MISCELLANEOUS 6.1 Entire Agreement. This Agreement, together with the Exhibits and ---------------- Schedules hereto and the Transaction Documents contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. 6.2 Notices. Any notices, consents, waivers or other communications ------- required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile, provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party (if received by 7:00 p.m. EST where such notice is received) or the first business day following such delivery (if received after 7:00 p.m. EST where such notice is received); or (iii) one business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: 22 If to the Company: SatCon Technology Corporation 161 First Street Cambridge, MA 02142-1221 Telephone: (617) Facsimile: (617) 576-7455 Attention: President and Chief Executive Officer With a copy to: Hale & Dorr LLP 60 State Street Boston, MA 02109 Telephone: (617) 526-6468 Facsimile: (617) 526-5000 Attention: Jeffrey N. Carp, Esq. If to the Transfer Agent: If to Brown Simpson Strategic Growth Fund, Ltd. to: 152 West 57th Street, 40th Floor New York, New York 10029 Telephone: (212) 247-8200 Facsimile: (212) 247-1329 Attention: Paul Gustus If to Brown Simpson Strategic Growth Fund, L.P. to: 152 West 57th Street, 40th Floor New York, New York 10029 Telephone: (212) 247-8200 Facsimile: (212) 247-1329 Attention: Paul Gustus With a copy, in the case of Notice to Brown Simpson Strategic Growth Fund, Ltd. or Brown Simpson Strategic Growth Fund, L.P. to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue New York, New York 10022 Telephone: (212) 872-1000 Facsimile: (212) 872-1002 Attention: James Kaye 23 Each party shall provide written notice to the other party of any change in address or facsimile number in accordance with the provisions hereof. 6.3 Amendments; Waivers. No provision of this Agreement may be waived ------------------- or amended except in a written instrument signed, in the case of an amendment, by both the Company and each of the Purchasers or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. The Company shall not offer or pay any consideration to a Purchaser for consenting to such an amendment or waiver unless the same consideration is offered to each Purchaser and the same consideration is paid to each Purchaser which consents to such amendment or waiver. 6.4 Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 6.5 Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each of the Purchasers. The Purchasers may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Company, provided, that any assignees must make the representations and warranties set forth in Section 2.2, in writing to the Company, and otherwise comply with the terms of this Agreement otherwise applicable to its assignor. This provision shall not limit a Purchaser's right to transfer securities in accordance with all of the terms of this Agreement or the Transaction Documents. 6.6 No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 6.7 Governing Law. This Agreement shall be governed by and construed ------------- and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the nonexclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER 24 OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 6.8 Survival. The representations and warranties of the Company and -------- the Purchasers contained in Sections 2.1 and 2.2, the agreements and covenants set forth in Section 3, and the indemnification provisions set forth in Section 5, shall survive the Closing and any conversion of the Securities or exercise of the Warrants regardless of any investigation made by or on behalf of the such Purchaser or by or on behalf of the Company, except that, in the case of representations, warranties and indemnities such survival shall be limited to the period of three (3) years following the Closing Date on which they were made or deemed to have been made. This section shall have no effect on the survival of the indemnification provisions of the Registration Rights Agreement. 6.9 Counterparts. This Agreement may be executed in two or more ------------ counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 6.10 Publicity. The Company and the Purchasers shall consult with each --------- other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. The Company shall not publicly or otherwise disclose the names of any of the Purchasers without each such Purchaser's prior written consent. Subject to the Company's review and approval, the Purchasers and their affiliated companies shall, without further cost, have the right to use in its advertising, marketing or other similar materials, the Company's logo and trademarks and all or parts of the Company's press releases that focus on the Transaction forming the subject matter of this Agreement or which make reference to the Transaction; provided, however, that Company approval is not required with regard to formal newspaper announcements of transactions or "tombstones." The Purchasers understand that this grant by the Company only waives objections that the Company might have to the use of such materials by the Purchasers and in no way constitutes a representation by the Company that references in such materials to the activities of third-parties have been cleared or constitute a fair use. 6.11 Severability. In case any one or more of the provisions of this ------------ Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 6.12 Remedies. In addition to being entitled to exercise all rights -------- provided herein or granted by law, including recovery of damages, the Purchasers will be entitled to specific 25 performance of the obligations of the Company under this Agreement or the Transaction Documents without the showing of economic loss and without any bond or other security being required. Each of the Company and the Purchasers (severally and not jointly) agree that monetary damages would not be adequate compensation for any loss incurred by reason of any breach of its obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. 6.13 Independent Nature of Purchasers' Obligations and Rights. The -------------------------------------------------------- obligations of each Purchaser hereunder is several and not joint with the obligations of the other Purchasers hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. 6.14 Further Assurances. Each party shall do and perform, or cause to ------------------ be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 6.15 Fees and Expenses. Except as set forth in the Registration Rights ----------------- Agreement, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement; provided, however, that the Company shall pay the -------- ------- Purchasers an aggregate fee of $60,000 at the Closing. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Conversion Shares and the Warrant Shares pursuant hereto. IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized persons as of the date first indicated above. SATCON TECHNOLOGY CORPORATION By: /s/ Michael C. Turmelle ---------------------------------------------- Name: Michael C. Turmelle Title:Vice President, Chief Financial Officer 26 BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. By: /s/ James R. Simpson ______________________________________________ Name: James R. Simpson Title: Principal BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. By: /s/ James R. Simpson ______________________________________________ Name: James R. Simpson Title: Principal Schedule I
Principal Amount of Number of Shares Nos. of shares underlying Name of Purchaser Securities at Closing Date of Preferred Stock Warrants - ----------------- -------------------------- ------------------ -------- Brown Simpson Strategic $5 ,400,000 5,400 452,250 Growth Fund, Ltd. Brown Simpson Strategic $2,600,000 2,600 222,750 Growth Fund, L.P.
1 Schedule II
Name of Purchaser Address - ----------------- ------- Brown Simpson Strategic Growth Fund, Ltd. 152 West 57th Street, 40th Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 Residence: Grand Cayman, Cayman Islands Brown Simpson Strategic Growth Fund, L.P. 152 West 57th Street, 40th Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 Residence: New York, New York
EX-10.26 5 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.26 REGISTRATION RIGHTS AGREEMENT ----------------------------- This Registration Rights Agreement (this "Agreement") is made and --------- entered into as of August 25, 1999, among SatCon Technology Corporation, a Delaware corporation (the "Company"), and the parties who have executed this ------- Agreement and whose names appear on Schedule I hereto (each party listed on Schedule I hereto is sometimes individually referred to herein as a "Purchaser" --------- and all such parties are sometimes collectively referred to herein as the "Purchasers"). - ----------- This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof among the Company and the Purchasers (the "Purchase -------- Agreement"). - --------- The Company and the Purchasers hereby agree as follows: 1. Definitions ----------- Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "Advice" has meaning set forth in Section 3(o) hereof. ------ "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "affiliated," controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Aggregate Price" has the meaning set forth in Section 2(d) hereof. --------------- "AMEX" shall mean the American Stock Exchange. ---- "Business Day" means any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close. "Closing Date" shall mean the Closing Date as defined in the Purchase ------------ Agreement. "Commission" means the Securities and Exchange Commission. ---------- "Common Stock" means the Company's Common Stock, par value $0.01 per ------------ share. "Effectiveness Date" means the earlier of (i) the 120th day following ------------------ the Closing Date, or (ii) the fifth day after the Company has received notice (written or oral) from the Commission that the Commission Staff will not be reviewing the Registration Statement or has no further comments on the Registration Statement. "Effectiveness Period" has the meaning set forth in Section 2(a) -------------------- hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ "Event" has the meaning set forth in Section 2(d) hereof. ----- "Filing Date" means as soon as practicable but in no event later than ----------- the 30th day following the Closing Date. "Holder" or "Holders" means the holder or holders, as the case may be, ------ ------- from time to time of Registrable Securities. "Indemnified Party" has the meaning set forth in Section 5(c) hereof. ----------------- "Indemnifying Party" has the meaning set forth in Section 5(c) hereof. ------------------ "Initial Registration Statement" has the meaning set forth in Section ------------------------------ 2(a) hereof. "Losses" has the meaning set forth in Section 5(a) hereof. ------ "Nasdaq" shall mean the Nasdaq Stock Market. ------ "NYSE" shall mean the New York Stock Exchange. ---- "Person" means an individual or a corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Proceeding" means an action, claim, suit, investigation or proceeding ---------- (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "Prospectus" means the prospectus included in the Registration ---------- Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the 2 Prospectus, including post-effective amendments, and all material incorporated by reference in such Prospectus. "Registrable Securities" means the shares of Common Stock issued or ---------------------- issuable upon (i) conversion of or with respect to the Securities, (ii) payment of interest or any other payments in respect of the Securities, (iii) exercise of the Warrants, and (iv) any shares of the Company's capital stock issued with respect to (i), (ii) or (iii) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise; provided, that Registrable Securities shall not include any such shares that are eligible for sale under Rule 144(k). "Registration Delay Payment" has the meaning set forth in Section 2(d) -------------------------- hereof. "Registration Statement" means the Initial Registration Statement and ---------------------- any additional registration statements contemplated by Sections 2(a), 2(b) and 7(d), including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference in such registration statement. "Rule 144" means Rule 144 promulgated by the Commission pursuant to -------- the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 158" means Rule 158 promulgated by the Commission pursuant to -------- the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 415" means Rule 415 promulgated by the Commission pursuant to -------- the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Securities" means the Company's Convertible Redeemable Preferred ---------- Stock issuable pursuant to the Purchase Agreement. "Securities Act" means the Securities Act of 1933, as amended. -------------- "Special Counsel" means one special counsel to the Holders, for which --------------- the Holders will be reimbursed by the Company to the extent provided in Section 4. "Standstill Notice" has the meaning set forth in Section 2(e). ----------------- "Standstill Period" has the meaning set forth in Section 2(e). ----------------- "Trading Day" means a day on which the Nasdaq (or in the event the ----------- Common Stock is not traded on Nasdaq, such other securities market on which the Common Stock is listed) is open for trading. 3 "Underlying Shares" means the shares of Common Stock issuable upon ----------------- conversion of the Securities and exercise of the Warrants. "Underwritten Registration or Underwritten Offering" means a -------------------------------------------------- registration in connection with which securities of the Company are sold to an underwriter for reoffering to the public pursuant to an effective registration statement. "Warrants" means the warrants issuable pursuant to the Purchase -------- Agreement. 2. Registration Requirements ------------------------- (a) Filing and Effectiveness Obligations. On or prior to the Filing ------------------------------------ Date, the Company shall prepare and file with the Commission a Registration Statement (the "Initial Registration Statement") which shall cover all ------------------------------ Registrable Securities for an offering to be made on a continuous basis pursuant to a "Shelf" registration statement under Rule 415. The Initial Registration Statement shall be on Form S-3 or any successor form (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith, subject to the reasonable consent of the original Holders of the Registrable Securities). The Company shall (i) not permit any securities other than the Registrable Securities and securities with respect to which there are outstanding demand or "piggy-back" registration rights as of the date of this Agreement to be included in the Initial Registration Statement and (ii) use commercially reasonable efforts to cause the Initial Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event on or prior to the Effectiveness Date, and, except as provided herein, to keep such Initial Registration Statement continuously effective under the Securities Act until the date which is two years after the date that such Initial Registration Statement is declared effective by the Commission or such earlier date when all Registrable Securities covered by such Initial Registration Statement have been sold or may be sold without volume restrictions pursuant to Rule 144 as determined by counsel to the Company pursuant to a written opinion letter, addressed to the Holders and the Company's transfer agent to such effect (the "Effectiveness Period"). The -------------------- number of shares of Common Stock initially included in the Initial Registration Statement shall be no less than 1.2 times the sum of the number of Securities and Warrants that are then issuable upon conversion of the Securities (based on the Conversion Price (as defined in the Securities) as would then be in effect at such time) and the exercise of the Warrants, without regard to any limitation on the Investor's ability to convert the Securities or exercise the Warrants. If at any time the number of shares of Common Stock issuable pursuant to the Securities is adjusted pursuant to the Certificate of Designation, or to the Warrant is adjusted in accordance with the terms thereof, and more shares are issuable pursuant to the Securities and Warrants then remain available for sale pursuant to the Initial Registration Statement, the Company shall immediately, but in no more than five (5) Business Days, file a Registration Statement sufficient to register such additional shares of Common Stock. (b) Underwritten Offering. Prior to the third anniversary of the --------------------- Closing Date, in addition to the Initial Registration Statement, if the Holders of a majority of the Registrable Securities covered by a Registration Statement so elect, an offering of Registrable Securities 4 pursuant to such Registration Statement may be effected on one (1) occasion in the form of an Underwritten Offering, provided that the offering is at least fifteen million dollars ($15,000,000), with net proceeds to the Company of at least five million dollars ($5,000,000). In such event, and if the managing underwriters advise the Company and such Holders in writing that in their opinion the amount of Registrable Securities proposed to be sold in such Underwritten Offering exceeds the amount of Registrable Securities which can be sold in such Underwritten Offering, so long as the offering is at least fifteen million dollars ($15,000,000), with net proceeds to the Company of at least five million dollars ($5,000,000), there shall be included in such Underwritten Offering the amount of such Registrable Securities which in the opinion of such managing underwriters can be sold, and such amount shall be allocated pro rata --- ---- among the Holders proposing to sell Registrable Securities in such Underwritten Offering. (c) Underwriter. If any of the Registrable Securities are to be sold ----------- in an Underwritten Offering, the investment banker in interest that will administer the offering will be selected by the Holders of a majority of the Registrable Securities included in such offering, provided that such investment banker is reasonably satisfactory to the Company. No Holder may participate in any Underwritten Offering hereunder unless such Holder (i) agrees to sell its Registrable Securities on the basis provided in any underwriting agreements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such arrangements. (d) Penalties. Subject to Sections 3(r) and 3(s) hereof, if (i) the --------- Initial Registration Statement covering all the applicable Registrable Securities and required to be filed by the Company pursuant to this Agreement is not filed with the Commission on or before the Filing Date or (B) declared effective by the Commission on or before the applicable Effectiveness Date, (ii) on any day after the Registration Statement has been declared effective by the Commission (A) sales of all the Registrable Securities required to be included on a Registration Statement cannot be made pursuant to the Registration Statement (including, without limitation, because of a failure to keep the Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to the Registration Statement, or to register sufficient shares of Common Stock) or (iii) the Company shall otherwise fail to file a Registration Statement required by Section 2(a) hereof, (each such event specified in (i), (ii) and (iii) above, an "Event"), then, as partial relief for ----- the damages to any Holder by reason of any such delay in or reduction of its ability to sell the Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity) after a 60-day period commencing on the date of the Event], the Company shall pay to each Holder an amount in cash (a "Registration Delay Payment") equal to the purchase price of -------------------------- Securities as set forth in Schedule I the Purchase Agreement (the "Aggregate --------- Price") multiplied by one hundredth (.010) times the sum of: (i) the number of - ----- months (prorated for partial months) after the end of the Effectiveness Date and prior to the date the Registration Statement is declared effective by the Commission, provided, however, that there shall be excluded from such period any -------- ------- delays which are solely attributable to changes required by the Purchasers in the Registration Statement with respect to information relating to the Purchasers, or to the failure of the Purchasers to conduct their review of the Registration Statement pursuant to Section 3(a); and (ii) the number of months (prorated for partial months) that sales cannot be made pursuant to the Registration Statement after the Registration Statement has been declared effective (including, without 5 limitation, when sales cannot be made by reason of the Company's failure to properly supplement or amend the Prospectus in accordance with the terms of this Agreement, or otherwise, but excluding when such sales cannot be made solely by reason of any act or omission solely attributable to the Purchasers or by reason of the circumstances contemplated by Section 3(r) or 3(s) hereof). The Company shall pay any Required Registration Delay Payments to each Holder in cash on the last Business Day of each month during which an Event has occurred and is continuing. In the event the Company fails to make a Registration Delay Payment in a timely manner, such Registration Delay Payment shall bear interest at the rate of 1.0% per month (prorated for partial months) until paid in full. Notwithstanding anything in this Agreement to the contrary, in lieu of the Registration Delay Payment during the sixty (60) day period described below, if the Event is the Company's failure to file the Initial Registration Statement on or before the Filing Date, the Company shall issue to the Holders Warrants to purchase additional 33,750 shares of Common Stock for each 30-day period that passes following the Filing Date up to a maximum of two such 30-day periods, if the Event is the failure to have the Registration Statement declared effective on or before the Effectiveness Date, the Company shall issue to the Holders Warrants to purchase an additional 33,750 shares of Common Stock for each 30-day period that passes following the Effectiveness Date up to a maximum of two such 30-day periods. The Warrant issued to each Holder shall be to purchase a portion of the aggregate number of shares of Common Stock on a pro rata basis equal to its percentage ownership of the then outstanding number of shares of Preferred Stock. The exercise price, expiration date and other terms of the warrants (other than the number of shares of common stock for which it is exercisable) shall be substantially identical to the Warrants issued to the Holders on the Closing Date. (e) Form S-3 Eligibility. The Company represents and warrants that it -------------------- currently meets the registrant eligibility and transaction requirements for the use of Form S-3 (for primary and secondary offerings) for the registration of the sale of Registrable Securities by the Purchasers and any other Holders and the Company shall file all reports required to be filed by the Company with the Commission in a timely manner so as to maintain such eligibility for the use of Form S-3. 3. Registration Procedures ----------------------- In connection with the Company's registration obligations hereunder, the Company shall: (a) Preparation of Registration Statement. Prepare and file with the ------------------------------------- Commission on or prior to the Filing Date a Registration Statement on Form S-3 or its successor form (or if the Company is not then eligible to register for resale the Registrable Securities on Form S-3 such registration shall be on another appropriate form in accordance herewith (which shall include a Plan of Distribution substantially in the form of Exhibit A annexed hereto, unless in --------- connection with an Underwritten Offering) or in connection with an Underwritten Offering hereunder, such other form agreed to by the Company and by a majority- in-interest of Holders of Registrable Securities to be covered by such Registration Statement) (except if otherwise directed by the Holders), and cause the Registration Statement to become effective and remain effective as provided herein; provided, however, that not less than three (3) Business Days prior to -------- ------- the filing of the Registration Statement or any related Prospectus or any amendment or 6 supplement thereto (including any document that would be incorporated therein by reference), the Company shall, if reasonably practicable (i) furnish to the Holders, their Special Counsel and any managing underwriters, copies of all such documents proposed to be filed (including documents incorporated by reference), which documents will be subject to the review of such Holders, their Special Counsel and such managing underwriters, and (ii) cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to such Holders and such underwriters, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities, their Special Counsel or any managing underwriters shall reasonably object, and will not request acceleration of such Registration Statement without prior notice to such counsel; provided, however, any failure of the Company to file such a Registration Statement or amendment or to request acceleration following an objection by any such person should not constitute a breach of the Company's obligation under this Agreement or cause the imposition of any penalties set forth herein. The sections of such Registration Statement covering information with respect to the Holders, the Holder's beneficial ownership of securities of the Company or the Holders intended method of disposition of Registrable Securities shall conform to the information provided to the Company by each of the Holders. (b) Amendments. (i) Prepare and file with the Commission such ---------- amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as possible to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notifications. Notify the Holders of Registrable Securities to be ------------- sold, their Special Counsel and any managing underwriters as promptly as possible (and, in the case of (i)(A) below, not less than five (5) days prior to such filing and, in the case of (i)(C) below, not later than the first Business Day after effectiveness) and (if requested by any such Person) confirm such notice in writing no later than one (1) Business Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on such Registration Statement and (C) with respect to the Registration Statement or any post- effective amendment, when the same has become effective; (ii) of any request by the 7 Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (vi) of the occurrence of any event that makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (d) Suspensions. Use its reasonable efforts to avoid the issuance ----------- of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of the Registration Statement or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. (e) Supplements and Post-Effective Amendments. If requested by any ----------------------------------------- managing underwriter or the Holders of a majority in interest of the Registrable Securities to be sold in connection with an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the -------- ------- Company shall not be required to take any action pursuant to this Section 3(e) that would, in the opinion of counsel for the Company, violate applicable law or if the Holders of a majority of the Registrable Securities consent to the delay in taking, or the failure to take, any such action, which consent shall not be unreasonably withheld. (f) Copies of Registration Statement. Furnish to each Holder, their -------------------------------- Special Counsel, and any managing underwriters, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (g) Copies of Prospectus. Promptly deliver to each Holder, their -------------------- Special Counsel, and any underwriters, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders and any underwriters in 8 connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. (h) Blue Sky. Prior to any public offering of Registrable Securities, --------- use commercially reasonable efforts to register or qualify or cooperate with the selling Holders, any underwriters and their Special Counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder or underwriter requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be -------- ------- required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject. (i) Certificates. Cooperate with the Holders and any managing ------------ underwriters to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by applicable law and the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such managing underwriters or Holders may request at least two (2) Business Days prior to any sale of Registrable Securities. (j) Supplements and Amendments. Upon the occurrence of any event -------------------------- contemplated by Section 3(c)(vi), as promptly as possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (k) Listing. Cause all Registrable Securities relating to such ------- Registration Statement to be listed on Nasdaq and any other securities exchange, quotation system, market or over-the-counter bulletin board, if any, on which similar securities issued by the Company are then listed as and when required pursuant to the Purchase Agreement. (l) Underwriting Agreement. Enter into such underwriting agreements ---------------------- in form, scope and substance as is customary in Underwritten Offerings and pursuant thereto to, (i) make such representations and warranties to such underwriters as are customarily made by issuers to underwriters in underwritten public offerings, obtain and deliver copies thereof to the managing underwriters, of opinions of counsel to the Company addressed to each such underwriter, in form, scope and substance reasonably satisfactory to any such managing underwriters covering the matters customarily covered in opinions requested in Underwritten 9 Offerings; (iii) immediately prior to the effectiveness of the Registration Statement, and, at the time of delivery of any Registrable Securities sold pursuant thereto, and, in the case of non-Underwritten Offerings, obtain and deliver copies to the managing underwriters, if any, of "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if required, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data is, or is required to be, included in the Registration Statement), addressed to each of the underwriters, in form and substance as are customary in connection with Underwritten Offerings; (iv) indemnification provisions and procedures no less favorable to the underwriters, if any, than those set forth in Section 5 (or such other provisions and procedures acceptable to the managing underwriters, and (v) deliver such documents and certificates as may be reasonably requested by any managing underwriters to evidence the continued validity of the representations and warranties made pursuant to clause 3(1)(i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. (m) Due Diligence. Make available for inspection by the selling ------------- Holders, any representative of such Holders, any underwriter participating in any disposition of Registrable Securities, and any attorney or accountant retained by such selling Holders or underwriters, at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors, agents and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such Holder, representative, underwriter, attorney or accountant in connection with the Registration Statement; provided, however, -------- ------- that if any information is determined in good faith by the Company in writing to be of a confidential nature at the time of delivery of such information, then prior to delivery of such information, the Company and the Holders shall enter into a confidentiality agreement reasonably acceptable to the Company and the Holders providing that such information shall be kept confidential, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities (provided, -------- however, that the Company shall be given notice of any such pending disclosure - ------- so that the Company may seek a protective order); (ii) disclosure of such information, in the opinion of counsel to such Person, is required by law; (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Person; or (iv) such information becomes available to such Person from a source other than the Company and such source is not known by such Person to be bound by a confidentiality agreement with the Company. (n) Earnings Statement. Comply in all material respects with all ------------------ applicable rules and regulations of the Commission and make generally available to its securityholders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts Underwritten Offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of the Registration Statement, which statement shall conform to the requirements of Rule 158. 10 (o) Information. The Company may require each selling Holder to ----------- furnish to the Company information regarding such Holder and the distribution of such Registrable Securities as is required by law to be disclosed in the Registration Statement, and the Company may exclude from such registration the Registrable Securities of any such Holder who unreasonably fails to furnish such information within a reasonable time after receiving such request. The Company shall hold in confidence and not make any disclosure of information concerning a Holder provided to the Company unless (i) disclosure of such information, in the opinion of counsel to the Company, is required by law, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities (provided, however, that the -------- ------- Holder shall be given notice of any such pending disclosure so that the Holder may seek a protective order), or (iv) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning a Holder is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to such Holder prior to making such disclosure, and allow the Holder, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. If the Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (if such reference to such Holder by name or otherwise is not required by the Securities Act or any similar Federal statute then in force) the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder covenants and agrees that (i) it will not sell any Registrable Securities under the Registration Statement until it has received copies of the Prospectus as then amended or supplemented as contemplated in Section 3(g) and notice from the Company that such Registration Statement and any post-effective amendments thereto have become effective as contemplated by Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will comply with the prospectus delivery requirements of the Securities Act as applicable to them in connection with sales of Registrable Securities pursuant to the Registration Statement. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3(j), or until it is advised in writing (the "Advice") ------ by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. Notwithstanding anything to the 11 contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of a Holder in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Holder has entered into a contract for sale prior to the Holder's receipt of a notice from the Company of the happening of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi) and for which the Holder has not yet settled. (p) Responses to the Commission. The Company agrees to respond --------------------------- fully and completely to any and all comments on a Registration Statement received from the Commission staff as promptly as possible but, for non- Underwritten Offerings, in no event later than ten (10) Business Days of the receipt of such comments, regardless of whether such comments are in oral or written form. (q) Confirmation of Effectiveness. Within two (2) Business Days ----------------------------- after a Registration Statement which covers applicable Registrable Securities is ordered effective by the Commission, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Holders whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the Commission in the form attached hereto as Exhibit B. --------- (r) Notwithstanding any other provision of this Section 3, the Company may delay the filing or effectiveness of any Registration Statement or any amendment or supplement thereto and suspend the right of the Holders to effect sales of Registrable Securities thereunder for one or more periods (each a "Suspension Period") of up to 60 calendar days in the aggregate per twelve (12) month period in the event that such filing, effectiveness or sale would require the Company to disclose any non-public information that the Company is not otherwise required to disclose or to file any financial statements that the Company is not otherwise required to file, provided however, that no Suspension Period shall exceed 45 consecutive calendar days. (s) Notwithstanding any other provision of this Section 3, the Holders shall not be permitted to effect sales of the Registrable Securities under a Registration Statement during a period in which the Company is engaged in the process of registering under the Securities Act an underwritten offering, for as long as the underwriter reasonably considers is necessary. 4. Registration Expenses --------------------- All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company, whether or not pursuant to an Underwritten Offering and whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without 12 limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with Nasdaq and each other securities exchange or market on which Registrable Securities are required hereunder to be listed and (B) in compliance with state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for the Holders in connection with Blue Sky qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as the managing underwriters, if any, or the Holders of a majority of Registrable Securities may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is requested by the managing underwriters, if any, or by the holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) reasonable fees and disbursements of counsel for the Company and Special Counsel for the Holders, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. The Company shall not be required to pay selling concessions, discounts or other compensation paid to brokers, underwriters or other agents in connection with the sale of any Registrable Securities, whether or not incurred in an Underwritten Offering, or fees and expenses incurred by a Holder that are not specified in this Section. 5. Indemnification --------------- (a) Indemnification by the Company. The Company shall, ------------------------------ notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents (including any underwriters retained by such Holder in connection with the offer and sale of Registrable Securities), investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all joint or several losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, together with actions, proceedings or inquiries by any regulatory or self-regulatory organization, whether commenced or threatened, "Losses"), as incurred, arising out of or ------ relating to (i) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary Prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made), except to the extent, but only to the extent, that such untrue statements or omissions are based upon and in conformity with 13 information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or (ii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of Registrable Securities, provided, however, that the Company shall not be required to indemnify any person with respect to a loss arising out of a sale of any Registrable Securities during any period during which the Company has advised the Holders to suspend sales pursuant to a registration statement. The Company shall not, however, be liable for any Losses to any Holder with respect to any untrue or alleged untrue statement of material fact or omission or alleged omission of material fact if such statement or omission was made in a preliminary Prospectus and such Holder did not receive a copy of the final Prospectus (or any amendment or supplement thereto) at or prior to the confirmation of the sale of the Registrable Securities in any case where such delivery is required by the Securities Act and the untrue or alleged untrue statement of material fact or omission or alleged omission of material fact contained in such preliminary Prospectus was corrected in the final Prospectus (or any amendment or supplement thereto), unless the failure to deliver such final Prospectus (as amended or supplemented) was a result of noncompliance by the Company with Section 3(g) of this Agreement. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. (b) Indemnification by Holders. Each Holder shall, severally and -------------------------- not jointly, indemnify and hold harmless the Company, the directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising solely out of or based solely upon (i) any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in the Registration Statement or such Prospectus and that such information was reasonably relied upon by the Company for use in the Registration Statement, such Prospectus or such form of prospectus or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of prospectus or (ii) any violation or alleged violation by the Holders of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of Registrable Securities; provided, however, that the indemnity agreement contained in this Section 5(b) - -------- ------- shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the prior written consent of such Holder. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. 14 (c) Conduct of Indemnification Proceedings. If any Proceeding shall -------------------------------------- be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly shall notify the Person ----------------- from whom indemnity is sought (the "Indemnifying Party") in writing, and the ------------------ Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, -------- however, that the failure of any Indemnified Party to give such notice shall not - ------- relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Business Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). (d) Contribution. If a claim for indemnification under Section 5(a) ------------ or 5(b) is unavailable to an Indemnified Party because of a failure or refusal of a court of competent jurisdiction to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of 15 such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. In no event shall any selling Holder be required to contribute an amount under this Section 5(d) in excess of the net proceeds received by such Holder upon sale of the Registrable Securities pursuant to the Registration Statement giving rise to such contribution obligation. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. 6. Rule 144 -------- During the Effectiveness Period, as long as any Holder owns Registrable Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or l5(d) of the Exchange Act. During the Effectiveness Period, as long as any Holder owns Registrable Securities, if the Company is not required to file reports pursuant to Section 13(a) or l5(d) of the Exchange Act, it will prepare and furnish to the Holders and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will use commercially reasonable efforts to take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Person to sell Underlying Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including requesting of its counsel 16 to provide any legal opinions referred to in the Purchase Agreement. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements of this Section 6. 7. Miscellaneous ------------- (a) Remedies. In the event of a breach by the Company or by a -------- Holder of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. Neither the Company nor any of its -------------------------- subsidiaries has, as of the date hereof, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with or limits the provisions hereof. Except as disclosed in Schedule 2.1(r) of the Purchase Agreement, neither the Company nor any of its subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person. This Agreement, together with the Purchase Agreement, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. (c) Piggy-Back Registrations. Except as provided herein if, at any ------------------------ time when there is not an effective Registration Statement covering the Registrable Securities, the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, the Company shall send to each Holder of Registrable Securities written notice of such determination and, if within ten (10) days after receipt of such notice, any such Holder shall so request in writing, (which request shall specify the Registrable Securities intended to be disposed of by the Purchasers), the Company will use reasonable efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Holder, to the extent requisite to permit the disposition of the Registrable Securities so to be registered, provided that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to such Holder and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable 17 Securities in connection with such registration (but not from its obligation to pay expenses in accordance with Section 4 hereof), and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities being registered pursuant to this Section 7(d) for the same period as the delay in registering such other securities. The Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided, however, that the -------- ------- Company shall not be required to register any Registrable Securities pursuant to this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten public offering, if the managing underwriter(s) or underwriter(s) should reasonably object to the inclusion of the Registrable Securities in such registration statement, then if the Company after consultation with the Underwriter's representative should reasonably determine that the inclusion of such Registrable Securities would materially adversely affect the offering contemplated in such registration statement, and based on such determination recommends inclusion in such registration statement of fewer Registrable Securities then proposed to be sold by the Holders, then (x) the number of Registrable Securities of the Holders and other holders of piggy-back registration rights included in such registration statement shall be reduced pro rata among such Holders and other holders of piggy-back registration rights (based upon the number of Registrable Securities requested to be included in the registration) or, in the case of other holders of piggy-back registration rights, in the manner provided for in that applicable agreement, or (y) none of the Registrable Securities of the Holders shall be included in such registration statement if the Company, after consultation with the underwriter(s), recommends the inclusion of none of such Registrable Securities; provided, however, that if -------- ------- securities are being offered for the account of other persons or entities as well as the Company, such reduction shall not represent a greater fraction of the number of Registrable Securities intended to be offered by the Holders than the fraction of similar reductions imposed on such other persons or entities (other than the Company). Notwithstanding the foregoing, the Company shall not file any registration statement under the Securities Act (other than on Form S-4 or Form S-8) relating to the offer and sale of any equity securities of the Company, or offer or sell any equity securities of the Company in a transaction exempt from registration pursuant to Regulation S under the Securities Act, until such time as the Initial Registration Statement has been effective for a period of sixty (60) Trading Days, which period shall be tolled if the effectiveness of the Initial Registration Statement is suspended for any reason whatsoever. (d) Amendments and Waivers. The provisions of this Agreement, ---------------------- including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of at least two thirds of the then outstanding Registrable Securities; provided, however, that for the purposes of this sentence, -------- ------- Registrable Securities that are owned, directly or indirectly, by the Company, or an Affiliate of the Company are not deemed outstanding. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this -------- ------- sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. 18 (e) Notices. Any notice or other communication required or permitted ------- to be given hereunder shall be in writing and shall be deemed to have been received (a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct answer back received), telecopy or facsimile (with transmission confirmation report) at the address or number designated below (if received by 5:00 p.m. eastern time where such notice is to be received), or the first Business Day following such delivery (if received after 5:00 p.m. eastern time where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications are (i) if to the Company to SatCon Technology Corporation, 161 First Street, Cambridge, MA 02142-1221, Attn: President and Chief Executive Officer, fax no. (617) 576-7455, with copies to Hale & Dorr LLP, 60 State Street, Boston, MA 02109, Attn: Jeffrey N. Carp, Esq., fax no. (617) 526-5000 and (ii) if to any Purchaser to the address set forth on Schedule I hereto with copies to those specified on the signature pages hereto and to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye, Esq., fax no. (212) 872-1002 or such other address as may be designated in writing hereafter, in the same manner, by such Person. (f) Successors and Assigns. This Agreement shall inure to the benefit ---------------------- of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior written consent of each Holder. Each Holder may assign its rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement. In addition, the rights of each Holder hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be automatically assignable by each Holder if: (i) the Holder agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees is restricted under the Securities Act and applicable state securities laws, (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this Section, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Agreement, and (v) such transfer shall have been made in accordance with the applicable requirements of the Purchase Agreement. The rights to assignment shall apply to the Holders (and to subsequent) successors and assigns. (g) Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. 19 (h) Governing Law. The corporate laws of the State of Delaware shall ------------- govern all issues concerning the relative rights of the Company and the Purchasers as its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. (i) Cumulative Remedies. The remedies provided herein are cumulative ------------------- and not exclusive of any remedies provided by law. (j) Severability. If any term, provision, covenant or restriction of ------------ this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (k) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (l) Shares Held by The Company and its Affiliates. Whenever the --------------------------------------------- consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other than any Holder or transferees or successors or assigns thereof if such Holder is deemed to be an Affiliate solely by reason of its holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (m) Revision of SEC Position on Warrants. In the event the rules and ------------------------------------ regulations of the Commission or the policies of the staff of the Commission are modified and as a result thereof the Company determines in good faith that it may be practicable and in the interests of the Company and the Holders to register the exercise of the Warrants so that the Warrant Shares may be freely resold without maintaining an effective registration statement under the Securities Act for resales, the Company and the Holders agree to cooperate in good faith to effect such amendments to this Agreement as may be appropriate to provide that the Company may fulfill its obligations hereunder with respect to the Warrants and the Warrant 20 Shares by maintaining an effective registration statement under the Securities Act covering the exercise of the Warrants rather than the resale of the Warrant Shares. 21 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. SATCON TECHNOLOGY CORPORATION By: /s/ Michael C. Turmelle --------------------------------- Name:Michael C. Turmelle Title:Vice President, Chief Financial Officer 22 BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. By: /s/ James R. Simpson -------------------------------------- Name: James R. Simpson Title: Principal BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. By: /s/ James R. Simpson -------------------------------------- Name: James R. Simpson Title: Principal 23 SCHEDULE I ----------- Company - ------- SatCon Technology Corporation 161 First Street Cambridge, MA 02142-1221 Attn: President and Chief Executive Officer Fax: (617) 576-7455 Purchasers: - ---------- Brown Simpson Strategic Growth Fund, L.P. 152 West 57th Street, 40th Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 Brown Simpson Strategic Growth Fund, Ltd. 152 West 57th Street, 40th Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 24 EXHIBIT A PLAN OF DISTRIBUTION Our company is registering the shares of common stock on behalf of the selling stockholders. All costs, expenses and fees in connection with the registration of the shares offered by this prospectus will be borne by the Company, other than brokerage commissions and similar selling expenses, if any, attributable to the sale of shares which will be borne by the selling stockholders. Sales of shares may be effected by selling stockholders from time to time in one or more types of transactions (which may include block transactions) on the Nasdaq National Market, in the over-the-counter market, in negotiated transactions, through put or call options transactions relating to the shares, through short sales of shares, or a combination of such methods of sale, at market prices prevailing at the time of sale, or at negotiated prices. Such transactions may or may not involve brokers or dealers. The selling stockholders have advised our company that they have not entered into any agreements, understandings or arrangements with any underwriters or broker- dealers regarding the sale of their securities, nor is there an underwriter or coordinated broker acting in connection with the proposed sale of shares by the selling stockholders. The selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of the shares or of securities convertible into or exchangeable for the shares in the course of hedging positions they assume with selling stockholders. The selling stockholders may also enter into options or other transactions with broker-dealers or other financial institutions which require the delivery to such broker-dealers or other financial institutions of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as amended or supplemented to reflect such transaction). The selling stockholders may make these transactions by selling shares directly to purchasers or to or through broker-dealers, which may act as agents or principals. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal, or both (which compensation as to a particular broker- dealer might be in excess of customary commissions). The selling stockholders and any broker-dealers that act in connection with the sale of shares are "underwriters" within the meaning of Section 2(11) of the Securities Act, and any commissions received by such broker-dealers or any profit on the resale of the shares sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities Act. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act. 25 Because selling stockholders are "underwriters" within the meaning of Section 2(11) of the Securities Act, the selling stockholders will be subject to the prospectus delivery requirements of the Securities Act. Our company has informed the selling stockholders that the anti-manipulative provisions of Regulation M promulgated under the Exchange Act may apply to their sales in the market. Selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided they meet the criteria and conform to the requirements of Rule 144. Upon our company being notified by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing: . the name of each such selling stockholder and of the participating broker-dealer(s); . the number of shares involved; . the initial price at which such shares were sold; . the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable; . that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and . other facts material to the transactions. In addition, upon our company being notified by a selling stockholder that a donee or pledgee intends to sell more than 500 shares, a supplement to this prospectus will be filed. 26 EXHIBIT B FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT [TRANSFER AGENT] Attn.: Re: SatCon Technology Corporation Ladies and Gentlemen: We are counsel to SatCon Technology Corporation, a Delaware corporation (the "Company"), and have represented the Company in connection with that certain Securities Purchase Agreement (the "Purchase Agreement") entered into by and among the Company and the buyers named therein (collectively, the "Holders") pursuant to which the Company issued to the Holders its [Insert Security (the "Securities")] convertible into shares of the Company's common stock, par value $0.01 per share (the "Common Stock"), and Warrants (the "the Warrants") to acquire shares of Common Stock. Pursuant to the Purchase Agreement, the Company also has entered into a Registration Rights Agreement with the Holders (the "Registration Rights Agreement") pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issuable upon conversion of the Securities and exercise of the Warrants, under the Securities Act of 1933, as amended (the "1933 Act"). In connection with the Company's obligations under the Registration Rights Agreement, on _______________, 1999, the Company filed a Registration Statement on Form S-3 (File No. 333-_____________) (the "Registration Statement") with the Securities and Exchange Commission (the "SEC") relating to the Registrable Securities which names each of the Holders as a selling stockholder thereunder. In connection with the foregoing, we advise you that a member of the SEC's staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC's staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement. Very truly yours, [ISSUER'S COUNSEL] cc: [LIST NAMES OF HOLDERS] 27 EX-10.27 6 FORM OF WARRANTS EXHIBIT 10.27 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. August 25, 1999 __________ shares Warrant No.__ SATCON TECHNOLOGY CORPORATION STOCK PURCHASE WARRANT Registered Owner: ____________________________ This certifies that, for value received, SatCon Technology Corporation, a Delaware corporation, the ("Company") grants the following rights to the ------- Registered Owner, or assigns, of this Warrant: 1. Issue. Upon tender (in accordance with Section 6 hereof) to the Company, the Company, within three (3) Business Days of the date thereof, shall issue to the Registered Owner, or assigns, up to the number of shares specified in Section 2 hereof of fully paid and nonassessable shares of Common Stock that the Registered Owner, or assigns, is otherwise entitled to purchase. 2. Number of Shares. The total number of shares of Common Stock that the Registered Owner, or assigns, of this Warrant is entitled to receive upon exercise of this Warrant (the "Warrant Shares") is ________ shares, subject to -------------- adjustment from time to time as to the number and kind of securities for which this Warrant is exercisable, all as set forth in Section 7 hereof. The Company shall at all times reserve and hold available out of its authorized and unissued shares of Common Stock or other securities, as the case may be, sufficient shares of Common Stock to satisfy all conversion and purchase rights represented by outstanding convertible securities, options and warrants, including this Warrant. The Company covenants and agrees that all shares of Common Stock or other securities, as the case may be, that may be issued upon the exercise of this Warrant shall, upon issuance, be duly and validly issued, fully paid and nonassessable, free from all taxes, liens and charges with respect to the purchase and the issuance of the shares, and shall not have any legend or restrictions on resale, expect as required by Section 3.2(b) of the Purchase Agreement. 3. Exercise Price. The per share exercise price of this Warrant, representing the price per share at which the shares of stock issuable upon exercise of this Warrant may be purchased, is eight dollars and fifty-four cents ($8.54), subject to adjustment from time to time pursuant to the provisions of Section 7 hereof (the "Exercise -------- Price"). - ------ 4. Exercise Period. This Warrant may be exercised from the Closing Date (as defined in the Purchase Agreement) up to and including August 25, 2003 (the "Exercise Period"). If not exercised during this period, this Warrant and all --------------- rights granted under this Warrant shall expire and lapse. 5. Replacement Warrants. To the extent that Warrant Shares are issued pursuant to Section 8, the Company shall issue to the Registered Owner a replacement warrant (a "Replacement Warrant"), subject to the terms set forth herein, equal to the number of Warrant Shares received or the number of shares of Common Stock issuable upon the exercise of the Warrant so redeemed, subject to the following qualifications: a. the exercise price shall equal $12.81; b. the exercise period of any such Replacement Warrant shall be five (4) years from the date if issuance; and c. this Section 5. shall not be incorporated into any such warrant. 6. Tender; Issuance of Certificates. a. Subject to Section 17 hereof, this Warrant may be exercised, in whole or in part, by (i) actual delivery of (a) the Exercise Price in cash, (b) a duly executed Warrant Exercise Form, a copy of which is attached to this Warrant as Exhibit A, properly executed by the Registered Owner, or --------- assigns, of this Warrant, and (c) by surrender of this Warrant. The Warrant Shares so purchased shall be deemed to be issued to the Registered Owner as of the close of business on the date on which the last of the following shall have occurred: (i) this Warrant shall have been surrendered and (ii) the completed Warrant Exercise Form shall have been delivered and payment shall have been made for such shares as set forth above. The payment and Warrant Exercise Form must be delivered to the registered office of the Company either in person or as set for in Section 14 hereof. b. In lieu of physical delivery of the Warrant, provided the Company's transfer agent is participating in the Depositary Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request --- ---- of the Registered Owner and in compliance with the provisions hereof, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Warrant Shares to the Registered Owner by crediting the account of the Registered Owner's Prime Broker with DTC through its Deposit Withdrawal Agent Commission system. The time period for delivery described herein shall apply to the electronic transmittals described herein. c. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Warrant Exercise Form, and any cash payments due under Section 16 hereof shall be delivered to the Registered Owner within 2 a reasonable time, not exceeding three (3) Business Days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the Registered Owner and shall be registered in the name of the Registered Owner or such other name as shall be designated by such Registered Owner. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Registered Owner a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. 7. Adjustment of Exercise Price. a. Common Stock Dividends; Common Stock Splits; Reverse Common Stock ----------------------------------------------------------------- Splits. If the Company, at any time while this Warrant is outstanding, (a) ------ shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, then (i) the Exercise Price shall be multiplied by a fraction the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding (excluding treasury shares, if any) after such event and (ii) the number of Warrant Shares shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding after such event and the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event. Any adjustment made pursuant to this paragraph (6)(a) shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re- classification. b. Rights; Options; Warrants or Other Securities. If the Company, at --------------------------------------------- any time while this Warrant is outstanding, shall fix a record date for the issuance of rights, options, warrants or other securities to all of the holders of Common Stock entitling them to subscribe for or purchase, convert to, exchange for or otherwise acquire shares of Common Stock for no consideration or at a price per share less than the Exercise Price, the Exercise Price shall be multiplied by a fraction, the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights, options, warrants or other securities plus the number of additional shares of Common Stock offered for subscription, purchase, conversion, exchange or acquisition and the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights, options, warrants or other securities plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at the Exercise Price. Such adjustment shall be made whenever such rights, options, warrants or other securities are issued, and shall become effective immediately after the record 3 date for the determination of shareholders entitled to receive such rights, options, warrants or other securities. c. Subscription Rights. If the Company, at any time while this ------------------- Warrant is outstanding, shall fix a record date for the distribution to all of the holders of Common Stock evidence of its indebtedness or assets or rights, options, warrants or other security entitling them to subscribe for or purchase, convert to, exchange for or otherwise acquire any security (excluding those referred to in paragraphs 6(a) and (b) above), then in each such case the Exercise Price at which the Warrant shall thereafter be exercisable shall be determined by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of shareholders entitled to receive such distribution by a fraction, the denominator of which shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and the numerator of which shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a -------- ------- distribution exceeding ten percent (10%) of the net assets of the Company, such fair market value shall be determined in accordance with the Appraisal Procedure. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. d. Rounding. All calculations under this Section 7 shall be made to -------- the nearest cent or the nearest l/l00th of a share, as the case may be. e. Notice of Adjustment. Whenever the Exercise Price is adjusted -------------------- pursuant to paragraphs 6(a), (b) or (c), the Company shall promptly deliver to the Registered Owner a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. f. Redemption Events. The following are "Redemption Events" under ----------------- ----------------- this Section 7(f): (A) any Change of Control or (B) any suspension from listing or delisting of the Common Stock from the Nasdaq or any Subsequent Market on which the Common Stock is listed for a period of five consecutive days. On and after the date of any Redemption Event, the Registered Owner shall have the option to require the Company to redeem (the "Redemption ---------- Right"), for a period of thirty (30) days after the Registered Owner ----- receives notice of Redemption Event, in cash and subject to the terms of payment provisions set forth in Section 8, the Registered Owner's shares of Common Stock immediately theretofore acquirable and receivable upon the exercise of such Registered Owner's Warrant at a price per share equal to the product of (i) the amount by which, if any, the Average Price immediately preceding the latest of the effective date, the date of the closing, date of occurrence or the date of the announcement, as the case may be, of the Redemption Event triggering such Redemption Right exceeds the Exercise Price and (ii) the number of shares of Common Stock issuable upon exercise of the Warrant immediately prior to such Redemption Event. After the occurrence of (A), the Registered Owner shall have the right at his or its option, in lieu of the Redemption Right, to exercise the Warrant for shares of stock and other securities, cash and property receivable 4 upon or deemed to be held by holders of Common Stock following such Redemption Event; the Registered Owner shall be entitled upon such event to receive such amount of securities, cash or property as if the Registered Owner had exercised the Warrant of the shares of the Common Stock issuable upon exercise of the Warrant immediately prior to such Redemption Event (without taking into account any limitations or restrictions on the exercise of the Warrant). In the case of a transaction specified in (A) in which holders of the Company's Common Stock receive cash, the Registered Owner shall have the right at his or its option, in lieu of the Redemption Right, to exercise the Warrant for such number of shares of the surviving company equal to the amount of cash into which the Warrant is exercisable divided by the fair market value of the shares of the surviving company on the effective date of the merger. In the case of (A), the Company shall not effect any such Redemption Event unless, prior to the consummation thereof, each Person (other than the Company) which may be required to deliver any stock, securities, cash or property upon the exercise of the Warrant as provided herein shall assume, by written instrument delivered and reasonably satisfactory to, the Registered Owner, (a) the obligations of the Company under the Warrant (and if the Company shall survive the consummation of such transaction, such assumption shall be in addition to, and shall not release the Company from, any continuing obligations of the Company under this Warrant), (b) the obligations of the Company under the Purchase Agreement, the Warrant, the Certificate of Designation, and the Registration Rights Agreement, and (c) the obligation to deliver to the Registered Owner such shares of stock, securities, cash or property as, in accordance with the foregoing provisions of this Section 7(f), the Registered Owner may be entitled to receive. Nothing in this Section 7(f) shall be deemed to authorize the Company to enter into any transaction not otherwise permitted by the Purchase Agreement. This provision shall similarly apply to successive Redemption Events. g. Notice of Certain Events. If: ------------------------ (i) the Company shall declare a dividend (or any other distribution) on its Common Stock; or (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (iii) the Company shall authorize the granting to the holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or (iv) the approval of any shareholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or 5 (v) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of exercise of this Warrant, and shall cause to be delivered to the Registered Owner, at least 10 Business Days prior to the applicable record or effective date hereinafter specified, a notice (provided such notice shall not include any material non-public information) stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. h. Adjustment of Number of Shares. Upon each adjustment of the ------------------------------ Exercise Price as a result of the calculations made in this Section 7, this Warrant shall thereafter evidence the right to receive, at the adjusted Exercise Price, that number of shares of Common Stock (calculated to the nearest one-hundredth) obtained by dividing (i) the product of the aggregate number of shares covered by this Warrant immediately prior to such adjustment and the Exercise Price in effect immediately prior to such adjustment of the Exercise Price by (ii) the Exercise Price in effect immediately after such adjustment of the Exercise Price. 8. Call Option. If, at any time during the Exercise Period, the Per Share Market Value equals or exceeds $12.81 for any twenty (20) consecutive Trading Days, then so long as (i) any Registration Statement required to be filed and be effective pursuant to the Registration Rights Agreement has been filed and declared effective, and, if this call option is being implemented prior to the second anniversary of the Closing Date, such Registration Statement has been in effect and sales of all of the Registrable Securities can be made thereunder for at least ten (10) days prior to the Call Notice Date (as defined below), or such lesser number of days to the extent that in such 10-day period are days contemplated by Sections 3(r) and 3(s) of the Registration Rights Agreement and (ii) the Company has a sufficient number of authorized shares of Common Stock reserved for issuance upon full exercise of the Warrants, the Company shall have the right during the two month period commencing on the first business day after such 20-day period, upon written notice to the Registered Owner, to cause such Registered Owner to exercise this Warrant in full in accordance with the provisions of Section 6 hereof within the period of ten (10) business days commencing on the Registered Owner's receipt of such notice (the "Call Notice Date"). - ----------------- 9. Restriction on Conversion by Either the Registered Owner or the Company. Notwithstanding anything herein to the contrary, except as set forth in Section 7.1 to the Certificate of Designation and Section 8 hereof, in no event shall any Registered Owner have the right or be required to exercise this Warrant if as a result of such conversion the aggregate 6 number of shares of Common Stock beneficially owned by such Registered Owner and its Affiliates would exceed 9.99% of the outstanding shares of the Common Stock following such exercise. For purposes of this Section 9, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. The provisions of this Section 9 may be waived by a Registered Owner as to itself (and solely as to itself) upon not less than 65 days prior written notice to the Company, and the provisions of this Section 9 shall continue to apply until such 65th day (or later, if stated in the notice of waiver). 10. Officer's Certificate. Whenever the number of shares purchasable upon exercise shall be adjusted as required by the provisions of Section 7, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted Exercise Price, number of shares or other securities determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. Each such officer's certificate shall be signed by the chairman, president or chief financial officer of the Company and by the secretary or any assistant secretary of the Company. Each such officer's certificate shall be made available at all reasonable times for inspection by any Registered Owner of the Warrants and the Company shall, forthwith after each such adjustment, deliver a copy of such certificate to the each of the Registered Owners. 11. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Purchase Agreement. As used in this Warrant, the following terms have the following meanings: "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Appraisal Procedure" shall have the following meaning. The independent ------------------- directors of the Company shall determine the fair market value. The Holders shall have ten (10) Business Days to provide the Company with written notice of its approval or disapproval of such determination. If the Holders do not respond within such ten (10) Business Day period, they will be deemed to have approved the fair market value determination of the independent directors. If the Holders appropriately respond that they do not approve of the determination and the independent directors and Holders collectively can not agree on an appropriate fair market value within 30 Business Days, then the Company, on the one hand, and the Holders, on the other hand shall each appoint an Appraiser. A neutral Appraiser shall be appointed by the two party-appointed Appraisers. The three Appraisers shall collectively ascertain the fair market value, which valuation shall be binding upon all parties absent manifest error. "Appraiser" shall mean a nationally recognized or major regional --------- investment banking firm or firm of independent certified public accountants of recognized standing. 7 "Average Price" on any date means (x) the sum of the Per Share Market Value ------------- for the ten (10) Trading Days immediately preceding such date minus (y) the highest and lowest Per Share Market Value during the ten (10) Trading Days immediately preceding such date, divided by (z) eight (8), or a similar calculation if another figure for the number of Trading Days is set forth for clause (x) of this definition. "Business Day" means any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in the state of New York generally are authorized or required by law or other government actions to close. "Change of Control" has the meaning set forth in the Purchase Agreement. ----------------- "Closing" has the meaning set forth in Section 1.2 of the Purchase ------- Agreement. "Common Stock" means the shares of the Company's Common Stock, par value ------------ $0.01 per share. "Company" means SatCon Technology Corporation, a Delaware corporation. ------- "Exercise Period" has the meaning assigned to it the Section 4 hereof. --------------- "Exercise Price" has the meaning assigned to it in Section 3 hereof -------------- "Per Share Market Value" means on any particular date (i) the closing bid ---------------------- price per share of the Common Stock on such date on the National Market System of the Nasdaq Stock Market or other registered national stock exchange on which the Common Stock is then listed or if there is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such date, or (ii) if the Common Stock is not listed then on the National Market System of the Nasdaq Stock Market or any registered national stock exchange, the closing bid price for a share of Common Stock in the over- the-counter market, as reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (iii) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined in accordance with the Appraisal Procedure. In addition, all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. "Purchase Agreement" means that certain Securities Purchase Agreement, ------------------ dated August 25, 1999, among the Company and the Purchasers. "Purchaser" has the meaning set forth in the Purchase Agreement. --------- "Redemption Event" has the meaning assigned to it in Section 6(f) hereof. ---------------- "Redemption Right" has the meaning assigned to it in Section 6(f) hereof. ---------------- 8 "Registered Owner" means the person identified on the face of this Warrant ---------------- as the registered owner hereof or such other person as shown on the records of the Company as being the registered owner of this Warrant or their assigns. "Registration Rights Agreement" means that certain Registration Rights ----------------------------- Agreement, dated August 25, 1999, among the Company and the Purchasers. "Trading Day(s)" means any day on which the primary market on which shares -------------- of Common Stock are listed is open for trading. "Underlying Shares" has the meaning set forth in the Purchase Agreement. ----------------- "Warrant(s)" means the warrants issuable at the Closing. ---------- 12. Registration Rights. The Warrant Shares are subject to the Registration Rights Agreement. 13. Reservation of Underlying Shares; Listing. The Company covenants that it will at all times reserve and keep available out of its authorized shares of Common Stock, free from preemptive rights, solely for the purpose of issue upon exercise of the Warrants as herein provided, such number of shares of the Common Stock as shall then be issuable upon the exercise of all outstanding Warrants into Common Stock. The Company covenants that all shares of the Common Stock issued upon exercise of the Warrant which shall be so issuable shall, when issued, be duly and validly issued and fully paid and non-assessable. The Company shall promptly secure the listing of the shares of Common Stock issuable upon exercise of the Warrant upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance upon exercise of this Warrant) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock form time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. 14. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been received (a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct answer back received), telecopy or facsimile (with transmission confirmation report) at the address or number designated below (if received by 5:00 p.m. eastern time where such notice is to be received), or the first Business Day following such delivery (if received after 5:00 p.m. eastern time where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications are (i) if to the Company to SatCon Technology Corporation, 161 First Street, Cambridge, MA 02142-1221, Attn: President and Chief Executive Officer, fax no. (617) 576-7455, with copies to Hale & Dorr LLP, 60 State Street, Boston, MA 02109, Attn: Jeffrey N. Carp, Esq., fax no. (617) 526-5000 and (ii) if to any 9 Purchaser to the address set forth on Schedule I hereto with copies to those specified on the signature pages hereto and to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye, Esq., fax no. (212) 872-1002 or such other address as may be designated in writing hereafter, in the same manner, by such Person. 15. Compliance With Governmental Requirements. The Company covenants that if any shares of Common Stock required to be reserved for purposes of exercise of Warrants hereunder require registration with or approval of any governmental authority under any Federal or state law, or any national securities exchange, before such shares may be issued upon exercise, the Company will use its best efforts to cause such shares to be duly registered or approved, as the case may be. 16. Fractional Shares. Upon any exercise hereunder, the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not, or is unable, to make such a cash payment, the Registered Owner shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. 17. Payment of Tax Upon Issue of Transfer. The issuance of certificates for shares of the Common Stock upon exercise of the Warrants shall be made without charge to the Registered Owners thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon exercise in a name other than that of the Registered Owner of such Warrant so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 18. Warrants Owned by Company Deemed Not Outstanding. In determining whether the holders of the outstanding Warrants have concurred in any direction, consent or waiver under this Warrant, warrants which are owned by the Company or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding for the purpose of any such determination. Warrants so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Company the pledgee's right so to act with respect to such warrants and that the pledgee is not the Company or any other obligor upon the securities or any Affiliate of the Company or any other obligor on the warrants. 19. Effect of Headings. The section headings herein are for convenience only and shall not affect the construction hereof. 20. No Rights as Stockholder. This Warrant shall not entitle the Registered Owner to any rights as a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive notice of, or to attend, meetings of 10 stockholders or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof. 21. Certain Actions Prohibited. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, subject to Section 8 hereof. 22. Shareholder Rights Plan. Notwithstanding the foregoing, in the event that the Company shall distribute "poison pill" rights pursuant to a "poison pill" shareholder rights plan (the "Rights"), the Company shall, in lieu of ------ making any adjustment pursuant to Section 7 hereof, make proper provision so that each Registered Owner who exercises a Warrant after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such exercise, in addition to the shares of Common Stock issuable upon such exercise, a number of Rights to be determined as follows: (i) if such exercise occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the "Distribution Date"), the same number of Rights to which a holder of ----------------- a number of shares of Common Stock equal to the number of shares of Common Stock issuable upon such exercise at the time of such exercise would be entitled in accordance with the terms and provisions of and applicable to the Rights; and (ii) if such exercise occurs after the Distribution Date, the same number of Rights to which a holder of the number of shares into which the Warrant to exercised was exercisable immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and provisions of and applicable to the Rights, and in each case subject to the terms and conditions of the Rights. 23. Successors and Assigns. This Warrant shall be binding upon and inure to the benefit of the Registered Owners and its assigns, and shall be binding upon any entity succeeding to the Company by merger or acquisition of all or substantially all the assets of the Company. The Company may not assign this Warrant or any rights or obligations hereunder without the prior written consent of the Registered Owner. The Registered Owner may assign this Warrant without the prior written consent of the Company. 24. Transfers. The Company shall maintain a register (the "Register") containing the name and address of the Registered Owner of this Warrant, which Register can be relied upon by the Company as conclusive evidence of the Registered Owner. If the Registered Owner transfers or assigns this Warrant it shall promptly notify the Company in writing of the name and address of the person to which such transfer or assignation was made. Upon receipt of such notice the Company shall immediately update the Register to incorporate the new Registered Owner. 11 25. Governing Law. This Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the nonexclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of the date first set forth above. SATCON TECHNOLOGY CORPORATION By: /s/ Michael C. Turmelle ------------------------------------------- Name: Michael C. Turmelle ------------------------------------------ Title: Vice President, Chief Financial Officer ----------------------------------------- 12 EXHIBIT A Warrant Exercise Form --------------------- TO: [INSERT COMPANY NAME] The undersigned hereby: (1) irrevocably subscribes for and offers to purchase _______ shares of Common Stock of [Insert Company Name], pursuant to Warrant No. ___ heretofore issued to ___________________ on ____________, 199__; (2) encloses either (a) a cash payment of $__________ of (b) a Warrant representing _____ shares of Common Stock valued at the Per Share Market Price of $ _____ on ________, 199_, for these shares at a price of $____ per share (as adjusted pursuant to the provisions of the Warrant); and (3) requests that a certificate for the shares be issued in the name of the undersigned and delivered to the undersigned at the address specified below. Date: ___________________________ Investor Name: ___________________________ Taxpayer Identification ___________________________ Number: ___________________________ By: ___________________________ Printed Name: ___________________________ Title: ___________________________ Address: ___________________________ ___________________________ ___________________________ Note: The above signature should correspond exactly with the name on the face of this Warrant Certificate or with the name of assignee appearing in assignment form below. AND, if said number of shares shall not be all the shares purchasable under the within Warrant, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder less any fraction of a share paid in cash and delivered to the address stated above. 13 -----END PRIVACY-ENHANCED MESSAGE-----