Item
1.01.
Entry into a Material Definitive
Agreement.
Note
Purchase Agreement
On
October 19, 2007, SatCon Technology Corporation (the Company) entered into a
Note Purchase Agreement (the Purchase Agreement) with Rockport Capital
Partners II, L.P. and NGP Energy Technology Partners, L.P. (collectively, the Purchasers).
Pursuant to the Purchase Agreement, the Purchasers have agreed to purchase from
the Company promissory notes (the Notes) that have an aggregate principal
amount of up to $10,000,000 on the terms described below. The net proceeds from
the sale of the Notes will be used primarily to retire the Companys senior
secured convertible notes (the Existing Convertible Notes) at 120% of the
aggregate outstanding principal plus accrued and unpaid interest thereon. It is
expected that the Companys repurchase of the Existing Convertible Notes will
occur on November 7, 2007.
The
sale of the Notes may occur in two tranches. The first tranche may be for up to
$750,000 in principal amount of Notes (the Tranche 1 Notes). The Tranche 1
Notes, if any, would be unsecured and subordinated to the Existing Convertible
Notes in right of payment. The net proceeds from the sale of Tranche 1 Notes,
if any, would be used for certain needs specified by the Company and agreed to
by the Purchasers. The second tranche would be for the balance of the
$10,000,000 aggregate principal amount of the Notes (the Tranche 2 Notes). The
net proceeds from the sale of the Tranche 2 Notes would be used (i) first, for
the purchase of the Existing Convertible Notes and (ii) second, for general
corporate purposes. Immediately following the funding of the Tranche 2 Notes
and the repurchase of the Existing Convertible Notes, in order to secure all of
the Notes (including any Tranche 1 Notes), the Company and each of its domestic
U.S. subsidiaries will grant the Purchasers a perfected lien on and security
interest in all of their respective properties and assets, including the
Companys ownership interest in the capital stock of its subsidiaries. At such
time, the Companys subsidiaries will also guarantee the obligations under the
Notes.
The
Notes will bear interest at a rate of 17% per annum. All unpaid principal,
together with accrued but unpaid interest, under the Notes will become due and
payable on February 19, 2008. The Notes may not be prepaid without the consent
of the Purchasers.
The
Note Purchase Agreement contains certain covenants and restrictions, including,
among others, that (for so long as the Notes are outstanding):
effective immediately, each Purchaser be
allowed one representative of its choice to attend all meetings of the Companys
Board of Directors (the Board) and all meetings of committees of the Board in
a nonvoting capacity;
the Company maintain at all times cash and
cash equivalents, measured on a consolidated basis, of at least $1,000,000;
neither the Company nor any of its
subsidiaries incur any indebtedness or any liens on assets or property, in each
case subject to certain limited exceptions;
neither the Company nor any of its
subsidiaries transfer any assets or property except in the ordinary course of
business;
neither the Company nor any of its
subsidiaries consolidate or merge with or into any other person;
the Board establish and maintain the
existence of a special committee to initiate a search for a new Chief Executive
Officer; and
the Company offer the Purchasers the
opportunity to participate in subsequent securities offerings by the Company
(up to 50% of such offerings), subject to certain exceptions for, among other
things,
2
certain
mergers, acquisitions or strategic alliances approved by the Board and certain
underwritten public offerings.
Events
of default under the Notes include, among others, payment defaults,
cross-defaults, breaches of any representation or warranty, breaches of
covenants that are not cured within the proper time periods (if any), judgment
defaults in excess of $500,000 that remain undischarged for a period of time
and certain bankruptcy-related events involving the Company or any subsidiary. Upon
an event of default (other than bankruptcy-related events of default), the
holders of a majority of the outstanding principal amount of the Notes may
declare all amounts outstanding under the Notes immediately due and payable. Upon
the occurrence of a bankruptcy-related event of default, all amounts
outstanding under the Notes shall automatically become immediately due and
payable. Following the second closing, if the Company cannot satisfy its
obligations following an event of default, the Purchasers shall have the rights
of secured creditors under the Uniform Commercial Code and take action against
the collateral securing the Notes.
The
above description is a summary of the material provisions of the Note Purchase
Agreement, the Notes and the related agreements. This summary is not
complete and is qualified in its entirety by reference to the full text of the
Note Purchase Agreement (including the exhibits thereto), which is attached as
an exhibit to this Current Report on Form 8-K. Readers should review the
Note Purchase Agreement (including the exhibits thereto) for a complete
understanding of the terms and conditions associated with the Note Purchase
Agreement, the Notes and the related agreements.
Term
Sheet for Series C Preferred Stock and Warrant Financing
On
October 19, 2007, the Company also executed a term sheet (the Term Sheet)
with the Purchasers for a proposed equity financing (the Proposed Equity Transaction)
of up to $25.0 million of Series C Convertible Preferred Stock to be designated
by the Company (the Series C Preferred Stock) and Warrants to purchase the
Companys common stock (the Warrants), $10.0 million of which may be used to
retire the Notes.
As
currently contemplated by the Term Sheet, the Proposed Equity Transaction would
occur in two tranches. The first tranche would be for approximately $10.0
million and the second tranche, which would be subject to stockholder approval,
would be for approximately $15.0 million. The Series C Preferred Stock would be
convertible into the Companys common stock (the Common Stock) at an initial
conversion price of $1.04 per share and would accrue a 5% annual dividend. In
connection with the first closing, the Purchasers would receive Warrants to
purchase approximately 15.3 million shares of Common Stock. In connection with
the second closing, the Purchasers would receive Warrants to purchase
approximately 4.4 million shares of Common Stock. All of the Warrants would
have a seven-year term and an exercise price of $1.25 per share or, if higher,
the closing price of the Common Stock immediately prior to signing definitive
agreements, in which case the exercise price would be lowered to $1.25 per share
upon obtaining stockholder approval for the second tranche.
Except
as described below, the Term Sheet is non-binding. The Term Sheet is not an
offer to purchase or sell securities, which will only occur if definitive
documentation is entered into.
The
material binding provisions of the Term Sheet are as follows:
Alternative Transaction Fee
. In the event that after the execution of
the Term Sheet (i) the Company elects not to proceed with the Proposed Equity
Transaction (including terminating any definitive purchase agreement relating
to such transaction) for any reason, and (ii) the Company enters into an
agreement with respect to any Alternative Transaction (as defined below) within
nine months after the date of the Term Sheet, then, at the election of the
Purchasers, either (A) the Company shall pay the Purchasers a fee equal to, at
the Companys option, either $2,000,000 if paid in shares of Common Stock or
$1,500,000 if paid in cash (in either case, the Alternative Transaction Fee)
or (B) the Company shall use its best efforts to provide the Purchasers with
the
3
opportunity
to invest up to 50% of the funds to be received by the Company in such
Alternative Transaction.
Exclusivity
. Until April 30, 2008 (unless certain conditions extending or
shortening such period are met), the Company had agreed to negotiate
exclusively with the Purchasers with respect to (i) any sale of equity or
convertible securities of the Company, (ii) the sale of all or substantially
all of the assets of the Company or (iii) any merger or consolidation of the
Company (each, an Alternative Transaction), and has agreed that neither it
nor its officers or directors will initiate, solicit, encourage, discuss,
negotiate or accept any offers from any third party with respect to any
Alternative Transaction.
The
Proposed Equity Transaction is subject to the execution of definitive
agreements, as well as customary closing conditions. In addition, the closing
of the second tranche of the Proposed Equity Transaction will be subject to
stockholder approval. If and when definitive agreements relating to the
Proposed Equity Transaction are executed, the Company will file another Current
Report on Form 8-K with the Securities and Exchange Commission, which filing
will provide a complete description of the securities to be issued in the
Proposed Equity Transaction.
Item 2.03.
Creation of a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement of a
Registrant.
The
information contained in Item 1.01 above with respect to the Note Purchase
Agreement and the transactions contemplated thereby is incorporated herein by
reference.
Item
9.01
Financial Statements and
Exhibits.
(d)
Exhibits
Exhibit No.
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Description
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10.1
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Note
Purchase Agreement, dated as of October 19, 2007, by and among the Company
and the Purchasers.
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Additional Information About the Proposed Equity Transaction
and Where to Find It:
This
report is not a proxy statement with respect to the Proposed Equity Transaction.
The Company will file a proxy statement with respect to the Proposed Equity
Transaction and related matters.
INVESTORS AND SECURITY
HOLDERS ARE URGED TO READ THE PROXY STATEMENT, WHICH WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED EQUITY TRANSACTION AND RELATED MATTERS, WHEN IT
BECOMES AVAILABLE
. The proxy statement and other documents which are
filed by the Company with the U.S. Securities and Exchange Commission (the SEC)
will be available free of charge at the SECs website, www.sec.gov, or by
directing a request when such a filing is made by the Company to SatCon
Technology Corporation, 27 Drydock Avenue, Boston, Massachusetts 02210,
Attention: Investor Relations.
The
Company, its directors and certain of its executive officers may be considered
participants in the solicitation of proxies in connection with the Proposed
Equity Transaction. Information about the directors and executive officers of
the Company and their respective interests in the Proposed Equity Transaction
will be set forth in the proxy statement that the Company will file with the
SEC in connection with the Proposed Equity Transaction. Additional information
regarding the Companys directors and executive officers is also included in
the Companys proxy statement for its 2007 Annual Meeting of Stockholders,
which was filed with the SEC
4
on
April 27, 2007. Such proxy statement is available free of charge at the
SECs web site at www.sec.gov and from the Company by contacting it as
described above.
Safe
Harbor Statement
Statements
made in this document that are not historical facts or which apply
prospectively constitute forward-looking statements. These forward-looking
statements may be identified by words such as will, intends, believes, expects,
plans, anticipates and similar expressions and include, but are not limited
to, the Companys ability to execute definitive agreements with respect to the
Proposed Equity Transaction, the Companys ability to consummate both the debt
financing and the Proposed Equity Transaction, the ability of the financings to
help the Company achieve stability and success, the ability of the Company to
meet the power demands in the alternative energy and distributed generation
markets, the ability of the Company to execute on its strategic plan and the
ability of the Company to use the proceeds to accelerate growth and for
research and development. Investors should not rely on forward looking
statements because they are subject to a variety of risks and uncertainties and
other factors that could cause actual results to differ materially from the
Companys expectations, including risks that the conditions to closing of the
debt financing may not be satisfied, that the Term Sheet for the Proposed
Equity Transaction is primarily non-binding and that the investors in the
Proposed Equity Transaction may not consummate the transactions for any reason,
risks that the holders of outstanding warrants may seek to put such warrants to
the Company as a result of the Proposed Equity Transaction, and risks that the
Companys shareholders do not approve the second tranche of the Proposed Equity
Transaction. Additional information concerning risk factors is contained from
time to time in the Companys SEC filings (copies of which may be obtained at
the SECs website at: http://www.sec.gov). Readers should not place undue
reliance on any such forward-looking statements, which speak only as of the
date they are made. The Company disclaims any obligation to publicly update or
revise any such statements to reflect any change in the Company expectations,
or in events, conditions or circumstances on which any such statements may be
based, or that may affect the likelihood that actual results will differ from
those set forth in the forward-looking statements.
5
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto duly authorized.
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SATCON
TECHNOLOGY CORPORATION
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Date:
October 25, 2007
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By:
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/s/
David E. ONeil
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David
E. ONeil
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Vice
President of Finance and Treasurer
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6
EXHIBIT INDEX
Exhibit No.
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Description
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10.1
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Note
Purchase Agreement, dated as of October 19, 2007, by and among the Company
and the Purchasers.
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7
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