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Filed
Pursuant to Rule 424(b)(3)
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Registration
No. 333-150070
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PROSPECTUS
SatCon Technology Corporation
44,499,998 Shares of Common Stock
This prospectus relates to the offer and sale
by the selling stockholders identified in this prospectus, and any of their
pledgees, donees, transferees or other successors in interest, of up to an
aggregate of 44,499,998 shares of the common stock of SatCon Technology
Corporation. We are filing the registration statement of which this prospectus
is a part at this time to fulfill contractual obligations to do so, which we
undertook at the time of the original issuance of the Series C convertible
preferred stock, or Series C Preferred Stock, and the related warrants. We
will not receive any of the proceeds from the sale of the common stock by the
selling stockholders.
We have agreed to pay certain expenses in
connection with the registration of the shares and to indemnify most of the
selling stockholders against certain liabilities. The selling stockholders will
pay all underwriting discounts and selling commissions, if any, in connection
with the sale of the shares.
The selling stockholders identified in this
prospectus, or their pledgees, donees, transferees or other
successors-in-interest, may offer the shares from time to time through public
or private transactions at prevailing market prices, at prices related to
prevailing market prices or at privately negotiated prices.
Our common stock is traded on the Nasdaq
Capital Market under the symbol SATC. On March 28, 2008, the closing
sale price of the common stock on Nasdaq was $1.84 per share. We urge you to
obtain current market quotations for our common stock.
Investing
in our common stock involves a high degree of risk. See Risk Factors
beginning on page 2.
Neither the
Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is April 30,
2008
TABLE OF CONTENTS
Our executive offices are located at 27
Drydock Avenue, Boston, Massachusetts 02210, our telephone number is
(617) 897-2400 and our Internet address is www.satcon.com. The information
on our Internet website is not incorporated by reference in this prospectus.
We have not authorized anyone to provide you
with information different from that contained or incorporated by reference in
this prospectus. The selling stockholders are offering to sell, and seeking
offers to buy, shares of our common stock only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of common stock.
PROSPECTUS
SUMMARY
This
summary highlights important features of this offering and the information
included or incorporated by reference in this prospectus. This summary does not
contain all of the information that you should consider before investing in our
common stock. You should read the entire prospectus carefully, especially the
risks of investing in our common stock discussed under Risk Factors.
Unless the context otherwise
requires, references in this prospectus to SatCon, we, us, and our
refer to SatCon Technology Corporation and its subsidiaries.
SatCon
Technology Corporation
We design and manufacture enabling
technologies and products for electrical power conversion and control for
high-performance, high-efficiency applications in large, growth markets such as
alternative energy, hybrid electric vehicles, distributed power generation,
power quality, semiconductor fabrication capital equipment, industrial motors
and drives, and high reliability defense electronics.
The
Offering
Common stock offered by selling stockholders
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44,499,998 shares
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Use of proceeds
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We will not receive any proceeds from the sale of shares in this
offering.
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Nasdaq Capital Market symbol
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SATC
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1
RISK FACTORS
Investing
in our common stock involves a high degree of risk. You should carefully
consider the risks and uncertainties described below before purchasing our
common stock. If any of the following risks actually occur, our business,
financial condition or results of operations would likely suffer. In that case,
the trading price of our common stock could fall, and you may lose all or part
of the money you paid to buy our common stock.
Risks Related to Our Company
We have a history of operating losses, may not be able to achieve
profitability and may require additional capital in order to sustain our
businesses.
For
each of the past ten fiscal years, we have experienced losses from operating
our businesses. As of December 31, 2007, we had an accumulated deficit of
approximately $176.8 million. During the year ended December 31, 2007 we
had a loss from operations of approximately $11.0 million. In the fourth quarter of fiscal 2007, we
raised $25.0 million through the sale of short-term notes, Series C
Preferred Stock and related warrants.
The net proceeds of these transactions were approximately $23.0 million,
after deducting placement fees and other offering-related expenses. See Description of Transactions for a
detailed description of these transactions and the related securities. If, however, we are unable to operate on a
cash flow breakeven basis in the future, we may need to raise additional
capital in order to sustain our operations. There can be no assurance that we
will be able to achieve such results or to raise such funds if they are
required.
We could issue additional shares of common stock or securities
convertible into or exercisable for common stock, which might dilute your
percentage ownership interest in our company.
We
have authorized 200,000,000 shares of our common stock, of which 49,803,979
shares were issued and outstanding as of December 31, 2007. Our board of directors has the authority,
without action or vote of our stockholders in most cases, to issue all or a
part of any authorized but unissued shares. Such stock issuances may be made at
a price that reflects a discount from the then-current trading price of our
common stock. In addition, in order to raise the capital that we may need at
todays stock prices, we will need to issue securities that are convertible
into or exercisable for a significant amount of our common stock. For example,
in the fourth quarter of 2007, we sold Series C Preferred Stock and
related warrants for $25.0 million. See Description
of Transactions for a detailed description of these transactions and the
related securities. These issuances
would dilute your percentage ownership interest, which will have the effect of
reducing your influence on matters on which our stockholders vote. You may incur
additional dilution if holders of stock options, whether currently outstanding
or subsequently granted, exercise their options or if warrant holders exercise
their warrants to purchase shares of our common stock. In addition, these issuances, or the perception
that such issuances may occur in the future, may have a depressant effect on
our stock price and make it more difficult to raise capital in the future on
reasonable terms or at all.
The sale or issuance of a large number of shares of our common stock
could depress our stock price.
As
of March 1, 2008, we have reserved 31,749,634 shares of common stock for
issuance upon exercise of stock options and warrants, 12,288,077 shares for
future issuances under our stock plans and 924,517 shares for future issuances
as matching contributions under our 401(k) plan
.
We have also reserved 1,096,774 shares of common stock for
issuance upon conversion of the outstanding Series B Preferred Stock,
which can be converted at any time. In addition, we have reserved 24,038,060
shares of common stock for issuance upon conversion of the outstanding Series C
Preferred Stock, which can be converted at any time. As of March 1, 2008, holders of warrants
and options to purchase an aggregate of 30,718,756 shares of our common stock
may exercise those securities and transfer the underlying common stock at any
time subject, in some cases, to Rule 144.
The availability of these shares for sale in the open market, or the
perception that such shares are available for sale, may have a depressant
effect on our stock price and make it more difficult to raise capital in the
future on reasonable terms or at all.
2
We have not consistently complied with Nasdaqs Marketplace Rules for
continued listing, which exposes us to the risk of delisting from the Nasdaq
Stock Market
.
As
a result of our failure to comply with the continued listing requirements of
The Nasdaq Global Market, on October 25, 2006 we transferred our
securities to The Nasdaq Capital Market.
However, if we fail to maintain compliance with the rules for
continued listing on The Nasdaq Capital Market, including, without limitation,
the minimum $1.00 bid price requirement, and our common stock is delisted from
The Nasdaq Capital Market, there could be a number of negative implications,
including reduced liquidity in our common stock as a result of the loss of
market efficiencies associated with The Nasdaq Capital Market, the loss of
federal preemption of state securities laws, the potential loss of confidence
by suppliers, customers and employees, as well as the loss of analyst coverage
and institutional investor interest, fewer business development opportunities
and greater difficulty in obtaining financing.
We expect to generate a significant portion of our future revenues from
sales of our power control products and cannot assure market acceptance or
commercial viability of our power control products.
We
intend to continue to expand development of our power control products. We
cannot assure you that potential customers will select our products to
incorporate into their systems or that our customers products will realize
market acceptance, that they will meet the technical demands of their end users
or that they will offer cost-effective advantages over existing products. Our
marketing efforts have included development contracts with several customers
and the targeting of specific market segments for power and energy management
systems. We cannot know if our commercial marketing efforts will be successful
in the future. Additionally, we may not be able to develop competitive
products, our products may not receive market acceptance, and we may not be
able to compete profitably in this market, even if market acceptance is achieved.
If our products do not gain market acceptance or achieve commercial viability,
we will not attain our anticipated levels of profitability and growth.
If we are unable to maintain our technological expertise in design and
manufacturing processes, we will not be able to successfully compete.
We
believe that our future success will depend upon our ability to develop and
provide products that meet the changing needs of our customers. This requires
that we successfully anticipate and respond to technological changes in design
and manufacturing processes in a cost-effective and timely manner. As a result,
we continually evaluate the advantages and feasibility of new product design
and manufacturing processes. We cannot, however, assure you that our process improvement
efforts will be successful. The introduction of new products embodying new
technologies and the emergence of shifting customer demands or changing
industry standards could render our existing products obsolete and
unmarketable, which would have a significant impact on our ability to generate
revenue. Our future success will depend upon our ability to continue to develop
and introduce a variety of new products and product enhancements to address the
increasingly sophisticated needs of our customers. We may experience delays in
releasing new products and product enhancements in the future. Material delays
in introducing new products or product enhancements may cause customers to
forego purchases of our products and purchase those of our competitors.
We are heavily dependent on contracts with the U.S. government and its
agencies or from subcontracts with the U.S. governments prime contractors for
revenue to develop our products, and the loss of one or more of our government
contracts could preclude us from achieving our anticipated levels of growth and
revenues.
Our
ability to develop and market our products is dependent upon maintaining our
U.S. government contract revenue and research grants. Many of our U.S.
government contracts are funded incrementally on a year-to-year basis.
Approximately 22% of our revenue during the year ended December 31, 2007
was derived from government contracts and subcontracts. Changes in government
policies, priorities or programs that result in budget reductions could cause
the government to cancel existing contracts or eliminate follow-on phases in
the future which would severely inhibit our ability to successfully complete
the development and commercialization of our products. In addition, there can
be no assurance that, once a government contract is completed, it will lead to
follow-on contracts for additional research and development, prototype build
and test or production. Furthermore, there can be no assurance that our U.S.
government contracts or subcontracts will not be terminated or suspended in the
future. In the event that any of our government contracts are terminated for
cause, it could significantly affect our ability to obtain future government
contracts, which could seriously harm our ability to develop our technologies
and products.
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Our contracts with the U.S. government are subject to audit
by the Defense Contract Audit Agency and other agencies of the government,
which may challenge our treatment of direct and indirect costs and
reimbursements, resulting in a material adjustment and adverse impact on our
financial condition.
The
accuracy and appropriateness of our direct and indirect costs and expenses
under our contracts with the U.S. government are subject to extensive
regulation and audit by the Defense Contract Audit Agency or by other
appropriate agencies of the U.S. government. These agencies have the right to
challenge our cost estimates or allocations with respect to any such contract.
Additionally, substantial portions of the payments to us under U.S. government
contracts are provisional payments that are subject to potential adjustment
upon audit by such agencies. Adjustments that result from inquiries or audits
of our contracts could have a material adverse impact on our financial
condition or results of operations.
Currently 2006 and 2007 remain open for review with the Defense Contract
Audit Agency.
Since
our inception, we have not experienced any material adjustments as a result of
any inquiries or audits, but there can be no assurance that our contracts will
not be subject to material adjustments in the future.
The U.S. government has certain rights relating to our intellectual
property.
Many
of our patents are the result of inventions made under U.S. government-funded
research and development programs. With respect to any invention made with
government assistance, the government has a nonexclusive, nontransferable,
irrevocable, paid-up license to use the technology or have the technology
employed for or on behalf of the U.S. government throughout the world. Under certain
conditions, the U.S. government also has march-in rights, which enable the
U.S. government to require us to grant a nonexclusive, partially exclusive, or
exclusive license in any field of use to responsible applicants, upon terms
that are reasonable under the circumstances.
Our business could be adversely affected if we are unable to protect
our patents and proprietary technology.
As
of March 1, 2008, we held approximately 65 U.S. patents and had 6 patent
applications pending with the U.S. Patent and Trademark Office. We have also
obtained corresponding patents in the rest of North America, Europe and Asia
for many of these patents. The expiration dates of our patents range from 2009
to 2021, with the majority expiring after 2015. As a qualifying small business
from our inception to date, we have retained commercial ownership rights to
proprietary technology developed under various U.S. government contracts and
grants.
Our
patent and trade secret rights are of significant importance to us and to our
future prospects. Our ability to compete effectively against other companies in
our industry will depend, in part, on our ability to protect our proprietary
technology and systems designs relating to our products. Although we have
attempted to safeguard and maintain our proprietary rights, we do not know
whether we have been or will be successful in doing so. Further, our
competitors may independently develop or patent technologies that are
substantially equivalent or superior to ours. No assurance can be given as to
the issuance of additional patents or, if so issued, as to their scope. Patents
granted may not provide meaningful protection from competitors. Even if a
competitors products were to infringe patents owned by us, it would be costly
for us to pursue our rights in an enforcement action and there can be no
assurance that we would be successful in enforcing our intellectual property
rights. Because we intend to enforce our patents, trademarks and copyrights and
protect our trade secrets, we may be involved from time to time in litigation
to determine the enforceability, scope and validity of these rights. This
litigation could result in substantial costs to us and divert resources from
operational goals. In addition, effective patent, trademark, service mark,
copyright and trade secret protection may not be available in every country
where we operate or sell our products.
We may not be able to maintain confidentiality of our trade secrets and
other proprietary technology.
In
addition to our patent rights, we also rely on treatment of our technology as
trade secrets through confidentiality agreements, which all of our employees
are required to sign, assigning to us all patent rights and other intellectual
property developed by our employees during their employment with us. Our
employees have also agreed not to disclose any trade secrets or confidential
information without our prior written consent. We also rely on non-disclosure
agreement to protect our trade secrets and proprietary knowledge. These agreements
may be breached, and we may not
4
have
adequate remedies for any breach. Our trade secrets may also be known without
breach of these agreements or may be independently developed by competitors.
Failure to maintain the proprietary nature of our technology and information
could harm our results of operations and financial condition by reducing or
eliminating our technological advantages in the marketplace.
Others may assert that our technology infringes their intellectual
property rights.
We
believe that we do not infringe the proprietary rights of others and, to date,
no third parties have asserted an infringement claim against us, but we may be
subject to infringement claims in the future. The defense of any claims of
infringement made against us by third parties could involve significant legal
costs and require our management to divert time from our business operations.
If we are unsuccessful in defending any claims of infringement, we may be
forced to obtain licenses or to pay royalties to continue to use our
technology. We may not be able to obtain any necessary licenses on commercially
reasonable terms or at all. If we fail to obtain necessary licenses or other
rights, or if these licenses are costly, our operating results may suffer
either from reductions in revenues through our inability to serve customers or
from increases in costs to license third-party technologies.
Our success is dependent upon attracting and retaining highly
qualified personnel and the
loss of key
personnel could significantly hurt our business.
To
achieve success, we must attract and retain highly qualified technical,
operational and executive employees. The
loss of the services of key employees or an inability to attract, train and
retain qualified and skilled employees, specifically engineering, operations
and business development personnel, could result in the loss of business or
could otherwise negatively impact our ability to operate and grow our business
successfully.
We expect significant competition for our products and services.
In
the past, we have faced limited competition in providing research services,
prototype development and custom and limited quantity manufacturing. We expect
competition to intensify greatly as commercial applications increase for our
products under development. Many of our competitors and potential competitors
are well established and have substantially greater financial, research and
development, technical, manufacturing and marketing resources than we do. Some
of our competitors and potential competitors are much larger than we are. If
these larger competitors decide to focus on the development of distributed
power and power quality products, they have the manufacturing, marketing and
sales capabilities to complete research, development and commercialization of
these products more quickly and effectively than we can. There can also be no
assurance that current and future competitors will not develop new or enhanced
technologies perceived to be superior to those sold or developed by us. There
can be no assurance that we will be successful in this competitive environment.
We are dependent on third-party suppliers for the supply of key
components for our products.
We
use third-party suppliers for components in many of our systems. From time to
time, shipments can be delayed because of industry-wide or other shortages of
necessary materials and components from third-party suppliers. A suppliers
failure to supply components in a timely manner, or to supply components that
meet our quality, quantity or cost requirements, or our inability to obtain
substitute sources of these components on a timely basis or on terms acceptable
to us, could impair our ability to deliver our products in accordance with
contractual obligations.
On occasion, we agree to fixed price engineering contracts, which
exposes us to losses.
Most
of our engineering design contracts are structured on a cost-plus basis. However, on occasion we have entered into
fixed price contracts, which may expose us to loss. In addition, in our manufacturing divisions
we accept fixed price contracts via customer purchase orders. A fixed priced contract, by its very nature,
requires cost estimates during the bidding process and throughout the contract,
as the program proceeds to completion.
Depending upon the complexity of the program, the estimated completion
costs could change frequently and significantly during the course of the
contract. We regularly involve the
appropriate people on the program and finance staffs to arrive at a reasonable
estimate of the cost to complete.
However, due to unanticipated technical challenges and other factors,
there is the
5
potential
for substantial cost overruns in order to complete a contract in accordance
with the contract specifications. At December 31,
2007, we have accrued approximately $1.3 million related to an anticipated loss
on a fixed price contract. At December 31,
2006 there were no contract losses recorded.
If we experience a period of significant growth or expansion, it could
place a substantial strain on our resources.
If
our power control products are successful in achieving rapid market
penetration, we may be required to deliver large volumes of technically complex
products or components to our customers on a timely basis at reasonable costs
to us. We have limited experience in ramping up our manufacturing capabilities
to meet large-scale production requirements and delivering large volumes of our
power control products. If we were to commit to deliver large volumes of our
power control products, we cannot assure you that we will be able to satisfy
large-scale commercial production on a timely and cost-effective basis or that
such growth will not strain our operational, financial and technical resources.
Our business could be subject to product liability claims.
Our
business exposes us to potential product liability claims, which are inherent
in the manufacturing, marketing and sale of our products, and we may face
substantial liability for damages resulting from the faulty design or
manufacture of products or improper use of products by end users. We currently
maintain a moderate level of product liability insurance, and there can be no
assurance that this insurance will provide sufficient coverage in the event of
a claim. Also, we cannot predict whether we will be able to maintain such
coverage on acceptable terms, if at all, or that a product liability claim
would not harm our business or financial condition. In addition, negative
publicity in connection with the faulty design or manufacture of our products
would adversely affect our ability to market and sell our products.
We are subject to a variety of environmental laws that expose us to
potential financial liability.
Our
operations are regulated under a number of federal, state and foreign
environmental and safety laws and regulations that govern, among other things,
the discharge or release of hazardous materials into the air and water as well
as the handling, storage and disposal of these materials. These laws and
regulations include the Clean Air Act, the Clean Water Act, the Resource,
Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation
and Liability Act, as well as analogous state and foreign laws. Because we use
hazardous materials in certain of our manufacturing processes, we are required
to comply with these environmental laws. In addition, because we generate
hazardous wastes, we, along with any other person who arranges for the disposal
of our wastes, may be subject to potential financial exposure for costs
associated with an investigation and remediation of sites at which we have
arranged for the disposal of hazardous wastes if those sites become
contaminated and even if we fully comply with applicable environmental
laws. If we were found to be a
responsible party, we could be held jointly and severably liable for the costs
of remedial actions. To date, we have not been cited for any improper discharge
or release of hazardous materials.
Businesses and consumers might not adopt alternative energy solutions
as a means for obtaining their electricity and power needs.
On-site
distributed power generation solutions, such as fuel cell, photovoltaic and
wind turbine systems, which utilize our products, provide an alternative means
for obtaining electricity and are relatively new methods of obtaining
electrical power that businesses may not adopt at levels sufficient to grow this
part of our business. Traditional electricity distribution is based on the
regulated industry model whereby businesses and consumers obtain their
electricity from a government regulated utility. For alternative methods of
distributed power to succeed, businesses and consumers must adopt new
purchasing practices and must be willing to rely upon less traditional means of
purchasing electricity. We cannot assure you that businesses and consumers will
choose to utilize on-site distributed power at levels sufficient to sustain our
business in this area. The development of a mass market for our products may be
impacted by many factors which are out of our control, including:
·
market acceptance of fuel
cell, photovoltaic and wind turbine systems that incorporate our products;
·
the cost competitiveness of
these systems;
6
·
regulatory requirements; and
·
the emergence of newer, more
competitive technologies and products.
If
a mass market fails to develop or develops more slowly than we anticipate, we
may be unable to recover the losses we will have incurred to develop these
products.
Our quarterly operating results are subject to fluctuations, and if we
fail to meet the expectations of securities analysts or investors, our share
price may decrease significantly.
Our
annual and quarterly results may vary significantly depending on various
factors, many of which are beyond our control.
Because our operating expenses are based on anticipated revenue levels,
our sales cycle for development work is relatively long and a high percentage
of our expenses are fixed for the short term, a small variation in the timing
of recognition of revenue can cause significant variations in operating results
from quarter to quarter. If our earnings do not meet the expectations of
securities analysts or investors, the price of our stock could decline.
Provisions in our charter documents and Delaware law may delay, deter
or prevent the acquisition of SatCon, which could decrease the value of your
shares.
Some
provisions of our certificate of incorporation and bylaws may delay, deter or
prevent a change in control of SatCon or a change in our management that you,
as a stockholder, may consider favorable. These provisions include:
·
authorizing the issuance of blank
check preferred stock that could be issued by our board of directors to
increase the number of outstanding shares and deter a takeover attempt;
·
a board of directors with
staggered, three-year terms, which may lengthen the time required to gain
control of our board of directors;
·
prohibiting cumulative
voting in the election of directors, which would otherwise allow less than a
majority of stockholders to elect director candidates; and
·
limitations on who may call
special meetings of stockholders.
In
addition, Section 203 of the Delaware General Corporation Law and
provisions in some of our stock incentive plans may delay, deter or prevent a
change in control of SatCon. Those provisions serve to limit the circumstances
in which a premium may be paid for our common stock in proposed transactions,
or where a proxy contest for control of our board may be initiated. If a change
of control or change in management is delayed, deterred or prevented, the
market price of our common stock could suffer.
We are subject to stringent export laws and risks inherent in
international operations.
We
market and sell our products and services both inside and outside the United
States. We are currently selling our products and services throughout North
America and in certain countries in South America, Asia, Canada and Europe.
Certain of our products are subject to the International Traffic in Arms
Regulations (ITAR) 22 U.S.C 2778, which restricts the export of information and
material that may be used for military or intelligence applications by a
foreign person. Additionally, certain products of ours are subject to export
regulations administered by the Department of Commerce, Bureau of Industry
Security, which require that we obtain an export license before we can export
certain products or technology. Failure to comply with these laws could result
in enforcement responses by the government, including substantial monetary
penalties, denial of export privileges, debarment from government contracts and
possible criminal sanctions.
Revenue
from sales to our international customers for the years ended December 31,
2007 and 2006 were approximately $9.6 million and $3.3 million, respectively.
Our success depends, in part, on our ability to expand our
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market
for our products and services to foreign customers and our ability to
manufacture products that meet foreign regulatory and commercial requirements.
We have limited experience developing and manufacturing our products to comply
with the commercial and legal requirements of international markets. We face
numerous challenges in penetrating international markets, including unforeseen
changes in regulatory requirements, export restrictions, fluctuations in
currency exchange rates, longer accounts receivable cycles, difficulties in
managing international operations, and the challenges of complying with a wide
variety of foreign laws.
We are exposed to credit risks with respect to some of our customers.
To
the extent our customers do not advance us sufficient funds to finance our
costs during the execution phase of our contracts, we are exposed to the risk
that they will be unable to accept delivery or that they will be unable to make
payment at the time of delivery. Occasionally, we accept the risk of dealing
with thinly financed entities. We attempt to mitigate this risk by seeking to
negotiate more timely progress payments and utilizing other risk management
procedures.
Our loan agreement with Silicon Valley Bank subjects us to various
restrictions, which may limit our ability to pursue business opportunities
.
Our
loan agreement with Silicon Valley Bank subjects us to various restrictions on
our ability to engage in certain activities without the prior written consent
of the bank, including, among other things, our ability to:
·
dispose of or encumber
assets, other than in the ordinary course of business,
·
incur additional
indebtedness,
·
merge or consolidate with
other entities, or acquire other businesses, and
·
make investments
The
agreement also subjects us to various financial and other covenants with which
we must comply on an ongoing or periodic basis. The financial covenant requires
us to maintain a minimum level of tangible net worth, as defined, which varies
from month to month. If we violate this or any other covenant, any outstanding
debt under this agreement could become immediately due and payable, the bank
could proceed against any collateral securing indebtedness and our ability to
borrow funds in the future may be restricted or eliminated. These restrictions
may also limit our ability to pursue business opportunities or strategies that
we would otherwise consider to be in the best interests of the Company.
The holders of our Series B Preferred Stock are entitled to
receive liquidation payments in preference to the holders of our common stock.
As
of March 1, 2008, 340 shares of our Series B Preferred Stock were
outstanding. Pursuant to the terms of the certificate of designation creating
the Series B Preferred Stock, upon a liquidation of our company, the
holders of shares of the Series B Preferred Stock are entitled to receive
a liquidation payment prior to the payment of any amount with respect to the
shares of our common stock. The amount of this preferential liquidation payment
is $5,000 per share of Series B Preferred Stock, plus the amount of any
accrued but unpaid dividends on those shares.
Dividends accrue on the shares of Series B Preferred Stock at a
rate of 8% per annum.
The holders of our certain of our outstanding warrants have the right
to put those warrants to us for cash if we issue common stock or common stock
equivalents at a price per share less than $1.65
.
As
of March 1, 2008, we had outstanding Warrant As to purchase up to an
aggregate of 2,090,911 shares of common stock and Warrant Cs to purchase up to
an aggregate of 1,045,456 shares of common stock. The holder of those warrants may put those
warrants to us for a cash amount equal to their Black-Scholes value if we issue
common stock or common stock equivalents at a price per share less than $1.65,
subject to certain exceptions. These
rights are exercisable for the 45-day period following any such issuance. For example,
in connection with the issuance of the Series C Preferred
8
Stock
in the fourth quarter of 2007, holders of these series of warrants put their
warrants to us for an aggregate of $2.7 million in cash. The existence of these potential put rights
with respect to the remaining Warrant As and Warrant Cs could limit our ability
to raise necessary capital in the future.
Furthermore, the exercise of these rights could materially impact our
capital resources and materially affect our ability to fund operations.
Risks Related to Our Private Placement of Series C Preferred Stock
and Related Warrants
The holders of our Series C Preferred Stock are entitled to
receive liquidation payments in preference to the holders of our common stock.
As
of March 1, 2008, 25,000 shares of our Series C Preferred Stock were
outstanding. Upon a liquidation of our company, the holders of shares of Series C
Preferred Stock are entitled to receive a liquidation payment prior to the
payment of any amount with respect to the shares of our common stock. The
amount of this preferential liquidation payment is the greater of (i) $1,000
per share of Series C Preferred Stock, plus the amount of any accrued but
unpaid dividends on those shares, or (ii) the amount per share that a
holder would have received if, immediately prior to the liquidation, that
holders share had been converted to our common stock. Dividends accrue on the
shares of Series C Preferred Stock at a rate of 5% per annum. Because of
the substantial liquidation preference to which the holders of the Series C
Preferred Stock are entitled, the amount available to be distributed to the
holders of our common stock upon a liquidation of our company could be
substantially limited or reduced to zero and may make it more difficult to
raise capital or recruit and retain key personnel in the future.
We are responsible for having the resale of shares of common stock
underlying the Series C Preferred Stock and related warrants registered
with the SEC within defined time periods and will incur liquidated damages if
the shares are not registered with the SEC within those defined time periods
.
Pursuant
to our agreement with the investors in the Series C Preferred Stock
financing transaction, we are obligated to (i) file a registration
statement covering the resale of the common stock underlying the Series C
Preferred Stock and related warrants with the SEC by the earlier of (x) five
business days after we filed our Annual Report on Form 10-K for the fiscal
year ended December 31, 2007 and (y) April 7, 2008 (which we
have satisfied), (ii) use our best efforts to cause the registration
statement to be declared effective within 60 days following the required filing
date, and (iii) use our best efforts to keep the registration statement
effective until the earlier of (x) the date all of the securities covered
by the registration statement have been publicly sold and (y) the date all
of the securities covered by the registration statement may be sold without
restriction under SEC Rule 144. If we fail to comply with these or certain
other provisions, then we will be required to pay liquidated damages of one
twentieth of a percent (.05%) of the aggregate purchase price paid by the
investors for the securities that can be registered on the registration
statement for each day the failure continues. The total liquidated damages
under this provision are capped at 9.9% of the aggregate purchase price paid by
the investors in the private placement. Any such payments could materially
affect our ability to fund operations.
The certificate of designation governing the Series C Preferred
Stock contains various covenants and restrictions which may limit our ability
to operate our business
.
Under
the certificate of designation governing the Series C Preferred Stock we
are not permitted, without the affirmative vote or written consent of the
holders of 50% of the Series C Preferred Stock, directly or indirectly, to
take any of the following actions or agree to take any of the following
actions:
·
authorize, create or issue
any shares of preferred stock or other equity securities ranking senior to or
on a parity with the Series C Preferred Stock;
·
increase or decrease the
total number of authorized shares of Series C Preferred Stock;
·
amend or modify our
certificate of incorporation (including the certificate of designation
governing the Series C Preferred Stock) or bylaws that would adversely
affect the rights, preferences, powers and privileges of the Series C
Preferred Stock;
9
·
incur any form of
indebtedness for borrowed money in excess of $5,000,000 in the aggregate (other
than indebtedness existing at November 8, 2007);
·
repurchase or redeem any
equity securities ranking junior to the Series C Preferred Stock, subject
to certain exceptions;
·
effect any distribution or
declare, pay or set aside any dividend with respect to any equity securities
ranking junior to the Series C Preferred Stock;
·
effect a liquidation,
consummate a reorganization event or dispose, transfer or license any material
assets, technology or intellectual property, other than non-exclusive licenses
in connection with sales of our products in the ordinary course of business;
·
change the size of our board
of directors;
·
encumber or grant a security
interest in all or substantially all or a material part of our assets except to
secure indebtedness permitted above that is approved by our board of directors;
·
acquire a material amount of
assets of another entity, through a merger, purchase of assets or purchase of
capital stock or otherwise; or
·
enter into any agreement to
do or cause to be done any of the foregoing
These
restrictions could limit our ability to plan for or react to market conditions
or meet extraordinary capital needs or otherwise restrict corporate activities,
any of which could have a material adverse impact on our business.
The holders of the Series C Preferred Stock will have substantial
voting power on matters submitted to a vote of stockholders
.
Generally,
the holders of Series C Preferred Stock are entitled to vote on all
matters on which the holders of our common stock are entitled to vote, voting
together with the holders of our common stock as a single class. Each share of Series C
Preferred Stock is entitled to 694 votes. Based on 49,961,606 shares of common
stock outstanding as of March 1, 2008, the outstanding shares of Series C
Preferred Stock represent, in the aggregate, 25.8% of the voting power of our
stock. The voting percentage held by the investors would increase to the extent
the shares of Series C Preferred Stock are converted or the warrants
issued in the private placement are exercised. Because the investors will own a
significant percentage of our voting power, they may have considerable
influence in determining the outcome of any corporate transaction or other
matter submitted to our stockholders for approval, including the election of
directors and approval of merger, consolidations and the sale of all or
substantially all of our assets.
In
addition, the ownership by the investors of a substantial percentage of our
total voting power and the terms of the Series C convertible preferred
stock could make it more difficult and expensive for a third party to pursue a
change of control of our company, even if a change of control would generally
be beneficial to our stockholders.
The Series C
Preferred Stock is redeemable at the option of the holders under certain
circumstances
.
On
or after November 8, 2011, the holders of two-thirds of the outstanding
shares of Series C Preferred Stock may require us to redeem all or any
portion of the outstanding shares of Series C Preferred Stock. The
redemption price is equal to 120% of the stated liquidation preference amount,
to the extent that the redemption is made in cash, or 140% of the stated
liquidation preference amount to the extent that, at our election, the
redemption is made in shares of our common stock. If the redemption is made in
shares of common stock, the shares will be based on the fair market value of
the common stock, based on a 10 day volume weighted average, as of the
redemption date. Depending on our cash resources at the time that this
redemption right is exercised, we may or may not be able to fund the redemption
from our available cash resources. If we were unable to fund the redemption
from available cash we would need to find an
10
alternative
source of financing to do so. The can be no assurances that we would be able to
raise such funds if they are required. If we were not able to finance the
redemption in cash, we would have to make the redemption payment in shares of
our common stock which would be dilutive to our common stockholders.
The investors in our private
placement of Series C Preferred Stock will have the right to designate up
to four individuals to be elected to our board of directors
.
In
the purchase agreement, we agreed that for as long as each investor
beneficially owns at least 25% of the total number of shares of common stock
underlying the Series C Preferred Stock and warrants issued to them in the
private placement, each investor would be entitled to designate one individual
to be nominated to our board of directors. We also agreed that as long as
either investor or both investors beneficially owns at least 25% of the total
number of shares of common stock underlying Series C Preferred Stock and
warrants issued to them in the private placement, we would include one investor
designee in the corporate governance and nominating committee and one investor
designee on the compensation committee of our board of directors. Upon the
first closing, our board of directors elected Philip J. Deutch, as the designee
of NGP Energy Technology Partners, L.P., and David J. Prend, as the designee of
RockPort Capital Partners II, L.P., to serve on our board.
Upon
the second closing, as required under the purchase agreement, our board of
directors was reduced from nine directors to seven directors, and the investors
jointly had the right to designate one additional director who is independent
(as that term is defined in the regulations of the Nasdaq Stock Market) to
serve as a director. Accordingly, effective as of the second closing, three
existing directors resigned and the board duly appointed Robert G.
Schoenberger, Chairman of the Board and Chief Executive Officer of Unitil
Corporation, as the investors additional independent designee. However, in the event the size of our board
of directors is increased to nine members in order to comply with Nasdaq rules,
the investors will be entitled to designate an additional independent director.
The
number of investor designees will be appropriately adjusted to the extent
required by the applicable rules of Nasdaq.
Because
the holders of Series C Preferred Stock will have the right to designate
these members to our board of directors, as well as designees to serve on our
board committees, they have considerable influence on the composition of our
board of directors and its committees.
We have agreed to give the
holders of Series C Preferred Stock the right to participate in subsequent
stock issuances
.
We
agreed that if we issue and sell any new equity securities prior to December 20,
2009, subject to some exceptions, we will give the investors the right to
purchase all or some of those new securities so as we permit the investors to
maintain their ownership percentage in our stock. The existence of this right
may make it more difficult for us to obtain financing from third parties that
do not wish to have the Series C Preferred Stock investors participating
in their financing.
The Series C Preferred Stock private placement had a substantial
dilutive effect on our common stock, and subsequent anti-dilution adjustments
could increase the dilutive effect
.
Consummation
of the private placement had a substantial dilutive effect on our common
stockholders. The aggregate number of shares issued pursuant to the private
placement substantially increased the number of shares of our capital stock
outstanding on an as converted basis. As a result, the percentage ownership of
our common stockholders significantly declined as a result of the private
placement. As a result of the private placement, the investors own
approximately 46.7% of the outstanding shares of our capital stock, on an as
converted basis assuming conversion of all the shares of Series C
Preferred Stock and exercise of all warrants (excluding the additional warrants
that may be issued from time to time upon the exercise of certain existing
warrants).
Furthermore,
the anti-dilution protection provided to both the Series C Preferred stock
and the warrants could substantially increase the number of shares of our
common stock currently outstanding. Upon a dilutive issuance, the
11
conversion
price or exercise price will be adjusted down and the number of shares issuable
upon conversion or exercise of the Series C Preferred Stock and warrants
will increase. Accordingly, if any shares of our capital stock are issued below
the current conversion price, there will be additional dilution.
Finally,
sales in the public market of the common stock acquired upon conversion of the Series C
Preferred Stock or exercise of the warrants, or the perception that such sales
could occur, could adversely affect the prevailing market price of our common
stock and impair our ability to raise funds in additional stock financings.
SPECIAL
NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus includes and incorporates
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act). All statements, other
than statements of historical facts, included or incorporated in this
prospectus regarding our strategy, future operations, financial position,
future revenues, projected costs, prospects, plans and objectives of management
are forward-looking statements. The words anticipates, believes, estimates,
expects, intends, may, plans, projects, will, would and similar
expressions are intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words. We cannot
guarantee that we actually will achieve the plans, intentions or expectations
disclosed in our forward-looking statements and you should not place undue
reliance on our forward-looking statements. Actual results or events could
differ materially from the plans, intentions and expectations disclosed in the
forward-looking statements we make. We have included important factors in the
cautionary statements included or incorporated in this prospectus, particularly
under the heading Risk Factors, that we believe could cause actual results or
events to differ materially from the forward-looking statements that we make.
Our forward-looking statements do not reflect the potential impact of any
future acquisitions, mergers, dispositions, joint ventures or investments we
may make. We do not assume any obligation to update any forward-looking
statements.
USE OF
PROCEEDS
We will not receive any proceeds from the
sale of shares by the selling stockholders. The selling stockholders will pay
any underwriting discounts and commissions and expenses incurred by the selling
stockholders for brokerage, accounting, tax or legal services or any other
expenses incurred by the selling stockholders in disposing of the shares. We
will bear all other costs, fees and expenses incurred in effecting the
registration of the shares covered by this prospectus, including, without
limitation, all registration and filing fees, Nasdaq listing fees and fees and
expenses of our counsel and our accountants.
DESCRIPTION
OF TRANSACTIONS
Private
Placement of Series C Preferred Stock and Related Warrants
On
November 8, 2007, we entered into a Stock and Warrant Purchase Agreement
(the Stock Purchase Agreement) with Rockport Capital Partners II, L.P. and
NGP Energy Technology Partners, L.P. (collectively, the Purchasers). Under the Stock Purchase Agreement, the
Purchasers agreed to purchase in a private placement up to 25,000 shares of our
newly created Series C Preferred Stock and warrants to purchase up to
19,711,539 shares of common stock, for an aggregate gross purchase price of $25
million.
This
private placement occurred in two closings.
The first closing occurred on November 8, 2007. At the first closing, we issued 10,000 shares
of Series C Preferred Stock at $1,000 per share for an aggregate gross
purchase price of $10 million. These
shares are currently convertible into 9,615,384 shares of common stock at a
conversion price of $1.04 per share. We
also issued warrants to purchase an aggregate of 15,262,072 shares of common
stock. These warrants had an initial
exercise price of $1.44 per share and may not be exercised until May 8,
2008. As a result of stockholder
approval of the second closing and related matters on December 20, 2007,
as described below, the exercise price of these warrants was reduced to $1.25
per share.
At the second closing, which
occurred on December 20, 2007 following stockholder approval, we issued
15,000
12
shares
of Series C Preferred Stock for an aggregate gross purchase price of $15
million, of which $10 million was paid through the cancellation of short-term
notes previously issued to the Purchasers on November 7, 2007. These shares are currently convertible into
14,423,076 shares of common stock. At
this closing, we also issued warrants to purchase an aggregate of 4,449,467
shares of common stock at an exercise price of $1.25 per share. These warrants are exercisable immediately.
Stock
Purchase Agreement
The
Stock Purchase Agreement contains the following additional material provisions:
·
Board Representation
. We agreed that each Purchaser had the right
to designate one representative to our board of directors in connection with
the first closing. Accordingly, our
board of directors duly appointed David Prend, as RockPorts designee, and
Philip Deutch, as NGPs designee, to fill vacancies existing on the board of
directors and to serve as members, respectively, of the corporate governance
and nominating committee and the compensation committee of the board. These appointments were effective as of the
first closing. Accordingly, Messrs. Deutch
and Prend became directors on November 8, 2007. Mr. Deutch serves as a Class II
Director and Mr. Prend serves as a Class III Director. Messrs. Prend and Deutch have also been
appointed to serve as members of a four person special committee of the board
charged with searching for a new Chief Executive Officer for our company.
Upon
the second closing, as required under the Stock Purchase Agreement, our board
of directors was reduced from nine directors to seven directors and the
Purchasers jointly had the right to designate one additional director who is independent
(as that term is defined in the regulations of the Nasdaq Stock Market) to
serve as a director. Accordingly,
effective as of the second closing, three existing directors resigned and the
board duly appointed Robert G. Schoenberger, Chairman of the Board and Chief
Executive Officer of Unitil Corporation, as the Purchasers additional independent
designee. Mr. Schoenberger serves
as a Class II Director. Following
the second closing, if the number of members of the board of directors must be
set at nine to comply with regulations of the Nasdaq Stock Market, the
Purchasers would have the right to designate one additional independent
director.
·
Additional Warrants
. We have also agreed to issue the Purchasers
additional warrants in the event that the holders of certain existing warrants
(none of whom are affiliated with the Purchasers) exercise those warrants in
the future. Upon those exercises, we
will issue to the Purchasers additional warrants to purchase common stock equal
to one-half of the number of shares of common stock issued upon exercise of
these existing warrants. The exercise
price of these warrants will be $1.25 per share. As of March 1, 2008, if all of these
existing warrants are exercised, we would need to issue warrants to purchase an
additional 3,455,258 shares of common stock to the Purchasers.
·
Future Issuances
. We have agreed that if we issue and sell any
new securities prior to the second anniversary of the stockholders meeting
called to approve the second closing, subject to some exceptions, we will give
the investors the right to purchase all or some of those new securities so as
to permit the Purchasers to maintain their ownership percentage in the our
stock.
Warrants
At
the first closing, we issued warrants to purchase an aggregate of 15,262,072
shares of common stock. These warrants may
be exercised any time after May 8, 2008, but no later than November 8,
2014. These warrants had an initial
exercise price of $1.44 per share, but the exercise price was reduced to $1.25
per share as a result of obtaining stockholder approval of the second closing
and related matters.
At
the second closing, we issued warrants to purchase an aggregate of 4,449,467
shares of common stock. These warrants
are immediately exercisable, have an exercise price of $1.25 per share, and
expire on December 20, 2014.
The
exercise price and number of shares issuable upon exercise of these warrants
are subject to adjustment in the
13
event
of stock splits or dividends, liquidation, dissolution, winding-up, consolidation,
merger, sale of substantially all assets, or similar event. In addition, the exercise price and number of
shares issuable upon exercise of these warrants will be subject to adjustment
in the event of dilutive issuances so that the exercise price of these warrants
will always be equal to the product of 120% multiplied by the conversion price
of the Series C Preferred Stock.
Upon each adjustment of the exercise price, the number of shares subject
to the warrant will also be adjusted.
The number of shares subject to the warrant upon adjustment will be
determined by multiplying the current exercise price prior to the adjustment by
the number of shares subject to the warrant and dividing the product by the
exercise price resulting from the adjustment.
Under
the terms of these warrants, the holders have the option to exercise the
warrants on a net share or cashless basis, in which warrant shares are
forfeited in lieu of paying the cash exercise price, in which case we would
receive no additional proceeds upon their exercise (but fewer shares would be
issued).
Series C
Preferred Stock
Set
forth below are the material terms of the Series C Preferred Stock:
·
Seniority
. The Series C Preferred Stock ranks
senior to the common stock and senior to all other existing or future classes
or series of preferred stock or other equity securities, other than the
outstanding Series B Preferred Stock, with which it ranks pari passu. The Series C Preferred Stock is
subordinate to our indebtedness. The
maximum number of shares of Series C Preferred Stock that we may issue is
30,000 shares.
·
Dividends
. Holders of the Series C Preferred Stock
have the right to receive, in preference to all other classes of stock junior
in rank to the Series C Preferred Stock, cumulative dividends at a rate of
five percent (5%) of the stated liquidation preference amount, as defined
below. After the payment of this
dividend, holders of the Series C Preferred Stock are entitled to
participate on an as converted basis in the payment of any dividends on the
common stock.
·
Liquidation Preference
. Upon a liquidation, dissolution, winding-up,
consolidation, merger, sale of substantially all assets or similar event,
holders of the Series C Preferred Stock have the right to receive, in
preference to all other classes of our stock junior in rank to the Series C
Preferred Stock, an amount per share equal to the greater of (i) $1,000
per share plus all accrued but unpaid dividends (the stated liquidation
preference amount), or (ii) the amount per share that a holder would have
received if, immediately prior to the liquidation, that holders share had been
converted to common stock. After payment
of the liquidation preference described above, holders of the Series C
Preferred Stock are not entitled to any further participation in any
distribution of our assets.
·
Conversion
. Each share of Series C Preferred Stock
is convertible into that number of shares of common stock equal to the quotient
determined by dividing 1,000 (plus accrued dividends) by the conversion
price. The initial conversion price of
the Series C Preferred Stock is $1.04 per share. The conversion price is subject to adjustment
under certain conditions and upon the occurrence of certain events, as
described below. The holder of a share
of Series C Preferred Stock may elect to convert that holders share at
any time. In addition, after November 8,
2009, we have the right to force conversion of all Series C Preferred
Stock if, for a 180 consecutive day period, the average closing price of our
common stock is equal to at least $7.00, subject to adjustment for stock
dividends, stock splits or other similar recapitalizations. The Series C Preferred Stock will
receive weighted average anti-dilution protection in the event of a dilutive
issuance in accordance with a formula set forth in the Certificate of
Designation.
·
Voting
. The holders of Series C Preferred Stock
are entitled to vote on all matters on which the holders of common stock are
entitled to vote, voting together with the holders of common stock as a single
class. Each share of Series C Preferred
Stock is entitled to that number of votes as is equal to the quotient
determined by dividing (i) the original issue price of $1,000 by (ii) $1.44. Accordingly, each share of Series C
Preferred Stock is entitled to 694 votes.
The number of votes to which a share of Series C Preferred Stock is
entitled is subject to adjustment for any stock dividends, combinations, splits
and the
14
like with respect to shares of common stock. We are not permitted, without the affirmative
vote or written consent of the holders of 50% of the Series C Preferred
Stock, directly or indirectly, to take any of the following actions or agree to
take any of the following actions:
(1)
authorize, create or issue
any shares of preferred stock or other equity securities ranking senior to or
on a parity with the Series C Preferred Stock;
(2)
increase or decrease the
total number of authorized shares of Series C Preferred Stock;
(3)
amend or modify our
certificate of incorporation (including the Certificate of Designation
governing the Series C Preferred Stock) or bylaws that would adversely
affect the rights, preferences, powers and privileges of the Series C
Preferred Stock;
(4)
incur any form of
indebtedness for borrowed money in excess of $5,000,000 in the aggregate (other
than indebtedness existing at November 8, 2007);
(5)
repurchase or redeem any
equity securities ranking junior to the Series C Preferred Stock, subject
to certain exceptions;
(6)
effect any distribution or
declare, pay or set aside any dividend with respect to any equity securities
ranking junior to the Series C Preferred Stock;
(7)
effect a liquidation,
consummate a reorganization event or dispose, transfer or license any material
assets, technology or intellectual property, other than non-exclusive licenses
in connection with sales of our products in the ordinary course of business;
(8)
change the size of our board
of directors;
(9)
encumber or grant a security
interest in all or substantially all or a material part of our assets except to
secure indebtedness permitted above that is approved by our board of directors;
(10)
acquire a material amount of
assets of another entity, through a merger, purchase of assets or purchase of
capital stock or otherwise; or
(12)
enter into any agreement to
do or cause to be done any of the foregoing
·
Redemption
. On or after November 8, 2011, the
holders of two-thirds of the outstanding shares of Series C Preferred
Stock may require us to redeem all or any portion of the outstanding shares of Series C
Preferred Stock. The redemption price is
equal to 120% of the liquidation preference amount, to the extent that the
redemption is made in cash, or 140% of the liquidation preference amount to the
extent that, at our election, the redemption is made in shares of common
stock. If the redemption is made in
shares of common stock, the shares will be based on the fair market value of
the common stock, based on a 10 day volume weighted average, as of the
redemption date.
Registration Rights Agreement
In
connection with the private placement, we agreed to file a registration
statement with the Securities and Exchange Commission covering the resale of
shares of common stock issuable upon conversion of the Series C Preferred
Stock and upon exercise of the warrants issued under the Stock Purchase
Agreement. We were required to file this
registration statement by the earlier of (x) five business days after we
filed our Annual Report on Form 10-K for the fiscal year ended December 31,
2007 and (y) April 7, 2008 (which we have satisfied). We agreed to use our best efforts to have
this registration statement declared effective as soon as practicable after
filing, but not later than sixty (60) days after the required filing date, and
to keep it effective until the earlier of the date on which all of the shares
of common stock covered by that registration statement have been sold and the
date on which the holders of the Series C Preferred Stock
15
and
warrants may sell all of the common stock covered by that registration
statement without restriction pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended. If
we fail to comply with these or certain other provisions, then we will be
required to pay liquidated damages of one twentieth of a percent (.05%) of the
aggregate purchase price paid by the Purchasers for the securities that can be
registered on the registration statement for each day the failure continues.
The total liquidated damages under this provision are capped at 9.9% of the
aggregate purchase price paid by the Purchasers in the private placement.
In
the event there is no registration statement effective with respect to the
shares of common stock issuable upon conversion of the Series C Preferred
Stock and upon exercise of the warrants issued in the private placement, we
have agreed to provide the Purchasers with two demand registration rights, so
long as each demand registration statement covers shares with an anticipated
aggregate offering price of at least $3,000,000. We have also agreed to provide the Purchasers
with unlimited piggyback rights with respect to offerings by us, subject to
certain carve-backs in an underwritten offering.
Issuance
of Common Stock in Connection with Offer to Sell Notes
On
October 19, 2007, we entered into an Offer to Sell Notes (the Offer)
with all of the holders of our senior secured convertible notes. Under the
terms of the Offer, at any time prior to November 9, 2007, we had the
right to purchase the notes for an amount in cash equal to 120% of the
aggregate outstanding principal amount of the notes plus accrued and unpaid
interest thereon. In exchange for the
holders agreement to keep the Offer open until November 9, 2007, we
agreed to issue to the holders 749,999 shares of our common stock with piggy
back registration rights. Such shares were issued on October 19,
2007. The notes were repurchased on November 7,
2007.
16
SELLING STOCKHOLDERS
This prospectus relates to the resale from
time to time of up to 44,499,998 shares of our common stock by the selling
stockholders, comprising:
·
up to 24,038,460 shares of
common stock issuable upon conversion or redemption of Series C Preferred
Stock (the Series C Shares);
·
up to 19,711,539 shares of
common stock issuable upon exercise of related warrants (the Warrant Shares);
and
·
up to 749,999 shares of
outstanding common stock issued in connection with the Offer (the Offer Shares).
The following table, based upon information
currently known by us, sets forth as of March 12, 2008: (i) the
number of shares held of record or beneficially by the selling stockholders as
of such date (as determined below) and (ii) the number of shares that may
be offered under this prospectus by each selling stockholder. Beneficial
ownership includes shares of common stock plus any securities held by the
holder exercisable for or convertible into shares of common stock within sixty
(60) days after March 12, 2008, in accordance with Rule 13d-3(d)(1) under
the Exchange Act. The inclusion of any shares in this table does not constitute
an admission of beneficial ownership for the selling stockholder named below.
Except with respect to the Purchasers right
to designate directors, as described above under Description of Transactions
Private Placement of Series C Preferred Stock and Related Warrants, none
of the selling stockholders has held any position or office, or has otherwise
had a material relationship, with us or any of our subsidiaries within the past
three years other than as a result of the ownership of our shares or other
securities. Unless otherwise indicated below, to our knowledge, all persons
named in the table have sole voting and investment power with respect to their
shares of common stock, except to the extent authority is shared by spouses
under applicable law.
None of the selling stockholders are
broker-dealers. Three selling stockholders are affiliates of broker-dealers. Each
such selling stockholder acquired such selling stockholders shares in the
ordinary course of such selling stockholders business and, at the time of the
acquisition of the securities to be resold pursuant to this prospectus, such
selling stockholder had no agreements or understandings, directly or
indirectly, with any person to distribute them. The three stockholders who are
affiliates of broker-dealers are as follows:
·
Capital Ventures International;
·
Hudson Bay Fund, LP; and
·
Hudson Bay Overseas Fund, Ltd.
17
Name of Selling Stockholder
|
|
Common
Stock Beneficially
Owned
Prior to the
Offering (1)
|
|
Common Stock
Offered
Pursuant to
this Prospectus (2)
|
|
Common Stock
Owned Upon Completion of this Offering (3)(4)
|
|
Percentage of
Common
Stock Owned Upon
Completion
of this
Offering (5)
|
|
|
|
|
|
|
|
|
|
|
|
Rockport Capital Partners II, L.P. (6)
|
|
26,249,999
|
|
26,249,999
|
|
0
|
|
*
|
|
NGP Energy Technology Partners, L.P. (7)
|
|
17,500,000
|
|
17,500,000
|
|
0
|
|
*
|
|
Iroquois Master Fund, Ltd. (8)
|
|
1,402,786
|
|
165,373
|
|
1,237,413
|
|
2.42%
|
|
Rockmore Investment Master Fund Ltd. (9)
|
|
781,043
|
|
99,224
|
|
681,819
|
|
1.35%
|
|
RHP Master Fund, Ltd. (10)
|
|
1,280,401
|
|
66,149
|
|
1,214,252
|
|
2.37%
|
|
Highbridge International LLC (11)
|
|
520,696
|
|
66,149
|
|
454,547
|
|
*
|
|
Capital Ventures International (12)
|
|
138,914
|
|
138,914
|
|
0
|
|
*
|
|
Enable Growth Partners LP (13)
|
|
84,980
|
|
49,612
|
|
35,368
|
|
*
|
|
Enable Opportunity Partners LP (14)
|
|
45,290
|
|
9,922
|
|
35,368
|
|
*
|
|
Pierce Diversified Strategy Master Fund LLC, Ena
(15)
|
|
6,615
|
|
6,615
|
|
0
|
|
*
|
|
Hudson Bay Fund, LP (16)
|
|
249,142
|
|
52,919
|
|
196,223
|
|
*
|
|
Hudson Bay Overseas Fund, Ltd. (17)
|
|
26,460
|
|
13,230
|
|
13,230
|
|
*
|
|
Bristol Investment Fund, Ltd. (18)
|
|
398,350
|
|
38,895
|
|
359,455
|
|
*
|
|
Alpha Capital Anstalt (19)
|
|
42,997
|
|
42,997
|
|
0
|
|
*
|
|
TOTAL
|
|
48,727,673
|
|
44,499,998
|
|
4,227,675
|
|
|
|
*
Less than one percent.
(1)
Includes, to the extent applicable, (i) the
Series C Shares, (iii) the Warrant Shares, (iii) shares issuable
upon exercise or conversion of any other securities that are exercisable or
convertible within 60 days of March 12, 2008 and (iv) any outstanding
shares of common stock held, including the Offer Shares.
(2)
Each entry in this column represents (i) for
Rockport Capital Partners II, L.P. and NGP Energy Technology Partners, L.P.,
the sum of such selling stockholders Series C Shares and Warrant Shares
and (ii) for each other selling stockholder, such selling stockholders
Offer Shares.
(3)
Assumes solely for purpose of this table
that such shares are still owned upon completion of the offering.
(4)
We do not know
when or in what amounts a selling stockholder may offer shares for sale. The
selling stockholders may not sell any or all of the shares offered by this
prospectus. Because the selling stockholders may offer all or some of the
shares pursuant to this offering, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any of
the shares, we cannot estimate the number of the shares that will be held by
the selling stockholders after completion of the offering. However, for
purposes of this table, we have assumed that, after completion of the offering,
none of the shares covered by this prospectus will be held by the selling
stockholders.
18
(5)
Percentage ownership is
based on 49,961,606 shares of common stock outstanding as of March 12,
2007, plus securities deemed to be outstanding with respect to individual
stockholders pursuant to Rule 13d-3(d)(1) under the Exchange Act.
(6)
Shares offered hereby
include (i) 14,423,076 Series C Shares and (ii) 11,826,923
Warrant Shares. These securities may be deemed to be beneficially owned by RockPort
Capital II, LLC (RockPort LLC), and Alexander Ellis III, Janet B. James,
William E. James, Charles J. McDermott, Stoddard M. Wilson and David J. Prend
(the Members). RockPort LLC is the general partner of RockPort Capital
Partners II, L.P. (RockPort). Each of the Members are managing members of
RockPort LLC. Each of RockPort LLC and the Members (the Reporting Persons)
disclaim beneficial ownership of the reported securities except to the extent
of his, her or its pecuniary interest therein, and this report shall not be
deemed an admission that such Reporting Person is the beneficial owner of the
securities for purposes of Section 16 of the Exchange Act or for any other
purpose. As discussed in more detail under Description of Transactions Private
Placement of Series C Preferred Stock and Related Warrants, in connection
with the first closing of the private placement, RockPort was entitled to
designate one individual to be nominated to our board of directors. Mr. Prend
was RockPorts designee and, accordingly, was appointed to the board effective
upon consummation of the first closing and serves as a member of the corporate
governance and nominating committee and the compensation committee.
(7)
Shares offered hereby
include (i) 9,615,384 Series C Shares and (ii) 7,884,616 Warrant
Shares. NGP ETP, L.L.C. (NGP GP) is the general partner of NGP Energy
Technology Partners, L.P. (NGP Energy Tech). Energy Technology Partners,
L.L.C. (ETP) is the manager of NGP GP. Philip J. Deutch (Deutch) is the
manager of ETP. Each of NGP GP, ETP and Deutch (the Reporting Persons)
disclaim beneficial ownership of the reported securities except to the extent
of his, her or its pecuniary interest therein, and this response shall not be
deemed an admission that such Reporting Person is the beneficial owner of the
securities for purposes of Section 16 of the Exchange Act or for any other
purpose. As discussed in more detail under Description of Transactions Private
Placement of Series C Preferred Stock and Related Warrants, in connection
with the first closing of the private placement, NGP Energy Tech was entitled
to designate one individual to be nominated to our board of directors. Mr. Deutch
was NGP Energy Techs designee and, accordingly, was appointed to the board
effective upon consummation of the first closing and serves as a member of the
compensation committee.
(8)
Joshua Silverman has voting and
investment control over the shares held by Iroquois Master Fund, Ltd. Mr. Silverman
disclaims beneficial ownership of these shares.
(9)
Rockmore Capital, LLC (Rockmore Capital)
and Rockmore Partners, LLC (Rockmore Partners), each a limited liability
company formed under the laws of the State of Delaware, serve as the investment
manager and general partner, respectively, to Rockmore Investments (US) LP, a
Delaware limited partnership, which invests all of its assets through Rockmore
Investment Master Fund Ltd., an exempted company formed under the laws of
Bermuda (Rockmore Master Fund). By reason of such relationships, Rockmore
Capital and Rockmore Partners may be deemed to share dispositive power over the
shares our common stock owned by Rockmore Master Fund. Rockmore Capital and
Rockmore Partners disclaim beneficial ownership of such shares of our common
stock. Rockmore Partners has delegated authority to Rockmore Capital regarding
the portfolio management decisions with respect to the shares of common stock
owned by Rockmore Master Fund and, as of March 12, 2008, Mr. Bruce T.
Bernstein and Mr. Brian Daly, as officers of Rockmore Capital, are
responsible for the portfolio management decisions of the shares of common
stock owned by Rockmore Master Fund. By reason of such authority, Messrs. Bernstein
and Daly may be deemed to share dispositive power over the shares of our common
stock owned by Rockmore Master Fund. Messrs. Bernstein and Daly disclaim
beneficial ownership of such shares of our common stock and neither of such
persons has any legal right to maintain such authority. No other person has
sole or shared voting or dispositive power with respect to such shares of our
common stock as those terms are used for purposes under Regulation 13D-G of the
Exchange Act. No person or group (as that term is used in Section 13(d) of
the Exchange Act or the SECs Regulation 13D-G) controls Rockmore Master Fund.
(10)
RHP Master Fund, Ltd. is a party to an
investment management agreement with Rock Hill Investment Management, L.P., a
limited partnership of which the general partner is RHP General Partner, LLC. Pursuant
to such agreement, Rock Hill Investment Management directs the voting and
disposition of shares owned by RHP Master Fund. Messrs. Wayne Bloch and
Peter Lockhart own all of the interests in RHP General Partner. The
aforementioned entities and individuals disclaim beneficial ownership of our
securities owned by the RHP Master Fund.
19
(11)
Highbridge Capital Management, LLC is the
trading manager of Highbridge International LLC and has voting control and
investment direction over securities held by Highbridge International LLC. Glenn
Dubin and Henry Swieca control Highbridge Capital Management, LLC and have
voting control and investment discretion over the securities held by Highbridge
International LLC. Each of Highbridge Capital Management, LLC, Glenn Dubin and
Henry Swieca disclaim beneficial ownership of the securities held by Highbridge
International LLC.
(12)
Heights Capital Management, Inc.,
the authorized agent of Capital Ventures International (CVI), has
discretionary authority to vote and dispose of the shares held by CVI and may
be deemed to be the beneficial owner of these shares. Martin Kobinger, in his
capacity as Investment Manager of Heights Capital Management, Inc., may
also be deemed to have investment discretion and voting power over the shares
held by CVI. Mr. Kobinger disclaims any such beneficial ownership of the
shares.
(13)
Mitch Levine, Managing Partner, has
voting and investment power over securities held by Enable Growth Partners LP.
(14)
Mitch Levine, Managing Partner, has
voting and investment power over securities held by Enable Opportunity Partners
LP.
(15)
Mitch Levine, Managing Partner, has
voting and investment power over securities held by Pierce Diversified Strategy
Master Fund LLC, Ena.
(16)
Sander Gerber, Yoav Roth and John Doscas
share voting and investment power over these securities. Each of Sander Gerber,
Yoav Roth and John Doscas disclaims beneficial ownership of the securities held
by Hudson Bay Fund, LP.
(17)
Sander Gerber, Yoav Roth and John Doscas
share voting and investment power over these securities. Each of Sander Gerber,
Yoav Roth and John Doscas disclaims beneficial ownership of the securities held
by Hudson Bay Overseas Fund, Ltd.
(18)
Bristol Capital Advisors, LLC (BCA) is
the investment advisor to Bristol Investment Fund, Ltd. (Bristol). Paul
Kessler is the manager of BCA and as such has voting and investment control
over the securities held by Bristol. Mr. Kessler disclaims beneficial
ownership of these securities.
(19)
Konrad Ackerman has voting and investment
power over securities owned by Alpha Capital Anstalt.
20
PLAN OF
DISTRIBUTION
The selling stockholders, and any of their
pledgees, donees, transferees or other successors in interest, may, from time
to time, sell any or all of their shares of common stock on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These sales may be at
fixed or negotiated prices. The selling
stockholders may use any one or more of the following methods when selling
shares:
·
ordinary brokerage
transactions and transactions in which the broker-dealer solicits purchasers;
·
block trades in which the
broker-dealer will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction;
·
purchases by a broker-dealer
as principal and resale by the broker-dealer for its account;
·
an exchange distribution in
accordance with the rules of the applicable exchange;
·
privately negotiated
transactions;
·
short sales;
·
through the writing or
settlement of options or other hedging transactions, whether through an options
exchange or otherwise;
·
broker-dealers may agree
with the selling stockholders to sell a specified number of such shares at a
stipulated price per share;
·
one or more underwritten
offerings on a firm commitment or best efforts basis;
·
a combination of any such
methods of sale; and
·
any other method permitted
pursuant to applicable law.
The selling stockholders may also sell shares
under Rule 144 under the Securities Act, if available, rather than under
this prospectus.
Broker-dealers engaged by the selling
stockholders may arrange for other brokers-dealers to participate in
sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated, which commissions or discounts may be less than or in
excess of those customary in the types of transactions involved. Any profits on the resale of shares of common
stock by a broker-dealer acting as principal might be deemed to be underwriting
discounts or commissions under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, attributable to the sale of shares will be
borne by a selling stockholder. The
selling stockholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of the shares if liabilities
are imposed on that person under the Securities Act.
The selling stockholders may from time to
time pledge or grant a security interest in some or all of the shares of common
stock owned by them and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the shares of
common stock from time to time under this prospectus after we have filed a
supplement to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 supplementing or amending
the list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.
21
The selling stockholders also may transfer
the shares of common stock in other circumstances, in which case the donees,
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell the shares of
common stock from time to time under this prospectus after we have filed a
supplement to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 supplementing or amending
the list of selling stockholders to include the donee, pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.
Under the securities laws of some states, the
shares of our common stock may be sold in such states only through registered
or licensed brokers or dealers. In addition, in some states the shares of our
common stock may not be sold unless such shares have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
The selling stockholders and any broker-dealers
or agents that are involved in selling the shares of common stock may be deemed
to be underwriters within the meaning of the Securities Act in connection
with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses
incident to the registration of the shares of common stock. We have agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
The selling stockholders have advised us that
they have not entered into any agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their shares of common
stock, nor is there an underwriter or coordinating broker acting in connection
with a proposed sale of shares of common stock by any selling stockholder. If we are notified by any selling stockholder
that any material arrangement has been entered into with a broker-dealer for
the sale of shares of common stock, if required, we will file a supplement to
this prospectus.
The selling stockholders and any other person
participating in such distribution will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including,
without limitation, to the extent applicable, Regulation M of the Exchange Act,
which may limit the timing of purchases and sales of any of the shares of our
common stock by the selling stockholders and any other participating person. To
the extent applicable, Regulation M may also restrict the ability of any person
engaged in the distribution of the shares of our common stock to engage in
market-making activities with respect to the shares of our common stock. All of
the foregoing may affect the marketability of the shares of our common stock
and the ability of any person or entity to engage in market-making activities
with respect to the shares of our common stock.
There can be no assurance that any selling stockholder will sell any or
all of the shares of our common stock registered pursuant to the registration
statement, of which this prospectus forms a part.
LEGAL
MATTERS
Greenberg Traurig LLP has opined as to the
legality of the securities being offered by this registration statement.
EXPERTS
The financial statements of SatCon Technology
Corporation as of December 31, 2007 and 2006 and for the years ended December 31,
2007 and December 31, 2006, incorporated by reference in this prospectus
and elsewhere in the Registration Statement, have been audited by Vitale,
Caturano & Company, Ltd., an independent registered public accounting
firm, as indicated in their report with respect thereto, and are incorporated
by reference herein in reliance upon the authority of said firm as experts in
giving said reports.
22
WHERE YOU
CAN FIND MORE INFORMATION
We file reports, proxy statements and other
documents with the SEC. You may read and copy any document we file at the SECs
public reference room at 100 F Street, N.E., Room 1580, Washington, DC
20549. You should call 1-800-SEC-0330 for more information on the operation of
the public reference room. Our SEC filings are also available to you on the SECs
Internet site at http://www.sec.gov. The
SECs Internet site contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC.
This prospectus is part of a registration
statement that we filed with the SEC. The registration statement contains more
information than this prospectus regarding us and our common stock, including
certain exhibits and schedules. You can obtain a copy of the registration
statement from the SEC at the address listed above or from the SECs Internet
site.
Our Internet address is www.satcon.com. The
information on our Internet website is not incorporated by reference in this
prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate
into this prospectus information that we file with the SEC in other documents.
This means that we can disclose important information to you by referring to
other documents that contain that information. Any information that we
incorporate by reference is considered part of this prospectus. The documents
and reports that we list below are incorporated by reference into this
prospectus. In addition, all documents and reports which we file pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
are incorporated by reference in this prospectus as of the respective filing
dates of these documents and reports. Statements contained in documents that we
file with the SEC and that are incorporated by reference in this prospectus
will automatically update and supersede information contained in this
prospectus, including information in previously filed documents or reports that
have been incorporated by reference in this prospectus, to the extent the new
information differs from or is inconsistent with the old information.
We have filed the following documents with
the SEC. These documents are incorporated herein by reference as of their
respective dates of filing:
(1)
Our Annual
Report on Form 10-K for the fiscal year ended December 31, 2007;
(2)
Our Current
Reports on Form 8-K filed on January 22, 2008, January 28, 2008
and March 3, 2008;
(3)
All of our
filings pursuant to the Exchange Act after the date of filing the initial
registration statement and prior to the effectiveness of the registration
statement; and
(4)
The description
of our common stock contained in our Registration Statement on Form 8-A
filed on November 6, 1992, including any amendments or reports filed for
the purpose of updating that description.
You may request a copy of these documents,
which will be provided to you at no cost, by contacting:
SatCon Technology Corporation
27 Drydock Avenue
Boston, MA 02210
Attn: Investor Relations Department
(617) 897-2400
You should rely only on the information
contained in this prospectus, including information incorporated by reference
as described above, or any prospectus supplement that we have specifically
referred you to. We have not authorized anyone else to provide you with
different information. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of those documents or that any document incorporated by
reference is accurate as of any date other than its filing date. You should not
consider this prospectus to be an offer or solicitation relating to the
securities in any jurisdiction in which such an offer or solicitation relating
to the securities is not authorized. Furthermore, you should not consider this
prospectus to be an offer or solicitation relating to the securities if the
person making the offer or solicitation is not qualified to do so, or if it is
unlawful for you to receive such an offer or solicitation.
23
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