Filed
pursuant to Rule 424(b)(5)
Registration
No. 333-159649
PROSPECTUS
SUPPLEMENT
(To
Prospectus dated June 12, 2009)
RASER
TECHNOLOGIES, INC.
9,305,790
Shares of Common Stock
Warrants
to Purchase 4,652,895 Shares of Common Stock
We are
offering up to 9,305,790 shares of our common stock, par value $0.01 per share,
and warrants to purchase up to 4,652,895 shares of our common stock by this
prospectus supplement and the accompanying prospectus. The common stock and
warrants will be sold in units, with each unit consisting of one share of common
stock and a warrant to purchase 0.50 shares of common stock, at an initial
exercise price of $0.25 per share. Each unit will be sold at a negotiated price
of $0.27 per unit. Units will not be issued or certificated. The shares of
common stock and warrants are immediately separable and will be issued
separately.
Our
common stock is listed on the New York Stock Exchange under the symbol “RZ.” On
October 12, 2010, the last reported sale price of our common stock on the
New York Stock Exchange was $0.25 per share.
We are
offering these shares of common stock and warrants to purchase common stock to
certain parties that have advanced funds to the Company pursuant to that certain
Unsecured Line of Credit Agreement and Promissory Note, dated as of
January 23, 2009, as amended on July 22, 2009 and further amended on
August 5, 2010, which we refer to as the LOC Lenders. We anticipate
that the LOC Lenders will purchase units by delivering promissory notes to us
and electing to forego repayment of a portion of the respective amounts they are
owed under our line of credit as an offset against the amounts owed pursuant to
the promissory notes.
Investing in our securities involves
a high degree of risk. You should read this prospectus supplement and
the accompanying prospectus carefully before you make your investment
decision. See “Risk Factors” beginning on page S-6 of this prospectus
supplement,
page 3 of
the accompanying prospectus, as well as the documents we file with the
Securities and Exchange Commission that are incorporated by reference therein
for more information.
We
estimate that the total proceeds from this offering will be approximately $2.5
million, a portion of the amount owed to the LOC Lenders that we intend to
satisfy with the proceeds of this offering. We estimate the total
expenses of this offering will be approximately $5,000. The LOC Lenders have
informed us that they intend to purchase units having a value equal to
approximately $2.5 million of the approximately $5.3 million outstanding balance
owed to such LOC Lenders. However, because there is no minimum offering amount
required as a condition to closing in this offering, the actual offering amount
and net proceeds to us, if any, in this offering are not presently determinable
and may be substantially less than the amounts set forth above.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
We expect
that delivery of the units being offered pursuant to this prospectus supplement
and the accompanying prospectus will be completed on or about October 27,
2010.
Prospectus
Supplement dated October 13, 2010.
TABLE
OF CONTENTS
Prospectus
Supplement
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Page
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About
This Prospectus Supplement
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ii
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Available
Information
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iii
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Forward-Looking
Statements
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iii
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Summary
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S-1
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The
Offering
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S-5
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Risk
Factors
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S-6
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S-7
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Description
of Securities We are Offering
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S-8
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Price
Range of Common Stock and Dividends
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S-9
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Dilution
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S-10
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Plan
of Distribution
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S-12
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Legal
Matters
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S-13
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Experts
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S-13
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Information
Incorporated By Reference
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S-13
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Form
of Warrant
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S-14
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Prospectus
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Page
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About
This Prospectus
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1
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Available
Information
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1
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Forward-Looking
Statements
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2
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The
Company
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2
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Risk
Factors
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3
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Use
of Proceeds
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17
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Ratio
of Earnings To Fixed Charges
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17
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Description
of Capital Stock
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18
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Description
of Warrants
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20
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Description
of Debt Securities
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22
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Material
Federal Income Tax Consequences
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34
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Plan
of Distribution
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34
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Legal
Matters
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36
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Experts
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36
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Information
Incorporated By Reference
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36
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ABOUT
THIS PROSPECTUS SUPPLEMENT
This
document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of the offering and other matters
relating to us and our financial condition. The second part is the
attached base prospectus, which gives more general information about securities
we may offer from time to time, some of which does not apply to the common stock
we are offering. The information in this prospectus supplement
replaces any inconsistent information included in the accompanying
prospectus. Generally, when we refer to the prospectus, we are
referring to both parts of this document combined. If information in
the prospectus supplement differs from information in the accompanying
prospectus, you should rely on the information in this prospectus
supplement.
Except as
otherwise specified or used in this prospectus supplement or the accompanying
prospectus, the terms “we,” “our,” “us,” “the company,” “Raser,” “Raser
Technologies” and “Raser Technologies, Inc.” refer to Raser Technologies, Inc.
and its subsidiaries. References in this prospectus supplement to
“U.S. dollars,” “U.S. $” or “$” are to the currency of the
United States of America.
You
should rely only on the information contained or incorporated by reference in
this prospectus supplement, the prospectus or any free writing prospectus
prepared by Raser. We have not authorized any other person to provide
you with different or additional information. If anyone provides you
with different or inconsistent information, you should not rely on
it. We are not making an offer to sell the common stock in any
jurisdiction where the offer or sale is not permitted. You should not
assume that the information contained or incorporated by reference in this
prospectus supplement or in the prospectus is accurate as of any date other than
the date on the front of that document.
The
distribution of this prospectus supplement and the attached prospectus and the
offering of the common stock in certain jurisdictions may be restricted by
law. Persons who come into possession of this prospectus supplement
and the attached prospectus should inform themselves about and observe any such
restrictions. This prospectus supplement and the attached prospectus
do not constitute, and may not be used in connection with, an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to any person to whom it is unlawful to make such
offer or solicitation.
You
should not consider any information in this prospectus supplement or the
prospectus to be investment, legal or tax advice. You should consult
your own counsel, accountant and other advisors for legal, tax, business,
financial and related advice regarding the purchase of the common
stock. We are not making any representation to you regarding the
legality of an investment in the common stock by you under applicable investment
or similar laws.
You
should read and consider all information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus before making your
investment decision.
AVAILABLE
INFORMATION
We are a
public company and are required to file annual, quarterly and current reports,
proxy statements and other information with the SEC pursuant to the Securities
Exchange Act of 1934, as amended, or the Exchange Act. You may read and copy any
document we file at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. You can request copies of these documents by writing to
the SEC and paying a fee for the copying cost. Please call the SEC at
1-800-SEC-0330 for more information about the operation of the public reference
room. Our SEC filings are also available to the public on the SEC’s website at
http://www.sec.gov. In addition, because our stock is listed
for trading on the New York Stock Exchange, you can read and copy reports and
other information concerning us at the offices of the New York Stock Exchange
located at 11 Wall Street, New York, New York 10005.
We filed
a registration statement on Form S-3 under the Securities Act with the SEC with
respect to the securities being offered pursuant to this prospectus. This
prospectus is only part of the registration statement and omits certain
information contained in the registration statement, as permitted by the SEC.
You should refer to the registration statement, including the exhibits, for
further information about us and the securities being offered pursuant to this
prospectus. Statements in this prospectus regarding the provisions of certain
documents filed with, or incorporated by reference in, the registration
statement are not necessarily complete and each statement is qualified in all
respects by that reference. You may:
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•
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inspect a copy of the
registration statement, including the exhibits and schedules, without
charge at the SEC’s Public Reference
Room;
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obtain a copy from the SEC upon
payment of the fees prescribed by the SEC;
or
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obtain a copy from the SEC
website.
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Our
mailing address is 5152 North Edgewood Drive, Suite 200, Provo, Utah 84604 and
our Internet address is www.rasertech.com. Our telephone number is
(801) 765-1200. General information, financial news releases and filings
with the SEC, including annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and all amendments to these reports are
available free of charge on the SEC’s website at www.sec.gov. We are not
including the information contained on our website as part of, or incorporating
it by reference into, this prospectus.
FORWARD-LOOKING
STATEMENTS
Statements
included or incorporated by reference in this prospectus include both historical
and “forward-looking” statements within the meaning of the federal securities
laws. These forward-looking statements are based on current expectations and
projections about future results and include the discussion of our business
strategies, plans, goals, objectives and expectations concerning future
operations, margins, profitability, liquidity and capital resources. In
addition, in certain portions of this prospectus and the documents incorporated
by reference, the words “anticipate,” “believe,” “estimate,” “may,” “will,”
“expect,” “plan” and “intend” and similar expressions, or the negative of such
terms or other comparable terminology, as they relate to us or our management,
are intended to identify forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by these forward-looking statements. These statements are based upon the
beliefs and assumptions of, and on information available to, our management.
Factors that could cause actual results to differ materially from those
expressed or implied by the forward-looking statements include, but are not
limited to those set forth below under “Risk Factors.” Unless required by law,
we do not assume any obligation to update forward-looking statements based on
unanticipated events or changed expectations. However, you should carefully
review the reports and documents we file from time to time with the SEC,
particularly our annual reports on Form 10-K, quarterly reports on
Form 10-Q and any current reports on Form 8-K.
SUMMARY
The
following summary highlights selected information contained elsewhere in this
prospectus supplement and in the documents incorporated by reference in this
prospectus supplement and does not contain all the information you will need in
making your investment decision. You should read carefully this entire
prospectus supplement, the attached prospectus and the documents incorporated by
reference in this prospectus supplement.
Raser
Technologies, Inc.
We are an
environmental energy technology company focused on geothermal power development
and technology licensing. We operate two business segments: Power Systems and
Transportation & Industrial. Our Power Systems segment develops
geothermal electric power plants and is exploring opportunities to partner with
developers to take advantage of potential solar and wind resources at some of
our geothermal project sites. Our Transportation & Industrial segment
focuses on using our Symetron™ family of technologies to improve the efficiency
of electric motors, generators and power electronic drives used in electric and
hybrid electric vehicle propulsion systems. Through these two business segments,
we are employing a business strategy to produce a positive impact on the
environment and economically beneficial results for our stockholders. By
executing our business strategy, we aim to become a producer of geothermal
electric power as well as a provider of electric and hybrid-electric vehicle
technologies and products.
We are
incorporated in Delaware. We are the successor to Raser Technologies, Inc., a
Utah corporation, which was formerly known as Wasatch Web Advisors, Inc. Wasatch
Web Advisors acquired 100% of our predecessor corporation in a reverse
acquisition transaction in October of 2003. Prior to that transaction, our
predecessor corporation was a privately-held company.
Overview
We have
accumulated a portfolio of geothermal interests in four western continental
states and a geothermal concession in Indonesia. These geothermal interests are
important to our ability to develop geothermal power plants. We continue to
accumulate additional interests in geothermal resources for potential future
projects.
We have
initiated the development of eight geothermal power plant projects in our Power
Systems segment to date. We have placed one power plant in service to date,
which we refer to as our Thermo No. 1 plant, and we are currently selling
electricity generated by the Thermo No. 1 plant. Although we placed the
Thermo No. 1 plant in service in the first quarter of 2009 for accounting
purposes, we were unable to operate the plant at designed capacity due primarily
to mechanical deficiencies of the power generating units, lower than anticipated
well field temperature and flow from certain wells and other inefficiencies
which occurred as a result of overall design of the plant. Accordingly, we
initiated several actions to improve the electrical output of the plant and the
resource. These efforts included reworking certain production wells, the
installation of bottom cycling operations and the replacement of recirculation
pumps on each of the generating units with more efficient pumps. These efforts
culminated in June 2010, at which time we evaluated the actual impact of these
initiatives and the resulting overall performance of the plant. The results of
this evaluation indicate that plant performance may improve from the current
output level of approximately 6.6 megawatts (“MW”) but most likely will not
achieve originally designed electrical output levels. After evaluating the
performance of the plant, we determined an evaluation of possible impairment of
the Thermo No. 1 plant as of June 30, 2010 was warranted. Based upon
the impairment analysis, we determined that the Thermo No. 1 plant was
impaired as of June 30, 2010. Accordingly, we computed the projected
discounted future operating cash flows of the Thermo No. 1 plant using a
discount rate that reflects the average cost of funds for Thermo No. 1
BE-01, LLC (“Thermo Subsidiary”) and determined that we incurred a loss
resulting from the impairment totaling $52.2 million. This analysis required us
to exercise significant judgments including, among other items, estimating that
the Thermo No. 1 plant will produce electricity over the next 33.5 years,
assuming our power purchase agreement will be renewed on similar terms upon
expiration in 2028 and estimating operating and capital costs over the remaining
useful life of the plant and the estimated selling price of the Thermo
No. 1 plant at the end of its estimated useful life. Accordingly, we
recognized an impairment of the Thermo No. 1 plant and expensed $52.2
million of capitalized costs during the second quarter of
2010.
Due to
the economic downturn, a difficult financing environment, difficulties
experienced at the Thermo No. 1 plant and other factors, we have had to
adjust our development plans. We had anticipated to be in a position to move
forward with the simultaneous development of the other seven sites we have
initiated. In light of current conditions, we believe in the near term we need
to focus most of our time and resources on the one or two projects we believe
are best positioned for development. Thus, we intend to focus on improving the
electrical output from our Thermo No. 1 plant and completing the well field
development at our Lightning Dock and/or Thermo No. 2 and No. 3
projects. We will continue to undertake permitting at the other sites we have
initiated. Additionally, we are soliciting the sale of Thermo No. 1 or an
interest therein and exploring the potential sale of one or more of our other
geothermal power projects or interests therein.
In
connection with the development of our geothermal power projects, we intend to
explore opportunities to partner with developers to take advantage of potential
solar and wind resources at some of our geothermal project sites. We believe
certain geothermal sites we intend to develop may be suitable for solar or wind
generation. If so, we may be able to improve the overall utilization of
transmission lines and other infrastructure investments associated with these
projects. Until we conduct further analysis, however, we cannot predict whether
any of our sites will be suitable for complementary solar or wind generating
facilities.
Historically,
federal and state governments have provided incentives and mandates for the
development of renewable resources, including geothermal projects. The American
Recovery and Reinvestment Act of 2009 (the “Recovery Act”) provides for a number
of additional incentive programs to help fund renewable energy projects. Among
these new programs is the Section 1603 renewable energy grant program under
the Recovery Act. Pursuant to the Recovery Act, an owner of a qualified
geothermal power plant may elect to receive a grant from the U.S. Treasury
Department of up to 30% of certain qualifying construction and drilling costs in
lieu of claiming either the energy credit (sometimes referred to as the
investment tax credit) or the production tax credit. The owner of a qualified
geothermal power plant may apply for a grant of up to 30% of the cost of
qualifying geothermal property placed in service in 2009 or 2010, or placed in
service before 2014 if construction began in 2009 or 2010. Grants are to be paid
60 days after the later of the date of the application for the grant is deemed
complete or the date the project is placed in service.
We
originally financed the construction of the Thermo No. 1 plant through
project financing and tax equity financing arrangements. Subsequent to the
adoption of the Recovery Act, we amended these financing arrangements to be
consistent with the Recovery Act and take advantage of the grants available
under the Recovery Act. We obtained a grant of approximately $33.0 million,
which we received in February 2010. Approximately $3.8 million of the grant
funds were released to us, as owner of the project. The remainder of the grant
funds was placed in escrow to be released to the other parties that provided the
debt and equity financing for the project based on the electrical output,
operational costs of the plant and certain other factors. On July 9, 2010, we
entered into an Amendment, Consent and Forbearance Agreement (the “Forbearance
Agreement”) pursuant to which the lenders of the debt financing for the Thermo
No. 1 plant received a payment of $27 million out of the escrow and waived
compliance with applicable debt-related covenants and obligations f until June
29, 2011. During the next year, but no later than June 29, 2011, the
lenders are entitled to receive an additional payment of up to $6 million plus
the expenses of the administrative lender and agents. The Forbearance Agreement
contemplates that we will satisfy this additional payment by using proceeds from
the sale of all or part of our interest in the Thermo No. 1
plant. After providing for the $27 million payment to the lenders,
approximately $3 million in the Thermo No. 1 plant escrow account remained in
escrow to be used for the operation of the Thermo No. 1 plant and other related
expenses.
Because
the amount contained in the Thermo No. 1 plant escrow account was insufficient
to fully satisfy the lenders, to the extent we are obligated to pay Pratt
Whitney Power Systems any additional amounts for the turbines in production at
the Thermo No. 1 plant, such payments shall be made out of our general
corporate funds.
We
believe the demand for clean, renewable energy will continue to increase in the
future, and we believe we are well positioned to play a meaningful role in
providing clean, renewable power to consumers. Not everything has been in
keeping with our original timeframes and cost expectations. Some of our projects
have experienced longer development timelines or higher costs than originally
planned. Moreover, the current economic conditions in the United States and
around the world make it more difficult to secure the financing and complete the
other various steps necessary to develop our projects. Nevertheless, we intend
to continue to implement our business strategy of rapid deployment of our
geothermal power projects.
Our
Thermo No. 1 plant was the first geothermal power plant to be constructed
utilizing PureCycle 280 generation units (“PureCycle units”) manufactured by
PWPS. The PureCycle units are small, modular units each producing approximately
280 kilowatts (“kW”) of gross electrical output each. We installed fifty
PureCycle units at the Thermo No. 1 plant. While we believe that the
PureCycle units have advantages in certain scenarios, our current development
plans anticipate using larger binary cycle units that produce 2.5 MW to 10 MW of
gross electrical output per unit. We have received proposals from a number of
equipment manufacturers and believe that moving to larger generating units could
result in greater returns on our future projects.
Our
geothermal resources portfolio consists of over 275,000 acres in the United
States and a concession of over 100,000 acres in Indonesia. Our portfolio of
geothermal leases contains a mix of private, state and federal leases. We
utilize our in-house geologists, independent geologists, in-house and
independent transmission specialists, ARC-GIS specialists and others on our
development team to help identify and locate areas that are favorable to
development. We are primarily interested in securing locations that we believe
contain the targeted geothermal activity, present a favorable development
environment (considering permitting requirements, topography, site access,
etc.), and allow transmission access to favorable power markets. Each lease we
acquire is based upon these key indicators of the project’s geothermal
potential. Some prospect areas, like our Lightning Dock project, have been the
subjects of extensive exploration and data analysis, while others will require
additional exploration and evaluation. Some of the geothermal leases in our
portfolio have not been extensively explored and documented and could ultimately
be rejected for full-scale development. We seek to acquire a broad-based
portfolio of prospects, and we continue to evaluate new areas to target for
leasing in addition to studying the prospect areas we currently have under
lease.
Our
Transportation & Industrial segment focuses on commercializing our
electric motor, generator and drive technologies, such as our series plug-in
hybrid electric vehicle (“PHEV”) with range extender technologies, into
applications. In 2008, we began work to integrate a Symetron™ traction motor,
generator and controller drive in a Hummer H3 demonstration vehicle (“Hummer
Demonstration Vehicle”). The Hummer Demonstration Vehicle was built under a
collaborative arrangement with General Motors, Inc. (“General Motors”) and our
integration partner FEV, Inc. The Hummer Demonstration Vehicle was designed to
achieve 100 mpg equivalent to demonstrate the benefits of our plug-in electric
drive system in Sports Utility Vehicle (“SUV”) and light truck applications. Our
plug-in electric drive system is designed to allow light trucks and SUVs to
achieve the equivalent of over 100 mpg in typical local daily driving with near
zero emissions, by using electricity instead of petroleum as the primary fuel.
Recently, General Motors decided to discontinue the Hummer brand. We believe,
however, that our technology is capable of being used in other types of SUVs and
light truck applications and we believe that our systems for light weight trucks
and SUVs are ahead of our competitors in the market.
We
completed the initial phase of developing our Hummer Demonstration Vehicle and
unveiled the prototype at the 2009 SAE International World Congress, in Detroit
Michigan. We are currently in the process of further testing the Hummer
Demonstration Vehicle and seeking a manufacturing partner for small scale
manufacturing of additional prototype vehicles. Although progress is being made
by each of our business segments with respect to this initiative, we may not be
able to generate significant revenues from this technology by either of our
segments, if at all.
We intend
to continue to explore opportunities to commercialize our motor and drive
technologies. However, the recent economic downturn has had a dramatic and
adverse effect on the automotive industry and other large industrial
manufacturers that would otherwise be in a position to use and benefit from our
technologies. As a result, we believe our ability to commercialize our Symetron™
technologies will be limited until economic conditions improve. In light of the
current economic conditions, we have reduced our resources committed to new
developmental efforts. We intend to evaluate the prospects for our technologies
on an ongoing basis. If we believe there are attractive opportunities, we will
devote the resources to pursue those opportunities to the extent we believe
appropriate. If, on the other hand, we determine that the risks and
uncertainties for this business segment are too great in light of the current
economic climate, we may choose to further reduce the resources devoted to these
efforts.
We are
also currently evaluating the advantages and disadvantages of a possible
business separation transaction involving the Transportation and Industrial
segment, which may include spinning off the Transportation and Industrial
business to our stockholders as a separate independent company. We believe that
a separation transaction involving the Transportation and Industrial business
would facilitate the ability to raise capital for both businesses. However, we
may ultimately determine that a business separation transaction involving the
Transportation and Industrial segment is not feasible for financial, legal or
other reasons.
Consistent
with our limited operating history, we have generated limited revenues from
operations. While our Power Systems segment has begun to generate revenue from
the operation of our Thermo No. 1 plant, we do not expect to generate
significant additional revenues from this segment until we develop additional
plants and place them in service. To date, our Transportation &
Industrial segment has generated only a limited amount of revenue from research
and development subcontracts administered through contractors for certain
government agencies. Future revenues from our Transportation &
Industrial segment will depend on our ability to commercialize our Symetron™
technologies, and we cannot predict when those efforts will be successful, if at
all.
Limited
historical information exists upon which an evaluation can be made regarding our
business and prospects. We also have limited insight into how market and
technology trends may affect our future business. The revenue and income
potential of both of our business segments is unproven and the markets in which
we expect to compete are very competitive and rapidly evolving. To date, all of
our revenues have been derived from domestic sources. Our business and prospects
should be considered in light of the risks, expenses, cash requirements,
challenges and uncertainties that exist in an early stage company seeking to
develop new technologies and products in competitive and rapidly evolving
markets.
We have
incurred substantial losses since inception and we are not operating at cash
breakeven. Our continuation as a going concern is dependent on efforts to raise
additional capital, increase revenues, reduce expenses, and ultimately achieve
profitable operations. If substantial losses continue, or if we are unable to
raise sufficient, additional capital on reasonable terms, liquidity concerns may
require us to curtail or cease operations, liquidate or sell assets, or pursue
other actions that could adversely affect future operations.
Given our
current business strategy, we will need to secure additional financing in order
to execute our plans and continue our operations. We may acquire this additional
funding through the issuance of debt, preferred stock, equity or a combination
of these instruments. We also intend to evaluate a variety of alternatives to
finance the development of our geothermal power projects. These alternatives
could include project financing and tax equity financing, government funding
from grants, loan guarantees or private activity bonds, joint ventures, the sale
of one or more of our projects or interests therein, entry into prepaid power
purchase agreements with utilities or municipalities, or a merger and/or other
transaction, a consequence of which could include the sale or issuance of stock
to third parties. The amount and timing of our future capital needs will depend
on many factors, including the timing of our development efforts, opportunities
for strategic transactions, and the amount and timing of any revenues we are
able to generate. We cannot be certain that funding will be available to us on
reasonable terms, or at all. If we are unable to secure adequate funds on a
timely basis on terms acceptable to us, we may be unable to execute out plans or
continue our operations.
THE
OFFERING
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Common
stock offered by us
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9,305,790
shares of our common stock
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Warrants
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Warrants
to purchase up to 4,652,895 shares of common stock will be offered in this
offering. This prospectus supplement also relates to the offering of the
shares of common stock issuable upon exercise of the
warrants.
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Warrant
exercise price
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The
warrants will be exercisable at an exercise price of $0.25 per
share
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Warrant
exercisability and expiration
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The
warrants are exercisable at any time on or after the date of issuance and
expire ten years from the date of issuance
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Use
of proceeds
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The
total proceeds we receive from the sale of securities offered pursuant to
this prospectus supplement, excluding the proceeds, if any, from the
exercise of the warrants issued in this offering, we estimate will be
approximately $2.5 million, which is the portion of the amount owed to the
LOC Lenders that we intend to satisfy with the proceeds of this offering.
The net proceeds will be the total proceeds less our estimated offering
expenses of $5,000. A portion of the proceeds may consist of promissory
notes, which we may accept in lieu of cash at our sole discretion. We
anticipate that the LOC Lenders will purchase units by delivering
promissory notes to us and elect to forego repayment of the respective
amounts they are owed under our line of credit as an offset against the
amounts owed pursuant to the promissory notes. The amounts outstanding
under our line of credit bear interest at 10% per annum and are due on
June 30, 2011.
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We
used the proceeds we received from our line of credit to satisfy vendor
obligations, power plant construction expenses, well field development
expenses and for general corporate purposes.
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Risk
factors
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See
“Risk Factors” and other information included in this prospectus
supplement and the accompanying prospectus for a discussion of factors you
should carefully consider before deciding to invest in our common
stock.
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New
York Stock Exchange symbol
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RZ
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RISK
FACTORS
An
investment in our securities involves certain risks. You should carefully
consider all of the information set forth in this prospectus supplement, the
accompanying prospectus and the section entitled “Risk Factors” contained in our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, as filed with
the SEC on August 11, 2010, which are incorporated herein by reference in their
entirety and the other information incorporated by reference herein and therein
from time to time. In particular, you should evaluate the following risk factors
before making an investment in our securities. If any of the following
circumstances actually occur, our business, financial condition and results of
operations could be materially and adversely affected. If that occurs, the
trading price of our common stock could decline, and you could lose all or part
of your investment.
We
may be unable to pay our $2.2 million interest payment on our 8% Convertible
Notes, which became due on October 1, 2010 and needs to be paid on or before
October 31, 2010.
In 2008,
we issued $55 million aggregate principal amount of our 8% Convertible Senior
Notes Due 2013 (the "Notes"). The terms of the Notes required us to make a
semi-annual interest payment of $2.2 million on October 1, 2010. We
have not made the October 1, 2010 interest payment. However, pursuant to the
March 26, 2008 Indenture Agreement (the "Indenture"), we have until October 31,
2010 to make the interest payment before there is an event of default under the
Indenture that would permit the holders of the Notes to accelerate the maturity
date or take any action to enforce the Notes.
At this
time, we intend to make the October 1, 2010 interest payment on or before
October 31, 2010 or to seek, from the holders of the Notes, a forbearance with
regards to the interest payment and a modification of the
Notes. There can be no assurance that we will make the interest
payment on or before October 31, 2010, or will obtain a forbearance of the
October 1, 2010 interest payment from the holders of the Notes and/or any
modification of the Notes or the terms upon which any such forbearance or
modification agreement will be reached, or that any requisite consents will be
obtained or requisite conditions will be satisfied.
If we do
not make the interest payment on or before October 31, 2010, not only will we
trigger the event of default provisions under the Indenture, but we may also
trigger other cross-default provisions under the terms of our other existing
indebtedness.
Our
independent registered public accounting firm’s report on our 2009 financial
statements questions our ability to continue as a going concern.
Our
independent registered public accounting firm’s report on our financial
statements as of December 31, 2009 and 2008 and for the three year period
ended December 31, 2009 expresses doubt about our ability to continue as a
going concern. Their report includes an explanatory paragraph stating that there
is substantial doubt about our ability to continue as a going concern due to the
lack of sufficient capital, as of the date their report was issued, to support
our business plan through the end of 2010.
We will
need to secure additional financing in the future and if we are unable to secure
adequate funds on terms acceptable to us, we will be unable to support our
business requirements, build our business or continue as a going concern.
Accordingly, we can offer no assurance that the actions we plan to take to
address these conditions will be successful. Inclusion of a “going concern
qualification” in the report of our independent accountants or any future report
may have a negative impact on our ability to obtain financing and may adversely
impact our stock price.
Certain
purchasers of our outstanding securities may assert rights to purchase
securities in this offering.
In
connection with an offering of securities that we completed in July 2009, we
granted the purchasers of those securities the right, subject to certain
exceptions, to participate in any future equity financing by us prior to
December 31, 2010. The participation right allows the investors to purchase
up to 35% of any equity securities we offer, including the shares of Common
Stock offered pursuant to this Prospectus Supplement. We have
provided notice of this offering to each participation right holder, and we are
offering to issue and sell the participation rights holders at least their pro
rata portion of the securities offered hereby having an aggregate market price
of up to $262,500 at a price per share equal to $0.27.
Our
management will have broad discretion over the use of the net proceeds from this
offering, you may not agree with how we use the proceeds and the proceeds may
not be invested successfully.
Our
management will have broad discretion as to the use of the net proceeds from any
offering by us and could use them for purposes other than those contemplated at
the time of this offering. Accordingly, you will be relying on the judgment of
our management with regard to the use of these net proceeds, and you will not
have the opportunity as part of your investment decision to assess whether the
proceeds are being used appropriately. It is possible that the proceeds will be
invested in a way that does not yield a favorable, or any, return for our
company.
As of
June 30, 2010, we had accounts payable and accrued liabilities in excess of
$10.1 million. As a result, we will need to devote a part of the proceeds from
this offering to the payment of a portion of these outstanding obligations,
which will limit the amount of proceeds available to us for other
purposes.
We
have never declared or paid dividends on our common stock and we do not
anticipate paying dividends on our common stock in the foreseeable
future.
Our
business requires significant funding, and we currently invest more in project
development than we earn from operating our projects and sales of our
technology. In addition, the agreements governing our debt and the terms of our
Series A-1 Cumulative Convertible Preferred Stock (the “Preferred Stock”)
restrict our ability to pay dividends on our common stock. Therefore, we do not
anticipate paying any cash dividends on our common stock in the foreseeable
future. We currently plan to invest all available funds and future earnings in
the development and growth of our business. As a result, capital appreciation,
if any, of our common stock will be your sole source of potential gain in the
foreseeable future.
USE
OF PROCEEDS
The total
proceeds we receive from the sale of securities offered pursuant to this
prospectus supplement, excluding the proceeds, if any, from the exercise of the
warrants issued in this offering, we estimate will be approximately $2.5
million, which is the portion of the amount owed to the LOC Lenders that we
intend to satisfy with the proceeds of this offering. The net proceeds will be
the total proceeds less our estimated offering expenses of $5,000. A portion of
the proceeds may consist of promissory notes, which we may accept in lieu of
cash at our sole discretion. We anticipate that the LOC Lenders will purchase
units by delivering promissory notes to us and elect to forego repayment of the
respective amounts they are owed under our line of credit as an offset against
the amounts owed pursuant to the promissory notes. The amounts outstanding under
our line of credit bear interest at 10% per annum and are due on June
30, 2011. We used the proceeds we received from our line of credit to
satisfy vendor obligations, power plant construction expenses, well field
development expenses and for general corporate purposes.
DESCRIPTION
OF SECURITIES WE ARE OFFERING
In this
offering, we are offering a maximum of 9,305,790 units, consisting of up to
9,305,790 shares of common stock and warrants to purchase up to 4,652,895 shares
of common stock. Each unit consists of one share of common stock and warrants to
purchase 0.50 shares of common stock at an initial exercise price of $0.25 per
share. Each unit will be sold at a negotiated price of $0.27 per unit. This
prospectus supplement also relates to the offering of shares of our common stock
upon exercise, if any, of the warrants. Units will not be issued or
certificated. The shares of common stock and warrants are immediately separable
and will be issued separately.
The units
offered in this offering will be issued pursuant to subscription agreements
between each of the purchasers and us. You should review a copy of the form of
subscription agreement delivered to you in connection with this offering and the
form of warrant attached to this prospectus supplement for a complete
description of the terms and conditions applicable to the units. This
description of the units in this prospectus supplement is qualified in its
entirety by reference to the warrants.
Common
Stock
The
material terms and provisions of our common stock and each other class of our
securities which qualifies or limits our common stock are described under the
caption “Description of Capital Stock” starting on page 17 of the
accompanying prospectus.
Warrants
The
following is a brief summary of the warrants and is subject in all respects to
the provisions contained in the warrants, the form of which is attached to this
prospectus supplement.
Exercisability.
Holders may
exercise warrants at any time on or after the date of issuance through and
including 4:30 p.m., Utah time, on the date that is 10 years from the date of
issuance. The warrants are exercisable, at the option of each holder, in whole
or in part, by delivering to us a duly executed exercise notice accompanied by
payment in full for the number of shares of our common stock purchased upon such
exercise. The holder of warrants does not have the right to exercise any portion
of the warrant if the holder would beneficially own in excess of 9.999% of the
shares of our common stock outstanding immediately after giving effect to such
exercise. This percentage may, however, be raised or lowered to any other
percentage at the option of the holder upon at least 61 days’ prior written
notice from the holder to us.
Exercise Price.
The exercise
price of common stock purchasable upon exercise of the warrants is $0.25 per
share. The exercise price and the number of shares issuable upon exercise of the
warrants is subject to appropriate adjustment in the event of recapitalization
events, stock dividends, stock splits, stock combinations, reclassifications or
similar events affecting our common stock, and also upon any distributions of
assets, including cash, stock or other property to our
stockholders.
Transferability.
The warrants
may be transferred at the option of the holder upon surrender of the warrants
with the appropriate instruments of transfer.
Purchase Rights, Fundamental
Transactions and Change of Control
. If we sell or grant any rights to
purchase stock, warrants or securities or other property to our stockholders on
a pro rata basis, we will provide the holders of warrants with the right to
acquire, upon the same terms, the securities subject to such purchase rights as
though the warrant had been exercised immediately prior to the declaration of
such rights. If we consummate any fundamental transaction, as described in the
warrants and generally including any consolidation or merger into another
corporation, the consummation of a transaction whereby another entity acquires
more than 50% of our outstanding common stock, the sale of all or substantially
all of our assets, or another transaction in which our common stock is converted
into or exchanged for other securities or other consideration, the holder of
warrants will thereafter receive upon exercise of the warrants the securities or
other consideration to which a holder of the number of shares of common stock
then deliverable upon the exercise or conversion of such warrants would have
been entitled upon such consolidation, merger or other transaction.
Exchange Listing.
We do not
plan on making an application to list the warrants on the New York Stock
Exchange, any other national securities exchange or other nationally recognized
trading system. Our common stock underlying the warrants is listed on the New
York Stock Exchange.
Rights as Stockholder.
Except
as otherwise provided in the warrants (such as the rights described above of a
warrant holder upon our sale or grant of any rights to purchase stock, warrants
or securities or other property to our stockholders on a pro rata basis) or by
virtue of such holder’s ownership of shares of our common stock, the holders of
the warrants do not have the rights or privileges of holders of our common
stock, including any voting rights, until they exercise their
warrants.
Fractional Shares.
No
fractional shares of common stock will be issued upon the exercise of the
warrants. Rather, the number of shares of common stock to be issued will be
rounded down to the nearest whole number.
PRICE
RANGE OF COMMON STOCK AND DIVIDENDS
Our
common stock is listed on the New York Stock Exchange under the symbol “RZ.”
Prior to December 22, 2008, our common stock was listed on the NYSE Arca
exchange under the symbol “RZ.” The following table sets forth the high and low
closing sales prices by quarter as reported by the NYSE Arca exchange or the New
York Stock Exchange, as applicable, for the periods indicated.
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
17.09
|
|
|
$
|
7.30
|
|
|
Second
Quarter
|
|
|
11.37
|
|
|
|
7.87
|
|
|
Third
Quarter
|
|
|
11.70
|
|
|
|
4.10
|
|
|
Fourth
Quarter
|
|
|
8.35
|
|
|
|
2.47
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
4.71
|
|
|
|
2.54
|
|
|
Second
Quarter
|
|
|
4.50
|
|
|
|
2.80
|
|
|
Third
Quarter
|
|
|
2.58
|
|
|
|
1.53
|
|
|
Fourth
Quarter
|
|
|
1.69
|
|
|
|
1.05
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
1.38
|
|
|
|
0.89
|
|
|
Second
Quarter
|
|
|
1.16
|
|
|
|
0.51
|
|
|
Third
Quarter
|
|
|
0.58
|
|
|
|
0.24
|
|
|
Fourth
Quarter
|
|
|
0.27
|
|
|
|
0.21
|
|
On
October 12, 2010, the last sale price for our common stock as reported by the
New York Stock Exchange was $0.25 per share.
We are
required to pay a quarterly dividend to the holder of the Preferred Stock,
payable in cash or shares of common stock equal to an annual rate of LIBOR plus
8%, but in no event higher than 14%, subject to adjustment. If we elect to pay
the quarterly dividend to the holders of the Preferred Stock in shares of our
common stock, the amount that would have been paid in cash is converted to
shares of our common stock based upon the lower of the intraday weighted average
stock price as reported by Bloomberg, LP for the 60 business day period prior to
three business days before the end of the quarterly period or the average price
for the lowest five days during the 60 business day period. We elected to pay
the quarterly dividend payment for the quarterly periods ended March 31,
2010, June 30, 2010 and September 30, 2010 with shares of our common stock.
Accordingly, we issued 70,457, 200,466 and 388,151 shares of our common stock to
the holder of the Preferred Stock for the quarters ended March 31, 2010,
June 30, 2010 and September 30, 2010, respectively.
We are
limited in dividend payments that we can make to our common stockholders unless
such dividend payment is made equally to the holders of the Preferred Stock as
if such holders had converted or redeemed (whichever is greater) their Preferred
Stock for shares of our common stock immediately prior to the payment of such
dividend. We have never declared or paid any cash dividends with respect to our
common stock. We currently anticipate that we will retain all future earnings
for the operation and expansion of our business and do not intend to declare
dividends with respect to our common stock in the foreseeable
future.
DILUTION
If you
purchase our shares in this offering, your interest will be diluted to the
extent of the difference between the offering price per share and the net
tangible book value per share of our common stock after this offering. We
calculate net tangible book value per share by subtracting our total liabilities
from our total tangible assets, which is total assets less intangible assets,
and dividing this amount by the number of outstanding shares of our common stock
on that date.
Our net
negative tangible book value (unaudited) at June 30, 2010, was approximately
$(48.3) million, or $(0.53) per share, based on 90,989,961 shares of our common
stock outstanding as of June 30, 2010. After giving effect to the sale of our
common stock in the aggregate amount of $2,512,563 offered at a negotiated price
of $0.27 per share, and after deducting the estimated offering expenses payable
by us, our net negative tangible book value as of June 30, 2010 would have been
approximately $(45.8) million, or approximately $(0.46) per share of common
stock. This represents an immediate increase in the net tangible book value of
$0.07 per share to our existing stockholders and an immediate and substantial
dilution in net negative tangible book value of $0.73 per share to new
investors. The following table illustrates this per share dilution:
|
Assumed
price to public per share
|
|
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
Net
negative tangible book value per share as of June 30, 2010
|
|
$
|
(0.53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
in net negative tangible book value per share attributable to new
investors
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
adjusted net tangible book value per share after this
offering
|
|
|
|
|
|
|
(0.46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
dilution per share to new investors
|
|
|
|
|
|
$
|
0.73
|
|
The
number of shares of our common stock on October 12,2010 totaled 96,191,219. The
calculations made above are based upon 90,989,961 shares of our common stock
outstanding as of June 30, 2010 and assume no issuance of shares, exercise of
outstanding options or warrants since that date and exclude the
following:
|
|
•
|
4,928,478 shares issuable upon
exercise of outstanding options and under outstanding stock option
agreements pursuant to our stock incentive plans at a weighted average
option exercise price of $4.69 per share at June 30,
2010;
|
|
|
•
|
1,000,000 shares issuable upon
conversion of all of the Preferred Stock at June 30, 2010. The
holders of the Preferred Stock may also redeem shares of Preferred Stock
into a maximum of 4,895,721 shares of our common stock at the earlier of
July 28, 2010 or the date on which the price of our common stock
exceeds $2.00 per share, at an exercise price of $1.0213 per
share;
|
|
|
•
|
5,960,121 shares issuable upon
conversion of all of our 8.00% Convertible Senior Notes due 2013 at June
30, 2010;
|
|
|
•
|
15,000 shares subject to
outstanding warrants, at an exercise price of $12.06 per share, that had
vested at June 30, 2010;
|
|
|
•
|
1,350,000 shares subject to
outstanding warrants, at an exercise price of $10.99 that had vested at
June 30, 2010. The exercise price has been subsequently reset to $10.56
per share;
|
|
|
•
|
122,603 shares subject to
outstanding warrants, at an exercise price of $5.35 per share, that had
vested at June 30, 2010;
|
|
|
•
|
1,799,774 shares subject to
outstanding warrants, at an exercise price of $6.00 per share, that had
vested at June 30, 2010;
|
|
|
•
|
4,275,170 shares subject to
outstanding warrants, at an exercise price of $4.62 per share, that had
vested at June 30, 2010;
|
|
|
•
|
1,600,762 shares subject to
outstanding warrants, at an exercise price of $1.61 per share that had
vested at June 30, 2010;
|
|
|
•
|
171,569 shares subject to
outstanding warrants, at an exercise price of $1.275 per share that had
vested on August 3, 2010;
and
|
|
|
•
|
410,533 shares available for
future grants or issuance under our stock incentive plans and our employee
stock purchase plan at June 30,
2010.
|
To the
extent options and warrants outstanding as of June 30, 2010 have been or may be
exercised or other shares have been or are issued, there may be further dilution
to new investors.
In
addition, as part of the Preferred Stock offering on February 3, 2010, we issued
warrants to purchase up to 14,000 additional shares of the Preferred Stock (the
“Preferred Warrants”). The Preferred Warrants have an exercise price of $1,000
per share. The Preferred Warrants are exercisable from time to time in full or
in part in two tranches of up to 7,000 shares of the Preferred Stock for each
tranche. The first tranche of up to 7,000 shares of the Preferred Stock are
exercisable on or before February 3, 2011 (subject to extension under
certain circumstances). The second tranche of up to $7.0 million are exercisable
on or before February 3, 2011 (subject to extension under certain
circumstances) so long as the Prevailing Market Price (as defined in the
Certificate of Rights and Preferences of Series A-1 Cumulative Convertible
Preferred Stock) rises above $2.00 per share prior to February 3, 2011.
Otherwise, the second tranche of up to 7,000 shares of Preferred Stock for up to
$7.0 million are exercisable on or before February 4, 2013 (subject to
extension under certain circumstances).
Subsequent
to June 30, 2010, we have issued :
|
|
•
|
1,670,378 shares of our common
stock in connection with our $750,000 direct equity offering at a price of
$0.449 per share that closed on July 20,
2010.
|
|
|
•
|
2,777,777 shares of our common
stock in connection with our $750,000 direct equity offering at a price of
$0.27 per share that closed on September 20,
2010.
|
|
|
•
|
364,952
shares of our common stock to a service provider to settle an outstanding
invoice totaling $91,238 on September 23,
2010.
|
In addition to the shares of our common
stock issued subsequent to June 30, 2010, the following transactions have
occurred:
|
|
•
|
245,569 shares issuable upon the
exercise of outstanding warrants were forfeited or expired due to
termination of employment.
|
PLAN
OF DISTRIBUTION
We are
offering the units directly to the LOC Lenders. We do not intend to
offer the units to any other potential investors.
We
currently anticipate that closing of the offering contemplated by this
prospectus supplement will take place on or about October 27, 2010.
The subscription agreements to be executed by purchasers of units in this
offering will provide for the manner in which they must transmit the purchase
price for their units. The estimated offering expenses payable by us are
approximately $5,000, which includes legal and accounting costs and various
other fees associated with listing the common stock
.
After deducting
our estimated offering expenses, we expect the net proceeds from this offering
to be approximately $2.5 million.
The
transfer agent for our common stock to be issued in this offering is Interwest
Transfer Company Inc.
Our
common stock is traded on the New York Stock Exchange under the symbol
“RZ.”
LEGAL
MATTERS
Certain
legal matters in connection with the offering of the common stock will be passed
upon for us by Stoel Rives LLP.
EXPERTS
Our
financial statements, incorporated in this prospectus by reference to our Annual
Report on Form 10-K for the years ended December 31, 2009, 2008 and 2007,
and the effectiveness of our internal control over financial reporting as of
December 31, 2009, have been audited by Hein & Associates LLP of
Denver, Colorado, our independent registered public accounting firm, and are so
incorporated by reference hereto in reliance upon such report given upon the
authority of said firm as an expert in auditing and accounting.
INFORMATION
INCORPORATED BY REFERENCE
The SEC
allows us to “incorporate by reference” certain of our publicly-filed documents
into this prospectus, which means that information included in those documents
is considered part of this prospectus. Information that we file with the SEC
after the date of this prospectus will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act between the date of this prospectus and the termination of the
offering.
The
following documents filed with the SEC are incorporated by reference in this
prospectus (other than, in each case, documents or information therein deemed to
have been furnished and not filed in accordance with SEC rules):
|
|
1.
|
Our Annual Report on Form 10-K
for the year ended December 31,
2009.
|
|
|
2.
|
Our Quarterly Reports on Form
10-Q for the quarters ended March 31, 2010 and June 30,
2010.
|
|
|
3.
|
Our Current Reports on Form 8-K
filed on January 13, 2010, February 8, 2010, February 22, 2010, February
25, 2010, April 5, 2010, April 8, 2010, April 28, 2010, June 14, 2010,
June 23, 2010, July 2, 2010, July 7, 2010, July 14, 2010, July 20, 2010,
August 5, 2010, September 20, 2010, October 4, 2010, and October 5, 2010,
and our Current Report on Form 8-K/A filed on April 5,
2010.
|
|
|
4.
|
Our Registration Statement on
Form 8-A filed on November 1, 2005, as amended by Amendment
No. 1 to such Form 8-A filed on May 15,
2008.
|
We will
provide without charge to any person to whom this prospectus is delivered, on
the written or oral request of such person, a copy of any or all of the
foregoing documents incorporated by reference, excluding exhibits, unless we
have specifically incorporated an exhibit in the incorporated document. Written
requests should be directed to: Raser Technologies, Inc., 5152 North Edgewood
Drive, Suite 200, Provo, UT 84604, Attention: Investor Relations,
(801) 765-1200 (telephone).
Each
document or report subsequently filed by us pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the securities shall be deemed to be incorporated
by reference into this prospectus and to be a part of this prospectus from the
date of filing of such document, unless otherwise provided in the relevant
document. Any statement contained herein, or in a document all or a portion of
which is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the registration statement
and this prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the registration statement or this
prospectus.
The
information relating to Raser contained in this prospectus is not comprehensive,
and you should read it together with the information contained in the
incorporated documents.
FORM OF
WARRANT
RASER
TECHNOLOGIES, INC.
WARRANT
|
Warrant
No. [ ]
|
Dated: October
13, 2010
|
Raser
Technologies Inc., a Delaware corporation (the “
Company
”), hereby certifies
that, for value received, [NAME], or its registered assigns (the “
Holder
”), is entitled to
purchase from the Company up to a total of [# OF SHARES ]
shares of common stock,
$0.01 par value per share (the “
Common
Stock
”), of the Company (each
such share, a “
Warrant
Share
” and all such shares, the “
Warrant Shares
”) at an
exercise price equal to $0.25 per share (as adjusted from time to time as
provided in
Section
9
, the “
Exercise
Price
”), at any time and on or after the date in which the warrants are
issued (the “
Initial Exercise
Date
”) and through and including the date that is ten (10) years from the
date hereof (the “
Expiration
Date
”), and subject to the following terms and
conditions. This Warrant (this “
Warrant
’) is issued pursuant
to that certain Subscription Agreement, dated as of October 13, 2010, by and
among the Company and the Holder, pursuant to the Company’s Registration
Statements on Form S-3 (File number 333-159649). This Warrant is one
of a series of similar warrants issued by the Company to certain parties
(collectively, the “
Warrants
”).
1.
Definitions
. Capitalized
terms used and not otherwise defined herein have the meanings given to such
terms below:
“
Bloomberg”
means Bloomberg
Financial Markets.
“
Closing Bid Price
” means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., Utah time, as reported by Bloomberg, or,
if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the
Closing Bid Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as
the case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to
Section 16
of this
Warrant. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination, reclassification or similar
transaction during the applicable calculation period.
“
Fundamental Transaction
” means
any “change of control,” as such term is defined in the Indenture dated as of
March 26, 2008 relating to the Company’s 8.00% Convertible Senior Notes due
2013.
“
Principal Market
” means the
New York Stock Exchange.
“
Voting Stock
” of a Person
means capital stock of such Person of the class or classes pursuant to which the
holders thereof have the general voting power to elect, or the general power to
appoint, at least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
2.
Registration of
Warrant
. The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of record of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, absent actual notice to the
contrary.
3.
Registration of
Transfers
. The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to
Interwest Transfer Company, Inc. (the Company’s “Transfer Agent”) or to the
Company at its address specified herein. Upon any such registration
of transfer, a new warrant to purchase Common Stock, in substantially the form
of this Warrant (any such new warrant, a “New Warrant”), evidencing the portion
of this Warrant so transferred shall be issued to the transferee and a New
Warrant evidencing the remaining portion of this Warrant not so transferred, if
any, shall be issued to the transferring Holder. The acceptance of
the New Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a
Warrant.
4.
Exercise and Duration of
Warrants
.
a) This
Warrant shall be exercisable by the registered Holder at any time and from time
to time on or after the Initial Exercise Date and including the Expiration
Date. At 4:30 P.M., Utah time on the Expiration Date, the portion of
this Warrant not exercised prior thereto shall be and become void and of no
value.
b) A
Holder may exercise this Warrant by delivering to the Company (i) an exercise
notice, in the form attached hereto (the “Exercise Notice”), appropriately
completed and duly signed, and (ii) payment of the Exercise Price for the
number of Warrant Shares as to which this Warrant is being exercised, and the
date such items are delivered to the Company (as determined in accordance with
the notice provisions hereof) is an “Exercise Date.” The Holder shall
not be required to deliver the original Warrant in order to effect an exercise
hereunder. Execution and delivery of the Exercise Notice shall have
the same effect as cancellation of the original Warrant and issuance of a New
Warrant evidencing the right to purchase the remaining number of Warrant
Shares.
5.
Delivery of Warrant
Shares
.
a) Upon
exercise of this Warrant, the Company shall promptly (but in no event later than
three Trading Days after the Exercise Date) transmit to the Holder and the
Transfer Agent, by email or facsimile, an acknowledgment of confirmation of
receipt of the Exercise Notice and funds representing the Exercise
Price. On or before the fourth (4th) Trading Day following the date
of the Company’s receipt of the Exercise Notice (the “Share Delivery Date”), the
Company shall (x) provided that the Transfer Agent is participating in The
Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate number of Warrant Shares
to which the Holder is entitled pursuant to such exercise to the Holder’s or its
designee’s balance account with DTC through its Deposit Withdrawal Agent
Commission system, or (y) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program, issue and dispatch by overnight
courier to the address as specified in the Exercise Notice, a certificate,
registered in the Company’s share register in the name of the Holder or its
designee, for the number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise. Upon receipt by the Company of
the Exercise Notice and funds representing the Exercise Price, the Holder shall
be deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date such Warrant Shares are credited to the Holder’s DTC
account or the date of delivery of the certificates evidencing such Warrant
Shares, as the case may be. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but rather the number of shares
of Common Stock to be issued shall be rounded down to the nearest whole
number.
b) This
Warrant is exercisable, either in its entirety or, from time to time, for a
portion of the number of Warrant Shares. Upon surrender of this
Warrant following one or more partial exercises, the Company shall issue or
cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares.
c) In
addition to any other rights available to a Holder, if the Company fails to
deliver to the Holder a certificate representing Warrant Shares or credit the
Holder’s balance account with DTC, as applicable, by the fifth (5
th
)
Trading Day after the Company’s receipt of the Exercise Notice and funds
representing the Exercise Price, and if after such Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock in
a good faith transaction with an unaffiliated third party (a “Good Faith
Purchase”) to deliver in satisfaction of a sale by the Holder of the Warrant
Shares that the Holder is actually entitled to receive from the Company (a
“Buy-In”), then the Company shall, within five (5) Trading Days after the
Holder’s request and in the Holder’s discretion, and after the Holder provides
the Company with written evidence of such Good Faith Purchase, either (i) pay
cash to the Holder in an amount equal to the Holder’s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased (the “Buy-In Price”), at which point the Company’s obligation to
deliver such certificate or to credit the Holder’s balance account with DTC (and
to issue such Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates representing
such Common Stock and pay cash to the Holder in an amount equal to the excess
(if any) of the Buy-In Price over the product of (A) such number of shares of
Common Stock, times (B) the Closing Bid Price on the Exercise Date.
d) The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of this Warrant as required pursuant to the terms hereof.
6.
Charges, Taxes and
Expenses
. Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the foregoing shall not apply if the Company has an
obligation to withhold tax and the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the registration of
any certificates for Warrant Shares or Warrants in a name other than that of the
Holder. The Holder shall be responsible for all other tax liability
that may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof, including but not limited to income taxes
or capital gains of the Holder or exercising holder.
7.
Replacement of
Warrant
. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable bond or indemnity, if requested. Applicants for a New
Warrant under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third-party costs as
the Company may prescribe.
8.
Reservation of Warrant
Shares
. The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder (after giving effect
to the adjustments and restrictions of
Section 9
, if any).
The Company covenants that all Warrant Shares so issuable and deliverable shall,
upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable. The Company will take all such action as may be
necessary to assure that such shares of Common Stock may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of any securities exchange or automated quotation system upon which
the Common Stock may be listed.
9.
Certain
Adjustments
. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this
Section
9
.
a)
Stock Dividends and
Splits
. If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to this paragraph shall become
effective immediately after the effective date of such dividend, distribution,
subdivision or combination.
b)
Pro Rata
Distributions
. If the Company, at any time while this Warrant is
outstanding, distributes to holders of Common Stock (i) evidences of its
indebtedness, (ii) any security (other than a distribution of Common Stock
covered by the preceding paragraph), (iii) rights or warrants to subscribe
for or purchase any security, or (iv) any other asset (in each case,
“Distributed Property”), then in each such case the Holder shall be entitled
upon exercise of this Warrant for the purchase of any or all of the Warrant
Shares, to receive the amount of Distributed Property which would have been
payable to the Holder had such Holder been the holder of such Warrant Shares on
the record date for the determination of stockholders entitled to such
Distributed Property. The Company will at all times set aside in
escrow and keep available for distribution to such holder upon exercise of this
Warrant a portion of the Distributed Property to satisfy the distribution to
which such Holder is entitled pursuant to the preceding sentence.
c)
Fundamental
Transactions
. If, at any time while this Warrant is
outstanding, the Company effects or is subject to a Fundamental Transaction
(other than as a result of a subdivision or combination of shares of Common
Stock covered by
Section 9(a)
above),
then the Holder shall have the right thereafter to receive, upon exercise of
this Warrant, the same amount and kind of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of the number of Warrant Shares then issuable upon exercise in full
of this Warrant (the “Alternate Consideration”). The aggregate
Exercise Price for this Warrant will not be affected by any such Fundamental
Transaction, but the Company shall apportion such aggregate Exercise Price among
the Alternate Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. At
the Holder’s request, any successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new warrant consistent with
the foregoing provisions and evidencing the Holder’s right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise
thereof. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c) and
insuring that the Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
d)
Number of Warrant
Shares
. Simultaneously with any adjustment to the Exercise
Price pursuant to paragraph (a) of this Section, the number of Warrant Shares
that may be purchased upon exercise of this Warrant shall be adjusted
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the increased number of Warrant Shares shall be the same
as the aggregate Exercise Price in effect immediately prior to such
adjustment.
e)
Calculations
. All
calculations under this
Section 9
shall be
made to the nearest cent or the nearest 1/100th of a share, as applicable,
provided that the Company shall not be required to issue any fractional shares
pursuant to this Warrant. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock. No adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least $0.01 in such price; provided, however, that
any adjustment which by reason of this paragraph is not required to be made
shall be carried forward and taken into account in any subsequent adjustments
under this
Section
9
. No adjustment need be made for a change in the par value or no par
value of the Company’s Common Stock.
f)
Notice of
Adjustments
. Upon the occurrence of each adjustment pursuant
to this
Section
9
, the Company at its expense will promptly compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Warrant Shares or other securities issuable upon
exercise of this Warrant (as applicable), describing the transactions giving
rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly
deliver a copy of each such certificate to the Holder and to the Transfer
Agent.
g)
Notice of Corporate
Events
. If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common
Stock, including without limitation any granting of rights or warrants to
holders of the Company’s Common Stock to subscribe for or purchase any capital
stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into
any agreement contemplating or solicits stockholder approval for any Fundamental
Transaction or (iii) authorizes the voluntary dissolution, liquidation or
winding up of the affairs of the Company, then the Company shall deliver to the
Holder a notice describing the material terms and conditions of such
transaction, at least ten calendar days prior to the applicable record or
effective date on which a Person would need to hold Common Stock in order to
participate in or vote with respect to such transaction, and the Company will
take all steps reasonably necessary in order to insure that the Holder is given
the practical opportunity to exercise this Warrant prior to such time so as to
participate in or vote with respect to such transaction; provided, however, that
the failure to deliver such notice or any defect therein shall not affect the
validity of the corporate action required to be described in such
notice.
10.
Payment of Exercise
Price
. The Holder shall pay the Exercise Price in immediately
available funds.
11.
Limitation on
Exercise
.
a) Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock
that may be acquired by the Holder upon any exercise of this Warrant (or
otherwise in respect hereof) shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not
exceed 9.999% (the “Maximum Percentage”) of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated
thereunder. Each delivery of an Exercise Notice hereunder will
constitute a representation by the Holder that it has evaluated the limitation
set forth in this paragraph and determined that issuance of the full number of
Warrant Shares requested in such Exercise Notice is permitted under this
paragraph. The Company’s obligation to issue shares of Common Stock
in excess of the limitation referred to in this Section shall be suspended (and
shall not terminate or expire notwithstanding any contrary provisions hereof)
until such time, if any, as such shares of Common Stock may be issued in
compliance with such limitation, but in no event later than the Expiration
Date. By written notice to the Company, the Holder may waive the
provisions of this Section or increase or decrease the Maximum Percentage to any
other percentage specified in such notice, but (i) any such waiver or increase
will not be effective until the 61st day after such notice is delivered to the
Company, and (ii) any such waiver or increase or decrease will apply only to the
Holder and not to any other holder of Warrants.
12.
Fractional
Shares
. The Company shall not be required to issue or cause to
be issued fractional Warrant Shares on the exercise of this
Warrant. If any fraction of a Warrant Share would, except for the
provisions of this Section, be issuable upon exercise of this Warrant, the
number of Warrant Shares to be issued will be rounded down to the nearest whole
share.
13.
Notices
. Any
and all notices or other communications or deliveries hereunder (including
without limitation any Exercise Notice) shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile prior to 4:30 p.m. (Utah
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile on a
day that is not a Trading Day or later than 4:30 p.m. (Utah time) on any Trading
Day, (iii) the Trading Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address and
facsimile number for such notices or communications shall be as
follows:
If sent
to the Company:
Raser
Technologies, Inc.
5152
North Edgewood Drive, Suite 375
Provo,
Utah 84604
Attention: John
Perry, Chief Financial Officer
Telephone:
801-765-1200
Facsimile: 801-374-3314
If sent
to the Holder:
[Name]
[Address]
[Address]
Telephone:
___________
Facsimile:
___________
14.
Warrant
Agent
. The Company shall serve as warrant agent under this
Warrant. Upon 30 days’ notice to the Holder, the Company may appoint
a new warrant agent. Any corporation into which the Company or any
new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or
any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or stockholder services business shall
be a successor warrant agent under this Warrant without any further
act. Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder’s last address as shown on the Warrant
Register.
15.
Warrant Holder Not Deemed a
Stockholder
. Except as otherwise specifically provided herein,
the Holder, solely in such Person’s capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person’s capacity
as the Holder of this Warrant, any of the rights of a stockholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.
16.
Dispute
Resolution
. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Business Days of receipt of the Exercise Notice giving
rise to such dispute, as the case may be, to the Holder. If the
Holder and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Warrant Shares within five (5) Business
Days of such disputed determination or arithmetic calculation being submitted to
the Holder, then the Company shall, within one (1) Business Day submit via
facsimile (a) the disputed determination of the Exercise Price to an
independent, reputable investment bank selected by the Company and approved by
the Holder, which approval shall not be unreasonably withheld, conditioned or
delayed, or (b) the disputed arithmetic calculation of the Warrant Shares to the
Company’s independent, outside accountant. The Company shall use its
commercially reasonable efforts to cause at its expense the investment bank or
the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
ten (10) Business Days from the time it receives the disputed determinations or
calculations. Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
17.
Miscellaneous
.
a) This
Warrant may be assigned by the Holder. This Warrant may not be
assigned by the Company except to a successor in the event of a Fundamental
Transaction. This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and
assigns. Subject to the preceding sentence, nothing in this Warrant
shall be construed to give to any Person other than the Company and the Holder
any legal or equitable right, remedy or cause of action under this
Warrant. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.
b) The
Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any Warrant Shares above the amount payable therefor on such exercise, (ii) will
take all such action as may be reasonably necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant, and (iii) will not close its stockholder
books or records in any manner which interferes with the timely exercise of this
Warrant.
c)
Governing Law; Venue; Waiver
Of Jury Trial
. all questions concerning the construction,
validity, enforcement and interpretation of this warrant shall be governed by
and construed and enforced in accordance with the laws of the state of Utah,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the state of Utah or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the state of
Utah. each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in Salt Lake County, for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the transaction documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by
law. the company hereby waives all rights to a trial by
jury.
d) The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
e) In
case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE
PAGE FOLLOWS
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.
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RASER
TECHNOLOGIES, INC.
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By:
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Name:
|
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Title:
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EXERCISE
NOTICE
(To be
executed by the Holder to exercise the right to purchase shares of Common Stock
under the foregoing Warrant)
To
Raser Technologies,
Inc.:
The
undersigned is the Holder of Warrant No. _______ (the “
Warrant
”) issued by Raser
Technologies Inc., a Delaware corporation (the “
Company
”). Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.
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1.
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The
Warrant is currently exercisable to purchase a total of ______________
Warrant Shares.
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2.
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The
undersigned Holder hereby exercises its right to purchase
_________________ Warrant Shares pursuant to the
Warrant.
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3.
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The
Holder shall pay the sum of $____________ to the Company in accordance
with the terms of the Warrant.
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4.
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Pursuant
to this exercise, the Company shall deliver to the Holder _______________
Warrant Shares in accordance with the terms of the
Warrant.
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5.
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Following
this exercise, the Warrant shall be exercisable to purchase a total of
______________ Warrant Shares.
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Dated:
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Name
of Holder:
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(Print)
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By:
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Name:
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Title:
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(Signature
must conform in all respects to name of
holder
as specified on the face of the
Warrant)
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ACKNOWLEDGED
AND AGREED TO
this ___
day of ___________, 200_
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RASER
TECHNOLOGIES, INC.
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By:
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Name:
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Title:
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ASSIGNMENT
[To be
completed and signed only upon transfer of Warrant]
FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Warrant to
purchase ____________ shares of Common Stock of Raser Technologies,
Inc. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of Raser Technologies, Inc. with full power
of substitution in the premises.
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Dated:
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(Signature
must conform in all respects to name of holder as specified on the face of
the Warrant)
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Address
of Transferee
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In
the presence of:
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PROSPECTUS
$150,000,000
RASER
TECHNOLOGIES, INC.
COMMON
STOCK, PREFERRED STOCK, WARRANTS, SENIOR DEBT SECURITIES AND
SUBORDINATED
DEBT SECURITIES
We may
offer common stock, preferred stock, warrants, senior debt securities and
subordinated debt securities consisting of a combination of any of these
securities at an aggregate initial offering price not to exceed $150,000,000.
The debt securities that we may offer may consist of senior debt securities or
subordinated debt securities, in each case consisting of notes or other evidence
of indebtedness in one or more series. The warrants that we may offer will
consist of warrants to purchase any of the other securities that may be sold
under this prospectus. The securities offered under this prospectus may be
offered separately, together, or in separate series, and in amounts, at prices
and on terms to be determined at the time of sale. A prospectus supplement that
will set forth the terms of the offering of any securities will accompany this
prospectus. You should read this prospectus and any supplement carefully before
you invest.
Our
common stock is listed on the New York Stock Exchange under the symbol “RZ.” On
June 9, 2009, the closing price of our common stock was $3.82 per
share. As of the date of this prospectus, none of the other
securities that we may offer by this prospectus are listed on any national
securities exchange or automated quotation system.
INVESTING
IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING
ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN MATTERS THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN OUR SECURITIES.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This
prospectus may not be used to consummate the sale of any securities unless
accompanied by a prospectus supplement relating to the securities
offered.
THE DATE
OF THIS PROSPECTUS IS JUNE 12, 2009.
You
should rely only on the information contained in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference herein as described under “Information Incorporated by Reference.” We
have not authorized anyone to provide you with information different from that
contained in or incorporated by reference into this prospectus and the
accompanying prospectus supplement. This prospectus and the accompanying
prospectus supplement may be used only for the purposes for which they have been
published, and no person has been authorized to give any information not
contained in or incorporated by reference into this prospectus and the
accompanying prospectus supplement. If you receive any other information, you
should not rely on it. The information contained in this prospectus and the
accompanying prospectus supplement is accurate only as of the dates on the cover
pages of this prospectus or the accompanying prospectus supplement, as
applicable, the information incorporated by reference into this prospectus or
the accompanying prospectus supplement is accurate only as of the date of the
document incorporated by reference. Any statement made in this prospectus, the
accompanying prospectus supplement or in a document incorporated or deemed to be
incorporated by reference in this prospectus will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus, the accompanying prospectus supplement or in any
other subsequently filed document that is also incorporated or deemed to be
incorporated by reference in this prospectus modifies or supersedes that
statement. Any statement so modified or superseded will be deemed to constitute
a part of this prospectus only to the extent so modified or superseded. See
“Information Incorporated by Reference.” We are not making an offer of these
securities in any jurisdiction where the offer is not permitted.
TABLE
OF CONTENTS
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Page
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ABOUT
THIS PROSPECTUS
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1
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AVAILABLE
INFORMATION
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1
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FORWARD-LOOKING
STATEMENTS
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2
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THE
COMPANY
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RISK
FACTORS
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3
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USE
OF PROCEEDS
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17
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RATIO
OF EARNINGS TO FIXED CHARGES
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17
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DESCRIPTION
OF CAPITAL STOCK
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18
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DESCRIPTION
OF WARRANTS
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DESCRIPTION
OF DEBT SECURITIES
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MATERIAL
FEDERAL INCOME TAX CONSEQUENCES
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34
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PLAN
OF DISTRIBUTION
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34
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LEGAL
MATTERS
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EXPERTS
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36
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INFORMATION
INCORPORATED BY REFERENCE
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36
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ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-3 that we filed with
the Securities and Exchange Commission, which we refer to as the SEC, utilizing
a “shelf” registration, or continuous offering, process. Under this shelf
registration process, we may issue and sell any combination of the securities
described in this prospectus in one or more offerings with a maximum aggregate
offering price of up to $150,000,000.
This
prospectus provides you with a general description of the securities we may
offer. Each time we sell securities under this shelf registration, we will
provide a prospectus supplement that will contain specific information about the
terms of that offering, including a description of any risks relating to the
offering, if those terms and risks are not described in this prospectus. A
prospectus supplement may also add, update or change information contained in
this prospectus. If there is any inconsistency between the information in this
prospectus and the applicable prospectus supplement, you should rely on the
information in the prospectus supplement. The registration statement
we filed with the SEC includes exhibits that provide more details of the matters
discussed in this prospectus.
You should read
this prospectus and the related exhibits filed with the SEC and the accompanying
prospectus supplement together with additional information described under the
headings “Available Information” and “Information Incorporated by Reference”
before investing in any of the securities offered.
We may
sell securities to or through underwriters or dealers, and also may sell
securities directly to other purchasers or through agents. To the extent not
described in this prospectus, the names of any underwriters, dealers or agents
employed by us in the sale of the securities covered by this prospectus, the
principal amounts or number of shares or other securities, if any, to be
purchased by such underwriters or dealers and the compensation, if any, of such
underwriters, dealers or agents will be set forth in an accompanying prospectus
supplement.
The
information in this prospectus is accurate as of the date on the front cover.
Information incorporated by reference into this prospectus is accurate as of the
date of the document from which the information is incorporated. You should not
assume that the information contained in this prospectus is accurate as of any
other date.
Unless
the context otherwise requires, all references in this prospectus to “Raser,”
“us,” “our,” “we,” the “Company” or other similar terms are to Raser
Technologies, Inc.
AVAILABLE
INFORMATION
We are a
public company and are required to file annual, quarterly and current reports,
proxy statements and other information with the SEC pursuant to the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). You may read and copy any
document we file at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. You can request copies of these documents by writing to
the SEC and paying a fee for the copying cost. Please call the SEC at
1-800-SEC-0330 for more information about the operation of the public reference
room. Our SEC filings are also available to the public on the SEC’s website at
http://www.sec.gov. In addition, because our stock is listed
for trading on the New York Stock Exchange, you can read and copy reports and
other information concerning us at the offices of the New York Stock Exchange
located at 11 Wall Street, New York, New York 10005.
We filed
a registration statement on Form S-3 under the Securities Act with the SEC with
respect to the securities being offered pursuant to this prospectus. This
prospectus is only part of the registration statement and omits certain
information contained in the registration statement, as permitted by the SEC.
You should refer to the registration statement, including the exhibits, for
further information about us and the securities being offered pursuant to this
prospectus. Statements in this prospectus regarding the provisions of certain
documents filed with, or incorporated by reference in, the registration
statement are not necessarily complete and each statement is qualified in all
respects by that reference. You may:
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inspect a copy of the
registration statement, including the exhibits and schedules, without
charge at the SEC’s Public Reference
Room;
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obtain a copy from the SEC upon
payment of the fees prescribed by the SEC;
or
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obtain a copy from the SEC
website.
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Our
mailing address is 5152 North Edgewood Drive, Suite 375, Provo, Utah 84604 and
our Internet address is www.rasertech.com. Our telephone number is
(801) 765-1200. General information, financial news releases and filings
with the SEC, including annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and all amendments to these reports are
available free of charge on the SEC’s website at www.sec.gov. We are not
including the information contained on our website as part of, or incorporating
it by reference into, this prospectus.
FORWARD-LOOKING
STATEMENTS
Statements
included or incorporated by reference in this prospectus include both historical
and “forward-looking” statements within the meaning of the federal securities
laws. These forward-looking statements are based on current expectations and
projections about future results and include the discussion of our business
strategies, plans, goals, objectives and expectations concerning future
operations, margins, profitability, liquidity and capital resources. In
addition, in certain portions of this prospectus, the documents incorporated by
reference and in any prospectus supplement, the words “anticipate,” “believe,”
“estimate,” “may,” “will,” “expect,” “plan” and “intend” and similar
expressions, or the negative of such terms or other comparable terminology, as
they relate to us or our management, are intended to identify forward-looking
statements. These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by these forward-looking statements. These
statements are based upon the beliefs and assumptions of, and on information
available to, our management. Factors that could cause actual results to differ
materially from those expressed or implied by the forward-looking statements
include, but are not limited to those set forth below under “Risk Factors.”
Unless required by law, we do not assume any obligation to update
forward-looking statements based on unanticipated events or changed
expectations. However, you should carefully review the reports and documents we
file from time to time with the SEC, particularly our annual reports on
Form 10-K, quarterly reports on Form 10-Q and any current reports on
Form 8-K.
THE
COMPANY
We are an
environmental energy technology company focused on geothermal power development
and technology licensing. We operate two business segments: Power Systems and
Transportation & Industrial. Our Power Systems segment develops clean,
renewable geothermal electric power plants and bottom-cycling operations. Our
Transportation & Industrial segment focuses on using our Symetron™ family of
technologies to improve the efficiency of electric motors, generators and power
electronic drives used in electric and hybrid electric vehicle propulsion
systems. Through these two business segments, we are employing a “Well to
Wheels” strategy in an effort to produce a positive impact on the environment
and economically beneficial results for our stockholders. By executing our “Well
to Wheels” strategy, we aim to become both a producer of clean, geothermal
electric power as well as a provider of electric and hybrid-electric vehicle
technologies and products.
We are
incorporated in Delaware. We are the successor to Raser Technologies, Inc., a
Utah corporation, which was formerly known as Wasatch Web Advisors, Inc. Wasatch
Web Advisors acquired 100% of our predecessor corporation in a reverse
acquisition transaction in October of 2003. Prior to that transaction, our
predecessor corporation was a privately-held company.
We have
initiated the development of eight geothermal projects in our Power Systems
segment to date, and we are currently in the development stage of drilling wells
and constructing geothermal power plants to further develop viable geothermal
resources. We have accumulated a large portfolio of geothermal interests in four
western continental states and a geothermal concession in Indonesia. These
geothermal interests are important to our ability to develop geothermal power
plants. We continue to accumulate additional interests in geothermal resources
for potential future projects. We have incurred substantial losses since
inception and we are not operating at cash breakeven. Our continuation as a
going concern is dependent on efforts to raise additional capital, increase
revenues, reduce expenses, and ultimately achieve profitable operations, any of
which may be challenging given the deepening economic recession. If substantial
losses continue, or if we are unable to raise sufficient additional capital on
reasonable terms, liquidity concerns may require us to curtail or cease
operations, liquidate or sell assets or pursue other actions that could
adversely affect future operations.
RISK
FACTORS
An
investment in our securities involves certain risks. You should carefully
consider all of the information set forth in this prospectus and described under
the heading “Risk Factors” contained in the applicable prospectus supplement and
any related free writing prospectus, and under similar headings in the other
documents that are incorporated by reference into this prospectus. In
particular, you should evaluate the following risk factors before making an
investment in our securities. If any of the following circumstances actually
occur, our business, financial condition and results of operations could be
materially and adversely affected. If that occurs, the trading price of our
common stock could decline, and you could lose all or part of your
investment.
We
will need to secure additional financing and if we are unable to secure adequate
funds on terms acceptable to us, we will be unable to support our business
requirements, build our business or continue as a going concern.
At
March 31, 2009, we had approximately $0.2 million in cash and cash
equivalents, which is not sufficient to satisfy our anticipated cash
requirements for normal operations and capital expenditures for the foreseeable
future. Our operating activities used approximately $22.9 million of cash for
the year ended December 31, 2008 and approximately $8.1 million of cash
during the quarter ended March 31, 2009. We have incurred substantial
losses since inception and we are not operating at cash breakeven. Obligations
that may exert further pressure on our liquidity situation include the
obligation to repay amounts borrowed under our Line of Credit, which are due in
November 2009.
Our
continuation as a going concern is dependent on efforts to secure additional
funding, increase revenues, reduce expenses, and ultimately achieve profitable
operations. The current economic environment will make it challenging for us to
access the funds that we need, on terms acceptable to us, to successfully pursue
our development plans and operations. The cost of raising capital in the debt
and equity capital markets has increased substantially while the availability of
funds from those markets generally has diminished significantly. If we are
unable to raise sufficient, additional capital on reasonable terms, we may be
unable to satisfy our existing obligations, or to execute our plans. In such
case, we would be required to curtail or cease operations, liquidate or sell
assets, modify our current plans for plant construction, well field development
or other development activities, or pursue other actions that would adversely
affect future operations. Further, reduction of expenditures could have a
negative impact on our business. A reduction of expenditures would make it more
difficult for us to execute our plans to develop geothermal power plants in
accordance with our expectations. It would also make it more difficult for us to
conduct adequate research and development and other activities necessary to
commercialize our Symetron
TM
technologies.
From time
to time, we have raised additional capital through the sale of equity and
equity-related securities. Most recently, we entered into the Line of Credit in
January 2009. However, the lenders party to the Line of Credit have no
obligation to make advances to us. Further, the Line of Credit was established
primarily for general corporate purposes and the maximum amount available under
the Line of Credit is not sufficient to satisfy a meaningful portion of our
financing needs for the next year. In addition, under our agreement with Pratt
& Whitney Power Systems, Inc., a subsidiary of United Technologies, Inc.
(“PWPS”), PWPS is required to refund to us $7,355,250 of deposits (the “Deposit
Refund”), subject to the satisfaction of certain conditions. However, since the
purpose of the Deposit Refund is to help facilitate payment for certain work
necessary for the completion of the Thermo No. 1 geothermal power plant,
including the payment of certain existing accounts payable, PWPS is only
required to distribute portions of the Deposit Refund if we (1) provide
reasonable documentation to PWPS evidencing the work performed at the Thermo
No. 1 project site by a third party vendor; (2) provide reasonable
documentation to PWPS evidencing the payment of such third party vendor; and
(3) represent that the amount of the Deposit Refund to be paid is related
solely to the Thermo No. 1 project site and is necessary to keep the
project moving forward. The Deposit Refund may be released to Raser in
installments at times and in the amounts determined at the sole reasonable
discretion of PWPS.
In order
to execute our business strategy and continue our business operations, we will
need to secure additional funding from other sources through the issuance of
debt, preferred stock, equity or a combination of these instruments. We may also
seek to obtain financing through a joint venture, the sale of one or more of our
projects or interests therein, entry into pre-paid power purchase agreements
with utilities or municipalities, a merger and/or other transaction, a
consequence of which could include the sale or issuance of stock to third
parties. We cannot be certain that funding that we seek from any of these
sources will be available on reasonable terms or at all.
Our
Commitment Letter with Merrill Lynch (the “Commitment Letter”) sets forth
certain general terms relating to the structure and financing of up to 155 MW of
geothermal power plants we intend to develop. Pursuant to the Commitment Letter,
we have obtained project financing for our Thermo No. 1 project. Pursuant
to the Commitment Letter we have also received financing commitments for two
other projects: one in Nevada and one in New Mexico. The financing commitments
for the New Mexico and Nevada projects expired on December 1, 2008 and
June 30, 2008, respectively. We and Merrill Lynch have agreed to work
towards formally extending the expiration date of the Lightning Dock commitment
in the future. Since the Truckee commitment was negotiated, we have initiated
the development of several other projects, and a number of these projects are
expected to be developed more rapidly than the Truckee project. Therefore, in
the fourth quarter of 2008, we determined to postpone our discussions with
Merrill Lynch regarding an extension of the Truckee commitment. We intend to
continue our development efforts at the Truckee project and seek a new financing
commitment from Merrill Lynch once those development efforts progress to the
point when financing is needed for construction of a plant and related
development activities. If Merrill Lynch elects to provide or arrange a
financing commitment with respect to any additional projects, such financing
commitment will be subject to satisfactory due diligence, the execution of a
separate commitment letter relating to such project and certain other
conditions. Even if we are able to obtain funding for the development of
additional projects pursuant to the Commitment Letter, we will need additional
financing to cover general operating expenses and certain development expenses
that are not covered by the Commitment Letter.
If we
raise additional capital through the issuance of equity or securities
convertible into equity, our stockholders may experience dilution. Any new
securities we issue may have rights, preferences or privileges senior to those
of the holders of our common stock, such as dividend rights or anti-dilution
protections. We have previously issued warrants to purchase our common stock in
connection with certain transactions. Some of these warrants continue to be
outstanding and contain anti-dilution provisions. Pursuant to these
anti-dilution provisions, the exercise price of the applicable warrants will be
adjusted if we issue equity securities or securities convertible into equity
securities at a price lower than the exercise price of the applicable
warrants.
We may
also seek to secure additional financing by incurring indebtedness. However, as
a result of concerns about the stability of financial markets generally and the
solvency of counterparties specifically, the cost of obtaining money from the
credit markets generally has increased as many lenders and institutional
investors have increased interest rates, enacted tighter lending standards,
refused to refinance existing debt at maturity on terms that are similar to
existing debt, and reduced, or in some cases ceased, to provide funding to
borrowers. In addition, any indebtedness we incur could constrict our liquidity,
result in substantial cash outflows, and adversely affect our financial health
and ability to obtain financing in the future. Any such debt would likely
contain restrictive covenants that may impair our ability to obtain future
additional financing for working capital, capital expenditures, acquisitions,
general corporate or other purposes, and a substantial portion of cash flows, if
any, from our operations may be dedicated to interest payments and debt
repayment, thereby reducing the funds available to us for other purposes. Any
failure by us to satisfy our obligations with respect to these potential debt
obligations would likely constitute a default under such credit
facilities.
We
have limited operating experience and revenue, and we are not currently
profitable. We expect to continue to incur net losses for the foreseeable
future, and we may never achieve or maintain profitability.
We have a
limited operating history and, from our inception, we have earned limited
revenue from operations. We have incurred significant net losses in each year of
our operations, including a net loss applicable to common stockholders of
approximately $45.5 million and $6.7 million for the year ended December 31,
2008 and the quarter ended March 31, 2009, respectively. As a result of ongoing
operating losses, we had an accumulated deficit and deficit after re-entry into
development stage of approximately $96.2 million on cumulative revenues from
inception of approximately $1.0 million as of March 31, 2009. In
addition, at March 31, 2009, we had negative working capital totaling $58.7
million.
Under our
current growth plan, we do not expect that our revenues and cash flows will be
sufficient to cover our expenses unless we are able to successfully place a
number of power plants in service. As a result, we expect to continue to incur
substantial losses until we are able to generate significant revenues. Our
ability to generate significant revenues and become profitable will depend on
many factors, including our ability to:
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secure adequate
capital;
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identify and secure productive
geothermal sites;
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verify that the properties in
which we have acquired an interest contain geothermal resources that are
sufficient to generate
electricity;
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acquire electrical transmission
and interconnection rights for geothermal plants we intend to
develop;
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enter into power purchase
agreements for the sale of electrical power from the geothermal power
plants we intend to develop at prices that support our operating and
financing costs;
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enter into additional tax equity
partner agreements with potential financing partners that will provide for
the allocation of tax benefits to them and for the contribution of capital
by them to our projects or to successfully utilize new incentive
provisions being implemented by the United States
government;
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finance and complete the
development of multiple geothermal power
plants;
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manage construction, drilling and
operating costs associated with our geothermal power
projects;
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successfully license commercial
applications of our motor, generator and drive
technologies;
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enforce and protect our
intellectual property while avoiding infringement
claims;
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comply with applicable
governmental regulations;
and
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attract and retain qualified
personnel.
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Our
independent registered public accounting firm’s report on our 2008 financial
statements questions our ability to continue as a going concern.
Our
independent registered public accounting firm’s report on our financial
statements as of December 31, 2008 and 2007 and for the three year period ended
December 31, 2008 expresses doubt about our ability to continue as a going
concern. Their report includes an explanatory paragraph stating that there is
substantial doubt about our ability to continue as a going concern due to the
lack of sufficient capital, as of the date their report was issued, to support
our business plan through the end of 2009.
If we are
unable to secure adequate funds on terms acceptable to us, we will be unable to
support our business requirements, build our business or continue as a going
concern. Accordingly, we can offer no assurance that the actions we plan to take
to address these conditions will be successful. Inclusion of a “going concern
qualification” in the report of our independent accountants or any future report
may have a negative impact on our ability to obtain financing and may adversely
impact our stock price.
The
current worldwide political and economic conditions, specifically disruptions in
the capital and credit markets, may materially and adversely affect our
business, operations and financial condition.
Recently,
general worldwide economic conditions have experienced a downturn due to the
credit conditions resulting from the subprime-mortgage turmoil and other
factors, slower economic activity, concerns about inflation and deflation,
decreased consumer confidence, reduced corporate profits and capital spending,
recent international conflicts, recent terrorist and military activity, and the
impact of natural disasters and public health emergencies. If the current market
conditions continue or worsen, our business, operations and financial condition
will likely be materially and adversely affected.
The United States credit and capital markets have become
increasingly volatile as a result of adverse conditions that have caused the
failure and near failure of a number of large financial services companies. If
the capital and credit markets continue to experience volatility and the
availability of funds remains limited, our ability to obtain needed financing on
favorable terms could be severely limited or even non-existent. In the current
environment, lenders may seek more restrictive lending provisions and higher
interest rates that may reduce our ability to obtain financing and increase our
costs. Also, lenders may simply be unwilling or unable to provide financing.
Although we intend to seek additional funding for our projects in accordance
with our Commitment Letter with Merrill Lynch, we cannot predict whether Merrill
Lynch’s ability or willingness to provide financing to us will be adversely
affected if current market conditions continue or worsen.
Longer
term disruptions in the capital and credit markets as a result of uncertainty,
changing or increased regulation, reduced alternatives or failures of
significant financial institutions could adversely affect our access to capital
needed for our operations and development plans. If we are unable to obtain
adequate financing, we could be forced to reduce, delay or cancel planned
capital expenditures, sell assets or seek additional equity capital, or pursue
other actions that could adversely affect future operations. Failure to obtain
sufficient financing or a reduction of expenditures may cause delays and make it
more difficult to execute our plans to develop geothermal power plants in
accordance with our expectations. It would also make it more difficult to
conduct adequate research and development and other activities necessary to
commercialize our Symetron
TM
technologies.
The
market price for our common stock has experienced significant price and volume
volatility and is likely to continue to experience significant volatility in the
future. Such volatility may cause investors to experience dramatic declines in
our stock price from time to time, may impair our ability to secure additional
financing and may otherwise harm our business.
The
closing price of our common stock fluctuated from a low of $2.47 per share to a
high of $11.70 per share during from June 1, 2008 to June 9, 2009. Our stock
price is likely to experience significant volatility in the future as a result
of numerous factors outside of our control, including the level of short sale
transactions. As a result, the market price of our stock may not reflect our
intrinsic value. In addition, following periods of volatility in our stock
price, there may be increased risk that securities litigation, governmental
investigations or enforcement proceedings may be instituted against us. Any such
litigation, and investigation or other procedures, regardless of merits, could
materially harm our business and cause our stock price to decline due to
potential diversion of management attention and harm to our business
reputation.
In
addition, if the market price for our common stock remains below $5.00 per
share, our common stock may be deemed to be a penny stock, and therefore subject
to rules that impose additional sales practices on broker-dealers who sell our
securities. For example, broker-dealers must make a special suitability
determination for the purchaser and have received the purchaser’s written
consent to the transaction prior to sale. Also, a disclosure schedule must be
delivered to each purchaser of a penny stock, disclosing sales commissions and
current quotations for the securities. Monthly statements are also required to
be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. Because of these
additional conditions, some brokers may choose to not effect transactions in
penny stocks. This could have an adverse effect on the liquidity of our common
stock.
The
volatility in our stock price could impair our ability to raise additional
capital. Further, to the extent we do raise additional funds through equity
financing, we may need to issue such equity at a substantial discount to the
market price for our stock. This, in turn, could contribute to the volatility in
our stock price.
The
geothermal power production development activities of our Power Systems segment
may not be successful.
We are
devoting a substantial amount of our available resources to the power production
development activities of our Power Systems segment. To date, we have placed one
geothermal power plant in service, and we continue our efforts to ramp up
production of that plant. However, our ability to successfully complete that
plant and develop additional projects is uncertain. Our success in developing a
particular geothermal project is contingent upon, among other things, locating
and developing a viable geothermal site, negotiation of satisfactory
engineering, procurement and construction agreements, negotiation of
satisfactory power purchase agreements, receipt of required governmental
permits, obtaining interconnection rights, obtaining transmission service
rights, obtaining adequate financing, and the timely implementation and
satisfactory completion of construction. We may be unsuccessful in accomplishing
any of these necessary requirements or doing so on a timely basis. Generally, we
must also incur significant expenses for preliminary engineering, permitting,
legal fees and other expenses before we can even determine whether a project is
feasible. Project financing is not typically available for these preliminary
activities.
Financing needed to develop geothermal power projects may be
unavailable.
A
substantial capital investment will be necessary to develop each geothermal
power project our Power Systems segment seeks to develop. Our continued access
to capital through project financing or other arrangements is necessary for us
to complete the geothermal power projects we plan to develop. Our attempts to
secure the necessary capital on acceptable terms may not be
successful.
Market
conditions and other factors may not permit us to obtain financing for
geothermal projects on terms favorable to us or at all. Our ability to arrange
for financing on a substantially non-recourse or limited recourse basis, and the
costs of such financing, are dependent on numerous factors, including general
economic and capital market conditions, credit availability from banks, investor
confidence, the success of current projects, the credit quality of the projects
being financed, the political situation in the state in which the project is
located and the continued existence of tax and securities laws which are
conducive to raising capital. If we are not able to obtain financing for our
projects on a substantially non-recourse or limited recourse basis, or if we are
unable to secure capital through partnership or other arrangements, we may have
to finance the projects using recourse capital such as direct equity
investments, which would have a dilutive effect on our common stock. Also, in
the absence of favorable financing or other capital options, we may decide not
to pursue certain projects. Any of these alternatives could have a material
adverse effect on our growth prospects and financial condition.
Other
than certain excluded financings, the Commitment Letter gives Merrill Lynch the
exclusive right to provide or arrange financing for up to 100 MW of
substantially similar geothermal power plants we intend to develop and also has
a right of first refusal with respect to the financing of an additional 55 MW of
substantially similar geothermal power plants we intend to develop. Pursuant to
the Commitment Letter, we have obtained project financing for our Thermo
No. 1 project. Any determination on the part of Merrill Lynch to provide
financing commitments is subject to the satisfaction of additional due diligence
and other conditions, and the funding obligations pursuant to any existing
financing commitment, are subject to the satisfaction of certain conditions
precedent and various other factors, including but not limited to, satisfactory
completion of due diligence, the absence of any material adverse change in our
business, liabilities, operations, condition (financial or otherwise) or
prospects, the execution of acceptable definitive documentation, receipt of
customary legal opinions acceptable to Merrill Lynch, satisfactory market
conditions and necessary approvals. Accordingly, there can be no assurance that
Merrill Lynch will ultimately fund the financing commitments or provide us with
additional financing commitments at any time either pursuant to the Commitment
Letter or otherwise. Further, Merrill Lynch’s rights under the Commitment
Letter, including its right to generally match alternative financing proposals,
may make it difficult or impossible for us to obtain financing proposals from
other sources.
The
parent of Merrill Lynch was recently acquired by Bank of America Corporation.
While we do not expect this transaction to adversely affect our relationship
with Merrill Lynch or our ability to obtain project financing under the
Commitment Letter, we are not in a position to predict what impact, if any, this
transaction might have on Merrill Lynch’s organizational structure, personnel,
efficiency or existing or future commitments. Therefore, we cannot be certain
that the acquisition will not adversely affect the timing or availability of the
project financing arrangements contemplated by the Commitment Letter. Moreover,
the United States financial markets are currently experiencing a broad-based
credit crisis, which could also have an adverse effect on the timing or
availability of project financing.
In
addition, the tax benefits originating from geothermal power projects are
anticipated to provide a significant portion of the funding of the geothermal
projects. This tax equity has traditionally been driven by the tax liability of
the major financial industry companies. Many of these companies are currently
experiencing significantly reduced income or incurring substantial losses. As a
result, they are seeking fewer tax-advantaged investments and this may reduce
the amount of readily available tax credit equity available for our geothermal
projects.
The United States Congress recently passed the American Recovery
and Reinvestment Act of 2009 (the “Recovery Act”) that was subsequently signed
into law by President Obama. The Recovery Act provides certain economic
incentives, such as clean energy grants, that are designed to provide developers
of geothermal and other clean energy projects with cash to help fund the
projects. These incentives are designed, in part, to address some of the current
problems in the tax equity markets and provide an alternative funding mechanism.
Because this legislation is new, many of the details regarding the availability
of grants or other incentives are unknown. Therefore, we cannot predict whether
the Recovery Act will have a positive effect on our ability to obtain financing
for our projects.
In
order to finance the development of our geothermal power projects, we may
transfer a portion of our equity interest in the individual projects to a third
party and enter into long-term fixed price power purchase agreements. Under
generally accepted accounting principles, this may result in the deconsolidation
of these subsidiaries, and the reflection of only our net ownership interests in
our financial statements.
Each of
the geothermal power projects our Power Systems segment develops will likely be
owned by a separate subsidiary. The geothermal power projects developed by these
subsidiaries will likely be separately financed. To obtain the financing
necessary to develop the geothermal power projects, we may transfer a portion of
our equity interest in the individual subsidiaries to a third party and enter
into long-term fixed price power purchase agreements. Depending upon the nature
of these arrangements and the application of generally accepted accounting
principles, primarily Statement of Financial Accounting Standards Board
Interpretation Number 46R “Consolidation of Variable Interest Entities (Revised
December 2003) – an interpretation of ARB No. 51,” we may be required to
deconsolidate one or more or all of these subsidiaries, which would result in
our share of the net profits or loss generated by the deconsolidated entities
being presented as a net amount in our financial statements. As a result, our
financial statements would not reflect the gross revenues and expenses of the
deconsolidated entities. However, we do not expect the effect of such
deconsolidation, if required, to have an impact on our stockholders’ equity
(deficit), net income/loss or income/loss per share.
The
financial performance of our Power Systems segment is subject to changes in the
legal and regulatory environment.
Our
geothermal power projects will be subject to extensive regulation. Changes in
applicable laws or regulations, or interpretations of those laws and
regulations, could result in increased compliance costs and require additional
capital expenditures. Future changes could also reduce or eliminate certain
benefits that are currently available.
Federal
and state energy regulation is subject to frequent challenges, modifications,
the imposition of additional regulatory requirements, and restructuring
proposals. We may not be able to obtain or maintain all regulatory approvals or
modifications to existing regulatory approvals that may be required in the
future. In addition, the cost of operation and maintenance and the financial
performance of geothermal power plants may be adversely affected by changes in
certain laws and regulations, including tax laws.
In order
to promote the production of renewable energy, including geothermal energy, the
federal government has created incentives within the United States Internal
Revenue Code. These tax incentives are instrumental to our ability to finance
and develop geothermal power plants by providing increased economic benefits. If
the available tax incentives were reduced or eliminated, the economics of the
projects would be reduced and there could be reductions in our overall
profitability or the amount of funding available from tax equity partners. Some
projects may not be viable without these tax incentives.
Available
federal tax incentives include intangible drilling costs, accelerated
depreciation, depletion allowances and the investment tax credit (“ITC”), all of
which currently are permanent features of the Internal Revenue Code. In
addition, the Recovery Act recently extended the availability of the production
tax credit (“PTC”) for geothermal projects placed in service before 2014 and
created a new grant program for certain projects that are placed in service in,
or for which construction begins in, 2009 or 2010.
The ITC is claimed in the year in which the qualified project is
placed in service, and the amount of the credit is a specified percentage (10%
or 30%) of the eligible costs of the facility. The ITC is subject to recapture
if the property eligible for the credit is sold or otherwise disposed of within
five years after being placed in service. In lieu of claiming the ITC, a project
owner generally can claim the PTC during the first ten years after the project
is placed in service. The amount of the PTC is $21.00 (as adjusted for
inflation) per megawatt hour of electricity produced from the facility and sold
to unrelated parties. As extended by the Recovery Act, the PTC applies to
qualifying facilities that are placed in service before 2014. Also pursuant to
the Recovery Act, an owner may elect to receive a grant from the United States
Treasury Department in lieu of claiming either the ITC or the PTC. The amount of
the grant is 30% of the cost of qualifying geothermal property placed in service
in 2009 or 2010, or placed in service before 2014 if construction begins in 2009
or 2010. Grants are to be paid 60 days after the later of the date of the
application for the grant or the date the project is placed in
service.
Owners of
projects also are permitted to depreciate for tax purposes most of the cost of
the power plant on an accelerated basis. Generally, that depreciation occurs
over a five year period. Under the Recovery Act, property placed in service
during 2009 generally is entitled to additional “bonus” depreciation in which
50% of the adjusted basis of the property is deducted in 2009 and the remaining
50% of the adjusted basis of the property is depreciated over the five-year
accelerated tax depreciation schedule.
All of
these programs are subject to review and change by Congress from time to time.
In addition, several of the programs are currently scheduled to expire, and
continuation of those incentives will require affirmative Congressional action.
Moreover, there are ambiguities as to how some of the provisions of the Recovery
Act will operate, including the grant program for which there is not yet
administrative guidance.
Many of
the tax incentives associated with geothermal power projects generally are
beneficial only if the owners of the project have sufficient taxable income to
utilize the deductions and credits. Due to the nature and timing of these tax
incentives, it is likely that the tax incentives available in connection with
our geothermal power plants will exceed our ability to efficiently utilize these
tax benefits for at least several years of operations. Therefore, an important
part of our strategy involves partnering with investors that are able to utilize
the tax credits and other tax incentives to offset taxable income associated
with their operations unrelated to our geothermal power plants. For example, a
corporation in a different industry may be willing to finance the development of
a geothermal power plant in consideration for receiving the benefit of the tax
incentives, which it could then use to reduce the tax liability associated with
its regular operations.
Tax
reform has the potential to have a material effect on our business, financial
condition, future results and cash flow. Tax reform could reduce or eliminate
the value of the tax subsidies currently available to geothermal projects. Any
restrictions or tightening of the rules for lease or partnership transactions,
whether or not part of major tax reform, could also materially affect our
business, financial condition, future results and cash flow. In addition,
changes to the Internal Revenue Code could significantly increase the
regulatory-related compliance and other expenses incurred by geothermal projects
which, in turn, could materially and adversely affect our business, financial
condition, future results and cash flow. Any such changes could also make it
more difficult for us to obtain financing for future projects.
A
significant part of our business strategy is to utilize the tax and other
incentives available to developers of geothermal power generating plants to
attract strategic alliance partners with the capital sufficient to complete
these projects. Many of the incentives available for these projects are new and
highly complex. There can be no assurance that we will be successful in
structuring agreements that are attractive to potential strategic alliance
partners. If we are unable to do so, we may be unable to complete the
development of our geothermal power projects and our business could be
harmed.
The
exploration, development, and operation of geothermal energy resources by our
Power Systems segment is subject to geological risks and uncertainties, which
may result in decreased performance, increased costs, or abandonment of our
projects.
Our Power
Systems segment is involved in the exploration, development and operation of
geothermal energy resources. These activities are subject to uncertainties,
which vary among different geothermal resources. These uncertainties include dry
holes, flow-constrained wells, uncontrolled releases of pressure and temperature
decline, and other factors, all of which can increase our operating costs and
capital expenditures or reduce the efficiency of our power plants. In addition,
the high temperature and high pressure in geothermal energy resources requires
special resource management and monitoring. Because geothermal resources are
complex geological structures, we can only estimate their geographic area. The
viability of geothermal projects depends on different factors directly related
to the geothermal resource, such as the heat content (the relevant composition
of temperature and pressure) of the geothermal resource, the useful life
(commercially exploitable life) of the resource and operational factors relating
to the extraction of geothermal fluids. Although we believe our geothermal
resources will be fully renewable if managed appropriately, the geothermal
resources we intend to exploit may not be sufficient for sustained generation of
the anticipated electrical power capacity over time. Further, any of our
geothermal resources may suffer an unexpected decline in capacity. In addition,
we may fail to find commercially viable geothermal resources in the expected
quantities and temperatures, which would adversely affect our development of
geothermal power projects.
The operation of geothermal power plants depends on the continued
availability of adequate geothermal resources. Although we believe our
geothermal resources will be fully renewable if managed properly, we cannot be
certain that any geothermal resource will remain adequate for the life of a
geothermal power plant. If the geothermal resources available to a power plant
we develop become inadequate, we may be unable to perform under the power
purchase agreement for the affected power plant, which in turn could reduce our
revenues and materially and adversely affect our business, financial condition,
future results and cash flow. If we suffer degradation in our geothermal
resources, our insurance coverage may not be adequate to cover losses sustained
as a result thereof.
Our
Power Systems segment operations may be materially adversely affected if we fail
to properly manage and maintain our geothermal resources.
Our
geothermal power plants use geothermal resources to generate electricity. When
we develop a geothermal power plant, we conduct hydrologic and geologic studies.
Based on these studies, we consider all of the geothermal resources used in our
power plants to be fully renewable.
Unless
additional hydrologic and geologic studies confirm otherwise, there are a number
of events that could have a material adverse effect on our ability to generate
electricity from a geothermal resource and/or shorten the operational duration
of a geothermal resource, which could cause the applicable geothermal resource
to become a non-renewable wasting asset. These events include:
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Any increase in power generation
above the amount our hydrological and geological studies indicate that the
applicable geothermal resource will
support;
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Failure to recycle all of the
geothermal fluids used in connection with the applicable geothermal
resource; and
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Failure to properly maintain the
hydrological balance of the applicable geothermal
resource.
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While we
intend to properly manage and maintain our geothermal resources in order to
ensure that they are fully renewable, our ability to do so could be subject to
unforeseen risks and uncertainties beyond our control.
Our
Power Systems segment may be materially adversely affected if we are unable to
successfully utilize certain heat transfer technologies in our geothermal power
projects.
Our Power
Systems segment intends to utilize certain heat transfer technologies in its
geothermal power projects. One of the providers of these heat transfer
technologies is PWPS. PWPS’s heat transfer technologies are designed
to enable the generation of power from geothermal resources that are lower in
temperature than those resources used in traditional flash steam geothermal
projects.
PWPS’s
heat transfer technologies have a limited operating history and have only been
deployed in a limited number of geothermal power projects. Although
we are using these technologies in our geothermal project near Beaver, Utah,
which we refer to as the Thermo No. 1 plant, that power plant has only been
operating for a short time. As a result, we cannot be certain that PWPS’s heat
transfer technologies or other vendors’ heat transfer technologies can be
successfully implemented. If we are not able to successfully utilize
heat transfer technologies in our geothermal power projects and we are unable to
utilize appropriate substitute technologies, we may be unable to develop our
projects and our business, prospects, financial condition and results of
operations could be harmed.
The costs of compliance with environmental laws and of obtaining
and maintaining environmental permits and governmental approvals required for
construction and/or operation of geothermal power plants are substantial, and
any non-compliance with such laws or regulations may result in the imposition of
liabilities, which could materially and adversely affect our business, financial
condition, future results and cash flow.
Our
geothermal power projects are required to comply with numerous federal,
regional, state and local statutory and regulatory environmental standards.
Geothermal projects must also maintain numerous environmental permits and
governmental approvals required for construction and/or operation. Environmental
permits and governmental approvals typically contain conditions and
restrictions, including restrictions or limits on emissions and discharges of
pollutants and contaminants, or may have limited terms. If we fail to satisfy
these conditions or comply with these restrictions, or we fail to comply with
any statutory or regulatory environmental standards, we may become subject to a
regulatory enforcement action and the operation of the projects could be
adversely affected or be subject to fines, penalties or additional
costs.
The
geothermal power projects developed by our Power Systems segment could expose us
to significant liability for violations of hazardous substances laws because of
the use or presence of such substances.
The
geothermal power projects developed by our Power Systems segment will be subject
to numerous federal, regional, state and local statutory and regulatory
standards relating to the use, storage and disposal of hazardous substances. We
may use industrial lubricants, water treatment chemicals and other substances at
our projects that could be classified as hazardous substances. If any hazardous
substances are found to have been released into the environment at or near the
projects, we could become liable for the investigation and removal of those
substances, regardless of their source and time of release. If we fail to comply
with these laws, ordinances or regulations or any change thereto, we could be
subject to civil or criminal liability, the imposition of liens or fines, and
large expenditures to bring the projects into compliance. Furthermore, we can be
held liable for the cleanup of releases of hazardous substances at other
locations where we arranged for disposal of those substances, even if we did not
cause the release at that location. The cost of any remediation activities in
connection with a spill or other release of such substances could be
significant.
Our
Transportation & Industrial segment may be unable to successfully license
our intellectual property.
A
significant part of our long-term business strategy for our Transportation &
Industrial segment is based upon the licensing of our Symetron
TM
technologies to electric motor, controller, alternator and generator
manufacturers, suppliers and system integrators. We expect the sales cycle with
respect to the licensing of our technology to be lengthy, and there can be no
assurance that we will achieve meaningful licensing revenues in the time frames
that we expect.
Our
Symetron
TM
technologies are relatively new and commercially unproven. While we have
completed some laboratory testing, our technologies have not yet been durability
tested for long-term applications. We can provide no assurance that our
technologies will prove suitable for our target business segments. Our potential
product applications require significant and lengthy product development
efforts. To date, we have not developed any commercially available products. It
may be years before our technology is proven viable, if at all. During our
product development process, we may experience technological issues that we may
be unable to overcome. Superior competitive technologies may be introduced or
potential customer needs may change resulting in our technology or products
being unsuitable for commercialization. Because of these uncertainties, our
efforts to license our technologies may not succeed.
We are
currently focusing on commercializing our Symetron
TM
technologies in the transportation and industrial markets. We cannot predict the
rate at which market acceptance of our technologies will develop in these
markets, if at all. Additionally, we may focus our product commercialization
activities on a particular industry or industries, which may not develop as
rapidly as other industries, if at all. The commercialization of our products or
the licensing of our intellectual property in an industry or industries that are
not developing as rapidly as other industries could harm our business,
prospects, financial condition and results of operations.
The demand for our technologies may be dependent on government
regulations and policies such as standards for Corporate Average Fuel Economy,
or CAFE, Renewable Portfolio Standards, or RPS, the Clean Air Act and
Section 45 of the Internal Revenue Code. Changes in these regulations and
policies could have a negative impact on the demand for the power we plan to
generate and our technologies. Any new government regulations or policies
pertaining to our products or technologies may result in significant additional
expenses to us and our potential customers and could cause a significant
reduction in demand for our technologies and thereby significantly harm our
Transportation & Industrial segment.
The
recent economic downturn has had a dramatic, adverse effect on the automotive
industry and other large industrial manufacturers that would be in a position to
use and benefit from our technologies. As a result, we believe our ability to
commercialize our Symetron™ technologies will be limited until economic
conditions improve. We intend to evaluate the prospects for our
Transportation & Industrial segment on an ongoing basis. If we believe
there are attractive opportunities, we will devote the resources to pursue those
opportunities to the extent we believe appropriate. If, on the other hand, we
determine that the risks and uncertainties for this business segment are too
great in light of the current economic climate, we may choose to further reduce
the resources devoted to these efforts. We may also be required to develop a new
long-term business strategy for the Transportation & Industrial
segment, discontinue operating this business segment, or explore opportunities
to spin off or sell this business segment.
We
may not be able to enforce or protect the intellectual property that our
Transportation & Industrial segment is seeking to license.
The
success of our Transportation & Industrial segment is dependent upon
protecting our proprietary technology. We rely primarily on a combination of
copyright, patent, trade secret and trademark laws, as well as confidentiality
procedures and contractual provisions to protect our proprietary rights. These
laws, procedures and provisions provide only limited protection. We have applied
for patent protection on most of our key technologies. We cannot be certain that
our issued United States patents or our pending United States and international
patent applications will result in issued patents or that the claims allowed are
or will be sufficiently broad to protect the inventions derived from our
technology or prove to be enforceable in actions against alleged infringers.
Also, additional patent applications that we may file for our current and future
technologies may not be issued. We have received three trademark registrations
in the United States and ten trademark registrations internationally. We have
also applied for five additional trademark registrations in the United States
and one additional trademark registration internationally which may never be
granted.
The
contractual provisions we rely on to protect our trade secrets and proprietary
information, such as our confidentiality and non-disclosure agreements with our
employees, consultants and other third parties, may be breached and our trade
secrets and proprietary information may be disclosed to the public. Despite
precautions that we take, it may be possible for unauthorized third parties to
copy aspects of our technology or products or to obtain and use information that
we regard as proprietary. In particular, we may provide our licensees with
access to proprietary information underlying our licensed applications which
they may improperly appropriate. Additionally, our competitors may independently
design around patents and other proprietary rights we hold.
Policing
unauthorized use of our technology may be difficult and some foreign laws do not
protect our proprietary rights to the same extent as United States laws.
Litigation may be necessary in the future to enforce our intellectual property
rights or determine the validity and scope of the proprietary rights of others.
Litigation could result in substantial costs and diversion of resources and
management attention resulting in significant harm to our business.
If third
parties assert that our current or future products infringe their proprietary
rights, we could incur costs and damages associated with these claims, whether
the claims have merit or not, which could significantly harm our business. Any
future claims could harm our relationships with existing or potential customers.
In addition, in any potential dispute involving our intellectual property, our
existing or potential customers could also become the targets of litigation,
which could trigger indemnification obligations under license and service
agreements and harm our customer relationships. If we unsuccessfully defend an
infringement claim, we may lose our intellectual property rights, which could
require us to obtain licenses which may not be available on acceptable terms or
at all.
We license patented intellectual property rights from third party
owners. If such owners do not properly maintain or enforce the patents
underlying such licenses, our competitive position and business prospects could
be harmed. Our licensors may also seek to terminate our
licenses.
We are a
party to licenses that give us rights to third-party intellectual property that
is necessary or useful to our business. Our success will depend in part on the
ability of our licensors to obtain, maintain and enforce our licensed
intellectual property. Our licensors may not successfully prosecute the patent
applications to which we have licenses. Even if patents are issued in respect of
these patent applications, our licensors may fail to maintain these patents, may
determine not to pursue litigation against other companies that are infringing
these patents, or may pursue such litigation less aggressively than we would.
Without protection for the intellectual property we license, other companies
might be able to offer substantially identical products for sale, which could
adversely affect our competitive business position and harm our business
prospects.
Our
licensors may allege that we have breached our license agreement with them, and
accordingly seek to terminate our license. If successful, this could result in
our loss of the right to use the licensed intellectual property, which could
adversely affect our ability to commercialize our technologies, products or
services, as well as harm our competitive business position and our business
prospects.
Our
Transportation & Industrial segment could incur significant expenses if
products built with our technology contain defects.
If our
Transportation & Industrial segment successfully licenses our technology,
products built with that technology may result in product liability lawsuits for
any defects that they may contain. Detection of any significant defects may
result in, among other things, loss of, or delay in, market acceptance and sales
of our technology, diversion of development resources, injury to our reputation,
or increased service and warranty costs. A material product liability claim
could significantly harm our business, result in unexpected expenses and damage
our reputation.
We
face significant competition in each of our business segments. If we fail to
compete effectively, our business will suffer.
Our Power
Systems segment faces significant competition from other companies seeking to
develop the geothermal opportunities available. Some of our competitors for
geothermal projects have substantial capabilities and greater financial and
technical resources than we do. As a result, we may be unable to acquire
additional geothermal resources or projects on terms acceptable to
us.
Our Power
Systems segment also competes with producers of energy from other renewable
sources. This competition may make it more difficult for us to enter into power
purchase agreements for our projects on terms that are acceptable to
us.
We
believe our Transportation & Industrial segment will face significant
competition from existing manufacturers, including motor, controller,
alternator, and transportation vehicle companies. We may also face significant
competition from our future partners. These partners may have better access to
information regarding their own manufacturing processes, which may enable them
to develop products that can be more easily incorporated into their products. If
our potential partners improve or develop technology that competes directly with
our technology, our business will be harmed.
In each
of our business segments, we face competition from companies that have access to
substantially greater financial, engineering, manufacturing and other resources
than we do, which may enable them to react more effectively to new market
opportunities. Many of our competitors may also have greater name recognition
and market presence than we do, which may allow them to market themselves more
effectively to new customers or partners.
We may pursue strategic acquisitions that could have an adverse
impact on our business.
Our
success depends on our ability to execute our business strategies. Our Power
Systems segment is seeking to develop geothermal power plants. Our
Transportation & Industrial segment is seeking to license our intellectual
property to electric motor and controller manufacturers, suppliers and system
integrators. Executing these strategies may involve entering into strategic
transactions to acquire complementary businesses or technologies. In executing
these strategic transactions, we may expend significant financial and management
resources and incur other significant costs and expenses. There is no assurance
that the execution of any strategic transactions will result in additional
revenues or other strategic benefits for either of our business segments. The
failure to enter into strategic transactions, if doing so would enable us to
better execute our business strategies, could also harm our business, prospects,
financial condition and results of operations.
We may
issue company stock as consideration for acquisitions, joint ventures or other
strategic transactions, and the use of common stock as purchase consideration
could dilute each of our current stockholder’s interest. In addition, we may
obtain debt financing in connection with an acquisition. Any such debt financing
could involve restrictive covenants relating to capital-raising activities and
other financial and operational matters, which may make it more difficult for us
to obtain additional capital and pursue business opportunities, including
potential acquisitions. In addition, such debt financing may impair our ability
to obtain future additional financing for working capital, capital expenditures,
acquisitions, general corporate or other purposes, and a substantial portion of
cash flows, if any, from our operations may be dedicated to interest payments
and debt repayment, thereby reducing the funds available to us for other
purposes and could make us more vulnerable to industry downturns and competitive
pressures.
If
we are unable to effectively and efficiently maintain our controls and
procedures to avoid deficiencies, there could be a material adverse effect on
our operations or financial results.
As a
publicly-traded company, we are subject to the reporting requirements of the
Exchange Act and the Sarbanes-Oxley Act of 2002. These requirements may place a
strain on our systems and resources. Our management is required to evaluate the
effectiveness of our internal control over financial reporting as of each year
end, and we are required to disclose management’s assessment of the
effectiveness of our internal control over financial reporting, including any
“material weakness” (within the meaning of Public Company Accounting Oversight
Board, or PCAOB, Auditing Standard No. 5) in our internal control over
financial reporting. On an on-going basis, we are reviewing, documenting and
testing our internal control procedures. In order to maintain and improve the
effectiveness of our disclosure controls and procedures and internal control
over financial reporting, significant resources and management oversight will be
required.
No
material weaknesses were identified in connection with the audit of our 2008
financial statements. However, weaknesses or deficiencies could be identified in
the future. If we fail to adequately address any deficiencies, it could have a
material adverse effect on our business, results of operations and financial
condition. Ultimately, if not corrected, any deficiencies could prevent us from
releasing our financial information and periodic reports in a timely manner,
making the required certifications regarding, and complying with our other
obligations with respect to our consolidated financial statements and internal
controls under the Sarbanes-Oxley Act. Any failure to maintain adequate internal
controls over financial reporting and provide accurate financial statements may
subject us to litigation and would cause the trading price of our common stock
to decrease substantially. Inferior controls and procedures could also subject
us to a risk of delisting by the New York Stock Exchange and cause investors to
lose confidence in our reported financial information, which could have a
negative effect on the trading price of our common stock.
If we fail to
comply with the New York Stock Exchange
listing standards
and maintain our listing on the
New York Stock
Exchange, our business could be materially harmed and our stock price could
decline.
Our
shares of common stock are listed on the New York Stock Exchange. Pursuant to
the Sarbanes-Oxley Act of 2002, national securities exchanges, including the New
York Stock Exchange, have adopted more stringent listing requirements. We may
not be able to maintain our compliance with all of the listing standards of the
New York Stock Exchange. Any failure by us to maintain our listing on the New
York Stock Exchange could materially harm our business, cause our stock price to
decline, and make it more difficult for our stockholders to sell their
shares.
We rely on key personnel and the loss of key personnel or the
inability to attract, train, and retain key personnel could have a negative
effect on our business.
We
believe our future success will depend to a significant extent on the continued
service of our executive officers and other key personnel. Of particular
importance to our continued operations are our executive management and
technical staff. We do not have key person life insurance for any of our
executive officers, technical staff or other employees. If we lose the services
of one or more of our executive officers or key employees, or if one or more of
them decide to join a competitor or otherwise compete directly or indirectly
with us, our business could be harmed. In recent years we have experienced
turnover in certain key positions.
Our
future success also depends on our ability to attract, train, retain and
motivate highly skilled technical and sales personnel. Since we have limited
resources to attract qualified personnel, we may not be successful in
recruiting, training, and retaining personnel in the future, which would impair
our ability to maintain and grow our business.
Our
limited cash resources have in the past required us to rely heavily on equity
compensation to hire and retain key personnel, and we expect this to continue in
the future. This practice may result in significant non-cash compensation
expenses and dilution to our stockholders.
The
large number of shares eligible for public sale could cause our stock price to
decline.
The
market price of our common stock could decline as a result of the resale of
shares of common stock that were previously restricted under Rule 144. In
addition, if our officers, directors or employees sell previously restricted
shares for tax, estate planning, portfolio management or other purposes, such
sales could be viewed negatively by investors and put downward pressure on our
stock price. Approximately 42.7 million shares were free of restrictive
legend as of March 31, 2009, up from approximately 40.6 million December 31,
2008. The occurrence of such sales, or the perception that such sales could
occur, may cause our stock price to decline.
Our
reported financial results may be adversely affected by changes in United States
generally accepted accounting principles.
United
States generally accepted accounting principles are subject to interpretation by
the Financial Accounting Standards Board, or FASB, the American Institute of
Certified Public Accountants, the SEC, and various bodies formed to promulgate
and interpret appropriate accounting principles. A change in these principles or
interpretations could have a significant effect on our financial results. For
example, prior to January 1, 2007, we were not required to record
liabilities relating to uncertainties in our income tax positions until a
determination was made by the IRS disallowing the deductions. However, for
periods after January 1, 2007 we are required to determine whether it is
more-likely-than-not that a tax position is sustainable and measure the tax
position to recognize in the financial statements in accordance with recent
accounting pronouncements.
Future
sales or the potential for future sales of our securities may cause the trading
price of our common stock to decline and could impair our ability to raise
capital through subsequent equity offerings.
Sales of
a substantial number of shares of our common stock or other securities in the
public markets, or the perception that these sales may occur, could cause the
market price of our common stock or other securities to decline and could
materially impair our ability to raise capital through the sale of additional
securities.
We
have broad discretion in the use of the net proceeds from this offering and may
not use them effectively.
Our
management will have broad discretion in the application of the net proceeds
from this offering. Accordingly, you will be relying on the judgment of our
management with regard to the use of these net proceeds, and you will not have
the opportunity, as part of your investment decision, to assess whether the
proceeds are being used appropriately. It is possible that the proceeds will be
invested in a way that does not yield a favorable, or any, return for our
company.
We have never declared or paid dividends on our capital stock and
we do not anticipate paying dividends in the foreseeable
future.
Our
business requires significant funding, and we currently invest more in product
development than we earn from sales of our products. In addition, the agreements
governing our debt restrict our ability to pay dividends on our common stock.
Therefore, we do not anticipate paying any cash dividends on our common stock in
the foreseeable future. We currently plan to invest all available funds and
future earnings in the development and growth of our business. As a result,
capital appreciation, if any, of our common stock will be your sole source of
potential gain for the foreseeable future.
Unless
otherwise indicated in an accompanying prospectus supplement, the net proceeds
from the sale of the securities offered hereby will be used for general
corporate purposes, which may include working capital, capital expenditures,
repayment of debt, development costs, strategic investments and possible
acquisitions. We have not allocated any portion of the net proceeds for any
particular use at this time. The net proceeds may be invested temporarily until
they are used for their stated purpose. Specific information concerning the use
of proceeds from the sale of any securities will be included in the prospectus
supplement relating to such securities.
RATIO
OF EARNINGS TO FIXED CHARGES
Our
deficiency of earnings to fixed charges for the indicated periods are set forth
below. The information set forth below should be read in conjunction with the
financial information incorporated by reference herein.
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Fiscal Year Ended December
31,
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2008
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2007
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2006
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2005
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2004
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Ratio
of earnings to fixed charges
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—
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—
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—
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—
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—
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(1) This
table sets forth our ratio of earnings to fixed charges on a historical basis
for the periods indicated. The ratios are calculated by dividing
earnings by fixed charges. For the purposes of computing the ratio of
earnings to fixed charges, earnings consist of loss before income taxes plus
fixed charges. Fixed charges consist of interest expense and that
portion of our rental payments under operating leases we believe represent
interest. Earnings for the years ended December 31, 2008, 2007, 2006,
2005 and 2004 were insufficient to cover fixed charges by $41,963,418,
$15,749,005, $18,488,936, $8,932,816 and $6,976,075, respectively.
We had no
shares of preferred stock outstanding for any period presented. As a
result, the ratio of earnings to combined fixed charges and preferred stock
dividends is the same as the ratio of earnings to fixed charges.
DESCRIPTION OF CAPITAL
STOCK
General
Our
authorized capital stock consists of 250,000,000 shares of common stock,
$0.01 par value per share, and 5,000,000 shares of preferred stock, $0.01
par value per share.
The
following is a summary of the material terms of our common stock and preferred
stock. Please see our certificate of incorporation for more detailed
information.
Common
Stock
As of
June 9, 2009, there were 65,535,012 shares of common stock issued and
outstanding. Holders of our common stock are entitled to one vote per share on
all matters submitted to a vote of stockholders and may not cumulate votes for
the election of directors. Common stockholders have the right to receive
dividends when, as, and if declared by the board of directors from funds legally
available therefor. Holders of common stock have no preemptive rights and have
no rights to convert their common stock into any other securities.
Preferred
Stock
As of
June 9, 2009, there were no preferred shares issued or outstanding. The shares
of preferred stock have such rights and preferences as our board of directors
shall determine, from time to time. Our common stock is subject to the express
terms of our preferred stock and any series thereof. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisition and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or discourage a third party from
acquiring, a majority of our outstanding common stock. Our board of directors
may issue preferred stock with voting and conversion rights that could adversely
affect the voting power of the holders of our common stock. There are no current
agreements or understandings for the issuance of preferred stock and our board
of directors has no present intention to issue any shares of preferred
stock.
Certain
Provisions Affecting Control of the Company
Delaware
Law
We are
subject to the provisions of Section 203 of the General Corporation Law of the
State of Delaware (“Delaware Law”). In general, Section 203 prohibits a publicly
held Delaware corporation from engaging under certain circumstances in a
“business combination” with any “interested stockholder,” defined as a
stockholder who owns 15% or more of the corporation’s outstanding voting stock,
as well as its affiliates and associates, for three years following the date
that the stockholder became an interested stockholder unless:
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the transaction that resulted in
the stockholder becoming an interested stockholder was approved by the
board of directors prior to the date the interested stockholder attained
this status;
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upon consummation of the
transaction that resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction
commenced, excluding those shares owned by (i) persons who are directors
as well as officers and (ii) employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
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on or subsequent to the relevant
date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders by the
affirmative vote of at least two-thirds of the outstanding voting stock
that is not owned by the interested
stockholder.
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Section
203 defines a “business combination” to include:
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any merger or consolidation
involving the corporation and the interested
stockholder;
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any sale, transfer, pledge or
other disposition involving the interested stockholder of 10% or more of
the assets of the
corporation;
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subject to exceptions, any
transaction that results in the issuance or transfer by the corporation of
any stock of the corporation to the interested stockholder;
or
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the receipt by the interested
stockholder of the benefit of any loans, advances, guarantees, pledges or
other financial benefits provided by or through the
corporation.
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A
Delaware corporation may opt out of Section 203 with an express provision in its
original certificate of incorporation or an express provision in its certificate
of incorporation or bylaws resulting from a stockholders’ amendment approved by
at least a majority of the outstanding voting shares. We have not opted out of
the provisions of Section 203. This statute could prevent or delay mergers or
other takeover or change-of-control transactions for us and, accordingly, may
discourage attempts to acquire us.
Certificate
of Incorporation and Bylaw Provisions
The
following summary of certain provisions of our certificate of incorporation and
bylaws is not complete and is subject to, and qualified in its entirety by, our
certificate of incorporation and bylaws, copies of which may be obtained as
described in “Available Information.”
Our
bylaws provide that special meetings of our stockholders may be called only by
the chairman of the board of directors, our chief executive officer, or by the
board of directors pursuant to a resolution adopted by a majority of the total
number of authorized directors. Our certificate of incorporation also specifies
that the authorized number of directors may be changed only by a resolution of
the board of directors and does not include a provision for cumulative voting
for directors. Under cumulative voting, a minority stockholder holding a
sufficient percentage of a class of shares may be able to ensure the election of
one or more directors. Subject to the rights of the holders of any series of
preferred stock, any vacancies on our board may only be filled by the
affirmative vote of a majority of the directors then in office, even though less
than a quorum of the board of directors, and not by stockholders. Any additional
directorships resulting from an increase in the number of directors may only be
filled by the directors. In addition, our certificate of incorporation divides
our board of directors into three classes having staggered terms. This may delay
any attempt to replace our board of directors.
Our
certificate of incorporation provides that should any stockholder desire to
present business at any meeting, they must comply with certain advance notice
provisions in our bylaws.
Provisions
of our certificate of incorporation and bylaws will make it more difficult for a
third party to acquire us on terms not approved by our board of directors and
may have the effect of deterring hostile takeover attempts. Our certificate of
incorporation authorizes our board of directors to issue up to 5,000,000 shares
of preferred stock and to fix the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the stockholders. The rights of the holders of our common stock
will be subject to, and may be junior to the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock could reduce the voting power of the holders of our common stock and the
likelihood that common stockholders will receive payments upon
liquidation.
Transfer
Agent and Registrar
Interwest
Transfer Company, Inc. is the transfer agent and registrar for our common
stock.
General
Description of Warrants
We may
issue warrants for the purchase of debt securities, preferred stock or common
stock, or any combination of these securities. Warrants may be issued
independently or together with other securities and may be attached to or
separate from any offered securities. Each series of warrants will be issued
under a separate warrant agreement to be entered into between a warrant agent
and us. The warrant agent will act solely as our agent in connection with the
warrants and will not have any obligation or relationship of agency or trust for
or with any holders or beneficial owners of warrants. The following outlines
some of the general terms and provisions of the warrants that we may issue from
time to time. Additional terms of the warrants and the applicable warrant
agreement will be set forth in the applicable prospectus supplement. The
following description, and any description of the warrants included in a
prospectus supplement, may not be complete and is subject to and qualified in
its entirety by reference to the terms and provisions of the applicable warrant
agreement, which we will file with the SEC in connection with any offering of
warrants.
Debt
Warrants
The
prospectus supplement relating to a particular issue of warrants exercisable for
debt securities will describe the terms of those warrants, including the
following:
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the title of the
warrants;
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the offering price for the
warrants, if any;
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the aggregate number of the
warrants;
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the designation and terms of the
debt securities purchasable upon exercise of the
warrants;
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if applicable, the designation
and terms of the securities that the warrants are issued with and the
number of warrants issued with each
security;
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if applicable, the date from and
after which the warrants and any securities issued with the warrants will
be separately transferable;
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the principal amount and price of
debt securities that may be purchased upon exercise of a
warrant;
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the dates on which the right to
exercise the warrants commence and
expire;
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if applicable, the minimum or
maximum amount of the warrants that may be exercised at any one
time;
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whether the warrants represented
by the warrant certificates or debt securities that may be issued upon
exercise of the warrants will be issued in registered or bearer
form;
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information relating to
book-entry procedures, if
any;
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if applicable, a discussion of
material U.S. federal income tax
considerations;
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anti-dilution provisions of the
warrants, if any;
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redemption or call provisions, if
any, applicable to the warrants;
and
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any additional terms of the
warrants, including terms, procedures and limitations relating to the
exchange and exercise of the
warrants.
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Stock Warrants
The
prospectus supplement relating to a particular issue of warrants exercisable for
common stock or preferred stock will describe the terms of the common stock
warrants and preferred stock warrants, including the following:
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the title of the
warrants;
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the offering price for the
warrants, if any;
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the aggregate number of the
warrants;
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the designation and terms of the
common stock or preferred stock that may be purchased upon exercise of the
warrants;
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if applicable, the designation
and terms of the securities that the warrants are issued with and the
number of warrants issued with each
security;
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if applicable, the date from and
after which the warrants and any securities issued with the warrants will
be separately transferable;
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the number of shares and price of
common stock or preferred stock that may be purchased upon exercise of a
warrant;
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the dates on which the right to
exercise the warrants commence and
expire;
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if applicable, the minimum or
maximum amount of the warrants that may be exercised at any one
time;
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if applicable, a discussion of
material U.S. federal income tax
considerations;
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anti-dilution provisions of the
warrants, if any;
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redemption or call provisions, if
any, applicable to the warrants;
and
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any additional terms of the
warrants, including terms, procedures and limitations relating to the
exchange and exercise of the
warrants.
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Exercise
of Warrants
Each
warrant will entitle the holder of the warrant to purchase at the exercise price
set forth in the applicable prospectus supplement the principal amount of debt
securities or shares of common stock or preferred stock being offered. Holders
may exercise warrants at any time up to the close of business on the expiration
date set forth in the applicable prospectus supplement. After the close of
business on the expiration date, unexercised warrants will be void. Holders may
exercise warrants as set forth in the prospectus supplement relating to the
warrants being offered.
Until a
holder exercises the warrants to purchase any securities underlying the
warrants, the holder will not have any rights as a holder of the underlying
securities by virtue of ownership of warrants.
DESCRIPTION OF DEBT
SECURITIES
This
section contains a description of the general terms and provisions of the debt
securities that may be offered by this prospectus. We may issue senior debt
securities and subordinated debt securities under one of two separate indentures
to be entered into between us and a trustee that will be named in the applicable
prospectus supplement. Senior debt securities will be issued under a senior
indenture and subordinated debt securities will be issued under a subordinated
indenture. The senior indenture and the subordinated indenture are referred to
in this prospectus individually as the “indenture” and collectively as the
“indentures.” The indentures may be supplemented from time to time.
This
prospectus briefly outlines some of the provisions of the indentures. The
following summary of the material provisions of the indentures is qualified in
its entirety by the provisions of the indentures, including definitions of
certain terms used in the indentures. Wherever we refer to particular sections
or defined terms of the indentures, those sections or defined terms are
incorporated by reference in this prospectus or the applicable prospectus
supplement. You should review the indentures that are filed as exhibits to the
registration statement of which this prospectus forms a part for additional
information.
In
addition, the material specific financial, legal and other terms as well as any
material U.S. federal income tax consequences particular to securities of each
series will be described in the prospectus supplement relating to the securities
of that series. The prospectus supplement may or may not modify the general
terms found in this prospectus and will be filed with the SEC. For a complete
description of the terms of a particular series of debt securities, you should
read both this prospectus and the prospectus supplement relating to that
particular series.
General
Neither
indenture limits the amount of debt that we may issue under the indenture or
otherwise. Under the indentures, we may issue the securities in one or more
series with the same or various maturities, at par or a premium, or with
original issue discount.
Unless
otherwise specified in the prospectus supplement, the debt securities covered by
this prospectus will be our direct unsecured obligations. Senior debt securities
will rank equally with our other unsecured and unsubordinated indebtedness.
Subordinated debt securities will be unsecured and subordinated in right of
payment to the prior payment in full of all of our senior indebtedness. See
“—Subordination” below. Any of our secured indebtedness will rank ahead of the
debt securities to the extent of the value of the assets securing such
indebtedness.
We
conduct operations primarily through our subsidiaries and substantially all of
our consolidated assets are held by our subsidiaries. Accordingly, our cash flow
and our ability to meet our obligations under the debt securities will be
largely dependent on the earnings of our subsidiaries and the distribution or
other payment of these earnings to us in the form of dividends, loans or
advances and repayment of loans and advances from us. Our subsidiaries are
separate and distinct legal entities and have no obligation to pay the amounts
that will be due on our debt securities or to make any funds available for
payment of amounts that will be due on our debt securities. Because we are a
holding company, our obligations under our debt securities will be effectively
subordinated to all existing and future liabilities of our subsidiaries.
Therefore, our rights, and the rights of our creditors, including the rights of
the holders of the debt securities, to participate in any distribution of assets
of any of our subsidiaries, if such subsidiary were to be liquidated or
reorganized, are subject to the prior claims of the subsidiary’s creditors. To
the extent that we may be a creditor with recognized claims against our
subsidiaries, our claims will still be effectively subordinated to any security
interest in, or mortgages or other liens on, the assets of the subsidiary that
are senior to us.
The
prospectus supplement relating to any series of debt securities being offered
will include specific terms relating to the offering. These terms will include,
among other terms, some or all of the following, as applicable:
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the title and series of such debt
securities, which may include medium-term
notes;
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the total principal amount of the
series of debt securities and whether there shall be any limit upon the
aggregate principal amount of such debt
securities;
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the date or dates, or the method
or methods, if any, by which such date or dates will be determined, on
which the principal of the debt securities will be
payable;
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the rate or rates at which such
debt securities will bear interest, if any, which rate may be zero in the
case of certain debt securities issued at an issue price representing a
discount from the principal amount payable at maturity, or the method by
which such rate or rates will be determined (including, if applicable, any
remarketing option or similar method), and the date or dates from which
such interest, if any, will accrue or the method by which such date or
dates will be determined;
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the date or dates on which
interest, if any, on such debt securities will be payable and any regular
record dates applicable to the date or dates on which interest will be so
payable;
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the place or places where the
principal of or any premium or interest on such debt securities will be
payable, where any of such debt securities that are issued in registered
form may be surrendered for registration of, transfer or exchange, and
where any such debt securities may be surrendered for conversion or
exchange;
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if such debt securities are to be
redeemable at our option, the date or dates on which, the period or
periods within which, the price or prices at which and the other terms and
conditions upon which such debt securities may be redeemed, in whole or in
part, at our option;
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provisions specifying whether we
will be obligated to redeem or purchase any of such debt securities
pursuant to any sinking fund or analogous provision or at the option of
any holder of such debt securities and, if so, the date or dates on which,
the period or periods within which, the price or prices at which and the
other terms and conditions upon which such debt securities will be
redeemed or purchased, in whole or in part, pursuant to such obligation,
and any provisions for the remarketing of such debt securities so redeemed
or purchased;
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if other than denominations of
$1,000 and any integral multiple thereof, the denominations in which any
debt securities to be issued in registered form will be issuable and, if
other than a denomination of $5,000, the denominations in which any debt
securities to be issued in bearer form will be
issuable;
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provisions specifying whether the
debt securities will be convertible into other securities of Raser and/or
exchangeable for securities of Raser or other issuers and, if so, the
terms and conditions upon which such debt securities will be so
convertible or exchangeable;
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if other than the principal
amount, the portion of the principal amount (or the method by which such
portion will be determined) of such debt securities that will be payable
upon declaration of acceleration of the maturity
thereof;
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if other than U.S. dollars, the
currency of payment, including composite currencies, of the principal of,
and any premium or interest on any of such debt
securities;
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provisions specifying whether the
principal of, and any premium or interest on such debt securities will be
payable, at the election of Raser or a holder of debt securities, in a
currency other than that in which such debt securities are stated to be
payable and the date or dates on which, the period or periods within
which, and the other terms and conditions upon which, such election may be
made;
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any index, formula or other
method used to determine the amount of payments of principal of, any
premium or interest on such debt
securities;
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provisions specifying whether
such debt securities are to be issued in the form of one or more global
securities and, if so, the identity of the depositary for such global
security or securities;
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provisions specifying whether
such debt securities are senior debt securities or subordinated debt
securities and, if subordinated debt securities, the specific
subordination provisions applicable
thereto;
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in the case of subordinated debt
securities, provisions specifying the relative degree, if any, to which
such subordinated debt securities of the series will be senior to or be
subordinated in right of payment to other series of subordinated debt
securities or other indebtedness of Raser, as the case may be, whether
such other series of subordinated debt securities or other indebtedness is
outstanding or not;
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any deletions from, modifications
of or additions to the events of default or covenants of Raser with
respect to such debt
securities;
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terms specifying whether the
provisions described below under “—Discharge; Defeasance and Covenant
Defeasance” will be applicable to such debt
securities;
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terms specifying whether any of
such debt securities are to be issued upon the exercise of warrants, and
the time, manner and place for such debt securities to be authenticated
and delivered; and
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any other terms of such debt
securities and any other deletions from or modifications or additions to
the applicable indenture in respect of such debt
securities.
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The
prospectus supplement relating to debt securities being offered pursuant to this
prospectus will be attached to the front of this prospectus.
We may
from time to time, without the consent of the existing holders of the debt
securities, create and issue further debt securities having the same terms and
conditions as the previously issued debt securities in all respects, except for
the issue date, issue price and, if applicable, the first payment of interest
thereon. Such debt securities will be fungible with the previously issued notes
to the extent specified in the applicable prospectus supplement or pricing
supplement.
We may
also in the future issue debt securities other than the debt securities
described in this prospectus. There is no requirement that any other debt
securities that we issue be issued under either of the indentures described in
this prospectus. Thus, any other debt securities that we may issue may be issued
under other indentures or documentation containing provisions different from
those included in the indentures or applicable to one or more issues of the debt
securities described in this prospectus.
Negative
Pledge
Neither
indenture limits the amount of other securities that we or our subsidiaries may
issue. However, each indenture contains a provision that we refer to in this
prospectus as the “Negative Pledge” that provides that we will not pledge or
otherwise subject to any lien any of our property or assets to secure
indebtedness for money borrowed that is incurred, issued, assumed or guaranteed
by us, subject to certain exceptions.
The terms
of the Negative Pledge do nevertheless permit us to create:
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liens in favor of any of our
subsidiaries;
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liens existing at the time of any
acquisition that we may
make;
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liens in favor of the United
States, any state or governmental agency or department to secure
obligations under contracts or
statutes;
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liens securing the performance of
letters of credit, bids, tenders, sales contracts, purchase agreements,
repurchase agreements, reverse repurchase agreements, bankers’
acceptances, leases, surety and performance bonds and other similar
obligations incurred in the ordinary course of
business;
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liens upon any real property
acquired or constructed by us primarily for use in the conduct of our
business;
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arrangements providing for our
leasing of assets, which we have sold or transferred with the intention
that we will lease back these assets, if the lease obligations would not
be included as liabilities on our consolidated balance
sheet;
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liens to secure non-recourse debt
in connection with our leveraged or single-investor or other lease
transactions;
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consensual liens created in our
ordinary course of business that secure indebtedness that would not be
included in total liabilities as shown on our consolidated balance
sheet;
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liens created by us in connection
with any transaction that we intend to be a sale of our property or
assets;
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liens on property or assets
financed through tax-exempt municipal
obligations;
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liens arising out of any
extension, renewal or replacement, in whole or in part, of any financing
permitted under the Negative Pledge, so long as the lien extends only to
the property or assets, with improvements, that originally secured the
lien; and
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liens that secure certain other
indebtedness which, in an aggregate principal amount then outstanding,
does not exceed 10% of our consolidated net
worth.
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In
addition, under the subordinated indenture pursuant to which any of our senior
subordinated debt is issued, we will agree not to permit:
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the aggregate amount of senior
subordinated indebtedness outstanding at any time to exceed 100% of the
aggregate amount of the par value of our capital stock plus our
consolidated surplus (including retained earnings);
or
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the aggregate amount of senior
subordinated indebtedness and junior subordinated indebtedness outstanding
at any time to exceed 150% of the aggregate amount of the par value of the
capital stock plus our consolidated surplus (including retained
earnings).
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The
supplemental indenture or the form of security for a particular series of debt
securities may include additional Negative Pledge terms or changes to the terms
of the Negative Pledge described above. The Negative Pledge terms
applicable to a particular series of debt securities will be discussed in the
prospectus supplement relating to such series.
Consolidation,
Merger or Sale
Subject
to the provisions of the Negative Pledge described above, the indentures will
not prevent us from consolidating or merging with any other person or selling
our assets as, or substantially as, an entirety. However, pursuant to the
indentures we will agree not to consolidate with or merge into any other person
or convey or transfer or lease substantially all of our properties and assets to
any person, unless, among other things:
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the successor entity (if other
than the company) expressly assumes by a supplemental indenture the due
and punctual payment of the principal of, and any premium and any interest
on, all the debt securities then outstanding and the performance and
observance of every covenant in the indentures that we would otherwise
have to perform as if it were an original party to the
indentures;
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the person to which our
properties and assets (as an entirety or substantially as an entirety) are
sold expressly assumes, as a part of the purchase price, by a supplemental
indenture the due and punctual payment of the principal of, and any
premium and any interest on, all the debt securities then outstanding and
the performance and observance of every covenant in the indentures that we
would otherwise have to perform as if it were an original party to the
indentures; and
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the company or the successor
entity (if other than the company), or purchaser of our properties and
assets, as applicable, is not immediately thereafter in default under the
indentures.
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The
successor entity or purchaser of our properties and assets, as applicable, will
assume all our obligations under the indentures as if it were an original party
to the indentures. After assuming the obligations, the successor entity will
have all our rights and powers under the indentures.
Events
of Default
An “event
of default” means any one of the following events that occurs with respect to a
series of debt securities issued under an indenture:
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we fail to pay interest on any
debt security of such series for 30 days after payment was
due;
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we fail to make the principal or
any premium payment on any debt security of such series when
due;
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we fail to make any sinking fund
payment or analogous obligation when due in respect of any debt securities
of such series;
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we fail to perform any other
covenant in the indenture and this failure continues for 30 days after we
receive written notice of it (other than any failure to perform in respect
of a covenant included in the indenture solely for the benefit of another
series of debt securities);
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any event of default shall have
occurred in respect of our indebtedness (including guaranteed indebtedness
but excluding any subordinated indebtedness), and, as a result, an
aggregate principal amount exceeding $5.0 million of such indebtedness is
accelerated prior to its scheduled maturity and such acceleration is not
rescinded or annulled within 30 days after we receive written notice;
or
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we or a court take certain
actions relating to the bankruptcy, insolvency or reorganization of our
company.
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The
supplemental indenture or the form of security for a particular series of debt
securities may include additional events of default or changes to the events of
default described above. The events of default applicable to a particular series
of debt securities will be discussed in the prospectus supplement relating to
such series. Other than as specified above, a default under our other
indebtedness will not be a default under the indentures for the debt securities
covered by this prospectus, and a default under one series of debt securities
will not necessarily be a default under another series.
If an
event of default with respect to outstanding debt securities of any series
occurs and is continuing, then the trustee or the holders of at least 25% in
principal amount of outstanding debt securities of that series may declare, in a
written notice, the principal amount (or specified amount) on all debt
securities of that series to be immediately due and payable. In the case of
certain events of bankruptcy or insolvency of Raser, all unpaid principal amount
(or specified amount) of and all accrued and unpaid interest on the outstanding
debt securities of such series shall automatically become immediately due and
payable.
The
trustee may withhold notice to the holders of our debt securities of any default
(except for defaults that involve our failure to pay principal of, premium, if
any, or interest, if any, or any sinking fund payment, if applicable, on any
series of debt securities) if the trustee considers that withholding notice is
in the interests of the holders of that series of debt securities.
At any time after a declaration of acceleration with respect to
debt securities of any series has been made, the holders of a majority in
principal amount (or specified amount) of the outstanding debt securities of
that series, by written notice to us and the trustee, may rescind and annul such
declaration and its consequences if:
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we have paid or deposited with
the trustee a sum sufficient to pay overdue interest and overdue principal
other than the accelerated interest and principal;
and
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we have cured or the holders have
waived all events of default, other than the non-payment of accelerated
principal and interest with respect to debt securities of that series, as
provided in the applicable
indenture.
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We refer
you to the prospectus supplement relating to any series of debt securities that
are discount securities for the particular provisions relating to acceleration
of a portion of the principal amount of the discount securities upon the
occurrence of an event of default.
If a
default in the performance or breach of an indenture shall have occurred and be
continuing, the holders of not less than a majority in principal amount of the
outstanding debt securities of all series under such indenture, by notice to the
trustee, may waive any past event of default or its consequences under such
indenture. However, an event of default cannot be waived with respect to any
series of securities in the following two circumstances:
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a failure to pay the principal
of, and premium, if any, or interest on, any security;
or
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a covenant or provision that
cannot be modified or amended without the consent of each holder of
outstanding securities of that
series.
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Other
than its duties in case of a default, the trustee is not obligated to exercise
any of its rights or powers under an indenture at the request, order or
direction of any holders, unless the holders offer the trustee reasonable
indemnity. If they provide this reasonable indemnity, the holders of a majority
in principal amount outstanding of any series of debt securities may, subject to
certain limitations, direct the time, method and place of conducting any
proceeding or any remedy available to the trustee, or exercising any power
conferred upon the trustee, for any series of debt securities.
We are
required to deliver to the trustee an annual statement as to our fulfillment of
all of our obligations under the indentures.
Modification
of Indenture
The
indentures contain provisions permitting us and the trustee to amend, modify or
supplement the indentures and any supplemental indenture under which the series
of debt securities are issued. Generally, these changes require the consent of
the holders of at least a majority of the outstanding principal amount of each
series of debt securities affected by the change.
However,
no modification of the maturity date or principal or interest payment terms, no
modification of the currency for payment, no impairment of the right to sue for
the enforcement of payment at the maturity of the debt security, no modification
of any conversion rights and no modification reducing the percentage required
for modifications or modifying the foregoing requirements or reducing the
percentage required to waive certain specified covenants is effective against
any holder without its consent. In addition, no supplemental indenture shall
adversely affect the rights of any holder of senior indebtedness with respect to
subordination without the consent of such holder.
In
computing whether the holders of the requisite principal amount of outstanding
debt securities have taken action under an indenture or any supplemental
indenture:
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for an original issue discount
security, we will use the amount of the principal that would be due and
payable as of that date, as if the maturity of the debt had been
accelerated due to a default;
and
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for a debt security denominated
in a foreign currency or currencies, we will use the U.S. dollar
equivalent of the outstanding principal amount as of that date, using the
exchange rate in effect on the date of original issuance of the debt
security.
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Subordination
Our
subordinated debt securities will, to the extent set forth in the subordinated
indenture, be subordinate in right of payment to the prior payment in full of
all senior indebtedness. In the event of (1) any insolvency or bankruptcy case
or proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to Raser or to its
creditors, as such, or to its assets, or (2) any voluntary or involuntary
liquidation, dissolution or other winding up of Raser, whether or not involving
insolvency or bankruptcy or (3) any assignment for the benefit of creditors or
(4) the taking of corporate action by Raser in furtherance of any such action or
(5) the admitting in writing by Raser of its inability to pay its debts
generally as they become due, then and in any such event the holders of senior
indebtedness will be entitled to receive payment in full of all amounts due or
to become due on or in respect of all senior indebtedness, or provision will be
made for such payment in cash, before the holders of our subordinated debt
securities are entitled to receive or retain any payment on account of principal
of, or any premium or interest on, our subordinated debt securities, and to that
end the holders of senior indebtedness will be entitled to receive, for
application to the payment thereof, any payment or distribution of any kind or
character, whether in cash, property or securities, including any such payment
or distribution which may be payable or deliverable by reason of the payment of
any of our other indebtedness being subordinated to the payment of our
subordinated debt securities, which may be payable or deliverable in respect of
the subordinated debt securities in any such case, proceeding, dissolution,
liquidation or other winding up event. By reason of such subordination, in the
event of liquidation or insolvency of Raser, holders of senior indebtedness and
holders of our other obligations that are not subordinated to senior
indebtedness may recover more, ratably, than the holders of our subordinated
debt securities.
Subject
to the payment in full of all senior indebtedness, the rights of the holders of
our subordinated debt securities will be subrogated to the rights of the holders
of the senior indebtedness to receive payments or distributions of cash,
property or securities of Raser applicable to such senior indebtedness until the
principal of, any premium and interest on, our subordinated debt securities have
been paid in full.
No
payment of principal (including redemption and sinking fund payments) of, or any
premium or interest on, our subordinated debt securities may be made (1) in the
event and during the continuation of any default by Raser in the payment of
principal, premium, interest or any other amount due on any of our senior
indebtedness, or (2) if the maturity of any our senior indebtedness has been
accelerated because of a default.
Our
subordinated indenture does not limit or prohibit us from incurring additional
senior indebtedness, which may include indebtedness that is senior to our
subordinated debt securities, but subordinate to our other obligations. Our
senior debt securities will constitute senior indebtedness under our
subordinated indenture.
The term
“senior indebtedness” means all indebtedness of Raser outstanding at any time,
except (1) our subordinated debt securities, (2) indebtedness as to which, by
the terms of the instrument creating or evidencing the same, it is provided that
such indebtedness is subordinated to or ranks equally with our subordinated debt
securities, (3) indebtedness of Raser to an affiliate, (4) interest accruing
after the filing of a petition initiating any bankruptcy, insolvency or other
similar proceeding unless such interest is an allowed claim enforceable against
Raser in a proceeding under federal or state bankruptcy laws, (5) trade accounts
payable, (6) any indebtedness issued in violation of the instrument creating it
and (7) any guarantee of indebtedness. Such senior indebtedness will continue to
be senior indebtedness and be entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term of
such senior indebtedness.
The subordinated indenture provides that the foregoing
subordination provisions, insofar as they relate to any particular issue of our
subordinated debt securities, may be changed prior to such issuance. Any such
change would be described in the related prospectus supplement.
Global
Securities
We may
issue the global securities in either registered or bearer form, in either
temporary or permanent form. Unless the prospectus supplement specifies
otherwise, debt securities, when issued, will be represented by a permanent
global security or securities, and each permanent global security will be
deposited with, or on behalf of, The Depository Trust Company, which we refer to
as the Depositary, and registered in the name of a nominee of the Depositary.
Investors may elect to hold interests in the global notes through either the
Depositary (in the United States), or Clearstream or Euroclear (outside of the
United States), if they are participants of those systems, or indirectly through
organizations that are participants in those systems. Clearstream and Euroclear
will hold interests on behalf of their participants through customers’
securities accounts in Clearstream’s and Euroclear’s names on the books of their
respective depositaries, which in turn will hold the interests in customers’
securities accounts in the depositaries’ names on the books of the Depositary.
Citibank, N.A. will act as depositary for Clearstream and The Chase Manhattan
Bank will act as depositary for Euroclear (in those capacities, the “U.S.
Depositaries”). Except under the limited circumstances described below,
permanent global securities will not be exchangeable for securities in
definitive form and will not otherwise be issuable in definitive
form.
Ownership
of beneficial interests in a permanent global security will be limited to
institutions that have accounts with the Depositary or its nominee (each a
“participant”) or persons who may hold interests through participants. In
addition, ownership of beneficial interests by participants in that permanent
global security will be evidenced only by, and the transfer of that ownership
interest will be effected only through, records maintained by the Depositary or
its nominee for that permanent global security. Ownership of beneficial
interests in that permanent global security by persons who hold through
participants will be evidenced only by, and the transfer of that ownership
interest within the participant will be effected only through, records
maintained by that participant. The Depositary has no knowledge of the actual
beneficial owners of securities. Beneficial owners will not receive written
confirmation from the Depositary of their purchase, but beneficial owners are
expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the participants through
which the beneficial owners entered the transaction. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. These laws may impair your ability to
transfer your beneficial interests in that permanent global
security.
We have
been advised by the Depositary that upon the issuance of a permanent global
security and the deposit of that permanent global security with the Depositary,
the Depositary will immediately credit on its book-entry registration and
transfer system the respective principal amounts represented by that permanent
global security to the accounts of participants.
The
paying agent will make all payments on securities represented by a permanent
global security registered in the name of or held by the Depositary or its
nominee to the Depositary or its nominee, as the case may be, as the registered
owner and holder of the permanent global security representing the securities.
The Depositary has advised us that upon receipt of any payment of principal of,
or premium or interest on, if any, a permanent global security, the Depositary
will immediately credit, on its book-entry registration and transfer system,
accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of that permanent global
security as shown in the records of the Depositary or its nominee. We expect
that payments by participants to owners of beneficial interests in a permanent
global security held through those participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in “street name”
(i.e., the name of a securities broker or dealer), and will be the sole
responsibility of those participants, subject to any statutory or regulatory
requirements as may be in effect from time to time.
None of
Raser, any trustee, any agent of Raser, or any agent of a trustee will be
responsible or liable for any aspect of the records relating to or payments made
on account of beneficial interests in a permanent global security or for
maintaining, supervising, or reviewing any of the records relating to such
beneficial interests.
A permanent global security is exchangeable for definitive
securities registered in the name of, and a transfer of a permanent global
security may be registered to, any person other than the Depositary or its
nominee, only if:
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the Depositary notifies us that
it is unwilling or unable to continue as Depositary for that permanent
global security or if at any time the Depositary ceases to be a clearing
agency registered under the Exchange Act, and we do not appoint a
successor Depositary within 90
days;
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we, in our discretion, determine
that the permanent global security will be exchangeable for definitive
securities in registered form;
or
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an event of default under the
applicable indenture shall have occurred and be continuing, as described
in the prospectus, and we, the applicable trustee, or the applicable
registrar and paying agent notify the Depositary that the permanent global
security will be exchangeable for definitive securities in registered
form.
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Any
permanent global security which is exchangeable will be exchangeable in whole
for definitive securities in registered form, of like tenor and of an equal
aggregate principal amount as the permanent global security, in denominations of
$1,000 and integral multiples thereof. Those definitive securities will be
registered in the name or names of such person or persons as the Depositary
shall instruct such trustee. We expect that those instructions may be based upon
directions received by the Depositary from its participants with respect to
ownership of beneficial interests in the permanent global security.
In the
event definitive securities are issued, you may transfer the definitive
securities by presenting them for registration to the registrar at its New York
office, as the case may be. If you transfer less than all of your definitive
securities, you will receive a definitive security or securities representing
the retained amount from the registrar at its New York office, as the case may
be, within 30 days of presentation for transfer. Definitive securities presented
for registration must be duly endorsed by the holder or his attorney duly
authorized in writing, or accompanied by a written instrument or instruments of
transfer in form satisfactory to us or the trustee for the securities, duly
executed by the holder or his attorney duly authorized in writing. You can
obtain a form of written instrument of transfer from the registrar for the
securities at its New York office. We may require you to pay a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any exchange or registration of transfer of definitive securities, but
otherwise transfers will be without charge. If we issue definitive
securities,
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principal of and interest on the
securities will be payable in the manner described
below;
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the transfer of the securities
will be registrable; and
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the securities will be
exchangeable for securities bearing identical terms and
provisions.
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If we
issue definitive securities, we will do so at the office of the paying agent,
including any successor paying agent and registrar for the
securities.
We may
pay interest on definitive securities, other than interest at maturity or upon
redemption, by mailing a check to the address of the person entitled to the
interest as it appears on the security register at the close of business on the
regular record date corresponding to the relevant interest payment date. The
term “record date,” as used in this prospectus, means the close of business on
the fifteenth day preceding any interest payment date.
Notwithstanding
the foregoing, the Depositary, as holder of the securities, or a holder of more
than $l million in aggregate principal amount of securities in definitive form,
may require a paying agent to make payments of interest, other than interest due
at maturity or upon redemption, by wire transfer of immediately available funds
into an account maintained by the holder in the United States, by sending
appropriate wire transfer instructions.
Such paying agent must receive these instructions not less than
ten days prior to the applicable interest payment date.
A paying agent will pay the principal and interest payable at
maturity or upon redemption by wire transfer of immediately available funds
against presentation of a security at the office of the paying
agent.
Except as
provided above, owners of beneficial interests in a permanent global security
will not be entitled to receive physical delivery of securities in definitive
form and will not be considered the holders of these securities for any purpose
under the applicable indenture, and no permanent global security will be
exchangeable, except for another permanent global security of like denomination
and tenor to be registered in the name of the Depositary or its nominee. So each
person owning a beneficial interest in a permanent global security must rely on
the procedures of the Depositary and, if that person is not a participant, on
the procedures of the participant through which that person owns its interest,
to exercise any rights of a holder under the applicable indenture.
We
understand that, under existing industry practices, in the event that we request
any action of holders, or an owner of a beneficial interest in a permanent
global security desires to give or take any action which a holder is entitled to
give or take under the applicable indenture, the Depositary would authorize the
participants holding the relevant beneficial interests to give or take this
action, and the participants would authorize beneficial owners owning through
participants to give or take this action or would otherwise act upon the
instructions of beneficial owners owning through them.
Where any
debt securities of any series are issued in bearer form, the restrictions and
considerations applicable to such debt securities and with respect to the
payment, transfer and exchange of such debt securities will be described in the
related prospectus supplement.
The Depository
Trust Company
. The Depositary has advised us that it is a
limited-purpose trust company organized under the laws of the State of New York,
a “banking organization” within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a “clearing corporation” within the
meaning of the New York Uniform Commercial Code, and a “clearing agency”
registered under the Exchange Act. The Depositary was created to hold securities
of its participants and to facilitate the clearance and settlement of securities
transactions among its participants in securities through electronic book-entry
changes in accounts of the participants. By doing so, the Depositary eliminates
the need for physical movement of securities certificates. The Depositary’s
participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. The Depositary is owned
by a number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the Depositary’s book-entry system is also available to
others, such as banks, brokers, dealers, and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. The rules applicable to the Depositary and its participants are on
file with the SEC.
We
believe that the sources from which the information in this section concerning
the Depositary and the Depositary’s system has been obtained are reliable, but
we take no responsibility for the accuracy of the information.
Clearstream.
Clearstream advises that it is incorporated under the laws of Luxembourg as a
professional depositary. Clearstream holds securities for its participating
organizations (“Clearstream Participants”) and facilitates the clearance and
settlement of securities transactions between Clearstream Participants through
electronic book-entry changes in accounts of Clearstream Participants, thereby
eliminating the need for physical movement of certificates. Clearstream provides
to Clearstream Participants, among other things, services for safekeeping,
administration, clearance, and settlement of internationally traded securities
and securities lending and borrowing. Clearstream interfaces with domestic
markets in several countries. As a professional depositary, Clearstream is
subject to regulation by the Luxembourg Monetary Institute. Clearstream
Participants are recognized financial institutions around the world, including
Agents, securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations and may include the Agents.
Indirect access to Clearstream, is also available to others, such as banks,
brokers, dealers, and trust companies that clear through or maintain a custodial
relationship with a Clearstream Participant either directly or
indirectly.
Distributions
with respect to debt securities held beneficially through Clearstream will be
credited to cash accounts of Clearstream Participants in accordance with its
rules and procedures, to the extent received by the U.S. Depositary for
Clearstream.
Euroclear.
Euroclear advises that it was created in 1968 to hold securities for
participants of Euroclear (“Euroclear Participants”) and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries. Euroclear is operated by the Euroclear S.A./N.V. (the “Euroclear
Operator”), under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation (the “Cooperative”). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on behalf of
Euroclear Participants. Euroclear Participants include banks (including central
banks), securities brokers and dealers, and other professional financial
intermediaries and may include the Agents. Indirect access to Euroclear is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear Participant, either directly or indirectly.
Securities
clearance accounts and cash accounts with the Euroclear Operator are governed by
the Terms and Conditions Governing Use of Euroclear, the related Operating
Procedures of the Euroclear System, and applicable Belgian law (collectively,
the “Terms and Conditions”). The Terms and Conditions govern transfers of
securities and cash within Euroclear, withdrawals of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear, and receipts of
payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear
Participants.
Distributions
with respect to debt securities held beneficially through Euroclear will be
credited to the cash accounts of Euroclear Participants in accordance with the
Terms and Conditions, to the extent received by the U.S. depositary for
Euroclear.
Global
Clearance and Settlement Procedures
Initial
settlement for the securities will be made in immediately available funds.
Secondary market trading between participants in the Depositary will occur in
the ordinary way in accordance with the Depositary’s rules and will be settled
in immediately available funds using the Depositary’s Same-Day Funds Settlement
System. Secondary market trading between Clearstream Participants and/or
Euroclear Participants will occur in the ordinary way in accordance with the
applicable rules and operating procedures of Clearstream and Euroclear and will
be settled using the procedures applicable to conventional eurobonds in
immediately available funds.
Cross-market
transfers between persons holding directly or indirectly through the Depositary
on the one hand, and directly or indirectly through Clearstream or Euroclear
Participants, on the other, will be effected in the Depositary in accordance
with the Depositary rules on behalf of the relevant European international
clearing system by its U.S. Depositary. However, these cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in that system in accordance with its rules
and procedures and within its established deadlines (European time). If the
transaction meets the settlement requirements, the relevant European
international clearing system will deliver instructions to its U.S. depositary
to take action to effect final settlement on its behalf by delivering or
receiving securities in the Depositary and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
the Depositary. Clearstream Participants and Euroclear Participants may not
deliver instructions directly to their respective U.S.
depositaries.
Because
of time-zone differences, credits of securities received in Clearstream or
Euroclear as a result of a transaction with a participant in the Depositary will
be made during subsequent securities settlement processing and dated the
business day following the Depositary settlement date. Credits or any
transactions in securities settled during this processing will be reported to
the relevant Euroclear or Clearstream Participants on that following business
day. Cash received in Clearstream or Euroclear as a result of sales of notes by
or through a Clearstream Participant or a Euroclear Participant to a participant
in the Depositary will be received with value on the Depositary settlement date
but will be available in the relevant Clearstream or Euroclear cash account only
as of the business day following settlement in the Depositary.
Although the Depositary, Clearstream and Euroclear have agreed to
the foregoing procedures in order to facilitate transfers of securities among
participants of the Depositary, Clearstream and Euroclear, they are under no
obligation to perform or continue to perform these procedures and these
procedures may be discontinued at any time.
Discharge;
Defeasance and Covenant Defeasance
We may
discharge certain obligations to the holders of any debt securities of any
series that have not already been delivered to the trustee for cancellation and
that either have become due and payable or will become due and payable within
one year (or scheduled for redemption within one year) if we deposit with the
trustee, in trust, funds in the currency in which such debt securities are
payable in an amount sufficient to pay the entire indebtedness on such debt
securities with respect to principal and any premium and interest to the date of
such deposit (if such debt securities have then become due and payable) or to
the maturity date of such debt securities, as the case may be.
We also
may, at our option, elect to:
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discharge any and all of our
obligations with respect to the debt securities of such series, except
for, among other things, our obligation to register the transfer of or
exchange such debt securities and to maintain an office or agency with
respect to such debt securities (which we refer to in this prospectus as
“defeasance”); or
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release ourselves from our
obligation to comply with certain restrictive covenants under the
indentures, and to provide that any failure to comply with such
obligations shall not constitute a default or an event of default with
respect to such series of debt securities (which we refer to in this
prospectus as “covenant
defeasance”).
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Defeasance
or covenant defeasance, as the case may be, shall be conditioned upon the
irrevocable deposit by us with the trustee, in trust, of an amount in U.S.
dollars or in the foreign currency in which such debt securities are payable at
stated maturity, or government obligations, or both, applicable to such debt
securities which, through the scheduled payment of principal and interest in
accordance with their terms, will provide money in an amount sufficient to pay
the principal of and any premium and interest on such debt securities on the
scheduled due dates.
Such
trust may only be established if, among other things:
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the applicable defeasance or
covenant defeasance does not result in a breach or violation of, or
constitute a default under, the applicable indenture or any other material
agreement or instrument to which we are a party or by which we are
bound;
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no event of default or event
which with notice or lapse of time or both would become and an event of
default with respect to the debt securities to be defeased shall have
occurred and be continuing on the date of establishment of such trust;
and
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we shall have delivered to the
trustee an opinion of counsel to the effect that the deposit and related
defeasance or covenant defeasance, as the case may be, would not cause the
holders of the securities to recognize income, gain or loss for U.S.
federal income tax purposes.
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In the
case of a defeasance, we must also deliver any ruling to such effect received
from or published by the U.S. Internal Revenue Service.
Concerning the Trustee
We will
provide the name of the trustee in any prospectus supplement related to the
issuance of debt securities. The trustee will act as trustee under
our senior indenture and our subordinated indenture, as permitted by the terms
thereof. At all times, the trustee must be organized and doing business under
the laws of the United States, any state thereof or the District of Columbia,
and must comply with all applicable requirements under the Trust Indenture
Act.
The
trustee may resign at any time by giving us written notice or may be
removed:
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by act of the holders of a
majority in principal amount of a series of outstanding debt securities;
or
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if it (i) fails to comply with
the obligations imposed upon it under the Trust Indenture Act;
(ii) is not organized and doing business under the laws of the United
States, any state thereof or the District of Columbia; (iii) becomes
incapable of acting as trustee; or (iv) or a court takes certain
actions relating to bankruptcy, insolvency or
reorganization.
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If the
trustee resigns, is removed or becomes incapable of acting, or if a vacancy
occurs in the office of the trustee for any cause, we, by or pursuant to a board
resolution, will promptly appoint a successor trustee or trustees with respect
to the debt securities of such series. We will give written notice to holders of
the relevant series of debt securities, of each resignation and each removal of
the trustee with respect to the debt securities of such series and each
appointment of a successor trustee. Upon the appointment of any successor
trustee, we, the retiring trustee and such successor trustee, will execute and
deliver a supplemental indenture in which each successor Trustee will accept
such appointment and which will contain such provisions as necessary or
desirable to transfer to such successor trustee all the rights, powers, trusts
and duties of the retiring trustee with respect to the relevant series of debt
securities.
The form
of senior indenture and the form of subordinated indenture are filed as exhibits
to this registration statement. Holders of any series of debt securities may
obtain an indenture or any other documents relating to a series of debt
securities by contacting us or the trustee or by accessing the SEC’s web site.
See “Where You Can Find More Information.”
A trustee
under a senior indenture or a subordinated indenture may act as trustee under
any of our other indentures.
New
York Law to Govern
The
indentures will be governed by and construed in accordance with the laws of the
State of New York applicable to agreements made or instruments entered into and,
in each case, performed in that state.
MATERIAL
FEDERAL INCOME TAX CONSEQUENCES
A summary
of any material United States federal income tax consequences to persons
investing in the securities offered by this prospectus will be set forth in an
applicable prospectus supplement. The summary will be presented for information
purposes only, however, and will not be intended as legal or tax advice to
prospective purchasers. Prospective purchasers of securities are urged to
consult their own tax advisors prior to any acquisition of
securities.
PLAN
OF DISTRIBUTION
We may
sell the securities in one or more of the following ways from time to
time:
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through underwriters or dealers
for resale to the public or to institutional
investors;
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directly to a limited number of
institutional purchasers or to a single
purchaser;
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if indicated in the prospectus
supplement, pursuant to delayed delivery contracts, by remarketing firms
or by other means.
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Any
dealer or agent, in addition to any underwriter, may be deemed to be an
underwriter within the meaning of the Securities Act, and any discounts or
commissions they receive from us and any profit on the resale of the offered
securities by them may be treated as underwriting discounts and commissions
under the Securities Act. The terms of the offering of the securities with
respect to which this prospectus is being delivered will be set forth in the
applicable prospectus supplement and will include:
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the name or names of any
underwriters, dealers or
agents;
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the purchase price of such
securities and the proceeds to us from such
sale;
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any underwriting discounts,
agency fees and other items constituting underwriters’ or agents’
compensation;
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the public offering
price;
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any discounts or concessions that
may be allowed or reallowed or paid to dealers and any securities
exchanges on which the securities may be listed;
and
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the securities exchange on which
the securities may be listed, if
any.
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If
underwriters are used in the sale of securities, such securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by one or more
underwriters acting alone. Unless otherwise set forth in the applicable
prospectus supplement, the obligations of the underwriters to purchase the
securities described in the applicable prospectus supplement will be subject to
certain conditions precedent, and the underwriters will be obligated to purchase
all such securities if any are so purchased by them. Any public offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
The
securities may be sold directly by us or through agents designated by us from
time to time. Any agents involved in the offer or sale of the securities in
respect of which this prospectus is being delivered, and any commissions payable
by us to such agents, will be set forth in the applicable prospectus supplement.
Unless otherwise indicated in the applicable prospectus supplement, any such
agent will be acting on a best efforts basis for the period of its
appointment.
If
dealers are utilized in the sale of any securities, we will sell the securities
to the dealers, as principals. Any dealer may resell the securities to the
public at varying prices to be determined by the dealer at the time of resale.
The name of any dealer and the terms of the transaction will be set forth in the
prospectus supplement with respect to the securities being offered.
Securities
may also be offered and sold, if so indicated in the applicable prospectus
supplement, in connection with a remarketing upon their purchase, in accordance
with a redemption or repayment pursuant to their terms, or otherwise, by one or
more firms, which we refer to herein as the “remarketing firms,” acting as
principals for their own accounts or as our agents, as applicable. Any
remarketing firm will be identified and the terms of its agreement, if any, with
us and its compensation will be described in the applicable prospectus
supplement. Remarketing firms may be deemed to be underwriters, as that term is
defined in the Securities Act in connection with the securities remarketed
thereby.
If so
indicated in the applicable prospectus supplement, we will authorize agents,
underwriters or dealers to solicit offers by certain specified institutions to
purchase the securities to which this prospectus and the applicable prospectus
supplement relates from us at the public offering price set forth in the
applicable prospectus supplement, plus, if applicable, accrued interest pursuant
to delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject only to those conditions set
forth in the applicable prospectus supplement, and the applicable prospectus
supplement will set forth the commission payable for solicitation of such
contracts.
Underwriters
will not be obligated to make a market in any securities. We can give no
assurance regarding the activity of trading in, or liquidity of, any
securities.
Agents, dealers, underwriters and remarketing firms may be
entitled, under agreements entered into with us, to indemnification by us, as
applicable, against certain civil liabilities, including liabilities under the
Securities Act, or to contribution to payments they may be required to make in
respect thereof. Agents, dealers, underwriters and remarketing firms may be
customers of, engage in transactions with, or perform services for, us in the
ordinary course of business.
Each
series of securities will be a new issue and, other than the common stock, which
is listed on the New York Stock Exchange, will have no established trading
market. We may elect to list any series of securities on an exchange, and in the
case of the common stock, on any additional exchange, but, unless otherwise
specified in the applicable prospectus supplement, we shall not be obligated to
do so. Any underwriters to whom securities are sold for public offering and sale
may make a market in the securities, but the underwriters will not be obligated
to do so and may discontinue any market making at any time without notice. The
securities may or may not be listed on a national securities exchange or a
foreign securities exchange. No assurance can be given as to the liquidity of
the trading market for any of the securities.
The
place, time of delivery and other terms of the offered securities will be
described in the applicable prospectus supplement.
LEGAL
MATTERS
Stoel
Rives LLP, Salt Lake City, Utah, will pass upon the validity of any securities
that we offer pursuant to this prospectus. If the securities are being
distributed in an underwritten offering, certain legal matters will be passed
upon for the underwriters by counsel identified in the applicable prospectus
supplement.
EXPERTS
Our
financial statements, incorporated in this prospectus by reference to our Annual
Report on Form 10-K, as amended, for the years ended December 31, 2008, 2007 and
2006, and the effectiveness of our internal control over financial reporting as
of December 31, 2008, have been audited by Hein & Associates LLP of Denver,
Colorado, our independent registered public accounting firm, and are so
incorporated by reference hereto in reliance upon such report given upon the
authority of said firm as an expert in auditing and accounting.
INFORMATION
INCORPORATED BY REFERENCE
The SEC
allows us to “incorporate by reference” certain of our publicly-filed documents
into this prospectus, which means that information included in those documents
is considered part of this prospectus. Information that we file with the SEC
after the date of this prospectus will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act between the date of this prospectus and the termination of the
offering, and also between the date of the initial registration statement and
prior to effectiveness of the registration statement.
The
following documents filed with the SEC are incorporated by reference in this
prospectus (other than, in each case, documents or information therein deemed to
have been furnished and not filed in accordance with SEC rules):
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Our Annual Report on Form 10-K
for the year ended December 31, 2008, as
amended.
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Our Quarterly Report on Form 10-Q
for the quarter ended March 31, 2009, as
amended.
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Our Current Reports on Form 8-K
filed on February 2, 2009, February 18, 2009 and April 17,
2009.
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Our Registration Statement on
Form 8-A filed on November 1, 2005, as amended by Amendment No. 1 to such
Form 8-A filed on May 15,
2008.
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We will provide without charge to any person to whom this
prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference, excluding
exhibits, unless we have specifically incorporated an exhibit in the
incorporated document. Written requests should be directed to: Raser
Technologies, Inc., 5152 North Edgewood Drive, Suite 375, Provo, UT 84604,
Attention: Investor Relations, (801) 765-1200 (telephone).
Each
document or report subsequently filed by us pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the securities shall be deemed to be incorporated
by reference into this prospectus and to be a part of this prospectus from the
date of filing of such document, unless otherwise provided in the relevant
document. Any statement contained herein, or in a document all or a portion of
which is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the registration statement
and this prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the registration statement or this
prospectus.
The
information relating to Raser contained in this prospectus and the accompanying
prospectus supplement is not comprehensive, and you should read it together with
the information contained in the incorporated documents.
9,305,790 Shares of Common Stock
Warrants to Purchase 4,652,895 Shares
of Common Stock
Raser
Technologies, Inc.
Common
Stock
October
13, 2010
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