SatCon Technology 10-K 2005
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 2004
Commission file number 1-11512
SATCON TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class
Common Stock, $.01 Par Value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No ý
The aggregate market value of the Registrants Common Stock, $.01 par value per share, held by non-affiliates of the Registrant was $60,885,763 based on the last reported sale price of the Registrants Common Stock on the Nasdaq National Market as of the close of business on the last business day of the Registrants most recently completed second fiscal quarter ($2.45). There were 33,182,694 shares of Common Stock outstanding as of January 1, 2005.
This Amendment No. 1 to Form 10-K/A to the Registrants Annual Report on Form 10-K for the fiscal year ended September 30, 2004 (Fiscal 2004) is being filed to add certain information required to be set forth in Part III. Items 10, 11, 12, 13 and 14 of Part III of the Registrants Annual Report on Form 10-K for Fiscal 2004, as filed with the Securities and Exchange Commission on December 29, 2004, are hereby amended and restated in their entirety as follows:
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Corporation
The Corporation has a classified Board of Directors (the Board) consisting of three Class I directors, two Class II directors and three Class III directors. At each Annual Meeting of Stockholders, directors are elected for a full term of three years to succeed those whose terms are expiring.
For each member of the Board there follows information given by each concerning his principal occupation and business experience for the past five years, the name of other publicly held companies on which he serves as a director and his age and length of service as a director of the Corporation.
No director or executive officer is related by blood, marriage or adoption to any other director or executive officer.
Current DirectorsTerms Expiring in 2005 (Class II Directors)
Andrew R. Muir, age 60, became a director in 2004.
Andrew R. Muir joined the Corporation as a director in December 2004. Dr. Muir is currently a private consultant advising emerging technology companies on a broad range of strategic and operational matters. Following his 20 year career with Perkin Elmer Corporation in the U.S. and Europe, where he had positions of increasing responsibility in Engineering and Operations Management, he has served in a variety of management and advisory roles with emerging technology companies. Most recently, he served as Chairman and Chief Executive Officer of Select Therapeutics, Inc., a development stage pharmaceutical company engaged in the development of novel pharmaceutical treatments utilizing technologies licensed from academic institutions. He continues to serve as a member of the Board of Directors of the company. Dr. Muir received his doctoral degree from Oxford University in the United Kingdom and MBA from Pace University in New York.
Michael C. Turmelle, age 45, became a director in 1993.
Michael C. Turmelle joined the Corporation in September 1987, and currently serves as President of SatCon Power Systems, the Corporations largest division. From January 2000 to January 2005, Mr. Turmelle was Vice President and Chief Operating Officer of the Corporation. Previously, he served as Vice President, Chief Financial Officer and Treasurer from November 1991 until January 2000, as Secretary from June 1993 until May 2001 and as Controller from September 1987 until November 1991. Mr. Turmelle became a director of the Corporation in June 1993. Prior to joining the Corporation, Mr. Turmelle held several positions with HADCO Corporation, a manufacturer of circuit boards, and with the aerospace division of General Electric Corporation. Mr. Turmelle holds a B.A. degree in Economics from Amherst College.
Current DirectorsTerms Expiring in 2006 (Class III Directors)
Marshall J. Armstrong, age 69, became a director in 1994.
Marshall J. Armstrong joined the Corporation as a director in 1994. Mr. Armstrong previously served as Chief Executive Officer and Chairman of the Board of Thermo Power Corporation from 1992 through 1997. Thermo Power provides research and development relating to engines, cogeneration and refrigeration equipment to the marine, food processing, transportation, power generating, petrochemical and pharmaceutical industries. From January 1998 to September 1999, Mr. Armstrong served as Senior Vice President of Thermo Electron Corporation, where he had been employed since 1968 in various capacities including management of Thermo Electrons government affairs. Mr. Armstrong previously served as a director of Thermo Sentron, Inc. Mr. Armstrong holds an M.S. degree from George Washington University and a B.S. degree in Mechanical Engineering from the University of Vermont.
Joseph E. Levangie, age 59, became a director in 2004.
Joseph E. Levangie joined the Corporation as a director in December 2004. Mr. Levangie is Chief Executive Officer of JEL & Associates, a financial and investment services firm based in Bedford, MA. Previously, Mr. Levangie served as Chief Financial Officer for Greenman Technologies, Inc., Colorgen Inc. and Spire Corporation. Earlier in his career, Mr. Levangie served as Executive Vice President of the Solar Energy Conservation Bank in Washington, D.C. and held management positions with Northern Energy Corporation and AVCO Systems, a $100 million company, which became a division of Textron, Inc. Mr. Levangie received his S.B from the Massachusetts Institute of Technology and his MBA from Harvard Universitys Graduate School of Business Administration.
Anthony J. Villiotti, age 58, became a director in 2002.
Anthony J. Villiotti first joined the Corporation as a director in June 1997. Following his resignation from the Board in January 2000, Mr. Villiotti re-joined the Corporation as a director in January 2002. Mr. Villiotti formerly served as Vice President and Chief Financial Officer of AquaSource, Inc., a water resource management company, where he was responsible for all financial and information technology activities from May 1999 until his retirement in August 2003. From October 1993 until May 1999, Mr. Villiotti served as Vice President, Treasurer and Controller of DQE Enterprises, where he was responsible for identifying and implementing investment opportunities and for all financial and administrative activities. From June 1990 through October 1993, Mr. Villiotti served as Treasurer and Controller of DQE Enterprises. Mr. Villiotti holds a B.S. degree in accounting from Pennsylvania State University.
Current DirectorsTerms Expiring in 2007 (Class I Directors)
David B. Eisenhaure, age 59, became a director in 1985.
David B. Eisenhaure joined the Corporation as President, Chief Executive Officer and Chairman of the Board in 1985. After Mr. Firebaugh assumes the role of President late in February 2005, Mr. Eisenhaure will continue as Chief Executive Officer and Chairman of the Board. Prior to founding the Corporation, Mr. Eisenhaure was associated with the Charles Stark Draper Laboratory, Incorporated from 1974 to 1985, and with its predecessor, the Massachusetts Institute of Technologys Instrumentation Laboratory, from 1967 to 1974. Mr. Eisenhaure holds S.B., S.M. and an Engineers Degree in Mechanical Engineering from the Massachusetts Institute of Technology (MIT). Mr. Eisenhaure previously held an academic position at MIT, serving as
a lecturer in the Department of Mechanical Engineering. Mr. Eisenhaure also serves on the board of directors of Implant Sciences Corporation.
Alan P. Goldberg, age 59, became a director in 1999.
Alan P. Goldberg joined the Corporation as a director in 1999. Mr. Goldberg serves as President and Chief Executive Officer and has been a member of the board of directors of First Albany Companies Inc., an investment bank, since 1993 and as President and Chief Executive Officer of First Albany Capital, Inc. Mr. Goldberg is active in industry and civic organizations and serves on the board of several non-profit institutions in the Albany, New York region. He received a B.A. degree in Government from Tufts University.
James L. Kirtley, Jr., age 59, became a director in 1992.
James L. Kirtley, Jr., joined the Corporation as a consultant in 1985 and became a director in 1992. From February 2000 until September 2004, Dr. Kirtley served as Vice President and Chief Scientist of the Corporation and was previously employed on a on a full-time basis as the Vice President and General Manager of the Corporations Technology Center beginning in 1998. Dr. Kirtley currently serves as a consultant to the Corporation. Dr. Kirtley is also a Professor of Electrical Engineering at Massachusetts Institute of Technology (MIT) having served as a member of the MIT faculty since 1971. Dr. Kirtley received his S.B., S.M., E.E. and PhD. degrees in Electrical Engineering from MIT.
Executive Officers of the Corporation
Millard S. Firebaugh, age 64, will become an officer in 2005
Millard S. Firebaugh agreed to become President and Chief Operating Officer of the Company in January 2005. He is expected to begin serving in these roles in late February 2005. He recently resigned from his position with Electric Boat Corporation, a division of General Dynamics Corporation, where he served as Vice President Innovation and Chief Engineer and was responsible for the operations of a 2800 person nuclear submarine design and engineering group. Rear Admiral Firebaugh served for more than 33 years in the U.S. Navy, retiring in 1995 as the Deputy Commander for Engineering and Chief Engineer for Naval Sea Systems Command. He received his B.S. in Physics, M.S. in Electrical Engineering, a Naval Engineer degree and ScD. in Ocean Engineering, all from the Massachusetts Institute of Technology.
Ralph M. Norwood, age 61, became an Executive Officer in 2002
Ralph M. Norwood joined the Corporation in February 2002 and serves as Vice President of Finance, Chief Financial Officer and Treasurer. Prior to joining the Corporation, Mr. Norwood served as an independent financial consultant from June 2000 until February 2002. From 1976 to June 2000, Mr. Norwood was employed by the Polaroid Corporation, an instant imaging company and manufacturer of instant cameras, where he served in several financial positions including as Vice President and Corporate Controller from 1989 to 1996 and as Vice President and Treasurer from 1996 until his departure in June 2000. Mr. Norwood is a Certified Public Accountant and received his M.B.A. degree from the Darden School at the University of Virginia.
For additional information relating to Executive Officers of the Corporation, see disclosure regarding Messrs. Eisenhaure and Turmelle set forth under the heading Directors of the Corporation.
For information relating to shares of Common Stock owned by each of the directors and executive officers of the Corporation, see Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Audit Committee of the Corporation
The Company has a separately designated standing audit committee established in accordance with section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the Exchange Act). The Audit Committee consists of Messrs. Armstrong, Goldberg, and Villiotti.
The Board of Directors of the Company has determined that Mr. Villiotti qualifies as an audit committee financial expert under Item 401(h) of Regulation S-K. Further, all of the members of the Audit Committee are independent, as that term is used in Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Corporations directors, executive officers and holders of more than 10% of the Common Stock to file with the Securities and Exchange Commission (the SEC) initial reports of ownership of the Common Stock and other equity securities on a Form 3 and reports of changes in such ownership on a Form 4 or Form 5. Officers, directors and 10% stockholders are required by SEC regulations to furnish the Corporation with copies of all Section 16(a) forms they file. To the Corporations knowledge, based solely on a review of the Corporations records and written representations by the persons required to file such reports, all filing requirements of Section 16(a) were satisfied with respect to the Corporations most recent fiscal year.
Code of Ethics
The Corporation has adopted a code of ethics that applies to the Corporations principal executive officer, principal financial officer and principal accounting officer. Please see Exhibit 14.1 to this Form 10-K/A.
Item 11. EXECUTIVE COMPENSATION
Compensation of Executive Officers
Summary Compensation Table. The following table sets forth information concerning the annual and long-term compensation for services rendered to the Corporation for the fiscal years ended September 30, 2004, 2003 and 2002, of those persons who were at September 30, 2004 (i) the chief executive officer of the Corporation and (ii) each other executive officer of the Corporation whose annual compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
(1) In February 2002, Mr. Norwood joined the Corporation as Vice President of Finance, Chief Financial Officer and Treasurer.
(2) Amounts consist of Board fees paid to Messrs. Eisenhaure and Turmelle in their capacity as directors of the Corporation of $900 per quarter and $200 per Board meeting attended.
(3) Includes the amounts of $9,787 for each of 2004, 2003 and 2002 for the dollar value of term life insurance premiums paid by the Corporation on a $1,000,000 term life insurance policy of which members of the Mr. Eisenhaures family are the beneficiaries. Also includes the amounts of $12,300 for 2004, $15,000 for 2003, and $11,000 for the dollar value of the Corporations contributions under the Corporations 401(k) Plan.
(4) Includes the amounts of $7,995 for each of 2004, 2003 and 2002 for the dollar value of life insurance premiums paid by the Corporation on a $1,000,000 term life insurance policy of which members of Mr.Turmelles family are the beneficiaries. Also includes the amounts of $12,000 for 2004, $11,584 for 2003, and $11,000 for 2002 for the dollar value of the Corporations contributions under the Corporations 401(k) Plan.
(5) Includes the dollar value of the Corporations contributions under the Corporations 401(k) Plan.
Option Grants Table. There were no individual grants of stock options to purchase the Common Stock made to the executive officers named in the Summary Compensation Table during Fiscal 2004.
Aggregated Option Exercises and Fiscal Year-End Option Value Table. The following table sets forth certain information regarding stock options exercised during Fiscal 2004 and held as of September 30, 2004 by the executive officers named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
(1) Represents the difference between the exercise price and the fair market value of the Common Stock on the date of exercise.
(2) Value is based on the closing sale price of the Common Stock on September 30, 2004, the last trading day of Fiscal 2004 ($1.89), less the applicable option exercise price.
Compensation of Directors
Outside (non-employee) directors receive $2,500 per quarter as a retainer for serving as a director. Outside directors receive an additional $1,000 per Board meeting if attended in person, or $500 per Board meeting if attended by telephone. The Corporation also pays all out of pocket expenses reasonably incurred by outside directors in attending Board meetings. Employee directors receive a fee of $200 for each Board meeting attended, as well as a retainer of $900 per quarter.
During Fiscal 2004, the Corporation granted stock options to purchase shares of the Corporations Common Stock to the members of the Board as follows: Mr. Goldberg: 23,000; and Mr. Villiotti: 23,000. The stock option exercise price is $3.12 per share, and these stock options were exercisable immediately upon grant. There were no grants during fiscal year 2004 to Mr. Armstrong, Mr. Eisenhaure, Mr. Kirtley, Mr. Trumelle and Mr. Levangie and Dr. Muir.
During 2004, Mr. Armstrong, Mr. Kirtley and Dr. Wilson participated in the Corporations stock option exchange tender offer whereby certain options could be surrendered to the Corporation and, after a period of six months and 1 day, subject to certain conditions, new options would be granted at the then current market price. Mr. Armstrong surrendered 32,000 options under the plan on April 19, 2004 with an average exercise price of $16.24 per share, and on October 20, 2004 was granted 19,000 options with an exercise price of $2.05 per share all of which were immediately exercisable. Dr. Wilson, a former director of the Corporation, surrendered 20,000 options under the plan on April 19, 2004, with an average exercise price of $26.06 per share, and on October 20, 2004 was granted 12,500 options with an exercise price of $2.05 per share all of which were immediately exercisable. Mr. Kirtley surrendered 130,000 options under the plan on April 19, 2004, with an average exercise price of $14.76 per share, and on October 20, 2004 was granted 91,700 options with an exercise price of $2.05 per share all of which were immediately exercisable.
On April 11, 2002, to encourage ownership in the Corporation by outside directors, to provide such directors with a further incentive to remain as directors and to align the interests of such directors with the interests of the Corporations stockholders, the Board adopted a director stock option program. Pursuant to this program, (i) each individual who first becomes an outside director of the Corporation will receive a non-statutory stock option to purchase 15,000 shares of the Common Stock on the date of his or her initial election to the Board; and (ii) on the date of each Annual Meeting of Stockholders of the Corporation commencing with the 2002 Annual Meeting of Stockholders (other than a director who was
initially elected to the Board at any such Annual Meeting of Stockholders or, if previously, at any time after the prior years Annual Meeting of Stockholders), provided that he or she is serving as a director immediately following the date of such Annual Meeting of Stockholders, (a) each outside director who is serving on the Corporations Audit Committee will be granted a non-statutory stock option to purchase an additional 5,000 shares of the Common Stock and (b) each outside director who is serving on the Compensation Committee will be granted a non-statutory stock option to purchase an additional 3,000 shares of the Common Stock. These non-statutory stock options will be immediately exercisable and will have exercise prices equal to the closing price of the Common Stock on the NASDAQ National Market on the date of grant.
Employment Contracts, Termination of Employment and Change-in-Control Arrangements
The Corporation has entered into Key Employee Agreements (the Employee Agreements) with Messrs. Eisenhaure and Turmelle, which provide that each of Messrs. Eisenhaure or Turmelle are entitled to receive as a severance payment 100% of their annual salary plus benefits, payable in twelve equal monthly installments, if (i) the Corporation or a substantial portion of the Corporation is acquired without the approval of the Board; or (ii) without their consent, either of their employment is terminated without cause or either of their salaries are reduced, or there is a substantial change in either one of their positions or there is a change in their principal place of employment from the greater Boston, Massachusetts area . The Employee Agreements also contain provisions prohibiting Messrs. Eisenhaure and Turmelle from competing with the Corporation for a one-year period following termination of employment.
Compensation Committee Interlocks and Insider Participation
During Fiscal 2004, Messrs. Goldberg and Villiotti, both of whom are independent, in accordance with Nasdaq requirements, served as members of the Compensation Committee. Neither member was ever an officer or an employee of the Corporation.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity Compensation Plans
The following table provides information about the securities authorized for issuance under the Corporations equity compensation plans as of September 30, 2004.
EQUITY COMPENSATION PLAN INFORMATION
(1) Includes 41,317 shares of the Common Stock issuable under the Corporations 1996 Stock Option Plan, 40,068 shares of the Common Stock issuable under the Corporations 1998 Stock Incentive Plan, 373,493 shares of the Common Stock issuable under the Corporations 1999 Stock Incentive Plan, 720,500 shares of the Common Stock
issuable under the Corporations 2000 Stock Incentive Plan and 600,500 shares of the Common Stock issuable under the Corporations 2002 Stock Incentive Plan.
(2) Includes 21,000 shares of the Common Stock issuable upon exercise of option grants issued outside of existing stock option plans to non-executive employees. These options were issued on January 19, 2000 at an exercise price of $17.563 per share and expire on January 19, 2010. The right to exercise these options vested in equal annual installments over the four-year period from the date of initial grant. These options must be exercised within 90 days after an employees termination or they expire.
(3) Includes 195,000 shares of the Common Stock issuable outside of existing stock option plans.
On January 19, 2000, the Board granted to four of the Corporations employees options exercisable in the aggregate of up to 216,000 shares of Common Stock outside of the Corporations stockholder-approved equity compensation plans. The terms of these options are substantially similar to those of non-statutory stock options issued under the Corporations shareholder-approved 1999 Stock Incentive Plan.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of December 31, 2004, certain information concerning the beneficial ownership of the Common Stock by (i) each person known by the Corporation to own beneficially five percent (5%) or more of the outstanding shares of the Common Stock; (ii) each of the Corporations executive officers and directors and (iii) all executive officers and directors as a group.
The number of shares beneficially owned by each 5% stockholder, director or executive officer is determined under rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and also any shares which the individual or entity has the right to acquire on or before February 23, 2005 through the exercise of any stock option, warrant or other right. Unless otherwise indicated, each person or entity has sole investment and voting power (or shares such power with his spouse) with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.
* Less than 1%
(1) The address for all executive officers and directors, other than Mr. Goldberg, is c/o SatCon Technology Corporation, 27 Drydock Avenue, Boston, Massachusetts, 02210.
(2) Includes the following number of shares of Common Stock issuable upon the exercise of outstanding stock options which may be exercised on or before Mach 1, 2005: Mr. Armstrong: 79,000; Mr. Eisenhaure: 268,500; Mr. Goldberg: 90,000; Dr. Kirtley: 125,800; Mr. Levangie 15,000, Mr. Muir 15,000, Mr. Norwood: 170,000; Mr. Turmelle: 241,450; Mr. Villiotti: 69,000; all executive officers and directors as a group: 1,073.750. Also includes the following number of shares of Common Stock to be issued before February 23, 2005 as company-matching grants under the SatCon Technology Corporation 401(k) Plan: Mr. Norwood: 1,291; Mr. Turmelle: 834; all executive officers and directors as a group: 2,125.
(3) Includes 7,500 shares of Common Stock held by Goldberg Charitable Trust of which Mr. Goldberg is the trustee. Mr. Goldberg disclaims beneficial ownership of these shares.
(4) Includes 12,000 shares of Common Stock issuable upon the exercise of Series B Warrants, 31,914 shares of Common Stock issuable upon the conversion of redeemable convertible Series B preferred stock.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Grant Thornton LLP (Grant Thornton) billed fees of $319,350 during the fiscal year ended September 30, 2004 for professional services rendered for the audit of the Corporations financial statements included in this Annual Report on Form 10-K, the review of the financial statements included in the Corporations Quarterly Reports on Form 10-Q for the quarters ended December 27, 2003, March 27, 2004 and June 26, 2004 and review of registration statements filed during the most recent fiscal year. Grant Thornton billed fees of $300,000 during the fiscal year ended September 30, 2003 for professional services rendered for the audit of the Corporations financial statements included in its Annual Report on Form 10-K for the year ended September 30, 2003 and the review of the financial statements included in the Corporations Quarterly Report on Form 10-Q for the quarters ended December 28, 2002, March 29, 2003 and June 28, 2003.
Audit Related Fees
There were no fees paid to Grant Thornton that would constitute audit related fees besides those described above in Audit Fees.
Grant Thornton billed fees of $38,045 during the fiscal year ended September 30, 2004 for professional services rendered for tax compliance, tax advice and tax planning. Grant Thornton billed fees of $30,000 during the fiscal year ended September 30, 2003 for professional services rendered for tax compliance, tax advice and tax planning.
All Other Fees
Grant Thornton did not bill the Corporation for any professional services in each of the last two fiscal years.
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed as part of this Annual Report on Form 10-K.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of Massachusetts on January 28, 2005.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
(*) Previously filed as an Exhibit to the Annual Report on Form 10-K for the fiscal year ended September 30, 2004.