Exhibit 99.3
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of May 22, 2003, between Northern Power
Systems, Inc., a Delaware corporation having its principal place of business at
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and Proton Energy
Systems, Inc., a Delaware corporation having its principal place of business at
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Secured Party").
WHEREAS, the Company has entered into a Bonding Support Agreement dated as
of May __, 2003, (as amended and in effect from time to time, the "Support
Agreement"), with the Secured Party, pursuant to which the Secured Party,
subject to the terms and conditions contained therein, shall provide credit
support to the Company; and
WHEREAS, it is a condition precedent to the Secured Party's providing any
credit support to the Company under the Support Agreement that the Company
execute and deliver to the Secured Party a security agreement in substantially
the form hereof; and
WHEREAS, the Company wishes to grant security interests in favor of the
Secured Party as herein provided;
NOW, THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein without definitions shall
have the respective meanings provided therefor in the Support Agreement. The
term "State," as used herein, means the State of Vermont. All terms defined in
the Uniform Commercial Code as enacted and amended in the State (the "UCC") and
used herein shall have the same definitions herein as specified therein;
provided, however, that the term "instrument" shall be such term as defined in
Article 9 of the Uniform Commercial Code of the State rather than Article 3. The
term "Obligations," as used herein, means all of the repayment obligations,
indebtedness, obligations and liabilities of the Company to the Secured Party,
individually or collectively, whether direct or indirect, joint or several,
absolute or contingent, due or to become due, now existing or hereafter arising
under or in respect of the Support Agreement, any guaranties, promissory notes
or other instruments or agreements executed and delivered pursuant thereto or in
connection therewith or this Agreement, and the term "Event of Default," as used
herein, means the failure of the Company to pay or perform any of the
Obligations as and when due to be paid or performed under the terms of the
Support Agreement.
2. Grant of Security Interest. The Company hereby grants to the Secured
Party, to secure the payment and performance in full of all of the Obligations,
a security interest in the following properties, assets and rights of the
Company, wherever located, whether now owned or hereafter acquired or arising,
and all proceeds and products thereof: all goods (including inventory,
equipment, furniture and accessions thereto), instruments (including promissory
notes), receivables, accounts, chattel paper (whether tangible or electronic),
securities, deposit accounts, letter of credit rights, and any other contract
rights or rights to the payment of money (all of the above being hereinafter
called the "Collateral").
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3. Authorization to File Financing Statements. The Company hereby
irrevocably authorizes the Secured Party at any time and from time to time to
file in any Uniform Commercial Code jurisdiction any initial financing
statements and amendments thereto that contain any information required by
Article 9 of the Uniform Commercial Code of the State for the sufficiency or
filing office acceptance of any financing statement or amendment. The Company
agrees to furnish any such information to the Secured Party promptly upon
request. The Company also ratifies its authorization for the Secured Party to
have filed in any Uniform Commercial Code jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date hereof.
4. Other Actions. Further to ensure the attachment, perfection and first
priority of, and the ability of the Secured Party to enforce the Secured Party's
security interest in the Collateral, the Company agrees, in each case at the
Company's own expense, to take the following actions with respect to the
following Collateral:
4.1. Promissory Notes and Tangible Chattel Paper. If the Company shall
at any time hold or acquire any promissory notes or tangible chattel paper,
the Company shall forthwith endorse, assign and deliver the same to the
Secured Party, accompanied by such instruments of transfer or assignment
duly executed in blank as the Secured Party may from time to time specify.
4.2. Deposit Accounts. For each deposit account that the Company at
any time opens or maintains, the Company shall, at the Secured Party's
request and option, pursuant to an agreement in form and substance
satisfactory to the Secured Party, either (a) cause the depositary bank to
agree to comply at any time with instructions from the Secured Party to
such depositary bank directing the disposition of funds from time to time
credited to such deposit account, without further consent of the Company,
or (b) arrange for the Secured Party to become the customer of the
depositary bank with respect to the deposit account, with the Company being
permitted, only with the consent of the Secured Party, to exercise rights
to withdraw funds from such deposit account. The Secured Party agrees with
the Company that the Secured Party shall not give any such instructions or
withhold any withdrawal rights from the Company, unless an Event of Default
has occurred and is continuing. The provisions of this paragraph shall not
apply to (i) any deposit account for which the Company, the depositary bank
and the Secured Party have entered into a cash collateral agreement
specially negotiated among the Company, the depositary bank and the Secured
Party for the specific purpose set forth therein, (ii) deposit accounts for
which the Secured Party is the depositary, and (iii) deposit accounts
specially and exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of the Company's
salaried employees.
4.3. Collateral in the Possession of a Bailee. If any goods are at any
time in the possession of a bailee, the Company shall promptly notify the
Secured Party thereof and, if requested by the Secured Party, shall
promptly obtain an acknowledgement from the bailee, in form and substance
satisfactory to the Secured Party, that the bailee holds such Collateral
for the benefit of the Secured Party and shall act upon the instructions of
the Secured Party, without the further consent of the Company. The Secured
Party agrees
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with the Company that the Secured Party shall not give any such
instructions unless an Event of Default has occurred and is continuing.
4.4. Electronic Chattel Paper and Transferable Records. If the Company
at any time holds or acquires an interest in any electronic chattel paper
or any "transferable record," as that term is defined in Section 201 of the
federal Electronic Signatures in Global and National Commerce Act, or
in (S)16 of the Uniform Electronic Transactions Act as in effect in any
relevant jurisdiction, the Company shall promptly notify the Secured Party
thereof and, at the request of the Secured Party, shall take such action as
the Secured Party may reasonably request to vest in the Secured Party
control under UCC(S)9-105 of such electronic chattel paper or control under
Section 201 of the federal Electronic Signatures in Global and National
Commerce Act or, as the case may be,(S)16 of the Uniform Electronic
Transactions Act, as so in effect in such jurisdiction, of such
transferable record. The Secured Party agrees with the Company that the
Secured Party will arrange, pursuant to procedures satisfactory to the
Secured Party and so long as such procedures will not result in the Secured
Party's loss of control, for the Company to make alterations to the
electronic chattel paper or transferable record permitted under UCC
(S)9-105 or, as the case may be, Section 201 of the federal Electronic
Signatures in Global and National Commerce Act or (S)16 of the Uniform
Electronic Transactions Act for a party in control to make without loss of
control, unless an Event of Default has occurred and is continuing or would
occur after taking into account any action by the Company with respect to
such electronic chattel paper or transferable record.
4.5. Letter-of-Credit Rights. If the Company is at any time a
beneficiary under a letter of credit now or hereafter issued in favor of
the Company, the Company shall promptly notify the Secured Party thereof
and, at the request and option of the Secured Party, the Company shall,
pursuant to an agreement in form and substance satisfactory to the Secured
Party, either (i) arrange for the issuer and any confirmer of such letter
of credit to consent to an assignment to the Secured Party of the proceeds
of any drawing under the letter of credit, or (ii) arrange for the Secured
Party to become the transferee beneficiary of the letter of credit, with
the Secured Party agreeing, in each case, that the proceeds of any drawing
under the letter to credit are to be applied as provided in the Support
Agreement.
4.6. Other Actions as to any and all Collateral. The Company further
agrees to take any other action reasonably requested by the Secured Party
to insure the attachment, perfection and first priority of, and the ability
of the Secured Party to enforce, the Secured Party's security interest in
any and all of the Collateral including, without limitation, (a) executing,
delivering and, where appropriate, filing financing statements and
amendments relating thereto under the Uniform Commercial Code, to the
extent, if any, that the Company's signature thereon is required therefor,
(b) causing the Secured Party's name to be noted as secured party on any
certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of the Secured Party to
enforce, the Secured Party's security interest in such Collateral, (c)
complying with any provision of any statute, regulation or treaty of the
United States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of the
Secured Party to enforce, the Secured Party's
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security interest in such Collateral, (d) obtaining governmental and other
third party consents and approvals, including without limitation any
consent of any licensor, lessor or other person obligated on Collateral,
(e) obtaining waivers from mortgagees and landlords in form and substance
satisfactory to the Secured Party, and (f) taking all actions required by
any earlier versions of the Uniform Commercial Code or by other law, as
applicable in any relevant Uniform Commercial Code jurisdiction, or by
other law as applicable in any foreign jurisdiction.
5. Representations and Warranties Concerning Company's Legal Status. The
Company has previously delivered to the Secured Party a certificate signed by
the Company and entitled "Perfection Certificate" (the "Perfection
Certificate"). The Company represents and warrants to the Secured Party as
follows: (a) the Company's exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof, (b) the Company is an organization
of the type and organized in the jurisdiction set forth in the Perfection
Certificate, (c) the Perfection Certificate accurately sets forth the Company's
organizational identification number or accurately states that the Company has
none, (d) the Perfection Certificate accurately sets forth the Company's place
of business or, if more than one, its chief executive office as well as the
Company's mailing address if different, and (e) all other information set forth
on the Perfection Certificate pertaining to the Company is accurate and
complete.
6. Covenants Concerning Company's Legal Status. The Company covenants with
the Secured Party as follows: (a) without providing at least 30 days prior
written notice to the Secured Party, the Company will not change its name, its
place of business or, if more than one, chief executive office, or its mailing
address or organizational identification number if it has one, (b) if the
Company does not have an organizational identification number and later obtains
one, the Company shall forthwith notify the Secured Party of such organizational
identification number, and (c) the Company will not change its type of
organization, jurisdiction of organization or other legal structure.
7. Representations and Warranties Concerning Collateral, Etc. The Company
further represents and warrants to the Secured Party as follows: (a) the Company
is the owner of the Collateral, free from any adverse lien, security interest or
other encumbrance, except for the security interest created by this Agreement,
(b) none of the Collateral constitutes, or is the proceeds of, "farm products"
as defined in (S)9-102(a)(34) of the Uniform Commercial Code of the State, (c)
the Company has at all times operated its business in compliance with all
applicable provisions of the federal Fair Labor Standards Act, as amended, and
with all applicable provisions of federal, state and local statutes and
ordinances dealing with the control, shipment, storage or disposal of hazardous
materials or substances, and (d) all other information set forth on the
Perfection Certificate pertaining to the Collateral is accurate and complete.
8. Additional Covenants.
(a) The Company further covenants with the Secured Party as follows:
(i) the Collateral, to the extent not delivered to the Secured
Party, will be kept at those locations listed on the Perfection
Certificate and the Company will not remove the Collateral from such
locations,
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without providing at least 30 days prior written
notice to the Secured Party;
(ii) except for the security interest herein
granted, the Company shall be the owner of the
Collateral free from any lien, security interest or
other encumbrance, and the Company shall defend the
same against all claims and demands of all persons at
any time claiming the same or any interests therein
adverse to the Secured Party;
(iii) the Company shall not pledge, mortgage
or create, or suffer to exist a security interest in
the Collateral in favor of any person other than the
Secured Party;
(iv) the Company will keep the Collateral in
good order and repair and will not use the same in
violation of law or any policy of insurance thereon;
(v) the Company will permit the Secured
Party, or its designee, to inspect the Collateral at
any reasonable time, wherever located;
(vi) the Company will pay promptly when due
all taxes, assessments, governmental charges and
levies upon the Collateral or incurred in connection
with the use or operation of such Collateral or
incurred in connection with this Agreement;
(vii) the Company will continue to operate
its business in compliance with all applicable
provisions of the federal Fair Labor Standards Act,
as amended, and with all applicable provisions of
federal, state and local statutes and ordinances
dealing with the control, shipment, storage or
disposal of hazardous materials or substances; and
(viii) the Company will not sell or
otherwise dispose, or offer to sell or otherwise
dispose, of the Collateral or any interest therein
except for (a) sales and leases of inventory and
licenses of general intangibles in the ordinary
course of business and (b) so long as no Event of
Default has occurred and is continuing, sales or
other dispositions of obsolescent items of equipment
in the ordinary course of business consistent with
past practices.
(b) The Company shall conduct its operations in the
ordinary course of business and in compliance with all
applicable laws and regulations and, to the extent consistent
therewith, use its reasonable best efforts to preserve intact
its current business organization, keep its physical assets in
good working condition, keep available the services of its
current officers and employees and preserve its relationships
with customers, suppliers and others having business dealings
with it. Without limiting the generality of the foregoing, the
Company shall not, without the written consent of the Secured
Party:
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(i) create, incur or assume any indebtedness in excess of
$100,000 (including obligations in respect of capital leases),
except for any loans from the Export Import Bank Working Capital
Guarantee Program or any indebtedness currently outstanding under
that certain capital lease obligation in the original principal
amount of $2,790,000 from Central Vermont Economic Development
Corporation; assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or
make any loans, advances or capital contributions to, or
investments in, any other person or entity except in the ordinary
course of business; or
(ii) acquire, sell, lease, license, pledge or dispose of any
assets or property in excess of $100,000, other than purchases
and sales of assets in the ordinary course of business.
9. Insurance.
9.1. Maintenance of Insurance. The Company will maintain with
financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall
be in accordance with general practices of businesses engaged in similar
activities in similar geographic areas. Such insurance shall be in such
minimum amounts that the Company will not be deemed a co-insurer under
applicable insurance laws, regulations and policies and otherwise shall be
in such amounts, contain such terms, be in such forms and be for such
periods as may be reasonably satisfactory to the Secured Party. In
addition, all such insurance shall be payable to the Secured Party as loss
payee under a "standard" loss payee clause. Without limiting the foregoing,
the Company will (i) keep all of its physical property insured with
casualty or physical hazard insurance on an "all risks" basis, with broad
form flood and earthquake coverages and electronic data processing
coverage, with a full replacement cost endorsement and an "agreed amount"
clause in an amount equal to 100% of the full replacement cost of such
property, (ii) maintain all such workers' compensation or similar insurance
as may be required by law and (iii) maintain, in amounts equal to those
generally maintained by businesses engaged in similar activities in similar
geographic areas, general public liability insurance against claims of
bodily injury, death or property damage occurring on, in or about the
properties of the Company; business interruption insurance; and product
liability insurance.
9.2. Insurance Proceeds. The proceeds of any casualty insurance in
respect of any casualty loss of any of the Collateral shall, subject to the
rights, if any, of other parties with a prior interest in the property
covered thereby, (i) so long as no Event of Default has occurred and is
continuing and to the extent that the amount of such proceeds is less than
$10,000, be disbursed to the Company for direct application by the Company
solely to the repair or replacement of the Company's property so damaged or
destroyed and (ii) in all other circumstances, be held by the Secured Party
as cash collateral for the Obligations. The Secured Party may, at its sole
option, disburse from time to time all or any part of such proceeds so held
as cash collateral, upon such terms and conditions as
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the Secured Party may reasonably prescribe, for direct application by the
Company solely to the repair or replacement of the Company's property so
damaged or destroyed, or the Secured Party may apply all or any part of
such proceeds to the Obligations.
9.3. Notice of Cancellation, Etc. All policies of insurance shall
provide for at least 30 days prior written cancellation notice to the
Secured Party. In the event of failure by the Company to provide and
maintain insurance as herein provided, the Secured Party may, at its
option, provide such insurance and charge the amount thereof to the
Company. The Company shall furnish the Secured Party with certificates of
insurance and policies evidencing compliance with the foregoing insurance
provision.
10. Collateral Protection Expenses; Preservation of Collateral.
10.1. Expenses Incurred by Secured Party. In its discretion, the
Secured Party may discharge taxes and other encumbrances at any time levied
or placed on any of the Collateral, make repairs thereto and pay any
necessary filing fees. The Company agrees to reimburse the Secured Party on
demand for any and all expenditures so made. The Secured Party shall have
no obligation to the Company to make any such expenditures, nor shall the
making thereof relieve the Company of any default.
10.2. Secured Party's Obligations and Duties. Anything herein to the
contrary notwithstanding, the Company shall remain liable under each
contract or agreement comprised in the Collateral to be observed or
performed by the Company thereunder. The Secured Party shall not have any
obligation or liability under any such contract or agreement by reason of
or arising out of this Agreement or the receipt by the Secured Party of any
payment relating to any of the Collateral, nor shall the Secured Party be
obligated in any manner to perform any of the obligations of the Company
under or pursuant to any such contract or agreement, to make inquiry as to
the nature or sufficiency of any payment received by the Secured Party in
respect of the Collateral or as to the sufficiency of any performance by
any party under any such contract or agreement, to present or file any
claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Secured Party or
to which the Secured Party may be entitled at any time or times. The
Secured Party's sole duty with respect to the custody, safe keeping and
physical preservation of the Collateral in its possession, under (S)9-207
of the Uniform Commercial Code of the State or otherwise, shall be to deal
with such Collateral in the same manner as the Secured Party deals with
similar property for its own account.
11. Securities and Deposits. The Secured Party may at any time following
and during the continuance of an Event of Default, at its option, transfer to
itself or any nominee any securities constituting Collateral, receive any income
thereon and hold such income as additional Collateral or apply it to the
Obligations. Whether or not any Obligations are due, the Secured Party may
following and during the continuance of an Event of Default demand, ▇▇▇ for,
collect, or make any settlement or compromise which it deems desirable with
respect to the Collateral. Regardless of the adequacy of Collateral or any other
security for the Obligations, any deposits or other sums at any time credited by
or due from the Secured Party to the Company may at any time be applied to or
set off against any of the Obligations then due and owing.
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12. Notification to Account Debtors and Other Persons Obligated on
Collateral. If an Event of Default shall have occurred and be continuing, the
Company shall, at the request of the Secured Party, notify account debtors and
other persons obligated on any of the Collateral of the security interest of the
Secured Party in any account, chattel paper, general intangible, instrument or
other Collateral and that payment thereof is to be made directly to the Secured
Party or to any financial institution designated by the Secured Party as the
Secured Party's agent therefor, and the Secured Party may itself, if an Event of
Default shall have occurred and be continuing, without notice to or demand upon
the Company, so notify account debtors and other persons obligated on
Collateral. After the making of such a request or the giving of any such
notification, the Company shall hold any proceeds of collection of accounts,
chattel paper, general intangibles, instruments and other Collateral received by
the Company as trustee for the Secured Party without commingling the same with
other funds of the Company and shall turn the same over to the Secured Party in
the identical form received, together with any necessary endorsements or
assignments. Secured Party shall also have the right at any time to enforce
Company's rights against account debtors or other persons obligated on any
Collateral. The Secured Party shall apply the proceeds of collection of
accounts, chattel paper, general intangibles, instruments and other Collateral
received by the Secured Party to the Obligations, such proceeds to be
immediately entered after final payment in cash or other immediately available
funds of the items giving rise to them.
13. Power of Attorney.
13.1. Appointment and Powers of Secured Party. The Company hereby
irrevocably constitutes and appoints the Secured Party and any officer or
agent thereof, with full power of substitution, as its true and lawful
attorneys-in-fact, with full irrevocable power and authority in the place
and stead of the Company or in the Secured Party's own name, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments
that may be necessary or desirable to accomplish the purposes of this
Agreement and, without limiting the generality of the foregoing, hereby
gives said attorneys the power and right, on behalf of the Company, without
notice to or assent by the Company, to do the following:
(a) upon the occurrence and during the continuance of an Event
of Default, generally to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral in such
manner as is consistent with the Uniform Commercial Code of the State
and as fully and completely as though the Secured Party were the
absolute owner thereof for all purposes, and to do at the Company's
expense, at any time, or from time to time, all acts and things which
the Secured Party deems necessary to protect, preserve or realize upon
the Collateral and the Secured Party's security interest therein, in
order to effect the intent of this Agreement, all as fully and
effectively as the Company might do, including, without limitation,
(i) the filing and prosecuting of registration and transfer
applications with the appropriate federal or local agencies or
authorities with respect to trademarks, copyrights and patentable
inventions and processes, (ii) upon written notice to the Company, the
exercise of voting rights with respect to voting securities, which
rights may be exercised, if the Secured Party so elects,
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with a view to causing the liquidation in a commercially reasonable
manner of assets of the issuer of any such securities and (iii) the
execution, delivery and recording, in connection with any sale or
other disposition of any Collateral, of the endorsements, assignments
or other instruments of conveyance or transfer with respect to such
Collateral; and
(b) to the extent that the Company's authorization given in (S)3
is not sufficient, to file such financing statements with respect
hereto, with or without the Company's signature, or a photocopy of
this Agreement in substitution for a financing statement, as the
Secured Party may deem appropriate and to execute in the Company's
name such financing statements and amendments thereto and continuation
statements which may require the Company's signature.
13.2. Ratification by Company. To the extent permitted by law, the
Company hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with
an interest and shall be irrevocable.
13.3. No Duty on Secured Party. The powers conferred on the Secured
Party hereunder are solely to protect its interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The Secured
Party shall be accountable only for the amounts that it actually receives
as a result of the exercise of such powers, and neither it nor any of its
officers, directors, employees or agents shall be responsible to the
Company for any act or failure to act, except for the Secured Party's own
gross negligence or willful misconduct.
14. Remedies. If an Event of Default shall have occurred and be continuing,
the Secured Party may, without notice to or demand upon the Company, declare
this Agreement to be in default, and the Secured Party shall thereafter have in
any jurisdiction in which enforcement hereof is sought, in addition to all other
rights and remedies, the rights and remedies of a secured party under the
Uniform Commercial Code of the State or of any jurisdiction in which Collateral
is located, including, without limitation, the right to take possession of the
Collateral, and for that purpose the Secured Party may, so far as the Company
can give authority therefor, enter upon any premises on which the Collateral may
be situated and remove the same therefrom. The Secured Party may in its
discretion require the Company to assemble all or any part of the Collateral at
such location or locations within the jurisdiction(s) of the Company's principal
office(s) or at such other locations as the Secured Party may reasonably
designate. Unless the Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, the Secured
Party shall give to the Company at least ten (10) Business Days prior written
notice of the time and place of any public sale of Collateral or of the time
after which any private sale or any other intended disposition is to be made.
The Company hereby acknowledges that ten (10) Business Days prior written notice
of such sale or sales shall be reasonable notice. In addition, the Company
waives any and all rights that it may have to a judicial hearing in advance of
the enforcement of any of the Secured Party's rights hereunder, including,
without limitation, its right following an Event of Default, to take immediate
possession of the Collateral and to exercise its rights with respect thereto.
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15. Standards for Exercising Remedies. To the extent that applicable law
imposes duties on the Secured Party to exercise remedies in a commercially
reasonable manner, the Company acknowledges and agrees that it is not
commercially unreasonable for the Secured Party (a) to fail to incur expenses
reasonably deemed significant by the Secured Party to prepare Collateral for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (b) to fail to obtain
third party consents for access to Collateral to be disposed of, or to obtain
or, if not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (c) to fail to exercise collection remedies against account debtors
or other persons obligated on Collateral or to remove liens or encumbrances on
or any adverse claims against Collateral, (d) to exercise collection remedies
against account debtors and other persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral through publication s or media of general
circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other persons, whether or not in the same business as the Company, for
expressions of interest in acquiring all or any portion of the Collateral, (g)
to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the collateral is of a specialized nature, (h) to
dispose of Collateral by utilizing Internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets, (i) to
dispose of assets in wholesale rather than retail markets, (j) to disclaim
disposition warranties, (k) to purchase insurance or credit enhancements to
insure the Secured Party against risks of loss, collection or disposition of
Collateral or to provide to the Secured Party a guaranteed return from the
collection or disposition of Collateral, or (l) to the extent deemed appropriate
by the Secured Party, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist the Secured Party in the
collection or disposition of any of the Collateral, or to comply with any
applicable state or federal law requirements in connection with a disposition of
Collateral. The Company acknowledges that the purpose of this (S)15 is to
provide non-exhaustive indications of what actions or omissions by the Secured
Party would not be commercially unreasonable in the Secured Party's exercise of
remedies against the Collateral and that other actions or omissions by the
Secured Party shall not be deemed commercially unreasonable solely on account of
not being indicated in this (S)15. Without limitation upon the foregoing,
nothing contained in this (S)15 shall be construed to grant any rights to the
Company or to impose any duties on the Secured Party that would not have been
granted or imposed by this Agreement or by applicable law in the absence of this
(S)15.
16. No Waiver by Secured Party, Etc. The Secured Party shall not be deemed
to have waived any of its rights upon or under the Obligations or the Collateral
unless such waiver shall be in writing and signed by the Secured Party. No delay
or omission on the part of the Secured Party in exercising any right shall
operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right on any future
occasion. All rights and remedies of the Secured Party with respect to the
Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as the
Secured Party deems expedient.
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17. Suretyship Waivers by Company. The Company waives demand, notice,
protest, notice of acceptance of this Agreement, notice of loans made, Support
extended, Collateral received or delivered or other action taken in reliance
hereon and all other demands and notices of any description. With respect to
both the Obligations and the Collateral, the Company assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of or failure to perfect any security interest
in any Collateral, to the addition or release of any party or person primarily
or secondarily liable, to the acceptance of partial payment thereon and the
settlement, compromising or adjusting of any thereof, all in such manner and at
such time or times as the Secured Party may deem advisable. The Secured Party
shall have no duty as to the collection or protection of the Collateral or any
income thereon, nor as to the preservation of rights against prior parties, nor
as to the preservation of any rights pertaining thereto beyond the safe custody
thereof as set forth in (S)10.2. The Company further waives any and all other
suretyship defenses.
18. Marshalling. The Secured Party shall not be required to marshal any
present or future collateral security (including but not limited to this
Security Agreement and the Collateral) for, or other assurances of payment of,
the Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of its rights hereunder
and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights, however existing or arising.
To the extent that it lawfully may, the Company hereby agrees that it will not
invoke any law relating to the marshalling of collateral which might cause delay
in or impede the enforcement of the Secured Party's rights under this Agreement
or under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, the Company hereby irrevocably waives the benefits
of all such laws.
19. Proceeds of Dispositions; Expenses. The Company shall pay to the
Secured Party on demand any and all expenses, including reasonable attorneys'
fees and disbursements, incurred or paid by the Secured Party in protecting,
preserving or enforcing the Secured Party's rights under or in respect of any of
the Obligations or any of the Collateral. After deducting all of said expenses,
the residue of any proceeds of collection or sale of the Obligations or
Collateral shall, to the extent actually received in cash, be applied to the
payment of the Obligations in such order or preference as the Secured Party may
determine or in such order or preference as is provided in the Support
Agreement, proper allowance and provision being made for any Obligations not
then due. Upon the final payment and satisfaction in full of all of the
Obligations and after making any payments required by Sections 9-608(a)(1)(C) or
9-615(a)(3) of the Uniform Commercial Code of the State, any excess shall be
returned to the Company, and the Company shall remain liable for any deficiency
in the payment of the Obligations.
20. Overdue Amounts. Until paid, all amounts due and payable by the Company
hereunder shall be a debt secured by the Collateral and shall bear, whether
before or after judgment, interest at the rate of interest for overdue principal
set forth in the Support Agreement.
21. Governing Law; Consent to Jurisdiction. This Agreement is intended to
take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of the State.
-11-
22. Waiver of Jury Trial. THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY
SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Company waives any
right which it may have to claim or recover in any litigation referred to in the
preceding sentence any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages. The Company (i)
certifies that neither the Secured Party nor any representative, agent or
attorney of the Secured Party has represented, expressly or otherwise, that the
Secured Party would not, in the event of litigation, seek to enforce the
foregoing waivers and (ii) acknowledges that, in entering into the Security
Agreement and the Support Agreement, the Secured Party is relying upon, among
other things, the waivers and certifications contained in this (S)22.
23. Miscellaneous. The headings of each section of this Agreement are for
convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the
Company and its respective successors and assigns, and shall inure to the
benefit of the Secured Party and its successors and assigns. If any term of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity of
all other terms hereof shall in no way be affected thereby, and this Agreement
shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. The Company acknowledges
receipt of a copy of this Agreement.
[Balance of page intentionally blank; Signature page follows.]
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IN WITNESS WHEREOF, intending to be legally bound, the Company has caused
this Agreement to be duly executed as of the date first above written.
NORTHERN POWER SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Accepted
PROTON ENERGY SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
-13-
PERFECTION CERTIFICATE
(UCC Financing Statements)
The undersigned, the President and Secretary of Northern Power Systems,
Inc. (the "Company"), hereby certifies, with reference to a certain Security
Agreement dated as of May __, 2003, (terms defined in such Security Agreement
having the same meanings herein as specified therein), between the Company and
Proton Energy Systems, Inc. (the "Secured Party"), to the Secured Party as
follows:
1. Name. The exact legal name of the Company as that name appears on its
Certificate of Incorporation is as follows: Northern Power Systems, Inc.
2. Other Identifying Factors.
(a) The following is the mailing address of the Company and the address of
the Company's chief executive officer: ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) The following is the type of organization of the Company: Delaware
corporation
(c) The following is the jurisdiction of the Company's organization:
Delaware
(d) The following is the Company's state issued organizational
identification number: 2341641
3. Other Names, Etc.
(a) The following is a list of all other names (including trade names or
similar appellations) used by the Company, or any other business or
organization to which the Company became the successor by merger,
consolidation, acquisition, change in form, nature or jurisdiction of
organization or otherwise, now or at any time during the past five
years: New World Power Technology Corporation
(b) Attached hereto as Schedule 3, is the information required in (S)2 for
any other business or organization to which the Company became the
successor by merger, consolidation, acquisition, change in form,
nature or jurisdiction of organization or otherwise, now or at any
time during the past five years:
-14-
4. Other Current Locations.
(a) The following are all other locations in the United States of America
in which the Company maintains any books or records relating to any of the
Collateral consisting of accounts, instruments, chattel paper, or mobile goods:
Address County State
NONE
(b) The following are all other places of business of the Company in the
United States of America:
Address County State
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ (leased office
space)
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ (leased office
space)
Mad River Canoe Building #2 Waitsfield Vermont
(leased manufacturing space)
(c) The following are all other locations in the United States of America
where any of the Collateral consisting of inventory or equipment is located:
Address County State
CellXion Bossier City Louisiana
5031 ▇▇▇▇▇ ▇▇▇▇▇ Road
(enclosure manufacturer and point of final assembly for AGT project)
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(d) The following are the names and addresses of all persons or entities
other than the Company, such as lessees, consignees, warehousemen or
purchasers of chattel paper, which have possession or are intended to
have possession of any of the Collateral consisting of instruments,
chattel paper, inventory or equipment:
Name Mailing Address County State
Rock of Ages ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Corporation
(location of prototype NW100 wind turbine)
5. Prior Locations.
(a) Set forth below is the information required by (S)4(a) or (b) above
with respect to each location or place of business previously
maintained by the Company at any time during the past five years in a
state in which the Company has previously maintained a location or
place of business:
Address County State
NONE
(b) Set forth below is the information required by (S)4(c) or (d) above
with respect to each other location at which, or other person or entity with
which, any of the Collateral consisting of inventory or equipment has been
previously held at any time during the past twelve months:
Name Address County State
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IN WITNESS WHEREOF, we have hereunto signed this Certificate on May 22,
2003.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
-17-
Schedule 3
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Delaware corporation
Jurisdiction: Delaware
Delaware state identification number: same as current: 2341641
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