Exhibit 10.5

SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of July 19, 2006 (the “Agreement”) is by and
among SatCon Technology Corporation, a company duly organized and validly
existing under the laws of Delaware (the “Company”), the Purchasers identified
on the signature pages hereto (each, a “Purchaser” and collectively, the
“Purchasers”) and Iroquois Master Fund Ltd., as agent for the Purchasers (in
such capacity, together with its successors in such capacity, the “Agent”).

The Company and each of the Purchasers are parties to a Securities Purchase
Agreement dated as of July 19, 2006 (as modified and supplemented and in effect
from time to time, the “Purchase Agreement”), that provides, subject to the
terms and conditions thereof, for the issuance and sale by the Company to each
of the Purchasers, severally and not jointly, Notes and Warrants as more fully
described in the Purchase Agreement.

To induce each of the Purchasers to enter into the Purchase Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company has agreed to pledge and grant a security
interest in the Collateral (as hereinafter defined) as security for the Secured
Obligations (as hereinafter defined).  Accordingly, the parties hereto agree as
follows:

SECTION 1.               DEFINITIONS.  EACH CAPITALIZED TERM USED HEREIN AND NOT
OTHERWISE DEFINED SHALL HAVE THE MEANING ASSIGNED TO SUCH TERM IN THE PURCHASE
AGREEMENT.  IN ADDITION, AS USED HEREIN:

“Accounts” shall have the meaning ascribed thereto in Section 3(d) hereof.

“Business” shall mean the businesses from time to time, now or hereafter,
conducted by the Company and its Subsidiaries.

“Collateral” shall have the meaning ascribed thereto in Section 3 hereof.

“Copyright Collateral” shall mean all Copyrights, whether now owned or hereafter
acquired by the Company, that are associated with the Business.

“Copyrights” shall mean all copyrights, copyright registrations and applications
for copyright registrations, including, without limitation, all renewals and
extensions thereof, the right to recover for all past, present and future
infringements thereof, and all other rights of any kind whatsoever accruing
thereunder or pertaining thereto.

“Documents” shall have the meaning ascribed thereto in Section 3(j) hereof.

“Equipment” shall have the meaning ascribed thereto in Section 3(h) hereof.

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“Event of Default” shall have the meaning ascribed thereto in Section 8 of the
Notes.

“Excluded Collateral” shall mean the assets of the Company which secure the
Permitted Indebtedness and the assets listed on Annex 2 hereto.

“Instruments” shall have the meaning ascribed thereto in Section 3(e) hereof.

“Intellectual Property” shall mean, collectively, all Copyright Collateral, all
Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information, know-how and
trade secrets used or useful in the Business; (b) all licenses or user or other
agreements granted to the Company with respect to any of the foregoing, in each
case whether now or hereafter owned or used including, without limitation, the
licenses or other agreements with respect to the Copyright Collateral, the
Patent Collateral or the Trademark Collateral; (c) all customer lists,
identification of suppliers, data, plans, blueprints, specifications, designs,
drawings, recorded knowledge, surveys, manuals, materials standards, processing
standards, catalogs, computer and automatic machinery software and programs, and
the like pertaining to the operation by the Company of the Business; (d) all
sales data and other information relating to sales now or hereafter collected
and/or maintained by the Company that pertain to the Business; (e) all
accounting information which pertains to the Business and all media in which or
on which any of the information or knowledge or data or records which pertain to
the Business may be recorded or stored and all computer programs used for the
compilation or printout of such information, knowledge, records or data; (f) all
licenses, consents, permits, variances, certifications and approvals of
governmental agencies now or hereafter held by the Company pertaining to the
operation by the Company and its Subsidiaries of the Business; and (g) all
causes of action, claims and warranties now or hereafter owned or acquired by
the Company in respect of any of the items listed above.

“Inventory” shall have the meaning ascribed thereto in Section 3(f) hereof.

“Issuers” shall mean, collectively, the respective entities identified on Annex
1 hereto, and all other entities formed by the Company or entities in which the
Company owns or acquires any capital stock or similar interest.

 “Motor Vehicles” shall mean motor vehicles, tractors, trailers and other like
property, whether or not the title thereto is governed by a certificate of title
or ownership.

“Patent Collateral” shall mean all Patents, whether now owned or hereafter
acquired by the Company that are associated with the Business.

“Patents” shall mean all patents and patent applications, including, without
limitation, the inventions and improvements described and claimed therein
together with the reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof, all income, royalties, damages and payments now
or hereafter due and/or payable under and with respect thereto, including,
without limitation, damages and payments for past or future infringements
thereof, the right to sue for past, present and future infringements thereof,
and all rights corresponding thereto throughout the world.

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“Permitted Indebtedness” shall mean the Company’s existing indebtedness,
liabilities and obligations as disclosed on Annex 5 hereto, any future
capitalized leases, purchase money indebtedness or other indebtedness of the
Company permitted under the Purchase Agreement and the Notes.

“Permitted Liens” shall mean (i) the Company’s existing Liens as disclosed in
the Current SEC Report and Annex 6 hereto, (ii) the security interests created
by this Agreement, (iii) Liens of local or state authorities for franchise, real
estate or other like taxes, (iv) statutory Liens of landlords and liens of
carriers, warehousemen, bailees,  mechanics, materialmen and other like Liens
imposed by law, created in the ordinary course of business and for amounts which
are not more than sixty days past due, (v) Liens for taxes which are not yet due
and payable or are being contested in good faith and by appropriate proceedings,
and (vi) Liens which do not materially affect the value of the Company’s
property and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries.

“Pledged Stock” shall have the meaning ascribed thereto in Section 3(a) hereof.

“Real Estate” shall have the meaning ascribed thereto in Section 3(l) hereof.

“Secured Obligations” shall mean, collectively, the principal of and interest on
the Notes issued or issuable (as applicable) by the Company and held by the
applicable Purchaser, and all other amounts from time to time owing to such
Purchasers by the Company under the Purchase Agreement and the Notes.

 “Stock Collateral” shall mean, collectively, the Collateral described in
clauses (a) through (c) of Section 3 hereof and the proceeds of and to any such
property and, to the extent related to any such property or such proceeds, all
books, correspondence, credit files, records, invoices and other papers.

“Trademark Collateral” shall mean all Trademarks, whether now owned or hereafter
acquired by the Company, that are associated with the Business.  Notwithstanding
the foregoing, the Trademark Collateral does not and shall not include any
Trademark which would be rendered invalid, abandoned, void or unenforceable by
reason of its being included as part of the Trademark Collateral.

“Trademarks” shall mean all trade names, trademarks and service marks, logos,
trademark and service mark registrations, and applications for trademark and
service mark registrations, including, without limitation, all renewals of
trademark and service mark registrations, all rights corresponding thereto
throughout the world, the right to recover for all past, present and future
infringements thereof, all other rights of any kind whatsoever accruing
thereunder or pertaining thereto, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized by, each
such trade name, trademark and service mark.

“Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in
the State of New York from time to time.

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SECTION 2.               REPRESENTATIONS AND WARRANTIES.  THE COMPANY REPRESENTS
AND WARRANTS TO EACH OF THE PURCHASERS THAT:

A.                                       THE COMPANY IS THE SOLE BENEFICIAL
OWNER OF THE COLLATERAL AND NO LIEN EXISTS OR WILL EXIST UPON ANY COLLATERAL AT
ANY TIME (AND, WITH RESPECT TO THE STOCK COLLATERAL, NO RIGHT OR OPTION TO
ACQUIRE THE SAME EXISTS IN FAVOR OF ANY OTHER PERSON), EXCEPT FOR PERMITTED
LIENS AND THE PLEDGE AND SECURITY INTEREST IN FAVOR OF EACH OF THE PURCHASERS
CREATED OR PROVIDED FOR HEREIN, WHICH PLEDGE AND SECURITY INTEREST CONSTITUTES A
FIRST PRIORITY PERFECTED PLEDGE AND SECURITY INTEREST IN AND TO ALL OF THE
COLLATERAL (OTHER THAN INTELLECTUAL PROPERTY REGISTERED OR OTHERWISE LOCATED
OUTSIDE OF THE UNITED STATES OF AMERICA);

B.                                      THE PLEDGED STOCK DIRECTLY OR INDIRECTLY
OWNED BY THE COMPANY IN THE ENTITIES IDENTIFIED IN ANNEX 1 HERETO IS, AND ALL
OTHER PLEDGED STOCK, WHETHER ISSUED NOW OR IN THE FUTURE, WILL BE, DULY
AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE, FREE AND CLEAR OF ALL
LIENS OTHER THAN PERMITTED LIENS, AND NONE OF SUCH PLEDGED STOCK IS OR WILL BE
SUBJECT TO ANY CONTRACTUAL RESTRICTION, PREEMPTIVE AND SIMILAR RIGHTS, OR ANY
RESTRICTION UNDER THE CHARTER OR BY-LAWS OF THE RESPECTIVE ISSUERS OF SUCH
PLEDGED STOCK, UPON THE TRANSFER OF SUCH PLEDGED STOCK (EXCEPT FOR ANY SUCH
RESTRICTION CONTAINED HEREIN;

C.                                       THE PLEDGED STOCK DIRECTLY OR
INDIRECTLY OWNED BY THE COMPANY IN THE ENTITIES IDENTIFIED IN ANNEX 1 HERETO
CONSTITUTES ALL OF THE ISSUED AND OUTSTANDING SHARES OF CAPITAL STOCK OF ANY
CLASS OF SUCH ISSUERS BENEFICIALLY OWNED BY THE COMPANY ON THE DATE HEREOF
(WHETHER OR NOT REGISTERED IN THE NAME OF THE COMPANY), AND SAID ANNEX 1
CORRECTLY IDENTIFIES, AS AT THE DATE HEREOF, THE RESPECTIVE ISSUERS OF SUCH
PLEDGED STOCK;

D.                                      THE COMPANY OWNS AND POSSESSES THE RIGHT
TO USE, AND HAS DONE NOTHING TO AUTHORIZE OR ENABLE ANY OTHER PERSON TO USE, ALL
OF ITS COPYRIGHTS, PATENTS AND TRADEMARKS, AND ALL REGISTRATIONS OF ITS MATERIAL
COPYRIGHTS, PATENTS AND TRADEMARKS ARE VALID AND IN FULL FORCE AND EFFECT. 
EXCEPT AS MAY BE SET FORTH IN SAID ANNEX 3 AND EXCEPT FOR PERMITTED LIENS, THE
COMPANY OWNS AND POSSESSES THE RIGHT TO USE ALL MATERIAL COPYRIGHTS, PATENTS AND
TRADEMARKS, NECESSARY FOR THE OPERATION OF THE BUSINESS;

E.                                       TO THE COMPANY’S KNOWLEDGE, (I) EXCEPT
AS SET FORTH IN ANNEX 3 HERETO, THERE IS NO VIOLATION BY OTHERS OF ANY RIGHT OF
THE COMPANY WITH RESPECT TO ANY MATERIAL COPYRIGHTS, PATENTS OR TRADEMARKS,
RESPECTIVELY, AND (II) THE COMPANY IS NOT, IN CONNECTION WITH THE BUSINESS,
INFRINGING IN ANY RESPECT UPON ANY COPYRIGHTS, PATENTS OR TRADEMARKS OF ANY
OTHER PERSON; AND NO PROCEEDINGS HAVE BEEN INSTITUTED OR ARE PENDING AGAINST THE
COMPANY OR, TO THE COMPANY’S KNOWLEDGE, THREATENED, AND NO CLAIM AGAINST THE
COMPANY HAS BEEN RECEIVED BY THE COMPANY, ALLEGING ANY SUCH VIOLATION, EXCEPT AS
MAY BE SET FORTH IN SAID ANNEX 3, AND EXCEPT, IN EACH CASE FOR

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MATTERS WHICH SINGLY OR IN THE AGGREGATE COULD NOT REASONABLY BE EXPECTED TO
HAVE A MATERIAL ADVERSE EFFECT; AND

F.                                         THE COMPANY DOES NOT OWN ANY MATERIAL
TRADEMARKS REGISTERED IN THE UNITED STATES OF AMERICA TO WHICH THE LAST SENTENCE
OF THE DEFINITION OF TRADEMARK COLLATERAL APPLIES.

SECTION 3.               COLLATERAL.  AS COLLATERAL SECURITY FOR THE PROMPT
PAYMENT IN FULL WHEN DUE (WHETHER AT STATED MATURITY, BY ACCELERATION OR
OTHERWISE) OF THE SECURED OBLIGATIONS, THE COMPANY HEREBY PLEDGES, GRANTS,
ASSIGNS, HYPOTHECATES AND TRANSFERS TO THE AGENT, ON BEHALF OF THE PURCHASERS AS
HEREINAFTER PROVIDED, A SECURITY INTEREST IN AND LIEN UPON ALL OF THE COMPANY’S
RIGHT, TITLE AND INTEREST IN, TO AND UNDER ALL PERSONAL PROPERTY AND OTHER
ASSETS OF THE COMPANY, WHETHER NOW OWNED OR HEREAFTER ACQUIRED BY OR ARISING IN
FAVOR OF THE COMPANY, WHETHER NOW EXISTING OR HEREAFTER COMING INTO EXISTENCE,
AND REGARDLESS OF WHERE LOCATED, EXCEPT FOR THE EXCLUDED COLLATERAL (ALL BEING
COLLECTIVELY REFERRED TO HEREIN AS “COLLATERAL”), INCLUDING:

A.                                       THE COMPANY’S DIRECT OR INDIRECT
OWNERSHIP INTEREST IN THE RESPECTIVE SHARES OF CAPITAL STOCK OF THE ISSUERS AND
ALL OTHER SHARES OF CAPITAL STOCK OF WHATEVER CLASS OF THE ISSUERS, NOW OR
HEREAFTER OWNED BY THE COMPANY, TOGETHER WITH IN EACH CASE THE CERTIFICATES
EVIDENCING THE SAME (COLLECTIVELY, THE “PLEDGED STOCK”);

B.                                      ALL SHARES, SECURITIES, MONEYS OR
PROPERTY REPRESENTING A DIVIDEND ON ANY OF THE PLEDGED STOCK, OR REPRESENTING A
DISTRIBUTION OR RETURN OF CAPITAL UPON OR IN RESPECT OF THE PLEDGED STOCK, OR
RESULTING FROM A SPLIT-UP, REVISION, RECLASSIFICATION OR OTHER LIKE CHANGE OF
THE PLEDGED STOCK OR OTHERWISE RECEIVED IN EXCHANGE THEREFOR, AND ANY
SUBSCRIPTION WARRANTS, RIGHTS OR OPTIONS ISSUED TO THE HOLDERS OF, OR OTHERWISE
IN RESPECT OF, THE PLEDGED STOCK;

C.                                       WITHOUT AFFECTING THE OBLIGATIONS OF
THE COMPANY UNDER ANY PROVISION PROHIBITING SUCH ACTION HEREUNDER OR UNDER THE
PURCHASE AGREEMENT OR THE NOTES, IN THE EVENT OF ANY CONSOLIDATION OR MERGER IN
WHICH ANY ISSUER IS NOT THE SURVIVING CORPORATION, ALL SHARES OF EACH CLASS OF
THE CAPITAL STOCK OF THE SUCCESSOR CORPORATION (UNLESS SUCH SUCCESSOR
CORPORATION IS THE COMPANY ITSELF) FORMED BY OR RESULTING FROM SUCH
CONSOLIDATION OR MERGER (THE PLEDGED STOCK, TOGETHER WITH ALL OTHER
CERTIFICATES, SHARES, SECURITIES, PROPERTIES OR MONEYS AS MAY FROM TIME TO TIME
BE PLEDGED HEREUNDER PURSUANT TO CLAUSE (A) OR (B) ABOVE AND THIS CLAUSE (C)
BEING HEREIN COLLECTIVELY CALLED THE “STOCK COLLATERAL”);

D.                                      ALL ACCOUNTS AND GENERAL INTANGIBLES
(EACH AS DEFINED IN THE UNIFORM COMMERCIAL CODE) OF THE COMPANY CONSTITUTING ANY
RIGHT TO THE PAYMENT OF MONEY, INCLUDING (BUT NOT LIMITED TO) ALL MONEYS DUE AND
TO BECOME DUE TO THE COMPANY IN RESPECT OF ANY LOANS OR ADVANCES FOR THE
PURCHASE PRICE OF INVENTORY OR EQUIPMENT OR OTHER GOODS SOLD OR LEASED OR FOR
SERVICES RENDERED, ALL MONEYS DUE AND TO BECOME DUE TO THE COMPANY UNDER ANY

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GUARANTEE (INCLUDING A LETTER OF CREDIT) OF THE PURCHASE PRICE OF INVENTORY OR
EQUIPMENT SOLD BY THE COMPANY AND ALL TAX REFUNDS (SUCH ACCOUNTS, GENERAL
INTANGIBLES AND MONEYS DUE AND TO BECOME DUE BEING HEREIN CALLED COLLECTIVELY
“ACCOUNTS”);

E.                                       ALL INSTRUMENTS, CHATTEL PAPER OR
LETTERS OF CREDIT (EACH AS DEFINED IN THE UNIFORM COMMERCIAL CODE) OF THE
COMPANY EVIDENCING, REPRESENTING, ARISING FROM OR EXISTING IN RESPECT OF,
RELATING TO, SECURING OR OTHERWISE SUPPORTING THE PAYMENT OF, ANY OF THE
ACCOUNTS, INCLUDING (BUT NOT LIMITED TO) PROMISSORY NOTES, DRAFTS, BILLS OF
EXCHANGE AND TRADE ACCEPTANCES (HEREIN COLLECTIVELY CALLED “INSTRUMENTS”);

F.                                         ALL INVENTORY (AS DEFINED IN THE
UNIFORM COMMERCIAL CODE) OF THE COMPANY AND ALL GOODS OBTAINED BY THE COMPANY IN
EXCHANGE FOR SUCH INVENTORY (HEREIN COLLECTIVELY CALLED “INVENTORY”);

G.                                      ALL INTELLECTUAL PROPERTY AND ALL OTHER
ACCOUNTS OR GENERAL INTANGIBLES OF THE COMPANY NOT CONSTITUTING INTELLECTUAL
PROPERTY OR ACCOUNTS;

H.                                      ALL EQUIPMENT (AS DEFINED IN THE UNIFORM
COMMERCIAL CODE) OF THE COMPANY (HEREIN COLLECTIVELY CALLED “EQUIPMENT”);

I.                                          EACH CONTRACT AND OTHER AGREEMENT OF
THE COMPANY RELATING TO THE SALE OR OTHER DISPOSITION OF INVENTORY OR EQUIPMENT;

J.                                          ALL DOCUMENTS OF TITLE (AS DEFINED
IN THE UNIFORM COMMERCIAL CODE) OR OTHER RECEIPTS OF THE COMPANY COVERING,
EVIDENCING OR REPRESENTING INVENTORY OR EQUIPMENT (HEREIN COLLECTIVELY CALLED
“DOCUMENTS”);

K.                                       ALL RIGHTS, CLAIMS AND BENEFITS OF THE
COMPANY AGAINST ANY PERSON ARISING OUT OF, RELATING TO OR IN CONNECTION WITH
INVENTORY OR EQUIPMENT PURCHASED BY THE COMPANY, INCLUDING, WITHOUT LIMITATION,
ANY SUCH RIGHTS, CLAIMS OR BENEFITS AGAINST ANY PERSON STORING OR TRANSPORTING
SUCH INVENTORY OR EQUIPMENT;

L.                                          ALL ESTATES IN LAND TOGETHER WITH
ALL IMPROVEMENTS AND OTHER STRUCTURES NOW OR HEREAFTER SITUATED THEREON,
TOGETHER WITH ALL RIGHTS, PRIVILEGES, TENEMENTS, HEREDITAMENTS, APPURTENANCES,
EASEMENTS, INCLUDING, BUT NOT LIMITED TO, RIGHTS AND EASEMENTS FOR ACCESS AND
EGRESS AND UTILITY CONNECTIONS, AND OTHER RIGHTS NOW OR HEREAFTER APPURTENANT
THERETO (“REAL ESTATE”);

M.                                    ALL OTHER TANGIBLE OR INTANGIBLE PROPERTY
OF THE COMPANY, INCLUDING, WITHOUT LIMITATION, ALL PROCEEDS, PRODUCTS AND
ACCESSIONS OF AND TO ANY OF THE PROPERTY OF THE COMPANY DESCRIBED IN CLAUSES (A)
THROUGH (L) ABOVE IN THIS SECTION 3 (INCLUDING, WITHOUT LIMITATION, ANY PROCEEDS
OF INSURANCE THEREON), AND, TO THE EXTENT RELATED TO ANY PROPERTY DESCRIBED IN
SAID CLAUSES OR SUCH PROCEEDS, PRODUCTS AND ACCESSIONS, ALL BOOKS,

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CORRESPONDENCE, CREDIT FILES, RECORDS, INVOICES AND OTHER PAPERS, INCLUDING
WITHOUT LIMITATION ALL TAPES, CARDS, COMPUTER RUNS AND OTHER PAPERS AND
DOCUMENTS IN THE POSSESSION OR UNDER THE CONTROL OF THE COMPANY OR ANY COMPUTER
BUREAU OR SERVICE COMPANY FROM TIME TO TIME ACTING FOR THE COMPANY.

SECTION 4.               FURTHER ASSURANCES; REMEDIES.  IN FURTHERANCE OF THE
GRANT OF THE PLEDGE AND SECURITY INTEREST PURSUANT TO SECTION 3 HEREOF, THE
COMPANY HEREBY AGREES WITH THE AGENT AND EACH OF THE PURCHASERS AS FOLLOWS:

4.01         DELIVERY AND OTHER PERFECTION.  THE COMPANY SHALL:

A.                                       IF ANY OF THE ABOVE-DESCRIBED SHARES,
SECURITIES, MONIES OR PROPERTY REQUIRED TO BE PLEDGED BY THE COMPANY UNDER
CLAUSES (A), (B) AND (C) OF SECTION 3 HEREOF ARE RECEIVED BY THE COMPANY,
FORTHWITH EITHER (X) TRANSFER AND DELIVER TO THE AGENT SUCH SHARES OR SECURITIES
SO RECEIVED BY THE COMPANY (TOGETHER WITH THE CERTIFICATES FOR ANY SUCH SHARES
AND SECURITIES DULY ENDORSED IN BLANK OR ACCOMPANIED BY UNDATED STOCK POWERS
DULY EXECUTED IN BLANK) ALL OF WHICH THEREAFTER SHALL BE HELD BY THE AGENT,
PURSUANT TO THE TERMS OF THIS AGREEMENT, AS PART OF THE COLLATERAL OR (Y) TAKE
SUCH OTHER ACTION AS THE AGENT SHALL REASONABLY DEEM NECESSARY OR APPROPRIATE TO
DULY RECORD THE LIEN CREATED HEREUNDER IN SUCH SHARES, SECURITIES, MONIES OR
PROPERTY REFERRED TO IN SAID CLAUSES (A), (B) AND (C) OF SECTION 3;

B.                                      DELIVER AND PLEDGE TO THE AGENT, AT THE
AGENT’S REQUEST, ANY AND ALL INSTRUMENTS, ENDORSED AND/OR ACCOMPANIED BY SUCH
INSTRUMENTS OF ASSIGNMENT AND TRANSFER IN SUCH FORM AND SUBSTANCE AS THE AGENT
MAY REQUEST; PROVIDED, THAT SO LONG AS NO EVENT OF DEFAULT SHALL HAVE OCCURRED
AND BE CONTINUING, THE COMPANY MAY RETAIN FOR COLLECTION IN THE ORDINARY COURSE
ANY INSTRUMENTS RECEIVED BY IT IN THE ORDINARY COURSE OF BUSINESS AND THE AGENT
SHALL, PROMPTLY UPON REQUEST OF THE COMPANY, MAKE APPROPRIATE ARRANGEMENTS FOR
MAKING ANY OTHER INSTRUMENT PLEDGED BY THE COMPANY AVAILABLE TO IT FOR PURPOSES
OF PRESENTATION, COLLECTION OR RENEWAL (ANY SUCH ARRANGEMENT TO BE EFFECTED, TO
THE EXTENT DEEMED APPROPRIATE BY THE AGENT, AGAINST TRUST RECEIPT OR LIKE
DOCUMENT);

C.                                       GIVE, EXECUTE, DELIVER, FILE AND/OR
RECORD ANY FINANCING STATEMENT, NOTICE, INSTRUMENT, DOCUMENT, AGREEMENT OR OTHER
PAPERS THAT MAY BE NECESSARY (IN THE REASONABLE JUDGMENT OF THE AGENT) TO
CREATE, PRESERVE, PERFECT OR VALIDATE ANY SECURITY INTEREST GRANTED PURSUANT
HERETO OR TO ENABLE THE AGENT TO EXERCISE AND ENFORCE ITS RIGHTS HEREUNDER WITH
RESPECT TO SUCH SECURITY INTEREST, INCLUDING, WITHOUT LIMITATION, CAUSING ANY OR
ALL OF THE STOCK COLLATERAL TO BE TRANSFERRED OF RECORD INTO THE NAME OF THE
AGENT OR ITS NOMINEE (AND THE AGENT AGREES THAT IF ANY STOCK COLLATERAL IS
TRANSFERRED INTO ITS NAME OR THE NAME OF ITS NOMINEE, THE AGENT WILL THEREAFTER
PROMPTLY GIVE TO THE COMPANY COPIES OF ANY NOTICES AND

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COMMUNICATIONS RECEIVED BY IT WITH RESPECT TO THE STOCK COLLATERAL), PROVIDED
THAT NOTICES TO ACCOUNT DEBTORS IN RESPECT OF ANY ACCOUNTS OR INSTRUMENTS SHALL
BE SUBJECT TO THE PROVISIONS OF SECTION 4.09 BELOW;

D.                                      UPON THE ACQUISITION AFTER THE DATE
HEREOF BY THE COMPANY OF ANY EQUIPMENT COVERED BY A CERTIFICATE OF TITLE OR
OWNERSHIP CAUSE THE AGENT TO BE LISTED AS THE LIENHOLDER ON SUCH CERTIFICATE OF
TITLE AND WITHIN 120 DAYS OF THE ACQUISITION THEREOF DELIVER EVIDENCE OF THE
SAME TO THE AGENT;

E.                                       KEEP ACCURATE BOOKS AND RECORDS
RELATING TO THE COLLATERAL, AND STAMP OR OTHERWISE MARK SUCH BOOKS AND RECORDS
IN SUCH MANNER AS THE AGENT MAY REASONABLY REQUIRE IN ORDER TO REFLECT THE
SECURITY INTERESTS GRANTED BY THIS AGREEMENT;

F.                                         FURNISH TO THE AGENT FROM TIME TO
TIME (BUT, UNLESS AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, NO
MORE FREQUENTLY THAN QUARTERLY) STATEMENTS AND SCHEDULES FURTHER IDENTIFYING AND
DESCRIBING THE COPYRIGHT COLLATERAL, THE PATENT COLLATERAL AND THE TRADEMARK
COLLATERAL, RESPECTIVELY, AND SUCH OTHER REPORTS IN CONNECTION WITH THE
COPYRIGHT COLLATERAL, THE PATENT COLLATERAL AND THE TRADEMARK COLLATERAL, AS THE
AGENT MAY REASONABLY REQUEST, ALL IN REASONABLE DETAIL;

G.                                      PERMIT REPRESENTATIVES OF THE AGENT,
UPON REASONABLE NOTICE, AT ANY TIME DURING NORMAL BUSINESS HOURS TO INSPECT AND
MAKE ABSTRACTS FROM ITS BOOKS AND RECORDS PERTAINING TO THE COLLATERAL, AND
PERMIT REPRESENTATIVES OF THE AGENT TO BE PRESENT AT THE COMPANY’S PLACE OF
BUSINESS TO RECEIVE COPIES OF ALL COMMUNICATIONS AND REMITTANCES RELATING TO THE
COLLATERAL, AND FORWARD COPIES OF ANY NOTICES OR COMMUNICATIONS BY THE COMPANY
WITH RESPECT TO THE COLLATERAL, ALL IN SUCH MANNER AS THE AGENT MAY REASONABLY
REQUIRE; AND

H.                                      UPON THE OCCURRENCE AND DURING THE
CONTINUANCE OF ANY EVENT OF DEFAULT, UPON REQUEST OF THE AGENT, PROMPTLY NOTIFY
EACH ACCOUNT DEBTOR IN RESPECT OF ANY ACCOUNTS OR INSTRUMENTS THAT SUCH
COLLATERAL HAS BEEN ASSIGNED TO THE AGENT HEREUNDER, AND THAT ANY PAYMENTS DUE
OR TO BECOME DUE IN RESPECT OF SUCH COLLATERAL ARE TO BE MADE DIRECTLY TO THE
AGENT.

4.02         OTHER FINANCING STATEMENTS AND LIENS.  EXCEPT WITH RESPECT TO
PERMITTED INDEBTEDNESS, PERMITTED LIENS OR AS OTHERWISE PERMITTED UNDER SCHEDULE
3.1(A) OF THE PURCHASE AGREEMENT, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
AGENT, THE COMPANY SHALL NOT FILE OR SUFFER TO BE ON FILE, OR AUTHORIZE OR
PERMIT TO BE FILED OR TO BE ON FILE, IN ANY JURISDICTION, ANY FINANCING
STATEMENT OR LIKE INSTRUMENT WITH RESPECT TO THE COLLATERAL IN WHICH THE AGENT
IS NOT NAMED AS THE SOLE SECURED PARTY FOR THE BENEFIT OF EACH OF THE
PURCHASERS.

4.03         PRESERVATION OF RIGHTS.  THE AGENT SHALL NOT BE REQUIRED TO TAKE
STEPS NECESSARY TO PRESERVE ANY RIGHTS AGAINST PRIOR PARTIES TO ANY OF THE
COLLATERAL.

4.04         SPECIAL PROVISIONS RELATING TO CERTAIN COLLATERAL.

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A.                                       STOCK COLLATERAL.

(1)                                  THE COMPANY WILL CAUSE THE STOCK COLLATERAL
TO CONSTITUTE AT ALL TIMES 100% OF THE TOTAL NUMBER OF SHARES OF EACH CLASS OF
CAPITAL STOCK OF EACH ISSUER THEN OUTSTANDING THAT IS OWNED DIRECTLY OR
INDIRECTLY BY THE COMPANY.

(2)                                  SO LONG AS NO EVENT OF DEFAULT SHALL HAVE
OCCURRED AND BE CONTINUING, THE COMPANY SHALL HAVE THE RIGHT TO EXERCISE ALL
VOTING, CONSENSUAL AND OTHER POWERS OF OWNERSHIP PERTAINING TO THE STOCK
COLLATERAL FOR ALL PURPOSES NOT INCONSISTENT WITH THE TERMS OF THIS AGREEMENT,
THE PURCHASE AGREEMENT, THE NOTES OR ANY OTHER INSTRUMENT OR AGREEMENT REFERRED
TO HEREIN OR THEREIN, PROVIDED THAT THE COMPANY AGREES THAT IT WILL NOT VOTE THE
STOCK COLLATERAL IN ANY MANNER THAT IS INCONSISTENT WITH THE TERMS OF THIS
AGREEMENT, THE PURCHASE AGREEMENT, THE NOTES OR ANY SUCH OTHER INSTRUMENT OR
AGREEMENT; AND THE AGENT SHALL EXECUTE AND DELIVER TO THE COMPANY OR CAUSE TO BE
EXECUTED AND DELIVERED TO THE COMPANY ALL SUCH PROXIES, POWERS OF ATTORNEY,
DIVIDEND AND OTHER ORDERS, AND ALL SUCH INSTRUMENTS, WITHOUT RECOURSE, AS THE
COMPANY MAY REASONABLY REQUEST FOR THE PURPOSE OF ENABLING THE COMPANY TO
EXERCISE THE RIGHTS AND POWERS WHICH IT IS ENTITLED TO EXERCISE PURSUANT TO THIS
SECTION 4.04(A)(2).

(3)                                  UNLESS AND UNTIL AN EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING, THE COMPANY SHALL BE ENTITLED TO RECEIVE AND RETAIN
ANY DIVIDENDS ON THE STOCK COLLATERAL PAID IN CASH OUT OF EARNED SURPLUS.

(4)                                  IF ANY EVENT OF DEFAULT SHALL HAVE
OCCURRED, THEN SO LONG AS SUCH EVENT OF DEFAULT SHALL CONTINUE, AND WHETHER OR
NOT THE AGENT EXERCISES ANY AVAILABLE RIGHT TO DECLARE ANY SECURED OBLIGATIONS
DUE AND PAYABLE OR SEEKS OR PURSUES ANY OTHER RELIEF OR REMEDY AVAILABLE TO IT
UNDER APPLICABLE LAW OR UNDER THIS AGREEMENT, THE PURCHASE AGREEMENT, THE NOTES
OR ANY OTHER AGREEMENT RELATING TO SUCH SECURED OBLIGATIONS, ALL DIVIDENDS AND
OTHER DISTRIBUTIONS ON THE STOCK COLLATERAL SHALL BE PAID DIRECTLY TO THE AGENT
AND RETAINED BY IT AS PART OF THE STOCK COLLATERAL, SUBJECT TO THE TERMS OF THIS
AGREEMENT, AND, IF THE AGENT SHALL SO REQUEST IN WRITING, THE COMPANY AGREES TO
EXECUTE AND DELIVER TO THE AGENT APPROPRIATE ADDITIONAL DIVIDEND, DISTRIBUTION
AND OTHER ORDERS AND DOCUMENTS TO THAT END, PROVIDED THAT IF SUCH EVENT OF
DEFAULT IS CURED, ANY SUCH DIVIDEND OR DISTRIBUTION THERETOFORE PAID TO THE
AGENT SHALL, UPON REQUEST OF THE COMPANY (EXCEPT TO THE EXTENT THERETOFORE
APPLIED TO THE SECURED OBLIGATIONS) BE RETURNED BY THE AGENT TO THE COMPANY.

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B.                                      INTELLECTUAL PROPERTY.

(1)                                  FOR THE PURPOSE OF ENABLING THE AGENT TO
EXERCISE RIGHTS AND REMEDIES UNDER SECTION 4.05 HEREOF AT SUCH TIME AS THE AGENT
SHALL BE LAWFULLY ENTITLED TO EXERCISE SUCH RIGHTS AND REMEDIES, AND FOR NO
OTHER PURPOSE, THE COMPANY HEREBY GRANTS TO THE AGENT, TO THE EXTENT ASSIGNABLE,
AN IRREVOCABLE, NON-EXCLUSIVE LICENSE (EXERCISABLE WITHOUT PAYMENT OF ROYALTY OR
OTHER COMPENSATION TO THE COMPANY) TO USE, ASSIGN, LICENSE OR SUBLICENSE ANY OF
THE INTELLECTUAL PROPERTY (OTHER THAN THE TRADEMARK COLLATERAL OR GOODWILL
ASSOCIATED THEREWITH) NOW OWNED OR HEREAFTER ACQUIRED BY THE COMPANY, WHEREVER
THE SAME MAY BE LOCATED, INCLUDING IN SUCH LICENSE REASONABLE ACCESS TO ALL
MEDIA IN WHICH ANY OF THE LICENSED ITEMS MAY BE RECORDED OR STORED AND TO ALL
COMPUTER PROGRAMS USED FOR THE COMPILATION OR PRINTOUT THEREOF.

(2)                                  NOTWITHSTANDING ANYTHING CONTAINED HEREIN
TO THE CONTRARY, SO LONG AS NO EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE
CONTINUING, THE COMPANY WILL BE PERMITTED TO EXPLOIT, USE, ENJOY, PROTECT,
LICENSE, SUBLICENSE, ASSIGN, SELL, DISPOSE OF OR TAKE OTHER ACTIONS WITH RESPECT
TO THE INTELLECTUAL PROPERTY IN THE ORDINARY COURSE OF THE BUSINESS OF THE
COMPANY.  IN FURTHERANCE OF THE FOREGOING, UNLESS AN EVENT OF DEFAULT SHALL HAVE
OCCURRED AND IS CONTINUING, THE AGENT SHALL FROM TIME TO TIME, UPON THE REQUEST
OF THE COMPANY, EXECUTE AND DELIVER ANY INSTRUMENTS, CERTIFICATES OR OTHER
DOCUMENTS, IN THE FORM SO REQUESTED, WHICH THE COMPANY SHALL HAVE CERTIFIED ARE
APPROPRIATE (IN ITS JUDGMENT) TO ALLOW IT TO TAKE ANY ACTION PERMITTED ABOVE
(INCLUDING RELINQUISHMENT OF THE LICENSE PROVIDED PURSUANT TO CLAUSE (1)
IMMEDIATELY ABOVE AS TO ANY SPECIFIC INTELLECTUAL PROPERTY).  FURTHER, UPON THE
PAYMENT IN FULL OF ALL OF THE SECURED OBLIGATIONS OR EARLIER EXPIRATION OF THIS
AGREEMENT OR RELEASE OF THE COLLATERAL, THE AGENT SHALL GRANT BACK TO THE
COMPANY THE LICENSE GRANTED PURSUANT TO CLAUSE (1) IMMEDIATELY ABOVE.  THE
EXERCISE OF RIGHTS AND REMEDIES UNDER SECTION 4.05 HEREOF BY THE AGENT SHALL NOT
TERMINATE THE RIGHTS OF THE HOLDERS OF ANY LICENSES OR SUBLICENSES THERETOFORE
GRANTED BY THE COMPANY IN ACCORDANCE WITH THE FIRST SENTENCE OF THIS CLAUSE (2).

4.05         EVENTS OF DEFAULT, ETC.  DURING THE PERIOD DURING WHICH AN EVENT OF
DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING:

A.                                       THE COMPANY SHALL, AT THE REQUEST OF
THE AGENT, ASSEMBLE THE COLLATERAL OWNED BY IT AT SUCH PLACE OR PLACES,
REASONABLY CONVENIENT TO BOTH THE AGENT AND THE COMPANY, DESIGNATED IN ITS
REQUEST;

--------------------------------------------------------------------------------

 

B.                                      THE AGENT MAY MAKE ANY REASONABLE
COMPROMISE OR SETTLEMENT DEEMED DESIRABLE WITH RESPECT TO ANY OF THE COLLATERAL
AND MAY EXTEND THE TIME OF PAYMENT, ARRANGE FOR PAYMENT IN INSTALLMENTS, OR
OTHERWISE MODIFY THE TERMS OF, ANY OF THE COLLATERAL;

C.                                       THE AGENT SHALL HAVE ALL OF THE RIGHTS
AND REMEDIES WITH RESPECT TO THE COLLATERAL OF A SECURED PARTY UNDER THE UNIFORM
COMMERCIAL CODE (WHETHER OR NOT SAID CODE IS IN EFFECT IN THE JURISDICTION WHERE
THE RIGHTS AND REMEDIES ARE ASSERTED) AND SUCH ADDITIONAL RIGHTS AND REMEDIES TO
WHICH A SECURED PARTY IS ENTITLED UNDER THE LAWS IN EFFECT IN ANY JURISDICTION
WHERE ANY RIGHTS AND REMEDIES HEREUNDER MAY BE ASSERTED, INCLUDING, WITHOUT
LIMITATION, THE RIGHT, TO THE MAXIMUM EXTENT PERMITTED BY LAW, TO EXERCISE ALL
VOTING, CONSENSUAL AND OTHER POWERS OF OWNERSHIP PERTAINING TO THE COLLATERAL AS
IF THE AGENT WERE THE SOLE AND ABSOLUTE OWNER THEREOF (AND THE COMPANY AGREES TO
TAKE ALL SUCH ACTION AS MAY BE APPROPRIATE TO GIVE EFFECT TO SUCH RIGHT);

D.                                      THE AGENT IN ITS DISCRETION MAY, IN ITS
NAME OR IN THE NAME OF THE COMPANY OR OTHERWISE, DEMAND, SUE FOR, COLLECT OR
RECEIVE ANY MONEY OR PROPERTY AT ANY TIME PAYABLE OR RECEIVABLE ON ACCOUNT OF OR
IN EXCHANGE FOR ANY OF THE COLLATERAL, BUT SHALL BE UNDER NO OBLIGATION TO DO
SO; AND

E.                                       THE AGENT MAY, UPON 10 BUSINESS DAYS,
PRIOR WRITTEN NOTICE TO THE COMPANY OF THE TIME AND PLACE, WITH RESPECT TO THE
COLLATERAL OR ANY PART THEREOF WHICH SHALL THEN BE OR SHALL THEREAFTER COME INTO
THE POSSESSION, CUSTODY OR CONTROL OF THE AGENT, OR ANY OF ITS RESPECTIVE
AGENTS, SELL, LEASE, ASSIGN OR OTHERWISE DISPOSE OF ALL OR ANY OF SUCH
COLLATERAL, AT SUCH PLACE OR PLACES AS THE AGENT DEEMS BEST, AND FOR CASH OR ON
CREDIT OR FOR FUTURE DELIVERY (WITHOUT THEREBY ASSUMING ANY CREDIT RISK), AT
PUBLIC OR PRIVATE SALE, WITHOUT DEMAND OF PERFORMANCE OR NOTICE OF INTENTION TO
EFFECT ANY SUCH DISPOSITION OR OF TIME OR PLACE THEREOF (EXCEPT SUCH NOTICE AS
IS REQUIRED ABOVE OR BY APPLICABLE STATUTE AND CANNOT BE WAIVED) AND THE AGENT
OR ANYONE ELSE MAY BE THE PURCHASER, LESSEE, ASSIGNEE OR RECIPIENT OF ANY OR ALL
OF THE COLLATERAL SO DISPOSED OF AT ANY PUBLIC SALE (OR, TO THE EXTENT PERMITTED
BY LAW, AT ANY PRIVATE SALE), AND THEREAFTER HOLD THE SAME ABSOLUTELY, FREE FROM
ANY CLAIM OR RIGHT OF WHATSOEVER KIND, INCLUDING ANY RIGHT OR EQUITY OF
REDEMPTION (STATUTORY OR OTHERWISE), OF THE COMPANY, ANY SUCH DEMAND, NOTICE OR
RIGHT AND EQUITY BEING HEREBY EXPRESSLY WAIVED AND RELEASED.  IN THE EVENT OF
ANY SALE, ASSIGNMENT, OR OTHER DISPOSITION OF ANY OF THE TRADEMARK COLLATERAL,
THE GOODWILL OF THE BUSINESS CONNECTED WITH AND SYMBOLIZED BY THE TRADEMARK
COLLATERAL SUBJECT TO SUCH DISPOSITION SHALL BE INCLUDED, AND THE COMPANY SHALL
SUPPLY TO THE AGENT OR ITS DESIGNEE, FOR INCLUSION IN SUCH SALE, ASSIGNMENT OR
OTHER DISPOSITION, ALL INTELLECTUAL PROPERTY RELATING TO SUCH TRADEMARK
COLLATERAL.  THE AGENT MAY, WITHOUT NOTICE OR PUBLICATION, ADJOURN ANY PUBLIC OR
PRIVATE SALE OR CAUSE THE SAME TO BE ADJOURNED FROM TIME TO TIME

--------------------------------------------------------------------------------

 

BY ANNOUNCEMENT AT THE TIME AND PLACE FIXED FOR THE SALE, AND SUCH SALE MAY BE
MADE AT ANY TIME OR PLACE TO WHICH THE SAME MAY BE SO ADJOURNED.

The proceeds of each collection, sale or other disposition under this Section
4.05, including by virtue of the exercise of the license granted to the Agent in
Section 4.04(b)(1) hereof, shall be applied in accordance with Section 4.09
hereof.

The Company recognizes that, by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, and applicable state securities laws, the
Agent may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof.  The Company acknowledges that any such
private sales to an unrelated third party in an arm’s length transaction may be
at prices and on terms less favorable to the Agent than those obtainable through
a public sale without such restrictions, and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that the Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective Issuer
thereof to register it for public sale.

4.06         DEFICIENCY.  IF THE PROCEEDS OF SALE, COLLECTION OR OTHER
REALIZATION OF OR UPON THE COLLATERAL PURSUANT TO SECTION 4.05 HEREOF ARE
INSUFFICIENT TO COVER THE COSTS AND EXPENSES OF SUCH REALIZATION AND THE PAYMENT
IN FULL OF THE SECURED OBLIGATIONS, THE COMPANY SHALL REMAIN LIABLE FOR ANY
DEFICIENCY.

4.07         REMOVALS, ETC.  WITHOUT AT LEAST 30 DAYS’ PRIOR WRITTEN NOTICE TO
THE AGENT OR UNLESS OTHERWISE REQUIRED BY LAW, THE COMPANY SHALL NOT (I)
MAINTAIN ANY OF ITS BOOKS OR RECORDS WITH RESPECT TO THE COLLATERAL AT ANY
OFFICE OR MAINTAIN ITS CHIEF EXECUTIVE OFFICE OR ITS PRINCIPAL PLACE OF BUSINESS
AT ANY PLACE, OR PERMIT ANY INVENTORY OR EQUIPMENT TO BE LOCATED ANYWHERE OTHER
THAN AT THE ADDRESS INDICATED FOR THE COMPANY IN SECTION 7.4 OF THE PURCHASE
AGREEMENT OR AT ONE OF THE LOCATIONS IDENTIFIED IN ANNEX 4 HERETO OR IN TRANSIT
FROM ONE OF SUCH LOCATIONS TO ANOTHER OR (II) CHANGE ITS CORPORATE NAME, OR THE
NAME UNDER WHICH IT DOES BUSINESS, FROM THE NAME SHOWN ON THE SIGNATURE PAGE
HERETO.

4.08         PRIVATE SALE.  THE AGENT SHALL INCUR NO LIABILITY AS A RESULT OF
THE SALE OF THE COLLATERAL, OR ANY PART THEREOF, AT ANY PRIVATE SALE TO AN
UNRELATED THIRD PARTY IN AN ARM’S LENGTH TRANSACTION PURSUANT TO SECTION 4.05
HEREOF CONDUCTED IN A COMMERCIALLY REASONABLE MANNER.  THE COMPANY HEREBY WAIVES
ANY CLAIMS AGAINST THE AGENT ARISING BY REASON OF THE FACT THAT THE PRICE AT
WHICH THE COLLATERAL MAY HAVE BEEN SOLD AT SUCH A PRIVATE SALE WAS LESS THAN THE
PRICE WHICH MIGHT HAVE BEEN OBTAINED AT A PUBLIC SALE OR WAS LESS THAN THE
AGGREGATE AMOUNT OF THE SECURED OBLIGATIONS, EVEN IF THE AGENT ACCEPTS THE FIRST
OFFER RECEIVED AND DOES NOT OFFER THE COLLATERAL TO MORE THAN ONE OFFEREE.

4.09         APPLICATION OF PROCEEDS.  EXCEPT AS OTHERWISE HEREIN EXPRESSLY
PROVIDED, THE PROCEEDS OF ANY COLLECTION, SALE OR OTHER REALIZATION OF ALL OR
ANY PART OF THE COLLATERAL PURSUANT HERETO, AND ANY OTHER CASH AT THE TIME HELD
BY THE AGENT UNDER THIS SECTION 4, SHALL BE APPLIED BY THE AGENT:

--------------------------------------------------------------------------------

 

First, to the payment of the costs and expenses of such collection, sale or
other realization, including reasonable out-of-pocket costs and expenses of the
Agent and the fees and expenses of its agents and counsel, and all expenses, and
advances made or incurred by the Agent in connection therewith;

Next, to the payment in full of the Secured Obligations in each case equally and
ratably in accordance with the respective amounts thereof then due and owing to
each of the Purchasers; and

Finally, to the payment to the Company, or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining.

As used in this Section 4, “proceeds” of Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of the Company or any issuer of or obligor on any of the
Collateral.

4.10         ATTORNEY-IN-FACT.  WITHOUT LIMITING ANY RIGHTS OR POWERS GRANTED BY
THIS AGREEMENT TO THE AGENT WHILE NO EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING, UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF ANY EVENT OF
DEFAULT, THE AGENT IS HEREBY APPOINTED THE ATTORNEY-IN-FACT OF THE COMPANY FOR
THE PURPOSE OF CARRYING OUT THE PROVISIONS OF THIS SECTION 4 AND TAKING ANY
ACTION AND EXECUTING ANY INSTRUMENTS WHICH THE AGENT MAY DEEM NECESSARY OR
ADVISABLE TO ACCOMPLISH THE PURPOSES HEREOF, WHICH APPOINTMENT AS
ATTORNEY-IN-FACT IS IRREVOCABLE AND COUPLED WITH AN INTEREST.  WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, SO LONG AS THE PURCHASERS SHALL BE ENTITLED
UNDER THIS SECTION 4 TO MAKE COLLECTIONS IN RESPECT OF THE COLLATERAL, THE AGENT
SHALL HAVE THE RIGHT AND POWER TO RECEIVE, ENDORSE AND COLLECT ALL CHECKS MADE
PAYABLE TO THE ORDER OF THE COMPANY REPRESENTING ANY DIVIDEND, PAYMENT, OR OTHER
DISTRIBUTION IN RESPECT OF THE COLLATERAL OR ANY PART THEREOF AND TO GIVE FULL
DISCHARGE FOR THE SAME.

4.11         PERFECTION.  (I) PRIOR TO OR CONCURRENTLY WITH THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE COMPANY SHALL FILE SUCH FINANCING STATEMENTS AND
OTHER DOCUMENTS IN SUCH OFFICES AS THE AGENT MAY REQUEST TO PERFECT THE SECURITY
INTERESTS GRANTED BY SECTION 3 OF THIS AGREEMENT, AND (II) AT ANY TIME REQUESTED
BY THE AGENT, THE COMPANY SHALL DELIVER TO THE AGENT ALL SHARE CERTIFICATES OF
CAPITAL STOCK DIRECTLY OR INDIRECTLY OWNED BY THE COMPANY IN THE ENTITIES
IDENTIFIED IN ANNEX 1 HERETO, ACCOMPANIED BY UNDATED STOCK POWERS DULY EXECUTED
IN BLANK.

4.12         TERMINATION.  WHEN ALL SECURED OBLIGATIONS SHALL HAVE BEEN PAID IN
FULL UNDER THE PURCHASE AGREEMENT, THIS AGREEMENT SHALL TERMINATE, AND THE AGENT
SHALL FORTHWITH CAUSE TO BE ASSIGNED, TRANSFERRED AND DELIVERED, AGAINST RECEIPT
BUT WITHOUT ANY RECOURSE, WARRANTY OR REPRESENTATION WHATSOEVER, ANY REMAINING
COLLATERAL AND MONEY RECEIVED IN RESPECT THEREOF, TO OR ON THE ORDER OF THE
COMPANY AND TO BE RELEASED AND CANCELLED ALL LICENSES AND RIGHTS REFERRED TO IN
SECTION 4.04(B)(1) HEREOF.  THE AGENT SHALL ALSO EXECUTE AND DELIVER TO THE
COMPANY UPON SUCH TERMINATION SUCH UNIFORM COMMERCIAL CODE TERMINATION
STATEMENTS, CERTIFICATES FOR TERMINATING THE LIENS ON THE MOTOR VEHICLES AND
SUCH OTHER DOCUMENTATION AS SHALL BE REASONABLY REQUESTED BY THE COMPANY TO
EFFECT THE TERMINATION AND RELEASE OF THE LIENS ON THE COLLATERAL.

--------------------------------------------------------------------------------

 

4.13         EXPENSES.  THE COMPANY AGREES TO PAY TO THE AGENT ALL OUT-OF-POCKET
EXPENSES (INCLUDING REASONABLE EXPENSES FOR LEGAL SERVICES OF EVERY KIND) OF, OR
INCIDENT TO, THE ENFORCEMENT OF ANY OF THE PROVISIONS OF THIS SECTION 4, OR
PERFORMANCE BY THE AGENT OF ANY OBLIGATIONS OF THE COMPANY IN RESPECT OF THE
COLLATERAL WHICH THE COMPANY HAS FAILED OR REFUSED TO PERFORM UPON REASONABLE
NOTICE, OR ANY ACTUAL OR ATTEMPTED SALE, OR ANY EXCHANGE, ENFORCEMENT,
COLLECTION, COMPROMISE OR SETTLEMENT IN RESPECT OF ANY OF THE COLLATERAL, AND
FOR THE CARE OF THE COLLATERAL AND DEFENDING OR ASSERTING RIGHTS AND CLAIMS OF
THE AGENT IN RESPECT THEREOF, BY LITIGATION OR OTHERWISE, INCLUDING EXPENSES OF
INSURANCE, AND ALL SUCH EXPENSES SHALL BE SECURED OBLIGATIONS TO THE AGENT
SECURED UNDER SECTION 3 HEREOF.

4.14         FURTHER ASSURANCES.  THE COMPANY AGREES THAT, FROM TIME TO TIME
UPON THE WRITTEN REQUEST OF THE AGENT, THE COMPANY WILL EXECUTE AND DELIVER SUCH
FURTHER DOCUMENTS AND DO SUCH OTHER ACTS AND THINGS AS THE AGENT MAY REASONABLY
REQUEST IN ORDER FULLY TO EFFECT THE PURPOSES OF THIS AGREEMENT.

4.15         INDEMNITY.  EACH OF THE PURCHASERS HEREBY JOINTLY AND SEVERALLY
COVENANTS AND AGREES TO REIMBURSE, INDEMNIFY AND HOLD THE AGENT HARMLESS FROM
AND AGAINST ANY AND ALL CLAIMS, ACTIONS, JUDGMENTS, DAMAGES, LOSSES,
LIABILITIES, COSTS, TRANSFER OR OTHER TAXES, AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS’ FEES AND EXPENSES) INCURRED OR SUFFERED
WITHOUT ANY BAD FAITH OR WILLFUL MISCONDUCT BY THE AGENT, ARISING OUT OF OR
INCIDENT TO THIS AGREEMENT OR THE ADMINISTRATION OF THE AGENT’S DUTIES
HEREUNDER, OR RESULTING FROM ITS ACTIONS OR INACTIONS AS AGENT.

SECTION 5.               MISCELLANEOUS.

5.01         NO WAIVER.  NO FAILURE ON THE PART OF THE AGENT OR ANY OF ITS
AGENTS TO EXERCISE, AND NO COURSE OF DEALING WITH RESPECT TO, AND NO DELAY IN
EXERCISING, ANY RIGHT, POWER OR REMEDY HEREUNDER SHALL OPERATE AS A WAIVER
THEREOF; NOR SHALL ANY SINGLE OR PARTIAL EXERCISE BY THE AGENT OR ANY OF ITS
AGENTS OF ANY RIGHT, POWER OR REMEDY HEREUNDER PRECLUDE ANY OTHER OR FURTHER
EXERCISE THEREOF OR THE EXERCISE OF ANY OTHER RIGHT, POWER OR REMEDY.  THE
REMEDIES HEREIN ARE CUMULATIVE AND ARE NOT EXCLUSIVE OF ANY REMEDIES PROVIDED BY
LAW.

5.02         GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING SECTIONS 5-1401
AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

5.03         NOTICES.  ALL NOTICES, REQUESTS, CONSENTS AND DEMANDS HEREUNDER
SHALL BE IN WRITING AND FACSIMILE (FACSIMILE CONFIRMATION REQUIRED) OR DELIVERED
TO THE INTENDED RECIPIENT AT ITS ADDRESS OR TELEX NUMBER SPECIFIED PURSUANT TO
SECTION 7.4 OF THE PURCHASE AGREEMENT AND SHALL BE DEEMED TO HAVE BEEN GIVEN AT
THE TIMES SPECIFIED IN SAID SECTION 7.4.

5.04         WAIVERS, ETC.  THE TERMS OF THIS AGREEMENT MAY BE WAIVED, ALTERED
OR AMENDED ONLY BY AN INSTRUMENT IN WRITING DULY EXECUTED BY THE COMPANY AND THE
AGENT.  ANY SUCH AMENDMENT OR WAIVER SHALL BE BINDING UPON EACH OF THE
PURCHASERS AND THE COMPANY.

5.05         SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL BE BINDING UPON AND
INURE TO THE BENEFIT OF THE RESPECTIVE SUCCESSORS AND ASSIGNS OF THE COMPANY AND
EACH OF THE

--------------------------------------------------------------------------------

 

PURCHASERS (PROVIDED, HOWEVER, THAT THE COMPANY SHALL NOT ASSIGN OR TRANSFER ITS
RIGHTS HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF THE AGENT).

5.06         COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT
AND ANY OF THE PARTIES HERETO MAY EXECUTE THIS AGREEMENT BY SIGNING ANY SUCH
COUNTERPART.

5.07         AGENT.  EACH PURCHASER AGREES TO APPOINT IROQUOIS MASTER FUND LTD.
AS ITS AGENT FOR PURPOSES OF THIS AGREEMENT.  THE AGENT MAY EMPLOY AGENTS AND
ATTORNEYS-IN-FACT IN CONNECTION HEREWITH AND SHALL NOT BE RESPONSIBLE FOR THE
NEGLIGENCE OR MISCONDUCT OF ANY SUCH AGENTS OR ATTORNEYS-IN-FACT SELECTED BY IT
IN GOOD FAITH.

5.08         SEVERABILITY.  IF ANY PROVISION HEREOF IS INVALID AND UNENFORCEABLE
IN ANY JURISDICTION, THEN, TO THE FULLEST EXTENT PERMITTED BY LAW, (I) THE OTHER
PROVISIONS HEREOF SHALL REMAIN IN FULL FORCE AND EFFECT IN SUCH JURISDICTION AND
SHALL BE LIBERALLY CONSTRUED IN FAVOR OF THE PURCHASERS IN ORDER TO CARRY OUT
THE INTENTIONS OF THE PARTIES HERETO AS NEARLY AS MAY BE POSSIBLE AND (II) THE
INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION HEREOF IN ANY JURISDICTION SHALL
NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF SUCH PROVISION IN ANY OTHER
JURISDICTION.

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed as of the day and year first above written.

COMPANY:

SATCON TECHNOLOGY CORPORATION

 

 

 

 

By:

/s/ David B. Eisenhaure

 

Name: David B. Eisenhaure

 

Title: Chief Executive Officer

 

 

 

 

By:

/s/ David E. O’Neil

 

Name: David E. O’Neil

 

Title: Vice President of Finance and Treasurer

 

 

 

AGENT:

IROQUOIS MASTER FUND LTD.

 

 

 

 

By:

/s/ Joshua Silverman

 

Name: Joshua Silverman

 

Title: Authorized Signatory

 

--------------------------------------------------------------------------------

 

PURCHASERS:

IROQUOIS MASTER FUND LTD.

 

 

 

 

By:

/s/ Joshua Silverman

 

Name: Joshua Silverman

 

Title: Authorized Signatory

 

 

--------------------------------------------------------------------------------

 

OTHER PURCHASERS:

ROCKMORE INVESTMENT MASTER FUND LTD

 

 

 

 

By:

/s/ Bruce Bernstein

 

Name: Bruce Bernstein er

 

Title: Managing Memb

 

 

 

 

HIGHBRIDGE INTERNATIONAL LLC

 

 

 

 

By:

Highbridge Capital Management, LLC

 

 

 

 

By:

 /s/ Adam J. Chill

 

Name: Adam J. Chill

 

Title: Managing Director

 

 

 

 

NITE CAPITAL LP

 

 

 

 

By:

/s/ Keith A. Goodman

 

Name: Keith A. Goodman

 

Title: Manager of the General Partner

 

 

 

 

 

RHP MASTER FUND, LTD

 

 

 

 

By:

Rock Hill Investment Management, L.P.

 

By:

RHP General Partner, LLC

 

 

 

 

By:

/s/ Wayne Bloch

 

Name: Wayne Bloch

 

Title: Managing Partner

 

 

 

 

BRISTOL INVESTMENT FUND, LTD.

 

 

 

 

By:

/s/ Paul Kessler

 

Name: Paul Kessler

 

Title: Director

 

 

--------------------------------------------------------------------------------

 

 

HUDSON BAY FUND, LP

 

 

 

 

By:

/s/ Yoav Roth

 

Name: Yoav Roth

 

Title: Principal/ Portfolio Manager

 

 

 

 

HUDSON BAY OVERSEAS FUND, LTD

 

 

 

 

By:

/s/ Yoav Roth

 

Name: Yoav Roth

 

Title: Principal/ Portfolio Manager

 

 

 

 

CAPITAL VENTURES INTERNATIONAL

 

 

 

 

By:

Heights Capital Management, Inc., its authorized agent

 

 

 

 

By:

/s/ Martin Kobinge

 

Name: Martin Kobinger

 

Title: Investment Manager

 

 

 

 

ENABLE GROWTH PARTNERS LP

 

 

 

 

By:

/s/ Brendan O’Neil

 

Name: Brendan O’Neil

 

Title: Principal and Portfolio Manager

 

 

 

 

ENABLE OPPORTUNITY PARTNERS LP

 

 

 

 

By:

/s/ Brendan O’Neil

 

Name: Brendan O’Neil

 

Title: Principal and Portfolio Manager

 

 

--------------------------------------------------------------------------------

 

 

PIERCE DIVERSIFIED STRATEGY MASTER FUND LLC, ENA

 

 

 

 

By:

/s/ Brendan O’Neil

 

Name: Brendan O’Neil

 

Title: Principal and Portfolio Manager

 

 

 

 

ALPHA CAPITAL ANSTALT

 

 

 

 

By:

/s/ Konrad Ackermann

 

Name: Konrad Ackermann r

 

Title: Directo

 

 

--------------------------------------------------------------------------------

 

ANNEX 1

ENTITIES IN WHICH THE COMPANY IS PLEDGING ITS CAPITAL STOCK

 

Approximate

 

Entity

 

Percentage Interest

 

SatCon Power Systems US

 

100

%

SatCon Power Systems, LTD

 

100

%

SatCon Electronics

 

100

%

SatCon Applied Technology

 

100

%

 

 

--------------------------------------------------------------------------------

ANNEX 2

EXCLUDED COLLATERAL

None

--------------------------------------------------------------------------------

 

ANNEX 3

EXCEPTIONS FOR COPYRIGHTS, PATENTS AND TRADEMARKS

None

--------------------------------------------------------------------------------

 

ANNEX 4

LIST OF LOCATIONS

SatCon Technology Corporation

27 DryDock Avenue

Boston, MA  02110

SatCon Applied Technology Corporation

27 DryDock Avenue

Boston, MA  02110

SatCon Applied Technology Corporation

1745A West Nursery Road

Linthicum, MD 21090

SatCon Electronics Corporation

165 Cedar Hill Street

Marlborough, MA 01753

SatCon Power Systems

7 Coppage Drive

Worcester, MA 01603

SatCon Power Systems Ltd, Canada

835 Harrington Court

Burlington, Ontario  L7N 3P3

Canada

--------------------------------------------------------------------------------

 

ANNEX 5

EXISTING INDEBTEDNESS

Indebtedness.  Set forth below are all of the Company’s liabilities as of April
1, 2006:

Current liabilities:

 

April 1, 2006

 

Line of credit

 

$

2,000,000

 

Accounts payable

 

3,251,198

 

Accrued payroll and payroll related expenses

 

1,622,344

 

Deferred revenue

 

2,431,142

 

Other accrued expenses

 

1,802,711

 

Intercompany transactions.

 

—

 

Accrued restructuring costs.

 

—

 

Short term portion of long term debt

 

158,269

 

Total current liabilities.

 

$

11,265,664

 

Long term liabilities:

 

 

 

Long term debt

 

76,416

 

Other long-term liabilities

 

333,004

 

Subordinated convertible debentures

 

—

 

Total long term liabilities

 

$

409,420

 

 

In addition the following indebtedness exists as of April 1, 2006:

We lease equipment and office space under non-cancelable capital and operating
leases. Future minimum rental payments, as of April 1, 2006, under the capital
and operating leases with non-cancelable terms are as follows:

Fiscal Years ended September 30,

 

Capital Leases

 

Operating Leases

 

 

 

 

 

 

 

2006

 

$

83,794

 

$

660,360

 

2007

 

143,590

 

1,337,019

 

2008

 

—

 

1,288,074

 

2009

 

—

 

1,250,992

 

2010

 

—

 

495,796

 

Thereafter

 

—

 

227,726

 

Total

 

$

227,384

 

$

5,259,967

 

 

In addition, from time to time, the Company has trade accounts payable balances
that are aged over 60 days. Currently such trade account payable balances total
approximately $211,000 at July 12, 2006.

All amounts outstanding under the Silicon Valley Bank Credit Agreement will be
paid down prior to closing and the agreement will be terminated.

--------------------------------------------------------------------------------

 

ANNEX 6

EXISTING LIENS

None (subsequent to pay down of amounts outstanding and termination of Silicon
Valley Bank Agreement)

 

--------------------------------------------------------------------------------