Exhibit 10.1


 


Execution Copy


 


NOTE PURCHASE AGREEMENT


 


among


 


SATCON TECHNOLOGY CORPORATION


 


and


 


THE PURCHASERS NAMED HEREIN


 


October 19, 2007


 

















 


Table of Contents


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I ISSUANCE
  AND SALE

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
   

  	
  Issuance and Sale of the Tranche
  1 Notes

  	
   

  	
  1

  
	
  Section 1.2

  	
   

  	
  Issuance and Sale of the
  Tranche 2 Notes

  	
   

  	
  2

  
	
  Section 1.3

  	
   

  	
  Payment Terms

  	
   

  	
  2

  
	
  Section 1.4

  	
   

  	
  Use of Proceeds

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II CONDITIONS
  TO CLOSING

  	
   

  	
  3

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Conditions to Each Party’s
  Obligations

  	
   

  	
  3

  
	
  Section 2.2

  	
   

  	
  Conditions to Obligations
  of the Purchasers at the Tranche 1 Closing

  	
   

  	
  3

  
	
  Section 2.3

  	
   

  	
  Conditions to Obligations
  of the Purchasers at the Tranche 2 Closing

  	
   

  	
  5

  
	
  Section 2.4

  	
   

  	
  Conditions to Obligations
  of the Company at Each Closing

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Corporate Existence and
  Power

  	
   

  	
  7

  
	
  Section 3.2

  	
   

  	
  Authorization; No
  Contravention

  	
   

  	
  7

  
	
  Section 3.3

  	
   

  	
  Governmental
  Authorization; Third Party Consents

  	
   

  	
  8

  
	
  Section 3.4

  	
   

  	
  Binding Effect

  	
   

  	
  8

  
	
  Section 3.5

  	
   

  	
  Litigation

  	
   

  	
  8

  
	
  Section 3.6

  	
   

  	
  Compliance with Laws

  	
   

  	
  8

  
	
  Section 3.7

  	
   

  	
  Capitalization

  	
   

  	
  9

  
	
  Section 3.8

  	
   

  	
  No Default or Breach;
  Contractual Obligations; Restrictions on Business

  	
   

  	
  10

  
	
  Section 3.9

  	
   

  	
  Title to Properties

  	
   

  	
  11

  
	
  Section 3.10

  	
   

  	
  SEC Documents; Proxy
  Statement; Financial Statements

  	
   

  	
  11

  
	
  Section 3.11

  	
   

  	
  Taxes

  	
   

  	
  11

  
	
  Section 3.12

  	
   

  	
  No Material Adverse
  Change; Ordinary Course of Business

  	
   

  	
  12

  
	
  Section 3.13

  	
   

  	
  Investment Company

  	
   

  	
  13

  
	
  Section 3.14

  	
   

  	
  Private Offering

  	
   

  	
  13

  
	
  Section 3.15

  	
   

  	
  Employment Matters; Labor
  Relations

  	
   

  	
  13

  
	
  Section 3.16

  	
   

  	
  Employee Benefit Plans

  	
   

  	
  14

  
	
  Section 3.17

  	
   

  	
  Title to Assets

  	
   

  	
  15

  
	
  Section 3.18

  	
   

  	
  Liabilities

  	
   

  	
  15

  
	
  Section 3.19

  	
   

  	
  Intellectual Property

  	
   

  	
  15

  
	
  Section 3.20

  	
   

  	
  Trade Relations

  	
   

  	
  18

  
	
  Section 3.21

  	
   

  	
  Insurance

  	
   

  	
  19

  
	
  Section 3.22

  	
   

  	
  Environmental Matters

  	
   

  	
  19

  
	
  Section 3.23

  	
   

  	
  Related Party Transactions

  	
   

  	
  19

  
	
  Section 3.24

  	
   

  	
  Broker’s, Finder’s or
  Similar Fees

  	
   

  	
  19

  
	
  Section 3.25

  	
   

  	
  Internal Controls and
  Compliance with the Sarbanes-Oxley Act

  	
   

  	
  19

  
	
  Section 3.26

  	
   

  	
  Solvency

  	
   

  	
  20

  
	
  Section 3.27

  	
   

  	
  Government Contracts and
  Government Bids

  	
   

  	
  20

  
	
  Section 3.28

  	
   

  	
  Export Controls

  	
   

  	
  21

  
	
  Section 3.29

  	
   

  	
  Foreign Corrupt Practices
  Act

  	
   

  	
  21

  
	
  Section 3.30

  	
   

  	
  Outstanding Obligations

  	
   

  	
  21

  
	
  Section 3.31

  	
   

  	
  Full Disclosure

  	
   

  	
  21

  



 


i

















 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS
  AND WARRANTIES BY THE PURCHASER

  	
   

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Existence and Power

  	
   

  	
  22

  
	
  Section 4.2

  	
   

  	
  Authorization; No
  Contravention

  	
   

  	
  22

  
	
  Section 4.3

  	
   

  	
  Governmental
  Authorization; Third Party Consents

  	
   

  	
  22

  
	
  Section 4.4

  	
   

  	
  Binding Effect

  	
   

  	
  22

  
	
  Section 4.5

  	
   

  	
  Restricted Securities

  	
   

  	
  22

  
	
  Section 4.6

  	
   

  	
  Accredited Investor

  	
   

  	
  22

  
	
  Section 4.7

  	
   

  	
  Broker’s, Finder’s or
  Similar Fees

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V COVENANTS

  	
   

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Access

  	
   

  	
  23

  
	
  Section 5.2

  	
   

  	
  Tax Law Compliance

  	
   

  	
  23

  
	
  Section 5.3

  	
   

  	
  Security Agreement, Pledge
  Agreement and Guaranty

  	
   

  	
  23

  
	
  Section 5.4

  	
   

  	
  Stop-Orders

  	
   

  	
  23

  
	
  Section 5.5

  	
   

  	
  Listing

  	
   

  	
  23

  
	
  Section 5.6

  	
   

  	
  Market Regulations

  	
   

  	
  24

  
	
  Section 5.7

  	
   

  	
  Reporting Requirements

  	
   

  	
  24

  
	
  Section 5.8

  	
   

  	
  Information

  	
   

  	
  24

  
	
  Section 5.9

  	
   

  	
  Insurance

  	
   

  	
  25

  
	
  Section 5.10

  	
   

  	
  Properties

  	
   

  	
  25

  
	
  Section 5.11

  	
   

  	
  Notification of Certain
  Matters

  	
   

  	
  25

  
	
  Section 5.12

  	
   

  	
  Taxes and Other
  Indebtedness

  	
   

  	
  25

  
	
  Section 5.13

  	
   

  	
  General Business
  Operations

  	
   

  	
  25

  
	
  Section 5.14

  	
   

  	
  Observer Rights

  	
   

  	
  26

  
	
  Section 5.15

  	
   

  	
  Liquidity Covenant

  	
   

  	
  26

  
	
  Section 5.16

  	
   

  	
  Indebtedness

  	
   

  	
  26

  
	
  Section 5.17

  	
   

  	
  Liens

  	
   

  	
  26

  
	
  Section 5.18

  	
   

  	
  Asset Dispositions

  	
   

  	
  26

  
	
  Section 5.19

  	
   

  	
  Mergers, Acquisitions, Etc.

  	
   

  	
  26

  
	
  Section 5.20

  	
   

  	
  Investments

  	
   

  	
  26

  
	
  Section 5.21

  	
   

  	
  Dividends, Redemptions,
  Etc.

  	
   

  	
  26

  
	
  Section 5.22

  	
   

  	
  Indebtedness Payments

  	
   

  	
  27

  
	
  Section 5.23

  	
   

  	
  Affiliate Transactions

  	
   

  	
  27

  
	
  Section 5.24

  	
   

  	
  Option Agreements

  	
   

  	
  27

  
	
  Section 5.25

  	
   

  	
  Search Committee

  	
   

  	
  27

  
	
  Section 5.26

  	
   

  	
  Offer to Purchase Notes

  	
   

  	
  27

  
	
  Section 5.27

  	
   

  	
  Notice of Prepayment

  	
   

  	
  27

  
	
  Section 5.28

  	
   

  	
  Termination of Covenants

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI PREEMPTIVE
  RIGHTS

  	
   

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  Subsequent Offerings

  	
   

  	
  28

  
	
  Section 6.2

  	
   

  	
  Exercise of Rights

  	
   

  	
  28

  
	
  Section 6.3

  	
   

  	
  Issuance of New Securities
  to Other Persons

  	
   

  	
  28

  
	
  Section 6.4

  	
   

  	
  Termination

  	
   

  	
  28

  
	
  Section 6.5

  	
   

  	
  Definition of New
  Securities

  	
   

  	
  28

  



 


ii

















 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII LEGENDS

  	
   

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  Legends

  	
   

  	
  29

  
	
  Section 7.2

  	
   

  	
  Removal of Legends

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII
  INDEMNIFICATION

  	
   

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 8.1

  	
   

  	
  Indemnity

  	
   

  	
  30

  
	
  Section 8.2

  	
   

  	
  Procedures

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX
  MISCELLANEOUS

  	
   

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 9.1

  	
   

  	
  Waivers and Amendments

  	
   

  	
  31

  
	
  Section 9.2

  	
   

  	
  Governing Law

  	
   

  	
  31

  
	
  Section 9.3

  	
   

  	
  Exclusive Jurisdiction

  	
   

  	
  32

  
	
  Section 9.4

  	
   

  	
  Jury Waiver

  	
   

  	
  32

  
	
  Section 9.5

  	
   

  	
  Entire Agreement

  	
   

  	
  32

  
	
  Section 9.6

  	
   

  	
  Fees and Expenses

  	
   

  	
  32

  
	
  Section 9.7

  	
   

  	
  Notices

  	
   

  	
  32

  
	
  Section 9.8

  	
   

  	
  Validity

  	
   

  	
  33

  
	
  Section 9.9

  	
   

  	
  Counterparts

  	
   

  	
  33

  
	
  Section 9.10

  	
   

  	
  Publicity

  	
   

  	
  33

  
	
  Section 9.11

  	
   

  	
  Succession and Assignment

  	
   

  	
  34

  
	
  Section 9.12

  	
   

  	
  Further Assurances

  	
   

  	
  34

  
	
  Section 9.13

  	
   

  	
  No Strict Construction

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule I

  	
   

  	
  List of Defined Terms

  	
   

  	
   

  
	
  Schedule II

  	
   

  	
  Disclosure Schedule

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
   

  	
  Form of Tranche 1 Note

  	
   

  	
   

  
	
  EXHIBIT B

  	
   

  	
  Form of Tranche 2 Note

  	
   

  	
   

  
	
  EXHIBIT C

  	
   

  	
  Form of Amended and
  Restated Tranche 1 Note

  	
   

  	
   

  
	
  EXHIBIT D

  	
   

  	
  Form of Guaranty

  	
   

  	
   

  
	
  EXHIBIT E

  	
   

  	
  Form of Security Agreement

  	
   

  	
   

  
	
  EXHIBIT F

  	
   

  	
  Form of Pledge Agreement

  	
   

  	
   

  
							



 


iii

















 


NOTE PURCHASE AGREEMENT


 


NOTE PURCHASE AGREEMENT
(this “Agreement”), dated as of October 19, 2007, by and among  SatCon Technology Corporation, a Delaware
corporation (the “Company”), and the entities listed on the Schedule of
Purchasers attached hereto as Schedule 1.1 (the “Purchasers”). The
Company and the Purchasers are sometimes referred to in this Agreement,
individually, as a “Party” and, collectively, as the “Parties.”  Certain capitalized terms used in this
Agreement are defined in Schedule I hereto.


 


RECITALS


 


A.                                   To provide the Company with additional funds
to repay certain indebtedness and for general corporate purposes, the
Purchasers are willing to purchase from the Company, and the Company is willing
to issue and sell to the Purchasers, on the terms and subject to the conditions
contained in this Agreement, promissory notes that have an aggregate principal
amount of up to $10,000,000.


 


B.                                     Upon the funding of the Tranche 2 Notes (as
hereinafter defined), the Notes (as hereinafter defined) and all amounts owing
to the Purchasers thereunder or pursuant to this Agreement and any other
Transaction Document will be secured by substantially all of the assets of the
Company on the terms and subject to the conditions set forth in the Notes and
the Security Documents.


 


C.                                     The Company will also grant to the
Purchasers, on the terms and subject to the conditions contained in this
Agreement, a right of first refusal with respect to certain subsequent
financing transactions.


 


AGREEMENT


 


NOW, THEREFORE, in
consideration of the foregoing, and the representations, warranties, covenants
and conditions set forth below, the Parties, intending to be legally bound by
this Agreement, agree as follows:


 


ARTICLE I


ISSUANCE AND SALE


 


Section 1.1                                                Issuance
and Sale of the Tranche 1 Notes.


 


(a)                                  Tranche 1 Notes. In reliance upon the respective
representations, warranties and covenants of the Parties contained in this
Agreement, and subject to (i) the written consent of the Parties and (ii) the
satisfaction of the applicable conditions set forth in Article II of this
Agreement, at the Tranche 1 Closing (as defined below), the Company shall
issue, sell and deliver to the Purchasers, and the Purchasers shall purchase
from the Company, the promissory notes in the form set forth on Exhibit A
hereto (each, a “Tranche 1 Note”) in the amounts set forth opposite each
Purchaser’s respective name on the Schedule of Purchasers attached hereto as Schedule
1.1 for an aggregate purchase price of up to $750,000.


 


(b)                                 Tranche
1 Closing.


 

















 


(i)             The initial closing (the “Tranche 1
Closing”) shall take place on the closing date (the “Tranche 1 Closing
Date”), at 10:00 a.m. at the Boston, Massachusetts offices of
Greenberg Traurig, LLP, or at such other times and places as shall be mutually
agreed to by the Parties.


 


(ii)          At the Tranche 1 Closing, (i) the Company shall issue and deliver
to the Purchasers the Tranche 1 Notes, (ii) the Purchasers shall pay the
purchase price for the Tranche 1 Notes by wire transfer of immediately
available funds to the account of the Company or to such third party accounts
as the Company shall direct and (iii) the Parties (and, as applicable,
their Affiliates) shall execute and deliver all other documentation contemplated
hereby to be executed and delivered at such Closing.


 


Section 1.2                                                Issuance
and Sale of the Tranche 2 Notes.


 


(a)                                  Tranche 2 Notes. In reliance upon the respective
representations, warranties and covenants of the Parties contained in this
Agreement, and subject to satisfaction of the applicable conditions set forth
in Article II of this Agreement, at the Tranche 2 Closing (as defined
below), the Company shall issue, sell and deliver to the Purchasers, and the
Purchasers shall purchase from the Company, the promissory notes in the form
set forth on Exhibit B hereto (each, a “Tranche 2 Note”) in the
amounts set forth opposite each Purchaser’s respective name on the Schedule of
Purchasers attached hereto as Schedule 1.1 for an aggregate purchase
price of $10,000,000 less the aggregate principal amount of the Tranche 1 Notes
(if any), and each Purchaser shall receive an amended and restated Tranche 1
Note (if applicable) in the form
set forth on Exhibit C hereto (the “Amended and Restated Tranche 1
Notes” and together with the Tranche 1 Notes and Tranche 2 Notes, the “Notes”).


 


(b)                                 Tranche 2 Closing.


 


(i)             The subsequent closing (the “Tranche 2
Closing” and together with the Tranche 1 Closing, each a “Closing”)
shall take place on the closing date (the “Tranche 2 Closing Date” and
together with the Tranche 1 Closing Date, each a “Closing Date”), at
10:00 a.m. at the Boston, Massachusetts offices of Greenberg Traurig, LLP,
or at such other times and places as shall be mutually agreed to by the
Parties.


 


(ii)          At the Tranche 2 Closing, (i) the Company shall issue and deliver
to the Purchasers the Amended and Restated Tranche 1 Notes (if applicable) and
the Tranche 2 Notes, (ii) the Purchasers shall deliver to the Company for
cancellation the original Tranche 1 Notes (if applicable) and shall pay the
purchase price for the Tranche 2 Notes by wire transfer of immediately
available funds to the account of the Company or to such third party accounts
as the Company shall direct, less amounts deducted pursuant to clause (iii),
(iii) the Company shall pay all Transaction Expenses owed to the
Purchasers and (iv) the Parties (and, as applicable, their Affiliates)
shall execute and deliver all other documentation contemplated hereby to be
executed and delivered at such Closing.


 


Section 1.3                                                Payment Terms. 


 


(a)                                  Payments. Payments of principal and interest shall be made as and when
specified in the Notes.


 


(b)                                 Place and Manner. The Company shall make all payments due to
the Purchasers in lawful money of the United States, in immediately available
funds, or as otherwise specified in the Notes, at the address for payments and
in the manner specified in Schedule 1.1.


 


2

















 


(c)                                  Date. Whenever any payment due hereunder shall fall due on a day other than
a Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall be included in the computation of interest or
fees, as the case may be.


 


Section 1.4                                                Use of Proceeds. The net proceeds to the Company from the
issuance and sale of the Tranche 1 Notes (if any) shall be used for certain
needs specified by the Company and agreed to by the Purchasers in writing. The
net proceeds to the Company from the issuance and sale of the Tranche 2 Notes
shall be used first, for the repayment of the holders of the Existing
Notes in connection with the repayment of the Existing Notes (which such
repayment shall be made immediately after receipt of funds from the Purchasers)
and second, for general corporate purposes.


 


ARTICLE II

CONDITIONS TO CLOSING


 


Section 2.1                                                Conditions to Each Party’s Obligations. The respective obligations of each Party to
consummate the transactions described in this Agreement at each Closing are
subject to the satisfaction (or waiver by the respective Party), at or before
each Closing, of the following conditions:


 


(a)                                  No temporary restraining order, preliminary
or permanent injunction or other order or decree that has the effect of
preventing the consummation of the transactions contemplated in this Agreement
and the other Transaction Documents shall have been issued by any court of
competent jurisdiction and remain in effect.


 


(b)                                 All consents of and notices to Governmental
Authorities required in connection with the transactions described in this
Agreement and the other Transaction Documents shall have been obtained and
made, as applicable, and be in full force and effect.


 


Section 2.2                                                Conditions to Obligations of the Purchasers
at the Tranche 1 Closing. The
obligations of each Purchaser to consummate the transactions described in this
Agreement at the Tranche 1 Closing are subject to the satisfaction (or waiver
by such Purchaser), at or before the Tranche 1 Closing, of the following
conditions:


 


(a)                                  Representations and Warranties Correct. The representations and warranties of the
Company contained in this Agreement or in any other Transaction Document that
are qualified as to materiality are true and correct, and all other
representations and warranties of the Company contained in this Agreement or in
any other Transaction Document that are not so qualified are true and correct
in all material respects, in each case as of the date of this Agreement and as
of the Tranche 1 Closing Date, with the same effect as though made as of the
date of this Agreement except that the accuracy of representations and
warranties that by their terms speak as of a specified date will be determined
as of such date.


 


(b)                                 Performance of Obligations. The Company shall have performed or
complied with in all material respects all agreements and covenants required to
be performed or complied with by it under this Agreement or any other
Transaction Document at or prior to the Tranche 1 Closing.


 


(c)                                  Officer’s Certificate. The Company and each Subsidiary party to
the Guaranty shall have delivered to the Purchasers a certificate, executed by
a duly authorized officer of the Company or such Subsidiary, dated as of the
Tranche 1 Closing Date, certifying as to the authenticity and continued 


 


3

















 


effectiveness of attached
copies of the Certificate of Incorporation, as amended, Bylaws or other
organizational documents, as appropriate, and resolutions of the Company’s
Board of Directors (the “Board of Directors”) and the Board of Directors
of each Subsidiary approving the transactions contemplated by this Agreement
and by the other Transaction Documents, and authorizing specific officers to
execute and deliver this Agreement and each of the other Transaction Documents
to which such entity is a party, including the Notes.


 


(d)                                 Compliance Certificate. The Purchasers shall have received a
certificate dated as of the Closing Date and signed by the Chief Executive
Officer of the Company on behalf of the Company stating that the conditions specified
in Sections 2.2(a), (b), (g), (h) and (i)
have been satisfied.


 


(e)                                  Definitive Transaction Documents. The Tranche 1 Notes shall have been issued
and delivered by the Company to each Purchaser.


 


(f)                                    Certificates of Good Standing. The Company shall have delivered to each of
the Purchasers a long-form certificate of good standing from the Secretary of
State of the State of Delaware, and a good standing certificate from each
jurisdiction in which the Company and its Subsidiaries are qualified to do business,
each of which is to be dated within a reasonable period prior to the Tranche 1
Closing.


 


(g)                                 Opinion of Company’s Counsel. The Purchasers shall have received an
opinion of Greenberg Traurig, LLP, outside counsel to the Company, in form and
substance reasonably satisfactory to the Purchasers.


 


(h)                                 Consents and Waivers. The Company shall have received all
material consents, approvals, authorizations, permits and waivers of, and
delivered all notices to, third parties necessary for the Company to consummate
the transactions contemplated by this Agreement and by the Transaction
Documents, and all such consents, approvals, authorizations, permits and
waivers shall be in full force and effect.


 


(i)                                     No Material Judgment or Order. There shall not be on the Tranche 1 Closing
Date any Order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirement of Law
which would (a) subject the Purchasers to any material penalty or onerous
condition under or pursuant to any Requirement of Law if the Tranche 1 Notes
were to be purchased hereunder or (b) restrict the operation of the business of
the Company or any Subsidiary as conducted on the date hereof in a manner that
would have a material adverse effect on the Condition of the Company.


 


(j)                                     No Litigation. No action, suit, proceeding, claim or
dispute shall have been brought or otherwise arisen at law, in equity, in
arbitration or before any Governmental Authority against the Company or any
Subsidiary which would, if adversely determined (a) have a material adverse
effect on the Condition of the Company or (b) have a material adverse effect on
the ability of the Company to perform its obligations under this Agreement or
each of the other Transaction Documents.


 


(k)                                  No Delisting Notice. The Company shall not have received any
notice from the Nasdaq Stock Market that the Company may be delisted, which
notification has not been resolved in favor of the Company.


 


(l)                                     Material Adverse Effect. Since September 30, 2007, no event shall
have occurred or be reasonably likely to occur that would reasonably be
expected to have a Material Adverse Effect.


 


4

















 


(m)                               Offer to Sell Notes. The Company and each holder of an Existing
Note shall have entered into the Offer to Sell Notes providing for the
repayment of the Existing Notes on terms and conditions satisfactory to the
Purchasers and the Offer to Sell Notes shall be in full force and effect, and
the Company shall have delivered to each Investor party thereto a written
notice of the Company’s election to effect the purchase as contemplated in the
Offer to Sell Notes (the “Notice of Prepayment”).


 


(n)                                 Other Documents. The Purchasers shall have received from the
Company such other documents as they may reasonably request.


 


Section 2.3                                                Conditions to Obligations of the Purchasers
at the Tranche 2 Closing. The
obligations of each Purchaser to consummate the transactions described in this
Agreement at the Tranche 2 Closing are subject to the satisfaction (or waiver
by such Purchaser), at or before the Tranche 2 Closing, of the following
conditions:


 


(a)                                  Representations and Warranties Correct. The representations and warranties of the
Company contained in this Agreement or in any other Transaction Document that
are qualified as to materiality are true and correct, and all other
representations and warranties of the Company contained in this Agreement or in
any other Transaction Document that are not so qualified are true and correct in
all material respects, in each case as of the date of this Agreement and as of
the Tranche 2 Closing Date, with the same effect as though made as of the date
of this Agreement except that the accuracy of representations and warranties
that by their terms speak as of a specified date will be determined as of such
date.


 


(b)                                 Performance of Obligations. The Company shall have performed or
complied with in all material respects all agreements and covenants required to
be performed or complied with by it under this Agreement or any other
Transaction Document at or prior to the Tranche 2 Closing.


 


(c)                                  Compliance Certificate. The Purchasers shall have received a
certificate dated as of the Closing Date and signed by the Chief Executive
Officer of the Company on behalf of the Company stating that the conditions
specified in Sections 2.3(a), (b), (f), (h)
and (i) have been satisfied.


 


(d)                                 Definitive Transaction Documents. The Amended and Restated Tranche 1 Notes
(if applicable) and the Tranche 2 Notes shall have been issued and delivered by
the Company to each Purchaser. The Company and its Subsidiaries, as
appropriate, shall have delivered to the Purchasers the Security Agreement, the
Pledge Agreement, the Guaranty and each of the other Transaction Documents, in
each case duly executed by an authorized officer of the Company and/or, as
appropriate, its Subsidiaries.


 


(e)                                  Security Filings. The Company shall have executed and
delivered to the Purchasers all UCC-1 Financing Statements to be filed and such
other Security Documents necessary or appropriate for the perfection of the
security interests granted by this Agreement or any other Transaction Document
and by the Subsidiaries as may be reasonably requested by the Purchasers.


 


(f)                                    Certificates of Good Standing. The Company shall have delivered to each of
the Purchasers a bring-down certificate of good standing from the Secretary of
State of the State of Delaware, and a bring-down good standing certificate from
each jurisdiction in which the Company and its Subsidiaries are qualified to do
business, each of which is to be dated within a reasonable period prior to the
Tranche 2 Closing.


 


5

















 


(g)                                 Opinion of Company’s Counsel. The Purchasers shall have received an
opinion of Greenberg Traurig, LLP, outside counsel to the Company, in form and
substance reasonably satisfactory to the Purchasers (which such opinion shall
be governed by New York law).


 


(h)                                 Consents and Waivers. The Company shall have received all
material consents, approvals, authorizations, permits and waivers of, and
delivered all notices to, third parties necessary for the Company to consummate
the transactions contemplated by this Agreement and by the Transaction
Documents, and all such consents, approvals, authorizations, permits and
waivers shall be in full force and effect.


 


(i)                                     No Material Judgment or Order. There shall not be on the Tranche 2 Closing
Date any Order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirement of Law
which would (a) subject the Purchasers to any material penalty or onerous
condition under or pursuant to any Requirement of Law if the Amended and
Restated Tranche 1 Notes (if applicable) or Tranche 2 Notes were to be
purchased hereunder or (b) restrict the operation of the business of the
Company or any Subsidiary as conducted on the date hereof in a manner that
would have a material adverse effect on the Condition of the Company.


 


(j)                                     No Litigation. No action, suit, proceeding, claim or
dispute shall have been brought or otherwise arisen at law, in equity, in
arbitration or before any Governmental Authority against the Company or any
Subsidiary which would, if adversely determined (a) have a material adverse
effect on the Condition of the Company or (b) have a material adverse effect on
the ability of the Company to perform its obligations under this Agreement or
each of the other Transaction Documents.


 


(k)                                  No Delisting Notice. The Company shall not have received any notice
from the Nasdaq Stock Market that the Company may be delisted, which
notification has not been resolved in favor of the Company.


 


(l)                                     Material Adverse Effect. Since September 30, 2007, no event shall
have occurred or be reasonably likely to occur that would reasonably be
expected to have a Material Adverse Effect.


 


(m)                               Reimbursement of Expenses. The Company shall have tendered payment for
reimbursement of all Transaction Expenses in accordance with Sections 1.4(b)
and 9.6.


 


(n)                                 Offer to Sell Notes. The Company and each holder of an Existing
Note shall have entered into the Offer to Sell Notes and the Offer to Sell
Notes shall be in full force and effect, and the Company shall have delivered
and not revoked or modified the Notice of Prepayment.


 


(o)                                 Other Documents. The Purchasers shall have received from the
Company such other documents as they may reasonably request.


 


Section 2.4                                                Conditions to Obligations of the Company at
Each Closing. The
obligations of the Company to consummate the transactions described in this
Agreement at each Closing are subject to the satisfaction (or waiver by the
Company), at or before each Closing, of the following conditions:


 


(a)                                  Representations and Warranties Correct. The representations and warranties of the
Purchasers contained in this Agreement or in any other Transaction Document
that are qualified as to materiality are true and correct, and all other
representations and warranties of the Purchasers contained in 


 


6

















 


this Agreement or in any
other Transaction Document that are not so qualified are true and correct in
all material respects, in each case as of the date of this Agreement and as of
each Closing Date, with the same effect as though made as of such date, except that
the accuracy of representations and warranties that by their terms speak as of
a specified date will be determined as of such date.


 


(b)                                 Performance of Obligations. The Purchasers shall have performed or
complied with in all material respects all agreements and covenants required to
be performed or complied with by them under this Agreement and each other
Transaction Document at or prior to each Closing.


 


(c)                                  Payment. Each Purchaser shall have tendered payment for its Note in accordance
with Article I of this Agreement.


 


ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


The
Company represents and warrants to each of the Purchasers as of the date hereof
and as of each Closing Date as follows and acknowledges and confirms that each
of the Purchasers are relying upon the foregoing representations and warranties
in connection with the purchase by the Purchasers of the Notes (references to
the “Company” in this Article III shall refer, whenever not inappropriate by
reference to the context, to the Company, its Subsidiaries, its parent entities
and its predecessor entities, if any):


 


Section 3.1                                                Corporate Existence and Power.  The Company and each Subsidiary
(a) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation; (b) has all
requisite corporate power and authority to own, operate its property, to lease
the property it operates as lessee and to conduct the business in which it is
currently, or is proposed to be, engaged; and (c) is duly qualified as a
foreign corporation, licensed and in good standing under the laws of each
jurisdiction in which its ownership, lease or operation of property or the
conduct of its business requires such qualification, except where the failure
to be so qualified could not reasonably be expected to have a material adverse
effect on the Condition of the Company or any Subsidiary. The Company has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and each of the other Transaction Documents. Set forth on
Section 3.1 of the Disclosure Schedule is a list of all of the
Subsidiaries, the jurisdiction in which it is incorporated or organized and the
jurisdictions in which it is qualified to do business.


 


Section 3.2                                                Authorization; No Contravention.  The execution, delivery and
performance by the Company of this Agreement and each of the other Transaction
Documents and the transactions contemplated hereby and thereby, including the
issuance and sale of the Notes, (a) have been duly authorized by all
necessary corporate action of the Company, including all actions, consents and
approvals required by the Company’s Board of Directors and stockholders;
(b) do not contravene the terms of the Certificate of Incorporation or the
By-laws or the organizational documents of any Subsidiary; (c) do not
violate, conflict with or result in any breach, default or contravention of (or
with due notice or lapse of time or both would result in any breach, default or
contravention of), or the creation of any Lien under, any Contractual
Obligation of the Company or any Subsidiary or any Requirement of Law
applicable to the Company or any Subsidiary; and (d) do not violate any
judgment, injunction, writ, award, decree or order of any nature (collectively,
“Orders”) of any Governmental Authority against, or binding upon, the
Company or any Subsidiary. The Board of Directors, at a meeting duly called and
held, has (i) determined that this Agreement, the other Transaction
Documents the issuance and sale of the Notes and the transactions contemplated
hereby and thereby are fair to and in the best interests of the Company’s
stockholders and 


 


7

















 


(ii) approved
and adopted this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby in accordance with all applicable
Requirements of Law. Following approval by the Company’s stockholders of those
matters described in the definitive proxy statement filed with the SEC on
September 19, 2007, the “Equity Conditions” (as such term is defined in the
Existing Notes) shall be satisfied in all respects on the date hereof and on
the Tranche 2 Closing Date.


 


Section 3.3                                                Governmental Authorization; Third Party
Consents.  Except as
set forth on Section 3.3 of the Disclosure Schedule, no approval, consent,
compliance, exemption, authorization or other action by, or notice to, or
filing with, any Governmental Authority or any other Person, and no lapse of a
waiting period under a Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the sale, issuance and delivery of the Notes by, or enforcement
against, the Company of this Agreement and the other Transaction Documents or
the transactions contemplated hereby and thereby.


 


Section 3.4                                                Binding Effect.  This Agreement has been, and as of
the Closing Date each of the other Transaction Documents will have been, duly
executed and delivered by the Company, and this Agreement constitutes, and as
of the Closing Date each of the other Transaction Documents will constitute,
the legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity).


 


Section 3.5                                                Litigation.  There are no actions, suits, proceedings, claims (including,
without limitation, claims involving the prior employment of any of the Company’s
or any Subsidiary’s employees, their use in connection with the Company’s or
any Subsidiary’s business of any information or techniques allegedly
proprietary to any of their former employers or their obligations under any
agreements with prior employers), complaints, disputes, arbitrations or
investigations (collectively, “Claims”) pending or, to the Knowledge of
the Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company or any Subsidiary, nor is the
Company aware that there is any basis for any of the foregoing. No Order has
been issued by any court or other Governmental Authority against the Company or
any Subsidiary purporting to enjoin or restrain the execution, delivery or
performance of this Agreement or any of the other Transaction Documents.


 


Section 3.6                                                Compliance with Laws.


 


(a)                                  The Company and each Subsidiary is in
compliance in all material respects with all Requirements of Law and all Orders
issued by any court or Governmental Authority against the Company or any
Subsidiary. To the Company’s Knowledge, there is no existing or proposed
Requirement of Law which could reasonably be expected to prohibit or restrict
the Company or any Subsidiary from, or otherwise materially adversely effect
the Company or any Subsidiary in, conducting its business in any jurisdiction
in which it now conducts or proposes to conduct its business.


 


(b)                                 The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act, and is listed on Nasdaq, and neither
the Company nor any Subsidiary has taken any action designed to, or reasonably
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act or delisting the Common Stock from the Nasdaq. The
Company has complied with all requirements of the National Association of
Securities Dealers, Inc. with respect to the issuance of the Notes. Neither the



 


8

















 


Company nor any Subsidiary
has taken any action designed to or that might reasonably be expected to cause
or result in unlawful manipulation of the price of the Common Stock to
facilitate the sale or resale of the Notes.


 


(c)                                  (i) The Company and each Subsidiary has
all material licenses, permits and approvals of any Governmental Authority (collectively,
“Permits”) that are necessary for the conduct of the business of the
Company and its Subsidiaries; (ii) such Permits are in full force and
effect; and (iii) no violations are or have been recorded in respect of
any Permit, other than such violations that could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
Condition of the Company.


 


Section 3.7                                                Capitalization.


 


(a)                                  As of the date hereof, the authorized capital
stock of the Company shall consist of (i) 100,000,000 shares of Common Stock,
48,999,973 shares of which are issued and outstanding and (ii) 1,000,000 shares
of preferred stock, par value $0.01 per share, (A) 1,600 shares of which are
designated as Series B Convertible Preferred Stock, 340 shares of which are
issued and outstanding (and convertible into 880,829 shares of Common Stock)
and (B) 998,400 of which are undesignated “blank check” preferred stock. As of
the date of this Agreement, the aggregate number of shares of restricted stock
and options to purchase shares of Common Stock which may be issued under the
Stock Option Plans is 7,515,656, of which 4,889,579 are outstanding as of the
date hereof (the “Options”) and 4,010,204 of which outstanding Options
have vested as of the date hereof, and the aggregate number of shares of Common
Stock that may be issued under the Company’s 401(k) Plan is 1,012,100. As of
the date hereof, the Company has issued and outstanding warrants to purchase an
aggregate of 9,279,127 shares of Common Stock.


 


(b)                                 The number of shares and type of all
authorized, issued and outstanding capital stock, options and other securities
of the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Section 3.7(b) of the Disclosure Schedule. All outstanding shares of capital
stock are duly authorized, validly issued, fully paid and nonassessable and
have been issued in compliance with all applicable securities laws. Except as a
result of the purchase and sale of the Notes and except as disclosed in
Schedules 3.7(b) and 3.7(c) of the Disclosure Schedule, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. Except
as set forth on Section 3.7(b) of the Disclosure Schedule, the issuance and
sale of the Notes will not obligate the Company to issue shares of Common Stock
or other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities. No anti-dilution
rights of any capital stock or other securities issued by the Company shall be
triggered as a result of the transactions contemplated hereby. To the Knowledge
of the Company, except as specifically disclosed in Section 3.7(b) of the
Disclosure Schedule, no Person or group of related Persons beneficially owns
(as determined pursuant to Rule 13d-3 under the Exchange Act), or has the right
to acquire, by agreement with or by obligation binding upon the Company,
beneficial ownership of in excess of 5% of the outstanding Common Stock,
ignoring for such purposes any limitation on the number of shares of Common
Stock that may be owned at any single time.


 


(c)                                  Set forth in Section 3.7(c) of the Disclosure
Schedule is a complete and accurate list of all securities of the Company that
are entitled to preemptive, registration or similar rights accompanied by 


 


9

















 


a description of such rights.
No Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the issuance and sale of
the Notes in the transactions contemplated by the Transaction Documents.


 


(d)                                 The Notes are duly authorized, will be issued
in compliance with the registration and qualification requirements of all
applicable federal, state, provincial, and foreign securities laws and will be
free and clear of all other Liens, other than any Liens created by the
Purchasers. All of the issued and outstanding shares of the Company’s capital
stock are duly authorized, validly issued, fully paid and non-assessable, and
were issued in compliance with the registration and qualification requirements
of all applicable federal, state, provincial, and foreign securities laws.


 


(e)                                  Section 3.7(e) of the Disclosure
Schedule sets forth a true and complete list of (x) each of the
Subsidiaries of the Company and (y) the aggregate number of authorized
shares of capital stock of such Subsidiary. The Company owns all of the issued
and outstanding capital stock of the Subsidiaries, free and clear of all Liens
other than Liens in favor of the holders of the Existing Notes. All of such
shares of capital stock are duly authorized, validly issued, fully paid and non-assessable,
and were issued in compliance with the registration and qualification
requirements of all applicable federal, state, provincial, and foreign
securities laws. There are no options, warrants, conversion privileges,
subscription or purchase rights or other rights presently outstanding to
purchase or otherwise acquire any authorized but unissued, unauthorized or
treasury shares of capital stock or other securities of, or any proprietary
interest in, any of the Subsidiaries, and there is no outstanding security of
any kind convertible into or exchangeable for such shares or proprietary
interest.


 


Section 3.8                                                No Default or Breach; Contractual
Obligations; Restrictions on Business.


 


(a)                                  Except as set forth on Section 3.8(a) of the
Disclosure Schedule, neither the Company nor any Subsidiary has received notice
of a default and is not in material default under, or with respect to, any
Contractual Obligation filed as an exhibit to or described in the SEC Documents
or which is otherwise material to the Condition of the Company, nor does any condition
exist that with notice or lapse of time or both would constitute a material
default thereunder. All of such Contractual Obligations are valid, subsisting,
in full force and effect and binding upon the Company or such Subsidiary and
the other parties thereto, and the Company or such Subsidiary has paid in full
or accrued all amounts due thereunder and has satisfied in full or provided for
all of its liabilities and obligations thereunder. To the Knowledge of the
Company, no other party to any such Contractual Obligation is in material
default thereunder, nor does any condition exist that with notice or lapse of
time or both would constitute a material default by such other party thereunder.
There is no agreement (non-competition or otherwise), commitment, judgment,
injunction, order or decree to which the Company or any of its Subsidiaries is
a party or otherwise binding upon the Company or any of its Subsidiaries which
has or may reasonably be expected to have the effect of (i) prohibiting or
impairing (A) any business practice of the Company or any of its
Subsidiaries, (B) any acquisition of property (tangible or intangible) by
the Company or any of its Subsidiaries, or (C) the conduct of business by
the Company or any of its Subsidiaries, or (ii) otherwise limiting the
freedom of the Company or any of its Subsidiaries, to engage in any line of
business or to compete with any Person. Without limiting the generality of the
foregoing, neither the Company nor any of its Subsidiaries has entered into any
Contract under which the Company or any Subsidiary is, restricted from selling,
licensing, manufacturing or otherwise distributing any of its Company
Intellectual Property or Company or Subsidiary products or from providing
services to customers or potential customers or any class of customers, in any
geographic area, during any period of time, or in any segment of the market.


 


10

















 


(b)                                 Section 3.8(b) of the Disclosure Schedule
identifies (i) each Contractual Obligation which involves prospective fixed
and/or contingent payments or expenditures by the Company or its Subsidiaries
of more than $250,000, and (ii) each Contractual Obligation that is material to
the Condition of the Company other than those filed as an exhibit to or
described in the SEC Documents.


 


Section 3.9                                                Title to Properties.  The Company has provided Purchasers
true, correct and complete copies of all leases, lease guaranties, subleases,
agreements for the leasing, use or occupancy of, or otherwise granting a right
in or relating to property leases or otherwise occupied by the Company or any
of its Subsidiaries (the “Leased Real Property”), including all
amendments, terminations and modifications thereof (the “Lease Agreements”);
and there are no other Lease Agreements for real property to which the Company
or any of its Subsidiaries is bound, other than those identified in the Lease
Agreements. All such Lease Agreements are valid,  in full force and effect, enforceable in
accordance with their terms, and (x) with respect to the Company and its
Subsidiaries under any of such leases, no rentals are past due and there is no
existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a default) and (y) to the Knowledge of the
Company, with respect to any other Person under any of such leases, no rentals
are past due and there is no existing default or event of default (or event
which with notice or lapse of time, or both, would constitute a default). Neither
the Company nor any of its Subsidiaries could be required to expend more than
$50,000 in causing any Leased Real Property to comply with the surrender
conditions set forth in the applicable Lease Agreement. Neither the Company nor
or any of its Subsidiaries have received any notice of a default, alleged
failure to perform, or any offset or counterclaim with respect to any such
Lease Agreement, which has not been fully remedied and withdrawn. There are no
other parties occupying, or with a right to occupy, the Leased Real Property
other than the Company and its Subsidiaries.


 


Section 3.10                                          SEC Documents; Proxy Statement; Financial
Statements.


 


(a)                                  Since August 1, 2004, the Company has filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the Exchange
Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the “SEC
Documents”). As of their respective dates, the SEC Documents complied with
the requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.


 


(b)                                 As of their respective dates, the Financial
Statements of the Company and its Subsidiaries included in the SEC Documents
complied as to form with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. The Financial Statements
have been prepared in accordance with GAAP, consistently applied, during the
periods involved (except in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements)
and fairly present the financial position of the Company and its Subsidiaries
as of the dates thereof and the results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).


 


Section 3.11                                          Taxes.  The Company and each Subsidiary has timely paid all Taxes which
have come due and are required to be paid by it, and all deficiencies or other
additions to Tax, 


 


11

















 


interest
and penalties owed by it in connection with any such Taxes, other than Taxes
being disputed by the Company or any Subsidiary in good faith for which
adequate reserves have been made in accordance with GAAP. The Company and each
Subsidiary have timely paid or withheld with respect to their employees and
other third parties (and timely paid over any withheld amounts to the
appropriate Taxing authority) all federal, state and provincial income taxes,
Federal Insurance Contribution Act amounts, Federal Unemployment Tax Act
amounts and other Taxes required to be withheld. The Company and each
Subsidiary has timely filed or caused to be filed all Tax returns, reports,
forms and other such documents (“Tax Returns”) that it is required to
file (including all applicable extensions), and all such Tax Returns are
accurate and complete in all material respects. With respect to all Tax Returns
of the Company and each Subsidiary, (i) there is no unassessed Tax
deficiency proposed or, to the Knowledge of the Company, threatened against the
Company or any Subsidiary and (ii) no audit is in progress with respect to
any Tax Return, no extension of time is in force with respect to any date on which
any Tax Return was or is to be filed and no waiver or agreement is in force for
the extension of time for the assessment or payment of any Tax. No claim has
ever been made by an authority in a jurisdiction where the Company or any
Subsidiary does not file Tax Returns that the Company or any Subsidiary is or
may be subject to taxation by that jurisdiction. All provisions for Tax
liabilities of the Company and its Subsidiaries with respect to the Financial
Statements have been made in accordance with GAAP consistently applied, and all
liabilities for Taxes of the Company and its Subsidiaries attributable to
periods prior to or ending on the Closing Date have been adequately provided
for on the Financial Statements, and neither the Company nor any Subsidiary has
incurred any liability for Taxes since the date of the most recent Financial
Statements prior to the date hereof other than in the ordinary course of
business. There are no Liens for Taxes on the assets of the Company or any
Subsidiary. The Company is not a “United States real property holding
corporation” as that term is defined in Section 897(c)(2) of the Code and
the regulations promulgated thereunder. Neither the Company nor any Subsidiary
has (I) ever been a member of an affiliated group (within the meaning of Code
§1504(a)) filing a consolidated federal income Tax Return (other than a group
the common parent of which was the Company), (II) ever been a party to any Tax
sharing, indemnification or allocation agreement, nor does the Company or any
Subsidiary owe any amount under any such agreement, or (III) any liability for
the Taxes of any person, including under Treas. Reg. § 1.1502-6 (or any similar
provision of state, local or foreign law, including any arrangement for group
or consortium relief or similar arrangement), as a transferee or successor, by
contract, or otherwise. Neither the Company nor any Subsidiary has constituted
a “distributing corporation” or a “controlled corporation” in a distribution of
stock intended to qualify for tax-free treatment under Section 355 of the
Code. Neither the Company nor any Subsidiary has engaged in a reportable
transaction under Treas. Reg. § 1.6011-4(b), including any transaction that is
the same as or substantially similar to one of the types of transactions that
the Internal Revenue Service has determined to be a tax avoidance transaction
and identified by notice, regulation, or other form of published guidance as a
listed transaction, as set forth in Treas. Reg. § 1.6011-4(b)(2). None of the
indebtedness of the Company or any Subsidiary constitutes (i) “corporate
acquisition indebtedness” (as defined in Section 279(b) of the Code) with
respect to which any interest deductions may be disallowed under Section 279 of
the Code (ii) an “applicable high yield discount obligation” under Section
163(i) of the Code or (iii) a “disqualified debt instrument” under Section
163(l) of the Code.


 


Section 3.12                                          No Material Adverse Change; Ordinary Course
of Business.  Since
December 31, 2006, there has not been any material adverse change in the
Condition of the Company or any Subsidiary and no event has occurred or
circumstance exists which may result in such a material adverse change, except
to the extent any such change results from or is attributable to changes in
general economic or political conditions or changes affecting the industry
generally in which the Company or any Subsidiary operates (provided that such
changes do not affect the Company or any Subsidiary in a disproportionate
manner). Except as set forth in the SEC Documents filed prior to the date
hereof or as set forth on Section 3.12 of the Disclosure Schedule, since
December 31, 2006, neither the Company nor any 


 


12

















 


Subsidiary
has (a) participated in any transaction material to the Condition of the
Company or any Subsidiary or otherwise acted outside the ordinary course of
business, (b) increased the compensation of any of its officers or the
rate of pay of any of its employees, except as part of regular compensation
increases in the ordinary course of business, (c) created or assumed any
Lien on a material asset of the Company or any Subsidiary, (d) entered
into any material Contractual Obligation, other than in the ordinary course of
business, (e) sold, assigned or transferred any Intellectual Property
Rights of the Company or any Subsidiary or (f) entered into any agreement
or commitment to do any of the foregoing. Since December 31, 2006, there
has not occurred a material change in the Company’s or any Subsidiary’s
accounting principles or practice except as required by reason of a change in
GAAP.


 


Section 3.13                                          Investment Company.  The Company is not and is not
controlled by or affiliated with an “investment company” within the meaning of
the Investment Company Act of 1940, as amended.


 


Section 3.14                                          Private Offering.  No form of general solicitation or
general advertising was used by the Company or its representatives in
connection with the offer, sale or issuance of the Notes. Provided that the
representations of the Purchasers set forth in Article IV of this Agreement are
true, correct and complete, no registration of the Notes, pursuant to the
provisions of the Securities Act or any state securities or “blue sky” laws,
will be required by the offer, sale or issuance of the Notes. The Company
agrees that neither it, nor anyone acting on its behalf, shall offer to sell
the Notes or any other securities of the Company so as to require the
registration of the Notes pursuant to the provisions of the Securities Act or any
state securities or “blue sky” laws.


 


Section 3.15                                          Employment Matters; Labor Relations.


 


(a)                                  The Company and its Subsidiaries are in
compliance, in all material respects, with all Laws concerning employment,
including Laws relating to worker classification, wages and hours, tax
withholding, prohibited discrimination, equal employment, fair employment
practices, safety and health, meal and rest periods, and immigration status,
and neither the Company nor any of its Subsidiaries has any material liability
with respect to any misclassification of: 
(i) any Person as an independent contractor rather than as an
employee, (ii) any employee leased from another employer, or
(iii) any employee currently or formerly classified as exempt from
overtime wages. Except as set forth in Section 3.15 of the Disclosure Schedule,
the services provided by each of the Company’s and its Subsidiaries’ employees
is terminable at the will of the Company and its Subsidiaries and any such
termination would result in no severance or separation pay obligations. There
are no pending, threatened, or reasonably anticipated actions, suits, charges,
claims (including workers’ compensation claims), audits, investigations or
administrative matters pending against the Company or its Subsidiaries relating
to any of its respective employees or independent contractors. Neither the
Company nor any Subsidiary is party to a conciliation agreement, consent decree
or other agreement or order with any federal, state, or local agency or
governmental authority with respect to employment practices. Neither the
Company nor any Subsidiary has taken any action which would constitute a “plant
closing” or “mass layoff” within the meaning of the WARN Act or similar Law,
issued any notification of a plant closing or mass layoff required by the WARN
Act or similar Law, and no terminations prior to the Closing would trigger any
notice or other obligations under the WARN Act or similar Law.


 


(b)                                 (i) Neither the Company nor any Subsidiary
has engaged in any unfair labor practices; (ii) there is (A) no
grievance, complaint, or arbitration proceeding arising out of or under
collective bargaining agreements pending or, to the Knowledge of the Company,
threatened against the Company or any 


 


13

















 


Subsidiary, and (B) no
strike, labor dispute, slowdown, concerted refusal to work overtime or stoppage
pending or, to the Knowledge of the Company, threatened against the Company or
any Subsidiary; (iii) neither the Company nor any Subsidiary is a party to
any collective bargaining agreement or contract and no collective bargaining
agreement or similar agreement is being negotiated by the Company or its
Subsidiaries; (iv) there is no union representation question existing with
respect to the employees of the Company or any Subsidiary; (v) no union
has applied to have the Purchaser or any Subsidiary declared a related employer
pursuant to the Labour Relations Act (Ontario) or any similar legislation in
any jurisdiction in which the Company or any Subsidiary carries on business;
and (vi) no union organizing activities are taking place.


 


Section 3.16                                          Employee Benefit Plans.


 


(a)                                  Neither the company nor any Commonly
Controlled Entity maintains or contributes to, or has within the preceding six
years maintained or contributed to, or may have any liability with respect to
any Plan subject to Title IV of ERISA or Section 412 of the Code or
any “multiple employer plan” within the meaning of the Code or ERISA. Each Plan
(and related trust, insurance contract or fund) has been established and
administered in all material respects in accordance with its terms, and
complies in all material respects in form and in operation with the applicable
requirements of ERISA and the Code and other applicable Requirements of Law. All
contributions (including all employer contributions and employee salary
reduction contributions) which are due have been paid to each Plan.


 


(b)                                 No Claim with respect to the administration
or the investment of the assets of any Plan (other than routine claims for
benefits) is pending.


 


(c)                                  Each Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified and has received a
favorable determination letter from the Internal Revenue Service to such effect
and no circumstance, fact or event has occurred or exists that is reasonably
likely to adversely affect the qualified status of any such Plan.


 


(d)                                 No Plan is a Retiree Welfare Plan.


 


(e)                                  Neither the execution of this Agreement nor
the consummation of the transactions contemplated by this Agreement will
accelerate the time of the payment or vesting of, or increase the amount of,
compensation due to any employee or former employee or director or independent
contractor.


 


(f)                                    There are no unfunded obligations under any Plan
which are not fully reflected on the Financial Statements.


 


(g)                                 No insurance policy or any other agreement
affecting any Plan requires or permits a retroactive increase in contributions,
premiums or other payments due under such insurance policy or agreement. The
level of insurance reserves under each Plan is reasonable and sufficient to
provide for all incurred but unreported claims.


 


(h)                                 Neither the Company nor any Subsidiary has
any liability, whether absolute or contingent, including any obligations under
any Plan, with respect to any misclassification of any person as an independent
contractor rather than as an employee.


 


(i)                                     No Plan that is subject to Section 409A of
the Code has been materially modified (as defined in Section 409A of the Code)
since October 3, 2004 and all such Plans subject to Section 409A of the 


 


14

















 


Code have been operated and
administered in good faith compliance with Section 409A of the Code from the
period beginning December 31, 2004 through the date hereof.


 


(j)                                     No awards under any Plan that provides for
granting of equity, equity-based rights, or options to purchase equity (“Equity
Plans”) have been granted with an effective date that is other than the
date on which the committee or other administrator of such Equity Plans with
authority thereunder to make such awards has taken all necessary corporate
action to grant or complete such awards. No awards made under the Equity Plans
have been (or will be) altered in any manner that would result in or have the
effect of failing to comply with the foregoing sentence.


 


Section 3.17                                          Title to Assets.  Except as could not, individually or
in the aggregate, reasonably be expected to have a material adverse effect on
the Condition of the Company, the Company and each Subsidiary owns and has
good, valid, and marketable title to all of its properties and assets used in
its business and reflected as owned on the Financial Statements or so described
in any schedule hereto (collectively, the “Assets”), in each case free
and clear of all Liens, except for Liens specifically described on the notes to
the Financial Statements.


 


Section 3.18                                          Liabilities.  Neither the Company nor any Subsidiary has any direct or
indirect obligation or liability (“Liabilities”) which if known would be
required to be reflected in the Company’s or any Subsidiary’s financial
statements in accordance with GAAP other than (a) Liabilities fully and
adequately reflected or reserved against on the Financial Statements and
(b) except as set forth in the SEC Documents, Liabilities incurred since
December 31, 2006 in the ordinary course of business. Section 3.18 of the
Disclosure Schedule sets forth all of the outstanding Indebtedness of the
Company and its Subsidiaries as of the date hereof.


 


Section 3.19                                          Intellectual Property.


 


(a)                                  (i)                                     Other than (x) Shrink-Wrap Code and (y) the
Intellectual Property licensed to Company under the licenses set forth on
Section 3.19(a)(i) of the Disclosure Schedule, the Company Intellectual
Property constitutes all of the Intellectual Property that is used in,
necessary to or would otherwise be infringed by the operation of the business
of Company and its Subsidiaries as presently conducted and as contemplated in
their respective business plans to be conducted, free and clear of all Liens. Without
limiting the foregoing, the Company represents that neither it nor any
Subsidiary requires a license to use any of the patent rights subject to the
exclusive license agreements entered into between the Company and Beacon Power
Corporation and the Company and ERM Thermal Technologies for the operation of
the business of the Company and its Subsidiaries as currently conducted or
proposed to be conducted.


 


(ii)                                  Section 3.19(a)(ii) of the Disclosure
Schedule sets forth all of the Company Intellectual Property that is the
subject of a filing, registration, application or other document that the
Company or a Subsidiary owns or that is issued, filed with or recorded by any
state, government or other public legal authority in the name of Company or a
Subsidiary. None of the Company Intellectual Property listed on Section
3.19(a)(ii) of the Disclosure Schedule is subject to any outstanding Order, and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim
or demand is pending or, to the Knowledge of the Company, threatened, which
challenges the validity, enforceability, use or ownership of the item.


 


(iii)                               Section 3.19(a)(iii) of the Disclosure
Schedule sets forth all Intellectual Property licenses, sublicenses,
distributor agreements and other agreements or permissions (“IP Licenses”)
under which the Company or one of its Subsidiaries is either a licensor or
licensee of Intellectual Property 


 


15

















 


(including agreements under
which Company or one of its Subsidiaries is a distributor of a third party’s
products or services or under which a third party is a distributor of the
Company’s or one of its Subsidiaries’ products or services), except that
Section 3.19(a)(iii) does not list IP Licenses that consist of (x) in-bound
licenses for Shrink-Wrap Code, (y) non-disclosure agreements, and
(z) non-exclusive end-user licenses (and related end-user agreements) with
respect to the Company’s products (in each case, pursuant to written agreements
that have been entered into in the ordinary course of business that do not
materially differ in substance from the Company’s standard form(s) including
attachments). The Company or its relevant Subsidiary has substantially performed
all obligations imposed upon it under all IP Licenses, and is not, nor to the
Knowledge of the Company is any other party thereto, in breach of or default
under any IP Licenses in any material respect, nor is there any event which
with notice or lapse of time or both would constitute a default under any IP
License. All of the IP Licenses to which Company or one of its Subsidiaries is
a party are valid, enforceable and in full force and effect, and will continue
to be so on identical terms immediately following the Closing except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and by general principles
of equity relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).


 


(b)                                 The operation of the business of Company and
its Subsidiaries, including in connection with the exploitation of the Company
Intellectual Property and the design, development, use, import, branding,
advertising, promotion, marketing, manufacture and sale of any products or
services, has not, does not, and when conducted following the Closing in the
manner presently contemplated in the respective business plans of the Company
and its Subsidiaries, will not, infringe upon, misappropriate or otherwise
violate any Intellectual Property Rights of others.


 


(c)                                  Except as set forth on Section 3.19(c) of the
Disclosure Schedule, no litigation is pending and no Claim has been made
against the Company or any Subsidiary or, to the Knowledge of the Company, is
threatened, alleging infringement, misappropriation or other violation by the
Company or any Subsidiary of any Intellectual Property Rights of others (nor
does the Company or any Subsidiary have Knowledge of any reasonable basis
therefor).


 


(d)                                 To the Knowledge of the Company, no Person is
infringing upon, misappropriating or otherwise violating the Company
Intellectual Property.


 


(e)                                  All the Company Intellectual Property is
valid and enforceable. Except as set forth on Section 3.19(e) of the Disclosure
Schedule, the Company and its Subsidiaries have taken all necessary and
desirable actions to maintain and protect each item of Company Intellectual
Property Rights, and to protect the secrecy, confidentiality and value of the
Company’s and its Subsidiaries’ Trade Secrets.


 


(f)                                    No former employer of any employee of the
Company or any Subsidiary, and no current or former client of any consultant of
the Company or any Subsidiary, has made a claim against the Company or any
Subsidiary or, to the Knowledge of the Company, against any other Person, that
such employee or such consultant is utilizing Intellectual Property of such
former employer or client.


 


(g)                                 Neither the Company nor any Subsidiary is a
party to or bound by any license or other agreement requiring the payment by
the Company or any Subsidiary of any royalty payment, excluding such agreements
relating to Shrink-Wrap Code licensed for use solely on the computers of the
Company or any Subsidiary.


 


16
















 


(h)                                 No employee of the Company or any Subsidiary
is in violation of any Requirement of Law applicable to such employee relating
to the Company Intellectual Property, or any term of any employment agreement,
patent or invention disclosure agreement or other contract or agreement
relating to the Company Intellectual Property and the relationship of such
employee with the Company or any Subsidiary or any prior employer.


 


(i)                                     Except as set forth on Section 3.19(i) of
the Disclosure Schedule, none of the Company’s or any Subsidiary’s Trade
Secrets, wherever located, has been disclosed to any Person other than
employees, representatives and agents of the Company and its Subsidiaries,
except as required pursuant to the filing of a patent application by the
Company or any Subsidiary.


 


(j)                                     Except as set forth on Section 3.19(j)
of the Disclosure Schedule, no director, officer, employee or consultant of the
Company or any Subsidiary (or persons the Company or any Subsidiary presently
intends to hire) owns any Intellectual Property that is used in, necessary to
or would otherwise be infringed by the operation of the business of Company and
its Subsidiaries as presently conducted and as contemplated in their respective
business plans to be conducted. Except as set forth on Section 3.19(j) of
the Disclosure Schedule, at no time during the conception or reduction to
practice of any of the Company’s or any Subsidiary’s Intellectual Property was
any developer, inventor or other contributor to such Intellectual Property
operating under any grants from any Governmental Authority or subject to any
employment agreement, invention assignment, nondisclosure agreement or other
Contractual Obligation with any Person that could adversely affect the Company’s
or any Subsidiary’s rights to the Company Intellectual Property.


 


(k)                                  All present and former employees, consultants
and other Person who have developed, or who have any employment or contractual
responsibilities that include the development of, any Intellectual Property for
the Company or any of its Subsidiaries, have executed and delivered valid and
enforceable proprietary invention agreements with the Company or such
Subsidiary, and are obligated under the terms thereof to assign all right,
title and interest to any Intellectual Property developed by such Person in
connection with such Person’s employment or contract to the Company or any
Subsidiary. Except as set forth on Section 3.19(k) of the Disclosure
Schedule, no such employee, consultant or other Person has excluded works or inventions
made prior to his employment with or work for the Company or such Subsidiary
from his assignment of inventions pursuant to such proprietary invention
agreements.


 


(l)                                     The Company and its Subsidiaries do not use
any information they collect from web site visitors or other parties in an
unlawful manner or in a manner that in any way violates a stated privacy policy
of the Company or any Subsidiary or the privacy rights of their customers.


 


(m)                               (i)  Except as set forth on Section 3.19(m)(i) of
the Disclosure Schedule, (a) no government funding, facilities or
resources of a university, college, other educational institution or research
center or funding from third parties was used in the development of the Company
Intellectual Property and (b) no federal, state, county, local or other
U.S or foreign governmental authority, instrumentality, agency or commission,
or university, college, other educational institution or research center has
any claim or right in or to the Company Intellectual Property. The Company has
complied with all material grant terms and other material requirements, terms
and conditions associated with the foregoing and has not (x) received any
notice from any Person that it is in default of any such requirements, terms or
conditions or (y) received any notice that any Person intends to seek a
compulsory license, exercise “march-in” rights, or take any similar adverse
action in connection with any of the foregoing.


 


17

















 


(ii) Except as set forth on Section 3.19(m)(ii) of the
Disclosure Schedule, no current or former employee, consultant or independent
contractor of the Company or any of its Subsidiaries who was involved in, or
who contributed to, the creation or development of any Company Intellectual
Property, has performed services for the government, a university, college or
other educational institution, or a research center, during a period of time
during which such employee, consultant or independent contractor was also
performing services for the Company or any of its Subsidiaries. In no instance
has any government, university, college or other educational institution or
research center thereby become entitled to any right, title or interest in any
Company Intellectual Property.


 


(n)                                 No past or current Company or Subsidiary
product (including any Company or Subsidiary product currently under
development) contains any code that is, in whole or in part, subject to the
provisions of any license to Publicly Available Software (as defined below).
All Publicly Available Software used by the Company or any Subsidiary has been
used in its entirety and without modification. Neither the Company nor any
Subsidiary has incorporated or otherwise used Publicly Available Software in a
manner that would (i) require, or condition the use or distribution of any
Company Intellectual Property on the disclosure, licensing or distribution of
any source code for any portion of such Company Intellectual Property, or (ii) otherwise
impose any limitation, restriction or condition on the right or ability of the
Company or any Subsidiary to use or distribute any Company Intellectual
Property owned by the Company or any Subsidiary or any Company or Subsidiary
products. “Publicly Available Software” means (i) any software that
contains, or is derived in any manner (in whole or in part) from, any software
that is distributed as free software, open source software (e.g., GNU General
Public License, Apache Software License), or pursuant to similar licensing and
distribution models; and (ii) any software that requires as a condition of
use, modification, and/or distribution of such software that such software or
other software incorporated into, derived from, or distributed with such
software (a) be disclosed or distributed in source code form; (b) be
licensed for the purpose of making derivative works; or (c) be
redistributable at no or minimal charge.


 


(o)                                 No computer software and code that is Company
Intellectual Property has been disclosed, delivered or licensed to any escrow
agent or other person in source-code form (together with any related
programmer comments and annotations, help text, data and data structures,
instructions and procedural, object-oriented and other code, which may be
printed out or displayed in human readable form, “Source Code.”  No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time, or both) will,
or would reasonably be expected to, result in the disclosure or delivery by the
Company, any of its Subsidiaries or any person acting on their behalf to any
person of any Source Code that is Company Intellectual Property.


 


(p)                                 The Company’s inverter technology and related
patents was not developed pursuant to any Government Contract or any grant or subsidy
with any Governmental Authority.


 


Section 3.20                                          Trade Relations. Except as set forth on Section 3.20 of
the Disclosure Schedule, since December 31, 2006, no customer or supplier
or group of customers or suppliers whose purchases or inventories provided to
the Company’s or any Subsidiary’s business are individually or in the aggregate
material to the Condition of the Company or any Subsidiary has (i) terminated,
cancelled or limited, (ii) made any adverse modification or change to or (iii) to
the Knowledge of the Company, threatened termination, cancellation or
limitation of, the business relationship of the Company, or the business of the
Company or any Subsidiary. Section 3.20 of the Disclosure Schedule sets
forth a complete and accurate list of the Company’s sales orders which have not
yet been processed, or backlog.


 


18

















 


Section 3.21                                          Insurance. The Company and each Subsidiary maintains and will continue to
maintain insurance of the types and in the amounts that the Company reasonably
believes are adequate for its business, including, but not limited to,
directors and officers insurance (“D&O Policies”) and insurance
covering all real and personal property owned or leased by the Company or any
Subsidiary against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against in the industry, all of which insurance is in
full force and effect. Section 3.21 of the Disclosure Schedule sets
forth a description and the amounts of the Company’s D&O Policies.


 


Section 3.22                                          Environmental Matters. The Company and each Subsidiary is and has
conducted its Hazardous Materials Activities in compliance with all applicable
Environmental Laws. Except as set forth on Section 3.22 of the Disclosure
Schedule, there is no civil, criminal or administrative judgment, action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter pending or, to the Knowledge of the Company or any Subsidiary,
threatened against the Company or any Subsidiary pursuant to Environmental Laws
and there are no past or present events, conditions, circumstances, activities,
practices, incidents, agreements, actions or plans which could reasonably be
expected to prevent compliance with, or which have given rise to or will give
rise to liability under, Environmental Laws. As of the Closing, except in
compliance with Environmental Laws and in a manner that could not reasonably be
expected to subject the Company or any of its Subsidiaries to liability, no
Hazardous Materials are present on any facility currently owned, operated,
occupied, controlled or leased by the Company or any of its Subsidiaries or
were present on any other facility at the time it ceased to be owned, operated,
occupied, controlled or leased by the Company. The Hazardous Materials
Activities of the Company and its Subsidiaries prior to the Closing have not
resulted in the exposure of any person to a Hazardous Material in a manner
which has caused or could reasonably be expected to cause an adverse health
effect to any such person. Neither the Company nor any Subsidiary has entered
into any agreement that may require it to guarantee, reimburse, pledge,
defend, hold harmless or indemnify any other party with respect to liabilities
arising out of Environmental Laws, or the Hazardous Materials Activities of the
Company, any of its Subsidiaries or any other Person. The Company and its
Subsidiaries have registered as a “producer” where required in accordance with
European Directive 2002/95/EC on the restriction of the use of certain
hazardous substances in electrical and electronic equipment (“RoHS Directive”)
and European Directive 2002/96/EC on waste electrical and electronic equipment
(“WEEE Directive”). The Seller Parties and the Purchased Companies have
verified with its suppliers that all products that the Company and its
Subsidiaries acquire from its suppliers and sell into the EU comply with the
RoHS Directive.


 


Section 3.23                                          Related Party Transactions. Except as described in the SEC Documents or
except as contemplated hereby, there are no existing material arrangements or
proposed material transactions between the Company or any Subsidiary and (i) any
officer, director or equityholder of the Company or any Subsidiary or any
member of the immediate family of any of the foregoing Persons or (ii) any
business (corporate or otherwise) which any of the foregoing Persons owns,
directly or indirectly, or in which any of the foregoing Persons has an
ownership interest, or which would otherwise be required to be disclosed
pursuant to Item 404 of Regulation S-K under the Securities Act.


 


Section 3.24                                          Broker’s, Finder’s or Similar Fees. Except as set forth on Section 3.24 of
the Disclosure Schedule, there are no brokerage commissions, finder’s fees or
similar fees or commissions payable by the Company in connection with the
transactions contemplated hereby based on any agreement, arrangement or
understanding with the Company or any action taken by any such Person.


 


Section 3.25                                          Internal Controls and Compliance with the
Sarbanes-Oxley Act. The
Company, its Subsidiaries and the Board of Directors are in compliance with the
Sarbanes-Oxley 


 


19

















 


Act
of 2002 and all rules and regulations promulgated thereunder (“Sarbanes-Oxley”)
and the rules and regulations of the Nasdaq. Except as disclosed in Section 3.25
of the Disclosure Schedule, the Company and its Subsidiaries maintain a system
of internal controls, including, but not limited to, disclosure controls and
procedures, internal controls over accounting matters and financial reporting,
an internal audit function and legal and regulatory compliance controls
(collectively, “Internal Controls”) that comply with the Securities Act,
the Exchange Act, Sarbanes-Oxley, the auditing principles, rules, standards and
practices applicable to auditors of “issuers” (as defined in Sarbanes-Oxley)
promulgated or approved by the Public Company Accounting Oversight Board and
the rules and  regulations of the Nasdaq
and are sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Internal Controls are overseen by the Audit Committee of the
Board of Directors (the “Audit Committee”) in accordance with the rules and
regulations of the Nasdaq. The Company has not publicly disclosed or reported
to the Audit Committee or the Board of Directors, and within the next 135 days
the Company or any Subsidiary does not reasonably expect to publicly disclose
or report to the Audit Committee or the Board of Directors, a significant
deficiency, material weakness, change in Internal Controls or fraud involving
management or other employees who have a significant role in Internal Controls,
any violation of, or failure to comply with, the Securities Laws, or any matter
which, if determined adversely, would have a material adverse effect on the
Condition of the Company or any Subsidiary.


 


Section 3.26                                          Solvency. The Company or any Subsidiary has not: (i) made a general
assignment for the benefit of creditors; (ii) filed any voluntary petition
in bankruptcy or suffered the filing of any involuntary petition by its
creditors; (iii) suffered the appointment of a receiver to take possession
of all, or substantially all, of its assets; (iv) suffered the attachment
or other judicial seizure of all, or substantially all, of its assets; (v) admitted
in writing its inability to pay its debts as they come due; or (vi) made
an offer of settlement, extension or composition to its creditors generally.


 


Section 3.27                                          Government Contracts and Government Bids.


 


(a)                                  Except as set forth on Section 3.27 of
the Disclosure Schedule, since September 1, 2001, the Company and the
Subsidiaries has been legally and validly awarded each of the Government
Contracts. Neither the Company nor any of its Subsidiaries is subject to any
financing arrangement or assignment of proceeds or claims with respect to the
performance of any Government Contract. Neither the Company nor any of its
Subsidiaries is a party to any Government Contract which requires the Company
or any of its Subsidiaries to obtain or maintain a security clearance with any
Governmental Authority. Section 3.27 of the Disclosure Schedule identifies
(i) each fixed price Government 
Contract which involves prospective payments or expenditures by the
Company or its Subsidiaries of more than $250,000, and (ii) each
Government  Contract that is material to
the Condition of the Company other than those filed as an exhibit to or
described in the SEC Documents.


 


(b)                                 Neither the Company nor any of its
Subsidiaries has received and no basis exists for any of the following with
respect to any of their Government Contracts: (i) a Termination For
Default, (ii) a Termination for Convenience, (iii) a cure or show
cause notice, (iv) a no cost termination, (v) the rescission or
cancellation of any contract, (vi) a Stop-Work or Suspension of Work
Order; (vii) the assessment of damages against the Company or its
Subsidiaries, (viii) any price reductions against the Company or its
Subsidiaries for defective cost or pricing data or, for any GSA Schedule Contract,
for incorrect cost or pricing information 


 


20

















 


or
data or (ix) a claim for recoupment or setoff of payments previously made
to the Company or its Subsidiaries.


 


(c)                                  All facts set forth by the Company or its
Subsidiaries in any certification, representation or disclosure, and all test
and inspection results, submitted by the Company or its Subsidiaries with
respect to any Government Contract or Government Bid were current, accurate and
complete in all material respects as of the date of submission and the Company
and its Subsidiaries has complied with such certifications, representations,
disclosures, tests and inspections.


 


Section 3.28                                          Export Controls. Except as set forth in Section 3.28 of
the Disclosure Schedule, the Company and each Subsidiary has been and is in
compliance in all material respects with all United States or foreign import
and export laws and regulations (including without limitation those laws under
the authority of U.S. Departments of Commerce (Bureau of Industry and Security)
codified at 15 CFR, Parts 700-799, Homeland Security (Customs and Border
Protection) codified at 19 CFR, Parts 1-199, State (Directorate of Defense
Trade Controls) codified at 22 CFR, Parts 103, 120-130 and Treasury (Office of
Foreign Assets Control) codified at 31 CFR, Parts 500-599). Except as set forth
in Section 3.28 of the Disclosure Schedule, neither the Company nor any
Subsidiary has, within the last five years, violated in any material respect
any United States or foreign import or export laws, been the subject of an
investigation or inquiry or subject to civil or criminal penalties imposed by a
Governmental Authority or made a voluntary disclosure with respect to
violations of such laws. Section 3.28 of the Disclosure Schedule sets
forth all valid and pending export control licenses, agreements and/or
approvals required to be amended, assumed or transferred as a result of, or in
connection with, the transactions contemplated hereby.


 


Section 3.29                                          Foreign Corrupt Practices Act. The Company, the Subsidiaries and, to the
Knowledge of the Company, their employees are in compliance with the U.S.
Foreign Corrupt Practices Act, as amended, including without limitation the
books and records provisions thereof.


 


Section 3.30                                          Outstanding Obligations. As of, and including, the Effective Date,
under the Existing Notes, the outstanding principal balance is $7,558,654 and
the outstanding interest due under the Existing Notes is $158,915. Interest on
the Existing Notes currently accrues at an annual rate of 8.8269%. The interest
payment due to the holders of the Existing Notes on October 31, 2007
equals $181,155; the principal payment due to the holders of the Existing Notes
on November 1, 2007 equals $472,115.


 


Section 3.31                                          Full Disclosure. The statements by the Company contained in
this Agreement, the exhibits to this Agreement, the certificates and documents
required to be delivered by the Company and its Subsidiaries to the Purchasers
under this Agreement and in the information delivered to the Purchasers and its
representatives, taken together as a whole, do not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements contained in this Agreement and any other Transaction
Documents not materially misleading in light of the circumstances under which
such statements were made.


 


ARTICLE IV

REPRESENTATIONS AND WARRANTIES BY THE PURCHASER


 


Each of the Purchasers hereby represents and
warrants, severally and not jointly, to the Company as of the date hereof and
as of each Closing Date as follows:


 


21

















 


Section 4.1                                                Existence and Power. Such Purchaser (a) is a limited partnership,
corporation, partnership or limited liability company duly organized and
validly existing under the laws of the jurisdiction of its formation and (b) has
the requisite partnership, corporate or limited liability company, as the case may be,
power and authority to execute, deliver and perform its obligations under
this Agreement and each of the other Transaction Documents to which it is a
party.


 


Section 4.2                                                Authorization; No Contravention. The execution, delivery and performance by
such Purchaser of this Agreement and each of the other Transaction Documents to
which it is a party and the transactions contemplated hereby and thereby, (a) have
been duly authorized by all necessary partnership, corporate or limited
liability company, as the case may be, action, (b) do not contravene
the terms of such Purchaser’s organizational documents, or any amendment
thereof, (c) do not violate, conflict with or result in any breach or
contravention of, or the creation of any Lien under, any Contractual Obligation
of such Purchaser or any Requirement of Law applicable to such Purchaser, and (d) do
not violate any Orders of any Governmental Authority against, or binding upon,
such Purchaser.


 


Section 4.3                                                Governmental Authorization; Third Party
Consents. No approval, consent,
compliance, exemption, authorization or other action by, or notice to, or
filing with, any Governmental Authority or any other Person, and no lapse of a
waiting period under any Requirement of Law, is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, such Purchaser of this Agreement and each of the other Transaction
Documents to which it is a party or the transactions contemplated hereby and
thereby.


 


Section 4.4                                                Binding Effect. This Agreement and each of the other
Transaction Documents to which it is a party have been duly executed and
delivered by such Purchaser and constitutes the legal, valid and binding
obligations of such Purchaser, enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting the enforcement of creditors’ rights generally or by
equitable principles relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).


 


Section 4.5                                                Restricted Securities. Such Purchaser understands that the Notes
to be issued to the Purchasers pursuant to this Agreement will not be
registered at the time of their issuance under the Securities Act for the
reason that the sale provided for in this Agreement is exempt pursuant to Section 4(2) of
the Securities Act and that the reliance of the Company on such exemption is
predicated in part on such Purchaser’s representations set forth herein.


 


Section 4.6                                                Accredited Investor. Such Purchaser is an “Accredited Investor”
within the meaning of Rule 501 of Regulation D under the Securities Act,
as presently in effect.


 


Section 4.7                                                Broker’s, Finder’s or Similar Fees. There are no brokerage commissions, finder’s
fees or similar fees or commissions payable by such Purchaser in connection
with the transactions contemplated hereby based on any agreement, arrangement
or understanding with such Purchaser or any action taken by such Purchaser.


 


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ARTICLE V

COVENANTS


 


While any Obligations are outstanding, without the
prior written consent of the holders of a majority in aggregate principal
amount of the outstanding Notes:


 


Section 5.1                                                Access. To the extent permitted by Law and not in contravention of the rights
of third parties, the Company shall permit representatives of the Purchasers
reasonable access to examine the corporate books and make copies or extracts
from such corporate books and to discuss the affairs, finances and accounts of
the Company and its Subsidiaries with the principal officers and employees of
the Company upon request, all during regular business hours, as often as the
Purchasers may reasonably request; provided,
however, that the Purchasers or
their representatives, as the case may be, shall hold all information so
received in strict confidence, shall not trade in the Common Shares while in
possession of material non-public information, and shall use such information
only for the purpose of enforcement of this Agreement or the Transaction
Documents and for the valuation of its investment in the Company.


 


Section 5.2                                                Tax Law Compliance. The Company shall pay all transfer, excise,
withholding and similar Taxes (not including income or franchise Taxes) that it
is obligated by applicable Law to so pay in connection with the issuance, sale,
delivery or transfer by the Company to the Purchaser of the Notes. The Company
shall not be responsible for any Taxes in connection with the transfer by the
Purchasers of any Notes or any other Taxes which it is not obligated by
applicable Law to pay in its capacity as borrower.


 


Section 5.3                                                Security Agreement, Pledge Agreement and
Guaranty. Upon the funding
of the Tranche 2 Notes, the Company and each domestic Subsidiary shall grant to
the Collateral Agent, for the benefit of the Purchasers, a perfected lien on
and security interest in, subject to Permitted Liens, all of its assets and
properties, whether now or hereafter existing, owned or acquired, all in
accordance with the terms of the Security Agreement and Pledge Agreement, as
applicable. The Company shall assist the Collateral Agent with any and all
filings necessary or appropriate and reasonably requested by the Collateral Agent
for the perfection of the security interests granted under this Agreement. Upon
the formation of a new domestic Subsidiary, the Company shall cause such
Subsidiary to execute the Guaranty and the Security Agreement.


 


Section 5.4                                                Stop-Orders. The Company will advise the Purchasers promptly after it receives any
notice of issuance by the SEC, any state securities commission or any other
regulatory authority of any cease trade order, stop order or of any Order
preventing or suspending any offering of or trading in any securities of the
Company, or of the suspension of the qualification of the Common Shares for
offering or sale in any jurisdiction, or the initiation of any Proceeding for
any such purpose.


 


Section 5.5                                                Listing. The Company shall use its reasonable best efforts to maintain the
listing of the Common Stock on the Nasdaq, including, without limitation, (i) taking
all actions reasonably related to maintaining Nasdaq listing standards, and (ii) refraining
from taking actions reasonably expected to cause the Company to not meet Nasdaq
listing standards. The Company shall provide the Purchasers copies of all
correspondence between the Company and the Nasdaq promptly upon receipt thereof.
If required by the Nasdaq, the Company shall apply to list the Common Stock on
The Nasdaq Global Market promptly (but in no event later than fifteen (15)
Business Days) upon becoming eligible to do so.


 


23

















 


Section 5.6                                                Market Regulations. The Company shall notify Nasdaq of, and
make all necessary filings with federal or state securities regulators in
accordance with their requirements in connection with, the transactions
contemplated by this Agreement and the other Transaction Documents, and shall
take all other necessary action and Proceedings as may be required and
permitted by applicable Law, for the legal and valid issuance of the Notes to
the Purchasers, and promptly provide copies of all such notices and filings to
the Purchasers.


 


Section 5.7                                                Reporting Requirements. The Company will timely make all filings
required to be filed with the SEC or any state securities regulator, including (i) all
periodic reports required under the Exchange Act; (ii) definitive proxy
statements, (iii) reports on Form 8-K report and (iv) such other
reports as the Company may be required to file from time to time pursuant
to applicable securities Laws, taking into account any and all extensions
granted or permitted by the applicable securities regulator, and refrain from
terminating its status as a reporting issuer.


 


Section 5.8                                                Information.


 


(a)                                  The Company shall deliver to the Purchasers
within thirty (30) days after the last day of each month, a copy of the
Financial Statements of the Company for such month and for the fiscal year to
date, certified by the chief financial officer or controller of the Company to
present fairly the financial condition, results of operations and other
information presented therein and to have been prepared in accordance with GAAP
consistently applied, subject to normal year end adjustments and except that no
footnotes need be included with such Financial Statements;


 


(b)                                 The Company shall deliver to the Purchasers
within ninety (90) days after the close of each fiscal year of the
Company, (i) copies of the audited Financial Statements of the Company for
such year, audited by nationally recognized independent certified public
accountants, and (ii) copies of the unqualified opinions and management
letters delivered by such accountants in connection with such Financial
Statements.


 


(c)                                  The Company shall deliver to the Purchasers
as soon as possible and in no event later than five (5) Business Days
after they are sent, made available or filed, copies of all registration
statements and reports filed by the Company with the Securities and Exchange
Commission and all reports, proxy statements and financial statements sent or
made available by the Company to its shareholders generally.


 


(d)                                 All material non-public information and data,
in whatever form, obtained by the Purchasers in respect of the Company and the
subject-matter of this Agreement (the “Confidential Information”) shall
be held by the Purchasers in the strictest confidence and shall not be
disclosed to any third party; provided,
that such Confidential Information may be disclosed if the disclosure (i) is
made with the consent of the Company, (ii) is made to an Affiliate
(including any general partner, manager, director, officer or employee) of any
Purchaser or of any Affiliate, and such Affiliate agrees to be subject to such
confidentiality provisions, (iii) is required by Law or by a Governmental
Authority, (iv) is in respect of information or data that is in the public
domain at the time of the disclosure through no fault of the Purchaser or any
party to which it has disclosed the information, (v) is made to the
Purchasers’ advisors or representatives, which agree to maintain the
confidentiality of the Confidential Information or (vi) is received from a
third party not subject to confidentiality obligations with respect to such
information. The Purchasers shall use commercially reasonably efforts to cause
their Affiliates, employees, members, agents, representatives, advisors and
other related parties, to observe the restrictions set forth this Section 5.8(b) as
if 


 


24

















 


they
were the Purchaser, and the Purchasers shall be responsible to the Company for
any breach of the provisions of this Section 5.8(b) by any of
such parties.


 


Section 5.9                                                Insurance.
The Company shall and shall cause each Subsidiary to maintain insurance (i) covering,
without limitation, fire, theft, burglary, public liability, property damage,
product liability and workers’ compensation and (ii) on all property and
assets material to the operation of the business, all in amounts customary for
the Company’s industry. The Company shall, and shall cause each of its
Subsidiaries to, pay all insurance premiums payable by them.


 


Section 5.10                                          Properties. The Company will keep its properties in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make
all necessary repairs, renewals, replacements, additions and improvements
thereto. The Company will at all times comply in all material respects with
each provision of all leases to which it is a party or under which it occupies
property.


 


Section 5.11                                          Notification of Certain Matters. Promptly upon the occurrence thereof,
written notice of: (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which is likely to cause any representation or
warranty of the Company contained in this Agreement to be untrue or inaccurate
at or prior to a Closing Date, (ii) any failure of the Company to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (iii) any other Event of Default under the
Notes or any other event or circumstance that could reasonably be expected to
result in a Material Adverse Effect, or (iv) any holder of an Existing
Note electing to convert all or a portion of such Existing Note into shares of
Common Stock in accordance with the terms thereof; provided, however, that the
delivery of any notice pursuant to this Section 5.11 shall not (a) limit
or otherwise affect any remedies available to the party receiving such notice
or (b) constitute an acknowledgment or admission of a breach of this
Agreement. No disclosure by the Company pursuant to this Section 5.11
shall be deemed to amend or supplement the Disclosure Schedule or prevent
or cure any misrepresentations, breach of warranty or breach of covenant.


 


Section 5.12                                          Taxes and Other Indebtedness. The Company and its Subsidiaries shall
promptly pay and discharge when due (i) all Taxes prior to the date upon
which penalties accrue thereon, (ii) all Indebtedness which, if unpaid,
could become a Lien upon the property of the Company or its Subsidiaries and (iii) all
other Indebtedness which, if unpaid, could reasonably be expected to have a
Material Adverse Effect, except such Indebtedness as may in good faith be
contested or disputed, or for which arrangements for deferred payment have been
made, provided that in each such case appropriate reserves are maintained.


 


Section 5.13                                          General Business Operations. Each of the Company and its Subsidiaries
shall (i) preserve and maintain its corporate existence and all of its
rights, privileges and franchises reasonably necessary to the conduct of its
business, (ii) conduct its business activities in compliance with Law
applicable to such Person, the violation of which could reasonably be expected
to have a Material Adverse Effect, (iii) maintain its chief executive
office and principal place of at the address specified in Section 8.7
unless it shall have given Purchasers thirty (30) days’ prior written notice of
its intent to change the location thereof, and (iv) not change its
jurisdiction of organization, entity type or any organizational identification
number issued by its state of incorporation unless it shall have given
Purchasers thirty (30) days’ prior written notice of its intent to make such
change.


 


25

















 


Section 5.14                                          Observer Rights. As of the Effective Date, each of RockPort
and NGP shall be allowed one representative (the “RockPort Observer” and
the “NGP Observer,” respectively, and together, the “Observers”)
of its choice, to attend all meetings of the Board of Directors and all
meetings of committees of the Board of Directors in a nonvoting capacity. In
connection therewith, the Company shall provide the Observers with copies of
all notices, minutes, consents and other materials, financial or otherwise,
which the Company provides to its Board of Directors; provided, however, that
the Company reserves the right to exclude such Observers from access to any
material or meeting or portion thereof if the Company in good faith believes
that such exclusion is necessary to preserve the attorney-client privilege.
This right shall expire as to RockPort or NGP at such time that such entity no
longer holds any Notes.


 


Section 5.15                                          Liquidity Covenant. The Company shall maintain at all times
cash and Cash Equivalents, measured on a consolidated basis, of at least
$1,000,000. The Company shall notify the Purchasers promptly in the event that (i) the
Company’s cash and Cash Equivalents, measured on a consolidated basis, falls
below $1,000,000 or (ii) the Company reasonably expects its cash and Cash
Equivalents, measured on a consolidated basis, to fall below $1,000,000.


 


Section 5.16                                          Indebtedness. Neither the Company nor any of its
Subsidiaries shall create, incur, assume or permit to exist any Indebtedness
other than Permitted Indebtedness.


 


Section 5.17                                          Liens. Neither the Company nor any of its Subsidiaries shall create, incur,
assume or permit to exist any Lien on or with respect to any of its assets or
property of any character, whether now owned or hereafter acquired, except for
Permitted Liens.


 


Section 5.18                                          Asset Dispositions. Neither the Company nor any of its
Subsidiaries shall sell, lease, transfer, license or otherwise dispose of
(collectively, a “Transfer”) any of its assets or property, whether now
owned or hereafter acquired, except Transfers in the ordinary course of its
business consisting of (A) the sale of inventory, (B) the
non-exclusive licensing of Intellectual Property, or (C) the sale of
worn-out or obsolete equipment.


 


Section 5.19                                          Mergers, Acquisitions, Etc.. Neither the Company nor any of its
Subsidiaries shall consolidate or merge with or into any other Person or permit
any other Person to merge into it, or acquire all or substantially all of the
assets or the assets constituting a division or the capital stock of any other
Person. No Subsidiary shall, nor shall the Company permit any Subsidiary to,
issue any Equity Securities other than those in existence as of the Effective
Date.


 


Section 5.20                                          Investments. Neither the Company nor any of its Subsidiaries shall make any
Investment except for Permitted Investments. Neither the Company nor any of its
Subsidiaries shall create, acquire or permit to exist any Subsidiary other than
those in existence as of the Effective Date.


 


Section 5.21                                          Dividends, Redemptions, Etc.. Other than the issuance of Common Stock
upon the conversion of outstanding warrants or options and/or the conversion of
convertible securities outstanding as of the date of this Agreement or as a
payment of principal or interest on the Existing Notes in accordance with the
terms thereof, neither Company nor any of its Subsidiaries shall (i) pay
any dividends or make any distributions on its Equity Securities; (ii) purchase,
redeem, retire, defease or otherwise acquire for value any of its Equity
Securities (other than repurchases pursuant to the terms of employee stock
purchase plans, employee restricted stock agreements or similar arrangements in
an aggregate 


 


26

















 


amount
not to exceed One Million Dollars ($1,000,000)); (iii) return any capital
to any holder of its Equity Securities; (iv) make any distribution of
assets, Equity Securities, obligations or securities to any holder of its
Equity Securities; or (v) set apart any sum for any such purpose;
provided, however, that any Subsidiary may pay cash dividends to Company
and the Company may pay dividends payable solely in Common Stock.


 


Section 5.22                                          Indebtedness Payments. Neither Company nor any of its Subsidiaries
shall (i) prepay, redeem, purchase, defease or otherwise satisfy in any
manner prior to the scheduled repayment thereof any Indebtedness for borrowed
money (other than amounts due under the Notes or the Existing Notes in
accordance with the terms of this Agreement) or lease obligations, (ii) amend,
modify or otherwise change the terms of any Indebtedness for borrowed money
(other than the Obligations) or lease obligations so as to accelerate the
scheduled repayment thereof or (iii) repay any notes to officers,
directors or shareholders.


 


Section 5.23                                          Affiliate Transactions. Neither Company nor any of its Subsidiaries
shall enter into any contractual obligation with any Affiliate or engage in any
other transaction with any Affiliate except in the ordinary course of business
upon terms at least as favorable to the Company or such Subsidiary as an
arms-length transaction with unaffiliated Persons.


 


Section 5.24                                          Option Agreements. Unless otherwise approved by the holders of
a majority in aggregate principal amount of the outstanding Notes, the Company
shall not amend any option agreements that are outstanding on the date of this
Agreement to provide for the acceleration of vesting or to extend the exercise
period during which an option can be exercised following the termination of an
optionee’s service provider status.


 


Section 5.25                                          Search Committee. Promptly following the Effective Date, the
Board of Directors shall establish and maintain the existence of a special
committee of the Board of Directors with (i) the power to initiate
searches for, and to recruit, retain and replace the chief executive officer of
the Company and (ii) the ability to retain an executive search firm to
manage any search for a chief executive officer initiated by the Search
Committee; provided, that such committee in its sole discretion may elect
to refer a decision on such matters to the Board of Directors.


 


Section 5.26                                          Offer to Purchase Notes. In the event that the transactions
contemplated by the Offer to Purchase Notes are not consummated on or prior to November 9,
2007 for any reason, the Company shall take all actions necessary to effect the
prepayment of the Existing Notes in accordance with Section 12(b) thereof
as soon as practicable.


 


Section 5.27                                          Notice of Prepayment. Promptly following the Effective Date, but
in no event greater than two (2) Business Days following the Effective
Date, the Company shall deliver the Notice of Prepayment to the holders of the
Existing Notes.


 


Section 5.28                                          Termination of Covenants. Other than as provided for by their terms,
the covenants set forth in this Article V shall continue in effect until
all Obligations, including the full principal amount, all accrued but unpaid
interest outstanding and any other amounts owed on the Notes are repaid in
full.


 


27

















 


ARTICLE VI

PREEMPTIVE RIGHTS


 


Section 6.1                                      Subsequent Offerings. Each Purchaser shall have a right of first
refusal to purchase its pro rata share
of fifty percent (50%) of all New Securities (as defined below) that the
Company may, from time to time, propose to sell and issue after the date of
this Agreement. Each Purchaser’s pro rata
share is based on such Purchaser’s pro rata portion of the aggregate
principal amount of the Notes purchased hereunder. Each Purchaser shall be
entitled to apportion the right to purchase New Securities among itself and its
general partners, limited partners, members and Affiliates in such proportions
as it deems appropriate.


 


Section 6.2                                      Exercise of Rights. If the Company proposes to issue any New
Securities, it shall give each Purchaser written notice of its intention,
describing the New Securities, the price and the terms and conditions upon which
the Company proposes to issue the same. Each Purchaser shall have twenty (20)
days from the giving of such notice to agree to purchase its pro rata share of
fifty percent (50%) of the New Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased. Notwithstanding
the foregoing, the Company shall not be required to offer or sell such New
Securities to any Purchaser who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.


 


Section 6.3                                      Issuance of New Securities to Other Persons. If not all of the Purchasers elect to
purchase their pro rata share of
fifty percent (50%) of the New Securities, then the Company shall promptly
notify in writing the Purchasers who do so elect and shall offer such
Purchasers the right to acquire such unsubscribed shares. Each such Purchaser
shall have ten (10) days after receipt of such notice to notify the
Company of its election to purchase all or a portion thereof of the
unsubscribed shares. If the Purchasers fail to exercise in full the rights of
first refusal, the Company shall have ninety (90) days thereafter to sell the
New Securities in respect of which the Purchaser’s rights were not exercised,
at a price and upon general terms and conditions not more favorable to the
purchasers thereof than specified in the Company’s notice to the Purchasers
pursuant to Section 6.2 hereof. If the Company has not sold such New
Securities within ninety (90) days of the notice provided pursuant to Section 6.2,
the Company shall not thereafter issue or sell any New Securities, without
first offering such securities to the Purchasers in the manner provided above.


 


Section 6.4                                      Termination. The preemptive rights provided in this Article VI shall remain
in existence until all Obligations hereunder are repaid in full; provided,
however, that if the Company does not consummate a bona fide financing
transaction involving the issuance and sale of Common Stock or Common Stock
Equivalents to the Purchasers prior to the repayment in full of the Obligations
hereunder on substantially the terms and conditions set forth in a term sheet
dated on or around the date of this Agreement, the preemptive rights provided
in this Article VI shall remain in existence until the earlier to occur of
November 30, 2009 or the second anniversary of the Tranche 2 Closing Date.


 


Section 6.5                                      Definition of New Securities. For the purposes of this Article VI, “New
Securities” shall mean, whether or not authorized on the date hereof, any
Common Stock, Common Stock Equivalent or any other security of the Company or
any of its subsidiaries; provided, however, that “New Securities” do not
include the following:


 


28

















 


(a)                                  any securities that are issued or granted, to
officers, directors and employees of, or consultants or advisors to, the
Company pursuant to a stock grant, employee restricted stock purchase
agreement, option plan or purchase plan or other stock incentive program or
otherwise as part of their compensation arrangement, where such issuance
and grants are approved by the Board of Directors, or any securities issued in
respect of the exercise of any such securities;


 


(b)                                 any securities issued in connection with any
stock split, stock dividend, reclassification, reorganization or similar event
by the Company;


 


(c)                                  any securities issued or to be issued
pursuant to an acquisition or merger of another company that is approved by the
Board of Directors (not primarily for the purpose of obtaining cash);


 


(d)                                 any securities issued upon the conversion of
convertible securities or upon the exercise or rights, options or warrants, in
each case outstanding as of the Closing Date (as defined in the Purchase
Agreement), provided that such exercise or conversion occurs in accordance with
the terms thereof without amendment or modification;


 


(e)                                  any securities issued in connection with the
payment of principal and/or interest pursuant to the Existing Notes;


 


(f)                                    securities issued in connection with a bona
fide joint venture, strategic partnership or strategic alliance approved by the
Board of Directors, the primary purpose of which is not to raise capital; and


 


(g)                                 any Common Stock or Common Stock Equivalents
issued pursuant to a bona fide firm commitment underwritten public offering
with a nationally recognized underwriter in an aggregate offering amount
greater than $20,000,000.


 


ARTICLE VII

LEGENDS


 


Section 7.1                                                Legends. Each certificate representing any of the Notes shall bear legends
substantially in the following form:


 


“THIS NOTE HAS BEEN ACQUIRED
BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO THE DISTRIBUTION THEREOF. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND ANY APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN
COMPLIANCE WITH SUCH STATE SECURITIES LAWS, IN COMPLIANCE WITH RULE 144
UNDER THE SECURITIES ACT, OR AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR COMPLIANCE IS NOT
REQUIRED.”


 


The Company may instruct its transfer agent not
to register the transfer of the Notes, unless the conditions specified in the
foregoing legend are satisfied.


 


Section 7.2                                                Removal of Legends. Any legend endorsed on a certificate
pursuant to Section 6.1 and the stop transfer instructions with
respect to such Notes as it applies to Section 6.1 


 


29

















 


shall
be removed and the Company shall issue a certificate without such legend to the
holder of such Notes (i) if such legend may be properly removed under
the terms of Rule 144 promulgated under the Securities Act or another
exemption under the Securities Act or (ii) if such holder provides the
Company with an opinion of counsel for such holder, reasonably satisfactory to
legal counsel for the Company, to the effect that a sale, transfer or
assignment of such Notes may be made without Registration.


 


ARTICLE VIII

INDEMNIFICATION


 


Section 8.1                                                Indemnity. The Company agrees to indemnify and defend and hold harmless the Purchasers,
their Affiliates, successors and assigns and each of their respective officers,
directors, members, partners, employees and agents (each, a “Indemnified
Party,” and collectively, the “Indemnified Parties”) from and
against, and agrees to pay or cause to be paid to the Indemnified Parties all
amounts equal to the sum of, any and all claims, demands, costs, expenses,
losses and other liabilities of any kind (“Losses”) that the Indemnified
Parties may incur or suffer (including without limitation all reasonable
legal fees and expenses) which arise or result from any breach of any of its
representations or warranties, or failure by the Company to perform any of
its covenants or agreements, in, or any transactions contemplated by, this
Agreement or any other Transaction Document or any certificate or document
delivered pursuant to this Agreement or any other Transaction Document,
including but not limited to any third party claims arising or resulting in
connection therewith, except to the extent such Losses arise out of the gross
negligence or willful misconduct of such Indemnified Party. The rights of the
Purchasers hereunder shall be in addition to, and not in lieu of, any other
rights and remedies which may be available to them by law or under this
Agreement or the Transaction Documents.


 


Section 8.2                                                Procedures. If a third party shall notify an Indemnified Party with respect to
any matter that may give rise to a claim for indemnification under the
indemnity set forth above in Section 7.1, the procedures set forth
below shall be followed.


 


(a)                                  Notice. The respective Indemnified Party shall give to the Company (the “Indemnifying
Party”) written notice of any Claim for which indemnity may be sought
under Section 7.1 promptly but in any event within 30 days after
the Indemnified Party receives notice thereof, provided,
however, that failure by the
Indemnified Party to give such notice shall not relieve the Indemnifying Party
from any liability it shall otherwise have pursuant to this Agreement except to
the extent that the Indemnifying Party is actually prejudiced by such failure. Such
notice shall set forth in reasonable detail (x) the basis for such
potential claim and (y) the dollar amount, or an estimated dollar amount,
as applicable, of such claim. The Indemnifying Party shall have a period of 30
days within which to respond thereto. If the Indemnifying Party does not
respond within such 30-day period, the Indemnifying Party shall be deemed to
have accepted responsibility for such indemnity.


 


(b)                                 Defense of Claim. With respect to a claim by a third party
against an Indemnified Party for which indemnification may be sought under
this Agreement, the Indemnifying Party shall have the right, at its option and
subject to the remainder of this Section 7.2, to be represented by
counsel of its choice and to assume the defense or otherwise control the
handling of any Claim, which is set forth in the notice sent by the Indemnified
Party, by notifying the Indemnified Party in writing to such effect within 30
days of receipt of such notice; provided,
however, that the Indemnified
Party shall have the right to employ counsel to represent it if, in the
Indemnified Party’s reasonable judgment based upon the advice of counsel, it is
advisable in light of the separate interests of the Indemnified Party, to be
represented by separate counsel (including, as applicable, local counsel), and
in that event the reasonable fees and expenses of one such 


 


30

















 


separate
counsel shall be paid by the Indemnifying Party plus appropriate local counsel,
if applicable, for all Indemnified Parties; and, provided  further,
that the Indemnifying Party shall not have the right to assume the defense of
such Claim unless (i) the Indemnifying Party acknowledges fully the rights
of the Indemnified Party (and does not contest, as a whole or in part) the
Indemnified Party’s indemnification rights for the Claim, (ii) the counsel
selected by the Indemnifying Party is reasonably satisfactory to the
Indemnified Party, (iii) the Indemnified Party is kept informed of all
material developments and is furnished copies of all material papers filed or
sent to or from the opposing party or parties and (iv) the Indemnifying
Party prosecutes the defense of such Claim with commercially reasonable
diligence in a manner which does not materially prejudice the defense of such
Claim. If the Indemnifying Party does not give timely notice in accordance with
the preceding sentence, the Indemnifying Party shall be deemed to have given
notice that it does not wish to control the handling of such Claim. In the
event the Indemnifying Party elects (by notice in writing within such 30-day
period) to assume the defense of or otherwise control the handling of any such
Claim for which indemnity is sought, the Indemnifying Party shall indemnify and
hold harmless the Indemnified Party from and against any and all reasonable
professional fees (including attorneys’ fees, accountants, consultants and
engineering fees) and investigation expenses incurred by the Indemnified Party
after it provides notice under clause (a) and prior to such election,
notwithstanding the fact that the Indemnifying Party may not have been so
liable to the Indemnified Party had the Indemnifying Party not elected to
assume the defense of or to otherwise control the handling of such Claim. In
the event that the Indemnifying Party does not assume the defense or otherwise
control the handling of such matter, the Indemnified Party may retain
counsel, as an indemnification expense, to defend such Claim.


 


(c)                                  Final Authority. The Parties shall cooperate in the defense
of any such Claim and each shall make available all books and records which are
relevant in connection with such claim or litigation. In connection with any
Claim with respect to which the Indemnifying Party has assumed the defense or
control, the Indemnifying Party will not consent to the entry of any judgment
or enter into any settlement with respect to any matter which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the written
consent of the Indemnified Party, which shall not be unreasonably withheld. In
connection with any Claim with respect to which the Indemnifying Party has not
assumed the defense or control, the Indemnified Party may not compromise
or settle such Claim without the consent of the Indemnifying Party, which shall
not be unreasonably withheld or delayed.


 


(d)                                 Claims Between the Indemnifying Party and the
Indemnified Party. Any Claim
for indemnification under this Agreement which does not result from the
assertion of a Claim by a third party shall be asserted by written notice given
by the Indemnified Party to the Indemnifying Party. The Indemnifying Party
shall have a period of 30 days within which to respond thereto.


 


ARTICLE IX

MISCELLANEOUS


 


Section 9.1                                                Waivers and Amendments. Unless otherwise provided, any provision of
this Agreement may be amended, waived or modified upon the written consent
of the Company and the holders of a majority in aggregate principal amount of
the outstanding Notes.


 


Section 9.2                                                Governing Law. This Agreement and all actions arising out
of or in connection with this Agreement shall be governed by and construed in
accordance with the Laws of the State of New York, without regard to the
conflict of laws provisions thereof.


 


31

















 


Section 9.3                                                Exclusive Jurisdiction. In the event of any action or Proceeding
brought by a Party arising out of or in connection with this Agreement or any
other Transaction Document, the Parties consent to the exclusive jurisdiction
of the federal and state courts located in the State of New York for
resolutions of such dispute, and agree not to contest such exclusive
jurisdiction or seek to transfer any action relating to such dispute to any
other jurisdiction. Each of the Parties hereby submits to personal jurisdiction
and waives any objection to venue in the County of New York. Service of process
on the Parties in any action arising out of or relating to this Agreement shall
be effective if mailed to the Parties in accordance with Section 8.7
of this Agreement.


 


Section 9.4                                                Jury Waiver. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT.


 


Section 9.5                                                Entire Agreement. This Agreement and the other Transaction
Documents constitute the full and entire understanding and agreement among the
Parties with regard to the subjects of this Agreement and the other Transaction
Documents.


 


Section 9.6                                                Fees and Expenses. At the Tranche 2 Closing, the Company shall
pay all reasonable out-of-pocket expenses and fees and disbursements, including
reasonable attorneys’ and accountants’ fees, incurred by the Purchasers and
their representatives in connection with (i) the negotiation and
consummation of the transactions contemplated hereunder, including any due
diligence or other review conducted prior to the negotiation of this Agreement,
up to an aggregate amount of $160,000, (ii) any amendment, modification or
waiver, or consent with respect to, any of the Transaction Documents or any
documentation or agreements in connection therewith requested by the Company
(the “Transaction Expenses”) and (iii) in connection with any
attempt to enforce any right of the Purchasers against the Company, any
Subsidiary, or any Person that may be obligated to the Purchasers by
virtue of any of the Transaction Documents.


 


Section 9.7                                                Notices. All notices, requests and other communications hereunder shall be in
writing and shall be deemed to have been duly given at the time of receipt if
delivered by hand, or at the time the sender receives confirmation of the
facsimile transaction if transmitted by facsimile, or three days after being
mailed, registered or certified mail, return receipt requested, with postage
prepaid, or one day after being mailed via overnight courier service, to the
applicable Parties at the address or facsimile number, as applicable, stated below
or if any Party shall have designated a different address or facsimile number
by notice to the other Parties given as provided above, then to the last
address or facsimile number so designated.


 


If to the Company:


 


SatCon Technology Corporation


27 Drydock Avenue


Boston, MA 
02110


Telephone: (617) 897-2400


Facsimile: (617) 897-2401


Attention: 
David B. Eisenhaure


 


32

















 


with a copy to:


 


Greenberg Traurig, LLP


One International Place


Boston, MA 02110


Telephone: (617) 310-6000


Facsimile: (617) 310-6001


Attention: Jonathan Bell, Esq.


 


If to the Purchasers, the address set forth opposite
such Purchaser’s name on Schedule 1.1 hereto with a copy to:


 


Wilson Sonsini Goodrich & Rosati, P.C.


One Market Street


Spear Tower, Suite 3300


San Francisco, California 94105-1126


Telephone: 
(415) 947-2000


Facsimile: 
(415) 947-2099


Attention: Robert G. O’Connor, Esq.


 


Section 9.8                                                Validity. If any provision of this Agreement or any of the Transaction
Documents shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions of this Agreement or such Transaction Document shall not in any way
be affected or impaired thereby.


 


Section 9.9                                                Counterparts. This Agreement may be executed in any
number of counterparts. Signatures on this Agreement may be communicated
by facsimile or electronic transmission and shall be binding upon the parties
so transmitting their signatures. Counterparts with original signatures shall
be provided to the other parties following the applicable facsimile or
electronic transmission, provided
that the failure to provide the original counterpart shall have no effect
on the validity or the binding nature of this Agreement. No Party shall raise
facsimile or electronic delivery of a signature or the fact that any signature
or agreement or instrument was transmitted or communicated by a facsimile or e-mail
as a defense to the formation or enforceability of a contract and each such
Party forever waives any such defense.


 


Section 9.10                                          Publicity.


 


(a)                                  Neither any Purchaser nor the Company shall
issue any press release or make any public disclosure regarding the
transactions contemplated hereby unless such press release or public disclosure
is approved by those parties mentioned in such press release or public
disclosure in advance. Notwithstanding the foregoing, each of the Parties may,
if required by the SEC, Nasdaq or other regulatory bodies, make such public
disclosures with respect to the transactions contemplated hereby as each may be
advised by counsel is legally necessary or advisable; provided, however,
that the disclosing Party shall give the other Party prior written notice of
such requirement and a copy of the proposed public disclosure, in all cases
with sufficient time for such other Parties to seek a protective order or other
limit on the proposed public disclosure (unless the disclosing party would
suffer penalties or sanctions for failure to immediately disclose such
information).


 


33

















 


(b)                                 The Parties hereto acknowledge that (i) immediately
following the execution of this Agreement, the Company intends to issue a press
release announcing the execution of this Agreement and (ii) within four
Business Days of the date of this Agreement, the Company intends to file with
the SEC a current report on Form 8-K regarding the transactions
contemplated hereby, which report will include certain of the Transaction
Documents attached as exhibits thereto. The Company hereby agrees that it shall
provide the Purchasers with a copy of any such current report on Form 8-K
at least two Business Days prior to the intended date of such filing and shall
not file such report unless approved in advance by the Purchasers, which
approval shall not be unreasonably withheld or delayed.


 


Section 9.11                                          Succession and Assignment. Except as otherwise expressly provided in
this Agreement and subject to the other Transaction Documents and applicable
Law, the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the successors, assigns, permitted transferees, heirs, executors
and administrators of the Parties. This Agreement may not be assigned by
any Party without the prior written consent of the other Parties; provided, however,
that the Purchasers may assign their rights hereunder to an Affiliate of
such Purchaser without the prior written consent of the Company, so long as the
Purchaser provides prompt written notice to the Company of such assignment.


 


Section 9.12                                          Further Assurances. Each of the Parties shall promptly do,
make, execute, deliver, or cause to be done, made, executed or delivered, all
such further acts, documents and things as the other Parties may require,
acting reasonably, from time to time, for the purpose of giving effect to this
Agreement and shall take such steps as may be reasonably within its power
to implement the full extent of this Agreement.


 


Section 9.13                                          No Strict Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement and each other Transaction
Document. In the event an ambiguity or question of intent or interpretation
arises, this Agreement and each other Transaction Document shall be construed
as if drafted jointly by the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement or any other Transaction Document.


 


[Remainder of page intentionally left blank]


 


34

















 


IN WITNESS WHEREOF, the undersigned have executed,
or have caused to be executed, this Note Purchase Agreement on the date first
written above.


 


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  SATCON TECHNOLOGY CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ David B. Eisenhaure

  
	
   

  	
   

  	
  Name: David B. Eisenhaure

  
	
   

  	
   

  	
  Title: President/CEO

  



 

















 


	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  ROCKPORT CAPITAL PARTNERS II, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  RockPort Capital II, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ David J. Prend

  
	
   

  	
   

  	
  Name: David J. Prend

  
	
   

  	
   

  	
  Title:

  



 

















 


	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  NGP ENERGY TECHNOLOGY PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  NGP ETP, L.L.C.

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Philip J. Deutch

  
	
   

  	
   

  	
  Name: Philip J. Deutch

  
	
   

  	
   

  	
  Title: Authorized Member

  



 


[Signature Page To Note
Purchase Agreement]


 

















 


SCHEDULE 1.1


 


Schedule of Purchasers


 


	
  Purchaser

  	
   

  	
  Principal Amount

  of Tranche 1 Note

  	
   

  	
  Principal Amount

  of Tranche 2 Note

  	
   

  	
  Wire Instructions for

  Payments of Principal and

  Interest

  
	
  RockPort Capital Partners II, L.P.  

  160 Federal Street  
 18th Floor  
 Boston, MA 02110–1700  
 Phone: (617) 912-1420  
 Fax: (617) 912-1449

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Citizens Bank  

  40 Summer Street  
 Boston, MA 02110  
 Account #: 130-611-4389  
 ABA # 011-500-120  
 Account name: Rockport 

  Capital Partners II LP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NGP Energy Technology Partners, L.P.

  1700 K Street NW, Suite 750  

  Washington, D.C. 20006  
 Phone: (202) 536-3920  
 Fax: (202) 536-3921

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  750,000

  	
   

  	
  $

  	
  9,250,000

  	
   

  	
   

  
									



 
















 


SCHEDULE I


 


“Affiliate” shall mean, with respect to any
Person, (a) each Person that, directly or indirectly, owns or controls,
whether beneficially or as a trustee, guardian or other fiduciary, twenty
percent (20%) or more of any class of Equity Securities of such Person, (b) each
Person that controls, is controlled by or is under common control with such
Person or any Affiliate of such Person or (c) each of such Person’s
officers, directors, joint venturers and partners; provided, however,
that in no case shall a Purchaser be deemed to be an Affiliate of the Company
or any of its Subsidiaries for purposes of this Agreement or the other
Transaction Documents. For the purpose of this definition, “control” of a
Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether through
the ownership of voting securities, by contract or otherwise.


 


“Agreement” has the meaning set forth in the
preamble to this Agreement.


 


“Amended and Restated Tranche 1 Note” has the
meaning set forth in Section 1.3(a).


 


“Assets” has the meaning set forth in Section 3.17.


 


“Board of Directors” has the meaning set
forth in Section 2.2(c).


 


“Business Day” means any day other than a
Saturday, Sunday or other day on which commercial banks in the State of New
York are authorized or required by law or executive order to close.


 


“By-laws” means the By-laws of the Company,
and all amendments thereto, in effect on the Closing Date, as the same may be
amended from time to time.


 


“Cash Equivalents” shall mean (a) marketable
direct obligations issued or unconditionally guaranteed by the United States or
any agency or any State thereof having maturities of not more than one (1) year
from the date of acquisition; (b) commercial paper maturing no more than
one (1) year after its creation and having the highest rating from either
Standard & Poor’s Rating Group or Moody’s Investors Service, Inc.,
(c) certificates of deposit issued maturing no more than one (1) year
after issue; and (d) money market funds at least ninety-five percent (95%)
of the assets of which constitute Cash Equivalents of the kinds described in
clauses (a) through (c) of this definition.


 


“Certificate of Incorporation” means the
Certificate of Incorporation of the Company and all certificates of amendment
and certificates of designation thereto, in effect on the Closing Date, as the
same may be amended from time to time.


 


“Claims” has the meaning set forth in Section 3.5.


 


“Code” means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated thereunder.


 


“Collateral Agent” shall have the meaning
given such term in the Security Agreement.


 


“Common Stock” means the common stock, par
value $0.01 per share, of the Company.


 


I-1

















 


“Common Stock Equivalents” means any security
or obligation which is by its terms, directly or indirectly, convertible into
or exchangeable or exercisable into or for shares of Common Stock, and any
option, warrant or other subscription or purchase right with respect to Common
Stock or any Common Stock Equivalent.


 


“Commonly Controlled Entity” means any entity
which is under common control with the Company within the meaning of Code section 414(b),
(c), (m) or (o).


 


“Company” has the meaning set forth in the
preamble to this Agreement.


 


“Company Intellectual Property” means all
Intellectual Property owned by or exclusively licensed to the Company or its
Subsidiaries.


 


“Condition of the Company” means the assets,
business, properties, operations or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole.


 


“Contingent Obligation” means, as applied to
any Person, any direct or indirect liability of that Person with respect to any
Indebtedness, lease, dividend, guaranty, letter of credit or other obligation,
contractual or otherwise (the “primary obligation”) of another Person (the “primary
obligor”), whether or not contingent, (a) to purchase, repurchase or
otherwise acquire such primary obligations or any property constituting direct
or indirect security therefor, (b) to advance or provide funds (i) for
the payment or discharge of any such primary obligation, or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet item, level of
income or financial condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation, or (d) otherwise to assure or
hold harmless the owner of any such primary obligation against loss or failure
or inability to perform in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof.


 


“Contractual Obligations” means, as to any
Person, any provision of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed of trust or other
instrument to which such Person is a party or by which it or any of its
property is bound.


 


“Copyrights” means any foreign or United
States copyrights and mask works, including all renewals and extensions
thereof, copyright registrations and applications for registration thereof, and
any non-registered copyrights.


 


“Disclosure Schedule” means the disclosure schedule delivered
by the Company to the Purchasers on the date hereof and attached hereto as Schedule 
II.


 


“D&O Policies” has the meaning set forth
in Section 3.21.


 


“Effective Date” means the date that this
Agreement is executed by the Parties.


 


“Environmental Laws” are any Requirement of
Law or any agreement with Governmental Authorities which prohibits, regulates
or controls any Hazardous Material or any Hazardous Material Activity,
including, 


 


I-2

















 


without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Resource Recovery and Conservation Act of 1976, the
Federal Water Pollution Control Act, the Clean Air Act, the Hazardous Materials
Transportation Act, the Clean Water Act, all as amended at any time.


 


“Equity Plans” has the meaning set forth in Section 3.16.


 


“Equity Securities” of any Person shall mean (a) all
Common Stock, Preferred Stock, participations, shares, partnership interests,
membership interests or other equity interests in and of such Person
(regardless of how designated and whether or not voting or non-voting) and (b) all
warrants, options and other rights to acquire any of the foregoing.


 


“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended.


 


“Exchange Act” means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the SEC
thereunder.


 


“Existing Notes” shall mean the indebtedness
pursuant to that certain Securities Purchase Agreement, dated as of July 19,
2006, by and among SatCon Technology Corporation and each of the purchasers
identified on the signature pages thereto.


 


“Financial Statements” shall mean, with
respect to any accounting period for any Person, statements of income and of
cash flow of such Person for such period, and balance sheets of such Person as
of the end of such period, setting forth in each case in comparative form figures
for the corresponding period in the preceding fiscal year if such period is
less than a full fiscal year or, if such period is a full fiscal year,
corresponding figures from the preceding fiscal year, all prepared in
reasonable detail and in accordance with GAAP. Unless otherwise indicated, each
reference to Financial Statements of any Person shall be deemed to refer to
Financial Statements prepared on a consolidated basis.


 


“GAAP” shall mean generally accepted
accounting principles and practices as in effect in the United States of
America from time to time, consistently applied.


 


“Governmental Authority” means the government
of any nation, state, province, city, locality or other political subdivision
thereof, any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any corporation or
other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.


 


“Government Bid(s)” means any written
quotations, bids or proposals that, if accepted, would bind the Company or its
Subsidiaries to perform the resultant Government Contract


 


“Government Contract(s)” means any prime
contract, subcontract, teaming agreement, joint venture, basic ordering
agreement, pricing agreement, letter contract, grant, cooperative agreement, or
other mutually binding legal agreement between the Company and (i) any
Governmental Authority, (ii) any prime contractor of any Governmental
Authority, or (iii) any subcontractor of any Governmental Authority;
provided that a task order, purchase order or delivery order under a Government
Contract shall not constitute a separate Government Contract for purposes of
this definition, but shall be part of the Government Contract to which it
relates.


 


I-3

















 


“Guaranty” and “Guaranties” mean the
guaranty entered into by each of the Company’s Subsidiaries, substantially in
the form of Exhibit D to this Agreement.


 


“Hazardous Material” means any material,
chemical, emission or substance that has been designated by any Governmental
Authority to be radioactive, toxic, hazardous, a pollutant or otherwise a
danger to health, reproduction or the environment.


 


“Hazardous Materials Activity” means the
transportation, transfer, recycling, storage, use, treatment, manufacture,
removal, remediation, release, exposure of others to, sale, or distribution of
any Hazardous Material or any product or waste containing a Hazardous Material,
or product manufactured with Ozone depleting substances, including, without
limitation, any required labeling, payment of waste fees or charges (including
so-called e-waste fees) and compliance with any product take-back or product
content requirements.


 


“Indebtedness” means (a) all obligations
for borrowed money (including all notes payable and drafts accepted
representing extensions of credit and all obligations evidenced by bonds,
debentures, notes or other similar instruments on which interest charges are
customarily paid, (b) all obligations, including Contingent Obligations,
relative to the face amount of all letters of credit, whether or not drawn, and
banker’s acceptance issued for the account of the Company, any Subsidiary or
any Owned Entity, (c) all capitalized lease obligations, (d) all purchase
money indebtedness, (e) all obligations to pay the deferred purchase price
of property or services (excluding trade accounts payable arising in the
ordinary course of business) and Indebtedness secured by a Lien on property
owned or being purchased (including Indebtedness arising under conditional
sales or other title retention agreements), whether or not such Indebtedness
shall have been assumed by the Company, any Subsidiary or any Owned Entity or
is limited in recourse and (f) all obligations in respect of, and
obligations (continent or otherwise) to purchase or otherwise acquire, or
otherwise assure a creditor against loss in respect of, Indebtedness of another
Person of the type described in clauses (a), (b), (c), (d) or (e) above.


 


“Indemnified Party” and “Indemnified Parties”
have the meanings set forth in Section 8.1.


 


“Indemnifying Party” has the meaning set
forth in 8.2.


 


“Intellectual Property” means Technology and
Intellectual Property Rights.


 


“Intellectual Property Rights” means all of the
following and all rights associated with the following, worldwide: (a) Copyrights,
(b) Patents, (c) Trademarks, (d) Trade Secret rights and all
other rights in or to confidential business or technical information, (e) all
rights in Internet Assets, and (f) all proprietary rights that are
analogous or similar to any of the foregoing.


 


“Internet Assets” means any Internet domain
names and other computer user identifiers and any rights in and to sites on the
worldwide web, including rights in and to any text, graphics, audio and video
files and html or other code incorporated in such sites.


 


“Investment” of any Person shall mean any
loan or advance of funds by such Person to any other Person (other than
advances to employees of such Person for moving and travel expense, drawing
accounts and similar expenditures in the ordinary course of business), any
purchase or other acquisition of any capital stock or other Equity Securities
or Indebtedness of any other Person, any capital contribution by such Person to
or any other investment by such Person in any other Person; provided, however,
that Investments shall not 


 


I-4

















 


include
accounts receivable or other indebtedness owed by customers of such Person
which are current assets and arose from sales in the ordinary course of such
Person’s business.


 


“IP Licenses” has the meaning set forth in Section 3.19.


 


“Knowledge” means the knowledge of the
directors, officers and other managers of the Company or any Subsidiary after
due inquiry.


 


“Law” means any federal, state, local,
municipal, foreign, international, multinational, or other administrative
statute, regulation, order, rule, ordinance, constitution, principle of common
law or treaty.


 


“Leased Real Property” has the meaning set
forth in Section 3.9.


 


“Lease Agreements” has the meaning set forth
in Section 3.9.


 


“Liabilities” has the meaning set forth in Section 3.18.


 


“Lien” means any security interest, pledge,
bailment, mortgage, hypothecation, deed of trust, conditional sales and title
retention agreement (including any lease in the nature thereof), charge,
encumbrance or other similar arrangement or interest in real or personal
property, whether now or hereafter owned, operated or leased, and includes
conditional sales contracts, title retention agreements, capital trusts and
capital leases.


 


“LOI” has the meaning set forth in Section 5.12(c).


 


“Losses” has the meaning set forth in Section 7.1.


 


“Material Adverse Effect” means an effect on
the business, financial condition, results of operations, prospects, properties
or other assets of the Company or the ability of the Company to perform its
obligations under this Agreement or any Transaction Document, which effect,
either individually or in the aggregate with other such effects is adverse and
material.


 


“Nasdaq” means the Nasdaq Capital Market.


 


“New Securities” has the meaning set forth in
Section 6.5.


 


“NGP” means NGP Energy Technology Partners,
L.P. or its assignees or transferees.


 


“NGP Observer” has the meaning set forth in Section 5.14.


 


“Obligations” means all loans, advances,
debts, liabilities and obligations, howsoever arising, owed by Company to the
Purchasers and any collateral agent under the Transactions Documents of every
kind and description (whether or not evidenced by any note or instrument and
whether or not for the payment of money), now existing or hereafter arising
under or pursuant to the terms of this Agreement, the Notes and the other
Transaction Documents, including, all interest, fees, charges, expenses,
attorneys’ fees and costs and accountants’ fees and costs chargeable to and
payable by Company hereunder and thereunder, in each case, whether direct or
indirect, absolute or contingent, due or to become due, and whether or not
arising after the commencement of a proceeding under Title 11 of the United
States Code (11 U.S.C. Section 101 et seq.), as 


 


I-5

















 


amended
from time to time (including post-petition interest) and whether or not allowed
or allowable as a claim in any such proceeding.


 


“Observer(s)” has the meaning set forth in Section 5.14.


 


“Offer to Sell Notes” means that certain
Offer to Sell Notes, dated as of October __, 2007, by and among the
Company and the holders of the Existing Notes.


 


“Options” has the meaning set forth in Section 3.7(a).


 


“Order” has the meaning set forth in Section 3.2.


 


“Owned Entity” means any corporation,
partnership or other similar entity that the Company owns an interest of more
than 25% but not more than 50% of the voting securities or voting interests
therein.


 


“Party” and “Parties” have the
meanings set forth in the preamble to this Agreement.


 


“Patents” means any foreign or United States
patents and patent applications, including any divisions, continuations,
continuations-in-part, substitutions, reissues or interferences thereof,
whether or not patents are issued on such applications and whether or not such
applications are modified, withdrawn or resubmitted.


 


“Permit” has the meaning set forth in Section 3.6.


 


“Permitted Indebtedness” shall mean and
include:


 


(a)                        Indebtedness of the Company to Purchasers;


 


(b)                       Indebtedness existing on the date hereof and
set forth and identified as “Permitted Indebtedness” on Section 3.18 of
the Disclosure Schedule;


 


(c)                        Indebtedness of the Company in an amount not
to exceed One Million Dollars ($1,000,000) in the aggregate at any time
outstanding secured by Liens permitted under clause (g) of the definition
of Permitted Liens;


 


(d)                       Indebtedness of the Company to any Subsidiary
and Indebtedness of any Subsidiary to the Company in an amount not to exceed
One Million Dollars ($1,000,000) in the aggregate in any fiscal year;


 


(e)                        Indebtedness arising from the endorsement of
negotiable instruments in the ordinary course of business; and


 


(f)                          Other Indebtedness of the Company and its
Subsidiaries not exceeding One Million Dollars ($1,000,000) in the aggregate at
any time outstanding.


 


“Permitted Investments” shall mean and
include:


 


(a)                        Investments existing on the date hereof set forth on the Disclosure
Schedule;


 


I-6

















 


(b)                       Investments in marketable obligations issued or fully guaranteed by the
United States and maturing not more than one (1) year from the date of
issuance;


 


(c)                        Investments in open market commercial paper rated at least “A1” or “P1”
or higher by a national credit rating agency and maturing not more than one (1) year
from the creation thereof.


 


(d)                       Investments pursuant to or arising under currency agreements or
interest rate agreements entered into in the ordinary course of business;


 


(e)                        Investments consisting of deposit accounts or securities accounts in
which the Purchasers have perfected its security interest by obtaining a
control agreement;


 


(e)                        Investments by any Subsidiary in or to the Company and Investments by
Investments by the Company in or to any Subsidiary in an amount not to exceed
One Million Dollars ($1,000,000) in the aggregate in any fiscal year; and


 


(f)                          Other Investments aggregating not in excess of One Million Dollars
($1,000,000) at any time.


 


“Permitted Liens” shall mean and include:


 


(a)                        Liens in favor of the Purchasers.


 


(b)                       Liens existing on the date hereof and set forth and identified as “Permitted
Liens” on Section 3.18 of the Disclosure Schedule;


 


(c)                        Liens for Taxes not at the time delinquent or thereafter payable
without penalty or being contested in good faith, provided provision is made to
the reasonable satisfaction of Purchasers for the eventual payment thereof if
subsequently found payable;


 


(d)                       Liens of carriers, warehousemen, mechanics, materialmen, vendors, and
landlords incurred in the ordinary course of business for sums not overdue or
being contested in good faith, provided provision is made to the reasonable
satisfaction of the Purchasers for the eventual payment thereof if subsequently
found payable;


 


(e)                        Deposits under workers’ compensation, unemployment insurance and social
security laws or to secure the performance of bids, tenders, contracts (other
than for the repayment of borrowed money) or leases, or to secure statutory
obligations of surety or appeal bonds or to secure indemnity, performance or
other similar bonds in the ordinary course of business;


 


(f)                          Liens arising out of a judgment or award in circumstances not constituting
an Event of Default under Section 4(e) of the Tranche 1 Note and
under Section 5(e) of the Tranche 2 Notes and Amended and Restated
Tranche 1 Note;


 


(g)                       Liens upon any equipment acquired by the Company or its Subsidiaries
after the date hereof to secure (i) the purchase price of such equipment
or Indebtedness incurred solely to finance the purchase price of such equipment
or (ii) capital lease obligations, so long as, in each case, such Liens
extend 


 


I-7

















 


only
to the equipment financed, and any accessions, replacements, substitutions and
proceeds (including insurance proceeds) thereof or thereto; and


 


(h)                       Easements, reservations, rights of way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances affecting
real property in a manner not materially or adversely affecting the value or
use of such property;


 


(i)                           Liens on insurance proceeds in favor of insurance companies to secure
the financing of insurance premiums; and


 


(j)                           Liens which constitute rights of setoff of a customary nature or
bankers’ Liens with respect to amounts on deposit, whether arising by operation
of law or by contract, in connection with arrangements entered into with banks
in the ordinary course of business not relating to a financing transaction.


 


“Person” means any individual, firm,
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, Governmental
Authority or other entity of any kind, and shall include any successor (by
merger or otherwise) of such entity.


 


“Plan” means each “employee benefit plan”
within the meaning of section 3(3) of ERISA and all other plans,
arrangements, policies, programs, agreements or other commitments providing for
retirement, employee benefits, compensation, incentive compensation or fringe
benefits, including, without limitation, any employment, consulting or deferred
compensation agreement, executive compensation, bonus, incentive, pension,
profit-sharing, savings, retirement, stock option, stock purchase or severance
pay plan, any life, health, disability or accident insurance plan, whether oral
or written, whether or not subject to ERISA, as to which the Company or any
Commonly Controlled Entity has or could have any direct or indirect, actual or
contingent liability.


 


“Pledge Agreement” means that certain pledge
agreement among the Company and the Purchasers, substantially in the form of
Exhibit F to this Agreement.


 


“Publicly Available Software” has the meaning
set forth on Section 3.19(n).


 


“Purchasers” has the meaning set forth in the
preamble to this Agreement.


 


“Requirement of Law” means, as to any Person,
any law (including common law), statute, treaty, rule, regulation, code,
directive, ordinance, order, right, privilege, qualification, license or
franchise or determination of an arbitrator or a court or other Governmental
Authority or stock exchange, in each case applicable or binding upon such
Person or any of its property or to which such Person or any of its property is
subject or pertaining to any or all of the transactions contemplated or
referred to herein.


 


“Retiree Welfare Plan” means any welfare plan
(as defined in Section 3(1) of ERISA) that provides benefits to current
or former employees beyond their retirement or other termination of service
(other than coverage mandated by Section 4980B of the Code, commonly
referred to as “COBRA”).


 


“RockPort” means RockPort Capital Partners
II, L.P. or its assignees or transferees.


 


“RockPort Observer” has the meaning set forth
in Section 5.14.


 


I-8

















 


“RoHS Directive” has the meaning set forth in
Section 3.22.


 


“SEC” means the United States Securities and
Exchange Commission or any similar agency then having jurisdiction to enforce
the Securities Act.


 


“SEC Documents” has the meaning set forth in Section 3.10(a).


 


“Securities Act” means the Securities Act of
1933, as amended, and the rules and regulations of the SEC thereunder.


 


“Security Documents” means the Security
Agreement, the Pledge Agreement, the Guaranty, any UCC-1 financing statements,
mortgages, deposit control agreements and such other documents necessary or
appropriate for the perfection of the security interests granted by this
Agreement or any other Transaction Document and by the Subsidiaries as may be
reasonably requested by the Purchasers.


 


“Security Agreement” means that certain
security and pledge agreement among the Company, the Company’s Subsidiaries and
the Purchasers, substantially in the form of Exhibit E to this
Agreement.


 


“Shrink-Wrap Code” means generally
commercially available binary code where available for an aggregate cost of not
more than U.S. $20,000.


 


“Source Code” has the meaning set forth in Section 3.19(o).


 


“Stock Equivalents” means any security or
obligation which is by its terms, directly or indirectly, convertible into or
exchangeable or exercisable for shares of common stock or other capital stock
of the Company, and any option, warrant or other subscription or purchase right
with respect to common stock or such other capital stock.


 


“Stock Option Plans” means, collectively, the
Company’s 1992 Stock Option Plan, 1994 Stock Option Plan, 1996 Stock Option
Plan, 1998 Stock Incentive Plan, 1999 Stock Incentive Plan, 2000 Stock
Incentive Plan, 2002 Stock Incentive Plan and 2005 Incentive Compensation Plan.


 


“Subsidiaries” means, as of the relevant date
of determination, with respect to any Person, a corporation or other Person of
which 50% or more of the voting power of the outstanding voting Equity
Securities or 50% or more of the outstanding economic equity interest is held,
directly or indirectly, by such Person. Unless otherwise qualified, or the
context otherwise requires, all references to a “Subsidiary” or to “Subsidiaries”
in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company.


 


“Taxes” means any federal, state, provincial,
county, local, foreign and other taxes (including, without limitation, income,
profits, windfall profits, alternative, minimum, accumulated earnings, personal
holding company, capital stock, premium, estimated, excise, sales, use,
occupancy, gross receipts, franchise, ad valorem, severance, capital levy,
production, transfer, withholding, employment, unemployment compensation,
payroll and property taxes, import duties and other governmental charges and
assessments), whether or not measured in whole or in part by net income,
and including deficiencies, interest, additions to tax or interest, and
penalties with respect thereto, and including expenses associated with
contesting any proposed adjustments related to any of the foregoing.


 


“Tax Return” has the meaning set forth in Section 3.11.


 


I-9

















 


“Technology” means all tangible embodiments
of technology, including without limitation the following items or things, in
any format: (a) works of authorship including computer programs, whether
in source code or in executable code form, architecture and documentation, (b) inventions
(whether or not patentable), discoveries and improvements, (c) proprietary
and confidential information, Trade Secrets and know how, (d) databases,
data compilations and collections and technical data, (e)  methods and
processes, and (f) devices, prototypes, designs and schematics.


 


“Trade Secrets” means any trade secrets,
research records, processes, procedures, manufacturing formulae, technical
know-how, technology, blue prints, designs, plans, inventions (whether
patentable and whether reduced to practice), invention disclosures and
improvements thereto.


 


“Trademarks” means any foreign or United
States trademarks, service marks, trade dress, trade names, brand names,
designs and logos, corporate names, product or service identifiers, whether registered
or unregistered, all registrations and applications for registration thereof
and all goodwill related thereto.


 


“Trading Day” means (a) any day on which
the Common Stock is listed or quoted and traded on any national securities
exchange, market or trading or quotation facility on which the Common Stock is
then listed or quoted (an “Eligible Market”), or (b) if the Common
Stock is not then listed or quoted and traded on any Eligible Market, then a
day on which trading occurs on the OTC Bulletin Board (or any successor
thereto), or (c) if trading ceases to occur on the OTC Bulletin Board (or
any successor thereto), any Business Day.


 


“Tranche 1 Closing” has the meaning set forth
in Section 1.2(a).


 


“Tranche 2 Closing” has the meaning set forth
in Section 1.4(a).


 


“Tranche 1 Closing Date” has the meaning set
forth in Section 1.2(a).


 


“Tranche 2 Closing Date” has the meaning set
forth in Section 1.4(a).


 


“Tranche 1 Note” has the meaning set forth in
Section 1.1(a).


 


“Tranche 2 Note” has the meaning set forth in
Section 1.3(a).


 


“Transaction Documents” means this Agreement,
the Notes, the Security Agreement, the Pledge Agreement, the Guaranties, and
any other instrument or agreement at any time delivered in connection with the
foregoing or to secure the Obligations.


 


“Transaction Expenses” has the meaning set
forth in Section 9.6.


 


“WARN Act” means the Worker Adjustment and
Retraining Notification Act, as the same may be amended from time to time.


 


“WEEE Directive” has the meaning set forth in
Section 3.22.


 


I-10

















 


SCHEDULE II


 


Disclosure
Schedule


 

















 


EXHIBIT A


 


Form of
Tranche 1 Note


 


THIS
NOTE HAS BEEN ACQUIRED BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF. THIS NOTE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) AND ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH SUCH STATE SECURITIES LAWS, IN
COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION AND/OR COMPLIANCE IS NOT REQUIRED.


 


SATCON
TECHNOLOGY CORPORATION


 


TRANCHE 1
NOTE


 


	
  $[                    ](the
  “Principal Amount”)

  	
  [Date]

  
	
   

  	
  [Boston, Massachusetts]

  



 


FOR VALUE RECEIVED, SATCON TECHNOLOGY CORPORATION, a
corporation incorporated under the laws of the State of Delaware (the “Company”),
promises to pay to the order of                                  ,
or its registered assigns (the “Holder”), the Principal Amount, or such
lesser amount as shall then equal the outstanding Principal Amount, together
with interest thereon at a rate equal to seventeen percent (17.0%) per annum,
and computed on the basis of a year consisting of 360 days in accordance with
the terms set forth in Section 2 of this promissory note (this “Note”).


 


This Note is a “Tranche 1 Note” issued pursuant to
the Note Purchase Agreement (the “Purchase Agreement”) dated as of October 19,
2007 by and among the Company and the purchasers party thereto. This Note shall
be subordinated to the Existing Notes in right of payment.


 


The following is a statement of the rights of the
Holder and the conditions to which this Note is subject, and to which the
Holder hereof, by the acceptance of this Note, agrees:


 


1.                                       Definitions. Capitalized terms defined in the Purchase Agreement and used herein
without definition have the same meaning herein as in the Purchase Agreement. In
addition, as used in this Note, the following capitalized terms have the
following meanings.


 


(a)          “Change
of Control” means the occurrence of any of the following:


 


(i)             Any
“person” (as such term is used in subsections 13(d) and 14(d) of the
Securities and Exchange Act of 1934, as amended) or group of persons, on or
after the Effective Date, is or becomes the “beneficial owner” (as defined in Rule 13d-3
under said Act), directly or indirectly, of, or acquire(s) by contract or
otherwise, or enter(s) into a contract or arrangement which upon consummation
will result in its or their acquisition of, or control over, securities of the
Company (or other securities convertible 


 


A-1

















 


into
such securities) representing twenty percent (20%) or more of the combined
voting power of all securities of the Company entitled to vote in the election
of directors; or


 


(ii)                                            during any period of up to 12 consecutive
months individuals who at the beginning of such 12-month period were directors
of the Company shall cease for any reason to constitute a majority of the Board
of Directors of the Company unless the persons replacing such individuals were
nominated by the Board of Directors of the Company; or


 


(iii)                                         any Subsidiary of the Company shall cease to
be a wholly-owned Subsidiary of the Company.


 


(b)         “Closing
Price” means the closing price of the Common Shares as reported on the
Nasdaq.


 


(c)          “Common
Shares” means shares of the common stock, par value $0.01 per share, of the
Company.


 


(d)         “Date
of Issuance” means the date of issuance of this Note by the Company under
the Purchase Agreement.


 


(e)          “Default
Interest Rate” means the lesser of 5% above the otherwise applicable rate
or the maximum rate allowed by applicable Law.


 


(f)            “Maturity
Date” means February 19, 2008.


 


(g)         “Trading
Day” means any day on which Nasdaq is open for trading.


 


2.                                       Interest.


 


(a)          All
unpaid principal, together with any accrued but unpaid interest and other
amounts payable under this Note, shall be due and payable on (i) the
Maturity Date, or (ii) when such amounts are declared due and payable by
the Holder or made automatically due and payable upon or after the occurrence
of an Event of Default (as defined below). Interest on this Note shall be
payable (and if not paid when due, shall be compounded) on the Maturity Date
and shall be payable in lawful money of the United States of America.


 


(b)         Interest
shall be calculated based on the weighted average principal outstanding for
such period.


 


(c)          In
the event any interest is paid on this Note which is deemed to be in excess of
the then legal maximum rate, then that portion of the interest payment
representing an amount in excess of the then legal maximum rate shall be deemed
a payment of principal and applied against the principal of this Note.


 


3.                                       Prepayment. This Note may not be prepaid without the written consent of the
Purchaser.


 


4.                                       Events of Default. The occurrence of any of the following
shall constitute an “Event of Default” under this Note:


 


(a)          Failure
to Pay. The Company shall
fail to pay when due any principal payment on this Note, or any interest or
other payment required under the terms of this Note;


 


A-2

















 


(b)         Breaches
of Covenants. The Company or
any Subsidiary (i) shall fail to observe or perform any covenant
contained in Section 5.5 (insofar as it requires the Company to maintain
its listing on Nasdaq), Section 5.13 (insofar as it requires the Company
or such Subsidiary to maintain its existence) or Sections 5.15 through 5.23 of
the Purchase Agreement or (ii) shall fail to observe or to perform any
other covenant, agreement or obligation contained in the Purchase Agreement or
any Transaction Document and the Company or such Subsidiary shall fail to cure
such default for a period of twenty (20) days;


 


(c)          Breaches
of Representations and Warranties. Any representation or warranty made by the Company or any Subsidiary
in this Note or in any of the other Transaction Documents shall not have been
true in any material respect when made;


 


(d)         Cross-Default. The Company or any of its Subsidiaries
shall default under any other agreement, bond, debenture, note or other
evidence of indebtedness for money borrowed, under any guaranty or under any
mortgage, or indenture pursuant to which there shall be issued or by which
there shall be secured or evidenced any indebtedness for money borrowed by the
Company or any of its Subsidiaries (other than any Transaction Document),
whether such indebtedness now exists or shall hereafter be created, which
default results in a right by the holder of indebtedness of at least One
Million Dollars ($1,000,000) to cause such indebtedness to come due prior to
the date on which it would otherwise become due and payable;


 


(e)          Undischarged
Judgment. One or more
judgments for the payment of money in an amount in excess of Five Hundred
Thousand Dollars ($500,000) in the aggregate shall be rendered against the
Company or any of its Subsidiaries (or any combination thereof) and shall
remain undischarged for a period of ten consecutive Business Days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment;


 


(f)            Voluntary
Bankruptcy or Insolvency Proceedings. The Company (or any Subsidiary thereof) shall (i) apply for or
consent to the appointment of a receiver, trustee, liquidator or custodian of
itself or of all or a substantial part of its property, (ii) be
unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of
its creditors, (iv) be dissolved or liquidated in full or in part, (v) become
insolvent (as such term may be defined or interpreted under any applicable
statute), (vi) commence a voluntary case or other Proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar Law now or hereafter in
effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or other
Proceeding commenced against it or (vii) take any action for the purpose
of effecting any of the foregoing; or


 


(g)         Involuntary
Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or
custodian of the Company (or any Subsidiary thereof) or of all or a substantial
part of the property thereof, or an involuntary case or other Proceeding
seeking liquidation, reorganization or other relief with respect to the Company
(or any Subsidiary thereof) or the debts thereof under any bankruptcy,
insolvency or other similar Law now or hereafter in effect shall be commenced
and an order for relief entered, or such case or Proceeding shall not be
dismissed or discharged within 30 days of commencement.


 


5.                                       Rights of Holder upon Default.


 


(a)          Upon
the occurrence or existence of any Event of Default (other than an Event of
Default referred to in Section 4(f) or 4(g) of this Note) and at
any time thereafter during the continuance of such Event of Default, holders of
a majority of the outstanding principal amount of the Notes may declare
all outstanding Obligations payable by the Company under this Note to be
immediately due and payable without 


 


A-3

















 


presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived, anything contained in this Note or in the other Transaction
Documents to the contrary notwithstanding. Upon the occurrence or existence of
any Event of Default described in Sections 4(f) or 4(g) of this
Note, immediately and without notice, all outstanding Obligations payable by
the Company hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained in this Note or in the
other Transaction Documents to the contrary notwithstanding. In addition to the
foregoing remedies, upon the occurrence or existence of any Event of Default,
the Holder may exercise any other right, power or remedy granted to it by
the Transaction Documents or otherwise permitted to it by Law, either by suit
in equity or by action at Law, or both.


 


(b)         Notwithstanding
anything to the contrary contained in this Note, in addition to the rights of
the Holder specified in subsection (a) of this Section 5, on the
date an Event of Default under this Note occurs, the interest rate on this Note
shall increase, from that date forward, to the Default Interest Rate, which
interest shall be compounded quarterly and payable solely in lawful money of
the United States of America.


 


6.                                       Waiver and Amendment. Any provision of this Note may be
amended, waived or modified upon the written consent of both the Company and
the holders of a majority of the outstanding principal amount of the Notes.


 


7.                                       Transfer of this Note or Payment Hereunder. This Note may not be transferred in
violation of any restrictive legend set forth hereon. Each new Note issued upon
transfer of this Note shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Securities Act, unless
in the opinion of counsel for the Company such legend is not required in order
to ensure compliance with the Securities Act. The Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions. Subject to the foregoing, transfers of this Note shall be
registered upon registration books maintained for such purpose by or on behalf
of the Company. Prior to presentation of this Note for registration of
transfer, the Company shall treat the registered holder hereof as the owner and
holder of this Note for the purpose of receiving all payments of principal and
interest hereon and for all other purposes whatsoever, whether or not this Note
shall be overdue and the Company shall not be affected by notice to the contrary.


 


8.                                       Assignment. Neither this Note nor any of the rights, interests or obligations
hereunder may be assigned, by operation of law or otherwise, as a whole or
in part, by the Company without the prior written consent of the Holder. The
Holder may assign the rights, interests or obligations under this Note, as
a whole or in part, at any time, subject to compliance with Section 9 of
this Note, upon written notice to the Company of such assignment. Notwithstanding
the foregoing, until the Company receives notice in accordance with this Section 10,
the Company shall treat the registered holder hereof as the owner and holder of
this Note for the purpose of receiving all payments of principal and interest
on this Note and for all other purposes whatsoever, whether or not this Note
shall be overdue.


 


9.                                       Notices. Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in or otherwise designated by either party pursuant to the Purchase
Agreement or on the register maintained by the Company. Any party hereto may by
notice so given change its address or facsimile number for future notice
hereunder. Notice shall conclusively be deemed to have been given when received
if received prior to 4:00 p.m. (local time) otherwise it shall be deemed
to have been received the following Business Day.


 


A-4

















 


10.                                 Interaction with other Notes. The Company and the Holder agree that all
Tranche 1 Notes shall rank pari passu
notwithstanding date of issue. The Holder acknowledges and agrees that the
payment of all or any portion of the outstanding principal amount of this Note
and all interest hereon shall be pari passu in
right of payment and in all other respects to the other Tranche 1 Notes issued
pursuant to the Purchase Agreement or pursuant to the terms of such Notes. In
the event Holder receives payments in excess of its pro rata share of the
Company’s payments to the Holders of all of the Tranche 1 Notes, then Holder shall
hold in trust all such excess payments for the benefit of the holders of the
other Tranche 1 Notes and shall pay such amounts held in trust to such other
holders upon demand by such holders.


 


11.                                 Expenses; Waivers. If action is instituted to collect this
Note, the Company shall pay all costs and expenses, including, without
limitation, reasonable attorneys’ fees and costs, incurred in connection with
such action. The Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.


 


12.                                 Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 of this Note, the rights and obligations of
the Company and the Holder of this Note shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the parties.


 


13.                                 Governing Law; Jury Waiver. This Note and all actions arising out of or
in connection with this Note shall be governed by and construed in accordance
with the Laws of the State of New York, without regard to conflict of laws
provisions of the State of New York or of any other state. IN THE EVENT OF ANY
DISPUTE AMONG OR BETWEEN ANY OF THE PARTIES TO THIS NOTE ARISING OUT OF THE
TERMS OF THIS NOTE, THE PARTIES HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION OF
THE COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, OR THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR RESOLUTION OF
SUCH DISPUTE, AND AGREE NOT TO CONTEST SUCH EXCLUSIVE JURISDICTION OR SEEK TO
TRANSFER ANY ACTION RELATING TO SUCH DISPUTE TO ANY OTHER JURISDICTION. THE
COMPANY AND THE HOLDER AGREE TO ACCEPT SERVICE OF PROCESS PURSUANT TO THE
PROCEDURES SET FORTH IN SECTION 11. THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER
THIS NOTE.


 


[signatures
appear on following page]


 


A-5

















 


IN WITNESS WHEREOF, the Company has caused this Note to be
issued as of the date first written above.


 


	
   

  	
  SATCON TECHNOLOGY CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  



 


 


SIGNATURE PAGE FOR
PROMISSORY NOTE


 

















 


EXHIBIT B


 


Form of
Tranche 2 Note


 


THIS
NOTE HAS BEEN ACQUIRED BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF. THIS NOTE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) AND ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND IN COMPLIANCE WITH SUCH STATE SECURITIES LAWS, IN COMPLIANCE
WITH RULE 144 UNDER THE SECURITIES ACT, OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.


 


SATCON
TECHNOLOGY CORPORATION


 


TRANCHE 2
NOTE


 


	
  $[                     ](the
  “Principal Amount”)

  	
  [Date]

  
	
   

  	
  [Boston, Massachusetts]

  



 


FOR VALUE RECEIVED, SATCON TECHNOLOGY CORPORATION, a
corporation incorporated under the laws of the State of Delaware (the “Company”),
promises to pay to the order of                         ,
or its registered assigns (the “Holder”), the Principal Amount, or such
lesser amount as shall then equal the outstanding Principal Amount, together
with interest thereon at a rate equal to seventeen percent (17.0%) per annum,
and computed on the basis of a year consisting of 360 days in accordance with
the terms set forth in Section 2 of this promissory note (this “Note”).


 


This Note is a “Tranche 2 Note” issued pursuant to
the Note Purchase Agreement (the “Purchase Agreement”) dated as of October 19,
2007 by and among the Company and the purchasers party thereto. THE OBLIGATIONS
DUE UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT (THE “SECURITY AGREEMENT”) DATED AS OF THE DATE
HEREOF AND EXECUTED BY COMPANY FOR THE BENEFIT OF THE HOLDER. ADDITIONAL RIGHTS
OF THE HOLDER ARE SET FORTH IN THE SECURITY AGREEMENT.


 


The following is a statement of the rights of the
Holder and the conditions to which this Note is subject, and to which the
Holder hereof, by the acceptance of this Note, agrees:


 


1.                                       Definitions. Capitalized terms defined in the Purchase Agreement and used herein
without definition have the same meaning herein as in the Purchase Agreement. In
addition, as used in this Note, the following capitalized terms have the
following meanings.


 


(a)          “Change
of Control” means the occurrence of any of the following:


 


(i)             Any
“person” (as such term is used in subsections 13(d) and 14(d) of the
Securities and Exchange Act of 1934, as amended) or group of persons, on or
after the Effective Date, is or 


 


B-1

















 


becomes
the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly
or indirectly, of, or acquire(s) by contract or otherwise, or enter(s) into a
contract or arrangement which upon consummation will result in its or their
acquisition of, or control over, securities of the Company (or other securities
convertible into such securities) representing twenty percent (20%) or more of
the combined voting power of all securities of the Company entitled to vote in
the election of directors; or


 


(ii)                                            during any period of up to 12 consecutive
months individuals who at the beginning of such 12-month period were directors
of the Company shall cease for any reason to constitute a majority of the Board
of Directors of the Company unless the persons replacing such individuals were
nominated by the Board of Directors of the Company; or


 


(iii)                                         any Subsidiary of the Company shall cease to
be a wholly-owned Subsidiary of the Company.


 


(b)         “Closing
Price” means the closing price of the Common Shares as reported on the
Nasdaq.


 


(c)          “Common
Shares” means shares of the common stock, par value $0.01 per share, of the
Company.


 


(d)         “Date
of Issuance” means the date of issuance of this Note by the Company under
the Purchase Agreement.


 


(e)          “Default
Interest Rate” means the lesser of 5% above the otherwise applicable rate
or the maximum rate allowed by applicable Law.


 


(f)            “Maturity
Date” means February 19, 2008.


 


(g)         “Trading
Day” means any day on which Nasdaq is open for trading.


 


2.                                       Interest.


 


(a)          All
unpaid principal, together with any accrued but unpaid interest and other amounts
payable under this Note, shall be due and payable on (i) the Maturity
Date, or (ii) when such amounts are declared due and payable by the Holder
or made automatically due and payable upon or after the occurrence of an Event
of Default (as defined below). Interest on this Note shall be payable (and if
not paid when due, shall be compounded) on the Maturity Date and shall be
payable in lawful money of the United States of America.


 


(b)         Interest
shall be calculated based on the weighted average principal outstanding for
such period.


 


(c)          In
the event any interest is paid on this Note which is deemed to be in excess of
the then legal maximum rate, then that portion of the interest payment
representing an amount in excess of the then legal maximum rate shall be deemed
a payment of principal and applied against the principal of this Note.


 


3.                                       Prepayment. This Note may not be prepaid without the written consent of the
Purchaser.


 


4.                                       Secured Obligations; Collateral. In order to secure the Company’s payment and
performance of the Obligations and to secure the Company’s prompt, full and
faithful performance and observance of all of 


 


B-2

















 


the
provisions under this Note and the other Transaction Documents, the Company and
the Company’s domestic Subsidiaries have delivered to the Holder, the Security
Agreement, pursuant to which the Company and the Company’s domestic
Subsidiaries have granted to the Holder as security and collateral for the
payment and performance of the Obligations, a security interest in all of the
property and assets of the Company and the Company’s domestic Subsidiaries,
whether now existing or hereafter arising, and all as more specifically
described, and on the terms and conditions set forth in, the Security Agreement.
The Company’s Subsidiaries have also entered into and delivered to the Holder,
as further protection, the Guaranties. The security interest granted by the
Company and the Company’s domestic Subsidiaries under the Security Agreement,
securing the indebtedness evidenced by this Note, including all Obligations, is
senior to all other liens, security interests or encumbrances securing any
other indebtedness of each of the Company and its Subsidiaries.


 


5.                                       Events of Default. The occurrence of any of the following
shall constitute an “Event of Default” under this Note:


 


(a)          Failure
to Pay. The Company shall
fail to pay when due any principal payment on this Note, or any interest or
other payment required under the terms of this Note;


 


(b)         Breaches
of Covenants. The Company or
any Subsidiary (i) shall fail to observe or perform any covenant
contained in Section 5.5 (insofar as it requires the Company to maintain
its listing on Nasdaq), Section 5.13 (insofar as it requires the Company
or such Subsidiary to maintain its existence) or Sections 5.15 through 5.23 of
the Purchase Agreement or (ii) shall fail to observe or to perform any
other covenant, agreement or obligation contained in the Purchase Agreement or
any Transaction Document and the Company or such Subsidiary shall fail to cure
such default for a period of twenty (20) days;


 


(c)          Breaches
of Representations and Warranties. Any representation or warranty made by the Company or any Subsidiary
in this Note or in any of the other Transaction Documents shall not have been
true in any material respect when made;


 


(d)         Cross-Default. The Company or any of its Subsidiaries
shall default under any other agreement, bond, debenture, note or other
evidence of indebtedness for money borrowed, under any guaranty or under any
mortgage, or indenture pursuant to which there shall be issued or by which
there shall be secured or evidenced any indebtedness for money borrowed by the
Company or any of its Subsidiaries (other than any Transaction Document), whether
such indebtedness now exists or shall hereafter be created, which default
results in a right by the holder of indebtedness of at least One Million
Dollars ($1,000,000) to cause such indebtedness to come due prior to the date
on which it would otherwise become due and payable;


 


(e)          Undischarged
Judgment. One or more
judgments for the payment of money in an amount in excess of Five Hundred
Thousand Dollars ($500,000) in the aggregate shall be rendered against the
Company or any of its Subsidiaries (or any combination thereof) and shall
remain undischarged for a period of ten consecutive Business Days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment;


 


(f)            Voluntary
Bankruptcy or Insolvency Proceedings. The Company (or any Subsidiary thereof) shall (i) apply for or
consent to the appointment of a receiver, trustee, liquidator or custodian of
itself or of all or a substantial part of its property, (ii) be
unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of
its creditors, (iv) be dissolved or liquidated in full or in part, (v) become
insolvent (as such term may be defined or interpreted under any applicable
statute), (vi) commence a voluntary case or other Proceeding seeking
liquidation, 


 


B-3

















 


reorganization
or other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar Law now or hereafter in effect or consent to any
such relief or to the appointment of or taking possession of its property by
any official in an involuntary case or other Proceeding commenced against it or
(vii) take any action for the purpose of effecting any of the foregoing;
or


 


(g)         Involuntary
Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or
custodian of the Company (or any Subsidiary thereof) or of all or a substantial
part of the property thereof, or an involuntary case or other Proceeding
seeking liquidation, reorganization or other relief with respect to the Company
(or any Subsidiary thereof) or the debts thereof under any bankruptcy,
insolvency or other similar Law now or hereafter in effect shall be commenced
and an order for relief entered, or such case or Proceeding shall not be
dismissed or discharged within 30 days of commencement.


 


6.                                       Rights of Holder upon Default.


 


(a)          Upon
the occurrence or existence of any Event of Default (other than an Event of
Default referred to in Section 5(f) or 5(g) of this Note) and at
any time thereafter during the continuance of such Event of Default, holders of
a majority of the outstanding principal amount of the Notes may declare
all outstanding Obligations payable by the Company under this Note to be
immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything
contained in this Note or in the other Transaction Documents to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default
described in Sections 5(f) or 5(g) of this Note, immediately and
without notice, all outstanding Obligations payable by the Company hereunder
shall automatically become immediately due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived, anything contained in this Note or in the other Transaction
Documents to the contrary notwithstanding. In addition to the foregoing
remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise
any other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by Law, either by suit in equity or by action at Law,
or both.


 


(b)         Notwithstanding
anything to the contrary contained in this Note, in addition to the rights of
the Holder specified in subsection (a) of this Section 6, on the
date an Event of Default under this Note occurs, the interest rate on this Note
shall increase, from that date forward, to the Default Interest Rate, which
interest shall be compounded quarterly and payable solely in lawful money of
the United States of America.


 


7.                                       Waiver and Amendment. Any provision of this Note may be
amended, waived or modified upon the written consent of both the Company and
the holders of a majority of the outstanding principal amount of the Notes.


 


8.                                       Transfer of this Note or Payment Hereunder. This Note may not be transferred in
violation of any restrictive legend set forth hereon. Each new Note issued upon
transfer of this Note shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Securities Act, unless
in the opinion of counsel for the Company such legend is not required in order
to ensure compliance with the Securities Act. The Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions. Subject to the foregoing, transfers of this Note shall be
registered upon registration books maintained for such purpose by or on behalf
of the Company. Prior to presentation of this Note for registration of
transfer, the Company shall treat the registered holder hereof as the owner and
holder of this Note for the purpose of receiving all payments of principal and
interest hereon and for all other purposes whatsoever, whether or not this Note
shall be overdue and the Company shall not be affected by notice to the
contrary.


 


B-4

















 


9.                                       Assignment. Neither this Note nor any of the rights, interests or obligations
hereunder may be assigned, by operation of law or otherwise, as a whole or
in part, by the Company without the prior written consent of the Holder. The
Holder may assign the rights, interests or obligations under this Note, as
a whole or in part, at any time, subject to compliance with Section 9 of
this Note, upon written notice to the Company of such assignment. Notwithstanding
the foregoing, until the Company receives notice in accordance with this Section 10,
the Company shall treat the registered holder hereof as the owner and holder of
this Note for the purpose of receiving all payments of principal and interest
on this Note and for all other purposes whatsoever, whether or not this Note
shall be overdue.


 


10.                                 Notices. Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in or otherwise designated by either party pursuant to the Purchase
Agreement or on the register maintained by the Company. Any party hereto may by
notice so given change its address or facsimile number for future notice
hereunder. Notice shall conclusively be deemed to have been given when received
if received prior to 4:00 p.m. (local time) otherwise it shall be deemed
to have been received the following Business Day.


 


11.                                 Interaction with other Notes. The Company and the Holder agree that all
Notes secured by the Security Agreement (the “Secured Notes”) shall rank
pari passu notwithstanding date
of issue. The Holder acknowledges and agrees that the payment of all or any
portion of the outstanding principal amount of this Note and all interest
hereon shall be pari passu in
right of payment and in all other respects to the other Secured Notes issued
pursuant to the Purchase Agreement or pursuant to the terms of such Secured
Notes. In the event Holder receives payments in excess of its pro rata share of
the Company’s payments to the Holders of all of the Notes, then Holder shall
hold in trust all such excess payments for the benefit of the holders of the
other Secured Notes and shall pay such amounts held in trust to such other
holders upon demand by such holders.


 


12.                                 Expenses; Waivers. If action is instituted to collect this
Note, the Company shall pay all costs and expenses, including, without
limitation, reasonable attorneys’ fees and costs, incurred in connection with
such action. The Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.


 


13.                                 Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 of this Note, the rights and obligations of
the Company and the Holder of this Note shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the parties.


 


14.                                 Governing Law; Jury Waiver. This Note and all actions arising out of or
in connection with this Note shall be governed by and construed in accordance
with the Laws of the State of New York, without regard to conflict of laws
provisions of the State of New York or of any other state. IN THE EVENT OF ANY
DISPUTE AMONG OR BETWEEN ANY OF THE PARTIES TO THIS NOTE ARISING OUT OF THE
TERMS OF THIS NOTE, THE PARTIES HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION OF
THE COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, OR THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR RESOLUTION OF
SUCH DISPUTE, AND AGREE NOT TO CONTEST SUCH EXCLUSIVE JURISDICTION OR SEEK TO
TRANSFER ANY ACTION RELATING TO SUCH DISPUTE TO ANY OTHER JURISDICTION. THE
COMPANY AND THE HOLDER AGREE TO ACCEPT SERVICE OF PROCESS PURSUANT TO THE
PROCEDURES SET FORTH IN SECTION 11. THE PARTIES HERETO 


 


B-5

















 


WAIVE
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS NOTE.


 


[signatures
appear on following page]


 


B-6

















 


IN WITNESS WHEREOF, the Company has caused this Note to be
issued as of the date first written above.


 


	
   

  	
  SATCON TECHNOLOGY CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 
















 


EXHIBIT C


 


Form of
Amended and Restated Tranche 1 Note


 


THIS
NOTE HAS BEEN ACQUIRED BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF. THIS NOTE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) AND ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH SUCH STATE SECURITIES LAWS, IN
COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION AND/OR COMPLIANCE IS NOT REQUIRED.


 


SATCON
TECHNOLOGY CORPORATION


 


AMENDED AND
RESTATED TRANCHE 1 NOTE


 


	
  $[                  ](the
  “Principal Amount”)

  	
  [Date]

  
	
   

  	
  [Boston, Massachusetts]

  



 


FOR VALUE RECEIVED, SATCON TECHNOLOGY CORPORATION, a
corporation incorporated under the laws of the State of Delaware (the “Company”),
promises to pay to the order of                                   ,
or its registered assigns (the “Holder”), the Principal Amount, or such
lesser amount as shall then equal the outstanding Principal Amount, together
with interest thereon from the date of the Original Note (as defined below) at
a rate equal to seventeen percent (17.0%) per annum, and computed on the basis
of a year consisting of 360 days in accordance with the terms set forth in Section 2
of this promissory note (this “Note”).


 


This Note amends, re-evidences, restates and supersedes
in full, but does not in any way satisfy or discharge, the outstanding
indebtedness owed under that certain Tranche 1 Note dated as of October [         ],
2007 in an original principal amount equal to the principal amount set forth
above, made by Company in favor of Holder (the “Original Note”), and is
an “Amended and Restated Tranche 1 Note” issued pursuant to the Note Purchase
Agreement (the “Purchase Agreement”) dated as of October 19, 2007
by and among the Company and the purchasers party thereto. THE OBLIGATIONS DUE
UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT (THE “SECURITY AGREEMENT”) DATED AS OF THE DATE
HEREOF AND EXECUTED BY COMPANY FOR THE BENEFIT OF THE HOLDER. ADDITIONAL RIGHTS
OF THE HOLDER ARE SET FORTH IN THE SECURITY AGREEMENT.


 


The following is a statement of the rights of the
Holder and the conditions to which this Note is subject, and to which the
Holder hereof, by the acceptance of this Note, agrees:


 


1.                                       Definitions. Capitalized terms defined in the Purchase Agreement and used herein
without definition have the same meaning herein as in the Purchase Agreement. In
addition, as used in this Note, the following capitalized terms have the
following meanings.


 


C-1

















 


(a)          “Change
of Control” means the occurrence of any of the following:


 


(i)                                               Any “person” (as such term is used in
subsections 13(d) and 14(d) of the Securities and Exchange Act of
1934, as amended) or group of persons, on or after the Effective Date, is or
becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act),
directly or indirectly, of, or acquire(s) by contract or otherwise, or enter(s)
into a contract or arrangement which upon consummation will result in its or
their acquisition of, or control over, securities of the Company (or other
securities convertible into such securities) representing twenty percent (20%)
or more of the combined voting power of all securities of the Company entitled
to vote in the election of directors; or


 


(ii)                                            during any period of up to 12 consecutive
months individuals who at the beginning of such 12-month period were directors
of the Company shall cease for any reason to constitute a majority of the Board
of Directors of the Company unless the persons replacing such individuals were
nominated by the Board of Directors of the Company; or


 


(iii)                                         any Subsidiary of the Company shall cease to
be a wholly-owned Subsidiary of the Company.


 


(b)         “Closing
Price” means the closing price of the Common Shares as reported on the
Nasdaq.


 


(c)          “Common
Shares” means shares of the common stock, par value $0.01 per share, of the
Company.


 


(d)         “Date
of Issuance” means the date of issuance of this Note by the Company under
the Purchase Agreement.


 


(e)          “Default
Interest Rate” means the lesser of 5% above the otherwise applicable rate
or the maximum rate allowed by applicable Law.


 


(f)            “Maturity
Date” means February 19, 2008.


 


(g)         “Trading
Day” means any day on which Nasdaq is open for trading.


 


2.                                       Interest.


 


(a)          All
unpaid principal, together with any accrued but unpaid interest and other
amounts payable under this Note, shall be due and payable on (i) the
Maturity Date, or (ii) when such amounts are declared due and payable by
the Holder or made automatically due and payable upon or after the occurrence
of an Event of Default (as defined below). Interest on this Note shall be
payable (and if not paid when due, shall be compounded) on the Maturity Date
and shall be payable in lawful money of the United States of America.


 


(b)         Interest
shall be calculated based on the weighted average principal outstanding for
such period.


 


(c)          In
the event any interest is paid on this Note which is deemed to be in excess of
the then legal maximum rate, then that portion of the interest payment
representing an amount in excess of the then legal maximum rate shall be deemed
a payment of principal and applied against the principal of this Note.


 


C-2

















 


3.                                       Prepayment. This Note may not be prepaid without the written consent of the
Purchaser.


 


4.                                       Secured Obligations; Collateral. In order to secure the Company’s payment
and performance of the Obligations and to secure the Company’s prompt, full and
faithful performance and observance of all of the provisions under this Note
and the other Transaction Documents, the Company and the Company’s Subsidiaries
have delivered to the Holder, the Security Agreement, pursuant to which the
Company and the Company’s domestic Subsidiaries have granted to the Holder as
security and collateral for the payment and performance of the Obligations, a
security interest in all of the property and assets of the Company and the
Company’s domestic Subsidiaries, whether now existing or hereafter arising, and
all as more specifically described, and on the terms and conditions set forth
in, the Security Agreement. The Company’s Subsidiaries have also entered into
and delivered to the Holder, as further protection, the Guaranties. The
security interest granted by the Company and the Company’s Subsidiaries under
the Security Agreement, securing the indebtedness evidenced by this Note,
including all Obligations, is senior to all other liens, security interests or
encumbrances securing any other indebtedness of each of the Company and its
Subsidiaries.


 


5.                                       Events of Default. The occurrence of any of the following
shall constitute an “Event of Default” under this Note:


 


(a)          Failure
to Pay. The Company shall
fail to pay when due any principal payment on this Note, or any interest or
other payment required under the terms of this Note;


 


(b)         Breaches
of Covenants. The Company or
any Subsidiary (i) shall fail to observe or perform any covenant
contained in Section 5.5 (insofar as it requires the Company to maintain
its listing on Nasdaq), Section 5.13 (insofar as it requires the Company
or such Subsidiary to maintain its existence) or Sections 5.15 through 5.23 of
the Purchase Agreement or (ii) shall fail to observe or to perform any
other covenant, agreement or obligation contained in the Purchase Agreement or
any Transaction Document and the Company or such Subsidiary shall fail to cure
such default for a period of twenty (20) days;


 


(c)          Breaches
of Representations and Warranties. Any representation or warranty made by the Company or any Subsidiary
in this Note or in any of the other Transaction Documents shall not have been
true in any material respect when made;


 


(d)         Cross-Default. The Company or any of its Subsidiaries
shall default under any other agreement, bond, debenture, note or other
evidence of indebtedness for money borrowed, under any guaranty or under any
mortgage, or indenture pursuant to which there shall be issued or by which
there shall be secured or evidenced any indebtedness for money borrowed by the
Company or any of its Subsidiaries (other than any Transaction Document),
whether such indebtedness now exists or shall hereafter be created, which
default results in a right by the holder of indebtedness of at least One
Million Dollars ($1,000,000) to cause such indebtedness to come due prior to
the date on which it would otherwise become due and payable;


 


(e)          Undischarged
Judgment. One or more
judgments for the payment of money in an amount in excess of Five Hundred
Thousand Dollars ($500,000) in the aggregate shall be rendered against the
Company or any of its Subsidiaries (or any combination thereof) and shall
remain undischarged for a period of ten consecutive Business Days during which
execution shall not be effectively stayed, or any action is legally taken by a
judgment creditor to levy upon any such judgment;


 


(f)            Voluntary
Bankruptcy or Insolvency Proceedings. The Company (or any Subsidiary thereof) shall (i) apply for or
consent to the appointment of a receiver, trustee, liquidator or custodian of
itself or of all or a substantial part of its property, (ii) be
unable, or admit in writing its inability, to pay its debts 


 


C-3

















 


generally
as they mature, (iii) make a general assignment for the benefit of its or
any of its creditors, (iv) be dissolved or liquidated in full or in part, (v) become
insolvent (as such term may be defined or interpreted under any applicable
statute), (vi) commence a voluntary case or other Proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar Law now or hereafter in
effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or other
Proceeding commenced against it or (vii) take any action for the purpose
of effecting any of the foregoing; or


 


(g)         Involuntary
Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or
custodian of the Company (or any Subsidiary thereof) or of all or a substantial
part of the property thereof, or an involuntary case or other Proceeding
seeking liquidation, reorganization or other relief with respect to the Company
(or any Subsidiary thereof) or the debts thereof under any bankruptcy, insolvency
or other similar Law now or hereafter in effect shall be commenced and an order
for relief entered, or such case or Proceeding shall not be dismissed or
discharged within 30 days of commencement.


 


6.                                       Rights of Holder upon Default.


 


(a)          Upon
the occurrence or existence of any Event of Default (other than an Event of
Default referred to in Section 5(f) or 5(g) of this Note) and at
any time thereafter during the continuance of such Event of Default, holders of
a majority of the outstanding principal amount of the Notes may declare
all outstanding Obligations payable by the Company under this Note to be
immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
in this Note or in the other Transaction Documents to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default
described in Sections 5(f) or 5(g) of this Note, immediately and
without notice, all outstanding Obligations payable by the Company hereunder
shall automatically become immediately due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived, anything contained in this Note or in the other Transaction
Documents to the contrary notwithstanding. In addition to the foregoing
remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise
any other right, power or remedy granted to it by the Transaction Documents or
otherwise permitted to it by Law, either by suit in equity or by action at Law,
or both.


 


(b)         Notwithstanding
anything to the contrary contained in this Note, in addition to the rights of
the Holder specified in subsection (a) of this Section 6, on the
date an Event of Default under this Note occurs, the interest rate on this Note
shall increase, from that date forward, to the Default Interest Rate, which
interest shall be compounded quarterly and payable solely in lawful money of
the United States of America.


 


7.                                       Waiver and Amendment. Any provision of this Note may be
amended, waived or modified upon the written consent of both the Company and
the holders of a majority of the outstanding principal amount of the Notes.


 


8.                                       Transfer of this Note or Payment Hereunder. This Note may not be transferred in
violation of any restrictive legend set forth hereon. Each new Note issued upon
transfer of this Note shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Securities Act, unless
in the opinion of counsel for the Company such legend is not required in order
to ensure compliance with the Securities Act. The Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions. Subject to the foregoing, transfers of this Note shall be
registered upon registration books maintained for such purpose by or on behalf
of the Company. Prior to presentation of this Note for registration 


 


C-4

















 


of
transfer, the Company shall treat the registered holder hereof as the owner and
holder of this Note for the purpose of receiving all payments of principal and
interest hereon and for all other purposes whatsoever, whether or not this Note
shall be overdue and the Company shall not be affected by notice to the
contrary.


 


9.                                       Assignment. Neither this Note nor any of the rights, interests or obligations
hereunder may be assigned, by operation of law or otherwise, as a whole or
in part, by the Company without the prior written consent of the Holder. The
Holder may assign the rights, interests or obligations under this Note, as
a whole or in part, at any time, subject to compliance with Section 9 of
this Note, upon written notice to the Company of such assignment. Notwithstanding
the foregoing, until the Company receives notice in accordance with this Section 10,
the Company shall treat the registered holder hereof as the owner and holder of
this Note for the purpose of receiving all payments of principal and interest
on this Note and for all other purposes whatsoever, whether or not this Note
shall be overdue.


 


10.                                 Notices. Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
set forth in or otherwise designated by either party pursuant to the Purchase
Agreement or on the register maintained by the Company. Any party hereto may by
notice so given change its address or facsimile number for future notice
hereunder. Notice shall conclusively be deemed to have been given when received
if received prior to 4:00 p.m. (local time) otherwise it shall be deemed
to have been received the following Business Day.


 


11.                                 Interaction with other Notes. The Company and the Holder agree that all
Notes secured by the Security Agreement (the “Secured Notes”) shall rank
pari passu notwithstanding date
of issue. The Holder acknowledges and agrees that the payment of all or any
portion of the outstanding principal amount of this Note and all interest
hereon shall be pari passu in
right of payment and in all other respects to the other Secured Notes issued
pursuant to the Purchase Agreement or pursuant to the terms of such Secured
Notes. In the event Holder receives payments in excess of its pro rata share of
the Company’s payments to the Holders of all of the Notes, then Holder shall
hold in trust all such excess payments for the benefit of the holders of the
other Secured Notes and shall pay such amounts held in trust to such other
holders upon demand by such holders.


 


12.                                 Expenses; Waivers. If action is instituted to collect this
Note, the Company shall pay all costs and expenses, including, without
limitation, reasonable attorneys’ fees and costs, incurred in connection with
such action. The Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.


 


13.                                 Successors and Assigns. Subject to the restrictions on transfer
described in Sections 9 and 10 of this Note, the rights and obligations of
the Company and the Holder of this Note shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the parties.


 


14.                                 Governing Law; Jury Waiver. This Note and all actions arising out of or
in connection with this Note shall be governed by and construed in accordance
with the Laws of the State of New York, without regard to conflict of laws
provisions of the State of New York or of any other state. IN THE EVENT OF ANY
DISPUTE AMONG OR BETWEEN ANY OF THE PARTIES TO THIS NOTE ARISING OUT OF THE
TERMS OF THIS NOTE, THE PARTIES HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION OF
THE COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, OR THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW 


 


C-5

















 


YORK
FOR RESOLUTION OF SUCH DISPUTE, AND AGREE NOT TO CONTEST SUCH EXCLUSIVE
JURISDICTION OR SEEK TO TRANSFER ANY ACTION RELATING TO SUCH DISPUTE TO ANY
OTHER JURISDICTION. THE COMPANY AND THE HOLDER AGREE TO ACCEPT SERVICE OF
PROCESS PURSUANT TO THE PROCEDURES SET FORTH IN SECTION 11. THE PARTIES
HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE
OR DEFEND ANY RIGHTS UNDER THIS NOTE.


 


[signatures
appear on following page]


 


C-6

















 


IN WITNESS WHEREOF, the Company has caused this Note to be
issued as of the date first written above.


 


 


	
   

  	
  SATCON TECHNOLOGY CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


EXHIBIT D


 


Form of
Guaranty


 


GUARANTY


 


THIS GUARANTY (this “Guaranty”), dated as of October      ,
2007, is executed by each of the undersigned (each such entity to be referred
to herein as a “Guarantor”), in
favor of RockPort Capital Partners II, L.P. and NGP Energy Technology Partners,
L.P. (collectively, the “Purchasers”).


 


RECITALS


 


A.                                   Pursuant to a Note Purchase Agreement, dated
as of October      , 2007 (as amended from time
to time, the “Purchase Agreement”),
among SatCon Technology Corporation (the “Company”)
and the Purchasers, the Purchasers have agreed to purchase promissory notes
(the “Notes”) from the Company
upon the terms and subject to the conditions set forth therein.


 


B.                                     The Purchasers’ obligations to purchase the
Notes under the Purchase Agreement is subject, among other conditions, to
receipt by the Purchasers of this Guaranty duly executed by each of the
undersigned Guarantors.


 


C.                                     Each of the undersigned Guarantors is a
Subsidiary of Company and expects to derive substantial direct and indirect
benefit from the transactions contemplated by the Purchase Agreement.


 


AGREEMENT


 


NOW, THEREFORE, in consideration of the above
recitals and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, each Guarantor and the Purchasers
hereby agree as follows:


 


1.                                      Definitions and
Interpretation.


 


(a)                                  Definition. When used in this Guaranty, the following terms shall have the
following respective meanings:


 


“Adjusted Maximum
Guaranty Amount” shall mean, with respect to any Guarantor, the
maximum liability of such Guarantor under this Guaranty, limited to the extent
provided in Section 2(d) hereof (except that, for purposes of
calculating the Adjusted Maximum Guaranty Amount of a Guarantor only, any
assets or liabilities of such Guarantor arising under Section 6
hereof shall be ignored).


 


“Aggregate
Guaranty Payments” shall mean, with respect to any Guarantor at any
time, the aggregate net amount of all  payments
made by such Guarantor under this Guaranty (including, without limitation,
under Section 6 hereof) at or prior to such time.


 


“Disallowed
Post-Commencement Interest and Expenses” shall mean interest
computed at the rate provided in the Notes and claims for reimbursement, costs,
expenses or indemnities under the terms of any of the Transaction Documents
accruing or claimed at any time after the commencement of any Insolvency 


 

















 


Proceeding,
if the claim for such interest, reimbursement, costs, expenses or indemnities
is not allowable, allowed or enforceable against the Company in such Insolvency
Proceeding.


 


“Fair Share”
shall mean, with respect to any Guarantor at any time, an amount equal to (i) a
fraction, the numerator of which is the Adjusted Maximum Guaranty Amount of
such Guarantor and the denominator of which is the aggregate Adjusted Maximum
Guaranty Amounts of all  Guarantors,
multiplied by (ii) the aggregate amount paid by all Funding Guarantors
under this Guaranty at or prior to such time.


 


“Fair Share
Shortfall” shall mean, with respect to any Guarantor at any time,
the amount, if any, by which the Fair Share of such Guarantor at such time
exceeds the Aggregate Guaranty Payments of such Guarantor at such time.


 


“Funding Guarantor”
shall have the meaning given to that term in Section 6 hereof.


 


“Guaranteed
Obligations” shall mean the Obligations.


 


“Guarantor”
shall have the meaning given to that term in the introductory paragraph hereof.


 


“Insolvency
Proceeding” shall mean any case or proceeding under the United
States Bankruptcy Code or any other similar law, rule or regulation of the
United States or any jurisdiction or any other action or proceeding for the
reorganization, liquidation, appointment of a receiver, rearrangement of debts,
marshalling of assets or similar action relating to any Guarantor, their respective
creditors or any substantial part of their respective assets, whether or
not any such case, proceeding or action is voluntary or involuntary.


 


“Investor”
shall have the meaning given to that term in the introductory paragraph hereof.


 


“Purchase Agreement”
shall have the meaning given to that term in Recital A hereof


 


“Subordinated
Obligations” shall have the meaning given to that term in Section 4
hereof.


 


Unless otherwise defined herein, all other
capitalized terms used herein and defined in the Purchase Agreement shall have
the respective meanings given to those terms in the Purchase Agreement.


 


(b)                                 Other Interpretive Provisions. The rules of construction set forth in
the Purchase Agreement shall, to the extent not inconsistent with the terms of
this Guaranty, apply to this Guaranty and are hereby incorporated by reference.
Each Guarantor acknowledges receipt of copies of the Purchase Agreement and the
other Transaction Documents.


 


2.                                      Guaranty.


 


(a)                                  Payment Guaranty. Each Guarantor unconditionally guarantees
and promises to pay and perform as and when due, whether at stated
maturity, upon acceleration or otherwise, any and all of the Guaranteed
Obligations. If any Insolvency Proceeding relating to the Company is commenced,
each Guarantor further unconditionally guarantees and promises to pay and
perform, upon the demand of Purchasers, any and all of the Guaranteed
Obligations (including any and all Disallowed Post-Commencement Interest and
Expenses) in accordance with the terms of the Transaction Documents, whether or
not such obligations are then due and payable by the Company and whether or not
such obligations are modified, reduced or discharged in such Insolvency
Proceeding. This Guaranty is a guaranty of payment and not of collection.


 


D-2

















 


(b)                                 Continuing Guaranty. This Guaranty is an irrevocable continuing
guaranty of the Guaranteed Obligations which shall continue in effect until all
of the Guaranteed Obligations have been fully, finally and indefeasibly paid. If
any payment on any Guaranteed Obligation is set aside, avoided or rescinded or
otherwise recovered from the Purchasers, such recovered payment shall
constitute a Guaranteed Obligation hereunder and, if this Guaranty was
previously released or terminated, it automatically shall be fully reinstated,
as if such payment was never made.


 


(c)                                  Independent Obligation. The liability of each Guarantor hereunder
is independent of the Guaranteed Obligations and of the obligations of each
other Guarantor hereunder, and a separate action or actions may be brought
and prosecuted against each Guarantor irrespective of whether action is brought
against the Company, any other Guarantor or any other guarantor of the
Guaranteed Obligations or whether the Company, any other Guarantor or any other
guarantor of the Guaranteed Obligations is joined in any such action or
actions.


 


(d)                                 Fraudulent Transfer Limitation. If, in any action to enforce this Guaranty,
any court of competent jurisdiction determines that enforcement against any
Guarantor for the full amount of the Guaranteed Obligations is not lawful under
or would be subject to avoidance under Section 548 of the United States
Bankruptcy Code or any applicable provision of any comparable law of any state
or other jurisdiction, the liability of such Guarantor under this Guaranty
shall be limited to the maximum amount lawful and not subject to such
avoidance.


 


(e)                                  Termination. Notwithstanding any termination of this Guaranty, this Guaranty shall
continue to be in full force and effect and applicable to any Guaranteed
Obligations arising thereafter which arise because prior payments of Guaranteed
Obligations are rescinded or otherwise required to be surrendered by the
Purchasers after receipt.


 


3.                                      Authorizations, Waivers, Etc.


 


(a)                                  Authorizations. Each Guarantor authorizes the Purchasers,
in their discretion, without notice to such Guarantor, irrespective of any
change in the financial condition of the Company, such Guarantor, any other
Guarantor or any other guarantor of the Guaranteed Obligations since the date
hereof, and without affecting or impairing in any way the liability of such
Guarantor hereunder, from time to time to:


 


(i)                                     Create new Guaranteed Obligations and renew,
compromise, extend, accelerate or otherwise change the time for payment or
performance of, or otherwise amend or modify the Transaction Documents or
change the terms of the Guaranteed Obligations or any part thereof,
including increase or decrease of the rate of interest thereon;


 


(ii)                                  Take and hold security for the payment or
performance of the Guaranteed Obligations and exchange, enforce, waive or
release any such security; apply such security and direct the order or manner
of sale thereof; and purchase such security at public or private sale;


 


(iii)                               Otherwise exercise any right or remedy they may have against the
Company, such Guarantor, any other Guarantor, any other guarantor of the
Guaranteed Obligations or any security, including, without limitation, the
right to foreclose upon any such security by judicial or nonjudicial sale;


 


(iv)                              Settle, compromise with, release or substitute any one or more makers,
endorsers or guarantors of the Guaranteed Obligations; and


 


D-3

















 


(v)                                 Assign the Guaranteed Obligations, this
Guaranty or the other Transaction Documents in whole or in part to the
extent provided in the Loan Agreement and the other Transaction Documents.


 


(b)                                 Waivers. Each Guarantor hereby waives:


 


(i)                                     Any right to require the Purchasers to (A) proceed
against the Company, any other Guarantor or any other guarantor of the
Guaranteed Obligations, (B) proceed against or exhaust any security
received from the Company, such Guarantor, any other Guarantor or any other
guarantor of the Guaranteed Obligations or otherwise marshal the assets of the
Company, such Guarantor, any other Guarantor or any other guarantor of the
Guaranteed Obligations or (C) pursue any other remedy in the Purchasers’
power whatsoever;


 


(ii)                                  Any defense arising by reason of the application
by the Company of the proceeds of the sale of Notes;


 


(iii)                               Any defense resulting from the absence, impairment or loss of any right
of reimbursement, subrogation, contribution or other right or remedy of
Guarantor against the Company, any other Guarantor, any other guarantor of the
Guaranteed Obligations or any security, whether resulting from an election by
the Purchasers to foreclose upon security by nonjudicial sale, or otherwise;


 


(iv)                              Any setoff or counterclaim of the Company or any defense which results
from any disability or other defense of the Company or the cessation or stay of
enforcement from any cause whatsoever of the liability of the Company
(including, without limitation, the lack of validity or enforceability of any
of the Transaction Documents);


 


(v)                                 Any defense based upon any law, rule or
regulation which provides that the obligation of a surety must not be greater
or more burdensome than the obligation of the principal;


 


(vi)                              Until all of the Guaranteed Obligations have been fully, finally and
indefeasibly paid, any right of subrogation, reimbursement, indemnification or
contribution and other similar right to enforce any remedy which the Purchasers
or any other Person now has or may hereafter have against the Company on
account of the Guaranteed Obligations, and any benefit of, and any right to
participate in, any security now or hereafter received by the Purchasers or any
other Person on account of the Guaranteed Obligations;


 


(vii)                           All presentments, demands for performance, notices of nonperformance,
notices delivered under the Transaction Documents, protests, notices of
dishonor, and notices of acceptance of this Guaranty and of the existence,
creation or incurring of new or additional Guaranteed Obligations and notices
of any public or private foreclosure sale;


 


(viii)                        The benefit of any statute of limitations to the extent permitted by
law;


 


(ix)                                Any appraisement, valuation, stay, extension, moratorium redemption or
similar law or similar rights for marshalling;


 


(x)                                   Any right to be informed by the Purchasers of
the financial condition of the Company, any other Guarantor or any other
circumstances bearing upon the risk of nonpayment or nonperformance of the
Guaranteed Obligations;


 


D-4

















 


(xi)                                Until all of the Guaranteed Obligations have been fully, finally and
indefeasibly paid, any right to revoke this Guaranty;


 


(xii)                             Any defense arising from an election for the application of Section 1111(b)(2) of
the United States Bankruptcy Code which applies to the Guaranteed Obligations;


 


(xiii)                          Any defense based upon any borrowing or grant of a security interest
under Section 364 of the United States Bankruptcy Code; and


 


(xiv)                         Any right it may have to a fair value hearing to determine the
size of a deficiency judgment following any foreclosure on any security for the
Guaranteed Obligations.


 


(c)                                  Financial Condition of the Company, Etc. Each Guarantor is fully aware of the
financial condition and affairs of the Company. Each Guarantor has executed this
Guaranty without reliance upon any representation, warranty, statement or
information concerning the Company furnished to such Guarantor by the
Purchasers and has, independently and without reliance on the Purchasers and
based on such documents and information as it has deemed appropriate, made its
own appraisal of the financial condition and affairs of the Company and of
other circumstances affecting the risk of nonpayment or nonperformance of the
Guaranteed Obligations. Each Guarantor is in a position to obtain, and assumes
full responsibility for obtaining, any additional information about the
financial condition and affairs of the Company and of other circumstances
affecting the risk of nonpayment or nonperformance of the Guaranteed
Obligations and will, independently and without reliance upon the Purchasers,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own appraisals and decisions in taking or not taking
action in connection with this Guaranty.


 


4.                                      Subordination. Each Guarantor hereby subordinates any and
all debts, liabilities and obligations owed to such Guarantor by the Company or
any Subsidiary of the Company (the “Subordinated
Obligations”) to the Guaranteed Obligations as provided in this Section 4.


 


(a)                                  Prohibited Payments, Etc. Until the occurrence of a Default or an
Event of Default or any default by any Guarantor hereunder, each Guarantor and
its Subsidiaries may receive regularly scheduled payments from the Company
on account of Subordinated Obligations. After the occurrence and during the
continuance of any Default or Event of Default or any default by any Guarantor
hereunder (including the commencement and continuation of any Insolvency
Proceeding relating to the Company, however, unless the Purchasers otherwise
request, no Guarantor shall, nor shall it permit any of its Subsidiaries to,
demand, accept or take any action to collect any payment on account of the
Subordinated Obligations.


 


(b)                                 Prior Payment of Guaranteed Obligation. In any Insolvency Proceeding relating to
the Company, each Guarantor agrees that the Purchasers shall be entitled to
receive payment of all Guaranteed Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses) before such Guarantor or any of its
Subsidiaries receives payment of any Subordinated Obligations.


 


(c)                                  Turn-Over. After the occurrence and during the continuance of any Default or
Event of Default (including the commencement and continuation of any Insolvency
Proceeding relating to the Company), each Guarantor and its Subsidiaries shall,
if the Purchasers so request, collect, enforce and receive payments on account
of the Subordinated Obligations as trustee for the Purchasers and deliver such
payments to the Purchasers on account of the Guaranteed Obligations (including
any and all Disallowed Post-Commencement Interest and Expenses), together with
any necessary endorsements or other instruments of 


 


D-5

















 


transfer,
but without reducing or affecting in any manner the liability of such Guarantor
under the other provisions of this Guaranty.


 


(d)                                 Investor Authorization. After the occurrence and during the
continuance of any Default or Event of Default or any default by a Guarantor hereunder
(including the commencement and continuation of any Insolvency Proceeding
relating to the Company, the Purchasers are authorized and empowered (but
without any obligation to so do), in their discretion, (i) in the name of
each Guarantor and its Subsidiaries, to collect and enforce, and to submit
claims in respect of, Subordinated Obligations and to apply any amounts
received thereon to the Guaranteed Obligations (including any and all
Disallowed Post-Commencement Interest and Expenses), and (ii) to require
each Guarantor (A) to collect and enforce, and to submit claims in respect
of, Subordinated Obligations and (B) to pay any amounts received on such
obligations to the Purchasers for application to the Guaranteed Obligations
(including any and all Disallowed Post-Commencement Interest and Expenses).


 


5.                                      General Pledge; Setoff.


 


(a)                                  Pledge. In addition to all liens upon and rights of setoff against the
property of any Guarantor given to the Purchasers by law or separate agreement
to secure the liabilities of any Guarantor hereunder, to the extent permitted
by law, each Guarantor hereby grants to the Purchasers, as security for such
Guarantor’s obligations hereunder, a security interest in all monies,
securities and other property of such Guarantor now or hereafter in the
possession of the Purchasers; and the Purchasers shall have all rights and
remedies of a secured party with respect to such property.


 


(b)                                 Setoff. In addition to any rights and remedies of the Purchasers provided by
law, each Investor shall have the right, without prior notice to any Guarantor,
any such notice being expressly waived by each Guarantor to the extent
permitted by applicable law, upon the occurrence and during the continuance of
a Default or an Event of Default, to set-off and apply against the Guaranteed
Obligations any amount owing from such Investor to such Guarantor.


 


(c)                                  Nonwaiver. No security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of the Purchasers or by any failure
to exercise such right of setoff or to enforce such security interest, or by
any delay in so doing; and every right of setoff and security interest shall
continue in full force and effect until such right of setoff or security
interest is specifically waived or released by an instrument in writing
executed by the Purchasers.


 


6.                                      Contribution among
Guarantors. The
Guarantors desire to allocate among themselves, in a fair and equitable manner,
their rights of contribution from each other when any payment is made by any
Guarantor under this Guaranty. Accordingly, if any payment is made by any
Guarantor under this Guaranty (a “Funding
Guarantor”) that exceeds its Fair Share, the Funding Guarantor shall
be entitled to a contribution from each other Guarantor in the amount of such
other Guarantor’s Fair Share Shortfall, so that all such contributions shall
cause each Guarantor’s Aggregate Guaranty Payments to equal its Fair Share. The
amounts payable as contributions hereunder shall be determined by the Funding
Guarantor as of the date on which the related payment or distribution is made
by the Funding Guarantor, and such determination shall be binding on the other
Guarantors absent manifest error. The allocation and right of contribution
among the Guarantors set forth in this Section 6 shall not be
construed to limit in any way the liability of any Guarantor under this
Guaranty or the amount of the Guaranteed Obligations.


 


D-6

















 


7.                                      Miscellaneous.


 


(a)                                  Notices. Except as otherwise provided herein, all notices, requests, demands,
consents, instructions or other communications to or upon any Guarantor or the
Purchasers under this Guaranty or the other Transaction Documents to which a
Guarantor is a party shall be in writing and fixed, mailed or delivered, if to
a Guarantor or the Purchasers, at its respective facsimile number or address
set forth below (or to such other facsimile number or address for any party as
indicated in any notice given by that party to the other parties). All such
notices and communications shall be effective (i) when sent by overnight
service of recognized standing, on the second Business Day following the
deposit with such service; (ii) when mailed, first class postage
prepaid and addressed as aforesaid through the United States Postal Service,
upon receipt; (iii) when delivered by hand, upon delivery; and (iv) when
faxed, upon confirmation of receipt.


 


	
  Guarantors:

  	
   

  
	
   

  	
  c/o SatCon Technology Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
  Facsimile:

  
	
   

  	
  Telephone:

  
	
   

  	
   

  
	
  Purchasers:

  	
  RockPort Capital Partners II, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
  Telephone:

  
	
   

  	
  Facsimile:

  
	
   

  	
   

  
	
   

  	
  NGP Energy Technology Partners, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attention:

  
	
   

  	
  Telephone:

  
	
   

  	
  Facsimile:

  



 


(b)                                 Payments. Each Guarantor shall make all payments required hereunder to each
Investor, or its order, at each Investor’s office located at the address set
forth in Section 7(a) hereof, or at such other office as such
Investor may designate, on demand, in U.S. dollars. If any amounts
required to be paid by a Guarantor under this Guaranty are not paid when due,
such Guarantor shall pay interest on the aggregate, outstanding balance of such
amounts from the date due until those amounts are paid in full at a per annum
rate equal to the Default Rate.


 


(c)                                  Expenses. Each Guarantor shall pay on demand (i) all reasonable fees and
expenses, including reasonable attorneys’ fees and expenses, incurred by the
Purchasers in connection with the 


 


D-7

















 


preparation,
execution and delivery of, and the exercise of its duties under, this Guaranty
and the preparation, execution and delivery of amendments and waivers hereunder
and (ii) all reasonable fees and expenses, including reasonable attorneys’
fees and expenses, incurred by the Purchasers in connection with the
enforcement or attempted enforcement of this Guaranty or any of the Guaranteed
Obligations or in preserving any of the Purchasers’ rights and remedies
(including, without limitation, all such fees and expenses incurred in
connection with any “workout” or restructuring affecting the Transaction
Documents or the Guaranteed Obligations or any bankruptcy or similar proceeding
involving such Guarantor, any other Guarantor, the Company or any of their
Affiliates).


 


(d)                                 Waivers, Amendments. This Guaranty may not be amended or
modified, nor may any of its terms be waived, except by written
instruments signed by each Guarantor and each Investor. Each waiver or consent
under any provision hereof shall be effective only in the specific instances for
the purpose for which given. No failure or delay on the Purchasers’ part in
exercising any right hereunder shall operate as a waiver thereof or of any
other right nor shall any single or partial exercise of any such right preclude
any other further exercise thereof or of any other right.


 


(e)                                  Assignment. This Guaranty shall be binding upon and inure to the benefit of the
Purchasers, the Guarantors and their respective successors and assigns; provided,
however, that no Guarantor may assign or transfer any of its rights
and obligations under this Guaranty without the prior written consent of the
Purchasers. All references in
this Guaranty to any Person shall be deemed to include all permitted successors
and assigns of such Person.


 


(f)                                    Cumulative Rights, etc. The rights, powers and remedies of the
Purchasers under this Guaranty shall be in addition to all rights, powers and
remedies given to the Purchasers by virtue of any applicable law, rule or
regulation of any Governmental Authority, the Loan Agreement, any other
Transaction Document or any other agreement, all of which rights, powers, and
remedies shall be cumulative and may be exercised successively or
concurrently without impairing the Purchasers’ rights hereunder. Each Guarantor
waives any right to require the Purchasers to proceed against any Person or to
exhaust any Collateral or to pursue any remedy in the Purchasers’ power.


 


(g)                                 Payments Free of Taxes, Etc. All payments made by each Guarantor under
this Guaranty shall be made by each Guarantor free and clear of and without
deduction for any and all present and future taxes, levies, charges, deductions
and withholdings. In addition, each Guarantor shall pay upon demand any stamp
or other taxes, levies or charges of any jurisdiction with respect to the
execution, delivery, registration, performance and enforcement of this Guaranty.
If any taxes, levies, charges or other amounts are required to be withheld from
any amounts payable to the Purchasers, hereunder, the amounts so payable to the
Purchasers shall be increased to the extent necessary to yield to the
Purchasers (after payment of all such amounts) any such amounts payable
hereunder in the amounts, specified in this Guaranty. Upon request by the
Purchasers, each Guarantor shall furnish evidence satisfactory to the
Purchasers that all requisite authorizations and approvals by, and notices to
and filings with, governmental authorities and regulatory bodies have been
obtained and made and that all requisite taxes, levies and charges have been
paid.


 


(h)                                 Partial Invalidity. If at any time any provision of this
Guaranty is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability
of the remaining provisions of this Guaranty nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.


 


D-8

















 


(i)                                     Joint and Several Obligation. The obligations of the Guarantors under
this Guaranty are joint and several obligations of each Guarantor and may be
freely enforced against each Guarantor, for the full amount of the Guaranteed
Obligations, without regard to whether enforcement is sought or available
against any other Guarantor.


 


(j)                                     Governing Law. This Guaranty and the rights and
obligations of the parties hereto shall be governed by and construed and
enforced in accordance with the laws of the State of New York (without
reference to its choice of laws provisions).


 


(k)                                  Jury Trial. EACH GUARANTOR AND THE PURCHASERS, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY
ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS GUARANTY.


 


(l)                                     Limitation of Liability. NO CLAIM MAY BE MADE BY ANY GUARANTOR
AGAINST THE PURCHASERS OR THE MEMBERS, AFFILIATES, DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS OF THE PURCHASERS FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL
OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM (WHETHER BASED UPON ANY BREACH OF
CONTRACT, TORT, BREACH OF STATUTORY DUTY OR ANY OTHER THEORY OF LIABILITY)
ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS GUARANTY, OR
ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH AND EACH GUARANTOR
HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH
DAMAGES, WHETHER OR NOT NOW ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO
EXIST IN ITS FAVOR.


 


D-9

















 


IN WITNESS WHEREOF, each Guarantor has caused this
Guaranty to be executed as of the day and year first above written.


 


	
   

  	
  SATCON POWER SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SATCON APPLIED TECHNOLOGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SATCON ELECTRONICS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 
















 


EXHIBIT E


 


Form of
Security Agreement


 


SECURITY
AGREEMENT


 


This Security Agreement (as amended, modified or
otherwise supplemented from time to time, this “Security Agreement”), dated as of October [     ],
2007, is executed by SatCon Technology
Corporation, a Delaware corporation (together with its successors
and assigns, the “Company”),
SatCon Power Systems, Inc., a Delaware corporation (“SPS”), SatCon Applied Technology, Inc.,
a Delaware corporation (“SAT”),
and SatCon Electronics, Inc., a Delaware corporation (“SE,” and together with SPS and SAT, the “Subsidiaries”) in favor of Collateral Agent (as herein defined) on
behalf of the Purchasers listed on the signature pages hereof, and the
Purchasers. The Company and the Subsidiaries are each referred to herein as a “Debtor.”


 


RECITALS


 


A.                                   Company and the Purchasers have entered into
a Note Purchase Agreement, dated as [           ],
2007 (the “Purchase Agreement”),
pursuant to which the Company has issued Notes, as defined therein, and as the
same may be amended, modified or otherwise supplemented from time to time,
in an aggregate principal amount of $10,000,000 in favor of the Purchasers.


 


B.                                     In order to induce each Purchaser to extend
the credit evidenced by the Amended and Restated Tranche 1 Notes and the
Tranche 2 Notes (as such terms are defined in the Purchase Agreement), each
Debtor has agreed to enter into this Security Agreement and to grant Collateral
Agent, for the benefit of itself and the Purchasers, the security interest in
the Collateral described below.


 


AGREEMENT


 


NOW, THEREFORE, in consideration of the above
recitals and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, each Debtor hereby agrees with
Collateral Agent and the Purchasers as follows:


 


1.                                       Definitions and Interpretation. When used in this Security Agreement, the
following terms have the following respective meanings:


 


“Collateral”
has the meaning given to that term in Section 2 hereof.


 


“Obligations”
means all loans, advances, debts, liabilities and obligations, howsoever
arising, owed by any Debtor to Collateral Agent and the Purchasers of every
kind and description (whether or not evidenced by any note or instrument and
whether or not for the payment of money), now existing or hereafter arising
under or pursuant to the terms of the Note Purchase Agreement, the Notes and
the other Transaction Documents, including, all interest, fees, charges,
expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable
to and payable by any Debtor hereunder and thereunder, in each case, whether
direct or indirect, absolute or contingent, due or to become due, and whether
or not arising after the commencement of a proceeding under Title 11 of the
United States Code (11 U.S.C. Section 101 et seq.), as amended from time
to time (including post-petition interest) and whether or not allowed or
allowable as a claim in any such proceeding.


 

















 


“Permitted Liens”
shall have the meaning given such term in the Purchase Agreement.


 


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


 


All capitalized terms not otherwise defined herein
shall have the respective meanings given in the Notes. Unless otherwise defined
herein, all terms defined in the UCC have the respective meanings given to
those terms in the UCC.


 


2.                                       Grant of Security Interest. As security for the Obligations, each
Debtor hereby pledges to Collateral Agent and grants to Collateral Agent a
security interest of first priority in all right, title and interests of such
Debtor in and to the property described in Attachment 1 hereto, whether
now existing or hereafter from time to time acquired (collectively, the “Collateral”).


 


3.                                       General Representations and Warranties. Each Debtor represents and warrants to
Collateral Agent and the Purchasers that (a) the Debtor is the owner of
the Collateral (or, in the case of after-acquired Collateral, at the time such
Debtor acquires rights in the Collateral, will be the owner thereof) and that
no other Person has (or, in the case of after-acquired Collateral, at the time
such Debtor acquires rights therein, will have) any right, title, claim or
interest (by way of Lien or otherwise) in, against or to the Collateral, other
than Permitted Liens; (b) upon the filing of UCC-1 financing statements in
the appropriate filing offices, Collateral Agent has (or in the case of
after-acquired Collateral, at the time such Debtor acquires rights therein,
will have) a first priority perfected security interest in the Collateral to
the extent that a security interest in the Collateral can be perfected by such
filing, except for Permitted Liens; (c) all Inventory has been (or, in the
case of hereafter produced Inventory, will be) produced in compliance with
applicable laws, including the Fair Labor Standards Act; (d) all accounts
receivable and payment intangibles are genuine and enforceable against the
party obligated to pay the same; (e) the originals of all documents
evidencing all accounts receivable and payment intangibles of the Debtor and
the only original books of account and records of the Debtor relating thereto
are, and will continue to be, kept at the chief executive office of such Debtor
set forth on Schedule B or at such other locations as such Debtor may establish
in accordance with Section 5(d), and (f) all information set
forth in Schedules A and B hereto is true and correct.


 


4.                                       Representations and Warranties regarding
Intellectual Property. Each
Debtor represents and warrants to Collateral Agent and the Purchasers that: (a) the
Debtor does not own any patents, trademarks, copyrights or mask works
registered in, or the subject of pending applications in, the Patent and
Trademark Office or the Copyright Office or any similar offices or agencies in
any other country or any political subdivision thereof, other than those
described on Schedule A hereto; (b) the Debtor has,
except for Permitted Liens, the sole, full and unencumbered right, title and
interest in and to the trademarks shown on Schedule A and the goods
and services covered by the registrations thereof and, to the extent
registered, such registrations are valid and enforceable and in full force and
effect; (c) the Debtor has, except for Permitted Liens, the sole, full and
unencumbered right, title and interest in and to each of the patents shown on Schedule A
and the registrations thereof are valid and enforceable and in full force and
effect; (d) the Debtor has, except for Permitted Liens, the sole, full and
unencumbered right, title and interest in and to each of the copyrights shown
on Schedule A and according to the records of the Copyright Office,
each of said copyrights is valid and enforceable and in full force and effect; (e) the
Debtor has, except for Permitted Liens, the sole, full and unencumbered right,
title and interest in and to the mask works shown on Schedule A and
according to the records of the Copyright Office, each of said mask works is
valid and enforceable and in full force and effect; (f) there is no claim
by any third party that any patents, trademarks, copyrights or mask works are
invalid and unenforceable or do or may violate the rights of any Person; (g) all
licenses (other than non-exclusive licenses 


 


E-2

















 


to
end-users) of patents, trademarks, copyrights, mask works and trade secrets
which the Debtor has granted to any Person are set forth in Schedule A
hereto; (h) all licenses of patents, trademarks, copyrights, mask works
and trade secrets which any Person has granted to the Debtor are set forth on Schedule A
hereto; (i) the Debtor has obtained from each employee who may be
considered the inventor of patentable inventions (invented within the scope of
such employee’s employment) an assignment to the Debtor of all rights to such
inventions, including patents; and (j) the Debtor has taken all reasonable
steps necessary to protect the secrecy and the validity under applicable law of
all material trade secrets.


 


5.                                       Covenants Relating to Collateral. Each Debtor hereby agrees (a) to perform all
acts that may be necessary to maintain, preserve, protect and perfect the
Collateral, the Lien granted to Collateral Agent therein and the perfection and
priority of such Lien, except for Permitted Liens; (b) not to use or
permit any Collateral to be used (i) in violation in any material respect
of any applicable law, rule or regulation, or (ii) in violation of
any policy of insurance covering the Collateral; (c) to pay promptly when
due all taxes and other governmental charges, all Liens and all other charges
now or hereafter imposed upon or affecting any Collateral; (d) without 30
days’ written notice to Collateral Agent, (i) not to change such Debtor’s
name, or place of business (or, if such Debtor has more than one place of
business, its chief executive office), or the office in which such Debtor’s
records relating to accounts receivable and payment intangibles are kept, (ii) not
to change such Debtor’s state of incorporation or any organizational
identification number assigned by its jurisdiction of organization, (iii) not
to keep Collateral consisting of chattel paper at any location other than its
chief executive office set forth in item 1 of Schedule B hereto,
and (iv) not to keep Collateral consisting of equipment or inventory at
any location other than the locations set forth in item 4 of Schedule B
hereto,  (f) to procure,
execute and deliver from time to time any endorsements, assignments, financing
statements and other writings reasonably deemed necessary or appropriate by
Collateral Agent to perfect, maintain and protect its Lien hereunder and the
priority thereof and to deliver promptly to Collateral Agent all originals of
Collateral consisting of instruments; (g) to appear in and defend any
action or proceeding which may affect its title to or Collateral Agent’s
interest in the Collateral; (h) if Collateral Agent gives value to enable
such Debtor to acquire rights in or the use of any Collateral, to use such
value for such purpose; (i) to keep separate, accurate and complete
records of the Collateral and to provide Collateral Agent with such records and
such other reports and information relating to the Collateral as Collateral
Agent may reasonably request from time to time; (j) not to surrender
or lose possession of (other than to Collateral Agent), sell, encumber, lease,
rent, or otherwise dispose of or transfer any Collateral or right or interest
therein, and to keep the Collateral free of all Liens except, in each case, as
permitted under the Purchase Agreement; (k) if requested by Collateral
Agent, to type, print or stamp conspicuously on the face of all original copies
of all Collateral consisting of chattel paper a legend satisfactory to
Collateral Agent indicating that such chattel paper is subject to the security
interest granted hereby; (l) to collect, enforce and receive delivery of
the accounts receivable and payment intangibles in accordance with past
practice until otherwise notified by Collateral Agent; (m) to comply with
all material requirements of law relating to the production, possession,
operation, maintenance and control of the Collateral (including the Fair Labor
Standards Act); (n) to permit Collateral Agent and its representatives the
right, at any time during normal business hours, upon reasonable prior notice,
to visit and inspect the properties of such Debtor and its corporate, financial
and operating records, and make abstracts therefrom, and to discuss such Debtor’s
affairs, finances and accounts with its directors, officers and independent
public accountants; and (m) to promptly notify Collateral Agent in writing if
such Debtor acquires a Commercial Tort Claim, and to provide a summary
description of such claim, and grant to Collateral Agent in writing a security
interest therein and in the proceeds thereof, all upon the terms of this
Security Agreement, with such writing to be in form and substance
reasonably satisfactory to Collateral Agent.


 


6.                                       Covenants Regarding Intellectual Property. Each Debtor hereby agrees:


 


E-3

















 


(a)                                  Debtor will perform all acts and execute
all documents, including notices of security interest for each relevant type of
intellectual property in forms suitable for filing with the Patent and
Trademark Office or the Copyright Office, that may be necessary or
desirable to record, maintain, preserve, protect and perfect Collateral Agent’s
interest in the Collateral, the Lien granted to Collateral Agent in the
Collateral and the first priority of such Lien;


 


(b)                                 Except to the extent that Collateral Agent
gives its prior written consent:


 


(i)                                     Each Debtor (either itself or through
licensees) will continue to use its material trademarks in connection with each
and every trademark class of goods or services applicable to its current
line of products or services as reflected in its current catalogs, brochures,
price lists or similar materials in order to maintain such trademarks in full
force and effect free from any claim of abandonment for nonuse, and the Debtors
will not (and will not permit any licensee thereof to) do any act or knowingly
omit to do any act whereby any material trademark may become invalidated;


 


(ii)                                  No Debtor will do any act or omit to do any
act whereby any material patent registrations may become abandoned or
dedicated to the public domain or the remedies available against potential
infringers weakened and shall notify Collateral Agent immediately if it knows
of any reason or has reason to know that any material patent registration may become
abandoned or dedicated; and


 


(iii)                               No Debtor will do any act or omit to do any act whereby any material
copyrights or mask works may become abandoned or dedicated to the public
domain or the remedies available against potential infringers weakened and
shall notify Collateral Agent immediately if it knows of any reason or has
reason to know that any material copyright or mask work may become
abandoned or dedicated to the public domain.


 


(c)                                  Each Debtor will promptly (and in any event
within 5 days) notify Collateral Agent upon the filing, either by such Debtor
or through any agent, employee, licensee or designee, of (i) an
application for the registration of any patent or trademark, with the Patent
and Trademark Office or any similar office or agency in any other country or
any political subdivision thereof, (ii) any assignment of any patent or
trademark, which such Debtor may acquire from a third party, with the
Patent and Trademark Office or any similar office or agency in any other
country or any political subdivision thereof, or (iii) any assignment of
any copyright or mask work, which such Debtor may acquire from a third
party, with the Copyright Office or any similar office or agency in any other
country or any political subdivision thereof. Upon the request of Collateral
Agent, each Debtor shall execute and deliver any and all agreements,
instruments, documents and papers as Collateral Agent may request to
evidence Collateral Agent’s security interest in such patent, trademark (and
the goodwill and general intangibles of such Debtor relating thereto or
represented thereby), copyright or mask work, and each Debtor authorizes
Collateral Agent to amend an original counterpart of the applicable notice
of security interest executed pursuant to Section 6(a) of this
Security Agreement without first obtaining such Debtor’s approval of or
signature to such amendment and to record such document with the Patent and
Trademark Office or Copyright Office, as applicable;


 


(d)                                 While any Obligations remain outstanding, no
Debtor shall register or cause to be registered with the United States
Copyright Office any copyright registrations with respect to any proprietary
software of such Debtor or any other property that is subject to registration
with the United States Copyright Office; provided, that a Debtor may register
or cause to be registered such proprietary software or other property of such
Debtor with the United States Copyright Office if (i) such copyright
registration is made in connection with the enforcement against third parties
of such Debtor’s rights with respect to such proprietary 


 


E-4

















 


software
or other property and (ii) such Debtor provides Collateral Agent five (5) business
days prior notice of such copyright registration. While any Obligations remain
outstanding, each Debtor shall file or cause to be filed with the United States
Copyright Office a copyright application with respect to any major revisions or
upgrades to any proprietary software that has previously been registered by
such Debtor with the United States Copyright Office. Each Debtor shall file for
such registration within thirty (30) days from such major revision or upgrade
and shall notify Collateral Agent in writing five (5) business days prior
to such filing.


 


(e)                                  Each Debtor will take all necessary steps in
any proceeding before the Patent and Trademark Office, the Copyright Office or
any similar office or agency in any other country or any political subdivision
thereof, to diligently prosecute or maintain, as applicable, each application and
registration of the patents, trademarks, copyrights and mask works, including
filing of renewals, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings (except to the extent
that dedication, abandonment or invalidation is permitted hereunder);


 


(f)                                    Each Debtor shall (i) use proper
statutory notice in connection with its use of the patents, trademarks,
copyrights and mask works, (ii) maintain consistent standards of quality
in its manufacture of products sold under the trademarks or provision of
services in connection with the trademarks, and (iii) take all steps
necessary to protect the secrecy and the validity under applicable law of all
material trade secrets;


 


(g)                                 Each Debtor agrees that if it learns of any
use by any Person of any term or design likely to cause confusion with any
trademark, such Debtor shall promptly notify Collateral Agent of such use and
of all steps taken and to be taken to remedy any infringement of any trademark;
and


 


(h)                                 Each Debtor shall maintain with each employee
who may have access to the trade secrets of such Debtor an agreement by
which such employee agrees not to disclose such trade secrets and with each
employee who may be the inventor of patentable inventions (invented within
the scope of such employee’s employment) an invention assignment agreement
requiring such employee to assign all rights to such inventions, including
patents and patent applications, to such Debtor and further requiring such
employee to cooperate fully with such Debtor, its successors in interest,
including Collateral Agent, and their counsel, in the prosecution of any patent
application or in any litigation involving the invention, whether such
cooperation is required during such employee’s employment with such Debtor or
after the termination of such employment.


 


7.                                       Authorized Action by Collateral Agent. Each Debtor hereby irrevocably appoints
Collateral Agent as its attorney-in-fact (which appointment is coupled with an
interest) and agrees that Collateral Agent may perform (but
Collateral Agent shall not be obligated to and shall incur no liability to any
Debtor or any third party for failure so to do) any act which such Debtor is
obligated by this Security Agreement to perform, and to exercise such rights
and powers as such Debtor might exercise with respect to the Collateral,
including the right to (a) collect by legal proceedings or otherwise and
endorse, receive and receipt for all dividends, interest, payments, proceeds
and other sums and property now or hereafter payable on or on account of the
Collateral; (b) enter into any extension, reorganization, deposit, merger,
consolidation or other agreement pertaining to, or deposit, surrender, accept,
hold or apply other property in exchange for the Collateral; (c) make any
compromise or settlement, and take any action it deems advisable, with respect
to the Collateral; (d) insure, process and preserve the Collateral; (e) pay
any indebtedness of such Debtor relating to the Collateral; and (f) file
UCC financing statements and execute other documents, instruments and
agreements required hereunder; provided, however, that Collateral Agent shall
not exercise any such powers granted pursuant to subsections (a) through (e) prior
to the occurrence of an Event of Default and shall only exercise 


 


E-5

















 


such
powers during the continuance of an Event of Default. Each Debtor agrees to
reimburse Collateral Agent upon demand for any reasonable costs and expenses,
including attorneys’ fees, Collateral Agent may incur while acting as such
Debtor’s attorney-in-fact hereunder, all of which costs and expenses are
included in the Obligations. It is further agreed and understood between the
parties hereto that such care as Collateral Agent gives to the safekeeping of
its own property of like kind shall constitute reasonable care of the
Collateral when in Collateral Agent’s possession; provided, however, that
Collateral Agent shall not be required to make any presentment, demand or
protest, or give any notice and need not take any action to preserve any rights
against any prior party or any other person in connection with the Obligations
or with respect to the Collateral.


 


8.                                       Litigation and Other Proceedings.


 


(a)                                   Each Debtor shall have the right and
obligation to commence and diligently prosecute such suits, proceedings or
other actions for infringement or other damage, or reexamination or reissue
proceedings, or opposition or cancellation proceedings as are reasonable to
protect any of the patents, trademarks, copyrights, mask works or trade secrets.
No such suit, proceeding or other actions shall be settled or voluntarily
dismissed, nor shall any party be released or excused of any claims of or
liability for infringement, without the prior written consent of Collateral
Agent, which consent shall not be unreasonably withheld.


 


(b)                                  Upon the occurrence and during the
continuation of an Event of Default, Collateral Agent shall have the right but
not the obligation to bring suit or institute proceedings in the name of each
Debtor or Collateral Agent to enforce any rights in the Collateral, including
any license thereunder, in which event such Debtor shall at the request of
Collateral Agent do any and all lawful acts and execute any and all documents
reasonably required by Collateral Agent in aid of such enforcement. If
Collateral Agent elects not to bring suit to enforce any right under the
Collateral, including any license thereunder, each Debtor agrees to use all
reasonable measures, whether by suit, proceeding or other action, to cause to
cease any infringement of any right under the Collateral by any Person and for
that purpose agrees to diligently maintain any action, suit or proceeding
against any Person so infringing necessary to prevent such infringement.


 


9.                                       Default and Remedies.


 


(a)                                  Default. The Debtors shall be deemed in default under this Security Agreement
upon the occurrence and during the continuance of an Event of Default (as
defined in the Notes).


 


(b)                                 Remedies. Upon the occurrence and during the continuance of any such Event of
Default, Collateral Agent shall have the rights of a secured creditor under the
UCC, all rights granted by this Security Agreement and by law, including the
right to:  (a) require each Debtor
to assemble the Collateral and make it available to Collateral Agent and the
Purchasers at a place to be designated by Collateral Agent and the Purchasers;
and (b) prior to the disposition of the Collateral, store, process, repair
or recondition it or otherwise prepare it for disposition in any manner and to
the extent Collateral Agent and the Purchasers deem appropriate. Each Debtor
hereby agrees that ten (10) days’ notice of any intended sale or
disposition of any Collateral is reasonable. In furtherance of Collateral Agent’s
rights hereunder, each Debtor hereby grants to Collateral Agent an irrevocable,
non-exclusive license, exercisable without royalty or other payment by
Collateral Agent, and only in connection with the exercise of remedies
hereunder, to use, license or sublicense any patent, trademark, trade name,
copyright or other intellectual property in which such Debtor now or hereafter
has any right, title or interest together with the right of access to all media
in which any of the foregoing may be recorded or stored.


 


E-6

















 


(c)                                  Application of Collateral Proceeds. The proceeds and/or avails of the
Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Collateral
Agent at the time of, or received by Collateral Agent after, the occurrence of
an Event of Default) shall be paid to and applied as follows:


 


(i)                                     First, to the payment of reasonable costs and expenses, including all
amounts expended to preserve the value of the Collateral, of foreclosure or
suit, if any, and of such sale and the exercise of any other rights or
remedies, and of all proper fees, expenses, liability and advances, including
reasonable legal expenses and attorneys’ fees, incurred or made hereunder by
Collateral Agent;


 


(ii)                                  Second, to the payment to each Purchaser of the amount then owing or unpaid
on such Purchaser’s Note, and in case such proceeds shall be insufficient to
pay in full the whole amount so due, owing or unpaid upon such Note, then its
Pro Rata Share of the amount remaining to be distributed (to be applied first
to accrued interest and second to outstanding principal);


 


(iii)                               Third, to the payment of other amounts then payable to each Purchaser under
any of the Transaction Documents, and in case such proceeds shall be
insufficient to pay in full the whole amount so due, owing or unpaid under such
Transaction Documents, then its Pro Rata Share of the amount remaining to be
distributed; and


 


(iv)                              Fourth, to the payment of the surplus, if any, to the Debtor, its successors
and assigns, or to whomsoever may be lawfully entitled to receive the
same.


 


For purposes of this Security Agreement, the term “Pro
Rata Share” shall mean, when calculating a Purchaser’s portion of any
distribution or amount, that distribution or amount (expressed as a percentage)
equal to a fraction (i) the numerator of which is the original outstanding
principal amount of such Purchaser’s Note and (ii) the denominator of
which is the original aggregate outstanding principal amount of all Notes
issued under the Purchase Agreement. In the event that a Purchaser receives
payments or distributions in excess of its Pro Rata Share, then such Purchaser
shall hold in trust all such excess payments or distributions for the benefit
of the other Purchasers and shall pay such amounts held in trust to such other
Purchasers upon demand by such Purchasers.


 


10.                                 Collateral Agent.


 


(a)                                  Appointment. The Purchasers hereby appoint [RockPort Capital Partners II, L.P.] as
collateral agent for the Purchasers under this Security Agreement (in such
capacity, the “Collateral Agent”)
to serve from the date hereof until the termination of the Security Agreement.


 


(b)                                 Powers and Duties of Collateral Agent, Indemnity
by Purchasers.


 


(i)                                     Each Purchaser hereby irrevocably authorizes
the Collateral Agent to take such action and to exercise such powers hereunder
as provided herein or as requested in writing by the Purchasers of a Majority
in Interest in accordance with the terms hereof, together with such powers as
are reasonably incidental thereto. Collateral Agent may execute any of its
duties hereunder by or through agents or employees and shall be entitled to
request and act in reliance upon the advise of counsel concerning all matters
pertaining to its duties hereunder and shall not be liable for any action taken
or omitted to be taken by it in good faith in accordance therewith.


 


E-7

















 


(ii)                                  Neither the Collateral Agent nor any of its
directors, officers or employees shall be liable or responsible to any
Purchaser or to the Debtors for any action taken or omitted to be taken by
Collateral Agent or any other such person hereunder or under any related
agreement, instrument or document, except in the case of gross negligence or
willful misconduct on the part of the Collateral Agent, nor shall the
Collateral Agent or any of its directors, officers or employees be liable or
responsible for (i) the validity, effectiveness, sufficiency,
enforceability or enforcement of the Notes, this Security Agreement or any
instrument or document delivered hereunder or relating hereto; (ii) the
title of the Debtors to any of the Collateral or the freedom of any of the
Collateral from any prior or other liens or security interests; (iii) the
determination, verification or enforcement of each Debtor’s compliance with any
of the terms and conditions of this Security Agreement; (iv) the failure
by a Debtor to deliver any instrument  or
document required to be delivered pursuant to the terms hereof; or (v) the
receipt, disbursement, waiver, extension or other handling of payments or
proceeds made or received with respect to the collateral, the servicing of the
Collateral or the enforcement or the collection of any amounts owing with
respect to the Collateral.


 


(iii)                               In the case of this Security Agreement and the transactions
contemplated hereby and any related document relating to any of the Collateral,
each of the Purchasers agrees to pay to the Collateral Agent, on demand, its
Pro Rata Share of all fees and all expenses incurred in connection with the
operation and enforcement of this Security Agreement, the Notes or any related
agreement to the extent that such fees or expenses have not been paid by the
Debtors. In the case of this Security Agreement 
and each instrument and document relating to any of the Collateral, each
of the Purchasers and the Debtors hereby agree to hold the Collateral Agent
harmless, and to indemnify the Collateral Agent from and against any and all
loss, damage, expense or liability which may be incurred by the Collateral
Agent under this Security Agreement and the transactions contemplated hereby
and any related agreement or other instrument or document, as the case may be,
unless such liability shall be caused by the willful misconduct or gross
negligence of the Collateral Agent.


 


11.                                 Miscellaneous.


 


(a)                                  Notices. Except as otherwise provided herein, all notices, requests, demands,
consents, instructions or other communications to or upon each Debtor or
Collateral Agent under this Security Agreement shall be in writing and faxed,
mailed or delivered to each party to the facsimile number or its address set
forth below (or to such other facsimile number or address as the recipient of
any notice shall have notified the other in writing). All such notices and
communications shall be effective (a) when sent by Federal Express or
other overnight service of recognized standing, on the business day following
the deposit with such service; (b) when mailed, by registered or certified
mail, first class postage prepaid and addressed as aforesaid through the
United States Postal Service, upon receipt; (c) when delivered by hand,
upon delivery; and (d) when faxed, upon confirmation of receipt.


 


	
  Collateral Agent:

  	
   

  	
  [RockPort Capital Partners II, L.P.

  
	
   

  	
   

  	
  160 Federal Street

  
	
   

  	
   

  	
  18th Floor

  
	
   

  	
   

  	
  Boston, MA 02110–1700

  
	
   

  	
   

  	
  Telephone: (617) 912-1420

  
	
   

  	
   

  	
  Facsimile: (617) 912-1449

  
	
   

  	
   

  	
  Attention: David Prend]

  



 


E-8

















 


	
  with a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
  Wilson Sonsini Goodrich & Rosati, P.C.

  
	
   

  	
   

  	
  One Market Street

  
	
   

  	
   

  	
  Spear Tower, Suite 3300

  
	
   

  	
   

  	
  San Francisco, California 94105-1126

  
	
   

  	
   

  	
  Telephone: (415) 947-2000

  
	
   

  	
   

  	
  Facsimile: (415) 947-2099

  
	
   

  	
   

  	
  Attention: Robert G. O’Connor, Esq.

  
	
  Debtors:

  	
   

  	
   

  
	
   

  	
   

  	
  SatCon Technology Corporation

  
	
   

  	
   

  	
  27 Drydock Avenue

  
	
   

  	
   

  	
  Boston, MA 02110

  
	
   

  	
   

  	
  Telephone: (617) 897-2400

  
	
   

  	
   

  	
  Facsimile: (617) 897-2401

  
	
   

  	
   

  	
  Attention: David B. Eisenhaure

  
	
  with a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
  Greenberg Traurig, LLP

  
	
   

  	
   

  	
  One International Place

  
	
   

  	
   

  	
  Boston, MA 02110

  
	
   

  	
   

  	
  Telephone: (617) 310-6000

  
	
   

  	
   

  	
  Facsimile: (617) 310-6001

  
	
   

  	
   

  	
  Attention: Jonathan Bell, Esq.

  



 


(b)                                 Termination of Security Interest. Upon the payment in full of all
Obligations, the security interest granted herein shall terminate and all
rights to the Collateral shall revert to the respective Debtor. Upon such
termination Collateral Agent hereby authorizes the Debtors to file any UCC
termination statements necessary to effect such termination and Collateral
Agent will, at such Debtor’s expense, execute and deliver to such Debtor any
additional documents or instruments as such Debtor shall reasonably request to
evidence such termination.


 


(c)                                  Nonwaiver. No failure or delay on Collateral Agent’s part in exercising any
right hereunder shall operate as a waiver thereof or of any other right nor
shall any single or partial exercise of any such right preclude any other
further exercise thereof or of any other right.


 


(d)                                 Amendments and Waivers. This Security Agreement may not be
amended or modified, nor may any of its terms be waived, except by written
instruments signed by the Debtors and Collateral Agent. Each waiver or consent
under any provision hereof shall be effective only in the specific instances
for the purpose for which given.


 


(e)                                  Assignments. This Security Agreement shall be binding upon and inure to the
benefit of Collateral Agent and the Debtors and their respective successors and
assigns; provided, however, that no Debtor may sell, assign
or delegate rights and obligations hereunder without the prior written consent
of Collateral Agent.


 


(f)                                    Cumulative Rights, etc. The rights, powers and remedies of Collateral
Agent under this Security Agreement shall be in addition to all rights, powers
and remedies given to Collateral Agent by 


 


E-9

















 


virtue
of any applicable law, rule or regulation of any governmental authority,
any Transaction Document or any other agreement, all of which rights, powers,
and remedies shall be cumulative and may be exercised successively or
concurrently without impairing Collateral Agent’s rights hereunder. Each Debtor
waives any right to require Collateral Agent to proceed against any person or
entity or to exhaust any Collateral or to pursue any remedy in Collateral Agent’s
power.


 


(g)                                 Payments Free of Taxes, Etc. All payments made by each Debtor under the
Transaction Documents shall be made by such Debtor free and clear of and
without deduction for any and all present and future taxes, levies, charges,
deductions and withholdings. In addition, each Debtor shall pay upon demand any
stamp or other taxes, levies or charges of any jurisdiction with respect to the
execution, delivery, registration, performance and enforcement of this Security
Agreement. Upon request by Collateral Agent, each Debtor shall furnish evidence
satisfactory to Collateral Agent that all requisite authorizations and
approvals by, and notices to and filings with, governmental authorities and
regulatory bodies have been obtained and made and that all requisite taxes,
levies and charges have been paid.


 


(h)                                 Partial Invalidity. If at any time any provision of this
Security Agreement is or becomes illegal, invalid or unenforceable in any
respect under the law or any jurisdiction, neither the legality, validity or enforceability
of the remaining provisions of this Security Agreement nor the legality,
validity or enforceability of such provision under the law of any other
jurisdiction shall in any way be affected or impaired thereby.


 


(i)                                     Expenses. Each Debtor shall pay on demand all fees and expenses, including
reasonable attorneys’ fees and expenses, incurred by Collateral Agent in
connection with custody, preservation or sale of, or other realization on, any
of the Collateral or the enforcement or attempt to enforce any of the
Obligations which is not performed as and when required by this Security
Agreement.


 


(j)                                     Construction. Each of this Security Agreement and the
other Transaction Documents is the result of negotiations among, and has been
reviewed by, the Debtors, Purchasers, Collateral Agent and their respective
counsel. Accordingly, this Security Agreement and the other Transaction
Documents shall be deemed to be the product of all parties hereto, and no
ambiguity shall be construed in favor of or against the Debtors, Purchasers or
Collateral Agent.


 


(k)                                  Entire Agreement. This Security Agreement taken together with
the other Transaction Documents constitute and contain the entire agreement of
the Debtors, Purchasers and Collateral Agent and supersede any and all prior
agreements, negotiations, correspondence, understandings and communications
among the parties, whether written or oral, respecting the subject matter
hereof.


 


(l)                                     Other Interpretive Provisions. References in this Security Agreement and
each of the other Transaction Documents to any document, instrument or
agreement (a) includes all exhibits, schedules and other attachments
thereto, (b) includes all documents, instruments or agreements issued or
executed in replacement thereof, and (c) means such document, instrument
or agreement, or replacement or predecessor thereto, as amended, modified and
supplemented from time to time and in effect at any given time. The words “hereof,”
“herein” and “hereunder” and words of similar import when used in this Security
Agreement or any other Transaction Document refer to this Security Agreement or
such other Transaction Document, as the case may be, as a whole and not to
any particular provision of this Security Agreement or such other Transaction
Document, as the case may be. The words “include” and “including” and
words of similar import when used in this Security Agreement or any other
Transaction Document shall not be construed to be limiting or exclusive.


 


E-10

















 


(m)                               Governing Law. This Security Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
reference to conflicts of law rules (except to the extent governed by the
UCC).


 


(n)                                 Counterparts. This Security Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which together shall be deemed to constitute one instrument.


 


[The remainder of this page is
intentionally left blank]


 


E-11

















 


IN WITNESS WHEREOF, each Debtor has caused this
Security Agreement to be executed as of the day and year first above written.


 


	
   

  	
  SATCON TECHNOLOGY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SATCON POWER SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SATCON APPLIED TECHNOLOGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SATCON ELECTRONICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
							



 


 


[Signature page to
Security Agreement]


 

















 


AGREED:


 


[                              ],


As
Collateral Agent


 


 


	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [PURCHASER]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					



 


 


[Signature page to
Security Agreement]


 

















 


ATTACHMENT
1


 


TO SECURITY
AGREEMENT


 


All right, title, interest, claims and demands of
SatCon Technology Corporation, SatCon Power Systems, Inc., SatCon Applied
Technology, Inc., and SatCon Electronics, Inc. (each a “Debtor”) in and to the following property:


 


(i)                                      All Accounts;


 


(ii)                                   All Chattel Paper;


 


(iii)                                All Commercial Tort Claims listed on Exhibit A;


 


(iv)                               All Deposit Accounts and cash;


 


(v)                                  All Documents;


 


(vi)                               All Equipment;


 


(vii)                            All General Intangibles;


 


(viii)                         All Goods;


 


(ix)                                 All Instruments;


 


(x)                                    All Intellectual Property;


 


(xi)                                 All Inventory;


 


(xii)                              All Investment Property;


 


(xiii)                           All Letter-of-Credit Rights


 


(xiv)                          To the extent not otherwise included, all Proceeds and products of any
and all of the foregoing, and all accessions to, substitutions and replacements
for, and rents and profits of each of the foregoing.


 


The term “Intellectual
Property” means all
intellectual and similar property of every kind and nature now owned or
hereafter acquired by any Debtor, including inventions, designs, patents
(whether registered or unregistered), copyrights (whether registered or
unregistered), trademarks (whether registered or unregistered), trade secrets,
domain names, confidential or proprietary technical and business information,
know-how, methods, processes, drawings, specifications or other data or
information and all memoranda, notes and records with respect to any research
and development, software and databases and all embodiments or fixations
thereof whether in tangible or intangible form or contained on magnetic
media readable by machine together with all such magnetic media and related
documentation, registrations and franchises, and all additions, improvements
and accessions to, and books and records describing or used in connection with,
any of the foregoing.


 

















 


All capitalized terms used in this Attachment 1
and not otherwise defined herein, shall have the respective meanings given to
such terms in the Uniform Commercial Code of the State of New York as in
effect from time to time.


 

















 


Exhibit A


 


to


 


Attachment
1 to Security Agreement


 


Commercial
Tort Claims


 

















 


SCHEDULE A


TO SECURITY
AGREEMENT


 


COPYRIGHTS


 


	
  Owner

  	
   

  	
  Description

  	
   

  	
  Registration Date

  	
   

  	
  Registration No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


PATENTS


 


 




	
  Owner

  	
   

  	
  Title

  	
   

  	
  Date Issued

  	
   

  	
  Patent No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  






 


PATENT
APPLICATIONS


 




	
  Owner

  	
   

  	
  Title

  	
   

  	
  Application Date

  	
   

  	
  Application No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  






 


TRADEMARKS


 




	
  Owner

  	
   

  	
  Mark

  	
   

  	
  Registration Date

  	
   

  	
  Registration No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  






 


TRADEMARK
APPLICATIONS


 




	
  Owner

  	
   

  	
  Mark

  	
   

  	
  Application Date

  	
   

  	
  Application No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  






 

















 


MASK WORKS


 




	
  Owner

  	
   

  	
  Description

  	
   

  	
  Registration Date

  	
   

  	
  Registration No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  






 


LICENSES OF
PATENTS, TRADEMARKS, COPYRIGHTS OR MASK WORKS


(other than non-exclusive licenses to
end-users)


 


1.


 

















 


SCHEDULE B


TO SECURITY
AGREEMENT


 


COMPANY
PROFILE


 


1.                                       Name. The legal name of each Debtor and the address
of its chief executive office is:


 


2.                                       Organizational
Identification Number; Federal Employer Identification Number. Each Debtor’s organizational identification
number in its state of incorporation and its federal employer identification
number are as follows:


 


	
   

  	
   

  	
  State Organization

  	
   

  	
  Federal Employer

  	
   

  
	
  Debtor

  	
   

  	
  Identification Number

  	
   

  	
  Identification Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


3.                                       State of Incorporation. Each Debtor was incorporated in the state of
Delaware on the following dates:


 


	
  Debtor

  	
   

  	
  Date of Incorporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


4.                                       Prior Names. Since its incorporation each Debtor has had
the following legal names (other than its current legal name):


 


	
   

  	
   

  	
  Date Debtor’s Name

  	
   

  
	
  Prior Name

  	
   

  	
  Was Changed From Such Name

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


5.                                       Each Debtor does business under the following
trade names:


 


	
  Trade Name

  	
   

  	
  Is This Name Registered?

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


6.                                       Place of Business. Each Debtor has the following places of
business:


 


	
   

  	
   

  	
  Brief Description

  	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
  Owner of Location

  	
   

  	
  of Assets and Value

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


7.                                       Assets in Possession of
Third Parties. The
following are names and addresses of all persons or entities other than the
Debtors, 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 intruments, chattel paper, inventory or equipment:


 


	
  Name

  	
   

  	
  Mailing Address

  	
   

  	
  County

  	
   

  	
  State

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


8.                                       Qualification To Do Business. Each Debtor is qualified to do business in
the following states:


 


9.                                       Existing Security Interests. Each Debtor’s assets are subject to the
following security interest of Persons other than the Collateral Agent:


 


	
  Assets

  	
   

  	
  Name of Secured Party

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


10.                                 Tax Assessments. The following tax assessments are currently
outstanding and unpaid:


 


	
  Assessing Authority

  	
   

  	
  Amount and Description

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


2

















 


11.                                 Guaranties. Each Debtor has directly or indirectly
guaranteed the following obligations of third parties:


 


	
  Person to whom Obligated

  	
   

  	
  Third Party Obligor

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


12.                                 Subsidiaries. Each Debtor has the following subsidiaries
(list jurisdiction and date of incorporation, federal employer identification
number, type and value of assets):


 


13.                                 Securities; Instruments. The following is a complete list of all
stocks, bonds, debentures, notes and other securities and investment property
owned by each Debtor (provide name of issuer,
whether certificated or uncertificated, certificate no. (if applicable),
number of shares):


 


14.                                 Bank Accounts; Securities
Accounts. The following is a
complete list of all bank accounts and securities accounts maintained by each
Debtor (provide name and address of
depository bank (or brokerage firm), type of account and account number):


 


15.                                 Commercial Tort Claims. The following is a complete list of all
commercial tort claims held by each Debtor:


 


3
















 


EXHIBIT F


 


Form of
Pledge Agreement


 


PLEDGE
AGREEMENT


 


This PLEDGE
AGREEMENT, dated as of October [     ],
2007 (this “Pledge Agreement”), is executed by SatCon Technology Corporation, a Delaware
corporation, (“Debtor”), in favor of Collateral Agent (as herein
defined) on behalf of the Purchasers listed on the signature pages hereof,
and the Purchasers.


 


RECITALS


 


A.                                   Company and the Purchasers have entered into
a Note Purchase Agreement, dated as [          ],
2007, pursuant to which the Company has issued Notes, as defined therein, and
as the same may be amended, modified or otherwise supplemented from time
to time, in an aggregate principal amount of $10,000,000 in favor of the
Purchasers.


 


B.                                     In connection with
the Purchase Agreement, Company, Purchasers and Collateral Agent are entering
into that certain Security Agreement, dated as of the date hereof, pursuant to
which the Company and certain of its subsidiaries granted to Collateral Agent,
on behalf of the Purchasers, a security interest in substantially all of their
assets, and the Purchasers agreed to appoint the Collateral Agent as their
agent for purposes of such security interest.


 


C.                                     In order to induce
each Purchaser to extend the credit evidenced by the Amended and Restated
Tranche 1 Notes and the Tranche 2 Notes (as such terms are defined in the
Purchase Agreement), Company has agreed to enter into this Pledge Agreement and
to grant Collateral Agent, for the benefit of itself and the Purchasers, the
security interest in the Collateral described below.


 


AGREEMENT


 


NOW, THEREFORE, in consideration of the above
recitals and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Debtor hereby agrees with Collateral
Agent as follows:


 


1.                                       Definitions and Interpretation. Unless otherwise defined herein, all other
capitalized terms used herein and defined in the Notes shall have the
respective meanings given to those terms in the Notes, and all terms defined in
the New York Uniform Commercial Code (the “UCC”) shall have the
respective meanings given to those terms in the UCC.


 


2.                                       The Pledge. To secure the Obligations as defined in Section 3 hereof, Debtor
hereby pledges and assigns to Collateral Agent, and grants to Collateral Agent
a security interest in, all of Debtor’s right, title and interest, whether now
existing or hereafter arising in all instruments, certificated and
uncertificated securities, money and general intangibles of, relating to or
arising from the following property (the “Pledged Collateral”):


 


(a)                                  The securities of the issuers listed on Schedule 1
hereto and the securities of any other issuers hereafter acquired by Debtor
(collectively, the “Issuers”), which securities (to the extent they are
currently held by Debtor) are more particularly described on Schedule 1
hereto (the “Securities”), together with any 


 

















 


additional
securities of any Issuer hereafter acquired by Debtor (collectively, with the
Securities, the “Pledged Securities”);


 


(b)                                 All dividends (including cash dividends),
other distributions (including redemption proceeds), or other property,
securities or instruments in respect of or in exchange for the Pledged
Securities, whether by way of dividends, stock dividends, recapitalizations,
mergers, consolidations, split-ups, combinations or exchanges of shares or
otherwise; and


 


(c)                                  All proceeds of the foregoing (“Proceeds”).


 


3.                                       Security for Obligations. The obligations secured by this Pledge
Agreement (the “Obligations”) shall mean and include all loans,
advances, debts, liabilities and obligations, howsoever arising, owed by
Company to Collateral Agent and the Purchasers of every kind and description
(whether or not evidenced by any note or instrument and whether or not for the
payment of money), now existing or hereafter arising under or pursuant to the
terms of the Note Purchase Agreement, the Notes and the other Transaction
Documents, including, all interest, fees, charges, expenses, attorneys’ fees
and costs and accountants’ fees and costs chargeable to and payable by Company
hereunder and thereunder, in each case, whether direct or indirect, absolute or
contingent, due or to become due, and whether or not arising after the
commencement of a proceeding under Title 11 of the United States Code (11
U.S.C. Section 101 et seq.), as amended from time to time (including
post-petition interest) and whether or not allowed or allowable as a claim in
any such proceeding.


 


4.                                       Delivery of Pledged Collateral; Financing
Statements. All certificates
or instruments representing or evidencing the Pledged Collateral shall be
promptly delivered to Collateral Agent and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed assignment in
blank, in the form attached as Exhibit A hereto.


 


5.                                       Representations and Warranties. Debtor hereby represents and warrants as
follows:


 


(a)                                  Issuance of Pledged Securities, Etc. The Pledged Securities are owned by Debtor
free and clear of any and all liens, pledges, encumbrances or charges, and
Debtor has not optioned or otherwise agreed to sell, hypothecate, pledge, or
otherwise encumber or dispose of the Pledged Securities.


 


(b)                                 Security Interest. The pledge of the Pledged Collateral
creates a valid security interest in the Pledged Collateral, which security
interest is a perfected and first priority security interest, securing the
payment of the Obligations and the obligations hereunder.


 


(c)                                  Restatement of Representations and Warranties. On and as of the date any property becomes
Pledged Collateral, the foregoing representations and warranties shall be
deemed restated with respect to such additional Pledged Collateral.


 


6.                                       Further Assurances. Debtor agrees that at any time and from
time to time, at Debtor’s expense, Debtor will promptly execute and deliver all
further instruments and documents, including without limitation all additional
Pledged Securities, and take all further action, that may be necessary or
desirable, or that Collateral Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral.


 


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7.                                       Voting Rights; Dividends; Etc.


 


(a)                                  Rights Prior to an Event of Default. So long as no Event of Default shall have
occurred and be continuing:


 


(i)                                     Debtor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged Securities or
any part thereof for any purpose not inconsistent with the terms of this
Pledge Agreement.


 


(ii)                                  Debtor shall be entitled to receive and
retain free any and all dividends and interest paid in respect of the Pledged
Securities, provided, however, that any and all (A) dividends and interest
paid or payable other than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed in respect of, or in
exchange for any Pledged Securities, (B) dividends and other distributions
paid or payable in cash in respect of any Pledged Securities in connection with
a partial or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable
or otherwise distributed in respect of principal of, or in redemption of, or in
exchange for, any Pledged Securities, shall be, and shall be forthwith
delivered to Collateral Agent to hold as, Pledged Collateral and shall, if
received by Debtor, be received in trust for the benefit of Collateral Agent,
be segregated from the other property or funds of Debtor and be forthwith
delivered to Collateral Agent as Pledged Collateral in the same form as so
received (with any necessary endorsement) to be held as part of the
Pledged Collateral.


 


(b)                                 Rights Following an Event of Default. Upon the occurrence and during the
continuance of an Event of Default:


 


(i)                                     All rights of Debtor to exercise the voting
and other consensual rights which it would otherwise be entitled to exercise
pursuant to Section 7(a)(i) and to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain pursuant
to Section 7(a)(ii) shall cease and all such rights shall thereupon
become vested in Collateral Agent which shall thereupon have the sole right,
but not the obligation, to exercise such voting and other consensual rights and
to receive and hold as Pledged Collateral such dividends and interest payments.


 


(ii)                                  All dividends and interest payments which are
received by Debtor contrary to the provisions of subparagraph (i) of
this Section 7(b) shall be received in trust for the benefit of
Collateral Agent, shall be segregated from other funds of Debtor and shall be
forthwith delivered to Collateral Agent as Pledged Collateral in the same form as
so received (with any necessary endorsement).


 


8.                                       Events of Default; Remedies.


 


(a)                                  Event of Default. An Event of Default shall be deemed to have
occurred under this Pledge Agreement upon the occurrence and during the
continuance of an Event of Default under the Notes.


 


(b)                                 Rights Under the UCC. In addition to all other rights granted
hereby, and otherwise by law, Collateral Agent shall have, with respect to the
Pledged Collateral, the rights and obligations of a secured party under the
UCC.


 


(c)                                  Sale of Pledged Collateral. Debtor acknowledges and recognizes that
Collateral Agent may be unable to effect a public sale of all or a part of
the Pledged Securities and may be compelled to resort to one or more
private sales to a restricted group of purchasers who will be obligated to
agree, among other things, to acquire the Pledged Securities for their own
account, for investment and not with a view to the 


 


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distribution
or resale thereof. Debtor acknowledges that any such private sales may be
at prices and on terms less favorable to Collateral Agent than those of public
sales, and agrees that so long as such sales are made in good faith such
private sales shall be deemed to have been made in a commercially reasonable
manner and that Collateral Agent has no obligation to delay sale of any Pledged
Securities to permit the issuer thereof to register it for public sale under
the Securities Act of 1933, as amended or under any state securities law.


 


(d)                                 Compliance with the Exchange Act. Upon the occurrence of an Event of Default
and at Collateral Agent’s request, Debtor agrees to use Debtor’s best efforts
to cause Issuer to disseminate publicly all information required to be
disseminated pursuant to the Securities Exchange Act of 1934, as amended, in
the event that Issuer or Debtor is required to file reports under such Act, or
to otherwise make available such information as to permit the public or private
sale of the Pledged Collateral in accordance with the terms of this Pledge
Agreement. Debtor further agrees to use Debtor’s best efforts to cause Issuer
to cooperate with Collateral Agent in taking whatever additional action may be
required to effect such public or private sale of the Pledged Collateral.


 


(e)                                  Notice, Etc. In any case where notice of sale is
required, ten (10) days’ notice shall be deemed reasonable notice. Collateral
Agent may have resort to the Pledged Collateral or any portion thereof
with no requirement on the part of Collateral Agent to proceed first
against any other Person or property.


 


(f)                                    Other Remedies. Upon the occurrence and during the
continuance of an Event of Default, (i) at the request of Collateral
Agent, Debtor shall assemble and make available to Collateral Agent all records
relating to the Pledged Securities at any place or places specified by
Collateral Agent, together with such other information as Collateral Agent
shall request concerning Debtor’s ownership of the Pledged Securities and
relationship to Issuer; and (ii) Collateral Agent or its nominee shall
have the right, but shall not be obligated, to vote or give consent with
respect to the Pledged Securities or any part thereof.


 


9.                                       Collateral Agent Appointed Attorney-in-Fact.


 


Debtor hereby appoints Collateral Agent as Debtor’s
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor or otherwise, from time to time in Collateral Agent’s
discretion and to the full extent permitted by law to take any action and to
execute any instrument which Collateral Agent may deem reasonably
necessary or advisable to accomplish the purposes of this Pledge Agreement in
accordance with the terms and provisions hereof, including without limitation,
to receive, endorse and collect all instruments made payable to Debtor
representing any dividend, interest payment or other distribution in respect of
the Pledged Collateral or any part thereof and to give full discharge for
the same.


 


Debtor hereby ratifies all reasonable actions that
said attorney 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.
The powers conferred on Collateral Agent hereunder are solely to protect its
interests in the Pledged Collateral and shall not impose any duty upon
Collateral Agent to exercise any such powers. Collateral Agent shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers and in no event shall Collateral Agent or any of its
officers, directors, employees or agents be responsible to Debtor for any act
or failure to act, except for gross negligence or willful misconduct.


 


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10.                                 Collateral Agent.


 


(a)                                  Appointment. The Purchasers hereby appoint [RockPort Capital Partners II, L.P.] as
collateral agent for the Purchasers under this Pledge Agreement (in such
capacity, the “Collateral Agent”) to serve from the date hereof until
the termination of the Pledge Agreement.


 


(b)                                 Powers and Duties of Collateral Agent,
Indemnity by Purchasers.


 


(i)                                     Each Purchaser hereby irrevocably authorizes
the Collateral Agent to take such action and to exercise such powers hereunder
as provided herein or as requested in writing by the Purchasers of a Majority
in Interest in accordance with the terms hereof, together with such powers as
are reasonably incidental thereto. Collateral Agent may execute any of its
duties hereunder by or through agents or employees and shall be entitled to
request and act in reliance upon the advise of counsel concerning all matters
pertaining to its duties hereunder and shall not be liable for any action taken
or omitted to be taken by it in good faith in accordance therewith.


 


(ii)                                  Neither the Collateral Agent nor any of its
directors, officers or employees shall be liable or responsible to any
Purchaser or to Company for any action taken or omitted to be taken by
Collateral Agent or any other such person hereunder or under any related
agreement, instrument or document, except in the case of gross negligence or
willful misconduct on the part of the Collateral Agent, nor shall the
Collateral Agent or any of its directors, officers or employees be liable or
responsible for (i) the validity, effectiveness, sufficiency,
enforceability or enforcement of the Notes, this Pledge Agreement or any
instrument or document delivered hereunder or relating hereto; (ii) the
title of Company to any of the Collateral or the freedom of any of the
Collateral from any prior or other liens or security interests; (iii) the
determination, verification or enforcement of Company’s compliance with any of
the terms and conditions of this Pledge Agreement; (iv) the failure by
Company to deliver any instrument  or
document required to be delivered pursuant to the terms hereof; or (v) the
receipt, disbursement, waiver, extension or other handling of payments or
proceeds made or received with respect to the collateral, the servicing of the
Collateral or the enforcement or the collection of any amounts owing with
respect to the Collateral.


 


(iii)                               In the case of this Pledge Agreement and the transactions contemplated
hereby and any related document relating to any of the Collateral, each of the
Purchasers agrees to pay to the Collateral Agent, on demand, its Pro Rata Share
(as defined in the Security Agreement) of all fees and all expenses incurred in
connection with the operation and enforcement of this Pledge Agreement, the
Notes or any related agreement to the extent that such fees or expenses have
not been paid by Company. In the case of this Pledge Agreement  and each instrument and document relating to
any of the Collateral, each of the Purchasers and the Company hereby agrees to
hold the Collateral Agent harmless, and to indemnify the Collateral Agent from
and against any and all loss, damage, expense or liability which may be
incurred by the Collateral Agent under this Pledge Agreement and the
transactions contemplated hereby and any related agreement or other instrument
or document, as the case may be, unless such liability shall be caused by
the willful misconduct or gross negligence of the Collateral Agent.


 


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11.                                 Miscellaneous.


 


(a)                                  Notices. Except as otherwise provided herein, all notices, requests, demands,
consents, instructions or other communications to or upon Collateral Agent or
Debtor under this Agreement or the Notes shall be in writing and telecopied,
mailed or delivered to each party at the address or telecopier number last
given to the other party. All such notices and communications shall be
effective (a) when sent by Federal Express or other overnight service of
recognized standing, on the business day following the deposit with such
service; (b) when mailed by registered or certified mail, first class postage
prepaid and addressed as aforesaid through the United States Postal Service,
upon receipt; (c) when delivered by hand, upon delivery; and (d) when
telecopied, upon confirmation of receipt.


 


(b)                                 Nonwaiver. No failure or delay on Collateral Agent’s part in exercising any
right hereunder shall operate as a waiver thereof or of any other right nor
shall any single or partial exercise of any such right preclude any other
further exercise thereof or of any other right.


 


(c)                                  Amendments and Waivers. This Pledge Agreement may not be
amended or modified, nor may any of its terms be waived, except by written
instruments signed by Debtor and Collateral Agent. Each waiver or consent under
any provision hereof shall be effective only in the specific instances for the
purpose for which given.


 


(d)                                 Assignments. This Pledge Agreement shall be binding upon and inure to the benefit
of Collateral Agent and Debtor and their respective successors and assigns; provided,
however, that Debtor may not assign its rights and duties hereunder
without the prior written consent of Collateral Agent.


 


(e)                                  Cumulative Rights, etc. The rights, powers and remedies of
Collateral Agent under this Pledge Agreement shall be in addition to all
rights, powers and remedies given to Collateral Agent by virtue of any
applicable law, rule or regulation of any governmental authority, the
Notes or any other agreement, all of which rights, powers, and remedies shall
be cumulative and may be exercised successively or concurrently without
impairing Collateral Agent’s rights hereunder. Debtor waives any right to
require Collateral Agent to proceed against any Person or to exhaust any
collateral or to pursue any remedy in Collateral Agent’s power.


 


(f)                                    Payments Free of Taxes, Etc. All payments made by Debtor under this
Pledge Agreement shall be made by Debtor free and clear of and without
deduction for any and all present and future taxes, levies, charges, deductions
and withholdings. In addition, Debtor shall pay upon demand any stamp or other
taxes, levies or charges of any jurisdiction with respect to the execution,
delivery, registration, performance and enforcement of this Pledge Agreement. Upon
request by Collateral Agent, Debtor shall furnish evidence satisfactory to
Collateral Agent or such Collateral Agent that all requisite authorizations and
approvals by, and notices to and filings with, governmental authorities and
regulatory bodies have been obtained and made and that all requisite taxes,
levies and charges have been paid.


 


(g)                                 Partial Invalidity. If any time any provision of this Pledge
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability
of the remaining provisions of this Pledge Agreement nor the legality, validity
or enforceability of such provision under the law of any other jurisdiction
shall in any way be affected or impaired thereby.


 


(h)                                 Expenses. Each of Debtor and Collateral Agent shall bear its own costs in
connection with the preparation, execution and delivery of, and the exercise of
its duties under, this Pledge Agreement and the Notes. Debtor shall pay on
demand all reasonable fees and expenses, including reasonable attorneys’ fees
and expenses, incurred by Collateral Agent with respect to any amendments or
waivers hereof requested by Debtor or in the enforcement or attempted
enforcement of any of the Obligations or in preserving any of 


 


F-6

















 


Collateral
Agent’s rights and remedies (including, without limitation, all such fees and
expenses incurred in connection with any “workout” or restructuring affecting
this Agreement, the Notes or the Obligations or any bankruptcy or similar
proceeding involving Debtor or any of its Subsidiaries). As used herein, the
term “reasonable attorneys’ fees” shall include, without limitation, allocable
costs of Collateral Agent’s in-house legal counsel and staff.


 


(i)                                     Governing Law. This Pledge Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
reference to conflicts of law rules (except to the extent governed by the
UCC).


 


(j)                                     Jury Trial. EACH OF DEBTOR AND SECURED PARTY, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY
ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS PLEDGE AGREEMENT.


 


F-7

















 


IN WITNESS WHEREOF, Debtor has caused this Pledge
Agreement to be executed as of the day and year first above written.


 


	
   

  	
  SATCON TECHNOLOGY CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED:

  
	
   

  
	
  [COLLATERAL AGENT]

  
	
  as Collateral Agent

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [PURCHASERS]

  
	
  as Purchaser

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
										



 


 


[Signature page to Pledge
Agreement]


 

















 


SCHEDULE 1


 


TO PLEDGE AGREEMENT


 


SHARES


 


	
  Issuer

  	
   

  	
  Certificate

  No.

  	
   

  	
  Certificate

  Date

  	
   

  	
  Registered Holder

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


EXHIBIT A


 


TO PLEDGE AGREEMENT


 


FORM OF ASSIGNMENT IN
BLANK


 


STOCK POWER


 


FOR VALUE RECEIVED, and pursuant to that certain
Pledge Agreement, dated as of                   ,
2007, made by SatCon Technology Corporation, a Delaware corporation, in favor
of [COLLATERAL AGENT], as collateral agent, and the Purchasers listed on the
signature pages thereto, as amended from time to time, the undersigned
hereby sells, assigns and transfers unto                       
                                                                                                                                                                                           
[No. of Shares —written out]
( [No. of Shares — numerals])
Shares of [Class or Series of
Stock], $[par value]
par value, of [Name of Issuer], a [state of incorporation] corporation,
standing in the undersigned’s name on the books of the corporation represented
by Certificate No. [Cert. No.].


 


The undersigned hereby irrevocably constitutes and
appoints                                               attorney
to transfer said stock on the books of said corporation with full power of
substitution in the premises.


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SatCon Technology Corporation

  
	
   

  	
   

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
								



 


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