SECURITY AGREEMENT
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THIS SECURITY AGREEMENT is made and entered into this 30th day of June,
2000, by and between FUELCELL ENERGY, INC., a Delaware corporation, having its
chief executive office at 3 Great Pasture Road, Danbury, Connecticut 06812-1305
(the "Debtor"), and the CONNECTICUT DEVELOPMENT AUTHORITY, a body politic and
corporate constituting a public instrumentality and political subdivision of the
State of Connecticut, having its principal office at 999 West Street, Rocky
Hill, Connecticut 06067-3405 (the "Secured Party").
WITNESSETH:
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In consideration of the mutual promises and covenants herein contained, the
parties agree as follows:
1. DEFINITIONS: In this Security Agreement:
a. "Collateral" means collectively (i) all machinery and equipment
purchased by the Debtor with the proceeds of the multiple-advance term
loan in the principal amount of up to $4,000,000.00 made available (or
to be made available) by the Secured Party to the Debtor, as such
machinery and equipment are more fully described in SCHEDULE A
attached hereto and made a part hereof (as SCHEDULE A may hereafter be
modified, amended and supplemented from time to time by the Secured
Party and the Debtor), and (ii) all items of machinery and equipment
now or hereafter owned by the Debtor and described in SCHEDULE A-1
attached hereto and made a part hereof (as SCHEDULE A-1 may hereafter
be modified, amended and supplemented from time to time by the Secured
Party and the Debtor), and the products, accessions and substitutions
therefor, and the accounts and proceeds arising from the sale or
disposition thereof including any returns thereof, including, where
applicable, the proceeds of insurance covering the above.
b. "Indebtedness" means all debts, liabilities and obligations of any
kind, whenever and however incurred, including future obligations of
the Debtor to the Secured Party, whether or not evidenced by any
notes, instruments, documents or other writing, including, without
limitation, all obligations of the Debtor under the Note and the Loan
Agreement (as hereafter defined).
c. "State" means any state or other jurisdiction in which the Debtor
carries on business or in which the Collateral is at any time located,
and includes the State of Connecticut.
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d. Any term not defined herein that is defined in the Uniform
Commercial Code, as enacted in the State of Connecticut (the "Code"),
shall have the meaning as defined therein.
To secure the payment of a multiple-advance term loan in the amount of up
to FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00) plus interest, made pursuant
to that certain loan agreement of even date herewith by and between Debtor and
the Secured Party (the "Loan Agreement") and payable in accordance with the
terms of that certain promissory note of the Debtor, dated as of the date
hereof, in the original principal amount of $4,000,000.00 (the "Note"), copies
of which Loan Agreement and Note are attached hereto as SCHEDULE B and made a
part hereof, and to secure the performance and payment of all Indebtedness,
Debtor hereby grants and conveys to the Secured Party a security interest in the
Collateral.
2. DEBTOR'S COVENANTS: The Debtor warrants, covenants and agrees as
follows:
a. To pay and perform all of the Indebtedness secured by this
Security Agreement according to its terms.
b. To defend the title to the Collateral against any and all persons
and against all claims.
c. At any time and from time to time, at the request of Secured
Party, to execute and deliver one or more financing statements
and/or continuation statements pursuant to the Code, and any
amendments thereof and supplements thereto, and such other
instruments as the Secured Party shall reasonably require in
order to perfect, protect, preserve and maintain the security
interests hereby granted, and to pay the cost of filing and
recording the same or filing and recording this Security
Agreement in all public offices wherever filing or recording is
deemed by Secured Party to be necessary or desirable. Debtor
hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact, coupled with an interest, to do whatever
Secured Party may deem necessary to perfect or continue perfected
its security interest in the Collateral under this Security
Agreement pursuant to the Code. Debtor agrees that a carbon,
photographic or other reproduction of this Security Agreement or
a financing statement is sufficient as a financing statement.
d. To retain possession of the Collateral during the existence of
this Security Agreement and not to sell, exchange, assign, loan,
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deliver, lease, transfer or otherwise dispose of same, without
the prior written consent of the Secured Party in each instance,
which consent shall not be unreasonably withheld or delayed.
e. To keep the Collateral at its present location and not to remove
same without the prior written consent of the Secured Party in
each instance; PROVIDED, HOWEVER, that by no later than January
1, 2001, all of the Collateral shall be moved to and permanently
installed in Debtor's leased facility located at Technology Park,
Technology Park Road, Torrington, Connecticut 06790 (the
"Torrington Facility").
f. To keep the Collateral free and clear of all liens, charges,
encumbrances, pledges, mortgages, and security interests, except
for any subsequent encumbrances consented to in writing by the
Secured Party, which consent the Secured Party may withhold in
its sole discretion.
g. To keep its chief executive office at the address set forth at
the beginning of this Security Agreement, and to provide the
Authority with at least thirty (30) days' prior written notice of
its intention to move its chief executive office to another
location.
h. To pay, when due, all taxes, assessments, governmental charges
and license fees relating to, or which could become a lien upon,
the Collateral.
i. To keep the Collateral, at the Debtor's own cost and expense, in
good repair and condition and to use it for the purposes intended
and not to misuse, abuse, waste or allow it to deteriorate,
except for normal wear and tear, and to make the same available
for inspection by the Secured Party during normal business hours.
j. To keep the Collateral insured against loss by fire, theft, flood
and other hazards (so-called "All Risk" coverage) as the Secured
Party may require in an amount equal to the full value of the
Collateral and in no event less than the outstanding Indebtedness
secured thereby. Policies covering the Collateral shall be
obtained from responsible insurers authorized to do business in
the State of Connecticut. Certificates of insurance or policies
shall name the Secured Party as loss payee and shall have
attached thereto a loss payable clause making loss payable to the
Secured Party as its interest may appear, and all such policies
and renewal policies shall be deposited with the Secured Party.
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Each policy or endorsement shall contain a clause requiring the
insurer to give not less than thirty (30) days' prior written
notice to the Secured Party in the event of modification or
cancellation of the policy for any reason whatsoever, and a
clause that the interest of the Secured Party shall not be
impaired or invalidated by any act or neglect of the Debtor or
owner of the Collateral nor by the occupation of the premises
where the Collateral is located for purposes more hazardous than
are permitted by said policy. The Debtor shall give immediate
written notice to the Secured Party and to insurers of loss or
damage to the Collateral and shall promptly file proofs of loss
with insurers. The Debtor hereby irrevocably appoints the Secured
Party the attorney-in-fact, coupled with an interest, of the
Debtor in obtaining and adjusting any such insurance and
endorsing settlement drafts and hereby assigns to the Secured
Party all sums which may become payable under such insurance,
including return premiums and dividends, as additional security
for the Indebtedness. In the event of termination or threatened
termination of insurance, the Secured Party has the right to
obtain its own insurance covering the Collateral and to add the
costs of obtaining and maintaining such insurance as an
additional obligation of the Debtor to the Secured Party. Nothing
herein shall relieve the Debtor of its duty or obligation to do
any act for which the Secured Party may be hereby appointed
attorney-in-fact for the Debtor or otherwise authorized to act.
k. In the conduct of its business, to materially comply with all
applicable laws, ordinances, rules and regulations of all
governmental authorities having jurisdiction over the Debtor, the
Collateral and/or its business.
l. The Debtor authorizes the Secured Party, if the Debtor fails to
do so, to do all things required of the Debtor herein and charge
all reasonable expenses incurred by the Secured Party to the
Debtor together with interest thereon until repayment to the
Secured Party at the interest rate provided in the Note. Failure
to repay any said advance with interest within ten (10) days from
the date of demand by the Secured Party shall constitute a
default hereunder.
m. Not, without thirty (30) days' prior written notice to the
Secured Party, change its name or make any changes in the
tradenames under which it now operates. In the event that the
Debtor so notifies the Secured Party, the Debtor will execute
such financing statements and other documents as the Secured
Party shall deem necessary or desirable in order to maintain the
existence, perfection and priority of its lien on the Collateral.
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n. The sixty (60) day liquidation value of the Collateral, as
determined by the Secured Party based upon a current appraisal of
same conducted by a qualified equipment appraiser selected by the
Secured Party, shall, at each time that the Debtor requests an
advance from the Secured Party under the Note, be equal to at
least one hundred fifty percent (150%) of the outstanding balance
of the Note (including the amount of the requested loan advance).
3. DEBTOR'S REPRESENTATIONS AND WARRANTIES: The Debtor represents and
warrants to the Secured Party as follows:
a. All written information heretofore or hereafter furnished by
Debtor to the Secured Party is or will be true and correct in all
material respects as of the date with respect to which such
information was furnished.
b. Except for the security interest of the Secured Party, Debtor is,
and as to Collateral acquired after the date hereof, Debtor will
be, the owner of the Collateral free and clear of any lien,
security interest, pledge and encumbrance of any nature, except
as otherwise provided herein.
c. The office where Debtor keeps its records concerning Collateral
and Debtor's chief executive office is and will be located at 3
Great Pasture Road, Danbury, Connecticut 06812-1305. Prior to
moving all of the Collateral to the Torrington Facility, the
Collateral will be kept at the locations described on SCHEDULE
3(C) attached hereto and made a part hereof (as same may
hereafter be modified, amended and supplemented from time to time
by the Secured Party).
4. NON-WAIVER: Waiver of or acquiescence in any default by the Debtor or
failure of the Secured Party to insist upon strict performance by the Debtor of
any warranties or agreements in this Security Agreement shall not constitute a
waiver of any subsequent or other default or failure.
5. DEFAULT: Any one of the following shall constitute a default by the
Debtor:
a. Failure by the Debtor to comply with or perform within ten (10)
days from the date required for performance any provision of this
Security Agreement;
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b. Any representation or warranty made or given by the Debtor in
connection with this Security Agreement proves to be false or
misleading in any material fashion;
c. Default under the Note, the Loan Agreement or any other document
or agreement evidencing or securing the Indebtedness secured
hereby;
d. All or substantial part of the Collateral is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or
comes within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors;
e. Depreciation (except depreciation as reflected for tax or
accounting purposes) or impairment of the Collateral;
f. Judgment or other claim in excess of $50,000.00 becomes a lien
upon the Collateral or any part thereof; or
g. If any of the Collateral is materially damaged and not covered by
insurance reasonably deemed adequate by the Secured Party.
6. REMEDIES ON DEFAULT: Upon any default (and during the continuance of
such default) and upon demand by Secured Party, the Debtor agrees immediately to
assemble the Collateral and make it available to the Secured Party at the place
and time designated in the said demand. The Secured Party shall be entitled to
immediate possession of the Collateral and the Secured Party may: (i) enter any
premises where any Collateral may be located for the purpose of assembling or
taking possession of and removing same, and (ii) sell, assign, lease or
otherwise dispose of the Collateral or any part thereof, either at public or
private sale acceptable to the Secured Party, all at the Secured Party's sole
option and as it, in its sole discretion, may deem advisable, and the Secured
Party may bid or become purchaser at any such sale, free from any right of
redemption which is hereby expressly waived by the Debtor. Until sale, the
Secured Party may store the Collateral on the premises where it is located when
seized, and if said premises are the property of the Debtor, the Debtor agrees
not to charge the Secured Party for storage thereof for a period of ninety (90)
days before or after sale or disposition of said Collateral. Unless the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold in a recognized market, the Secured Party will give the
Debtor reasonable notice of time and place of any public sale or the time after
which any private sale or other intended disposition will be made. The
requirement of reasonable notice shall be met if such notice is mailed to the
Debtor at least five (5) days before the time of the sale or disposition.
The net cash proceeds resulting from the collection, liquidation, sale or
other disposition of the Collateral shall be applied first to the reasonable
expenses (including all reasonable attorneys' fees) of preparing for sale,
storing, processing, selling, collecting, and/or liquidating the Collateral and
the like, and then to the satisfaction of the Indebtedness, application as to
particular obligations or against principal or interest under the Indebtedness
to be in the Secured Party's sole discretion. The Debtor shall be liable to the
Secured Party and shall pay to the Secured Party on demand any deficiency which
may remain after such sale, disposition, collection or liquidation of
Collateral, and the Secured Party in turn agrees to remit to the Debtor, or
other such persons as their interests may appear, any surplus remaining after
all such liabilities have been paid in full.
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To facilitate the exercise by the Secured Party of the rights and remedies
set forth in this section, the Debtor hereby irrevocably appoints the Secured
Party or any other person whom the Secured Party may designate, as
attorney-in-fact for the Debtor, coupled with an interest, at the Debtor's
expense, to exercise all or any of the foregoing powers, and other powers
incidental to the foregoing, all of which, being coupled with an interest, shall
be irrevocable, shall continue until all obligations have been paid in full and
shall be in addition to any other rights and remedies that the Secured Party may
have.
In the event the Secured Party seeks to take possession of any or all
Collateral by court process, Debtor hereby irrevocably waives any bonds and any
surety or security relating thereto required by any statute, court rule or
otherwise as an incident to such possession, and waives any demand for
possession prior to the commencement of any suit or action to recover with
respect thereto and waives the right to demand a jury in any action in which the
Secured Party is a party.
7. ATTORNEYS' FEES. ETC.: Upon any default, the Secured Party's
reasonable attorneys' fees and the legal and other expenses for pursuing,
searching for, receiving, taking, keeping, storing, advertising and selling the
Collateral, shall be chargeable to the Debtor.
8. OTHER RIGHTS: In addition to all rights and remedies herein, upon
default, the Secured Party shall have such other rights and remedies as are set
forth in the Code and the Connecticut General Statutes, as amended.
9. DEBTOR ACKNOWLEDGES THAT THIS SECURITY AGREEMENT AND THE UNDERLYING
TRANSACTIONS GIVING RISE HERETO CONSTITUTE COMMERCIAL BUSINESS TRANSACTED WITHIN
THE STATE OF CONNECTICUT. IN THE EVENT OF ANY LEGAL ACTION BETWEEN DEBTOR AND
THE SECURED PARTY HEREUNDER, DEBTOR HEREBY EXPRESSLY WAIVES ANY RIGHTS WITH
REGARD TO NOTICE, PRIOR HEARING AND ANY OTHER RIGHTS IT MAY HAVE UNDER THE
CONNECTICUT GENERAL STATUTES, CHAPTER 903a, AS NOW CONSTITUTED OR HEREAFTER
AMENDED, OR OTHER STATUTE OR STATUTES, STATE OR FEDERAL, AFFECTING PREJUDGMENT
REMEDIES, AND THE SECURED PARTY MAY INVOKE ANY PREJUDGMENT REMEDY AVAILABLE TO
IT, INCLUDING, BUT NOT LIMITED TO, GARNISHMENT, ATTACHMENT, FOREIGN ATTACHMENT
AND REPLEVIN, WITH RESPECT TO ANY TANGIBLE OR INTANGIBLE PROPERTY (WHETHER REAL
OR PERSONAL) OF DEBTOR TO ENFORCE THE PROVISIONS OF THIS NOTE, WITHOUT GIVING
DEBTOR ANY NOTICE OR OPPORTUNITY FOR A HEARING.
10. ADDITIONAL WAIVERS: Demand, presentment, protest and notice of
nonpayment are hereby waived by Debtor. Debtor also waives the benefit of all
valuation, appraisement and exemption laws.
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11. BINDING EFFECT: The terms, warranties and agreements herein contained
shall bind and inure to the benefit of the respective parties hereto, and their
respective legal representatives, successors and assigns.
12. ASSIGNMENT: The Secured Party may assign without limitation its
security interest in the Collateral.
13. AMENDMENT: This Security Agreement may not be altered or amended
except by an agreement in writing signed by the parties hereto.
14. TERM:
(a) This Security Agreement shall continue in full force and effect
until all Indebtedness has been irrevocably paid in full.
(b) No termination of this Security Agreement shall in any way affect
or impair the rights and liabilities of the parties hereto relating to any
transaction or events prior to such termination date, or to any Collateral in
which Secured Party has a security interest, and all agreements, warranties and
representations of Debtor shall survive such termination.
15. NO WAIVER: The Secured Party's failure at any time or times hereafter
to require strict performance by Debtor of any of the provisions, warranties,
terms and conditions contained in this Security Agreement, or in any other
agreement, instrument or document now or at any time or times hereafter executed
by Debtor and delivered to Secured Party, shall not waive, affect or diminish
any right of Secured Party at any time or times hereafter to demand strict
performance therewith, and such right shall not be deemed to have been waived by
any act or knowledge of Secured Party, its agents, officers or employees, unless
such waiver is contained in an instrument in writing signed by an officer of
Secured Party and directed to Debtor specifying such waiver. No waiver by
Secured Party of any default hereunder shall operate as a waiver of any other
default or the same default on a future occasion.
16. CHOICE OF LAW: THE LAWS OF THE STATE OF CONNECTICUT SHALL GOVERN THE
RIGHTS AND DUTIES OF THE PARTIES HEREIN CONTAINED.
IN WITNESS WHEREOF, the parties have signed and sealed this Security
Agreement at Waterbury, Connecticut as of the day and year first above written.
FUELCELL ENERGY, INC.
By: /s/ Christopher R. Bentley
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Christopher R. Bentley
Its Executive Vice President
Duly Authorized
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Brien T. Day
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Brien T. Day
Its Vice President
Duly Authorized
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SCHEDULE A
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List of Machinery and Equipment Acquired with Loan Proceeds
[To be completed Post-Closing]
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SCHEDULE A-1
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List of Other Machinery and Equipment of Debtor
[To be completed Post-Closing]
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SCHEDULE B
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Copy of Loan Agreement and Note
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SCHEDULE 3(C)
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List of Locations Where Collateral Located
[To be completed Post-Closing]
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