Acquisition Aims to Tap Distributed Gen. Market

Proton Energy Systems, Inc. a manufacturer of hydrogen generators and regenerative fuel cell systems, has acquired Northern Power Systems, Inc., which specializes in the design, manufacture, and installation of integrated on-site power systems for stationary commercial and industrial applications.

Wallingford, Connecticut – June 3, 2003 [SolarAccess.com] Together, the companies will offer a wide array of practical energy technologies, including Proton’s advanced hydrogen generation products and Northern’s renewable and fossil-fuel power systems, to meet critical power needs of customers around the globe–the hallmark of Northern’s 29-year history. Both companies believe that with the growing interest in the “hydrogen economy,” this transaction will accelerate widespread understanding and adoption of the essential link between renewable power and hydrogen as a fuel for energy sustainability. Proton will pay US$27.5 million to Northern’s security holders, approximately two-thirds in cash and the balance in Proton common stock. Northern’s security holders will also receive warrants to purchase approximately 2.5 million shares of Proton stock. In what Proton calls a commitment to commercial self-sufficiency and shareholder value, the company also plans to make a special cash distribution of US$1 per share, or approximately US$33.5 million based on current shares outstanding, payable on June 20, 2003 to shareholders of record as of June 6, 2003. Proton has decided to make this distribution for several reasons: First, Proton expects that the cash requirements for the combined business following the acquisition of Northern are less than Proton’s current cash on hand. Second, Proton believes that investors are attracted to the company’s long-term vision, but look for assurance of fiscal discipline. Third, Northern’s business is centered on positive project margins. And finally, both companies have enjoyed considerable success securing government and other outside funding for advanced energy demonstration projects, meaning that the combination is expected to reduce internally-funded R&D capital requirements. “The commercial and industrial markets are ready for products that can give end-users more control over the cost and quality of their energy,” said Walter W. “Chip” Schroeder, president and CEO of Proton Energy Systems, Inc. “Northern has already proven its skills in originating and developing distributed generation projects, thereby adding a valuable dimension to Proton’s business plan. At the same time, continuing global concerns for pollution and fossil-fuel depletion will create the environment for a growing array of demonstration programs that will validate Proton’s vision for energy sustainability.” Northern Power Systems has developed stand-alone and grid-connected power systems built upon proven combustion and renewable technologies to meet critical energy requirements in hundreds of applications worldwide.Combining Northern’s application expertise with Proton’s products that convert excess and renewable power into hydrogen fuel is expected to result in a broadened array of opportunities for both companies. “Proton knows our strengths, understands our role, and brings the technology and financial resources that will enable us to build value faster than either of us could achieve separately,” said Clint Coleman, president and CEO of Northern Power Systems, Inc. “Northern brings an established business model and channel that will position the combined entity to more rapidly deliver Proton’s leading-edge hydrogen technologies into the marketplace.”