Amended and Restated Fuel Cell Product Operating Agreement among ECO Fuel Cells, LLC, H Power Corp., and H Power Enterprises of Canada, Inc.
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This agreement, dated March 9, 2000, is between ECO Fuel Cells, LLC, H Power Corp., and H Power Enterprises of Canada, Inc. It sets out the terms for a strategic partnership where H Power will develop and manufacture fuel cell power systems for stationary applications, and ECO Fuel Cells will exclusively purchase, market, and service these products for rural electric cooperatives in the U.S. The agreement covers cooperation in product development, information sharing, field testing, warehousing, and joint marketing efforts, with each party having specific roles and responsibilities.
EX-10.27 2 ex-10_27.txt EXHIBIT 10.27 Exhibit 10.27 Confidential Treatment. The portions of this exhibit that have been replaced with "[*****]" have been filed separately with the Securities and Exchange Commission and are the subject of an application for confidential treatment. AMENDED AND RESTATED FUEL CELL PRODUCT OPERATING AGREEMENT BY AND AMONG ECO FUEL CELLS, LLC, H POWER CORP. AND H POWER ENTERPRISES OF CANADA, INC. - -------------------------------------------------------------------------------- This Amended and Restated Fuel Cell Product Operating Agreement (this "Agreement") is made this 9th day of March 2000, by and among ECO Fuel Cells, LLC, a Delaware limited liability company, with its principal offices at 2201 Cooperative Way, Herndon, Virginia 20171-3025 ("ECO Fuel Cells"), H Power Corp., a Delaware corporation, with its principal offices at 1373 Broad Street, Clifton, New Jersey 07013 and H Power Enterprises of Canada, Inc., a Canadian corporation with its principal offices located in Montreal, Province of Quebec (together with H Power Corp. "H Power"). ECO Fuel Cells and H Power are individually referred to herein as "Party" and collectively as the "Parties". WHEREAS: Energy Co-Opportunity, Inc. ("ECO") was formed on behalf of its member rural electric cooperatives to provide them with assistance as they diversify into new products and services; WHEREAS: ECO and its member cooperatives wish to build on their long-standing reputation for providing innovative energy solutions and reliable customer services; WHEREAS: ECO has formed ECO Fuel Cells as a wholly-owned subsidiary, to assist ECO's members in creating new business opportunities in distributed power generation provided by Fuel Cell Power Systems for Stationary Applications; WHEREAS: H Power is a technological leader in commercializing low-power fuel cell systems with a highly-skilled management and technical team and has been developing high-power fuel cell systems for various uses, including stationary power applications; WHEREAS: ECO Fuel Cells and H Power Corp. entered into a Fuel Cell Product Operating Agreement on July 29, 1999 (the "Operating Agreement") in order to create a strategic, exclusive relationship in which ECO Fuel Cells agreed to purchase, market and service H Power Corp's Fuel Cell Power Systems for Stationary Applications in exchange for exclusive marketing, distribution and servicing rights in all those areas in the United States now served by rural electric cooperatives; WHEREAS: The Parties modified and amended certain terms of the Operating Agreement pursuant to an Addendum Agreement, dated as of August 25, 1999 (the "Addendum Agreement," and together with the Operating Agreement, the "Prior Agreements"); and WHEREAS: The Parties desire to amend and restate the Prior Agreements as hereinafter set forth. - -------------------------------------------------------------------------------- Confidential Now, therefore, in consideration of these premises and other good and valuable consideration, the Parties hereby agree as follows: ARTICLE 1. PURPOSE AND DEFINITIONS. The purpose of this Agreement is to establish a close relationship between, ECO, ECO Fuel Cells and H Power, whereby H Power will use its best efforts to develop, design and manufacture Fuel Cell Power Systems for Stationary Applications that meet ECO's Cooperative Members' reasonable requirements ("Fuel Cell Products"); and ECO Fuel Cells will purchase those Fuel Cell Products exclusively from H Power and market them through Licensed Members, all in accordance with the terms of this Agreement. For the purpose of this Agreement, "Fuel Cell Power System(s) for Stationary Applications" shall mean fuel cell system(s) from 1kW to 25kW (of all types except for direct methanol fuel cells), manufactured by H Power, that are affixed and hard-wired to the premises or facility for the purpose of providing primary or backup electric power for the premises or facility or their appurtenances. Each Fuel Cell Power System for Stationary Applications shall be ready for installation to customers' lines and shall contain all the electronic and mechanical and other components required for normal operation, including if necessary, but not limited to, the following: reformer, H2 purification unit, H2 storage unit, heat and water management system, batteries, controls and a power management system; as well as all subsystems, components, sub- components, parts and accessories for the Fuel Cell Power Systems. Throughout this Agreement, "Cooperative Members" shall mean any rural electric cooperative, and members of ECO's corporate family, including corporate affiliates of both. For the purpose of this Agreement, "Licensed Members" shall mean ECO's Cooperative Members that have been assigned exclusive Distribution Rights to the Fuel Cell Products by ECO Fuel Cells, for their respective service territories under Article 3.A. or 3.B. ARTICLE 2. COOPERATION BETWEEN THE PARTIES. In view of the purpose set forth above and because the Parties believe that their individual strengths can create valuable synergies to achieve their mutual goals, they believe that it is important to cooperate with each other in the following areas: A. INFORMATION SHARING. H Power will share with ECO Fuel Cells, market and technical data on the Fuel Cell Products in test and in the field, and ECO Fuel Cells will, and will require the Licensed Members to share with H Power information they may receive or develop with respect to field operation of the Fuel Cell Products. In response to requests, H Power agrees to advise ECO Fuel Cells of sales information, including volumes, types of units and purchasers and information developed on competitors' products and strategies and other information available to it that could assist ECO Fuel Cells in marketing and servicing the Fuel Cell Products and in training Licensed Members to market and service the Fuel Cell Products. Both Parties shall otherwise be responsive to requests from the other for information pertinent to the purposes of this Agreement. B. FUEL CELL PRODUCTS THAT MEET COOPERATIVES' NEEDS. H Power recognizes that it is important to meet the needs of the Licensed Members with respect to quantity, quality, design, price, serviceability and other standards for the Fuel Cell Products that are the subject of this Agreement. To this end, the Parties agree to cooperate with each other so as to enable H Power to develop, design and manufacture Fuel Cell Products that meet these needs. C. FIELD-TESTING. ECO Fuel Cells will use its best efforts: 1. to place that number of Alpha and Beta Fuel Cell Product test units in the field with the Licensed Members in various Territories as specified in Schedule A, and 2. to arrange for the Licensed Members to monitor Fuel Cell Product performance and otherwise assist H Power in field testing the units in order to improve the Fuel Cell Products. D. WAREHOUSING. ECO Fuel Cells will encourage the Licensed Members to make available warehouse facilities for H Power's use in order to facilitate the distribution of the Fuel Cell Products to ECO Fuel Cells and the Licensed Members. Reasonable cost-based fees may be negotiated by ECO Fuel Cells or Licensed Members for such services. E. MARKETING, ADVERTISING, AND COMMUNICATION MATERIALS. ECO Fuel Cells and H Power will work together in a spirit of cooperation to produce effective marketing, advertising and communication materials with respect to the Fuel Cell Products that are the subject of this Agreement ("Marketing Materials"). Each Party will bear its own Marketing Materials costs and will own the Marketing Materials for which it pays. Each Party grants the other the right to use its Marketing Materials. ECO Fuel Cells and the Licensed Members shall be required to prominently display in their Marketing Materials which refer to the Fuel Cell Products the following phrase,"an H Power System", or such other words or phrases to which the Parties may hereafter agree. Additionally, H Power shall have the right to have its name, or the same or similar words and phrases utilized in ECO's, ECO Fuel Cells' and the Licensed Members' Marketing Materials, prominently displayed on the Fuel Cell Products. 3 ECO, ECO Fuel Cells and the Licensed Members shall have the right to display their name in Marketing Materials and have such name affixed on the Fuel Cell Products, provided that H Power's name is also displayed per the immediately preceding paragraph. F. TRAINING AND SERVICING. ECO Fuel Cells may provide information and recommendations to H Power with respect to appropriate training for Fuel Cell Product installers and service personnel, and H Power agrees to consider all such information and recommendations submitted to it. G. PRODUCTS PROVIDED. H Power shall provide the following products and services by the dates specified in Schedule A (as well as other products specified there): 1. Fuel Cell Products that heat water in addition to generating electricity; and 2. H Power shall develop Fuel Cell Products with the necessary controls and other equipment to allow full integration and interface with the electric transmission and distribution grid, including delivering electric power into the grid. H. ADDITIONAL COOPERATION. The Parties shall cooperate with each other to execute such additional documents and take such additional actions as are necessary to carry out the provisions of this Agreement. Article 3. Grant and Acceptance of Distribution Rights. A. Exclusive Territory and Transfer of Distribution Rights. 1. GRANT AND ACCEPTANCE. H Power grants to ECO Fuel Cells and ECO Fuel Cells accepts the exclusive right to sell, distribute, lease, finance, service, and otherwise handle the Fuel Cell Products ("Distribution Rights") in all the counties or part thereof in the United States (including the District of Columbia; and areas that are not a part of any county, such as Arlington, VA) in which Cooperative Members provide were providing energy services as of August 15, 1999 (including, but not limited to electricity, natural gas, propane and other fuels), as set forth in Schedule B ("Territory"). 4 2. EXCEPTIONS TO EXCLUSIVE TERRITORY. Notwithstanding anything to the contrary herein: a. TELECOMMUNICATIONS NATIONAL ACCOUNT SALES. H Power retains the exclusive right to sell (but not for retail consumer distribution) Fuel Cell Power Systems for Stationary Applications to the national accounts of telecommunications companies (including, but not limited to, Lucent and Motorola), for systems that power telecommunications equipment, either as the primary power source or as a backup thereto. ECO Fuel Cells may, nevertheless, approach H Power with specific proposals to sell to that market. In that event, H Power has the right to refuse such sales, but H Powers' approval for such sales will not be unreasonably withheld. In any event, ECO Fuel Cells will be able to provide on an exclusive basis, Fuel Cell Products to local telecommunications companies that are not national accounts of H Power. b. INDIAN RESERVATIONS. ECO Fuel Cells and H Power shall both have non-exclusive rights to sales of Fuel Cell Power Systems for Stationary Applications on Indian reservations. These sales shall not be subject to any payments for distribution rights under Article 3.C.2. If, however, the Parties agree in writing that ECO Fuel Cells can purchase exclusive territory rights on Indian reservations, then such rights shall be purchased subject to the payment provisions of Article 3.C.2. 3. ECO FUEL CELLS' ASSIGNMENT RIGHTS. It is ECO Fuel Cells' intention to assign to Cooperative Members all or some of the Distribution Rights granted herein. ECO Fuel Cells intends to work with Cooperative Members to develop marketing arrangements, which may result in several different strategies. Therefore, to provide ECO Fuel Cells with the necessary marketing and corporate structure flexibility, ECO Fuel Cells shall have the right to assign, sell, license, or otherwise transfer, all or any part of the Distribution Rights to ECO, Licensed Members or to any other entity affiliated with them. ECO Fuel Cells may also assign, sell, license, or otherwise transfer such rights to a third party with the consent of H Power, which consent shall not be unreasonably withheld. All assignments of Distribution Rights by ECO Fuel Cells shall be in writing and consistent with this Agreement. 5 4. NON-COMPETITION. a. H Power agrees that it will not sell the Fuel Cell Products either directly or knowingly indirectly for use in the Territory except to ECO Fuel Cells or to Licensed Members. b. ECO Fuel Cells agrees that it will not sell the Fuel Cell Products either directly or knowingly indirectly for use outside the Territory; that it will not sell Fuel Cell Power Systems (as Fuel Cell Power Systems are defined in Article 1.) that compete with H Power's Fuel Cell Power Systems; that it will not sell such Fuel Cell Power Systems (unless otherwise agreed to by the Parties) in counties of Cooperative Members to which no Distribution Rights have been assigned; and that it will include the terms set forth in this paragraph in all assignments of Distribution Rights to Cooperative Members. c. In the event that ECO Fuel Cells or the Licensed Members are able to purchase from third parties Fuel Cell Power Systems for Stationary Applications that are: (1) comparable or superior in quality and performance to H Power's Fuel Cell Products; (2) at unit prices that are at least [*****] H Power's unit prices; and (3) on terms and conditions that otherwise are comparable to H Power's terms and conditions, then ECO Fuel Cells shall so notify H Power in writing of such event and if H Power does not, within 30 days after receipt of said notice from ECO Fuel Cells, [*****], ECO Fuel Cells and the Licensed Members may purchase those Fuel Cell Power Systems for Stationary Applications from third parties and the restrictions against selling fuel cells that compete with H Power as set forth in paragraphs A. 4.a. and b. of this Article 3. shall not apply. Thereafter, if ECO Fuel Cells and the Licensed Members in total, [*****] from H Power during any [*****] then the exclusive rights granted by Article 3.A.1. shall terminate and all Territory under this Agreement shall convert to non-exclusive, Other Territories status, as defined in Article 3.B. d. Notwithstanding anything to the contrary contained in this Agreement (including all schedules, appendices and exhibits hereto), subject only to H Power's compliance with its covenants and agreements contained herein, ECO Fuel Cells will purchase or will arrange to have Licensed Members - -------------------------------------------------------------------------------- Confidential 6 purchase not less than 12,300 Fuel Cell Products as provided in Article 4A below. 5. FAIR PRICING. In no event shall ECO Fuel Cells or Licensed Members pay more for any of H Power's Fuel Cell Power System(s) and services under this Agreement than others pay for similar quantities or levels of service. B. Other Territories. In all counties in the United States not listed in Schedule B (including the District of Columbia and areas that are not a part of any county, such as Arlington, VA, "Unlisted Area"), ECO Fuel Cells shall have a right of first refusal to purchase the Distribution Rights for such county or counties or part thereof, at prices and terms no less favorable than the best price and terms offered by H Power to others. ECO Fuel Cells shall have fourteen (14) calendars days from the day it receives written notice from H Power that H Power has received a bona fide offer for an "Unlisted Area", to match said bona fide offer. In the event ECO Fuel Cells matches said offer, ECO Fuel Cells' rights (including assignment rights) to those areas shall be exactly the same as if it were a Territory as set forth in Article 3, paragraph A. C. Payment. ECO Fuel Cells will make the following payments to H Power for the Distribution Rights granted it by H Power: 1. Initial Payment. On the Effective Date of this Agreement, ECO Fuel Cells will pay H Power two million, five hundred thousand dollars ($2,500,000). 2. Payments Upon Assignment of Distribution Rights by ECO Fuel Cells to ECO's Cooperative Members. ECO Fuel Cells intends to assign its Distribution Rights to ECO's Cooperative Members on a county by county basis (the District of Columbia and other areas, e.g., Arlington, VA, that are not a part of any county will be treated as a county for this purpose). All or part of a county may be assigned. The Cooperative Member to which the Distribution Rights have been assigned shall be deemed to be a "Licensed Member". Within sixty (60) days of the closing of each such assignment, ECO Fuel Cells will make a one time payment of [*****] to H Power for each Occupied Housing unit within each assigned county, or portion thereof, as reflected in (a) the Census of Population and Housing, published by the U.S. Bureau of the Census, or (b) if updated - -------------------------------------------------------------------------------- Confidential 7 census statistics are published by the U.S. Bureau of the Census before a particular sale of Distribution Rights occurs, then the latest statistics available for Occupied Housing units in that area. Except that, within Schedule B territories, the amount will be [*****] for each Occupied Housing unit in any area in which ECO's Cooperative Members were not providing electric service as of August 15, 1999. If a portion of a county is purchased, the payment shall be the greater amount of: (a) a reasonable determination by ECO Fuel Cells and H Power of the percentage of the assigned county being purchased and multiplying that percentage by the number of Occupied Housing units in that county according to the latest census data; or (b) the total number of the Licensed Member's customers that receive electric, natural gas or propane service in the area purchased (without any double counting of any customer) as reflected in the books and records of the Licensed Member as of the time of the assignment. This number shall be verified in writing by the independent auditors of the Licensed Member at its next regular audit, and such writing shall be provided to H Power and ECO Fuel Cells. 3. Expiration of Exclusive Territory Rights. ECO Fuel Cells shall have three (3) years from the date that Fuel Cell Products are first available in commercial quantities, to assign to a Licensed Member the exclusive Distribution Rights for any county or part thereof listed in Schedule B of this Agreement. Any county or part thereof that has not been assigned by that date shall no longer be exclusive Territory to ECO Fuel Cells, but shall revert to the non-exclusive, right of first refusal status of Other Territories, as defined in Article 3. B. D. Other H Power Products. H Power, upon written application by ECO Fuel Cells, will give favorable consideration to granting to ECO Fuel Cells and its Licensed Members distribution rights to H Power products or services other than Fuel Cell Power Systems for Stationary Applications, on an individual product or service basis. It shall be in H Power's sole discretion whether or not to grant such rights. In the event rights are granted by H Power, than ECO Fuel Cells or Licensed Members shall not pay more to H Power for those products to which rights have been granted than others pay for similar quantities or levels of those products or services. E. Improvements. Any new or improved Fuel Cell Product, design, concept, or other invention (in whole or part thereof) made or developed by H Power, jointly by H Power with others, or jointly by H Power and ECO Fuel Cells in the course - -------------------------------------------------------------------------------- Confidential 8 of creation, development, distribution or operation of the Fuel Cell Products, will be promptly and completely disclosed to ECO Fuel Cells by H Power. The foregoing sentence is intended to include services and methods of operation. H Power will always make available to ECO Fuel Cells, at no greater than the same cost made available to any others, all improvements (in whole or part) to the Fuel Cell Products, all improved Fuel Cell Products, any accessories for the Fuel Cell Products, and any distribution or operational improvements. F. Training. H Power and ECO Fuel Cells will cooperate to develop a standard program of training, to be held at H Power's expense at mutually agreed upon, intervals and locations, Travel and living expenses incurred by ECO Fuel Cells, and Licensed Members' personnel attending training seminars shall be the full responsibility of ECO Fuel Cells and the Licensed Members. The training seminars shall cover the sale, care, maintenance and use of the Fuel Cell Products. Extra training, beyond the standard program, shall be provided by H Power on a consulting basis for an additional, reasonable charge. Article 4. Fuel Cell Product Purchases. A. Purchases. ECO Fuel Cells will purchase or will arrange to have Licensed Members purchase not less than 12,300 Fuel Cell Products from H Power for an aggregate purchase price of $81,180,000, in accordance with the delivery schedule set forth in Schedule A. ECO Fuel Cells shall confirm to H Power actual demand for commercial units five months prior to commencement of commercial production by H Power (which is anticipated to be approximately June 1, 2001). The parties shall consult with one another and mutually agree to review and update the delivery schedule with respect to budgetary commercial units on a quarterly basis; provided however, that ECO Fuel Cells shall request delivery and purchase the first 12,300 units no later than the later to occur of (1) December 30, 2003 or (2) within 30 months of when the tenth commercial unit is shipped. In making these purchases, H Power will offer pricing and terms to ECO Fuel Cells and the Licensed Members which in the aggregate are no less favorable than the best pricing and terms offered to any other customer of H Power for similar quantities and levels of service. ECO Fuel Cells hereby covenants and agrees that during the term of this Agreement it will use its best efforts to sell, distribute, lease, finance, service, and otherwise handle the Fuel Cell Products in its Territory and will require the Licensed Members to do the same in their respective assigned territories. 9 ECO Fuel Cells shall use its best efforts to include in its assignments of Distribution Rights to Cooperative Members some sales quota arrangement, in order to encourage marketing activities. B. Inspection. 1. During Alpha and Beta Fuel Cell Product Stages. During Alpha and Beta Fuel Cell Products stages, such Fuel Products may be shipped to ECO Fuel Cells or the Licensed Members in single units or larger quantities. Purchasers shall have a reasonable opportunity to inspect the Fuel Cell Products for compliance with the standards in Schedule C. Therefore, once a Fuel Cell Product is received, the purchaser will have thirty (30) days in which to inspect the Fuel Cell Product for defects and to notify H Power in writing of such defects. 2. Following Alpha and Beta Fuel Cell Products Stages. At such time as any individual Fuel Cell Product has passed through its Alpha and Beta stages and is commercialized, the purchaser of such Fuel Cell Product will have seven (7) calendar days from receipt in which to inspect the Fuel Cell Product for any visible defects in the packaging for the units and to notify H Power in writing of such defects. 3. Defects. If the Fuel Cell Product is damaged or otherwise does not pass inspection and H Power has received written notice of such fact within the time periods set forth in Subparagraphs 1. And 2. above, whichever may be applicable, then H Power will have thirty (30) days to cure the problem at its own expense (including shipping, servicing, parts, labor and all other expenses). Notwithstanding the payment requirements as set forth in Paragraph C, immediately hereinbelow, the purchaser need not pay for a Fuel Cell Product that does not pass inspection until the Fuel Cell Product is repaired, replaced or shown to be operable by H Power to the purchaser's reasonable satisfaction. C. Payments for Fuel Cell Products. 1. During Alpha and Beta Fuel Cell Product States. During Alpha and Beta stages, invoices submitted by H Power to ECO Fuel Cells and the Licensed Members for Fuel Cell Products purchased from H Power shall be paid within sixty (60) days of the date of the invoices. Any invoices, or portions thereof, not paid within this 60 day period are subject to interest 10 at the rate of 1.5% per month. Should ECO or a Licensed Member fail to pay any amounts due to H Power within the prescribed sixty (60) days, and the failure is not cured within fifteen (15) days after written notice of such failure, H Power may commence collection procedures or judicial action, at law or in equity, to collect such sums, damages, costs, liabilities and expenses, including court costs and reasonable attorney's fees. 2. Following Alpha and Beta Fuel Cell Product Stages. Following the Alpha and Beta Fuel Cell Product stages, and when each type of Fuel Cell Product is being produced on a commercial basis, then invoices submitted by H Power to ECO Fuel Cells and the Licensed Members for Fuel Cell Products purchased by them shall be paid within thirty (30) days of the date of the invoices. Any invoices, or portions thereof, not paid within this 30-day period are subject to interest at the rate of 1.5% per month. Should ECO Fuel Cells or Licensed Members fail to pay any amounts due to H Power within the prescribed thirty (30) days, and the failure is not cured within fifteen (15) days after written notice of such failure, H Power may commence collection procedures or judicial action, at law or in equity, to collect such sums, damages, costs, liabilities and expenses, including court costs and reasonable attorneys' fees. In the event of two (2) or more consecutive failures to make timely payments, or in the event of three failures in any preceding twelve (12) month period, H Power shall have the right to require the defaulting purchaser to prepay for all other purchases made. 3. Royalty Payments. ECO Fuel Cells and the Licensed Members shall be entitled to deduct from the per unit invoice price an amount equal to the per unit royalty payment, if any, for license of the 5,879,826 U.S. Patent. Should the royalty payments be a lump sum or upfront payment, the per unit royalty shall be calculated based on projected sales for the period of four years, or as the parties may otherwise agree. 4. Payments Due ECO Fuel Cells from H Power. The same payment procedures outlined above shall apply for any payments that are to be made by H Power to ECO Fuel Cells. 5. Failure to Deliver. If 1. H Power fails to deliver Fuel Cell Products and services within the time specified in Schedule A, Fuel Cell Products and Purchases; and 2. a purchase order has been issued by ECO Fuel Cells or a Licensed Member and accepted by H Power (which acceptance shall not be unreasonably withheld); and - -------------------------------------------------------------------------------- Confidential 11 3. failure to deliver is not cured to ECO Fuel Cells' satisfaction within 30 days, then H Power shall pay, upon demand, to ECO Fuel Cells a late fee of one (1.0) percent per month, of the price of such late unit, not to exceed ten (10.0) percent of the unit price, in addition to any other damages. Article 5. Fuel Cell Product Performance. In order to maintain the excellent reputation rural electric cooperatives have for quality and service to their customers/owners, it is essential that any Fuel Cell Products H Power sells to ECO Fuel Cells or the Licensed Members meet the performance standards contained in the attached Schedule C, Performance Standards. Article 6. Public Communications. ECO Fuel Cells will have the right to review, in advance, published materials (in any medium) prepared by H Power or at its direction, that are distributed to the public by H Power, that discuss ECO, ECO Fuel Cells, ECO's Cooperative Members, or the National Rural Utilities Cooperative Finance Corporation (CFC). Once the language in such materials has been agreed to, such approval will not be required for subsequent materials using similar language. ECO Fuel Cells agrees to provide similar review and consent privileges to H Power for materials it publishes discussing H Power. Article 7. Term. This Agreement will be effective on the date specified in the first paragraph of the Agreement and will remain in effect for a period of ten (10) years following the date that H Power's tenth commercial unit is shipped to ECO Fuel Cells and/or its Licensed Members. ECO Fuel Cells shall have an option to renew this Agreement with the same terms for an additional ten (10)-year term provided it notifies H Power in writing that it is exercising its option to renew at least eighteen (18) months prior to the expiration of the initial term. Article 8. Intellectual Property. A. Power's Trademarks, License and Literature. 1. H Power's Representations. H Power represents and warrants to ECO Fuel Cells that to the best of its knowledge, neither the Fuel Cell Products nor ECO Fuel Cells (in connection with performing marketing, distribution, and services as authorized by H Power and by this Agreement) infringes any patent, copyright, any other party's trade secret, - -------------------------------------------------------------------------------- Confidential 12 and trademark of any person. H Power further represents and warrants to ECO Fuel Cells, that to the best of its knowledge, it is not using any unauthorized trade secrets or confidential or proprietary information owned by any third party in developing the Fuel Cell Products, or in assisting ECO Fuel Cells in marketing, installing and servicing the Fuel Cell Products, unless the trade secrets and confidential information had been previously developed by H Power on its own accord. H Power further represents and warrants that neither H Power nor any company or individual performing services or developing the Fuel Cell Products is under any obligation to assign or give any development work done to any third party. H Power further warrants that it shall have in force valid assignment agreements with any of its employees or subcontractors who may perform services or development of the Fuel Cell Products. After the Beta version and after the first commercial version of Fuel Cell Products are produced, H Power shall obtain an opinion of counsel as to whether they infringe any intellectual property rights. ECO shall receive a copy of such opinion letter. If infringement is suggested, H Power shall cure. Such opinion shall be in sufficient detail that H Power could rely on it to avoid a charge of willful infringement. 2. License of Required Intellectual Property. H Power hereby grants to ECO Fuel Cells and the Licensed Members the right to utilize, reproduce and distribute H Power literature relating to the marketing, use and maintenance of the Fuel Cell Products. Such literature may include, but not be limited to, training manuals, maintenance manuals, Fuel Cell Product use instructions, and warranties. All technical and other proprietary information furnished to ECO Fuel Cells and the Licensed Members shall be utilized solely for the purposes of the Distribution Rights granted in this Agreement and not for any other purposes. To the extent that any other intellectual property rights of H Power are needed for ECO Fuel Cells, the Licensed Members, or their subcontractors to market, install and service Fuel Cell Products or carry out the intent of any part of the Agreement, H Power grants to all of them a non-exclusive license in the intellectual property to be used solely for the purposes of this Agreement. ECO Fuel Cells' Trademark Rights. ECO Fuel Cells will have the right to determine and own a name, logo, and other marks ("Marks") under which the Fuel 13 Cell Products will be sold, assigned, licensed, or otherwise distributed to Licensed Members and others in the territories to which ECO Fuel Cells has or may obtain Distribution Rights under this Agreement. ECO Fuel Cells may obtain trademark protection for its Marks and will notify H Power at least thirty (30) days prior to placing any mark in commerce or filing for any trade or service mark protection. Article 9. Manufacturer's Indemnification and Hold Harmless. H Power will indemnify, defend, hold harmless ECO, ECO Fuel Cells, and Licensed Members for any loss, liability, damages, demands, cost, judgment, award, expense, or claims, including reasonable attorney fees, which may at any time be suffered or incurred by ECO Fuel Cells, or Licensed Members arising out of the sale, resale, use, operation or failure to operate, repair, maintenance, exportation, importation, promotion and distribution of the Fuel Cell Products and accessories, or arising out of the use of marketing and promotional material prepared by H Power, designations, names, brands, insignia, or trademarks which identify the Fuel Cell Products, accessories or components thereof, or by reason of or in consequence of defects or design flaws in the Fuel Cell Products or accessories, or arising out of any claim of infringement of intellectual property rights or misappropriation of proprietary rights, or arising out of any claim for damages in connection with the use by anyone of any Fuel Cell Product or accessory except not the extent that any such claim is based upon the alleged gross negligence, including the unauthorized warranties, of ECO, ECO Fuel Cells, Licensed Members, or their distributors, subcontractors or sublicensees. In the event royalty damage, or punitive damage payments are payable to Humboldt State University Foundation, its assignee or licensee on account of U.S. Patent 5,879,826 to Lehman et al., entitled Proton Exchange Membrane Fuel Cell, such payments will be borne exclusively by H Power. Article 10. Environmental Liabilities. A. As used in this Agreement, "hazardous material" means: (1) any chemical, substance, material, mixture, contaminant or pollutant, now or hereafter defined as a "hazardous substance" under the Comprehensive Environmental Response, Compensation and Liability Act, as amended from time to time, and all regulations thereunder, as amended from time to time; (2) petroleum, crude oil, or any fraction thereof; (3) any pollutant, contaminant, special waste or toxic substance now or hereinafter listed, defined by or subject to regulation under any federal, state or local statute, ordinance, rule, regulation, standard, policy, guidance, permit, order, administrative or judicial decision or pronouncement, previously, currently, or hereafter in effect, as amended from time to time, pertaining to health, safety, or the environment, including without limitation, - -------------------------------------------------------------------------------- Confidential 14 natural resources, environmental regulation, contamination, pollution, cleanup, or disclosure. B. H Power hereby releases and discharges ECO, ECO Fuel Cells and all its successors, representatives, assigns, customers and all Licensed Members from all claims, which H Power has or may have in the future against ECO Fuel Cells or a Licensed member arising from or relating in any way to the treatment, storage, disposal, handling, spillage, leakage or presence in any form in soils, surface waters, groundwaters, air, or property, of any wastes or "hazardous materials," unless such actions are caused by the willful conduct of ECO Fuel Cells or its Licensed Members. C. H Power agrees to indemnify, hold harmless, and defend ECO, ECO Fuel Cells and their successors, representatives, subrogees, assigns, customers and all Licensed Members from any liability, claim, demand cause of action, suit, loss, damage, injury, expense, cost, settlement or judgment of any kind or nature including but not limited to demands, fines, remediations, or penalties asserted by any governmental entity, as a result of the treatment, storage, disposal, handling, spillage, leakage, or presence in any form in soils, surface waters, groundwater, air, or property, of any wastes or "hazardous materials" directly caused by Fuel Cell Products or operations, unless such actions are caused by the willful conduct of ECO Fuel Cells or its Licensed Members. Article 11. General Representatives, Warranties and Covenants. A. Performance and Merchantability. H Power warrants that the Fuel Cell Products will be built in a workmanlike manner and that the Fuel Cell Products will perform according to Performance Standards in Schedule C. H Power will correct any errors or discrepancies in the Fuel Cell Products that are identified by ECO Fuel Cells, the Licensed members or by H Power as soon as possible after ECO Fuel Cells or a Licensed Member informs H Power of any breach of this warranty. H Power expressly warrants that the Fuel Cell Products are merchantable and fit for the particular purpose for which they are designed, and these warranties will be extended to the end users of the Fuel Cell Products. H Power further warrants that the Fuel Cell Products have been designed by H Power without reliance on ECO, ECO Fuel Cells or Licensed Members and are provided to ECO, ECO Fuel Cells and Licensed Members with appropriate warnings and instructions. 15 B. Authority. Each Party represents and warrants to the other that it has provided truthful answers to due diligence questions and has all requisite power and authority: 1. to execute, deliver and perform this Agreement and all agreements, documents and instruments executed and delivered by each in connection with it; and that it has no conflicting arrangements or agreements with any other party; 2. to own, lease or operate its property and assets; and 3. to carry on its business as presently conducted. C. Liabilities. Each Party represents to the other that to the best of its knowledge, there is no outstanding or threatened judgment, litigation or proceeding of any type involving or affecting the transactions described in this Agreement, except as previously disclosed in writing to the other Party on or before Closing. D. Legal Compliance. Each Party shall comply with all governmental (whether international, federal, state, municipal, or otherwise) statutes, laws, rules, regulations, ordinances, codes, directives and orders or any such governmental agency, body, or court applicable to it, including, but not limited to, environmental, worker safety, codes and standards, and hazardous materials. E. Audit. Each Party at its own expense, shall have the right to audit the other's books and records at reasonable times and places, for information that is directly related to the subject matter of this Agreement. Article 12. Insurance. H Power agrees to maintain the following minimum levels of insurance: personal liability: $2,000,000; property liability: $1,000,000; directors and officers liability: $2,000,000; product liability: $10,000,000 and shall include ECO and ECO Fuel Cells as named insures. H Power shall provide ECO Fuel Cells at closing with copies of the applicable policies covering these lines and written proof from carriers that such policies are in force. ECO and ECO Fuel Cells agree to carry appropriate insurance at levels that are acceptable to H Power. Article 13. Confidentiality. The Parties shall hold in confidence all provisions of this Agreement and all information provided by either Party to the other in connection with it. The Parties agree that all information related to this Agreement, not otherwise known to the public, is confidential and proprietary and is not to be disclosed to third persons (other than to affiliates, officers, directors, employees and agents of the Parties, each of whom is bound by this provision) without the prior written consent of the other Party, except: 16 A. At the written direction of the other Party; 1. To the extent necessary to comply with law or valid order of a court of competent jurisdiction, in which event the party shall notify the other Party as promptly as practicable (and, if possible, prior to making any disclosure) and shall seek confidential treatment of the information; 2. As part of its normal reporting or review procedures to its parent company, Board of Directors, its auditors and its attorneys who agree to be bound by this provision; 3. In order to enforce any rights pursuant to this Agreement; 4. To obtain appropriate insurance, provided the insurance company agrees in writing to be bound by this provision; 5. To obtain financing, provided that any person or entity providing financing agrees in writing to be bound by this provision. All provisions in this Agreement relating to the confidentiality of information shall survive the termination, expiration, cancellation or rescission of this Agreement for a period of five (5) years thereafter. Article 14. Arbitration. The Parties agree that any and all controversies or claims arising out of or relating to this Agreement, or any alleged breach hereof, may be resolved by binding arbitration as prescribed herein, if both Parties agree. In that event, the Parties will mutually agree upon one or more arbitrator(s), not to exceed three, who will conduct the arbitration under the then current rules of the American Arbitration Association ("AAA"), unless otherwise provided herein. The arbitrator(s) will be selected in accordance with AAA procedures from a list of qualified arbitrators maintained by AAA. The arbitration will be conducted in Washington, D.C. and all expedited procedures prescribed under AAA rules will apply. Unless the Parties otherwise agree, the proceedings will be completed within forty-five (45) days of the Parties' receipt of notice of arbitration. Each Party will bear its own costs and attorney's fees and disbursements; and shall share equally the costs of the arbitrators. Article 15. Termination. Either Party may terminate this Agreement under the following circumstances: 17 A. If the other Party hereto shall become bankrupt or insolvent or shall file any debtor relief proceedings, or if there shall be filed in Court against the other Party legal proceedings in bankruptcy or insolvency or reorganization or for the appointment of a receiver or trustee of all or a portion of such other Party's property, or if the other Party makes an assignment for the benefit of creditors or petitions for or enters into an agreement for debtor relief, the other Party immediately shall notify the Party; and if such proceedings are not dismissed within a period of one hundred and fifty (150) days after the institution thereof. Any warranties and guarantees made to the terminating Party shall still survive such termination. H Power Corp. acknowledges and agrees that ECO Fuel Cells has assigned all of its right, title and interest in and to the Agreement to the National Rural Utilities Cooperative Finance Corporation ("CFC"), and that upon the occurrence of an event of default under the Agreement by ECO Fuel Cells, CFC shall have the right, but not the obligation, to exercise and perform all of the rights and obligations of ECO Fuel Cells under the Agreement. B. Except for failure to perform due to force majeure events, in the event that the other Party breaches any other material term or condition of this Agreement and fails to cure such breach within sixty (60) days after receipt of written notice of the breach from the non-breaching Party, the non-breaching Party may terminate this Agreement upon sixty (60) days' advance written notice. In the event that either Party terminates, CFC shall immediately be notified in writing by the terminating Party. Article 16. Other. A. Notices. All notices or other documents that are required by this Agreement shall be in writing, and shall be personally served upon the parties entitled thereto or mailed, postage prepaid, by certified or registered mail, or sent via established and reliable courier or overnight service (e.g., FedEx), or by FAX or other electronic or telecommunications transmission in written form (with telecommunications confirmation of receipt in a clearly legible copy) to the recipient's business addressed to such person at the address specified in this Agreement, or address later specified by written notice by and to the Parties. Any notice or other communication by this method shall be deemed given at the time of sending or certification, except for a notice changing a Party's address which shall be deemed given at the time of receipt. 18 B. Governing Law. This Agreement, including any arbitration, shall be governed, construed, and interpreted in accordance with the internal laws of the Commonwealth of Virginia (without giving effect to principles of conflicts of law). C. Waiver. Any waiver by either Party of a breach of this Agreement shall not operate as a waiver of any other provision. The failure of a Party to insist upon strict adherence to any term of this Agreement shall not be considered a waiver or deprive that Party of the right thereafter to insist on strict adherence to that term or any other term of the Agreement. Any waiver must be in writing. D. Severability. Nothing contained in this Agreement shall be construed to require the commission of any act contrary to law, and wherever there is any conflict between any provision of this Agreement and any law, such law shall prevail; provided however, that in the event of any such conflict, the provisions of this Agreement shall be curtailed and limited only to the extent necessary to permit compliance with the minimum legal requirement, and no other provisions shall be affected thereby and all other provisions shall continue in full force and effect. E. Taxes. Each Party is solely and entirely responsible for payment of any and all taxes (including, but not limited to, income, real property, personal property and gross receipts taxes) and contributions to government programs, that are applicable or related to the systems, operations, facilities and/or customers of such Party. F. Party's Relationship. Neither Party by this Agreement makes the other Party its legal representative or agent, and neither Party has the right to obligate the other Party in any manner with respect to any third parties, except as specifically described herein. G. Force Majeure. Any failure of delay of performance shall not be deemed a breach of this Agreement if it results from any acts of God, civil disorders, insurrections, riots, or wars, Year 2000 failures, weather, fire, flood, national emergencies declared after the date of this Agreement, government order or regulation, blockade, embargo, strike, work stoppage or similar causes beyond the reasonable control of the Parties. H. Integration of Agreement Provisions. All Schedules and any other attachments to this Agreement are incorporated as part of this Agreement; and the Agreement supercedes all previous understandings, commitments and representations, 19 whether oral, written or other, concerning the subject matter. Each Party acknowledges that the other Party has not made any representations other than those provided in this Agreement. I. Customs Duties. H. Power will be responsible for any customs documentation, labeling, processing, duties, charges, and taxes related to the importation of goods by H Power into the U.S. market in connection with this Agreement. J. Modification. This Agreement may be modified only by a written instrument signed by the Parties. 20 IN WITNESS WHEREOF, the undersigned hereby execute this Agreement. Attest: ECO FUEL CELLS, LLC By:__________________________ By: /s/ John McSweeney ---------------------------------- Title: President and Chief Executive Officer ------------------------------- Attest: H POWER CORP. By:__________________________ By: /s/ H. Frank Gibbard ---------------------------------- Title: Chief Executive Officer ------------------------------- Attest: H POWER ENTERPRISES OF CANADA, INC. By:___________________________ By: /s/ H. Frank Gibbard ---------------------------------- Title: President ------------------------------- Schedule A, Fuel Cell Products and Purchases Alpha & Beta Units
- -------------------------------------------------------------------------------- Confidential Schedule B, Part I Counties in Which Rural Electric Cooperatives Provide Electric Service Any county in which rural electric cooperatives provide electric service as of August 15, 1999, but which is inadvertently not included on this list, shall be deemed to be included.
102 SCHEDULE B, PART II PROPANE AND NATURAL GAS COUNTIES SERVED BY COOPERATIVES This is a list of additional propane and natural gas counties served by rural electric cooperatives outside of their electric service area as of the date of this Schedule (August 15, 1999). Any county in which such service is provided as of that date, but is inadvertently not listed, shall be deemed to be incuded. PROPANE
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SCHEDULE C PERFORMANCE STANDARDS FOR ALPHA, BETA AND RESIDENTIAL COGENERATION UNIT (RCU) (COMMERCIAL UNITS ALSO SHALL MEET OR EXCEED THESE STANDARDS) 1. TYPICAL SPECIFICATIONS - -------------------------------------------------------------------------------- PARAMETER VALUE - -------------------------------------------------------------------------------- Unit rating 3kW net, 10 kWe (1 hour) Optional : Up to 15 kWe (one hour) - -------------------------------------------------------------------------------- Fuel to electricity 30% (Beta), 25% (Alpha) efficiency - -------------------------------------------------------------------------------- Fuel input Natural gas @ 1,000 Btu/ft3 --------------------------- 34.3 ft3/hour (0.97 m3/hr) at 30% fuel to electricity efficiency 41.16 ft3/hr (1.16m3/hr) at 25% Fuel to electricity efficiency Propane @ 21,670 Btu/lb ----------------------- 0.372 Gal./hr (1.57 lb/hr) at 30% fuel to electricity efficiency 0.446 Gal./hr (1.88 lb/hr) at 25% fuel to electricity efficiency (Propane at 4.22 lb/Gal.) - -------------------------------------------------------------------------------- AC OUTPUT CHARACTERISTICS - -------------------------------------------------------------------------------- Nominal voltage, frequency 120/240 VAC, 60 Hz AC output waveform Sinewave, 34 to 52 steps per cycle Voltage regulation +/- 2% Total harmonic distorsion 3 to 5% (stand alone operation) Frequency regulation +/- 0.04% (crystal regulated) Power factor Can run loads which have a 0.7 power factor as confirmed by Trade Eng. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Unit overall efficiency 56% (Alpha) to 68% (Beta) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Thermal energy available 13,000 Btu/hr at 68% unit overall efficiency and for recuperation 30% fuel to electricity efficiency 13,000 Btu/hr at 56% unit overall efficiency and 25% fuel to electricity efficiency - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SPACE AND WATER HEATER OPTION - -------------------------------------------------------------------------------- Thermal energy temperature Hot water @ 140 (degrees) F - -------------------------------------------------------------------------------- Space and water heating 75,000 Btu/hr or 90,000 Btu/hr (sizing will depend on local climate conditions) - -------------------------------------------------------------------------------- Water tank capacity 30 US Gal. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Space heating 60,000 Btu/hr optional higher capacities available - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Confidential Page 1 2. Codes and Standards Units shall comply with the following codes and standards o A.G.A./CGA, UL Listing o IEEE 929 o IEEE P1547 o UL 1741 o NFPA 853 o ASME PTC-50 o IEEE 519 o ANSI Z21.83 3. Grid Compatibility The power conditioning module is based on a cooperative effort being carried out with Trace Engineering using the SW series inverter technology. These inverters are specifically designed for connecting an electric generating system to a utility grid with a battery storage system. For applications including the selling of the fuel cell's electricity back to the grid, the SW series software already includes code which allows this to happen both safely and efficiently. Operating mode of the SW series inverter include: Utility Interactive Mode: Operating as a bi-directional battery charger, the inverter delivers to the grid power from the fuel cell above that necessary to raise the batteries to their programmed float voltage. A grid usage timer can be set to allow selling of electricity to the utility only during prescribed hours. Sell-back current is adjustable. (Utility inter-tie must have approval of local utility company). Power Mode: The inverter is connected to the grid and to the fuel cell. If the fuel cell fails, then power is switched to the grid. After fuel cell power returns, power is switched back to fuel cell system. Battery Charging Mode: If the batteries are low, a low-battery set point triggers the battery-charging mode from the fuel cell. - -------------------------------------------------------------------------------- Confidential Page 2 Peak Load-Shaving Mode: The SW series inverter may be programmed so that during a programmable time of the day (peak periods), power is delivered to the grid from the batteries. SW Series II Specifications -------------------------------------------------------------------- Parameter Value -------------------------------------------------------------------- AC output voltage (RMS) 120/240 VAC -------------------------------------------------------------------- Nominal frequency 60 Hz -------------------------------------------------------------------- Continuous power @ 5,500 VA x 2 25(Degree)C -------------------------------------------------------------------- Efficiency (peak) 96% -------------------------------------------------------------------- All the SW series inverter/chargers include the following protective systems. These systems are used to protect the inverter/operator/utility personnel from hazardous conditions. The standard protection is as follows: SW Series Islanding Protection o Grid shorted : Normally, when the utility fails, the inverter momentarily tries to power the entire neighborhood. This protective system operates in less than four milliseconds. o Grid open : The inverter senses when there is no current being delivered to the grid and disconnects. This protective system may require up to one second to respond. o Islanding : This occurrs when the grid has failed and the "neigborhood" that the inverter is powering requires the same amount of power that the inverter can supply. This balanced condition is often called "islanding". The inverter monitors the utility grid and waits for it to rise a couple of volts before it begins to invert again. This is done on each cycle when SELL mode is activated. o Over/Under Since the inverter is locked onto the frequency of Frequency : the islanded utility grid, the frequency of the system will drift out of regulation in a short - -------------------------------------------------------------------------------- Confidential Page 3 amount of time during an islanding condition. The inverter will shut off and disconnect after the frequency exceeds +/- 1 hertz of the nominal frequency. o Over/Under Since the inverter does not regulate the voltage Voltage : of the utility grid while selling power into it, the AC voltage will drift out of regulation in short amount of time during an islanding condition. The inverter will shut off and disconnect after the voltage exceeds +/- 10% of the nominal AC voltage. 4. Installation, Start-up and Training Units are factory tested before shipping and ready for connections. o Installation & Start Up: - Included on site initial setting, start-up and commissioning as necessary, by HPEC, anywhere in the US - Inside installation, option available for outside installation o Technical assistance : - continuous phone assistance (regular hours, working days). - one on site visit during Alpha and Beta test period. Units are installed parallel to the grid. In the case of failure during the testing period, the customer will not suffer from a loss of power because power is then drawn from the grid. A local technician under H Power guidance or a H Power technician can then start with troubleshooting. o Training : - On site, two days during commissioning period - One or two days seminar at a central location up to 3 times/year o Manuals : Installation, Operation and Maintenance manuals included, RS-232 interfacing and fault diagnostics provided. o Remote monitoring : Included in Alpha units. - -------------------------------------------------------------------------------- Confidential Page 4 5. Safety Features : o Hydrogen leak detectors that shut-off RCU and close gas valves. o Natural Gas or propane leak detector with interlocks. o Shut-off valve device on fuel line o Automatic shut-off system on fresh water inlet of the steam boiler. o Automatic shut-off system in case of failure of hydrogen utilization into the stack. o Vent blockage detector with interlocks o Water heater (boiler) is CGA/A.G.A. aproved. It is a commercial product from Lennox Industries or equivalent. Therefore it already includes standard safety features as required locally and nationally (relief valves, high temperature limits, flame detection, etc.). - -------------------------------------------------------------------------------- Confidential Page 5