Exhibit 10.67
MEMORANDUM OF AGREEMENT
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This MEMORANDUM OF agreement ("Agreement") is entered into this 10 day of April,
2002 (the "Effective Date"), among H Power Corp., 0000 Xxxxx Xxxxxx, Xxxxxxx, XX
00000; H Power Enterprises of Canada, Inc. (together "H Power"); ECO Fuel Cells,
LLC ("EFC") and Energy Co-Opportunity, Inc. ("ECO"), both of 0000 Xxxxxxxxxxx
Xxx, Xxxxxxx, XX 00000. These parties are referred to herein singularly as
"Party" and collectively as "Parties". Defined terms used, but not otherwise
defined herein, shall have the respective meanings set forth in the Second
Amended and Restated Fuel Cell Product Operating Agreement, dated April
____, 2002, among the Parties (the "Operating Agreement").
WHEREAS: Over the past few years, H Power and EFC have been working together to
design, build, and market Fuel Cell Power Systems for all areas in the United
States served by Cooperatives;
WHEREAS: the Parties wish to further fund and encourage the marketing of Fuel
Cell Power Systems by providing H Power and ECO with additional marketing and
distribution opportunities and granting H Power marketing, technical, training,
field and other services from EFC;
WHEREAS: the Parties have entered into the Operating Agreement to further these
goals and have entered into other agreements in support of such goals, including
a "Sales and Marketing Services Agreement among ECO Fuel Cells, LLC, Energy
Co-Opportunity, Inc. and H Power Corp." ("Sales and Marketing Agreement"); and a
"Test Reporting, Engineering Services and Field Services Agreement among ECO
Fuel Cells, LLC, Energy Co-Opportunity, Inc. and H Power Corp." ("Test Reporting
Agreement"); and
WHEREAS: the Parties desire to enter into this Agreement to terminate the
Memorandum of Agreement, dated December 12, 2001, among the Parties (the
"December MOA") and to provide for a commitment by the Parties to explore the
development of sustainable fuel cell communities.
NOW, THEREFORE, in consideration of the promises herein and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties hereby agree as follows:
1. SUSTAINABLE FUEL CELL COMMUNITIES OR SIMILAR APPLICATIONS. Subject to
Sections 3. and 7. herein, H Power will provide up to $1,500,000 of
start-up funding to EFC, payable as set forth on Attachment A, for
development of sustainable fuel cell communities (or similar applications
as determined by the Parties) that could include the generation, storage,
transmission, distribution and utilization of hydrogen-based fuel cells.
EFC and H Power will seek to raise funding from third-party sources for
these purposes, including from the government, hydrogen-related suppliers
and other private sector sources. If such funds are received by EFC, this
$1,500,000 obligation of H Power to EFC shall be reduced by the same
amount, or if payment has already been made by H Power to EFC, the funds
will be promptly reimbursed to H Power. H Power's payment to EFC shall be
reduced by an amount not to exceed One Million Dollars ($1,000,000), less
any adjustment for taxes, which EFC receives from the sale of Altair
Energy, LLC.
2. FINANCIAL STATEMENTS. ECO and EFC have delivered to H Power the September
2001 unaudited financial statements. ECO and EFC attest that these
financial statements have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operations of ECO and
EFC as at the dates and for the periods set forth therein.
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Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted materials have been filed separately with
the Securities and Exchange Commission.
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Beginning with the first calendar quarter of 2002, ECO and EFC shall each
furnish H Power 1) within forty-five (45) days after the end of each
fiscal quarter, quarterly unaudited financial statements, all in
reasonable detail, fairly presenting the financial position and the
results of operations of ECO and EFC as of the end of and through such
fiscal quarter; and 2) within one hundred twenty (120) days after the end
of each fiscal year, audited financial statements and the accompanying
notes thereto, all in reasonable detail, fairly presenting the financial
position and the results of operations of ECO and EFC as of the end of and
for such fiscal year together with the opinion of independent certified
public accountants, that such financial statements had been prepared in
accordance with GAAP.
3. NO MATERIAL ADVERSE CHANGE; DEFAULT. Notwithstanding anything contained in
this Agreement to the contrary, H Power shall have no obligation to make
any payments to EFC under this Agreement, the Sales and Marketing
Agreement and the Test Reporting Agreement, if there has been a "Material
Adverse Change." In the event that NRUCFC, as defined herein, declares an
event of default under the terms of any of its agreements with ECO and/or
EFC, that event, or any violation of Sections 2, 4, and/or 5 of this
Agreement, shall be considered a Material Adverse Change under this
Agreement.
4. AFFIRMATIVE COVENANTS. From the Effective Date until the end of the Term
hereof, ECO and EFC shall:
A. Prior to January 1, 2003, EFC and/or ECO will provide H Power with
its annual operating budget for the calendar year ending December
31, 2003. The budget shall insure that adequate funding is available
for EFC and ECO to complete their obligations in this Agreement and
to continue in business through December 31, 2003.
B. Provide H Power and its representatives access during normal
business hours to ECO's and EFC's books, accounts and records and
all other relevant documents and information as representatives of H
Power may from time to time request. Such access may include
consultations with the personnel of ECO and EFC and/or professionals
and consultants responsible for the preparation of financial
statements. ECO and EFC shall make their respective premises and
personal property available for inspection by H Power and its
representatives during normal business hours;
C. Notify H Power in writing of (i) any Material Adverse Change in
their financial position, earnings or prospects, (ii) any
governmental complaints, investigations or hearings to which ECO
and/or EFC are a party, (iii) any material pending legal actions to
which ECO and/or EFC are a party; or (iv) any threatened legal
action.
D. Operate their businesses as presently operated and only in the
ordinary course of business and, consistent with such operation,
make commercially reasonable efforts to comply in all respects with
all applicable legal and contractual obligations; and
E. Keep in full force and effect all insurance related to their
businesses, comparable in amount and scope of coverage to that now
maintained. ECO and EFC will furnish to H Power appropriate
certificates of insurance confirming such coverage.
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5. NEGATIVE COVENANTS.
A. Notwithstanding any other provisions in this Agreement:
1. ECO and its affiliates may create a new technology business
organization to support innovative technologies and fund it;
provided that 100 percent of the funding for this organization
shall be provided from sources outside of H Power's funding
under this Agreement, the Sales and Marketing Agreement, and
the Test Reporting Agreement, unless otherwise agreed to in
writing by H Power. Any funding from ECO and EFC for this
purpose shall be included in the reporting obligations in
Section 4. of this Agreement; and
2. Nothing in this Agreement shall interfere with any
requirements imposed upon ECO or EFC by the National Rural
Utilities Cooperative Finance Corporation (NRUCFC) under their
existing agreements or new agreements that are necessary to
continue or increase funding for ECO or EFC.
B. ECO and EFC immediately shall notify H Power anytime that there is
any "Negative Deviation" from the annual EFC or ECO budget.
"Negative Deviation" is defined as a negative change or the prospect
of a negative change in excess of fifteen percent (15%) of the net
income/(loss) of ECO on a quarterly basis (any accrued interest
payments on loans from NRUCFC shall not be included in this
calculation). This provision shall not apply to any sales of propane
and other equipment that are made after a purchase order for such
sales has been received by ECO or such other events as may be agreed
to by the Parties in writing from time to time. At H Power's written
request, ECO or EFC shall immediately take such steps as may be
necessary to bring its budget back into compliance within forty-five
(45) days or a Material Adverse Change shall be deemed to have
occurred.
C. ECO and EFC agree not to do any of the following if they involve a
dollar amount in excess of $50,000 (unless it has been previously
budgeted or covered by a customer purchase order):
1. pledge, or otherwise encumber any shares of their capital
stock, any other voting securities or any securities
convertible into or exchangeable for, or any rights, warrants,
or options to acquire, any such shares, voting securities, or
convertible or exchangeable securities except to extend the
terms of its H Power stock sale plan, or as otherwise
described in this Agreement, such as the creation of a
technology company and to obtain funding from NRUCFC;
2. acquire, make any investment in, or make any capital
contributions to, any person or entity other than in the
ordinary course of business;
3. sell, transfer, lease, license, pledge, mortgage or otherwise
dispose of or encumber any of their properties or assets,
other than in the ordinary course of business; the sale of any
interest in Altair Energy, LLC is excluded from this
provision;
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4. a) incur any indebtedness, other than borrowings under
existing credit facilities, b) make any loans or advances to
any other person or entity, other than routine advances to
employees consistent with past practice or c) assume,
guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the
obligations of any other person;
5. enter into any compromise or settlement of, or take any action
with respect to, any litigation or proceeding other than the
prosecution, defense, and settlement thereof in the ordinary
course of business;
6. merge or consolidate with, or acquire (except in the ordinary
course of business) any of the assets of any other
corporation, business or person; and
7. enter into any transaction for the purchase, sale or exchange
of property or the rendering of any service to or by any
affiliate, except upon terms no less favorable to ECO and/or
EFC than they would obtain in a comparable arm's length
transaction with an unaffiliated person.
6. FAILURE TO COMPLY. Notwithstanding anything contained in this Agreement to
the contrary, upon ECO's and/or EFC's breach of any of the Affirmative or
Negative Covenants set forth in Paragraphs 4 and 5 of this Agreement, H
Power shall have the unilateral right to suspend payment of any further
monies due to EFC as set forth on Attachment A of this Agreement, and
under Attachment A of the Sales and Marketing and Test Reporting
Agreements, until such time that ECO and/or EFC cures such breach to H
Power's satisfaction.
7. TERM. This Agreement shall terminate when all the provisions are
satisfied, but no later than December 31, 2003; except that,
notwithstanding any termination of this Agreement, Sections 3, 4, 5 and 6
of this Agreement shall survive and remain in full force and effect until
the Sales and Marketing and Test Reporting Agreements have been
terminated.
8. NO RIGHTS IN THIRD PARTIES. Nothing contained in this Agreement shall be
construed as giving rise to any rights to enforce its provisions to any
person or entity not a Party to this Agreement under any legal theory.
9. PARTY'S RELATIONSHIP. Neither Party by this Agreement makes the other
Party its legal representative or agent. Neither Party shall assign this
Agreement to any other third party, without the other Party's prior
written permission, except that ECO Fuel Cells may assign it to a
Cooperative Member.
10. DISPUTES. The Parties agree that any and all controversies or claims
arising out of or relating to this Agreement, or any alleged breach
hereof, shall be resolved by binding arbitration as prescribed herein,
upon 30 days' written notice to the other Party. In that event, the
Parties each Party shall select one (1) arbitrator and those shall select
a third. The three (3) arbitrators 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
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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.
11. TERMINATION OF DECEMBER MOA. Effective as of the Effective Date, the
December MOA, and each of the terms, provisions and covenants contained
therein, shall terminate and be of no further force or effect.
12. ENTIRE AGREEMENT. With the exception of the Operating Agreement, Sales and
Marketing Agreement, and the Test Reporting Agreement, this Agreement
(including any Schedules and Exhibits attached hereto) constitutes the
entire agreement among the Parties with respect to the subject matter
hereof and supercedes all prior and contemporaneous agreements and
undertakings, written or oral, of any nature whatsoever of the Parties
hereto with respect to the subject matter hereof.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against
any Party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all the Parties hereon as
signatories.
14. SEVERABILITY. If any provision of this Agreement for any reason shall be
held to be illegal, invalid or unenforceable, such illegality shall not
affect any other provision of this Agreement, but this Agreement shall be
construed as if such illegal, invalid or unenforceable provision had never
been included herein.
15. MUTUAL COOPERATION. The Parties agree to take such other actions and
execute such other documents as shall be necessary to carry out the
provisions of this Agreement.
IN WITNESS WHEREOF the undersigned Parties hereby execute this Agreement as of
the Effective Date.
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H POWER CORP. H POWER ENTERPRISES OF CANADA, INC.
/s/ Xxxxxxx X. Xxxx /s/ H. Xxxxx Xxxxxxx
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ECO FUEL CELLS, LLC ENERGY CO-OPPORTUNITY, INC.
/s/ Xxxxxxx X. Xxxxx /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx, President & CEO Xxxxxxx X. Xxxxx, President & CEO
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ATTACHMENT A
ATTACHMENT OF H POWER'S PAYMENTS TO ECO FUEL CELLS (EFC)
Subject to the terms and conditions set forth in the Agreement, H Power shall
make the following payments to EFC:
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EFFECTIVE
DATE QTR 1-2002 QTR 2-2002 QTR 3-2002 QTR 4-2002 SUBTOTAL
======================================================================================================================
SUSTAINABLE FUEL CELL COMM. [*} [*} [*} [*} [*}
======================================================================================================================
TOTAL [*] [*] [*] [*] [*]
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QTR 1-2003 QTR 2-2003 QTR 3-2003 QTR 4-2003 TOTALS
===========================================================================================================
SUSTAINABLE FUEL CELL COMM. [*} [*} [*} [*} [*]
===========================================================================================================
TOTAL [*] [*] [*] [*] $1,500,000
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* Confidential
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