Exhibit 10.35
CONFIDENTIAL INTORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
AGREEMENT
This Agreement is made and entered into as of August 27, 1999, among Plug
Power, L.L.C., a Delaware limited liability company ("PP"), Plug Power Inc., a
Delaware corporation and wholly-owned subsidiary of PP ("PP Inc."), GE On-Site
Power, Inc., a Delaware corporation ("GEOSP"), GE Power Systems business of
General Electric Company, a New York corporation ("GEPS"), and GE Fuel Cell
Systems, L.L.C., a Delaware limited liability company ("GEFCS").
In consideration of the mutual covenants and agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
1.1 GEOSP shall by written notice to PP exercise the option granted to it
by PP (the "Option"), pursuant to Section 2(b) of that certain Contribution
Agreement, dated as of February 3, 1999 (the "Contribution Agreement"), between
GEOSP and PP, to purchase from PP 3,000,000 newly issued shares of the Class A
membership interests of PP at an exercise price of $12.50 per share,
concurrently with or prior to an initial public offering ("IPO") of PP's
securities (or those of PP Inc. following the merger of PP with and into PP Inc.
(the "Merger") as described in the Registration Statement filed with the United
States Securities and Exchange Commission on the date hereof, a copy of which is
attached hereto as Exhibit A; provided, that (i) the IPO shall have been
consummated on or before December 31, 1999; (ii) the price per share to the
public of the securities offered in such IPO is greater than $12.50 and (iii)
GEOSP shall have received all applicable governmental authorizations, consents
and approvals and made all necessary governmental filings necessary for the
valid consummation of the transactions contemplated hereby, including, without
limitation, filings under, and expiration of the applicable waiting period (or
early termination thereof) imposed by, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
1.2 Failure by GEOSP to exercise the Option pursuant to Section 1.1 shall
be deemed a surrender of such Option by GEOSP.
ARTICLE 2
2.1 Effective upon the exercise by GEOSP of the Option: (A) PP shall (i)
use its best efforts to cause one individual nominated by GEPS (the "GEPS
Nominee") to be elected to the Management Committee of PP for an initial term of
one (1) year and (ii) cause the GEPS Nominee to be elected to the Board of
Directors of PP Inc. for an initial term of three (3) years; and (B) GEPS shall
nominate Robert Nardelli or his successor as President and Chief Executive
Officer of GEPS to serve as the GEPS Nominee; provided, however, that GEPS may
nominate an individual other than Robert Nardelli or his successor as President
and Chief Executive Officer of GEPS to serve as the GEPS Nominee, subject to the
approval of PP and PP Inc., which approval shall not be unreasonably withheld.
Each of PP and PP Inc. hereby agree to take all reasonable actions necessary to
nominate the GEPS Nominee as a director, and to use best efforts to cause the
election of the GEPS Nominee to the Board of Directors of PP Inc. following the
IPO for so long as the Distributor Agreement (as defined below) remains in
effect. Each of PP, PP, Inc. and GEPS agree to take all reasonable actions
necessary to comply with the foregoing covenant. As used herein, the term
"Management Committee" shall have the meanings ascribed to such term in the
Limited Liability Company Agreement of Plug Power, L.L.C. made as of June 27,
1997, as amended (the "PP Operating Agreement").
2.2 Effective as of the date hereof, the vesting/forfeiture provisions set
forth in Section 2(a)(i)-(vi) of the Contribution Agreement shall be terminated
and have no further force or effect and the 1,500,000 Shares (as defined in the
Contribution Agreement) shall be fully vested, free of any restrictions set
forth in the Contribution Agreement. Effective upon exercise by GEOSP of the
Option, the Contribution Agreement shall be terminated.
ARTICLE 3
3.1 Effective upon exercise by GEOSP of the Option, GEOSP shall have the
right to include its shares of PP Class A membership interests or shares of
common stock of PP Inc. (collectively, "Registrable Shares") in any of the first
three registration statements (the "Piggyback Registration Statements") filed
under the Securities Act of 1933 (the "Securities Act") by PP or PP Inc. after
completion of the IPO (other than registration statements on Form S-4 or S-8 or
any successor Form). The number of Registrable Shares sought to be included in
any registration statement for an underwritten public offering shall be subject
to reduction on a pro-rata basis with all other selling stockholders and before
any shares sought to be registered by PP or PP Inc. are reduced, if in the
reasonable judgment of the managing underwriters of such offering, marketing or
other factors require such reduction in order to facilitate public distribution
of the offering. In the event GEOSP is not permitted to include any Registrable
Shares in a particular Piggyback Registration Statement as a result of the
immediately preceding sentence, such Piggyback Registration Statement shall not
be included in the three Piggyback Registration Statements in which GEOSP has
the right to include Registrable Shares. In addition, effective upon exercise
by GEOSP of the Option, GEOSP shall, at any time from and after the second
anniversary of the consummation of the IPO, have the right on one occasion to
require PP and PP Inc. to register for resale under the Securities Act up to
3,000,000 Registrable Shares (as appropriately adjusted for stock splits, stock
dividends, mergers, recapitalizations and
2
similar transactions), less the total number of shares sold by GEOSP under the
Piggyback Registration Statements. The parties shall, concurrently with or prior
to the IPO, enter into a registration rights agreement substantially in the form
of the August 24, 1999 draft provided to PP by GEOSP's counsel, provided that
Section 2 of such draft shall be revised to reflect the terms hereof..
ARTICLE 4
4.1 Subject to the exercise by GEOSP of the Option and subject to Section
4.4 below, PP shall purchase a minimum of $12,000,000 of technical support
services (e.g. engineering, testing, manufacturing, quality control) from GEOSP
over a period of three years (the "Initial Period") in accordance with the Work
Plan (as defined below) (the "PP Commitment") commencing on the earlier of (i)
the date on which the Management Committee of GEFCS unanimously approves the
Work Plan, as defined below, or (ii) September 30, 1999. Within 30 days of the
date hereof, representatives of PP, GEFCS shall agree on the specific work
scope, process for collaboration, resource/capability requirements and
deliverables for a three-year period and submit such plan (the "Work Plan") to
the Management Committee of GEFCS; provided, however, that each of PP and GEPS
-------- -------
agree that the draft work plan dated July 23, 1999 submitted to PP by GEPS shall
be the basis for the Work Plan and the Work Plan shall contain substantially the
same fundamental terms (other than purchase commitments) as such draft work
plan. PP shall purchase services from GEOSP only. GEOSP shall purchase
services as needed by PP from other General Electric Company divisions and,
except for services purchased from GEPS, GEOSP shall charge PP [***]. With
respect to services purchased by GEOSP from GEPS, GEOSP shall charge PP a price
equal to [***].
4.2 In providing the services set forth in the Work Plan, GEOSP need not
provide services directly, and may utilize resources as necessary from other
divisions and affiliates of General Electric Company.
4.3 If on March 31, 2002 PP reasonably believes that it will fail to both
(i) satisfy the PP Commitment during the time period set forth in Section 4.1
above (including amounts credited toward the PP Commitment in accordance with
Section 4.4 below), and (ii) complete the Work Plan in accordance with its
terms, then PP may, by written notice to GEOSP (which notice must be received by
April 30, 2002), request an extension of the time within which to complete the
Work Plan until a date not later than March 31, 2003 (the "Work Plan Extension
Period"). Such notice must set forth (i) the reason for PP's belief that it will
fail to complete the Work Plan, and (ii) PP's timetable and methodology for
completion of the Work Plan. Upon GEOSP's receipt of any such extension
request, the time within which PP may complete the Work Plan shall be
automatically extended until the date requested by PP (not later than March 31,
2003). During the Work Plan Extension Period PP shall continue to purchase
services from GEOSP in accordance with the provisions of Section 4.1 until the
earlier of satisfaction of the PP Commitment or completion of the Work Plan in
accordance with its terms. If at the end of the Work Plan Extension Period PP
fails to both (i) satisfy the PP Commitment and (ii) complete the Work Plan in
accordance with its terms, then PP shall pay GEOSP, as liquidated damages for
such failure, the difference between $12,000,000 and the amount purchased during
the Initial Period and the Work Plan Extension Period (including amounts paid to
third parties in accordance with Section 4.4).
3
4.4 PP recognizes that in order to meet its overall production development
obligations, it may be necessary to spend more than $12,000,000. GEOSP
recognizes that if it is unable to deliver support in conformity with the Work
Plan, PP may obtain such services from a third party subject to the provisions
of this Section 4.4. If PP believes, in good faith that GEOSP cannot deliver
support in conformity with the Work Plan, and provides GEOSP with written notice
of such good faith belief, GEOSP shall have thirty (30) days after GEOSP's
receipt of such notice to demonstrate that it can provide the requisite support.
If GEOSP fails to sufficiently demonstrate such ability within thirty (30) days,
PP may obtain such services from a third-party at reasonable and prevailing
costs and credit such costs to the PP Commitment. Any third-party costs must be
based on customary commercial practices and PP must provide evidence of such
costs to GEOSP.
4.5 Unless otherwise agreed to by PP and GEOSP, PP agrees that at least
$1,000,000 of the PP Commitment shall be for quality related initiatives (e.g.
training, design for six sigma (DFSS) implementation, design and use of quality
scorecards, design for reliability). In addition, PP agrees that the members of
PP's senior management team shall be trained by General Electric Company
personnel on six sigma/DFSS tools within 60 days of the date hereof.
4.6 In order to promote improved integration of the product development
and market development activities, the Management Committee of GEFCS shall meet
monthly to review key product and market development activities, progress to
date, obstacles and other related items.
ARTICLE 5
5.1 Effective upon exercise by GEOSP of the Option, PP and GEFCS hereby
amend that certain Distributor Agreement, dated as of February 2, 1999 (the
"Distributor Agreement"), between GEFCS and PP, to extend the term of the
Distributor Agreement by five years (the "Extension Period") from March 4, 2004
until March 4, 2009. In order to supplement the Distributor Agreement with
product transfer prices and purchase commitments applicable to the Extension
Period, GEFCS and PP agree to begin discussions on such terms on October 1, 2002
and engage in negotiations to conclude such discussions and resolve such points
by March 1, 2003. In the event GEFCS and PP fail to resolve such transfer prices
and purchase commitments by March 1, 2003, the parties agree that the product
transfer prices and purchase commitments in effect on March 4, 2004 shall remain
in effect until such issues are resolved; provided, however, that if the product
transfer prices in effect on March 4, 2004 (i) do not provide PP with a gross
profit margin on such sells of at least [***] and (ii) provide GEFCS with a
percentage of earnings before interest and taxes ("EBIT") to sales of greater
than [***], then the product transfer prices in effect pending such resolution
shall be adjusted to provide (A) PP with a gross profit margin on such sales of
at least [***] and (B) GEFCS with a percentage of EBIT to sales of at least
[***].
5.2 PP and GEFCS shall use commercially reasonable efforts to be the most
successful manufacturer, marketer and distributor of residential and small
commercial fuel cell systems in every market in the world (other than Illinois,
Indiana, Michigan and Ohio for so long as DTE Energy Company is the exclusive
distributor for such states).
5.3 PP and GEFCS further agree that during the Extension Period: (a) GEFCS
shall extend the distribution rights of John. Vaillant GMBH U. Co. ("Vaillant")
for Vaillant manufactured fuel cell combined heat and power systems to include
all countries that are included in the definitions of "Europe" as defined in the
Vaillant Agreement (as defined below); provided, that (i) PP, Vaillant and GEFCS
--------
complete the contemplated development, collaboration and distribution agreements
contemplated by that certain memorandum of
4
understanding among PP and Vaillant (the "Vaillant Agreement"), (ii) Vaillant
satisfies its obligations under the Vaillant Agreement and (iii) Vaillant and
GEFCS mutually agree on transfer prices and purchase commitments for the time
period; and (b) GEFCS shall retain its exclusive distribution rights pursuant to
the Distribution Agreement in each year of the Extension Period, provided that
GEFCS meets or exceeds the purchase commitment to be agreed upon for any given
year during the Extension Period or GEFCS is one of the world's three largest
sellers of PEM Fuel Cell-Powered Generator Sets as defined in the Distributor
Agreement, based on the dollar value of new units and replacement parts actually
sold by GEFCS for that year. However, any failure of GEFCS to meet its purchase
commitment target in any year which is caused by PP's failure to deliver a
competitive product, as defined under Section 9.3(b) of the Amended and Restated
Limited Liability Company Agreement of GEFCS, dated February 3, 1999, between
GEOSP and PP, for that year, shall not be grounds for PP to reduce or modify
GEFCS's distribution rights in any way.
ARTICLE 6
6.1 This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of New York without giving effect to any choice
or conflict of law provision or rule (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. Each party agrees that any
dispute relating to or arising from this Agreement or the transactions
contemplated hereby shall be resolved only in the Courts of the State of New
York.
6.2 In no case will any of the parties hereto be liable to any other party
for special, incidental, or consequential damages, including, but not limited
to, personal injury, property damage, loss of profit or revenues, or business
interruption.
6.3 If the performance by any party hereto of any obligation under this
Agreement is delayed or prevented in whole or in party by any cause not
reasonably within its control (including, without limitation, acts of God, war,
civil disturbances, accidents, damage to its facilities, labor disputes, acts of
any governmental body not attributable to such party's failure to comply with
this Agreement, or failure or delay of third parties), it shall be excused,
discharged, and released or performance to the extent such performance is so
limited or prevented, without liability of any kind. Each party shall use its
reasonable efforts to minimize the duration and consequences of any failure of
or delay in performance resulting from a "Force Majeure" event.
6.4 Each party agrees that the failure of any other party at any time to
require performance of any of the provisions herein shall not operate as a
waiver of the right of the other party to request strict performance of the same
or like provisions, or any other provisions hereof, at a later time.
6.5 If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any law or public policy, all other conditions
and provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
5
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.
6.6 This Agreement may not be amended or modified except by an instrument
in writing signed by the parties hereto.
6.7 This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Agreement by telecopier shall be effective as delivery of
a manually executed counterpart of this Agreement.
6.8 This Agreement, the Distribution Agreement, the Contribution
Agreement, the Registration Rights Agreement and the Operating Agreement
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof.
6.9 This Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
6.10 Each party hereto shall bear its own costs and expenses associated
with the negotiation, preparation, delivery and performance of this Agreement.
6.11 All notices or consents hereunder shall be in writing and shall be
deemed given (a) when delivered personally, (b) five days after deposit, postage
prepaid, if mailed by registered or certified mail, return receipt requested, or
(c) upon transmission if transmitted by telex or facsimile (with an electronic
confirmation thereof to the transmitter), to the parties at their respective
addresses set forth below (or at such other address for a party as shall be
specified by such party):
If to PP or PP Inc. Plug Power, L.L.C.
968 Albany-Shaker Road
Latham, New York 12110
Attn: Mr. Gary Mittleman
Telecopy: (518) 782-7884
6
If to GEFCS: GE Fuel Cell Systems, L.L.C.
968 Albany-Shaker Road, Building 1
Latham, New York 12110
Attn: Mr. Barry Glickman
Telecopy: (518) 785-2831
If to GEOSP: GE On-Site Power, Inc.
968 Albany-Shaker Road, Building 1
Latham, New York 12110
Attn: Mr. Barry Glickman
Telecopy: (518) 785-2831
If to GEPS: GE Power Systems
4200 Wildwood Parkway
Atlanta, Georgia 30339
Attn: Ms. Elizabeth K. Lanier
Telecopy: (770) 859-7710
6.12 This Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting or
causing any instrument to be drafted.
6.13 To the extent permitted by applicable law, the parties hereto agree
that irreparable damage will occur if any provision of this Agreement is not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity; provided that each of the parties agrees to provide the
--------
other with written notice at least two business days prior to filing any motion
or other pleading seeking a temporary restraining order, a temporary or
permanent injunction, specific performance, or any other equitable remedy and to
give the other and its counsel a reasonable opportunity to attend and
participate in any judicial or administrative hearing or other proceeding held
to adjudicate or rule upon any such motion or pleading.
[Signatures on next page.]
7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PLUG POWER, L.L.C.
By: /s/ Gary Mittleman
---------------------------------
Name: Gary Mittleman
Title: President & CEO
PLUG POWER INC.
By: /s/ Gary Mittleman
---------------------------------
Name: Gary Mittleman
Title: President & CEO
GE FUEL CELL SYSTEMS, L.L.C.
By: /s/ Barry Glickman
---------------------------------
Name: Barry Glickman
Title: President
GE ON-SITE POWER, INC.
By: /s/ Ricardo Artigas
---------------------------------
Name: Ricardo Artigas
Title: President
GE POWER SYSTEMS division of
GENERAL ELECTRIC COMPANY
By: /s/ Robert L. Nardelli
---------------------------------
Name: Robert L. Nardelli
Title: CEO, GE Power Systems
8