UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): February 11, 2020

 

FUELCELL ENERGY, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

1-14204

 

06-0853042

(State or Other Jurisdiction of

Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

 

 

 

3 Great Pasture Road,

Danbury,  Connecticut

 

06810

 

 

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (203) 825-6000

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

FCEL

 

The Nasdaq Stock Market LLC
(Nasdaq Global Market)

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 

 

 

 


 

Item 1.01.Entry into a Material Definitive Agreement.

 

Crestmark Sale-Leaseback Transaction

 

On February 11, 2020, a wholly owned subsidiary of FuelCell Energy, Inc. (the “Company”) entered into a Purchase and Sale Agreement (the “Purchase Agreement”) and an Equipment Lease Agreement (the “Lease”) with Crestmark Equipment Finance, a division of MetaBank (“Crestmark”). Under these agreements, the subsidiary, Central CA Fuel Cell 2, LLC (“CCFC2”), sold the 2.8 MW fuel cell power plant (the “Plant”) located at the Tulare wastewater treatment plant in Tulare, California to Crestmark and then leased the Plant back from Crestmark through this sale-leaseback transaction. The Plant was designed, manufactured and installed by the Company, and commercial operations began on December 27, 2019. In operating the Plant, CCFC2 purchases biogas from the City of Tulare and will sell the power produced by the Plant to Southern California Edison under a twenty year Power Purchase Agreement under the California Bioenergy Market Adjusting Tariff, which was separately entered into on April 20, 2018 (the “PPA”). The PPA provides the Company with predictable long-term revenue and cash flow.

 

Under the terms of the Purchase Agreement, Crestmark paid CCFC2 an aggregate purchase price of $14.4 million. A portion of these proceeds were used by CCFC2 to make a down payment and an initial rental payment under the Lease totaling $2.9 million to Crestmark, and to pay taxes and transaction costs totaling approximately $1.0 million, resulting in net proceeds to CCFC2 of approximately $10.5 million. Approximately $4.0 million of the net proceeds will be used by the Company to fund certain reserves, dividends and other payments, while the remaining $6.5 million of the net proceeds has been deposited into the Project Proceeds Account under the October 31, 2019 Credit Agreement among the Company, certain of its subsidiaries as guarantors, Orion Energy Partners Investment Agent, LLC and certain of its affiliated lenders, all as discussed under “Third Amendment to Orion Credit Agreement” below.

 

The Lease has an initial term of ten years but may be extended at the option of CCFC2. An initial rental down payment and one month’s rent totaling $2.9 million was paid using the proceeds from the sale of the Plant. Rental payments are due on a monthly basis in the amount of $71,530. Lease payments are expected to be funded with proceeds from the sale of power under the PPA. Following the sale-leaseback transaction, the remaining rental payments due over the term of the Lease total approximately $8.5 million.

 

CCFC2 and Crestmark entered into an Assignment Agreement on February 11, 2020 (the “Assignment Agreement”) and FuelCell Energy Finance, LLC (the direct parent of CCFC2) and Crestmark entered into a Pledge Agreement on February 11, 2020 (the “Pledge Agreement”) pursuant to which collateral was provided to Crestmark to secure CCFC2’s obligations under the Lease.  Specifically, CCFC2 and FuelCell Energy Finance, LLC have granted Crestmark a security interest in (i) certain agreements relating to the sale-leaseback transaction, (ii) the revenues CCFC2 receives with respect to the Plant, (iii) two fuel cell modules to be maintained by CCFC2 as replacement modules for the Plant, and (iv) FuelCell Energy Finance, LLC’s equity interest in CCFC2.  CCFC2 and the Company also entered into a Technology License and Access Agreement with Crestmark on February 11, 2020, which provides Crestmark with certain intellectual property license rights to have access to the Company’s proprietary fuel cell technology, but only for the purpose of maintaining and servicing the project in certain circumstances where the Company is not satisfying its obligations under its service agreement with regard to the maintenance and servicing of the Plant.

 

Pursuant to the Lease, CCFC2 has an obligation to indemnify Crestmark for the amount of any actual reduction in the U.S. Investment Tax Credit anticipated to be realized by Crestmark in connection with the foregoing sale-leaseback transaction. Such obligations would arise as a result of reductions to the value of the underlying fuel cell project as assessed by the U.S. Internal Revenue Service (“IRS”). The Company does not believe that any such obligation is likely based on the facts known as of February 11, 2020. The maximum potential future payments that CCFC2 could have to make under these obligations would depend on the difference between the fair values of the fuel cell projects sold or financed and the values the IRS would determine as the fair value for the systems for purposes of claiming the Investment Tax Credit. The value of the Investment Tax Credit in the sale-leaseback agreements is based on guidelines provided by the statutory regulations from the IRS. The Company and Crestmark used fair values determined with the assistance of an independent third-party appraisal.

 

The Purchase Agreement and the Lease contain customary representations and warranties, affirmative and negative covenants, and customary events of default that entitle Crestmark to cause CCFC2’s indebtedness under the Lease to become immediately due and payable.

 

Pursuant to a Guaranty Agreement executed on February 11, 2020 by the Company for the benefit of Crestmark (the “Guaranty”), the Company has guaranteed the payment and performance of CCFC2’s obligations under the Lease.

 

The foregoing summary of the terms of the Purchase Agreement, the Lease, the Assignment Agreement, the Pledge Agreement, the Guaranty and the Technology License and Access Agreement is qualified in its entirety by reference to (i) the full text of the Purchase Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference, (ii) the full text of the Lease, a copy of which is attached as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein by

 


 

reference, (iii) the full text of the Assignment Agreement, a copy of which is attached as Exhibit 10.3 to this Current Report on Form 8-K and incorporated herein by reference, (iv) the full text of the Pledge Agreement, a copy of which is attached as Exhibit 10.4 to this Current Report on Form 8-K and incorporated herein by reference, (v) the full text of the Guaranty, a copy of which is attached as Exhibit 10.5 to this Current Report on Form 8-K and incorporated herein by reference, and (vi) the full text of the Technology License and Access Agreement, a copy of which is attached as Exhibit 10.6 to this Current Report on Form 8-K and incorporated herein by reference.

 

Third Amendment to Orion Credit Agreement

On October 31, 2019, the Company and certain of its subsidiaries as guarantors entered into a Credit Agreement (as amended from time to time, the “Orion Credit Agreement”) with Orion Energy Partners Investment Agent, LLC, as Administrative Agent and Collateral Agent (the “Agent”), and its affiliates, Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., and Orion Energy Credit Opportunities Fund II PV, L.P., as lenders, for a $200.0 million senior secured credit facility (the “Orion Facility”), structured as a delayed draw term loan, to be provided by the lenders, subject to certain lender approvals.  In conjunction with the closing of the Orion Facility, on October 31, 2019, the Company drew down $14.5 million.  On November 22, 2019, a second draw (the “Second Funding”) of $65.5 million, funded by Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., Orion Energy Credit Opportunities Fund II PV, L.P., and Orion Energy Credit Opportunities FuelCell Co-Invest, L.P. (collectively, the “Lenders”), was made.  In conjunction with the Second Funding, the Company, the Agent, and the other loan parties entered into the First Amendment to the Orion Credit Agreement, which required the Company to establish a $5.0 million debt reserve.

 

In addition, on January 20, 2020, in order to obtain the Lenders’ consent to the January 20, 2020 letter agreement among the Company, FCE FuelCell Energy Ltd. (“FCE Ltd.”) and Enbridge Inc., pursuant to which such parties agreed to amend the articles of FCE Ltd. (the “Articles”) relating to and setting forth the terms of the Class A Cumulative Redeemable Exchangeable Preferred Shares issued by FCE Ltd. (the “Series 1 Preferred Shares”) to: (i) remove the provisions of the Articles permitting or requiring the issuance of shares of the Company’s common stock in exchange for the Series 1 Preferred Shares or as payment of amounts due to the holders of the Series 1 Preferred Shares, (ii) remove certain provisions of the Articles relating to the redemption of the Series 1 Preferred Shares, (iii) increase the annual dividend rate, commencing on January 1, 2020, to 15%, (iv) extend the final payment date for all accrued and unpaid dividends and all return of capital payments (i.e., payments of the principal redemption price) from December 31, 2020 to December 31, 2021, (v) clarify when divided and return of capital payments are to be made in the future and extend the quarterly dividend and return of capital payments through December 31, 2021 (which were previously to be paid each quarter through December 31, 2020), and (vi) remove certain terms and provisions of the Articles that are no longer applicable, the Company, the Agent, the Lenders, and the other loan parties entered into the Second Amendment to the Orion Credit Agreement (the “Second Orion Amendment”), which adds a new affirmative covenant to the Orion Credit Agreement that obligates the Company to, and to cause FCE Ltd. to, on or prior to November 1, 2021, either (i) pay and satisfy in full all of their respective obligations in respect of, and fully redeem and cancel, all of the Series 1 Preferred Shares of FCE Ltd., or (ii) deposit in a newly created account of FCE Ltd. or the Company cash in an amount sufficient to pay and satisfy in full all of their respective obligations in respect of, and to effect a redemption and cancellation in full of, all of the Series 1 Preferred Shares of FCE Ltd. The Second Orion Amendment also provides that the Articles setting forth the modified terms of the Series 1 Preferred Shares will be considered a “Material Agreement” under the Orion Credit Agreement. Under the Second Orion Amendment, a failure to satisfy this new affirmative covenant or to otherwise comply with the terms of the Series 1 Preferred Shares will constitute an event of default under the Orion Credit Agreement, which could result in the acceleration of any amounts outstanding under the Orion Credit Agreement.

 

In order to obtain the Lenders’ consent to the Crestmark sale-leaseback transaction described above and to the use of certain proceeds from the Crestmark sale-leaseback transaction (the “Crestmark Proceeds”) as described below, the Company, the Agent, the Lenders and the other loan parties entered into the Third Amendment to the Orion Credit Agreement (the “Third Orion Amendment”) dated February 11, 2020, and a Consent and Waiver dated February 11, 2020 (the “Consent and Waiver”).  Pursuant to the Third Orion Amendment,  TRS Fuel Cell, LLC was added as an Additional Covered Project Company (as defined in the Orion Credit Agreement), requiring the Company to pledge all of the assets of TRS Fuel Cell, LLC under the Orion Credit Agreement.  In addition, pursuant to the Orion Credit Agreement (as modified by the Third Orion Amendment), all of the proceeds received by the Company from the Crestmark sale-leaseback transaction described above, after the payment of transaction costs, were deposited in the Company’s Project Proceeds Account, which account is restricted, with withdrawals permitted only with consent of the Agent for use to (i) prepay the loans under the Orion Credit Agreement or (ii) fund (x) construction costs, inventory or other capital expenditures for an Additional Covered Project (as defined in the Orion Credit Agreement) whose contracted cash flows (as determined in the Lenders’ sole discretion) meet or exceed a coverage ratio acceptable to the Lenders, and (y) inventory, working capital and other costs required in connection with the performance of purchase orders, service agreements and other binding customer agreements (as determined in the Lenders’ sole discretion); provided, however, that, pursuant to the Third Orion Amendment, certain portions of the funds deposited in the Project Proceeds Account are permitted to and will be used as follows: (a) $1.1 million of the Crestmark Proceeds to be transferred to the Module Reserve Account (as defined in the Orion Credit Agreement) to fund module replacement costs for Covered Projects (as defined in the Orion Credit Agreement); (b) $75,000 of the Crestmark Proceeds to be transferred to the Debt Reserve Account; (c) $1.7 million of the Crestmark Proceeds to be used to fund the quarterly cash interest due to the Lenders under the Orion Credit

 


 

Agreement; and (d) $1.1 million of the Crestmark Proceeds to be used to fund the aggregate amount of the dividends on the Company’s 5% Series B Cumulative Convertible Perpetual Preferred Stock and the Series 1 Preferred Shares of FCE Ltd. required to be paid in the second quarter of fiscal 2020. The remaining approximately $6.5 million of Crestmark Proceeds will remain as restricted cash in the Project Proceeds Account and the Company expects to request the Lenders’ consent to draw down all or a portion of such amount for future projects as permitted under the Orion Credit Agreement.   Pursuant to the Consent and Wavier, subject to the terms and conditions described above in the Third Orion Amendment, the Lenders consented to the release of liens on those assets that were the subject of the Crestmark sale-leaseback transaction and to the Company’s entering into the Guaranty.

 

The foregoing summary of the terms of the Third Orion Amendment and the Consent and Waiver is qualified in its entirety by reference to the full text of the Third Orion Amendment, a copy of which is attached as Exhibit 10.7 to this Current Report on Form 8-K and incorporated herein by reference, and the full text of the Consent and Waiver, a copy of which is attached as Exhibit 10.8 to this Current Report on Form 8-K and incorporated herein by reference.

 

Item 2.03.Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The information in Item 1.01 of this Current Report on Form 8-K regarding the Crestmark transaction is incorporated by reference into this Item 2.03.

 

Item 7.01.Regulation FD Disclosure.

 

On February 13, 2020, the Company issued a press release announcing the Crestmark sale-leaseback transaction.  A copy of the press release is furnished herewith as Exhibit 99.1 to this Current Report on Form 8-K.

 

The information furnished in this Item 7.01, including Exhibit 99.1, is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. This information will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

 

Item 9.01.Financial Statements and Exhibits.

 

(d)  Exhibits.  The following exhibits are being filed or furnished (as applicable) herewith:

 

Exhibit

No.

 

Description

 

 

 

10.1

 

Purchase and Sale Agreement, dated February 11, 2020, by and between Central CA Fuel Cell 2, LLC and Crestmark Equipment Finance.

 

 

 

10.2

 

Equipment Lease Agreement, dated February 11, 2020, by and between Central CA Fuel Cell 2, LLC and Crestmark Equipment Finance.

 

 

 

10.3

 

Assignment Agreement, dated February 11, 2020, by a Central CA Fuel Cell 2, LLC in favor of Crestmark Equipment Finance.

 

 

 

10.4

 

Pledge Agreement, dated February 11, 2020, by and between FuelCell Energy Finance, LLC and Crestmark Equipment Finance.

 

 

 

10.5

 

Guaranty Agreement, dated February 11, 2020, by FuelCell Energy, Inc. in favor of Crestmark Equipment Finance.

 

 

 

10.6

 

Technology License and Access Agreement for Tulare Biomat Fuel Cell Power Plant, dated February 11, 2020, by and among Crestmark Equipment Finance, Central CA Fuel Cell 2, LLC and FuelCell Energy, Inc.

 

 

 

10.7

 

Third Amendment to Credit Agreement, dated as of February 11, 2020, by and among FuelCell Energy, Inc., each of the Guarantors party to the Credit Agreement, each of the lenders party to the Credit Agreement and Orion Energy Partners Investment Agent, LLC.

 

 

 

10.8

 

Consent and Waiver, dated as of February 11, 2020, by and among FuelCell Energy, Inc., each of the Guarantors party to the Credit Agreement, each of the lenders party to the Credit Agreement and Orion Energy Partners Investment Agent, LLC.

 

 


 

99.1

 

Press Release issued by FuelCell Energy, Inc. on February 13, 2020.

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

FUELCELL ENERGY, INC.

 

 

 

Date:  February 13, 2020

 

By:

 

/s/ Michael S. Bishop

 

 

 

 

Michael S. Bishop

 

 

 

 

Executive Vice President, Chief Financial Officer and Treasurer

 

 

 

EXHIBIT 10.1

 

PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale Agreement ("Agreement"), dated and effective as of February 11, 2020 is entered into between Central CA Fuel Cell 2, LLC, c/o FuelCell Energy, Inc., 3 Great Pasture Road, Danbury, CT 06810 ("Seller") and Crestmark Equipment Finance, a division of MetaBank, 5480 Corporate Drive, Suite 350, Troy, MI 48098 ("Crestmark").

 

WHEREAS, Crestmark desires to purchase from Seller certain fuel cell equipment (the "Equipment") described in Schedule A pursuant to the bill of sale attached hereto as Exhibit #1 ("Bill of Sale"), and Seller desires to sell the Equipment to Crestmark, and subsequently lease the Equipment from Crestmark in accordance with the terms and conditions of that certain Lease Agreement to be entered into by the parties hereto simultaneously with the execution and delivery of this Agreement (the "Lease Agreement") and the rental schedule thereunder.

 

NOW THEREFORE, in consideration of the mutual promises herein and other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, Seller and Crestmark agree as follows:

 

1.Purchase and Sale. Subject to the terms and conditions of this Agreement, the sale of Equipment shall be evidenced by the Bill of Sale. Seller agrees to sell to Crestmark, and Crestmark agrees to purchase from Seller, the Equipment on the terms and conditions set forth herein and in the Bill of Sale. Effective upon its purchase of the Equipment from Seller, Crestmark agrees to lease the Equipment to Seller pursuant to the terms and conditions contained in the Lease Agreement (and the rental schedule attached thereto). The purchase date and the date on which title to the Equipment shall pass from Seller to Crestmark shall be the Lease Commencement Date as shown in the rental schedule to the Lease Agreement (the "Commencement Date").

 

2.Purchase Price. On the Commencement Date, Crestmark shall pay to Seller the purchase price specified on the Bill of Sale (the "Purchase Price"). For purposes of Section 1060 of the Internal Revenue Code (the "Code"), the Purchase Price, and other relevant items, will be allocated among the Equipment in accordance with the fair market value of the assets and liabilities transferred as described in Schedule B to the Bill of Sale. Seller and Crestmark will: (a) be bound by such allocation for purposes of determining any taxes, (b) prepare and file their tax returns on a basis consistent with such allocation, and (c) take no position inconsistent with such allocation on any tax return or in any proceeding before any taxing authority. The obligations of Seller and Crestmark under this Section 2 will survive the closing of the transactions contemplated hereby.

 

3.Title. On the Commencement Date, Seller and Crestmark shall execute and deliver to each other the Bill of Sale.

 

 


 

4.Sale, Purchase and Performance. Seller and Crestmark hereby agree that the obligations of each party hereunder to enter into the Bill of Sale with respect to the Equipment are expressly conditioned on (a) both parties executing and delivering to the other party the Lease Agreement, and (b) the execution and delivery of such other documents, certificates and items as are set forth in Exhibit #2, each in form and substance satisfactory to both parties hereto, in their reasonable discretion and each as may be amended, amended and restated, modified or supplemented from time to time, and including any replacement or supplementary agreements thereof or thereto (collectively, the "Lease Documents").

 

5.Seller's Representations and Warranties. Seller represents and warrants to Crestmark as of the date hereof and the Commencement Date as follows:

 

(a)the execution, delivery and performance of this Agreement, the Bill of Sale and the Lease Documents to which Seller is a party are duly authorized on the part of Seller, and upon due execution thereof by the parties thereto, each of such documents shall constitute valid obligations binding upon and enforceable against Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency and other similar laws affecting the rights and remedies of creditors generally and by general principles of equity;

 

(b)neither the execution by Seller of this Agreement, the Bill of Sale or any of the Lease Documents to which Seller is a party, nor the due performance thereof by Seller, will result in any breach of, or constitute a default under, or violation of, Seller's certificate of formation, limited liability company agreement, or any material agreement to which Seller is a party or by which Seller is bound and that relates to the Equipment, nor will any of the same violate any material law, regulation or order by which Seller is bound and that relates to the Equipment;

 

(c)Seller is duly formed, validly existing and in good standing in its state of formation and is duly qualified as a foreign limited liability company in each other jurisdiction where the Equipment is located;

 

(d)Seller has and is transferring to Crestmark good, valid and marketable title to the Equipment free and clear of all liens, encumbrances and claims of any kind or description other than Permitted Liens (for purposes of this Section 5, Permitted Liens means (i) any liens, encumbrances or claims for taxes not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained; (ii) any liens created by the Lease Documents (other than the Project Documents (as defined below)); (iii) any liens, encumbrances or claims arising in the ordinary course of business by operation of law (including mechanics’ and materialmen’s liens) with respect to a liability that is not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained; and (iv) zoning, planning and other similar encumbrances affecting the Equipment which do not in any case materially detract from the value of the Equipment;

 

(e)the agreements listed on Exhibit #3 constitute a true, accurate and complete list of all material contracts with respect to the Equipment (as supplemented from time to time in connection with the Lease Agreement, and as may be amended, amended and restated, modified or supplemented from time to time, and including any replacement or supplementary agreements thereof or thereto, the Project Documents);

Page 2 of 14


 

(f)each Project Document to which Seller is a party is in full force and effect, creates a legal, valid and binding obligation of each party thereto, and has not been amended or modified except as noted on Exhibit #3, and with respect to each such agreement, Seller is not, and to Seller’s knowledge, no other party thereto is, in default thereunder;

 

(g)each Project Document to which Seller is not a party is in full force and effect, creates a legal, valid and binding obligation of each party thereto, has not been amended or modified and, to the knowledge of Seller, no party to any of such agreements is in default thereunder;

 

(h)Seller has provided to Crestmark true, correct and complete copies of each Project Document and has received all third party consents and approvals necessary to permit the collateral assignment to Crestmark contemplated by the Lease Documents, as well as the potential direct assignment to Crestmark upon the election of the Return Option or following the occurrence and during the continuance of a Default (each as defined in the Lease Agreement) at the end of the Lease Term;

 

(i)there are no warranties or indemnities applicable to the Equipment that were provided by any manufacturer, supplier or installer of any of the Equipment other than those included in the Project Documents and those separate warranties listed on Exhibit #4 hereto (all such warranties and indemnities, the Warranties);

 

(j)the installation and operation of the Equipment and development, construction and operation of the system comprising the Equipment is and has been in material compliance with all Applicable Laws, including environmental laws, and all material franchise, license, permit, approval, notification, certification, registration, authorization and qualification required by any governmental authority (“Governmental Approvals”) required as of the effective date of the Lease Agreement to develop, construct and operate the system comprising the Equipment have been duly obtained, are in full force and effect, are final and all periods to administratively or judicially appeal such Governmental Approvals have expired;

 

(k)Lessee is either not subject to or is exempt from regulation (i) as a "public utility" or a "holding company" under the Federal Power Act ("FPA") and the Public Utility Holding Company Act ("PUHCA") and FERC's regulations thereunder, and (ii) as a "public utility," "electric utility," "electric corporation," or a "holding company" or similar terms under applicable laws or regulations of each state where the Equipment is located, and, solely as the result of the execution and delivery of the Lease Documents or the consummation or performance of the transactions contemplated thereby, Lessor will not become subject to regulation under any of the foregoing laws or regulations. Lessee is not subject to regulation under the Investment Company Act of 1940; and

 

(l)(A) Seller has timely filed or caused to be filed all tax returns and reports required to have been filed by it and has paid or caused to be paid all taxes, assessments and governmental charges assessed or imposed that are required to have been paid by it, and (B) Seller has not applied to the Internal Revenue Service for a private letter ruling with respect to the Equipment, the Project Documents or the transactions contemplated by this Agreement and the Lease Agreement.

Page 3 of 14


 

 

6.Crestmark’s Representations and Warranties. Crestmark represents and warrants to Seller as of the Commencement Date as follows: (a) the execution, delivery and performance of this Agreement, the Bill of Sale and the Lease Documents to which Crestmark is a party are duly authorized on the part of Crestmark, and that upon due execution thereof by the parties thereto, each of such documents shall constitute valid obligations binding upon and enforceable against Crestmark in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency and other similar laws affecting the rights and remedies of creditors generally and by general principles of equity; (b) neither the execution of this Agreement, the Bill of Sale or the Lease Documents to which Crestmark is a party, nor the due performance thereof by Crestmark, will result in any breach of, or constitute a default under, or violation of, Crestmark’s organizational documents, or any material agreement to which Crestmark is a party or by which Crestmark is bound, nor will any of the same violate any material law, regulation or order by which Crestmark is bound; and (c) Crestmark is duly organized, validly existing and in good standing in its state of formation.

 

7.Manufacturer's Warranties. Seller hereby assigns to Crestmark all of Seller's rights, title and interest in and to all Warranties, each as further described in the agreements listed on Exhibit #4 hereto, to the extent the same exist as of the Commencement Date and to the extent assignable. Seller shall take such further actions as may reasonably be necessary to assign such Warranties to Crestmark. In the event that any Warranty is not assignable to Crestmark, Seller hereby appoints Crestmark as Seller’s agent and attorney-in-fact, which appointment is coupled with an interest, to assert and enforce, from time to time, in the name of and for the account of Seller and Crestmark, as their interests may appear, but in all cases at the sole cost and expense of Seller, any such Warranty.

 

8.Updated Project Documents and Warranties. Upon the Commencement Date, Exhibit #3 (Project Documents) and Exhibit #4 (Warranties) shall be updated to reflect additional Project Documents and Warranties related to the Equipment subject to the Bill of Sale executed on the Commencement Date. For avoidance of doubt, each representation, warranty, covenant or other agreement made by Seller hereunder applicable to Project Documents and Warranties shall be deemed to apply to such additional Project Documents and Warranties as of the Commencement Date.

 

9.Assignment. Crestmark and Seller agree that this Agreement shall inure to the benefit of and shall be binding upon each of Seller and Crestmark and their respective successors and assigns. Seller may not assign its interest in this Agreement without Crestmark’s prior written consent, which shall not be unreasonably withheld. Any attempted assignment without such consent shall be null and void. Crestmark may assign its interests in this Agreement, in whole or in part, with notice to but without the consent of Seller. If any such Crestmark assignment is a partial assignment of this Agreement by Crestmark, (i) so long as no Default (as defined in the Lease Agreement) shall have occurred, Crestmark shall maintain its administrative role under this Agreement with Seller and shall act as an intermediary between Seller and any Crestmark partial assignee, and (ii) unless Seller receives notice from Crestmark or Crestmark's assignee to the contrary, Seller's satisfaction of its obligations under this Agreement to Crestmark shall be deemed to satisfy such obligations to all assignees.

 

Page 4 of 14


 

10.Survival of Covenants. Crestmark and Seller agree that the warranties, covenants and agreements of the parties contained in this Agreement shall survive the passing of title. For the avoidance of doubt, any representations or warranties made in this Agreement by either party are deemed to have been made as of the date hereof and the Commencement Date, or as of such other date specified in this Agreement, and neither party shall be deemed to have made such representation or warranty as of any other date.

 

11.Limitations. Neither party shall be liable for any indirect, special or consequential damages, in connection with or arising by reason of this Agreement, nor shall either party be liable under this Agreement for any event beyond its control.

 

12.Miscellaneous. Section titles are not intended to, and shall not, limit or otherwise affect the interpretation of this Agreement. This Agreement shall not be binding upon either party until executed by such party’s authorized representative. If any provision of this Agreement shall be held to be invalid or unenforceable, the validity and enforceability of the remaining provisions hereof shall not be affected or impaired in any way. Any modifications to this Agreement shall be in writing and shall be signed by both parties or their permitted assigns, if any. Any capitalized terms used but not defined herein shall have the definitions set forth in the Lease Agreement, which definitions are incorporated herein by reference.

 

13.Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of New York, without giving effect to conflict of laws principles other than Section 5-1401 of the New York General Obligations Law. Each party consents to the exclusive jurisdiction of any state or federal court in the State of New York over any action or proceeding brought in connection with this Agreement. SELLER AND CRESTMARK EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH SELLER AND/OR CRESTMARK MAY BE PARTIES ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS AGREEMENT.

 

14.Entire Agreement. SELLER AND CRESTMARK AGREE THAT THIS AGREEMENT, THE BILL OF SALE AND THE LEASE DOCUMENTS CONSTITUTE THE ENTIRE AGREEMENT OF THE PARTIES WITH RESPECT TO THE EQUIPMENT AND SUPERSEDE ALL PROPOSALS, ORAL OR WRITTEN, ALL PRIOR NEGOTIATIONS AND AGREEMENTS, AND ALL OTHER COMMUNICATIONS BETWEEN THEM WITH RESPECT TO THE EQUIPMENT.

 

[Signature page follows.]

 

Page 5 of 14


 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their authorized representatives as of the date first above written.

 

CRESTMARK EQUIPMENT FINANCE,

a division of MetaBank

 

 

 

 

 

 

By:

 

/s/ Thomas R. Rutherford

Name:

 

Thomas R. Rutherford

Title:

 

President

 

CENTRAL CA FUEL CELL 2, LLC

 

 

 

By:

 

FuelCell Energy Finance II,

 

 

LLC Its: Sole Member

 

 

 

By:

 

FuelCell Energy, Inc.

 

 

Its: Sole Member

 

 

 

By:

 

/s/ Michael S. Bishop

Name:

 

Michael S. Bishop

Title:

 

Executive Vice President, Chief Financial

 

 

Officer and Treasurer

 

 

 

 


 

PURCHASE AND SALE AGREEMENT EXHIBIT #1

BILL OF SALE

 

CENTRAL CA FUEL CELL 2, LLC ("Seller"), in consideration of the sum of fourteen million three hundred and seventy-two thousand dollars ($14,372,000) (the "Purchase Price") and other good and valuable consideration paid by CRESTMARK EQUIPMENT FINANCE, a division of MetaBank ("Crestmark") does hereby sell, and convey to Crestmark all of its right, title and interest in and to the Equipment described more fully on Schedule A attached hereto.

 

This Bill of Sale is entered into in connection with that certain Purchase and Sale Agreement, dated as of February 11, 2020 (the "Purchase Agreement") between Seller and Crestmark. Unless otherwise indicated, capitalized terms used herein shall have the meaning set forth in the Purchase Agreement.

 

Seller warrants that it is transferring title to the Equipment free and clear of all liens and encumbrances other than Permitted Liens. EXCEPT AS SPECIFICALLY SET FORTH IN THE PURCHASE AGREEMENT, CRESTMARK ACKNOWLEDGES AND AGREES THAT SELLER HAS MADE AND MAKES NO REPRESENTATIONS OR WARRANTIES OF WHATSOEVER NATURE, DIRECTLY OR INDIRECTLY, EXPRESSED OR IMPLIED, WITH RESPECT TO THE EQUIPMENT OR OTHERWISE, INCLUDING BUT NOT LIMITED TO ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO SUITABILITY, DURABILITY, FITNESS FOR USE AND MERCHANTABILITY OF ANY OF THE EQUIPMENT, AND THAT THE EQUIPMENT IS BEING SOLD, TRANSFERRED AND DELIVERED TO CRESTMARK “AS-IS,” “WHERE-IS” AND “WITH ALL FAULTS.”

 

The Purchase Price, and other relevant items, will be allocated among the Equipment in accordance with the fair market value of the assets and liabilities transferred as described in Schedule B attached hereto.

 

In the event of any conflict between the terms of the Purchase Agreement and the terms of this Bill of Sale, the terms of the Purchase Agreement shall prevail.

 

Page 7 of 14


 

Schedule A to Bill of Sale

Description of Equipment

 

Equipment includes all equipment and components of the FCE SureSource 3000 fuel cell system, including but not limited to items detailed below.

 

Equipment

Model Number

Serial Number

Warranty Info

SureSource 3000 Module

C1420

C1420-134

C1420-135

Long Term Service Agreement (LTSA)  

SureSource 3000 MBOP

SureSource 3000

MM27

12 mos.

SureSource 3000 EBOP

Rockwell  - Power Conditioning Unit (PCU),

Allen -Bradley Power Flex

1.764MVA

Leader  46249256

     Follower  43204413

18 mos.  from ship or          12 from start

Chiller for EBOP PCU

Pfannenberg

Model EB 350 SP

460/3/60

Part No. 42533505321

S15530808168

S15530808172

 

12 mos.

SureSource 3000 Exhaust Heat Recovery - Water Loop Heater

Cain Heat Recovery Unit

HRU-360F26SSS DFC3000

S/N 8678

18 mos.

from ship or 12 from start

SureSource 3000 Transformer

Rockwell / Hammond

AA00706273

         AA00706274

12 mos.

1800kVA Transformer 370V/370V/12.0kV

BOP Transformer

Cooper / Eaton – XFMR, 300KVA, 12kV-480Y, FR3

 

CP1850008662

 

18 mos.  from ship or

12 from start

SureSource 3000 Switchgear F60/CCB

Powergrid Solutions – 15KV, 1200A, NEMA 3R, SMCG

SO5644901-001

18 mos.  from ship or        

12 from start

Neutral Grounding Reactor

Gilbert Electrical Systems 13.8kV, 62 ohms, 150A/10 sec

 

79710-79743-0818

 

18 mos.  from ship or

12 from start

 

 

Page 8 of 14


 

Schedule B

to Bill of Sale

Purchase Price Allocation

 

1.  Tulare Fuel Cell Project: $14,185,000

Total Purchase Price: $14,372,000

Page 9 of 14


 

PURCHASE AND SALE AGREEMENT

 

Exhibit #2

Lease Documents

 

1.

This Agreement;

 

2.

Lease Agreement;

 

3.

Rental Schedule (incorporated into Lease Agreement);

 

4.

Certificate of Acceptance for the Equipment, substantially in the form of Attachment #1 to Exhibit A to the Lease Agreement;

 

5.

Bill of Sale for the Equipment;

 

6.

Assignment Agreement, dated as of the date hereof, from Seller and FuelCell Energy, Inc. to Crestmark;

 

7.

Guaranty Agreement, dated as of the date hereof from FuelCell Energy, Inc. (“Guarantor”) to Crestmark;

 

8.

Pledge Agreement, dated as of the date hereof, from FuelCell Energy Finance, LLC (“Parent”) in favor of Crestmark, together with a membership interest certificate and transfer power;

 

9.

A third party consent agreement, dated as of the Commencement Date, from each counterparty to the Power Purchase Agreement;

 

10.

A third party consent agreement, dated as of the Commencement Date, from each counterparty to the Digester Gas Purchase Agreement;

 

11.

A third party consent agreement, dated as of the Commencement Date, from each counterparty to the EPC Contract;

 

12.

The Warranties with respect to the Equipment, in respect of the EPC Contract, the Service Agreement and any other applicable items of Equipment;

 

13.

The Project Documents;

 

14.

The Technology License and Access Agreement, dated as of the date hereof, between Crestmark, Seller and Guarantor;

 

15.

Secretary's Certificate of the sole member of Seller, attaching (i) true and complete copies of Seller’s constitutive documents in effect as of the date thereof, (ii) a true and complete copy of resolutions duly adopted by the authorized governing body of the sole member of Seller, authorizing the execution, delivery and performance by Seller of each of the Lease Documents and Project Documents to which it is a party, (iii) an incumbency certificate, and (iv) a certificate of good standing, issued by the Secretary of State of the state of Seller's

Page 10 of 14


 

formation, dated not more than ten (10) business days before closing;

 

16.

Secretary's Certificate of Guarantor, attaching (i) true and complete copies of Guarantor’s constitutive documents in effect as of the date thereof, (ii) a true and complete copy of resolutions duly adopted by the authorized governing body of Guarantor, authorizing the execution, delivery and performance by it of each of the Lease Documents and Project Documents to which it is a party, (iii) an incumbency certificate, and (iv) a certificate of good standing, issued by the Secretary of State of the state of Guarantor’s formation, dated not more than ten (10) business days before closing;

 

17.

Secretary's Certificate of the sole member of Parent, attaching (i) true and complete copies of Parent’s constitutive documents in effect as of the date thereof, (ii) a true and complete copy of resolutions duly adopted by the authorized governing body of the sole member of Parent, authorizing the execution, delivery and performance by Parent of each of the Lease Documents and Project Documents to which it is a party, (iii) an incumbency certificate, and (iv) a certificate of good standing, issued by the Secretary of State of the state of Parent’s incorporation, dated not more than ten (10) business days before closing;

 

18.

UCC-1 financing statements with respect to the Assignment Agreement, naming Seller as debtor and Crestmark as secured party, properly filed, registered or recorded in each jurisdiction in which Crestmark shall reasonably request;

 

19.

UCC-1 financing statements with respect to the Pledge Agreement, naming Parent as debtor and Crestmark as secured party, properly filed, registered or recorded in each jurisdiction in which Crestmark shall reasonably request;

 

20.

UCC-1 financing statements with respect to the SureSource 3000 Units naming Seller as debtor and Crestmark as secured party, properly filed, registered or recorded in each jurisdiction in which Crestmark shall reasonably request;

 

21.

Bailee Letter with respect to the SureSource 3000 Units;

 

22.

Precautionary UCC-1 financing statements, naming Seller as debtor and Crestmark as secured party, properly filed, registered or recorded in each jurisdiction in which Crestmark shall reasonably request;

 

23.

Precautionary fixture filing UCC-1 financing statements, naming Seller as debtor and Crestmark as secured party, properly filed, registered or recorded in each jurisdiction in which Crestmark shall reasonably request,

 

24.

UCC lien search reports, satisfactory to Crestmark, dated not more than ten (10) business days before closing, made in respect of Seller and Parent in each jurisdiction in which Seller and Parent are located or in which the Equipment is located;

 

25.

UCC-3 financing statements, terminating the interests of any secured party that is not Crestmark, properly filed, registered or recorded in each jurisdiction in which Crestmark shall reasonably request;

 

26.

A lien release, between any construction lender and Seller;

 

27.

A copy of the deed or other evidence satisfactory to Crestmark confirming ownership of the Site where the Equipment is located and any lienholders on such Site;

Page 11 of 14


 

 

28.

Copies of certificates of insurance naming Crestmark as loss payee and/or additional insured that conform to all requirements set forth in Section 13 of the Lease Agreement;

 

29.

Final engineering design documents for the system comprised of the Equipment, stamped by a licensed professional engineer;

 

30.

A report and certificate from a licensed professional engineer satisfactory to Crestmark;

 

31.

An appraisal report prepared solely for Lessor and its counsel by DAI Management Consultants, Inc. or another appraiser chosen by Lessor (the "Appraiser") as of the Lease Commencement Date that addresses certain valuation and other issues related to the Equipment and that is satisfactory in form and substance to Lessor.

 

32.

A legal opinion from counsel to the Digester Gas Purchase Agreement counterparty dated as of the Commencement Date;

 

33.

A pay proceeds letter addressed to Crestmark, executed by Seller;

 

34.

Lien Waivers with respect to the Equipment;

 

35.

All material Governmental Approvals with respect to the Equipment;

 

36.

Permission to operate or other interconnection approval from the local utility; and

 

37.

Appraisal

38.

Such other documentation as Crestmark shall reasonably require.

 

Page 12 of 14


 

PURCHASE AND SALE AGREEMENT

 

Exhibit #3

 

List of Project Documents

 

As of Commencement Date: February 11, 2020

 

 

 

1.

Bioenergy Market Adjusting Tariff Power Purchase Agreement, between Southern California Edison Company and Central CA Fuel Cell 2, LLC, dated as of April 20, 2018, as amended by that Amendment No. 1 to the Bioenergy Market Adjusting Tariff Power Purchase Agreement, dated as of August 15, 2019 (the “PPA Agreement”).  

 

2.

Interconnection Agreement, between Central CA Fuel Cell 2, LLC and Southern California Edison Company, dated as of April 17, 2018 (the “Interconnection Agreement”).

 

3.

Digester Gas Purchase Agreement, between Central CA Fuel Cell 2, LLC and the City of Tulare, dated as of June 20, 2017, as amended by that Amendment to Digester Gas Purchase Agreement dated June 20, 2017, that Second Amendment to the Digester Gas Purchase Agreement dated December 6, 2018 and that Third Amendment to the Digester Gas Purchase Agreement, dated September 19, 2019 (the “DGPA”)

 

4.

Fixed Price Engineering, Procurement, and Construction Agreement, between Central CA Fuel Cell 2, LLC and FuelCell Energy, Inc., dated as of March 1, 2018, as amended by that Amendment No. 1 to the Fixed Price Engineering, Procurement, and Construction Agreement, dates as of February 11, 2020 (the “EPC Agreement”).

 

5.

Service Agreement for SureSource 3000 Power Plant, between Central CA Fuel Cell 2, LLC and FuelCell Energy, Inc., dated as of February 11, 2020

 

6.

The SureSource 3000

 

7.

Biogas Sale and Purchase Agreement, between BioFuels Point Loma, LLC and Central CA Fuel Cell 2, LLC, dated September 23, 2019

 

8.

Governmental Approvals

 

9.

All Warranties

Page 13 of 14


 

PURCHASE AND SALE AGREEMENT

 

Exhibit #4

List of Warranties

As of Commencement Date: February 11, 2020

 

 

Equipment

Model Number

Serial Number

Warranty Info

SureSource 3000 Module

C1420

C1420-134

C1420-135

Long Term Service Agreement (LTSA)  

SureSource 3000 MBOP

SureSource 3000

MM27

12 mos.

SureSource 3000 EBOP

Rockwell  - Power Conditioning Unit (PCU),

Allen -Bradley Power Flex

1.764MVA

Leader  46249256

     Follower  43204413

18 mos.  from ship or          12 from start

Chiller for EBOP PCU

Pfannenberg

Model EB 350 SP

460/3/60

Part No. 42533505321

S15530808168

S15530808172

 

12 mos.

SureSource 3000 Exhaust Heat Recovery - Water Loop Heater

Cain Heat Recovery Unit

HRU-360F26SSS DFC3000

S/N 8678

18 mos.

from ship or 12 from start

SureSource 3000 Transformer

Rockwell / Hammond

AA00706273

         AA00706274

12 mos.

1800kVA Transformer 370V/370V/12.0kV

BOP Transformer

Cooper / Eaton – XFMR, 300KVA, 12kV-480Y, FR3

 

CP1850008662

 

18 mos.  from ship or

12 from start

SureSource 3000 Switchgear F60/CCB

Powergrid Solutions – 15KV, 1200A, NEMA 3R, SMCG

SO5644901-001

18 mos.  from ship or        

12 from start

Neutral Grounding Reactor

Gilbert Electrical Systems 13.8kV, 62 ohms, 150A/10 sec

 

79710-79743-0818

 

18 mos.  from ship or

12 from start

 

Page 14 of 14

 

EXHIBIT 10.2

EQUIPMENT LEASE AGREEMENT

 

This Equipment Lease Agreement (this Agreement or Lease”), dated as of February 11, 2020, is made between Crestmark Equipment Finance, a division of MetaBank, (the Lessor”) and Central CA Fuel Cell 2, LLC, a Delaware limited liability company (the Lessee”). Lessor and Lessee are referred to in this Agreement individually as a Party and, collectively, as the Parties”. Capitalized terms used but not defined herein shall have the meaning set forth for such terms in the Purchase Agreement (as defined below).

 

RECITALS

 

WHEREAS, Lessor is in the business of owning and leasing equipment and plans to purchase certain fuel cell power generation equipment from Lessee pursuant to that certain Purchase and Sale Agreement, dated as of the date hereof, between Lessor and Lessee (the Purchase Agreement”);

 

WHEREAS, FuelCell Energy, Inc., a Delaware corporation (“Guarantor”) has delivered to Lessor that certain Guaranty Agreement, dated as of the date hereof (the Guaranty”), to guarantee Lessee’s payment obligations to Lessor; and

 

WHEREAS, Lessee desires to lease from Lessor, and Lessor desires to lease to Lessee, the fuel cell power generation equipment described in the Bill of Sale entered into pursuant to the Purchase Agreement and as further described in this Agreement, when and as the conditions to such lease are met as provided herein.

 

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows:

 

1.LEASE. Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor certain fuel cell power generation equipment (the Equipment”) as further described in Exhibit A. The Equipment shall be installed at the location described in Exhibit A (the “Site”).

 

2.TERM AND RENT. The initial term (“Initial Term”) for this Lease shall be for the period specified in Exhibit A, and Lessee shall pay Lessor the Rent specified in Exhibit A throughout the Initial Term for the use of the Equipment. The Initial Term and Rent with respect to the Equipment shall commence on, and Lessee will be obligated to pay Rent from, the Rental Commencement Date (as defined in Exhibit A).  For purposes of this Agreement, the term Rent shall mean and include all amounts payable by Lessee to Lessor for the lease of the Equipment. As used in this Agreement, the term Lease Term means the Initial Term plus any Renewal Terms (as defined in Section 15), unless earlier terminated in accordance with the terms of this Agreement.

 

 

 


 

3.LATE CHARGES. If any Rent or other amount due hereunder is not paid within ten (10) days after the due date thereof, Lessor shall have the right to impose and collect and Lessee agrees to pay a late charge on, and in addition to, such unpaid Rent or other amount due hereunder for each month or part thereof that such Rent or other amount due hereunder remains unpaid, an amount equal to 1.5% per month of such unpaid Rent or other amount due hereunder until paid.

 

4.DISCLAIMER OF WARRANTIES. Lessee acknowledges that Lessor is not the manufacturer of the Equipment, nor manufacturer’s agent, and Lessee agrees that as between Lessor and Lessee, the Equipment leased hereunder is of a design, size, fitness and capacity selected by Lessee and that Lessee is satisfied that the same is suitable and fit for its intended purpose. LESSEE FURTHER ACKNOWLEDGES THAT THE EQUIPMENT IS LEASED UNDER THIS AGREEMENT ON AN ‘AS-IS,’ ‘WHERE IS’ BASIS AND THAT LESSOR MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE EQUIPMENT, ITS MERCHANTABILITY, OR ITS FITNESS FOR A PARTICULAR PURPOSE. LESSOR SHALL NOT BE LIABLE TO LESSEE OR ANY OTHER PERSON FOR DIRECT, INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING FROM LESSEE’S USE OF THE EQUIPMENT, ANY DEFECT OR MALFUNCTION OF THE EQUIPMENT, OR FOR DAMAGES BASED ON STRICT OR ABSOLUTE TORT LIABILITY OR LESSOR’S NEGLIGENCE. No defect or unfitness of the Equipment shall relieve Lessee of the obligation to pay Rent, or to perform any other obligation under this Agreement.

 

5.ASSIGNMENT OF WARRANTIES. Notwithstanding the foregoing, so long as no Default (as defined in Section 19) has occurred hereunder and is continuing, Lessee shall be entitled to the benefit of any applicable manufacturer’s warranties received or held by Lessor or from which Lessor otherwise benefits, and to the extent assignable, Lessor hereby assigns such warranties to Lessee for the Lease Term. In the event that any warranty is not assignable to Lessee, Lessor hereby appoints Lessee as Lessor’s agent and attorney-in-fact with respect to such warranty, which appointment is coupled with an interest, to assert and enforce, from time to time, in the name of and for the account of the Lessor and the Lessee, as their interests may appear, but in all cases at the sole cost and expense of the Lessee, any such warranty, and so long as no Default shall have occurred and be continuing, Lessee may retain any recovery from such claim.

 

 

6.

USE, OPERATION AND MAINTENANCE.

 

(a)Lessee shall use the Equipment in the manner for which it was designed and intended, solely for Lessee’s business purposes, substantially in accordance with all manufacturer manuals and instructions and in compliance with Applicable Law. As used herein, Applicable Law means all applicable laws, statutes, regulations, ordinances, orders and other requirements of any governmental authority (including such requirements necessary to ensure that the Equipment qualifies for all tax benefits and environmental attributes, in each case, to the extent available by law to the owner of the Equipment as of the date of this Agreement). Lessee, at Lessee’s own cost and expense, shall install a fuel cell energy production monitoring system to monitor the energy production of the Equipment, and such monitoring system shall be acceptable to the Lessor and provide Lessor with real-time access to such monitoring system’s data. Any

 

 


 

such monitoring systems installed by Lessee shall be deemed part of the Equipment and shall become property of Lessor. Lessee, at Lessee’s own cost and expense, shall keep the Equipment in good repair, condition and working order, ordinary wear and tear excepted, sufficient to perform according to the requirements of this Agreement and each Project Document, and shall furnish or otherwise obtain all parts, mechanisms, devices and servicing required therefor in the ordinary course. Lessee shall also make, at Lessee’s own cost and expense, all modifications to the Equipment as are required from time to time for the Equipment to comply with Applicable Law and each Project Document. All replacement parts, repairs, alterations, modifications and additions to the Equipment at any time made to or placed upon the Equipment shall become the property of Lessor.  Lessee may, with Lessor’s prior written consent, which shall not be unreasonably withheld, make such alterations, modifications or additions to the Equipment as Lessee may deem desirable in the conduct of its business; provided the same shall not diminish the current or estimated residual value, utility, function, operation or remaining useful life of the Equipment, cause the loss of any warranty thereon or any certification necessary for the maintenance thereof. Lessor acknowledges that any data files or software developed or installed by Lessee which is resident or otherwise installed on the Equipment shall be and remain the property of Lessee; provided, however, that the Lessor shall have no obligation or responsibility to remove or return same to Lessee. Lessee shall, at Lessee’s own cost and expense, provide and maintain a security system to adequately secure and limit access to the Equipment. In connection with any such alteration, modification or additions to the Equipment, if Lessee permanently removes any parts, equipment and/or other materials from the Equipment in connection with installing a permanent replacement, title to and risk of loss of and liability for such replaced parts, equipment and/or other materials shall pass to Lessee at the time of removal from the Equipment.  

 

(b)Lessee shall take all necessary actions so that Lessee is either not subject to or is exempt from regulation (i) as a "public utility" or a "holding company" under the FPA and PUHCA and FERC's regulations thereunder, and (ii) as a "public utility," "electric utility," "electric corporation," or a "holding company" or similar terms under applicable laws or regulations of the state where the Equipment is located.

 

(c)Lessee shall at all times maintain, or cause to be maintained, in full force and effect the Interconnection Agreement and/or such other interconnection agreement with the applicable local utility that permits interconnection and operation of the Equipment in parallel with such utility’s distribution system.

 

7.NET LEASE. This Agreement is a “net lease” and Lessee’s obligation to pay all Rent and other amounts due and owing hereunder is absolute and unconditional and shall not be terminated, extinguished, diminished, setoff or otherwise impaired by any circumstance whatsoever, including by (a) any claim, setoff, counterclaim, defense or other right which Lessee may have against Lessor or any affiliate of Lessor; (b) any defect in the title, condition, design, operation, merchantability or fitness for use of the Equipment, or any eviction of the Equipment by paramount title or otherwise from the Site, or any unavailability of access to the Equipment at the Site; (c) any loss, theft or destruction of, or damage to, the Equipment or any portion thereof or interruption or cessation in the use or possession thereof or any part thereof for any reason whatsoever and of whatever duration; (d) the condemnation, requisitioning, expropriation, seizure or other taking of title to or use of the Equipment or the Site by any governmental entity or otherwise; (e) any ineligibility of the Equipment or any portion thereof for any particular use,

 

 


 

whether or not due to any failure of Lessee to comply with any Applicable Law; (f) any event of “force majeure” or any frustration of purpose; (g) any insolvency, bankruptcy, reorganization or similar proceeding by or against Lessee; (h) termination or loss of the Site or any portion thereof, or of any other lease, sublease, right-of-way, easement or other interest in personal or real property upon or to which any portion of the Equipment is located, attached or appurtenant or in connection with which any portion of the Equipment is used or otherwise affects or may affect the Equipment or any right thereto, (i) any termination of a Project Document or the failure of any Project Document to be in full force and effect, or (j) any defect in the title to, or the existence of any lien with respect to, the Equipment (unless such defect or lien results from or is caused by any act or omission of Lessor, in which case Lessee may withhold Rent if and to the extent such defect or lien reasonably interferes with Lessee’s use of the Equipment), it being the intention of the Parties hereto that all Rent and other amounts payable under this Agreement shall continue to be payable in the manner and at times provided for herein. If for any reason whatsoever this Agreement is terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, Lessee nonetheless agrees, to the extent permitted by Applicable Law and without limiting any other rights or remedies Lessor has under this Agreement or any other Lease Document, to pay to Lessor an amount equal to each installment of Rent and all other amounts due and owing hereunder, at the time such payment would have become due and payable in accordance with the terms hereof had this Agreement not been so terminated.

 

8.NO LIENS; REMOVAL; ABANDONMENT; QUIET ENJOYMENT. Lessee shall keep the Equipment free and clear from all liens, charges, encumbrances, legal process and claims other than Permitted Liens. Lessee shall promptly notify Lessor of the imposition of any lien (other than Permitted Liens) of which the Lessee becomes aware and shall promptly use commercially reasonable efforts, at Lessee’s own cost and expense, to fully discharge and release any such lien. Lessee shall not move the Equipment from the location specified in this Lease therefor without the prior written consent of Lessor. Lessee agrees not to waive its right to use and possess the Equipment in favor of any party other than Lessor and further agrees not to abandon the Equipment to any party other than Lessor. So long as no Default has occurred and is continuing, Lessee’s quiet and peaceful possession and use of the Equipment will not be disturbed by Lessor or anyone claiming by, through or on behalf of Lessor.

 

9.TITLE. (a) Lessor and Lessee agree that the Equipment is and at all times shall remain the sole and exclusive personal property of Lessor (subject to Section 25), and Lessee covenants that it will at all times treat the Equipment as such and that no part of the Equipment shall be considered or treated as a fixture. No right, title or interest in the Equipment shall pass to Lessee other than the right to maintain possession and use of the Equipment for the Lease Term, conditioned upon Lessee’s compliance with the terms and conditions of this Agreement and except as otherwise provided in the last sentence of Section 6 (a). If requested by Lessor, Lessee shall affix to or place on the Equipment, at Lessor’s expense, plates or markings indicating Lessor’s ownership.

 

(b) The Parties agree that this Agreement is intended to be a “true lease,” and the Lessor will be treated as owner and lessor of the Equipment and Lessee will be treated as lessee of the Equipment for commercial law purposes as well as federal, state and local income tax purposes and, accordingly, the Parties agree that the Lessor is intended to be the party entitled to claim any

 

 


 

and all benefits available to an owner of the Equipment, including all Tax Benefits (as defined in Section 19). Lessor acknowledges that all rights and interests in and to any renewable energy credits, utility rebates (including performance based incentives), and any other environmental attributes associated with the electricity or thermal output from the Equipment (all such attributes, specifically excluding any Tax Benefits, the “Environmental Attributes”) are required to be transferred to Southern California Edison Company in connection with the delivery of energy pursuant to the PPA and Lessor has no rights to the foregoing. In the event that this Agreement or this Lease is deemed to be a lease intended for security, Lessee hereby grants Lessor a purchase money security interest in the Equipment (including any replacements, substitutions, additions, attachments and proceeds).

 

10.TAXES. (a) Lessee shall promptly reimburse Lessor, or shall pay directly if so requested by Lessor, as additional Rent, all taxes, charges and fees (including any interest, additions to tax and penalties) that may now or hereafter be imposed or levied by any governmental body or agency upon or in connection with the purchase, ownership, lease, possession, use or location of the Equipment or otherwise in connection with the transactions contemplated by this Agreement, including sales, use, property (real or personal and tangible or intangible), value added or other transfer taxes on (i) the initial sale of Equipment to Lessor, (ii) the Rents, (iii) the sale of power or thermal energy to, or the use of the Equipment by, the offtaker under the Power Purchase Agreement, executed on April 20, 2018, and entered into by Lessee, and Southern California Edison Company (as the same may be amended, amended and restated, modified or supplemented from time to time, the Power Purchase Agreement”), or otherwise with respect to any Project Document, (iv) any payment of Stipulated Loss Value and (v) upon any exercise of the Purchase Option, but excluding any and all taxes, charges and fees (including any interest, additions to tax and penalties) (A) on or measured by net or gross income, net or gross receipts, alternative minimum taxable income, items of tax preference, branch profits, franchise, capital, conduct of business, stock value or net worth (in each case other than taxes that are (or are in the nature of) sales, use, value added, transfer, excise and personal property taxes), (B) resulting from Lessor’s negligence, willful misconduct, or the breach by Lessor of any of its representations, warranties, covenants or obligations under any Lease Document, (C) resulting from or arising out of any failure on the part of Lessor to file any tax returns or pay any taxes owing on a timely basis or any errors or omissions on Lessor’s tax returns unless the Lessee is responsible under this Agreement for filing the returns, Lessee has not provided information requested by Lessor that is necessary to file such tax returns or Lessor’s failure to file any tax returns or any errors or omissions on such tax returns is attributable to Lessee’s fraud, negligence or misrepresentation, (D) attributable to a transfer or disposition (directly or indirectly) of any interest in the Equipment, this Agreement or any part of the foregoing or any interest in the Lessor (including a deemed transfer for tax purposes) other than (I) a transfer to Lessee pursuant to the exercise of any purchase option granted to Lessee under this Agreement, or (II) a transfer pursuant to Lessor’s exercise of remedies in Section 19 as a result of a Default, (E) resulting from the leasing, ownership, use or operation of any Equipment after the expiration or earlier termination of this Agreement with respect to such Equipment, (F) imposed on Lessor (including by way of withholding) as a result of the failure by Lessor (or any member of Lessor) to be a “United States person” (within the meaning of section 7701(a)(30) of the Internal Revenue Code (the Code”), (G) imposed on Lessor by any jurisdiction to the extent such taxes would not have been imposed on Lessor had Lessor not engaged in activities in such jurisdiction unrelated to the transactions contemplated by the Lease Documents,

 

 


 

and (H) imposed on any transferee, assignee or successor in interest of the Lessor to the extent such taxes are in excess of the taxes that would have been imposed on the original Lessor had such transfer or assignment not occurred. Lessee shall file, in a timely manner and in the name of the Lessor as owner, any personal property tax returns relating to the Equipment that are required to be filed covering periods during the Lease Term, pay the amounts shown on the returns and provide copies of such returns and proof of payment to the Lessor. Failure of Lessee to pay promptly amounts due hereunder shall be treated the same as failure to pay any installment of Rent pursuant to Section 3. If Lessee is requested by Lessor to file any other returns or remit payments directly to any governmental body or agency, Lessee shall provide proof of said filing or payment to Lessor.

(b) Lessee shall be entitled to contest the imposition of taxes, charges and fees (including penalties) subject to this Section 10 at Lessee’s sole cost and expense; provided that Lessee has confirmed in writing its liability for the amounts should it lose the contest, the contest does not create risk of forfeiture of the Equipment, and Lessee keeps Lessor informed about the progress of the contest and provides Lessor copies of any filings or correspondence with the tax authorities about the case. Lessor shall provide to Lessee such information as Lessee may reasonably request in order to contest and shall otherwise cooperate with Lessee to the extent necessary to permit Lessee to conduct such contest. Lessor agrees not to settle any claim that Lessee is contesting in accordance with this Section 10(b) without the prior consent of Lessee, such consent not to be unreasonably withheld. If Lessor shall obtain a refund or tax credit or other tax benefit attributable to an amount paid by Lessee pursuant to this Section 10, Lessor shall promptly pay or credit to Lessee the amount of such refund, credit or tax benefit.

11.ACCOUNTS. (a) Lessee agrees to deposit all revenues received by Lessee with respect to the Equipment into a demand deposit account (the Control Account) to be established by Lessee. In addition, on the Lease Commencement Date, Lessee shall establish a separate interest bearing account (the “Minimum Monthly Reserve Account”). The Minimum Monthly Reserve Account and the Control Account are together referred to as theAccounts”. Any and all interest accruing on invested amounts held in any of the Accounts shall be for the benefit of and shall be deemed the property of Lessee. Each of the Accounts may be at a financial institution that is an affiliate of Lessor. The cost of establishing and maintaining the Accounts shall be borne by Lessee. Lessee shall instruct each counterparty to each Project Document to make all payments to which Lessee or any of Lessee’s affiliates is entitled under each such Project Document to the Control Account and to provide evidence of such instruction to Lessor, and Lessee agrees to enforce its right, or to cause its affiliates to enforce their rights, to designate the Control Account as the place to which such payments should be made in the event that for any reason any such counterparty fails to make payment to such account. Lessee shall, on the Lease Commencement Date, fund the Minimum Monthly Reserve Account with an amount equal to the “Minimum Monthly Reserve Fund” amount set forth in Exhibit A (the Minimum Balance Requirement), and Lessee shall thereafter maintain a minimum amount in the Minimum Monthly Reserve Account equal to the amount set forth in Exhibit A. Lessor shall have sole signatory authority over the Accounts.  As collateral security for the prompt payment and performance of all obligations under this Agreement, Lessee hereby grants to Lessor a first priority security interest in, lien upon and pledge of the Control Account and the Minimum Monthly Reserve Account.  Lessee shall take all such action as may be reasonably requested by Lessor to maintain Lessor’s first priority security interest in each such account.

 

 

 


 

(b)If the amount in the Minimum Monthly Reserve Account falls below eighty percent (80%) of the Minimum Balance Requirement at any time, Lessee shall promptly replenish the Minimum Monthly Reserve Account such that the Minimum Balance Requirement is met and in addition shall provide to Lessor information regarding the cause of the shortfalls in the Control Account and/or Minimum Monthly Reserve Account, the steps being taken to remedy the situation giving rise to such shortfalls, and such other information as Lessor shall reasonably request (which information shall not include technical proprietary information).

 

(c)On the date that is ten (10) business days prior to each date on which a payment of Rent is due (each, a Rent Payment Date”), Lessor shall determine the amounts on deposit in the Control Account, and if there are insufficient funds to make the transfers contemplated in clauses first and second of Section 11(d) in full on the next occurring Rent Payment Date, Lessor shall withdraw from the Minimum Monthly Reserve Account an amount equal to such deficiency and deposit such amount into the Control Account.

 

(d)On each Rent Payment Date under this Lease, Lessor shall transfer funds from the Control Account in the following order of priority, in each case, to the extent funds are available in the Control Account:

 

First, if any amount (other than Rent due and payable on such Rent Payment Date) is due and owing on such Rent Payment Date to Lessor hereunder (including, for the avoidance of doubt, any delinquent Rent due and owing at such time) or under any other Lease Document, Lessor shall transfer such amount to Lessor.

 

Second, Lessor shall transfer the amount of all Rent due and owing on such Rent Payment Date to Lessor.

 

Third, if the Minimum Balance Requirement is not met as of such Rent Payment Date, Lessor shall transfer to the Minimum Monthly Reserve Account the amount necessary to meet the Minimum Balance Requirement.

 

Fourth, any obligation in the nature of operating expenses of the Project at the instruction of Lessee and as approved by Lessor.

 

Fifth, provided that no Default has occurred and is continuing, Lessor shall transfer to Lessee any amounts remaining in the Control Account as instructed by Lessee.

 

(e)[Intentionally omitted]

 

(f)At the end of the Lease Term, and after all amounts payable to Lessor under the Lease Documents have indefeasibly been paid in full, all amounts remaining in the Accounts shall be paid to Lessee other than amounts necessary to repair any damage to the Equipment for which Lessee is liable hereunder or to the Site as a result of Lessee’s activity on the Site for which Lessor is liable, which amounts (or reasonably estimated amounts if the specific amounts are not then known to Lessor) may be retained by Lessor. In the event the estimated amount retained by Lessor is greater than the actual amount necessary for such repairs, Lessor shall so notify Lessee promptly following such determination and shall deliver to Lessee an amount equal

 

 


 

to such excess.  Notwithstanding the foregoing, at the end of the Lease Term, Lessee shall have no obligation to repair or replace (or reimburse Lessor for any repair or replacement expenses related to) ordinary wear and tear, any module performing in line with the age and expected degradation curve of the Equipment, or any part performing with the performance, reliability and safety in line with the age of the Equipment and of a type, grade, quality and condition comporting with Prudent Industry Practices.

 

(g)Lessor may cause a collateral agent to take any or all actions Lessor is permitted to take under this Agreement or any other Lease Document.

 

12.LOSS OF OR DAMAGE TO EQUIPMENT. Lessee hereby assumes and shall bear the risk of loss for destruction of or damage to the Equipment from any and every cause whatsoever, whether or not insured, until the Equipment is returned to Lessor. No such loss or damage shall impair any obligation of Lessee under this Agreement, which shall continue in full force and effect. In event of damage to or theft, loss or destruction of the Equipment (or any item thereof), Lessee shall promptly notify Lessor in writing of such fact and of all details with respect thereto, and shall, within thirty days of such event, at Lessee’s option, (a) place the same in good repair, condition and working order, (b) at Lessee’s expense, dispose of any Equipment in compliance with Applicable Law, substitute such Equipment (or any item thereof) with equipment of equivalent or superior manufacture, make, model and features, in good repair, condition and working order and transfer clear title to such replacement property to Lessor whereupon such property shall be subject to this Agreement and the applicable other Lease Documents and be deemed Equipment for purposes hereof and thereof, or (c) pay Lessor an amount equal to the sum of (i) all Rent accrued but unpaid to the date of such payment, plus (ii) the “Stipulated Loss Value” of the Equipment as set forth in Exhibit A (the Stipulated Loss Value”), whereupon this Lease shall terminate, subject to Section 22, solely with respect to the Equipment (or any item thereof) for which such payment is received by Lessor. Any insurance proceeds received with respect to the Equipment (or any item thereof) shall be applied, in the event option (c) is elected, in reduction of the then unpaid obligations, including the Stipulated Loss Value, of Lessee to Lessor, if not already paid by Lessee, or, if already paid by Lessee, to reimburse Lessee for such payment, or, in the event option (a) or (b) is elected, to reimburse Lessee for the costs of repairing, restoring or replacing the Equipment (or any item thereof) upon receipt by Lessor of evidence, satisfactory to Lessor, that such repair, restoration or replacement has been completed, and an invoice has been provided therefor.

 

13.INSURANCE. (a) Lessee shall keep the Equipment insured against theft and all risks of loss or damage, subject to policy limitations or exclusions reasonably acceptable to Lessor, from every cause whatsoever for an amount equal to the greater of the Stipulated Loss Value and the replacement value of the Equipment and shall carry general liability insurance, both for personal injury and property damage, and Lessee shall be liable for all deductible portions of all required insurance. All such insurance shall be maintained with insurance companies rated A-X or better by Best’s Insurance Guide and Key Ratings (or an equivalent rating by another nationally recognized insurance rating agency of similar standing if Best’s Insurance Guide and Key Ratings shall no longer be published) or with other insurance companies of recognized responsibility satisfactory to Lessor. All insurance for theft, loss or damage shall provide that losses, if any, shall be payable to Lessor, and all such liability insurance shall name Lessor (or Lessor’s assignee as appropriate) as additional insured and shall

 

 


 

be endorsed to state that it shall be primary insurance as to Lessor. Lessee shall pay the premiums therefor and deliver to Lessor a certificate of insurance or other evidence satisfactory to Lessor that such insurance coverage is in effect; provided, however, that Lessor shall be under no duty either to ascertain the existence of or to examine such insurance policies or to advise Lessee in the event such insurance coverage shall not comply with the requirements hereof. Each insurer shall agree by endorsement upon the policy or policies issued by it or by independent instrument furnished to Lessor, that it will give Lessor at least ten (10) days’ prior written notice of cancellation of the policy for nonpayment of premiums and at least thirty (30) days’ prior written notice for alteration or cancellation due to any other reason or for non- renewal of the policy. The proceeds of such insurance payable as a result of loss of or damage to the Equipment shall be applied as set forth in Section 12.

 

(b) If Lessee fails to obtain insurance or provide evidence thereof to Lessor, Lessee agrees that Lessor may, upon prior written notice to Lessee, but shall not be obligated to, obtain such insurance on Lessee’s behalf and charge Lessee for all costs and expenses associated therewith. Without limiting the forgoing, Lessee specifically agrees that if Lessor obtains insurance on Lessee’s behalf, Lessee will be required to pay a monthly insurance charge. The insurance charge will include reimbursement for premiums advanced to the insurer, finance charges (which will typically be at a rate higher than the rate used to determine the Rent), billing and tracking fees, administrative expenses and other related fees. Lessor shall receive a portion of the insurance charges, which may include a profit from such finance charges, billing, tracking, administrative and other charges.

 

Except as provided in the immediately preceding paragraph, any other insurance obtained by or available to Lessor shall be secondary insurance, and Lessor shall be solely liable for all costs associated therewith.

 

14.END OF LEASE TERM OPTIONS. Not later than one hundred eighty (180) days prior to the expiration of the Initial Term or any Renewal Term (as defined below)] of this Lease, Lessee shall notify the Lessor in writing whether it intends at the expiration of such term to (a) renew the Lease in accordance with Section 15 (the Renewal Option”), (b) purchase the Equipment in accordance with Section 16 (the Purchase Option”), or (c) return the Equipment to Lessor (the “Return Option”); provided that Lessee may only exercise the Renewal Option or the Purchase Option so long as no Default under this Agreement has occurred and is then continuing and Lessee may only exercise the Return Option if all conditions contained in each Project Document to assign each such Project Document to Lessor have been met. If Lessee does not provide this notice at the end of the Initial Term, Lessee shall be deemed to have elected the Renewal Option, subject to the conditions in Section 15. If Lessee does not provide this notice at the end of any Renewal Term, Lessee shall be deemed to have elected either the Renewal Option or the Return Option, to be selected in Lessor’s sole discretion, subject to the conditions in Section 15. If Lessee elects the Return Option, Lessee acknowledges that by means of that certain Assignment Agreement dated as of the date hereof and executed by Lessee in favor of Lessor (the Assignment Agreement”), Lessee shall have assigned to Lessor all of Lessee’s right, title and interest in, to and under each Project Document and each Governmental Approval, effective as of the end of the Lease Term. If the Equipment is not then in good repair, condition and working order, ordinary wear and tear excepted, or has not been maintained in accordance with Section 6, Lessee shall promptly reimburse Lessor for all reasonable costs

 

 


 

incurred to restore the Equipment to such condition but subject to the limitations set forth in the last sentence of Section 11 (f). In such case, Lessor shall consider having FuelCell Energy, Inc. continue to remain as the operator of the Equipment for the duration of the Power Purchase Agreement. If,