Exhibit 10.1

 

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October 5, 2011

 

 

Mr. John C. Robinson

Chairman and CEO

Group Robinson LLC

3000 Sand Hill Road

Building Two, Suite 110

Menlo Park, California 94025

 

Dear John:

 

This engagement letter sets forth our mutual understanding concerning the
retention by Beacon Power Corporation (the “Company”) having a place of business
at 65 Middlesex Road, Tyngsboro, MA, 01879 of Group Robinson LLC (“Robinson”),
having a place of business at 3000 Sand Hill Road, Building Two, Suite 110,
Menlo Park CA 94025 on an exclusive basis (subject to Section 1) to assist the
Company in financing the US Project and Foreign Project(s) referenced below) for
one or more of its Frequency Regulation Plants (“Plant”) on the terms set forth
herein.

 

1.                                       Scope of Engagement.

 

(a)                                  Robinson will assist the Company in raising
and negotiating approximately $25-$30 million in third-party funding (most
likely in the form of equity and/or debt financing) to fund a portion of the
manufacturing, construction and certain operating costs for a 20MW Plant in
Pennsylvania (the “US Project”). Robinson shall work with investors the Company
has already spoken to about this US Project (including but not limited to those
previously disclosed by the Company to Robinson) as well as potential investors
not yet contacted by the Company.  Robinson acknowledges and agrees to cooperate
if the Company favors an approach that entails a coordinated financing both for
the US Project and for the Company, perhaps with some overlap in the
investor(s) for each and thus certainly requiring coordinated and collaborative
efforts by all the Company’s financial advisers, of which Robinson is one.

 

(b)                                 Robinson will assist the Company in
developing one or more deferred payment financing models (“Lease Model”) and,
where applicable, an associated Information Memorandum to be used in Company
proposals for manufacturing, constructing and operating Plants in non-US
locations (individually a “Foreign Project”). As part of this work, Robinson
shall work with the ExIm Bank, the IFC, the EBRD and other national or
multi-lateral funding groups as well as potential private sector institutional
investors to i) obtain their preliminary

 

Beacon Power Corporation · 65 Middlesex Road, Tyngsboro, MA 01879 · Phone:
978.694.9121 Fax: 978.694.9127

www.beaconpower.com

 

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Lease Model financing quotes in response to the Lease Model for each Foreign
Project, and ii) obtain financing commitments for and negotiate a Robinson Lease
Package (as defined below) for the manufacturing, construction and operation of
mandated projects (ie, Foreign Projects for which the Company has engaged in
material, targeted sales discussions).  The combination of the foregoing Lease
Model and the associated financing are known herein as the “Robinson Lease
Package.”

 

Robinson’s tasks will also include assisting the Company in each such Foreign
and U.S. Project by providing financial advisory services such as, but not
limited to: (i) analyzing the various financial commitments for the Project, the
timing of construction, equipment delivery and expenditures, and projected cash
flows in order to determine the optimal structures, (ii) consulting to the
Company on how to optimize the various agreements (e.g., proposed operating
agreements) for the Project so as to best match the expectations of the
investors for the Project at issue,, (iii) making the Robinson Lease Package
spreadsheets and their underlying formulas available to the Company, with no
hidden cells or formulas, to enable the Company to understand, work and plan
with the Robinson Lease Package, (iv) assisting the Company if it prepares an
Information Memorandum, descriptive of the Project, to be distributed to
Robinson Investors as part of the Lease Model, (v) contacting Robinson Investors
that are on the above list that may be likely to participate in the Project and
making the Lease Model available to them, and then assisting in representing the
Company in the negotiations with respect to the Project, (vi) participating in
the due diligence process conducted by Robinson Investors and (vii) assisting in
the closing of a Project and the associated Robinson Lease Package.

 

(c)                                  For a period of 16 months from the
execution date of this agreement, Robinson shall have the advisory exclusive to
assist the Company in obtaining financing commitments for and negotiating a
Robinson Lease Package with respect to any Foreign Project, including the
proposed plants in Turkey and Ireland, for which the Company is engaged in
material, targeted sales discussions that the Company has stated may include a
Lease Model financing option.  Although the Company already has an engagement
with other advisers previously disclosed to Robinson for possible project
investment by certain financial firms (also previously disclosed), collectively
known herein as the “Other Financial Firms”), the compensation elements of which
the Company intends to honor, Robinson is authorized to treat the Other
Financial Firms as Robinson Investors in the sense that Robinson may contact and
negotiate with them and will be compensated hereunder for any involvement by
those firms in Projects as if they were solely Robinson Investors.   The Company
shall assume the responsibility to pay the claims, if any, from any
agent(s) which had previously worked on the Company’s behalf for the US Project
or a Foreign Project.

 

(d)                                 For purposes of this agreement, the term
“Robinson’s Investors” shall refer to those of the potential third party
investors that are referenced above in clauses (a), (b)

 

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and (c), and which are pre-approved by the Company from a list supplied from
time to time by Robinson and to which Robinson has supplied information such as
an executive summary on a US or Foreign Project.  For clarity, except as
described in paragraph 1(a) above, this engagement is for financing projects,
and not, for example, for raising funds at the parent company level nor for
merger or acquisition transactions, nor transactions with third parties that are
commercial transactions (that is, not primarily a financing transaction). 
Robinson acknowledges, for example, that the Company has had (and may have or
may have in the future) engagements with other advisers for parent company
financing.    The Parties acknowledge that potential investors in the projects
are likely to require additional financing at the Company level in order assure
that the Company has adequate resources to construct and operate one or more
projects.

 

2.                                       Compensation and Expenses.

 

(a)                                  Upfront Retainer:  Robinson shall be paid
by wire transfer a one-time upfront retainer equal to an aggregate of $60,000,
$15,000 having been paid prior to the execution date of this agreement and the
balance of $45,000 to be paid by October 6, 2011.    This retainer is to cover
work by Robinson on the US Project and the projects in Turkey and Ireland over
the next 4 months and no other retainers shall be owed to Robinson in 2011.

 

(b)                                 Monthly Retainers:  No monthly retainer
shall be payable in respect to the US Project. For a Foreign Project, but not
before July 2012, Robinson shall be paid a monthly retainer equal to a total of
$10,000 for work on one or more Foreign Projects where the Company has asked
Robinson to develop a Robinson Lease Package.  For Foreign Projects for which
the Company has obtained a contractual commitment to build a Plant, and which
will utilize a Robinson Lease Package to be arranged by Robinson, the monthly
retainer will be $20,000 payable commencing in the month which the Company
receives the sales or similar contract to build a Plant.  The monthly retainer
total paid to Robinson shall not exceed $20,000 in the aggregate per month, and
any monthly retainers paid to Robinson under this paragraph (b) for a particular
project shall be deducted from the success fee payable to Robinson for that
project.  The $20,000 retainer will decline to $10,000 if the first Foreign
Project closes without a second Foreign Project having yet received a
contractual commitment to build a Plant (later increasing back to $20,000 if
such a second commitment is obtained).   Retainers cease at the end of the term.

 

(c)                                  Success Fee:

 

(i)                                     US Project: Robinson shall be paid a
lump sum success fee equal to 2.5% of the total financing amount (“Financing
Amount”) committed by Robinson’s Investors under executed financing
documentation.  This fee shall be payable to Robinson no later than five
(5) business days after the first disbursement to the Company of funding of the
US

 

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Project by Robinson’s Investors (the “Funding Date”).  The entire lump sum shall
be paid in that manner so long as such sum is disbursed to the Company at the
Funding Date by the investors without reduction of other elements of the Project
to be covered by such disbursement; or, if not, then it shall be paid from time
to time proportionate to each such disbursement of funds to the Company.  The
Company shall use its best efforts to have the success fee paid upfront in a
lump sum.

 

(ii)                                  Foreign Project: For each project
successfully closed with a Robinson Lease Package arranged by Robinson, Robinson
shall be paid a lump sum success fee equal to 3% of the total project cost
actually invested by the Robinson Investors (“Project Cost”). The Success Fee
shall be payable to Robinson no later five (5) business days after the first
disbursement to the Company of funding of the Foreign Project by Robinson’s
Investors.  The entire lump sum shall be paid in that manner so long as such sum
is disbursed to the Company at such Foreign Project Funding Date by the
investors without reduction of other elements of the Project to be covered by
such disbursement; or, if not, then it shall be paid from time to time
proportionate to each such disbursement of funds to the Company. The Company
shall use its best efforts to have the success fee paid upfront in a lump sum.

 

(iii)                               Non-utilization Fee: If the Company submits
to a potential customer a Robinson Lease Package proposal developed by Robinson
under this agreement for a Foreign Project and the customer for that project
elects instead to pay for the Plant under a traditional sales agreement or
similar contract then Robinson shall be paid a fee equal to 1.50% of the total
project cost that is actually paid by the Foreign Project buyer to purchase the
Plant (or, in the event of a lease that is not a Lease Model and not financed by
Robinson Investors, the Project Cost actually invested by those non-Robinson
Investors).  Project Cost excludes any amounts that are not for purchase of the
Plant (e.g., costs for services), and also does not include options for
expansion or for other plants in the future.  In situations where there is a
Non-utilization Fee, there will be no deduction of monthly retainers paid to
Robinson for that project.  This fee shall be payable to Robinson no later than
five (5) business days after the first disbursement of funds to the Company for
such a project.   The entire lump sum shall be paid in that manner so long as
such sum is disbursed to the Company at such Funding Date by the investors
without reduction of other elements of the Project to be covered by such
disbursement; or, if not, then it shall be paid from time to time proportionate
to each such disbursement of funds to the Company. The Company shall use its
best efforts to have the Non-Utilization fee paid upfront in a lump sum.

 

(d)                                 Warrant Coverage:   In further consideration
of the services described in 1(a) above, within 30 days after the execution of
this Agreement, Robinson will be issued warrants to purchase 3,000,000 shares of
Company common stock at an exercise price of the higher of book value (which the
Company believes is $1.03 as of 9.23.2011 or $0.70 (or the last

 

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reported closing price of the common stock at the time of the execution of this
agreement if higher).  These warrants will vest on the first funding date by
Robinson’s Investors at a rate of 85,000 warrants per $million of the total
amount committed by Robinson’s Investors for the US Project or any Foreign
Project.  As an example, 2,000,000 of the warrants would vest with an aggregate
commitment of $23.529 milllion and all the warrants would be vested with an
aggregate commitment of $35.294 million in the first Project or Projects that
close.

 

On the date when at least 2,000,000 of the foregoing warrants have vested, the
Company will issue a second tranche of warrants for a number of shares equal to
$3,000,000 of Beacon common stock (6% of $50 million) but not to exceed a number
such that when combined with all shares underlying the preceding warrant as well
as others that may be then owned by Robinson equal 19.9% of the shares
outstanding at that time.  The exercise price of this second warrant shall be
the higher of book value or $0.70 (or the last reported closing price of the
common stock at the time of execution of this agreement, if higher). This second
tranche of warrants will commence vesting after the first tranche has fully
vested, at a rate that is proportionate to additional aggregate commitment
amounts by Robinson’s Investors so that they would be fully vested once there is
a Funding Date for an additional aggregate amount of $50 million. In no event
will the warrants be exercisable for any amount that would cause Robinson to
beneficially own (when combined with other securities, as described above) more
than 19.9% of the shares outstanding at the time, nor for an amount which would
require stockholder approval under Nasdaq’s change of control rules.

 

Both tranches of warrants would expire on October 1, 2016, and they will become
exercisable to the extent vested from time to time.  Any unvested warrants will
expire at the expiration of the Tail described in paragraph 4.

 

(e)                                  Out of Pocket Expenses:   In addition to
any compensation described above, whether or not any financing is consummated,
the Company shall reimburse Robinson, on a monthly basis, for all reasonable
out-of-pocket travel and entertainment expenses incurred by Robinson in
providing the services contemplated hereby.  All air travel shall be in the same
class of service as used by Company representatives except for international
travel which may be in business class.  Robinson shall obtain preapproval of
expenses that are anticipated to exceed $5,000 per month (except for the trip to
Turkey on September 10-15, 2011), as well as of international itineraries.  All
such individual expenses in excess of seventy-five ($75) shall be evidenced by
receipts or other written documentation.

 

3.                                       Investor Contact

 

(a) During the term of this agreement, the Company shall promptly refer to
Robinson all potential investors for the US Project (including those already
contacted) or a

 

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Foreign Project and Robinson shall be the principal point of contact for all
potential Project investors on Project matters unless the Company and Robinson
agree otherwise

 

(b)                                 Robinson agrees to consult regularly with
the Company regarding which potential investors will be solicited, as well as
the status of the solicitation process.  Subject to the terms of this agreement,
there will be no exceptions or exclusions of investors for purposes of
determining Robinson’s Investors.

 

4.                       Term and Termination.

 

The term of this engagement shall be for a maximum period of 16 months from the
execution date of this agreement unless terminated in accordance with this
section 4.  Upon any such termination, Robinson shall cooperate with the Company
in the transition of pending opportunities to such other arrangement as the
Company may specify.  The Company may terminate this Agreement in the first four
months only for Cause.  In the event after the first four months that the
Company terminates this agreement other than for Cause, Robinson shall be
entitled to the payment of the success fees set forth in paragraph 2(c&d) for
any Project financing that the Company closes within 12 months (the “Tail”)
following the notice date of such termination with any of Robinson’s Investors.
“Cause” shall be defined as (i) Robinson’s continued willful failure, after 30
days’ advance written notice, substantially to perform its duties and
responsibilities to the Company, (ii) Robinson’s commission of any act of fraud,
embezzlement or any other willful misconduct that has caused or is reasonably
expected to result in material injury to the Company, or (iii) unauthorized use
or disclosure by Robinson of any proprietary information or trade secrets. Other
than compensation that is owed, or that may become owed, to Robinson as set
forth in this letter agreement, any termination of this engagement pursuant to
this paragraph 4 shall otherwise be without liability or continuing obligation
for either party.

 

5.                                       Responsibility for Disclosure.  The
Company shall provide Robinson all information material to its business and
operations as well as any other relevant information which Robinson reasonably
requests in connection with the performance of its services hereunder. The
Company represents and warrants to Robinson that all such information, and all
information released to the public or filed by the Company with any relevant
government agency or regulatory body, will be accurate and complete at the time
it is furnished or filed, and the Company agrees to keep Robinson advised of all
material developments affecting the Company through the term of Robinson’s
engagement.  The Company recognizes that, in rendering its services hereunder,
Robinson will be using information provided by the Company, as well as
information available from other sources deemed appropriate by Robinson.  The
Company further acknowledges that Robinson does not assume responsibility for
and may rely, without

 

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independent verification, on the accuracy or completeness of any such
information that is supplied by the Company.

 

6.                                       Indemnification and Contribution.

 

(a)                                  The Company agrees that in the event
Robinson or any of Robinson’s officers, employees, agents, affiliates or
controlling persons, if any (each of the foregoing, including Robinson, an
“Indemnified Person”), become involved in any capacity (whether or not as a
party) in any actual or threatened action, claim, proceeding or investigation
(including any security holder action or claim or any action brought by or in
the right of the Company, but excluding any material breach or alleged material
breach of Robinson’s obligations hereunder) related to or arising out of its
engagement, including any related services already performed under this
Agreement and any modifications or future additions to such engagement, the
Company will promptly upon demand advance to such Indemnified Person, or
reimburse each such Indemnified Person for, the legal and other reasonable
expenses (including the cost of any investigation and preparation) for a single
law firm for all Indemnified Persons as and when they are to be incurred, or are
incurred, in connection therewith.

 

(b)                                 In addition, the Company will indemnify and
hold harmless each Indemnified Person from and against, and no Indemnified
Person shall have any liability (whether direct or indirect, in contract or tort
or otherwise) to the Company or its security holders or creditors for, any
losses, claims, damages, judgments, fines, liabilities or expenses (including,
without limitation, attorney’s fees and expenses) related to or arising out of
its engagement, any services provided thereunder or any transactions or proposed
transactions related thereto (other than material breach or alleged material
breach of Robinson’s obligations hereunder), including any related services
already performed (as mentioned above) and any modifications or future additions
to such engagement, whether or not any pending or threatened action, claim,
proceeding or investigation giving rise to such losses, claims, damages,
liabilities or expenses is initiated or brought by or on behalf of the Company
and whether or not in connection with any action, claim, proceeding or
investigation in which the Company or any Indemnified Person is a party, except
to the extent that any such loss, claim, damage, judgment, fine, liability or
expense is found by a court of competent jurisdiction in a judgment that has
become final in that it is no longer subject to appeal or review to have
resulted directly from such Indemnified Person’s bad faith, willful misconduct
or gross negligence.

 

(c)                                  If for any reason the foregoing
indemnification is held unenforceable, then the Company shall contribute to the
loss, claim, damage, liability or expense for which such indemnification is held
unenforceable in such proportion as is appropriate to reflect the relative
benefits received, or sought to be received, by the Company and its security
holders on the one hand and the party entitled to contribution on the other hand
in the matters contemplated by this

 

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engagement, as well as the relative fault of the Company and such party with
respect to such loss, claim, damage, liability or expense and any other relevant
equitable considerations.  The Company agrees that, to the extent permitted by
applicable law, in no event shall the Indemnified Persons be responsible for or
be required to contribute amounts which in the aggregate exceed the fees, if
any, actually paid or committed to be paid to Robinson for such financial
advisory services.

 

(d)                                 The Company’s reimbursement, indemnity and
contribution obligations under this letter shall be in addition to any liability
which the Company may otherwise have and shall not be limited by any rights
Robinson or any other Indemnified Person may otherwise have.  The Company agrees
that, without Robinson’s prior written consent, which will not be unreasonably
withheld, the Company will not settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action, proceeding or investigation
in respect of which indemnification or contribution could be sought hereunder
(whether or not Robinson or any other Indemnified Person is an actual or
potential party to such claim, action, proceeding or investigation), unless such
settlement, compromise or consent includes an unconditional release of each
Indemnified Person from all liability arising out of such claim, action,
proceeding or investigation.

 

(e)                                  The provisions of this paragraph 6 shall
remain in effect indefinitely, notwithstanding the completion of this
engagement, the expiration of the term hereof or any other termination of this
engagement.

 

7.                                      Late Payments

 

Any payments due Robinson under this agreement and not paid by the due date
shall accrue interest at 1% per month (or, if lower, the highest amount allowed
by law) until paid.

 

8.                                       Miscellaneous.  No waiver, amendment or
other modification of this agreement shall be effective unless in writing and
signed by each party to be bound hereby.  This agreement, and any claim related
directly or indirectly to this agreement, shall be governed by, and construed in
accordance with, the laws of the State of New York without reference to the
conflict of laws provisions thereof.  The parties agree to submit any dispute
under this agreement to binding arbitration in San Mateo County, California, in
accordance with the rules of the American Arbitration Association. The
obligations of this agreement shall be binding upon and shall inure to the
benefit of the parties hereto, the Indemnified Persons hereunder and any of
their successors, assigns, heirs and personal representatives.

 

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Please confirm that the foregoing is in accordance with your understanding of
the terms of your engagement by signing and returning to us the enclosed
duplicate of this letter, which shall thereupon constitute a binding agreement
between us.

 

 

 

Very truly yours,

 

 

 

 

 

 

 

 

By:

/s/ F. William Capp

 

 

Name:

F. William Capp

 

 

Title:

Chief Executive Officer

 

 

 

Accepted and agreed to

 

 

as of the date first above written:

 

 

GROUP ROBINSON LLC

 

 

 

 

 

 

 

 

By:

/s/ John C. Robinson

 

 

Name:

John C. Robinson

 

 

Title:

Chairman and CEO

 

 

 

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