DRAFT
September 29, 2000
ALLIANCE AGREEMENT

This Alliance Agreement (the "Agreement") is made and entered into as of September 29, 2000, by and between FuelCell Energy, Inc., a Delaware corporation (the "Company"), with corporate headquarters at 3 Great Pasture Road, Danbury, Connecticut 06813, and Enron North America Corp., a Delaware corporation ("ENA"), with corporate headquarters at 1400 Smith Street, Houston, Texas 77002.  

	In consideration of the mutual covenants set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

1.	Defined Terms.  As used in this Agreement, the following terms have the meanings indicated:

“AAA” has the meaning specified in Section 3.8.

“Affiliate” means with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such Person.  The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person.

“Agreement” is defined in the preamble to this Agreement.

“Common Stock” means shares of the Company’s common stock, par value $0.0001 per share.

“Company” is defined in the preamble to this Agreement.

“Confidential Information” means all information that is furnished under this Agreement by a party hereto, and which is confidential, proprietary or otherwise not generally available to the public.  Notwithstanding the foregoing, the following will not constitute Confidential Information for purposes of this Agreement: (i) information that is or becomes generally available to the public other than as a result of a breach of this Agreement by the party receiving such information or its Representatives; (ii) information that, prior to being furnished pursuant hereto, was already in the files of the party receiving such information or its Representatives from another source not known to be subject to any prohibition against transmitting the information; or (iii) information that becomes available to the party receiving such information or its Representatives from another source not known to be subject to any prohibition against transmitting the information.

 “Dispute” has the meaning specified in Section 3.8.

“ENA” is defined in the preamble to this Agreement.

“Enron” means Enron Corp., an Oregon corporation.

“Fuel Cells” shall mean (i) any fuel cell powerplants (a) each with an initial rating at shipping of less than 10 MW or (b) that are sold for use in connection with any state-sponsored renewable energy or energy conservation program and (ii) any associated equipment and services, in each case, including proprietary fuel cells of the Company known as the “Direct FuelCell.”  For purposes of this definition, a powerplant shall consist of a fuel cell module and the associated balance of the powerplant with an initial rating less than 10 MW (at this time, the Company sells powerplants with rated capacities of 250 kw, 1MW and 2MW).

"MW" means the megawatts of initial capacity of a FuelCell at the time of shipment.

“Person” shall be broadly interpreted to include, without limitation, any corporation, company, partnership, individual or other entity.

“Qualified Order” means any purchase order or other binding commitment for the purchase of Fuel Cells, that is accepted by the Company, provided such purchase order or other binding commitment is from ENA or an Affiliate of ENA, or ENA or an Affiliate of ENA can demonstrate through written documentation that it provided material assistance to the Company in procuring such purchase order or other binding commitment. 

“Representative” means any director, officer, employee, lender, counsel, representative, and Affiliate who actually receives any confidential information hereunder.

“Warrants” has the meaning specified in Section 2.4.

2.  Relationship Between the Parties 

Section 2.1  Objectives and Purpose.  The Company has the objective of bringing its proprietary fuel cell technology to commercial viability.  In furtherance of this objective, the Company believes it would be beneficial to have access to ENA personnel regarding the following:

(a)	Customer access;
(b)	Product placement;
(c)	Project development;
(d)	Energy risk management; and
(e)	Finance structure.

The parties acknowledge the foregoing objectives and goals and agree that nothing in this Agreement shall be construed to obligate Enron, ENA or its Affiliates to purchase any product or service from the Company or to sell any product or service to others on behalf of the Company. 

2.2  Establishment of the Alliance; No Partnership or Fiduciary Duty.  In recognition of the foregoing objectives, the Company and ENA have determined it is in their mutual interest to establish a non-exclusive cooperative alliance pursuant to the terms of this Agreement.  Nothing in this Agreement shall be deemed to create or give rise to any partnership or joint venture between or among the Company and ENA, or any of their respective Affiliates, or to create or impose on any Person any fiduciary duty.

2.3  Mutual Access and Cooperation.  The Company desires, and ENA agrees to use reasonable efforts to provide to the Company reasonable access, from time to time on a mutually agreed basis, to representatives of ENA and its Affiliates (a) to discuss the capabilities of the Company’s products; (b) to discuss the development of products by the Company in fuel cell farms of any state-sponsored renewable energy or energy conservation programs, (c) for consultation with the Company regarding acquisition and investment opportunities identified by the Company, (d) to discuss matters in which ENA has, or may have, general expertise (which areas of expertise may include, without limitation, commodity trading, origination, and engineering; the financial analysis, modeling and structuring of proposed transactions; the construction and management of energy infrastructure, including energy infrastructure related to fuel cell farms and electricity generation, transmission and distribution) and (e) to explore and evaluate ways in which the Company and ENA might work together to enhance their respective businesses.  

In connection with the foregoing, ENA shall, as appropriate, use reasonable efforts (i) to arrange meetings from time to time between representatives of the Company and representatives of ENA or its Affiliates to discuss such matters and (ii) to provide to the Company from time to time reasonable access to relevant information of ENA and its Affiliates, subject, however, to limitations imposed by applicable law and existing confidentiality obligations as well as internal policies regarding the maintenance of the confidentiality of proprietary data and other commercially sensitive information. 

The Company agrees to provide to representatives of ENA and its Affiliates reasonable access from time to time to representatives of the Company and its Affiliates that it controls (i) to pursue the matters referenced above and (ii) to discuss generally the industry in which the Company and such Affiliates are engaged and the objectives of companies in such industry.  

It is the intent of the parties to work cooperatively in connection with the foregoing towards the goal of mutually beneficial discussions, relations and transactions.

2.4  Issuance of Warrants. Concurrently with, and as an inducement for, the execution and delivery of this Agreement, the Company has issued and delivered to ECT Merchant Investments Corp. (“ECT”) warrants to purchase up to 1,300,000 shares of Common Stock of the Company (the "Warrants").  A form of the Warrant is attached hereto as Exhibit A.  If the Commencement Date (as defined in the Warrants) does not occur on or prior to the Expiration Date (as defined in the Warrants), then ENA shall pay to the Company the sum of $2,000,000.  Notwithstanding the foregoing, if the Warrants have been exercised or surrendered to the Company for cancellation on or before the Expiration Date, ENA shall have no obligation to make the payment to the Company specified in this Section 2.4.

2.5  Term of This Agreement.  The term of this Agreement shall begin on the date hereof and continue until the earlier of (i) 24 months from the date of this Agreement and (ii) the first date on which ENA and its Affiliates, including ECT, no longer hold a beneficial interest in the Company representing at least 1% of the outstanding shares of Common Stock (assuming the exercise of the Warrant Warrants held by ECT and its Affiliates).  

2.6  Confidentiality.  In connection with the matters described in this Agreement, each party may provide to the other certain information that is confidential, proprietary or otherwise not generally available to the public.  As a condition to furnishing such information the parties agree as follows:

(a)	Nondisclosure of Confidential Information.  From and after the date hereof, until the date two years after the disclosure of the particular Confidential Information, such Confidential Information shall be used solely in connection with the matters contemplated by this Agreement and the recipient of the Confidential Information shall not disclose the Confidential Information to any person other than Representatives who need to know the Confidential Information.  It is understood that (i) the Representatives shall be informed of the confidential nature of the Confidential Information and the requirement that it not be used other than for the purposes described herein and (ii) in any event, the party receiving Confidential Information shall be responsible for any breach of this Agreement by any of its Representatives.  Each party may also disclose the Confidential Information in order to comply with any applicable law, order, regulation or ruling.  

(b)	Return of Information.  The written Confidential Information, except for that portion of the Confidential Information that may be found in analyses, compilations, studies or other documents prepared by or for the party receiving the Confidential Information, will be returned promptly upon any request made during the two-year period referred to in Section 2.6(a) above, and no copies shall be retained by the party receiving the Confidential Information or its Representatives.  That portion of the Confidential Information that may be found in analyses, compilations, studies or other documents prepared by or for the party receiving the Confidential Information, oral Confidential Information and written Confidential Information not so requested or returned will be held by the party receiving the Confidential Information and kept subject to the terms of this Agreement, or destroyed.

2.7  Relationships of the Parties.  The purpose of this Agreement is to establish the intent of the parties to establish and promote open communications with the objective of identifying mutually beneficial business opportunities.  The parties’ overall expectation is that a broader working relationship will develop; however, it is not the intent of this Agreement or any future action (not specifically set forth in a definitive agreement) by either party to require that either party suffer any unreasonable burden or commitment (including, without limitation, financial, time and human resource burdens and commitments), or any constraint on its business, nor is it the intent to create a right in either party to any specific business opportunity or opportunities.  Without limiting the generality of the following, nothing herein shall be deemed to impose any obligation on ENA or any of its Affiliates to purchase, market or distribute any products of the Company.  Any other actual commitments shall be set forth in a specific definitive agreement governing the proposed transaction or commitment.

All activities contemplated hereby shall be performed in a mutually agreeable manner designed to minimize the disruption of the business and operations of each party and that of its Affiliates.  Except as specifically contemplated in this Agreement or Securities Purchase Agreement, the parties shall be unrestricted in the conduct of their business.  

2.8  No Authority to Bind; No Fiduciary Relationship.  Neither party hereto shall have the authority to bind or to purport to bind the other party hereto.  The parties agree that no employment, agency, joint venture, partnership, advisory or fiduciary relationship shall be deemed to exist or arise between them with respect to the transactions contemplated by this Agreement; any such relationship shall exist only as expressly stated in any future definitive agreements.

2.9  Publicity.  The parties shall mutually agree upon any press release or other public announcement regarding or relating to the existence of this Agreement and its contents.

2.10  Most Favored Status.  The Company agrees that any Qualified Order shall be no less favorable to the purchaser (as to its principal terms, including price, payment schedule and delivery date) than the terms of any other comparably sized and contemporaneous purchase of Fuel Cells that is not a Qualified Order.  In the event the Company enters into a purchase order or other binding commitment, which is not a Qualified Order, that is more favorable (as to its principal terms, including price, payment schedule and delivery date) than any Qualified Order, each such Qualified Order shall be amended to incorporate therein such more favorable terms.

3.	Miscellaneous.

3.1  Survival of Provisions.  The provisions of the Sections 2.6 and 3.5 shall remain operative and in full force and effect regardless of any termination of this Agreement. 

3.2   Entire Agreement; Modifications in Writing.  This Agreement, together with any exhibits and schedules attached hereto, constitutes the entire agreement between the Parties hereto pertaining to the subject matter hereof and supersedes agreements, understandings, negotiations and discussions prior to the date hereof, whether oral or written, of the parties, other than any prior agreements relating to confidential information.  Except as specifically provided in this Agreement, no amendment, waiver, consent, modification or termination of any provision of this Agreement shall be effective unless signed by the Company and ENA. 

3.3   Binding Effect; Assignment.  The rights and obligations hereunder of any party may not be assigned or delegated to any Person without the prior written consent of each other party to this Agreement.  Except as expressly provided herein, this Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement, and their respective successors and any permitted assigns.  This Agreement shall be binding upon the Company and ENA, and their respective successors and permitted assigns.  

3.4   Communications.  All communications required or permitted under the terms of this Agreement shall be in writing, and shall be given by registered or certified mail, return receipt requested, telex, facsimile, telecopy, air courier guaranteeing overnight delivery or personal delivery, as follows:

	if to the Company:

	3 Great Pasture Road
	Danbury, Connecticut 06813
	Attention:  	Joseph Mahler and Ross Levine
	Facsimile:	(203) 825-6149

and, if to ENA:

	Enron North America Corp.
	1400 Smith Street
	Houston, Texas  77002
	Attention:	Charles Vetters
	Facsimile:	(713) 646-4043

	with a copy to:

Enron North America Corp.
	1400 Smith Street
	Houston, Texas  77002
	Attention:	Donna Lowry
	Facsimile:	(713) 646-4039

or to such other address as the Company or ENA may designate in writing in accordance with the provisions of this Section 3.4.  All such notices and communications shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; four (4) days after being sent by certified mail, return receipt requested, if mailed; when answered back, if telexed; when receipt acknowledged, if faxed; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery.

3.5  Expenses.  Each party agrees to pay their its own costs and expenses (including fees and expenses of counsel) incurred connection with the negotiation, execution and delivery of this Agreement.  

3.6  Execution in Counterparts.  This Agreement may be executed in any number of counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.

3.7  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.

3.8	Dispute Resolution. Any action, dispute, claim or controversy of any kind between the Company and the Purchaser arising out of, or pertaining to this Agreement or the transactions contemplated hereby (a "Dispute") shall be resolved by binding arbitration in accordance with the terms hereof.  Any party may, by summary proceedings, bring an action in court to compel arbitration of any Dispute.  Any arbitration shall be administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Section 3.8, the Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable, the Federal Arbitration Act.  Judgment on any award rendered by an arbitration panel may be entered in any court having jurisdiction.  Any arbitration shall be conducted by an arbitration panel consisting of three arbitrators.  Each party shall designate one arbitrator.  The third arbitrator shall be designated by the two arbitrators designated by the parties.  If either party fails to designate an arbitrator within 10 days after the filing of the Dispute with the AAA, such arbitrator shall be appointed in the manner prescribed by the AAA.  An arbitration proceeding hereunder shall be conducted in Fairfield County, Connecticut.  Each proceeding shall be concluded within 180 days of the filing of the Dispute with the AAA.  The arbitration panel shall be empowered to award sanctions and to take such other actions as they deem necessary, to the same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable law.  No award by the arbitration panel shall assess consequential, punitive or exemplary damages but may assess costs and expenses in a manner deemed equitable.  The arbitration panel shall make specific written findings of fact and conclusions of law.  The decision of the majority of the arbitration panel shall be final and binding on each party.

3.9  Severability of Provisions.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or enforceability of such provision in any other jurisdiction.

3.10 Headings.  The Section headings, if any, used or contained in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement.

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In witness whereof, the parties have executed this Agreement as of the date first above written.

FUELCELL ENERGY, INC.		ENRON NORTH AMERICA CORP.
By:						By:					
Name:___________________		Name:					
Title:____________________		Title:					

EXHIBIT A
FORM OF WARRANT

#1164859

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