ALLIANCE AGREEMENT

Exhibit 10.1

[Execution Copy]

ALLIANCE AGREEMENT

dated as of February 7, 2007

between

FUELCELL ENERGY, INC.

and

POSCO POWER

Confidential treatment requested as to certain portions of this exhibit marked with an *. Such portions have been redacted and filed separately with the SEC.

ALLIANCE AGREEMENT

THIS ALLIANCE AGREEMENT (this “ Agreement ”), dated as of February 7, 2007, is made and entered into by and between FUELCELL ENERGY, INC., a Delaware corporation having a place of business at 3 Great Pasture Rd., Danbury, Connecticut 06813, U.S.A. (“ FCE ”) and POSCO POWER, a Korean corporation having a place of business at Dacom Building 10th Floor, 706-1 Yeoksam-dong, Kangnam-gu, Seoul 135-987, Korea (“ POSCO Power ”).

RECITALS:

A. FCE manufactures and sells, directly and indirectly through a third party distributor, the FCE Products throughout the world.

B. POSCO Power and FCE have determined that it is in their best interest to have POSCO Power to sell, import, distribute, maintain, service and/or repair the FCE Products in the Korean Market and in the Non-Exclusive Territory, in accordance with the terms and conditions of the Technology Transfer Agreement.

C. FCE desires to provide POSCO Power with, and POSCO Power desires to obtain, all relevant technology and “know-how” and licenses and other assistance necessary for POSCO Power and POSCO Affiliates to construct, assemble, manufacture, use, sell, import, distribute, maintain, service and/or repair the POSCO Products and POSCO Parts, all in accordance with the terms and conditions of the Technology Transfer Agreement.

D. FCE and POSCO Power also have determined that it is mutually beneficial for FCE to issue and sell, and POSCO Power to purchase, such number of shares of the common stock of FCE in an amount equal to US$29,000,000, in accordance with the terms of the Securities Purchase Agreement.

E. In order to effectuate the purpose of this Agreement, POSCO Power intends to use commercially reasonable efforts to establish a company in Korea, which will be a Subsidiary of POSCO Power (“ NewCo ”), to construct, assemble, manufacture, use, sell import, distribute, maintain, service and/or repair the POSCO Products and POSCO Parts within two years from the Effective Date.

F. In connection with the transactions contemplated in this Agreement, FCE and POSCO entered into the Memorandum of Agreement on January 10, 2007.

G. Simultaneously herewith, the parties hereto have entered into the Securities Purchase Agreement and the Technology Transfer Agreement.

ARTICLE I
DEFINITIONS

SECTION 1.1. Certain Definitions.

As used in this Agreement, the capitalized terms set forth below shall have the following respective meanings:

“ Additional Term ” shall have the meaning set forth in Section 5.2 .

“ Agreement ” shall mean this Alliance Agreement, as it may be amended, modified or supplemented from time to time in accordance with its terms.

“ Applicable Laws ” shall mean all applicable laws, treaties, ordinances, judgments, decrees, injunctions, writs, orders, rules, regulations, orders, interpretations and permits of any Governmental Authority.

“ BOP ” shall have the meaning set forth in the Technology Transfer Agreement.

“ Claim ” shall have the meaning set forth in Section 8.1 .

“ Contract ” shall mean any contract, lease, sales order, purchase order, agreement, indenture, mortgage, note, bond, warrant or instrument.

“ Customer ” shall mean any Person (wherever located) who has contracted with POSCO Power for the purchase of electric power pursuant to a power supply agreement or the purchase or lease of a DFC Power Plant.

“ Damages ” shall have the meaning set forth in Section 8.2 .

“ Dispute ” shall have the meaning set forth in Section 6.1 .

“ DFC Power Plant ” shall have the meaning set forth in the Technology Transfer Agreement.

“ DOE Approval ” shall have the meaning set forth in Section 4.1(a) .

“ Effective Date ” shall mean the date that is no later than thirty (30) days from the date hereof on which all the obligations of FCE set forth in Section 4.1(a) , (b) and (f) have been satisfied or waived.

“ Facility ” shall mean the site at which the DFC Power Plant will be installed and operated by the end user.

“ FCE ” shall have the meaning set forth in the preamble.

“ FCE Products ” shall have the meaning set forth in the Technology Transfer Agreement.

“ FCE Technology ” shall have the meaning set forth in the Technology Transfer Agreement.

“ Force Majeure ” shall mean unforeseen circumstances beyond the reasonable control and without the fault or negligence of either party and which such party is unable to prevent or provide against by the exercise of reasonable diligence including, but not limited to, acts of God, any acts or omissions of any civil or military authority, earthquakes, strikes or other labor disturbances, wars (declared or undeclared), terrorist and similar criminal acts, epidemics, civil unrest and riots.

“ Fuel Cell Stack Module ” shall have the meaning set forth in the Technology Transfer Agreement.

“ Governmental Authority ” shall mean any supranational, national, federal, state, municipal or local government or quasi-governmental or regulatory authority (including a national securities exchange or other self-regulatory body), agency, court, commission or other similar entity, domestic or foreign.

“ Governmental Order ” shall mean any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“ ICC ” shall have the meaning set forth in Section 6.2 .

“ Indemnified Party ” shall have the meaning set forth in Section 8.4 .

“ Indemnifying Party ” shall have the meaning set forth in Section 8.4 .

“ Initial Term ” shall have the meaning set forth in Section 5.1 .

“ Korean Company ” shall have the meaning set forth in the Technology Transfer Agreement.

“ Korean Market ” shall have the meaning set forth in the Technology Transfer Agreement.

“ Legal Proceeding ” shall mean any judicial, administrative or arbitral action, suit or proceeding (whether public or private and whether civil, criminal or administrative) by or before any court or other Governmental Authority.

“ Long Term Service Agreement ” or “ LTSA ” shall have the meaning set forth in the Technology Transfer Agreement.

“ Marubeni ” shall mean Marubeni Corporation, a Japanese corporation having its principal office at 4-2 Ohtemachi-I-Chome, Dhiyoda-ku, Tokyo, Japan.

“ Marubeni Distribution Right ” shall have the meaning set forth in Section 4.1(f) .

“ Marubeni Settlement ” shall have the meaning set forth in Section 4.1(f) .

“ Memorandum of Agreement ” shall mean that certain Memorandum of Agreement dated January 10, 2007 between FCE and POSCO.

“ MTU ” shall mean MTU CFC SOLUTIONS, GmbH, a German limited liability entity.

“ MTU Consent ” shall have the meaning set forth in Section 4.1(b) .

“ MTU-FCE BOP License ” shall mean the license agreement between MTU and FCE dated July 16, 1998, for the cross licensing of certain balance of plant technology.

“ NewCo ” shall have the meaning set forth in the Recitals.

“ NewCo Stock ” shall have the meaning set forth in Section 2.5(g) .

“ New DFC-Based Products ” shall mean, as currently designated by FCE, the “DFC/T Products” and the “DFC/H2 Products,” and any modifications and derivation in whole or in part of thereof, regardless of designation.

“ New DFC-Based Technology ” shall mean all technical information, know-how, inventions (whether patented or not) or trade secrets, which relate to the New DFC-Based Products.

“ New POSCO Parts ” shall mean any parts or components of the New POSCO Products other than the Fuel Cell Stack Module.

“ New POSCO Products ” shall mean any products, regardless of designation, which is the same as, or modification or derivation in whole or in part of the New DFC Based-Products.

“ Non-Exclusive Territory ” shall mean the jurisdictions listed in Schedule B attached hereto, it being understood and agreed that additional jurisdictions may be added, as mutually agreed by the parties from time to time.

“ Person ” shall mean any natural person, firm, partnership, association, corporation, company, joint venture, trust, business trust, Governmental Authority or other entity.

“ POSCO Affiliate ” shall have the meaning set forth in the Technology Transfer Agreement, a list of which is set forth in Schedule A attached hereto.

“ POSCO Power Facility Completion Date ” shall have the meaning set forth in Section 2.6(a) .

“ POSCO Power Facility ” shall mean the factory constructed by POSCO Power at which POSCO Parts are manufactured and POSCO Products are assembled.

“ POSCO Technology ” shall have the meaning set forth in the Technology Transfer Agreement.

“ Purchase Orde r” shall have the meaning set forth in the Technology Transfer Agreement.

“ Rules ” shall have the meaning set forth in Section 6.2 .

“ SEC Documents ” shall mean any and all reports required to be filed by FCE under the U.S. Securities Act of 1933 and Exchange Act of 1934, as amended, including all exhibits and financial statements and other documents incorporated by reference therein.

“ Securities Purchase Agreement ” shall mean that certain Securities Purchase Agreement dated as of the date hereof between FCE and POSCO, in the form attached hereto as Exhibit A .

“ Subsidiary ” shall mean, with respect to any Person (for the purposes of this definition, the “parent”), any other Person (other than a natural person), whether incorporated or unincorporated, of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect or appoint a majority of the board of directors, senior management or other persons performing such similar functions is directly or indirectly owned by the parent or by one or more of its respective Subsidiaries or by the parent and any one or more of its respective Subsidiaries.

“ Technology Transfer Agreement ” shall mean that certain Technology Transfer, License and Distribution Agreement dated as of the date hereof between FCE and POSCO, in the form attached hereto as Exhibit B .

“ Technology Transfer Program ” or “TTP” shall have the meaning set forth in the Technology Transfer Agreement.

“ Term ” shall have the meaning set forth in Section 5.2 .

“ Transaction Agreements ” shall mean this Agreement, the Securities Purchase Agreement and the Technology Transfer Agreement, and any other documents or agreements to effectuate the transactions contemplated herein.

ARTICLE II
THE ALLIANCE

SECTION 2.1. Alliance Scope . The scope of this Alliance Agreement shall be limited to the FCE Products and FCE Technology, except to the extent the New DFC-Based Products and the New DFC-Based Technology are addressed in Section 2.2(b) . Each party shall have the right to pursue any opportunities that are not in conflict with or expressly subject to the provisions of this Agreement in the same manner in which it has previously pursued such opportunities or in any other manner in such party’s own discretion, including, without limitation, entering into a partnership, alliance, distribution or other sales and marketing arrangements with any third party.

SECTION 2.2. License and Distribution Rights .

(a) FCE Technology; FCE Products, POSCO Parts and POSCO Products . FCE, in consideration of payments and other amounts payable as specified in this Agreement and the other Transaction Agreements, agrees to grant to POSCO Power, and POSCO Power agrees to accept, certain licenses and distribution rights with respect to the FCE Technology, FCE Products, POSCO Parts and POSCO Products, it being understood and agreed that FCE shall not, during the Term, grant any right or license in or relating to the FCE Technology or FCE Products to any other Korean Companies, or grant any new distribution rights in respect of the Korean Market or renew any existing distribution rights in respect of the Korean Market, all in accordance with, and subject to, the terms and conditions of the Technology Transfer Agreement.

(b) New DFC-Based Technology and New DFC-Based Products . FCE agrees that it (i) will provide to POSCO Power the New DFC-Based Technology during the Term and (ii) will grant to POSCO Power certain exclusive and non-exclusive distribution rights with respect to, and licenses to use the New DFC-Based Technology for POSCO Power and/or POSCO Affiliates to construct, assemble, manufacture, sell, use, import, distribute, maintain, service and/or repair, the New DFC-Based Products in the Korean Market and to sell, use, import, distribute, maintain, service and/or repair the New DFC-Based Products in the Non-Exclusive Territory, when such technology is developed and such products and parts are commercialized by FCE, on terms and conditions, including compensation, to be mutually agreed in a separate agreement, using their commercially reasonable good faith efforts, it being understood and agreed that FCE will not grant any right or license in or relating to the New DFC-Based Technology and New DFC-Based Products to any other Korean Company during the Term, as long as POSCO Power is using commercially reasonable efforts to actively and diligently commercialize the New DFC-Based Technology in the Korean Market.

(c) POSCO Power agrees that it will grant to FCE certain licenses and rights with respect to the POSCO Technology developed by POSCO Power or any POSCO Affiliate, in accordance with and subject to the terms and conditions of the Technology Transfer Agreement, and on terms and conditions, including compensation, to be mutually agreed in a separate agreement using their commercially reasonable good faith efforts.

SECTION 2.3. Additional Agreements . Simultaneously with the execution of this Agreement, and subject to the terms hereof, the parties shall enter into the Technology Transfer Agreement and the Securities Purchase Agreement, and, within sixty (60) days of thereof, the parties shall use commercially reasonable efforts to finalize the terms and conditions of the Technology Transfer Program, LTSA and the Purchase Order. In addition, from time to time, the parties shall use commercially reasonable efforts to enter into any other agreements, as needed, to effectuate the purposes of this Agreement.

SECTION 2.4. Mutual Covenants .

(a) Cooperation; Alliance Management . The parties shall use commercially reasonable good faith efforts to cooperate with each other to effectuate the transactions contemplated by this Agreement and any other Transaction Agreements. In order to ensure such cooperation, each of the parties shall designate at least two representatives for the purpose of coordinating the implementation and performance of this Agreement and the other Transaction Agreements. The representatives shall meet on a quarterly basis and on an as needed basis at the request of either party.

(b) Good Faith and Fair Dealing . Each of the parties acknowledges and agrees that all aspects of the performance by the parties under the terms of this Agreement and the other Transaction Agreements, and all other dealings between the parties in connection therewith, shall be governed by the principle of good faith and fair dealing. Further, each party agrees that it will perform its functions under this Agreement and the other Transaction Agreements in cooperation with the other party and in accordance with prevailing industry standards.

(c) Reputation . Each of the parties agrees to conduct its respective businesses prudently and in a manner that does not attract unfavorable publicity, a negative reputation in the energy industry or enforcement activity by a Governmental Authority having jurisdiction over POSCO Power or FCE, which in each case would be reasonably expected to have a material adverse effect on the transactions contemplated herein.

(d) Compliance . Each of the parties shall comply with all Applicable Laws relating to its activities contemplated by this Agreement and the other Transaction Agreements. In performing their respective obligations under this Agreement and the other Transaction Agreements, neither party shall be required to undertake any activity that would violate any Applicable Laws. In addition, each of the parties shall, at its own cost and expense, obtain and maintain any and all licenses and registrations, and cause each of its employees to obtain any and all licenses and registrations, that are necessary or, in such party’s reasonable discretion, desirable in the performance of the services to be provided by such party pursuant to this Agreement and the other Transaction Agreements.

SECTION 2.5. FCE Obligations .

(a) Technical Assistance, Advertising and Marketing . FCE shall provide commercially reasonable good faith technical assistance and support in connection with POSCO Power’s performance of the transactions contemplated hereby in accordance with the terms and conditions of the Technology Transfer Agreement, including the Technology Transfer Program. FCE shall, at its own cost, provide commercially reasonable good faith support to POSCO Power’s marketing and sales activities, including, but not limited to, supplying information to POSCO Power for POSCO Power to prepare general marketing materials.

(b) FCE Product Literature and Marketing Materials . FCE shall provide POSCO Power with (i) appropriate instructions regarding the use of the FCE Products, including, but not limited to, warning labels, disclaimers of warranty and any other related documentation, (ii) available literature, data, price lists, promotional materials, or any other similar materials regarding the FCE Products, (iii) documents to manufacture, install, service and repair the FCE Products, POSCO Products and POSCO Parts in accordance with the terms and conditions of the Technology Transfer Agreement, including the Technology Transfer Program and (iv) (A) preventative maintenance procedures for the FCE Products, (B) suggested and necessary repair parts and (C) estimated prices and replacements schedules for standard wear and tear items, in accordance with the terms and conditions of the Technology Transfer Agreement, including the Technology Transfer Program. Any materials provided in accordance with this Section 2.5(b) shall be in the English language. POSCO Power shall have the right to reproduce the materials and, where appropriate, translate such materials into other languages.

(c) Referrals . FCE agrees to refer to POSCO Power all demonstration projects or orders from any Korean company for FCE Products to be sited in the Korean Market.

(d) Inspection and Testing . FCE shall provide from time to time to POSCO Power the acceptance criteria that must be met or exceeded at either the FCE factory and at each Facility before POSCO Power and/or its Customers will be deemed to have accepted delivery of the relevant FCE Product.

(e) Construction and Installation Duties . FCE shall advise POSCO Power with respect to the determination and design of site requirements, permitting, grid interface and controlled designs, BOP, installation, start-up services, training and data collection for DFC Power Plants.

(f) Performance Standards . Each Purchase Order will set forth the design specifications for the FCE Products ordered thereby.

(g) Transfer of NewCo Stock . In the event FCE desires to transfer to any third party all or any portion of the capital stock of NewCo (the “ NewCo Stock ”) received as royalties pursuant to the Technology Transfer Agreement, FCE shall deliver to POSCO Power within thirty (30) days prior to the proposed date of transfer a written notice setting forth the price and any other relevant terms of its proposed transfer of such NewCo Stock. POSCO Power shall then be entitled to purchase all or any portion of such NewCo Stock proposed to be transferred on the same terms and conditions set forth in the notice provided by FCE, by delivering notice to FCE within fifteen (15) days of notice from FCE of such proposed transfer. To the extent that any portion of the NewCo Stock is not purchased pursuant to the terms in this clause, the proposed transfer may proceed so long as such transfer is effected in accordance with Applicable Law, and, in which case, POSCO Power shall provide commercially reasonable assistance to FCE to effect the sale of NewCo Stock.

SECTION 2.6. POSCO Power Obligations .

(a) Completion of POSCO Power Facility . POSCO Power shall use its commercially reasonable efforts to complete the construction of the POSCO Power Facility within two (2) years of the Effective Date (the “ POSCO Power Facility Completion Date ”); provided , however , that the failure by POSCO Power to complete such construction by the POSCO Power Facility Completion Date shall not be considered a material breach or failure of this Agreement (including Article IV ) or any other Transaction Agreement.

(b) Manufacturing, Marketing and Sale of FCE Products . POSCO Power shall, at its sole expense, use its commercially reasonable good faith efforts to manufacture, promote, market, distribute, sell or otherwise commercialize the BOP technology in the Korean Market and distribute, sell, or otherwise commercialize the BOP technology in the Non-Exclusive Territory, in accordance with the terms of this Agreement and the other Transaction Agreements. POSCO Power shall comply with all FCE Product quality measures provided by FCE to POSCO Power from time to time.

(c) Marketing Plan . POSCO Power, at its sole expense, agrees to develop a marketing plan to advertise, promote and publicize the FCE Products in the Korean Market.

(d) Service Capability . POSCO Power has, or within 36 months of the Effective Date will develop, the necessary skills and capability to provide service for the FCE Products, POSCO Products and POSCO Parts to the Customers. Without limiting the foregoing and solely by way of example, such skills shall include the ability to perform, consistent with its commercial reasonable efforts, the following services: applications engineering, balance of plant service, power plant operations and control, installation services, troubleshooting, and maintenance services. The skills described in this section shall not include the performance of service within the Fuel Cell Stack Module, which shall be performed by FCE.

(e) FCE Fuel Cell Stack Module Integrity . POSCO Power shall not, and shall not permit its employees, subcontractors, Facility operators, site owners or agents, or those of its affiliates or Subsidiaries to, open any Fuel Cell Stack Modules or otherwise attempt to view the interiors of the Fuel Cell Stack Module without the prior written permission of FCE. Any violation of this section shall be deemed a material breach of the confidentiality provisions set forth herein and void all warranties contained in the related Purchase Order. POSCO Power may open a Fuel Cell Stack Module or allow a Fuel Cell Stack Module to be opened if there occurs an emergency condition, at POSCO Power’s reasonable judgment, involving the Fuel Cell Stack Module that imperils human life or threatens substantial property damage or bodily harm. If POSCO Power opens a Fuel Cell Stack Module or allows a Fuel Cell Stack Module to be opened pursuant to this Section, POSCO Power shall limit such intrusion into the Fuel Cell Stack Module as narrowly as possible, and treat any information learned thereby as confidential information in accordance with this Agreement. POSCO Power shall require, as a condition precedent to any agreement with respect to the sale, lease or such similar transaction of any FCE Product or POSCO Product, the purchaser, lessor, customer or any such party of such transaction to agree to accept the terms of this clause (e) and to agree to require any subsequent purchaser, lessor, customer or such similar party thereof to accept the terms hereof.

SECTION 2.7. Fuel Cell Stack Module Order Requirements .

(a) Order Requirements . During the Term of this Agreement, POSCO Power agrees to purchase from FCE, and FCE agrees to sell to POSCO, Fuel Cell Stack Modules that are capable of producing certain specified megawatts (on a cumulative basis) as follows (for the purpose of this section, the term “Year” means the 12-month period ending in each year on the anniversary of the Effective Date):

(b) Price . The parties acknowledge and agree that the price and terms of each order shall be negotiated separately in a commercially reasonable good faith manner, subject to the pricing guidelines agreed to by the parties pursuant to Section 4.1 (c) below.

(c) Joint Review . Notwithstanding any provision to the contrary herein, any failure by POSCO Power to purchase the Fuel Cell Stack Modules, as set forth in Section 2.7 shall not constitute a material breach of this Agreement. The parties shall undertake a joint performance review at the end of years 3 and 5 from the Effective Date to determine the desirability of continuation of this Agreement, in the event the cumulative order requirements set forth in Section 2.7 were not met.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

SECTION 3.1. Representations and Warranties of FCE . FCE represents and warrants to POSCO that as of the date hereof, and as of the Effective Date:

(a) It has all requisite right, power and authority, to execute and deliver this Agreement and the other Transaction Agreements, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby;

(b) The execution, delivery and performance by FCE of this Agreement and the other Transaction Agreements, and the consummation by FCE of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary corporate action on the part of FCE and no other corporate actions or proceedings on the part of FCE are necessary to authorize this Agreement, the other Transaction Agreements and the transactions contemplated hereby and thereby. Assuming due authorization, execution and delivery of this Agreement and the other Transaction Agreements by POSCO Power hereto and thereto, each of this Agreement and the other Transaction Agreements constitute a legal, valid and binding obligation of FCE enforceable against it in accordance with its terms;

(c) The execution, delivery and performance by FCE of this Agreement and the other Transaction Agreements, and the consummation by FCE of the transactions contemplated hereby and thereby, do not: (i) violate any Applicable Law; (ii) violate or conflict with any Contract to which FCE is a party, including, but not limited to, any Contract with Marubeni and MTU, upon receipt of the Marubeni Settlement and MTU Consent; (iii) violate any Governmental Order; (iv) require the approval, consent or permission of any Governmental Authority having authority over FCE, other than the DOE Approval (as hereinafter defined); or (v) violate FCE’s organizational documents;

(d) Neither FCE or any of its Subsidiaries nor any director, officer, agent, employee or other Person acting on behalf of FCE or its Subsidiaries has, in the course of its actions for, or on behalf of, FCE or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of in any material respect any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made or received any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to or from any foreign or domestic government official or employee;

(e) To FCE’s knowledge, there is no pending or threatened any suit, action or proceeding (i) by any Governmental Authority challenging the transactions contemplated herein or in the other Transaction Agreements by FCE, seeking to restrain or prohibit the consummation of the transactions contemplated hereby or thereby, or (ii) by any Person which has not been disclosed in the SEC Documents; and

(f) As of their respective dates, the financial statements set forth in the SEC Documents fairly present in all material respects the consolidated financial position of FCE as of the dates thereof and, since October 31, 2006, and except as noted in the SEC Documents, FCE’s business has be