NET Power, LLC Amendments to Service Provider Agreement and to the Profits Interest Share Award Agreement of Ron DeGregorio
Exhibit 10.19
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NET Power, LLC ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇-▇▇▇▇ |
NET Power, LLC
Amendments to Service Provider Agreement and to the Profits Interest Share Award Agreement of ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
This Amendment to (1) the Service Provider Agreement, and (2) to the Profits Interest Share Award Agreement of ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (the “Amendment”), made effective as of the date of completion of signing, below (the “Effective Date”), between NET Power, LLC, a limited liability company organized pursuant to the Delaware Limited Liability Company Act (the “Company”), and ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, an individual (the “Participant”).
Recitals
Whereas, Participant (as “Service Provider”) and Company are parties to that certain Service Provider Agreement fully executed as of October 1, 2021 (a copy of which is attached hereto)(the “Existing Service Provider Agreement”);
Whereas, the Company granted to the Participant certain “profits interests” Shares subject to, and in accordance with, the terms and conditions of a September 30, 2021 agreement (a copy of which is attached hereto)(the “Existing Profits Interest Agreement”);
Whereas, pursuant to a March 25, 2022 Unanimous Approval1, the Board of Managers of the Company agreed to further limit the Company’s Profits Interest Share repurchase option set out in Schedule I, Section 3 (“Repurchase Option”) of the Existing Profits Interest Agreement;
Whereas, certain Profits Interest Shares awarded pursuant to the Existing Profits Interest Agreement were awarded subject to performance-based vesting, and pursuant to a Written Resolution and Conformation of Approval of Board members to Set Annual Bonus Levels for NET Power Personnel (the “2022 Bonus Resolution”)2, the Board confirmed (i) that such Profits interest Shares for the period ending March 31, 2022 did fully vest, and (ii) the Board awarded additional Profits Interest Shares to Participant as a further performance bonus;
Whereas, pursuant to a Written Resolution of Board Members to Set Executive Management Compensation Terms (the “2022 Executive Management Compensation Terms Resolution”)3, the Board made certain adjustments to Executive Management compensation, including the granting of additional Profits Interest Shares to Participant and revision of the Annual Bonus Target set out in Participant’s Service Provider Agreement;
| 1 | Voice vote of Member Managers during Board Meeting. |
| 2 | Board resolution entitled “Written Resolution and Conformation of Approval of Board Members to Set Annual Bonus Levels for NET Power Personnel” (the “2022 Bonus Resolution”), fully executed as of April 21, 2022 (DocuSign Envelope ID: F4BCB6DB-65DE-46E3-96AF-F57DB7BE9E60) |
| 3 | Board resolution entitled “Written Resolution of Board Members to Set Executive Management Compensation Terms” (the “2022 Executive Management Compensation Terms Resolution”), fully executed as of April 24, 2022 (DocuSign Envelope ID: 275D393A-DCC8-4F0B-ADFB-3D401FC4FCFE) |
Now, therefore, in consideration of the services of the Participant and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Participant hereby agree as follows:
1. Effective April 1, 2022, Participant’s Annual Bonus Target as set out in Section 4.2 of Participant’s Existing Service Provider Agreement is increased to as follows:
| Performance Year (Start – End): | April 1 – March 31 |
| Annual Bonus Target | 77% of Base Salary |
2. Participant’s Existing Profits Interest Agreement is amended as follows:
| Schedule I of the Existing Profits Interest Agreement is replaced in its entirety by the “Amended and Restated Schedule I to Profits Interest Share Award Agreement of ▇▇▇ ▇▇▇▇▇▇▇▇▇▇” attached hereto. |
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In Witness Whereof, this Profits Interest Share Award Agreement has been executed in behalf of the Company and by the Participant effective as of the day and year first above written.
| “NET Power” | “Participant” | |
| Party: | NET Power, LLC | ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ |
| Address: |
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ |
[***] |
| By (signature): |
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇ |
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ |
| Print Name: | By ▇▇▇▇ ▇▇▇▇▇▇▇▇ on behalf of the Board of Managers of NET Power, LLC4 | ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ |
| Print Title: | Member Manager on behalf of the Board of Managers of NET Power, LLC | Chief Executive Officer |
| Signature Date: | April 27, 2022 | April 28, 2022 |
| Email: | [***] | [***] |
| 4 | Signing on behalf of the Board of NET Power pursuant to Written Resolution of Board Members to Set Employee Terms, unanimously agreed to an executed September 30, 2021, and such continuing authority to sign this Amendment as confirmed during March 25, 2022 Board Meeting. |
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Amended and Restated Schedule I to Profits Interest Share Award Agreement of ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
1. Award Date, Number of Shares Granted, Threshold Amount and Vesting.
| a. | Profits Interest Shares Grants (Overview) |
| Award Date |
Profits Interest Shares |
Threshold Amount (per-share) |
Notes |
| Sept. 30, 2021 | 120,000 | $168.75 | September 2021 Award. See Section 1.b. |
| Apr. 21, 2022 | 10,000 | $211.00 |
Bonus Shares per 2022 Bonus Resolution. See Section 1.c |
| Apr. 21, 2022 | 45,000 | $211.00 | Share adjustment per 2022 Executive Management Compensation Terms Resolution. See Section 1.d |
As of the Award Date the fair market value of the Awarded Shares based on the Threshold Amount is determined in good faith to be $0 and the amount paid for the Awarded Shares is $0.
| b. | September 30, 2021 Share Grant – Vesting Schedule and Conditions |
This Section sets for the conditions for vesting of the 120,000 Profits Interest Shares granted to Participant on September 30, 2021 (the “September 2021 Award”).
| (1) | Time-Vested Shares |
| ● | Thirty thousand (30,000) of the Shares shall vest on their award date of September 31, 2021. |
| ● | Ten thousand (10,000) of the Shares shall vest on April 1, 2022, subject to the Service of the Participant continuing through such date. |
| ● | Ten thousand (10,000) of Shares shall vest on April 1, 2023, subject to the Service of the Participant continuing through such date. |
| ● | Ten thousand (10,000) of the Shares shall vest on April 1, 2024, subject to the Service of the Participant continuing through such date. |
Sch. I - 1
| (2) | Performance-Vested Shares |
| ● | Up to twenty thousand (20,000) of the Shares shall vest on April 1, 2022, subject to the achievement prior to such date of performance factors established by the Board and communicated to the Participant; and pursuant to the 2022 Bonus Resolution, the Board has confirmed the vesting these 20,000 Profits Interest Shares. |
| ● | Up to twenty thousand (20,000) of the Shares shall vest on April 1, 2023, subject to the achievement prior to such date of performance factors established by the Board and communicated to the Participant. |
| ● | Up to twenty thousand (20,000) of the Shares shall vest on April 1, 2024, subject to the achievement prior to such date of performance factors established by the Board and communicated to the Participant. |
For each of the three tranches of Performance-Vested Shares:
| ● | The Board may establish performance factors that may be partially achieved, such that the partial achievement thereof results in the vesting of some, rather than all, of the Shares included in that tranche. |
| ● | The Board may establish performance factors based on the achievement of one or more specified milestones by one or more specified dates, rather than a measure of performance determined by reference to performance during a specified time period (or Company performance during a time period), in which case the Shares the vesting of which is subject to the achievement of such milestone shall vest immediately upon achievement of such milestone. |
| ● | With respect to any milestone the achievement of which by a specified date would result in vesting of Shares based on the performance factors for such tranche, the Board shall determine whether such milestone was partially or completely achieved by the specified date, shall notify the Participant in writing of its determination within sixty (60) days after the specified date, and shall specify in such notice the number of Shares relating to such milestone that the Board determined to have vested, if any, and the number of Shares relating to such milestone that the Board determined to have failed to vest, if any. If the Board fails to deliver such notice or fails to set forth in such notice the number of Shares relating to such milestone that were determined by the Board to have failed to vest, all Shares relating to such milestone shall be deemed to have vested as of the specified date for such milestone. If the Board delivers such notice and includes in such notice a determination that any Shares relating to such milestone failed to vest, such Shares shall be deemed to have been forfeited by the Participant on the specified date for such milestone and may, in the Board’s discretion, be returned to the Employee Pool. |
| ● | If the Board determines that the vesting criteria applicable to any Shares cannot be met due to changing business circumstances, the Board acting in good faith may amend the vesting criteria. |
| c. | Additional Grant of Bonus Shares Pursuant to 2022 Bonus Resolution |
| ● | Pursuant to the 2022 Bonus Resolution, the following additional fully vested Profits Interest Shares are granted to participant: |
| Award Date |
Profits Interest Shares |
Threshold Amount (per-share) |
| April 21, 2022 | 10,000 | $211.00 |
Sch. I - 2
| d. | Executive Management Share Award Recalculation |
| ● | Pursuant to the 2022 Executive Management Compensation Terms Resolution, the following additional unvested Profits Interest Shares are granted to participant: |
| Award Date |
Profits Interest Shares |
Threshold Amount (per-share) |
| April 21, 2022 | 45,000 | $211.00 |
Vesting of the Shares under this Section 1.d shall be subject to the following schedule and criteria:
| ● | Seven Thousand Five Hundred (7,500) of the Shares shall vest on May 1, 2023. |
| ● | Seven Thousand Five Hundred (7,500) of the Shares shall vest on May 1, 2023, subject to next financial raise having closed by not later than March 1, 2023. |
| ● | Seven Thousand Five Hundred (7,500) of the Shares shall vest on May 1, 2024. |
| ● | Seven Thousand Five Hundred (7,500) of the Shares shall vest on May 1, 2024, subject to the ATQI having been achieved by not later than December 31, 2023. |
| ● | Seven Thousand Five Hundred (7,500) of the Shares shall vest on May 1, 2025. |
| ● | Seven Thousand Five Hundred (7,500) of the Shares shall vest on May 1, 2025, subject to achieving final investment decision/first order for either an industrial scale or commercial scale NET Power Plant having been received by that same date. |
2. Continued Service; Vesting.
Vesting of any Unvested Shares shall be subject to the continued Service to or for the benefit of the Company or its Affiliates, or as otherwise provided herein.
3. Repurchase Option.
a. If the Service of the Participant with the Company terminates for Cause prior to a Sale of the Company or an IPO, the Company or its designee shall have the right (but not the obligation) to repurchase (the “Repurchase Right”) any or all Vested Shares, subject to the terms and conditions set forth herein and in Section 2.12 the Operating Agreement (including, but not limited to, determination of the Redemption Price as set forth in Section 2.12 of the Operating Agreement, but subject to Section 3(b). of this Schedule I, and provided that the Redemption Price shall take into account the “profits interest” nature of the Shares within the meaning of Revenue Procedure 93-27, 1993-2 C.B. 343, and Revenue Procedure 2001-43, 2001-2 C.B. 191, and the limitation on the rights of the Shares to participate in distributions as set forth in Section 2), the Participant shall be treated as a “Withdrawing Member” and the termination for Cause shall be treated as a “Redemption Event”.
Sch. I - 3
b. If the Company exercises the Repurchase Right and the value of the Shares is initially determined by an appraiser selected by the Company, then, notwithstanding anything in Section 2.12(e) of the Operating Agreement to the contrary:
i. The Company shall instruct the appraiser selected by it not to take into account any minority interest discount or any discount for lack of marketability in determining the value of the Shares;
ii. If the Participant disagrees with the value of the Shares as determined by the appraiser selected by the Company and the Participant notifies the Company in writing of such disagreement, the Participant may engage a second independent appraiser to determine the value of the Shares, and the Redemption Price shall be selected by third appraiser mutually agreed by the appraiser selected by the Company and the appraiser selected by the Participant, which third appraiser shall be required to select either the value of the Shares as determined by the appraiser selected by the Company or the value of the Shares as determined by the appraiser selected by the Participant, based on which appraisal such third appraiser believes more accurately reflects the value of the Shares; and
iii. If there is a Sale of the Company pursuant to a sale process initiated by the Company before the first anniversary of the Termination Date and the value of the consideration the Participant would have received with respect to the Shares in connection with such Sale of the Company if such Shares had not been repurchased by the Company exceeds the Redemption Price (as determined prior to taking into account the adjustment contemplated by this Section 3.b.iii), the Redemption Price shall be increased by the amount of such excess.
c. The Company’s Repurchase Right described herein may, in the Company’s discretion, be exercised by a designee or designees of the Company and, for the purposes of this section, references to the “Company” shall (unless the context otherwise requires) include its designee or designees.
d. Notwithstanding anything contained herein, the Company may delay payment of the Redemption Price for such period as may be necessary to avoid adverse accounting consequences for the Company, to avoid violation of the terms of any financing agreement applicable to the Company or to avoid violation of any provisions of Applicable Laws restricting distributions or the redemption of equity by the Company.
e. In the event that any Shares held by the Participant shall be transferred to another person or entity, the Company’s Repurchase Right shall extend and apply to all Shares held by such transferee or transferees.
4. Restrictions on Transfers.
The restrictions described in the Profits Interest Share Award Agreement, including but not limited to the Repurchase Right described above, shall apply to any Shares held by a transferee or transferees (collectively, the “Transferee”), which Shares were issued to the Participant pursuant to the Profits Interest Share Award Agreement and subsequently transferred to the Transferee. The Company shall be under no obligation to transfer or issue Shares to such Transferee, and such Transferee shall have no rights with respect to any such Shares, until the Transferee has agreed to be subject to the terms and conditions of the Profits Interest Share Award Agreement (including, but not limited to, the provisions of this Schedule I), the Operating Agreement and any other applicable agreement. Any transfer or purported transfer made by a purchaser of Shares under the Profits Interest Share Award Agreement except at the times and in the manner herein specified, will be null and void and the Company shall not recognize or give effect to such transfer on its books and records or recognize the person or persons to whom such proposed transfer has been made as the legal or beneficial holder of those Shares.
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