<PAGE>
As filed with the Securities and Exchange Commission on October 1, 1999
Registration Statement No. 333-86089
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
PLUG POWER INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 3629 22-3672377
(Primary Standard Industrial (I.R.S. Employer
(State or Other Classification Code Number) Identification No.)
Jurisdiction
of Incorporation or
Organization)
----------------
968 Albany-Shaker Road
Latham, NY 12110
(518) 782-7700
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
----------------
Gary Mittleman
President and Chief Executive Officer
Plug Power Inc.
968 Albany-Shaker Road
Latham, NY 12110
(518) 782-7700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
Stuart M. Cable, P.C. David C. Chapin, Esq.
Robert P. Whalen, Jr., Esq. Ropes & Gray
Goodwin, Procter & Hoar llp One International Place
Exchange Place Boston, Massachusetts 02110
Boston, Massachusetts 02109-2881 (617) 951-7000
(617) 570-1000
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]_______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]_______________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]_______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the SEC, acting pursuant to Section
8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated October 1, 1999.
6,000,000 Shares
[Plug Power logo appears here]
Common Stock
-----------
This is an initial public offering of shares of Plug Power Inc. All of the
shares of common stock are being sold by Plug Power.
Before this offering, there has been no public market for the common stock.
It is currently estimated that the initial public offering price per share will
be between $13.00 and $15.00. Application has been made for quotation of the
common stock on the Nasdaq National Market under the symbol "PLUG".
See "Risk Factors" on page 8 to read about factors you should consider before
buying shares of the common stock.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -------
<S> <C> <C>
Initial public offering price................................. $ $
Underwriting discount......................................... $ $
Proceeds, before expenses, to Plug Power...................... $ $
</TABLE>
To the extent that the underwriters sell more than 6,000,000 shares of common
stock, the underwriters have the option to purchase up to an additional 900,000
shares from Plug Power at the initial public offering price less the
underwriting discount.
-----------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
Goldman, Sachs & Co.
Hambrecht & Quist
Merrill Lynch & Co.
FAC/Equities
-----------
Prospectus dated , 1999.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and Plug Power's financial statements, the notes to those financial
statements and the other financial information appearing elsewhere in this
prospectus. In addition to historical information, the following summary and
other parts of this prospectus contain forward-looking statements that reflect
our plans, estimates, intentions, expectations and beliefs. Our actual results
could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those set forth in the "Risk Factors" section and contained
elsewhere in this prospectus.
Plug Power Inc.
Our Business
We are a leading designer and developer of on-site, electricity generation
systems utilizing proton exchange membrane (PEM) fuel cells for residential
applications. We believe that the electricity our residential fuel cell systems
will provide to homes can be less expensive, more reliable, more efficiently
produced and environmentally cleaner than the electricity provided by the
existing electric utility grid and other power generation technologies. We plan
to bring our first residential fuel cell systems to market in 2001 and to
become the first mass market producer of residential fuel cell systems by
selling 100,000 systems per year by 2003.
Our Product
Our residential fuel cell system will be an appliance, initially about the
size of a refrigerator, that will produce electricity through a clean,
efficient process without combustion. Our system will receive fuel from a
home's existing natural gas line or propane tank, convert the fuel into a
hydrogen-rich stream, and then combine it with oxygen from the air in a
chemical reaction that produces electric power. Our initial residential systems
will be designed to supply 7 kilowatts (kW) of baseload power, 10 kW of peak
power and 15 kW of surge load capacity, which will provide the full electricity
needs of a home, although the home can remain connected to the electric grid
for back-up purposes. To date, we have conducted successful demonstrations of
hydrogen-, methanol-, and natural gas-fueled systems and expect to demonstrate
a propane-fueled system during 2000.
Our Alliance with General Electric Company
General Electric Company has selected Plug Power to be its exclusive supplier
of fuel cell systems for residential and commercial applications under 35 kW.
Together with GE On-Site Power, Inc., a subsidiary of General Electric that
operates within General Electric's GE Power Systems business, we formed GE Fuel
Cell Systems, LLC, a joint venture dedicated to marketing, selling, installing
and servicing Plug Power fuel cell systems. GE Fuel Cell Systems is the
exclusive, global distributor and servicer of our systems (except in four
states assigned to another distributor) and all systems that it sells will be
co-branded with both the General Electric and Plug Power names and trademarks.
We believe that our strength in fuel cell system design and development,
coupled with General Electric's brand name, worldwide sales and distribution
network, service capabilities, and commitment to the commercialization of our
fuel cell technology, will allow us to bring the first and best residential
fuel cell system to market and, by doing so, establish the industry standard
for this new product.
3
<PAGE>
Changes in the Power Industry
Industrialized societies are dependent upon reliable, on-demand electric
power to function. Demand for electricity is expected to continue to grow as
the economies of the United States and other industrialized nations expand,
particularly with the increased reliance on computers and other electronics. At
the same time, developing nations will need additional electricity to improve
their standards of living.
Reliance upon the existing infrastructure has been and continues to be
problematic due to capacity constraints, environmental concerns and other
issues. In addition, utility deregulation is creating new challenges and
opportunities in the electric power industry. This evolving competitive
industry environment coupled with the consumer demand for more reliable,
accessible and competitively priced sources of electric power, is driving
traditional energy providers to develop new strategies and seek new
technologies for electricity generation, transmission, and distribution.
Our Solution
We believe our residential fuel cell systems will offer the following
benefits to energy providers and consumers:
. Electric utilities and rural electric cooperatives will be able to lower
capital expenditures by deploying our systems to meet increasing demand
for electricity rather than expanding, repairing or replacing existing
generation, transmission and distribution infrastructure.
. Natural gas and propane distributors will be able to increase the
utilization of their existing distribution infrastructure, and mitigate
the seasonality of their businesses, by taking advantage of additional
demand for the fuels used by our systems.
. Energy providers will be able to satisfy stricter environmental
regulations by using our fuel cell systems, which will generate
electricity through an efficient chemical process that produces fewer
harmful by-products than conventional combustion-based technologies.
. Consumers will be able to lower their exposure to weather- and capacity-
driven outages by utilizing our on-site systems to provide their
residential electricity, and may also benefit from lower electricity
costs.
Our Strategy
Our business strategy focuses on combining existing fuel cell technology with
improvements in system integration, component design, and manufacturing
processes to achieve the low-cost manufacturing capability necessary to bring
our product to the mass market. The key components of this strategy are:
. Focus on residential applications. We intend to focus on commercializing
our fuel cell systems for the residential mass market, which we believe
is the most accessible market for early fuel cell applications.
. Develop low-cost manufacturing capability and processes. We seek to
develop high-volume manufacturing capability by working closely with a
network of carefully selected suppliers to develop and produce low-cost
components and subsystems, while focusing internally on improving system
design and integration.
. Utilize General Electric's product development expertise and purchasing
capabilities. We believe we can utilize General Electric's engineering,
testing and analytical resources, as well as its purchasing power, to
help us develop a superior product more rapidly and at lower cost.
4
<PAGE>
. Leverage our strategic alliance with General Electric to achieve market
leadership. We believe we can leverage General Electric's brand name and
worldwide marketing, distribution and servicing capability to gain
immediate recognition for our product and achieve market leadership.
. Acquire or license complementary technologies. We regularly review
strategic opportunities to acquire or license technologies that can
advance the development of low-cost system components and subsystems.
. Capitalize on our experience in the residential market to develop other
fuel cell applications, including automotive applications. We believe
that we can build on our residential fuel cell technology, system
design, and manufacturing processes to develop other commercial
applications for fuel cell technology, including automotive
applications. We have a team of engineers dedicated to developing fuel
cell power systems for automotive applications, but do not anticipate
commercial production until at least 2006.
Additional Equity Financing at Time of Offering
Immediately before the closing of this offering and in addition to the shares
of common stock to be sold in this offering, the following current stockholders
of Plug Power will purchase additional shares of common stock as follows:
. Mechanical Technology Incorporated and Edison Development Corporation (a
wholly owned subsidiary of DTE Energy Company) will purchase an
aggregate of 5,466,666 shares of common stock for a total purchase price
of $41.0 million,
. GE On-Site Power, Inc. will purchase 3,000,000 shares of common stock
for $37.5 million and
. Two additional stockholders will purchase an aggregate of 750,000 shares
of common stock for a total purchase price of $6.4 million.
5
<PAGE>
The Offering
<TABLE>
<C> <S>
Shares offered by Plug Power........................ 6,000,000 shares
Common stock to be outstanding after this offering.. 42,208,480 shares(1)
Estimated net proceeds to Plug Power................ $77,300,000
Use of Proceeds..................................... For general corporate
purposes, including
research and product
development,
manufacturing and market
development, capital
expenditures and
potential acquisitions.
See "Use of Proceeds".
Proposed Nasdaq National Market symbol.............. "PLUG"
</TABLE>
- --------
(1) The number of shares of our common stock that will be outstanding after
this offering is based on 26,991,814 shares outstanding as of September 30,
1999, plus 9,216,666 shares of common stock to be issued upon the exercise
of outstanding warrants and other purchase rights immediately before the
closing of this offering as described above under "--Additional Equity
Financing at Time of Offering", plus 6,000,000 shares of common stock to be
issued in this offering. This number excludes:
. up to 900,000 shares of common stock issuable upon exercise of the
overallotment option granted to the underwriters;
. 3,377,189 shares of common stock issuable upon exercise of stock options
outstanding as of September 30, 1999 under our 1997 stock option plan,
at a weighted average exercise price of $4.98 per share;
. 2,561,002 shares of common stock available for future grant under our
1999 stock option plan as of September 30, 1999 (plus an additional
984,000 shares of common stock to become available for future grant
under our 1999 stock option plan as a result of this offering); and
. 1,000,000 shares of common stock reserved for purchase after this
offering under our employee stock purchase plan.
----------------
We were formed as a Delaware limited liability company on June 27, 1997 and
will be merged into a newly-formed Delaware corporation immediately before this
offering. Unless otherwise indicated, all information that we present in this
prospectus for any date or period gives effect to the merger as if it had
occurred on that date or as of the beginning of that period and all references
to capital stock for periods before the merger mean our issued and outstanding
membership interests. Our principal executive offices are located at 968
Albany-Shaker Road, Latham, New York 12110. Our telephone number at that
location is (518) 782-7700 and our Internet address is www.plugpower.com. The
information contained on our website is not incorporated by reference in this
prospectus.
The name Plug Power and our logo are names and trademarks that belong to us.
This prospectus also contains the names of other entities which are the
property of their respective owners.
6
<PAGE>
Summary Financial Data
The tables below present our statement of operations data for the period from
June 27, 1997 (date of inception) to December 31, 1997, the year ended December
31, 1998, and the six month periods ended June 30, 1998 and 1999, and our
balance sheet data at June 30, 1999. The balance sheet information is
presented:
. on an actual basis;
. on a pro forma basis giving effect to the issuance of 533,334 shares of
common stock pursuant to a September 1999 capital call, the issuance of
9,216,666 shares of common stock to be issued upon the exercise of
outstanding warrants and other purchase rights immediately before the
closing of this offering, the assumption of $6.2 million of debt in July
1999 in connection with the purchase of real estate from Mechanical
Technology, and the vesting in August 1999 of 1,500,000 shares of common
stock held by GE On-Site Power as described in "Management's Discussion
and Analysis of Financial Condition and Results of Operations"; and
. on a pro forma, as adjusted basis to reflect the pro forma adjustments
described above and the sale of 6,000,000 shares of common stock in this
offering at an assumed initial public offering price of $14.00 per
share, after deducting the estimated underwriting discounts and
commissions and our estimated offering expenses.
<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------------
Period from
June 27,
1997 to Year ended
December 31, December 31,
1997 1998 1998 1999
------------ ------------ ------------ -------------
(unaudited) (unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Contract revenue........ $ 1,194 $ 6,541 $ 2,549 $ 3,696
Cost of contract
revenue................ 1,227 8,864 3,439 5,118
------- ------- ------------ -------------
Loss on contracts....... (33) (2,323) (890) (1,422)
In-process research and
development............ 4,042 -- -- --
Research and development
expense................ 1,301 4,632 2,154 7,780
General and
administrative
expense................ 630 2,754 1,328 5,756
------- ------- ------------ -------------
Operating loss......... (6,006) (9,709) (4,372) (14,958)
Other income,
principally interest... 103 93 42 218
------- ------- ------------ -------------
Net loss............... $(5,903) $(9,616) $ (4,330) $ (14,740)
======= ======= ============ =============
Basic and diluted net
loss per share......... $ (0.62) $ (0.71) $ (0.40) $ (0.69)
======= ======= ============ =============
Shares used in computing
basic and diluted net
loss per share......... 9,500 13,617 10,865 21,299
======= ======= ============ =============
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
----------------------------------
Pro Forma,
Actual Pro Forma As Adjusted
------- -------------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................... $17,243 $106,118 $183,418
Working capital.............................. 13,570 102,165 179,465
Total assets................................. 30,077 146,310 223,610
Long-term obligations........................ 155 6,035 6,035
Total stockholders' equity................... 25,150 135,223 212,523
</TABLE>
7
<PAGE>
RISK FACTORS
You should carefully consider the following risks and all other information
contained in this prospectus before purchasing our common stock. If any of the
following risks occur, our business, prospects, results of operations or
financial condition could be harmed. In that case, the trading price of our
common stock could decline, and you could lose all or part of your investment.
This prospectus also contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of specific factors,
including the risks described below and elsewhere in this prospectus.
We have only been in business for a short time and your basis for evaluating us
is limited
We were formed in June 1997 to further the research and development of
residential fuel cell systems. We do not expect to have a commercially viable
product until at least 2001. Accordingly, there is only a limited basis upon
which you can evaluate our business and prospects. An investor in our common
stock should consider the challenges, expenses and difficulties that we will
face as a development stage company seeking to develop and manufacture a new
product.
We have incurred losses and anticipate continued losses through at least 2003
As of June 30, 1999, we had an accumulated deficit of $30.3 million. We have
not achieved profitability and expect to continue to incur net losses until we
can produce sufficient revenues to cover our costs. We expect the cost to
produce our pre-commercial systems during 1999 and 2000 to be higher than their
sales price under the terms of our distribution arrangements with GE Fuel Cell
Systems and Edison Development. Futhermore, even if we achieve our objective of
bringing our first commercial product to market in 2001, we anticipate that we
will continue to incur losses until we can cost-effectively produce and sell
our residential fuel cell systems to the mass market, which we do not expect to
occur until after 2002. Even if we do achieve profitability, we may be unable
to sustain or increase our profitability in the future. See "Selected
Historical Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
We may never complete the research and development of a commercially viable
residential fuel cell system
We do not know when or whether we will successfully complete research and
development of a commercially viable residential fuel cell system. We have
produced and are currently demonstrating a number of test and evaluation
systems and are continuing our efforts to decrease the costs of our systems'
components and subsystems, improve their overall reliability and efficiency,
and ensure their safety. However, we must complete substantial additional
research and development on our systems before we will have a commercially
viable product. In addition, while we are conducting tests to predict the
overall life of our systems, we will not have run our systems over their
projected useful life prior to commercialization. See "Business--Product
Development and Commercialization Process".
A mass market for residential fuel cell systems may never develop or may take
longer to develop than we anticipate
Fuel cell systems for residential use represent an emerging market, and we do
not know whether our targeted distributors and resellers will want to purchase
them or whether end-users will want to use them. If a mass market fails to
develop or develops more slowly than we anticipate, we may be unable to recover
the losses we will have incurred to develop our product and may be unable to
achieve profitability. The development of a mass market for our systems may be
impacted by many factors, some of which are out of our control, including:
. the cost competitiveness of fuel cell systems;
8
<PAGE>
. the future costs of natural gas, propane and other fuels used by our
systems;
. consumer reluctance to try a new product;
. consumer perceptions of our systems' safety;
. regulatory requirements; and
. the emergence of newer, more competitive technologies and products.
We have no experience manufacturing residential fuel cell systems on a
commercial basis
To date, we have focused primarily on research and development and have no
experience manufacturing fuel cell systems for the residential market on a
commercial basis. We are currently constructing a 51,000 square foot
manufacturing facility and are continuing to develop our manufacturing
capability and processes. We do not know whether or when we will be able to
develop efficient, low-cost manufacturing capability and processes that will
enable us to meet the quality, price, engineering, design and production
standards or production volumes required to successfully mass market our
residential fuel cell systems. Even if we are successful in developing our
manufacturing capability and processes, we do not know whether we will do so in
time to meet our product commercialization schedule or to satisfy the
requirements of our distributors or customers. See "Business--Manufacturing".
We are heavily dependent on our relationship with GE Fuel Cell Systems and
General Electric's commitment to develop the residential fuel cell market
Substantially all of our revenue for the foreseeable future will be derived
from sales of our products to GE Fuel Cell Systems. We have granted to GE Fuel
Cell Systems exclusive worldwide rights to market, distribute, install and
service Plug Power fuel cell systems designed for residential and commercial
applications under 35 kW (other than the states of Illinois, Indiana, Michigan
and Ohio, in which Edison Development has exclusive distribution rights). Under
our distribution agreement, we will sell our systems directly to GE Fuel Cell
Systems, which, in turn, will seek to sell them to selected resellers. We are
also obligated under an amendment to our agreement to purchase $12.0 million of
technical support services from General Electric during the next three years.
Our distribution agreement expires in 2009, although General Electric may
terminate the agreement earlier if, among other reasons, we fail to do any of
the following:
. remain in material compliance with the development schedule toward a
January 1, 2001 product release;
. produce competitive commercial fuel cell systems;
. meet commercial production and cost requirements;
. produce systems that comply with regulatory requirements; or
. obtain all necessary approvals and certifications for our systems.
Our ability to sell our systems to the mass market is heavily dependent upon
General Electric's worldwide sales and distribution network and service
capabilities. Even though we own a minority interest in GE Fuel Cell Systems,
we cannot control its operations or business decisions. Any change in our
relationship with General Electric, whether as a result of market, economic, or
competitive pressures, including any decision by General Electric to alter its
commitment to our fuel cell technology in favor of other fuel cell
technologies, to develop fuel cell systems targeted at different markets than
ours or to focus on different energy product solutions, could harm our
business, prospects, results of operations, or financial condition. See
"Business--Our Strategy" and "Business--Distribution and Marketing".
9
<PAGE>
We may not meet our product development and commercialization milestones
We have established product development and commercialization milestones that
we use to assess our progress toward developing a commercially viable
residential fuel cell system. Milestones are adjusted from time to time as a
result of delays in achieving specific targets related to technology and design
improvements as well as dates for achieving development goals. To gauge our
progress, we operate test and evaluation fuel cell systems under actual
residential conditions. If we experience delays in meeting our development
goals or if our systems exhibit technical defects or are unable to meet cost or
performance goals, including power output, useful life and reliability, our
commercialization schedule could be delayed and potential purchasers of our
initial commercial systems may decline to purchase them or choose alternative
technologies. We cannot guarantee that we will successfully achieve our
milestones in the future. See "Business--Product Development and
Commercialization Process".
We are dependent on third party suppliers for the development and supply of key
components for our products
While we have recently entered into relationships with some suppliers, we do
not know when or whether we will secure relationships with suppliers of all
required components and subsystems for our fuel cell systems, or whether such
relationships will be on terms that will allow us to achieve our objectives.
Our business, prospects, results of operations, or financial condition could be
harmed if we fail to secure relationships with entities who will supply the
required components for our systems.
Once we establish relationships with third party suppliers, we will rely on
them to provide components for our fuel cell systems. A supplier's failure to
develop and supply components in a timely manner, or to supply components that
meet our quality, quantity or cost requirements, or our inability to obtain
substitute sources of these components on a timely basis or on terms acceptable
to us, could harm our ability to manufacture our fuel cell systems. In
addition, to the extent the processes that our suppliers use to manufacture
components are proprietary, we may be unable to obtain comparable components
from alternative suppliers.
We face intense competition and may be unable to compete successfully
The markets for electricity are intensely competitive. There are many
companies engaged in all areas of traditional and alternative electric power
generation in the United States, Canada and abroad, including, among others,
major electric, oil, chemical, natural gas, and specialized electronics firms,
as well as universities, research institutions and foreign government-sponsored
companies. These firms are engaged in forms of power generation such as solar
and wind power, reciprocating diesel engines and microturbines as well as grid-
supplied electricity. Many of these entities have substantially greater
financial, research and development, manufacturing and marketing resources than
we do.
There are a number of companies located in the United States, Canada, and
abroad that are developing PEM fuel cell technology. We also compete with
companies that are developing applications, residential and otherwise, using
other types of fuel cells. Some of our competitors are much larger than we are.
If these larger competitors decide to focus on the development of residential
fuel cell systems, they have the manufacturing, marketing, and sales
capabilities to complete research, development and commercialization of a
commercially viable residential fuel cell system more quickly and effectively
than we can. See "Business--Competition".
10
<PAGE>
Changes in government regulations and electric utility industry restructuring
may affect demand for our fuel cell systems
The market for electricity generation products is heavily influenced by
federal and state governmental regulations and policies concerning the electric
utility industry. The loosening of current regulatory standards could deter
further investment in the research and development of alternative energy
sources, including fuel cells, and could result in a significant reduction in
the potential market demand for our products. We cannot predict how the
deregulation and restructuring of the industry will affect the market for
residential fuel cell systems. See "Business--Changes in the Power Industry".
Our business may become subject to future government regulation which may
impact our ability to market our product
We do not believe that our product will be subject to existing federal and
state regulations governing traditional electric utilities and other regulated
entities. We do believe that our product and its installation will be subject
to oversight and regulation at the local level in accordance with state and
local ordinances relating to building codes, safety, pipeline connections and
related matters. Such regulation may depend, in part, upon whether a fuel cell
system is placed outside or inside a home. At this time, we do not know which
jurisdictions, if any, will impose regulations upon our product. We also do not
know the extent to which any existing or new regulations may impact our ability
to distribute, install and service our product. Once our product reaches the
commercialization stage and we begin distributing our systems to our target
early markets, federal, state or local government entities or competitors may
seek to impose regulations. Any new government regulation of our product,
whether at the federal, state or local level, including any regulations
relating to installation and servicing of our products, may increase our costs,
and therefore, harm our business, prospects, results of operations, or
financial condition.
Utility companies could place barriers on our entry into the marketplace
Utility companies commonly charge fees to industrial customers for
disconnecting from the grid, for using less electricity, or for having the
capacity to use power from the grid for back up purposes. Though these fees are
not currently charged to residential users, it is possible that utility
companies could at some future date charge similar fees to residential
customers. The imposition of such fees could increase the cost to residential
customers of using our systems, could make our systems less desirable, and
could thereby harm our business, prospects, results of operations, or financial
condition.
Alternatives to our technology could render our systems obsolete prior to
commercialization
Our system is one of a number of alternative energy products being developed
today as supplements to the electric grid that have potential residential
applications, including microturbines, solar power and wind power, and other
types of fuel cell technologies. Improvements are also being made to the
existing electric transmission system. Technological advances in alternative
energy products, improvements in the electric grid or other fuel cell
technologies may render our systems obsolete.
The hydrocarbon fuels on which our systems rely may not be readily available or
available on a cost-effective basis
Our systems' ability to produce electricity depends on the availability of
natural gas and propane. If these fuels are not readily available to the mass
market or if their prices are such that electricity produced by our systems
costs more than electricity provided through the grid, our systems would be
less attractive to potential users and our business, prospects, results of
operations, or financial condition could be harmed.
11
<PAGE>
Our residential fuel cell systems use flammable fuels which are inherently
dangerous substances
Our residential fuel cell systems will utilize natural gas or propane in a
catalytic reaction which produces less heat than a typical gas furnace. While
our fuel cell system does not use these fuels in a combustion process, natural
gas and propane are flammable fuels that could leak in a home and combust if
ignited by another source. These dangers are present in any home appliance that
uses natural gas or propane such as a gas furnace, stove or dryer. Since our
fuel cell systems are a new product, any accidents involving our systems or
other fuel cell-based products could impede demand for our products.
We may be unable to raise additional capital to complete our product
development and commercialization plans
Our product development and commercialization schedule could be delayed if we
are unable to fund our research and development activities or the development
of our manufacturing capabilities. We expect that the net proceeds of this
offering, together with the proceeds from our issuance of shares to current
stockholders in September 1999 and immediately before the closing of this
offering and all other existing sources of capital, will be sufficient to fund
our activities through the end of 2001. We believe it is likely we will need to
raise additional funds to achieve full commercialization of our product. We do
not know whether we will be able to secure additional funding, or funding on
terms acceptable to us, to pursue our commercialization plans through the mass
market stage. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
We may have difficulty managing the expansion of our operations
We are undergoing rapid growth in the number of our employees, the size of
our physical plant and the scope of our operations. For example, we began with
22 employees in June 1997 and expect to have approximately 300 by the end of
1999. Such rapid expansion is likely to place a significant strain on our
senior management team and other resources. Our business, prospects, results of
operations or financial condition could be harmed if we encounter difficulties
in effectively managing the budgeting, forecasting and other process control
issues presented by such a rapid expansion.
We face risks associated with our plans to market, distribute and service our
products internationally
We intend to market, distribute, and service our residential fuel cell
systems internationally through GE Fuel Cell Systems. We have limited
experience developing, and no experience manufacturing, our products to comply
with the commercial and legal requirements of international markets. Our
success in those markets will depend, in part, on GE Fuel Systems' ability to
secure relationships with foreign resellers and our ability to manufacture
products that meet foreign regulatory and commercial requirements. In addition,
our planned international operations are subject to other inherent risks,
including difficulties in enforcing contractual obligations and intellectual
property rights in some countries and fluctuations in currency exchange rates.
We may not be able to protect important intellectual property
PEM fuel cell technology was first developed in the 1950s and we do not
believe we can achieve a significant proprietary position on the basic
technologies used in fuel cell systems. However, our ability to compete
effectively against other fuel cell companies will depend, in part, on our
ability to protect our proprietary technology, systems designs and
manufacturing processes. We do not know whether any of our pending patent
applications will issue or, in the case of patents
12
<PAGE>
issued or to be issued, that the claims allowed are or will be sufficiently
broad to protect our technology or processes. Even if all our patent
applications are issued and are sufficiently broad, they may be challenged or
invalidated. We could incur substantial costs in prosecuting or defending
patent infringement suits. While we have attempted to safeguard and maintain
our proprietary rights, we do not know whether we have been or will be
completely successful in doing so.
Further, our competitors may independently develop or patent technologies or
processes that are substantially equivalent or superior to ours. If we are
found to be infringing third party patents, we do not know whether we will be
able to obtain licenses to use such patents on acceptable terms, if at all.
Failure to obtain needed licenses could delay or prevent the development,
manufacture or sale of our fuel cell systems.
We rely, in part, on contractual provisions to protect our trade secrets and
proprietary knowledge. These agreements may be breached, and we may not have
adequate remedies for any breach. Our trade secrets may also be known without
breach of such agreements or may be independently developed by competitors. Our
inability to maintain the proprietary nature of our technology and processes
could harm our business, prospects, results of operations or financial
condition. See "Business--Proprietary Rights".
Our government contracts could restrict our ability to effectively
commercialize our technology
Under some of our contracts, government agencies can require us to obtain or
produce components for our systems from sources located in the United States
rather than foreign countries. Our contracts with government agencies are also
subject to the risk of termination at the convenience of the contracting
agency, potential disclosure of our confidential information to third parties,
and the exercise of "march-in" rights by the government. March-in rights refer
to the right of the United States government or government agency to exercise
its non-exclusive, royalty-free, irrevocable worldwide license to any
technology developed under contracts funded by the government if the contractor
fails to continue to develop the technology. The implementation of restrictions
on our sourcing of components or the exercise of march-in rights could harm our
business, prospects, results of operations, or financial condition.
Our existing stockholders will control all matters requiring a stockholder vote
Upon the completion of this offering, Edison Development, Mechanical
Technology, and GE On-Site Power will retain approximately 77.4% of our
outstanding stock. If all of these stockholders were to vote together as a
group, they would have the ability to exert significant influence over our
Board of Directors and its policies. For instance, these stockholders would be
able to control the outcome of all stockholder votes, including votes
concerning director elections, charter and by-law amendments and possible
mergers, corporate control contests and other significant corporate
transactions. See "Principal Stockholders" and "Description of Capital Stock".
Our future plans could be harmed if we are unable to attract or retain key
personnel
We have attracted a highly skilled management team and specialized workforce,
including scientists, engineers, researchers, and manufacturing and marketing
professionals. Based on our planned expansion, we will require a significant
increase in the number of our employees and outside contractors. Our future
success, therefore, will depend, in part, on attracting and retaining
additional qualified management and technical personnel. We do not know whether
we will be successful in hiring or retaining qualified personnel. Our inability
to hire qualified personnel on a timely basis, or the departure of key
employees, could harm our expansion and commercialization plans.
13
<PAGE>
There has been no prior public market for our common stock
Before this offering, there has been no public market for our common stock.
Although we expect our common stock to be quoted on the Nasdaq National Market,
an active trading market for our shares may not develop or be sustained
following this offering. Purchasers in this offering may not be able to resell
their shares at prices equal to or greater than the initial public offering
price. The initial public offering price will be determined through
negotiations between us and the underwriters and may not be indicative of the
market price for these shares following this offering. See "Underwriting".
We may be subject to litigation if our stock price is volatile
The stock market has, from time to time, experienced extreme price and volume
fluctuations. Many factors may cause the market price for our common stock to
decline, perhaps substantially, following this offering, including:
. failure to meet our product development and commercialization
milestones;
. demand for our common stock;
. revenues and operating results failing to meet the expectations of
securities analysts or investors in any quarter;
. downward revisions in securities analysts' estimates or changes in
general market conditions;
. technological innovations by competitors or in competing technologies;
. investor perception of our industry or our prospects; or
. general technology or economic trends.
In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. We
may be involved in a securities class action litigation in the future. Such
litigation often results in substantial costs and a diversion of management's
attention and resources and could harm our business, prospects, results of
operations, or financial condition.
Provisions of Delaware law and of our charter and by-laws may make a takeover
more difficult
Provisions in our certificate of incorporation and by-laws and in the
Delaware corporate law may make it difficult and expensive for a third party to
pursue a tender offer, change in control or takeover attempt which is opposed
by our management and Board of Directors. Public stockholders who might desire
to participate in such a transaction may not have an opportunity to do so. We
also have a staggered Board of Directors which makes it difficult for
stockholders to change the composition of the Board of Directors in any one
year. These anti-takeover provisions could substantially impede the ability of
public stockholders to benefit from a change in control or change our
management and Board of Directors. See "Description of Capital Stock".
You will suffer immediate and substantial dilution
The initial public offering price per share will be substantially higher than
the net tangible book value per share immediately after the offering. If you
purchase common stock in this offering, you will incur dilution of $9.44 from
the price you paid based on pro forma as adjusted net book value at June 30,
1999. We also have a large number of outstanding stock options to purchase our
common stock with exercise prices significantly below the initial public
offering price of the common stock. To the extent these options are exercised,
there will be further dilution. See "Dilution" and "Principal Stockholders".
14
<PAGE>
Future sales of our common stock could adversely affect our stock price
Substantial sales of our common stock in the public market following this
offering, or the perception by the market that such sales could occur, could
lower our stock price or make it difficult for us to raise additional equity
capital in the future. After this offering, we will have 42,208,480 shares of
common stock outstanding. Of these shares, the 6,000,000 shares sold in this
offering will be freely tradeable. All the remaining 36,208,480 shares are
subject to 180-day lock-up agreements. Up to 25,049,850 shares may be available
for sale in the public market 180 days after the date of this prospectus.
In addition, after this offering, we also intend to register 5,671,191 shares
of common stock for issuance under our stock option and grant plan and
1,000,000 shares of common stock under our employee stock purchase plan. As of
September 30, 1999, options to purchase 3,377,189 shares of common stock were
issued and outstanding, of which options to purchase 1,220,782 shares have
vested. See "Underwriting" and "Shares Eligible for Future Sale".
We cannot predict if future sales of our common stock, or the availability of
our common stock for sale, will harm the market price for our common stock or
our ability to raise capital by offering equity securities.
We may experience Year 2000 compliance problems
Our product development activities are dependent upon the use of computer
systems. As a result, we are vulnerable to the "Year 2000" issue which means
that our computer systems could fail or create erroneous data as a result of
misinterpreting the year designation "00" on January 1, 2000. We have completed
a review and evaluation of the potential impact of this issue on our computer
systems and believe that all of our material computer systems will function
properly although we can give no assurance in this regard. We have also
completed a review and assessment to identify all other time dependent systems
and have determined that all systems critical to our business have been
verified to be Year 2000 compliant. We have not fully assessed the state of
Year 2000 readiness of our suppliers and customers and do not know whether Year
2000 related difficulties of third parties could have a material impact on our
business, prospects, results of operations, or financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
We will have broad discretion as to the use of the net proceeds from this
offering
Our Board of Directors and our management will have broad discretion over the
use of the net proceeds of this offering. Investors will be relying on the
judgment of our Board of Directors and our management regarding the application
of the net proceeds of this offering. See "Use of Proceeds".
15
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of 6,000,000 shares of
our common stock in this offering will be $77.3 million, at an assumed initial
public offering price of $14.00 per share, after deducting the estimated
underwriting discounts and commissions and our estimated offering expenses. We
will also receive proceeds of $84.9 million from the issuance of 9,216,666
shares of common stock upon the exercise of outstanding warrants and other
purchase rights immediately before the closing of this offering. We estimate
that our total net proceeds of $162.2 million will be used as follows:
. approximately $20.0 million will be used for manufacturing equipment,
facilities and other capital expenditures in support of
commercialization activities during 1999 and 2000;
. approximately $142.2 million will be used for general corporate
purposes, including working capital, funds for operations, research and
product development, market development and capital expenditures after
the year 2000 and potential acquisitions.
Pending their use, we will invest these proceeds in government securities and
other short-term, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any dividends on our common stock. We
currently intend to retain our future earnings, if any, to finance the
expansion of our business and do not expect to pay any dividends in the
foreseeable future.
Payment of future cash dividends, if any, will be at the discretion of our
Board of Directors after taking into account various factors, including our
financial condition, operating results, current and anticipated cash needs and
plans for expansion.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
. on an actual basis;
. on a pro forma basis giving effect to the issuance of 533,334 shares of
common stock pursuant to a September 1999 capital call, the issuance of
9,216,666 shares of common stock to be issued upon the exercise of
outstanding warrants and other purchase rights immediately before the
closing of this offering, the assumption of $6.2 million of debt in July
1999 in connection with the purchase of real estate from Mechanical
Technology and the vesting in August 1999 of 1,500,000 shares of common
stock held by GE On-Site Power as described in "Management's Discussion
and Analysis of Financial Condition and Results of Operations"; and
. on a pro forma, as adjusted basis to reflect the pro forma adjustments
described above and the sale of 6,000,000 shares of common stock in this
offering at an assumed initial public offering price of $14.00 per
share, after deducting the estimated underwriting discounts and
commissions and our estimated offering expenses.
<TABLE>
<CAPTION>
June 30, 1999
--------------------------------
Pro Forma,
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Capital lease obligations...................... $ 246 $ 246 $ 246
Note payable................................... -- 6,160 6,160
-------- -------- --------
Total debt.................................... 246 6,406 6,406
-------- -------- --------
Stockholders' equity:
Class A membership interest, no par value,
40,000,000 shares authorized, 26,458,480
shares issued and outstanding............... --
Class B membership interest, no par value,
3,000,000 shares authorized, none issued.... --
Membership interest subscribed............... (4,698)
Preferred stock, $0.01 par value per share;
5,000,000 shares authorized, none issued and
outstanding, actual, pro forma, and pro
forma as adjusted........................... -- --
Common stock, $0.01 par value per share;
95,000,000 shares authorized; none issued
and outstanding, actual; 36,208,480 shares
issued and outstanding, pro forma; and
42,208,480 shares issued and outstanding,
pro forma, as adjusted...................... 362 422
Paid-in capital................................ 60,108 165,121 242,361
Deficit accumulated during the development
stage......................................... (30,260) (30,260) (30,260)
-------- -------- --------
Total stockholders' equity .................... 25,150 135,223 212,523
-------- -------- --------
Total capitalization......................... $ 25,396 $141,629 $218,929
======== ======== ========
</TABLE>
17
<PAGE>
DILUTION
As of June 30, 1999, we had a pro forma net tangible book value of $115.1
million, or $3.18 per share of common stock. Pro forma net tangible book value
per share is equal to our total tangible assets less total liabilities, divided
by the pro forma number of shares of our outstanding common stock. After giving
effect to the sale of the 6,000,000 shares of common stock offered hereby at an
assumed initial public offering price of $14.00 per share, and after deducting
the estimated underwriting discounts and commissions and our estimated offering
expenses, our pro forma net tangible book value as adjusted, as of June 30,
1999, would have been $192.4 million, or $4.56 per pro forma share of common
stock. This represents an immediate increase in pro forma net tangible book
value as adjusted of $1.38 per share to our existing stockholders and an
immediate dilution of $9.44 per share to new investors in this offering. If the
initial public offering price is higher or lower than $14.00 per share, the
dilution to new investors will be higher or lower, respectively. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $14.00
Pro forma net tangible book value per share before this
offering........................................................ $3.18
Increase per share attributable to this offering................. 1.38
-----
Pro forma net tangible book value per share after this offering.... 4.56
------
Dilution per share to new investors................................ $ 9.44
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1999, the
difference between existing stockholders and new investors with respect to the
number of shares of common stock purchased, the total consideration paid and
the average price per share paid. The table assumes that the initial public
offering price will be $14.00. If the underwriters' over-allotment option is
exercised in full, the percentage of the total number of shares of common stock
held by existing stockholders will decrease from 85.8% to 84.0% of the total
number of shares of common stock outstanding after the offering, and the
percentage of the total number of shares of common stock held by new investors
will increase from 14.2% to 16.0% of the total number of shares of common stock
outstanding after the offering.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 36,208,480 85.8% $165,482,964 66.3% $ 4.57
New investors............. 6,000,000 14.2 84,000,000 33.7 14.00
---------- ----- ------------ -----
Total................... 42,208,480 100.0% $249,482,964 100.0%
========== ===== ============ =====
</TABLE>
The table excludes:
. up to 900,000 shares that may be issued by us pursuant to the
underwriters' over-allotment option;
. 3,377,189 shares of common stock issuable upon exercise of stock options
outstanding at September 30, 1999 at a weighted average exercise price
of $4.98 per share.
To the extent these options are exercised and the underlying shares are
issued, there will be further dilution to new investors. See "Management" and
the notes to our financial statements included elsewhere in this prospectus.
18
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following tables present selected historical financial data for the
period from June 27, 1997 (date of inception) through December 31, 1997, the
year ended December 31, 1998 and the six month periods ended June 30, 1998 and
1999. The balance sheet data as of December 31, 1997 and 1998 and the statement
of operations data for the period from inception through December 31, 1997 and
for the year ended December 31, 1998 have been derived from financial
statements (including those set forth elsewhere in this prospectus) that have
been audited by PricewaterhouseCoopers LLP, independent accountants. The
statement of operations data for the six month periods ended June 30, 1998 and
1999 and the balance sheet data as of June 30, 1999 are derived from our
unaudited financial statements and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of our results of operations and financial condition for
those periods. The data for the six-month period ended June 30, 1999 are not
necessarily indicative of results for the year ending December 31, 1999 or any
future period.
<TABLE>
<CAPTION>
Period from
June 27, 1997 to Year ended
December 31, December 31, Six months ended June 30,
---------------- ------------ -----------------------------
1997 1998 1998 1999
---------------- ------------ ------------ -------------
(unaudited) (unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Contract revenue........ $ 1,194 $ 6,541 $ 2,549 $ 3,696
Cost of contract
revenue................ 1,227 8,864 3,439 5,118
------- ------- ------------ -------------
Loss on contracts....... (33) (2,323) (890) (1,422)
In-process research and
development............ 4,042 -- -- --
Research and development
expense................ 1,301 4,632 2,154 7,780
General and
administrative
expense................ 630 2,754 1,328 5,756
------- ------- ------------ -------------
Operating loss......... (6,006) (9,709) (4,372) (14,958)
Other income,
principally interest... 103 93 42 218
------- ------- ------------ -------------
Net loss............... $(5,903) $(9,616) $ (4,330) $ (14,740)
======= ======= ============ =============
Basic and diluted net
loss per share......... $ (0.62) $ (0.71) $ (0.40) $ (0.69)
======= ======= ============ =============
Shares used in computing
basic and diluted net
loss per share......... 9,500 13,617 10,865 21,299
======= ======= ============ =============
<CAPTION>
December 31, June 30,
------------------------- -------------
1997 1998 1999
------------ ------------ -------------
(unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................ $ 3,080 $ 3,993 $ 17,243
Working capital.......................... 2,667 2,692 13,570
Total assets............................. 4,847 8,093 30,077
Long-term obligations.................... -- -- 155
Total stockholders' equity............... 3,597 5,493 25,150
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Plug Power's
financial statements, the notes to those financial statements and other
financial information appearing elsewhere in this prospectus. In addition to
historical information, the following discussion and other parts of this
prospectus contain forward-looking statements that reflect our plans,
estimates, intentions, expectations and beliefs. Our actual results could
differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those set forth in the "Risk Factors" section and contained
elsewhere in this prospectus.
Plug Power was formed in June 1997 as a Delaware limited liability company.
Immediately before this offering, we will merge into a newly-formed Delaware
corporation and all of our outstanding equity interests will be converted on a
one-for-one basis into shares of common stock. Unless otherwise indicated, all
information that we present in this prospectus for any date or period gives
effect to the merger as if it had occurred on such date or as of the beginning
of such period and all references to capital stock in this prospectus for
periods prior to the merger mean our issued and outstanding membership
interests.
Overview
Plug Power is a leading designer and developer of on-site, electricity
generation systems utilizing proton exchange membrane (PEM) fuel cells for
residential applications. GE Fuel Cell Systems, LLC, a joint venture 75% owned
by General Electric's GE Power Systems business and 25% owned by Plug Power,
will market, sell, service, and install our product.
Plug Power was formed in June 1997 as a joint venture to further the
development of fuel cells for electric power generation in residential and
other applications. Through September 30, 1999, our existing stockholders in
the aggregate have invested $45.9 million in cash and $34.5 million in real
estate, in-process research and development, distribution and other agreements,
and other in-kind contributions. Certain of our existing investors have
committed to invest an additional $84.9 million in cash upon the exercise of
outstanding warrants and purchase commitments immediately before the closing of
this offering. Since inception, we have devoted substantially all of our
resources toward the development of our PEM fuel cell systems.
We are a development stage company and expect to bring our first commercial
product to market in 2001. Through June 30, 1999, we derived all of our revenue
from government research and development contracts. Substantially all of these
government contracts relate to PEM fuel cell research and development with a
focus on automotive applications. We believe most of the technology developed
under these government contracts is easily transferable to residential fuel
cell applications.
Since our inception in June 1997, we have raised capital through the issuance
of equity, formed strategic alliances with certain key suppliers, developed
distributor and customer relationships, and entered into development and
demonstration programs with electric utilities, government agencies and other
energy providers. In 1999, we expect to produce approximately 50 test and
evaluation systems which will be installed in laboratory and field locations
for field and market testing. Based on the system performance and market data
provided by these field trials, we will determine the final design of our first
pre-commercial product. During 2000 we expect to manufacture approximately 500
pre-commercial residential fuel cell systems to further our field testing
activities and prepare for commercial production, which is planned to begin in
2001. We do not expect significant product sales until some time after we begin
commercial production.
20
<PAGE>
From inception through June 30, 1999 we incurred losses of $30.3 million. We
expect to continue to incur losses as we expand our product development and
commercialization program and prepare for the commencement of manufacturing
operations. We expect that losses will fluctuate from quarter to quarter and
that such fluctuations may be substantial as a result of, among other factors,
the number of systems we produce and install for internal and external testing,
the related service requirements necessary to monitor those systems and
potential design changes required as a result of field testing. There can be no
assurance that we will manufacture or sell residential fuel cell systems
successfully or ever achieve or sustain product revenues or profitability.
Results of Operations
Comparison of the Six Months Ended June 30, 1998 and June 30, 1999
Revenues. Through June 30, 1999, our revenues have been derived exclusively
from cost reimbursement government contracts relating to the research and
development of PEM fuel cell technology. These contracts provide for the
partial recovery of direct and indirect costs from the specified government
agency, generally requiring us to absorb from 25% to 50% of contract costs
incurred. Contract revenues increased from $2.5 million for the six months
ended June 30, 1998 to $3.7 million for the six months ended June 30, 1999. As
of June 30, 1999, we have three ongoing government contracts which we expect
will produce approximately $7.6 million in contract revenue over the next eight
quarters.
We expect to continue to pursue government contracts that relate to the
further development and commercialization of PEM fuel cells and have been
awarded several additional contracts totaling $16.5 million that commenced in
the quarter ending September 30, 1999 and continue through 2003. These are also
cost reimbursement contracts in which the specific government agency will
reimburse us for 50% of the costs we incur. As a result, we will report a loss
on these contracts. We expect to continue to incur losses on future government
contracts awarded while developing proprietary information that we expect will
enhance our ability to commercialize our PEM fuel cell systems.
We expect to begin manufacturing pre-commercial residential fuel cell systems
during 2000. All users of these systems will be expected to participate in
field trials and evaluations designed to test system performance, market
conditions and customer preferences, including usage patterns, fuel
availability, buying criteria, and regulatory matters. We intend to use this
data to achieve optimal product design and speed commercialization and mass
market acceptance. The information obtained from the field test results will be
used to improve the design and performance of the commercial units planned for
production and sale in the year 2001. GE Fuel Cell Systems has committed to
purchase from us, on a take or pay basis, 485 of the pre-commercial residential
fuel cell systems prior to December 31, 2000. The total sales price for these
units will be approximately $10.3 million.
Cost of revenues. Cost of contract revenues includes compensation and
benefits for the engineering and related support staff, fees paid to outside
suppliers for subcontracted components and services, fees paid to consultants
for services provided, materials and supplies used and other general overhead
costs directly allocable to specific government contracts. Cost of contract
revenue was $3.4 million for the six months ended June 30, 1998 as compared to
$5.1 million for the six months ended June 30, 1999. This increase relates to
the additional staff and related support costs necessary to earn the additional
contract revenue as reported. The result was a loss on contracts of $890,000
for the six months ended June 30, 1998 compared to a loss on contracts of $1.4
million for the six months ended June 30, 1999.
We expect the cost to produce our initial systems to be higher than their
sales price under the terms of our distribution arrangements with GE Fuel Cell
Systems and Edison Development. We expect to continue to experience costs in
excess of product sales until we achieve higher production levels, which we do
not expect will occur until after 2002.
21
<PAGE>
Research and Development. Research and development expense includes
compensation and benefits for the engineering and related staff, expenses for
contract engineers, materials to build prototype units, fees paid to outside
suppliers for subcontracted components and services, supplies used, facility
related costs, such as computer and network services and other general overhead
costs. Research and development expenses increased from $2.2 million for the
six months ended June 30, 1998 to $7.8 million for the six months ended June
30, 1999. The increase was a result of the growth of Plug Power's research and
development activities focused on residential PEM fuel cell systems.
We expect to significantly increase our spending on research and development
in the future in order to bring our residential PEM fuel cell systems to the
marketplace by 2001. Beyond 2001, we plan to continue development activities
related to performance improvements of the residential PEM fuel cell system and
to develop other commercial PEM fuel cell applications.
General and Administrative. General and administrative expense includes
compensation, benefits and related costs in support of our general corporate
functions, including general management, finance and accounting, human
resources, business development, information and legal services. General and
administrative expenses increased from $1.3 million for the six months ended
June 30, 1998 to $5.8 million for the six months ended June 30, 1999. The
increase was primarily due to a $2.3 million charge for non-cash stock-based
compensation and a $1.9 million write-off of deferred rent, both further
explained below. We expect general and administrative expenses to increase in
future years as we prepare for expected increased sales volume.
The $2.3 million charge for non-cash stock-based compensation represents the
aggregate fair value of stock granted to Mechanical Technology. Our original
formation agreements provided for Mechanical Technology to earn non-cash
credits relating to services it rendered prior to our formation in connection
with securing future government contracts. Upon our formation, Mechanical
Technology contributed its fuel cell operations to Plug Power and we received
the right to these government contracts if ever awarded in the future. When
these contracts were awarded to us, Mechanical Technology earned the non-cash
credits, entitling it to receive 2,250,000 shares of common stock with a fair
value at the time of grant of $2.3 million. Accordingly, we recognized $2.3
million in non-cash stock-based compensation expense during the first six
months of 1999.
In June 1999, we entered into a real estate purchase agreement with
Mechanical Technology to acquire our current facility, a portion of which we
previously leased from them. As a result, we wrote off deferred rent expense in
the amount of $1.9 million. We originally recorded $2.0 million for deferred
rent in October 1998, representing the value of a ten-year lease agreement with
Mechanical Technology at favorable lease rates. See "Liquidity and Capital
Resources--Capital Contributions by Initial Investors".
Other Income. Other income consists principally of interest income earned on
our cash and cash equivalents. Other income increased from $41,000 for the six
months ended June 30, 1998 to $218,000 for the six months ended June 30, 1999.
The increase was due to interest earned on higher balances of cash and cash
equivalents available during the six months ended June 30, 1999.
Income Taxes. No benefit for federal and state income taxes is reported in
the financial statements, since before the merger, which will occur immediately
before the closing of this offering, we had elected to be taxed as a
partnership. Therefore, for the periods presented, the federal and state income
tax benefits of our losses were recorded by our stockholders. Subsequent to our
merger into a C corporation immediately before the closing of this offering, we
will account for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes", and
expect to be subject to an effective tax rate of 40%. Had we applied the
provisions of SFAS 109 since inception, the deferred tax asset generated,
primarily from
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net operating loss carryforwards, would have been offset by a full valuation
allowance. We believe any tax benefit resulting from expected operating losses
occurring after our conversion to a C corporation will also have a full
valuation allowance.
Comparison of the Period from June 27, 1997 (Date of Inception) to December
31, 1997 and the Year Ended December 31, 1998
Revenues. Our revenues during this period were derived exclusively from cost
reimbursement government contracts relating to the development of PEM fuel cell
technology. These contracts provide for the partial recovery of direct and
indirect costs from the specified government agency, generally requiring us to
absorb from 25% to 50% of contract costs incurred. Contract revenues increased
from $1.2 million for the period from inception through December 31, 1997 to
$6.5 million for the year ended December 31, 1998. This increase was due to
twelve months of activity in 1998 compared to six months in the period from
inception through December 31, 1997, combined with increased government
contract activities.
Cost of revenues. Cost of contract revenue includes compensation and benefits
for the engineering and related support staff, fees paid to outside suppliers
for subcontracted components and services, fees paid to consultants for
services provided, materials and supplies used and other directly allocable
general overhead costs allocated to specific government contracts. Cost of
contract revenue was $1.2 million for the period from inception through
December 31, 1997 as compared to $8.9 million for the year ended December 31,
1998. This increase in costs was due to twelve months of activity in 1998
compared to six months in the period from inception through December 31, 1997,
combined with the additional staff and related support costs necessary to earn
the additional contract revenue as reported. The result was a loss on contracts
of $33,000 for the year ended December 31, 1997 compared to a loss on contracts
of $2.3 million for the year ended December 31, 1998.
Research and Development. Research and development expense includes
compensation and benefits for the engineering and related staff, expenses for
contract engineers, materials to build prototype units, fees paid to outside
suppliers for subcontracted components and services, supplies used, facility
related costs, such as computer and network services and other general overhead
costs. Research and development expenses increased from $1.3 million in the
period from inception through December 31, 1997 to $4.6 million for the year
ended December 31, 1998, an increase of $3.3 million. This increase was related
to Plug Power's research and development activities focused on residential PEM
fuel cell systems in the year ended December 31, 1998 over that expensed for
the period from inception through December 31, 1997.
At inception, we recorded a $4.0 million in-process research and development
expense related to Mechanical Technology's initial equity contribution. The in-
process research and development was valued at the inception date at its
estimated fair value using the cost valuation approach.
General and Administrative. General and administrative expense includes
compensation, benefits and related costs in support of our general corporate
functions, including general management, finance and accounting, human
resources, business development, information and legal services. General and
administrative expenses increased from $630,000 for the period from inception
through December 31, 1997 to $2.8 million for the year ended December 31, 1998.
The increase was due to twelve months of activity in 1998 compared to six
months in the period from inception through December 31, 1997, combined with
increased personnel cost and general expenses associated with expanding
operations.
Other Income. Other income consists principally of interest income earned on
our cash and cash equivalents. Other income was $103,000 for the period from
inception through December 31, 1997 and $93,000 for the year ended December 31,
1998.
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Income Taxes. No benefit for federal and state income taxes is reported in
the financial statements, since before the merger, which will occur immediately
before the closing of this offering, we had elected to be taxed as a
partnership. Therefore, for the periods presented, the federal and state income
tax benefits of our losses were recorded by our stockholders. Subsequent to our
conversion from a limited liability company to a C corporation, we will account
for income taxes in accordance with SFAS 109. Had we applied the provisions of
SFAS 109 since inception, the deferred tax asset generated, primarily from net
operating loss carryforwards, would have been offset by a full valuation
allowance.
Liquidity and Capital Resources
Summary
Our cash requirements depend on numerous factors, including completion of our
product development activities, ability to commercialize our residential fuel
cell systems, market acceptance of our systems and other factors. We expect to
devote substantial capital resources to continue our development programs
directed at commercializing our fuel cell systems for worldwide residential
use, to hire and train our production staff, develop and expand our
manufacturing capacity, begin production activities and expand our research and
development activities. We believe that our current cash balances, the proceeds
we will receive in connection with the exercise by certain existing
stockholders of warrants and other purchase rights immediately before the
closing of this offering, and the net proceeds from this offering will provide
us with sufficient capital to fund operations through 2001.
We have financed our operations through June 30, 1999 primarily from the sale
of equity which has provided us cash of $41.9 million. We anticipate incurring
substantial additional losses over at least the next several years.
As of June 30, 1999, we had cash and cash equivalents totaling $17.2 million.
As a result of our purchase of real estate from Mechanical Technology, we were
required to escrow $6.2 million of the $17.2 million in cash to secure the debt
assumed on the purchase. Since inception, net cash used in operating activities
has been $16.4 million and cash used in investing activities has been $8.2
million. For the reasons stated above, we expect that our cash requirements
will increase in future periods.
Capital Contributions by Initial Investors
Plug Power was formed in June 1997 as a joint venture between Mechanical
Technology and Edison Development. At formation, Mechanical Technology
contributed assets related to its fuel cell program, including intellectual
property, 22 employees, equipment, and the right to receive certain government
contracts, if awarded. Edison Development contributed or committed to
contribute $9.0 million in cash, expertise in distributed power generation and
marketplace presence to distribute and sell stationary fuel cell systems.
In June 1999 we entered into a real estate purchase agreement with Mechanical
Technology to acquire approximately 36 acres of land, two commercial buildings,
and a residential building located in Latham, New York. This property is the
location of our current facilities and we are presently constructing our new
production facility at this site.
As part of the real estate transaction with Mechanical Technology, we assumed
a $6.2 million letter of credit issued by KeyBank National Association for the
express purpose of servicing $6.2 million of debt related to Industrial
Development Revenue Bonds issued by the Town of Colonie Industrial Development
Agency. As consideration for the purchase, we issued 704,315 shares of common
stock to Mechanical Technology, valued at $6.67 per share. The transaction
closed in July
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1999 and a receivable for membership interests of $4.7 million was recorded as
shares subscribed as of June 30, 1999. In connection with this transaction, we
wrote off deferred rent expense in the amount of $1.9 million during the first
six months of 1999. This deferred rent expense related to a 10-year facilities
lease, at a favorable lease rate, on one of the purchased buildings. In
connection with the July 1999 closing, we agreed to lease some of the office
and manufacturing space back to Mechanical Technology on a short-term basis.
In June 1999, Edison Development purchased 704,315 shares of common stock for
$4.7 million in cash under provisions of our original formation documents that
allowed Edison Development and Mechanical Technology to maintain equal
ownership percentage in Plug Power. This equity contribution was recorded as of
June 30, 1999.
As of June 30, 1999, Mechanical Technology had made aggregate cash
contributions of $4.5 million plus non-cash contributions of $9.5 million and
we had a receivable for membership interests from Mechanical Technology of $4.7
million, while Edison Development had made aggregate cash contributions of
$18.7 million.
Capital Calls
In January 1999, we entered into an agreement with Mechanical Technology and
Edison Development. Pursuant to this agreement, we have the right to require
Edison Development and Mechanical Technology to contribute $7.5 million each in
1999 and $15.0 million each in 2000 in exchange for which each will receive
common stock valued at $7.50 per share. The agreement terminates on the earlier
of December 31, 2000 or upon an initial public offering of our shares at a
price greater than $7.50 per share. The agreement permits Mechanical Technology
and Edison Development to contribute any funds not previously called by us on
the termination date in exchange for shares at a price of $7.50 per share. In
September 1999, we made a capital call of $4.0 million, and Mechanical
Technology and Edison Development each contributed $2.0 million in cash in
exchange for 266,667 shares of common stock. Mechanical Technology and Edison
Development have committed to contribute the remaining $41.0 million
immediately before the closing of this offering in exchange for an aggregate of
5,466,666 shares of common stock.
GE Fuel Cell Systems
In February 1999, we entered into an agreement with GE On-Site Power to
create GE Fuel Cell Systems, a joint venture owned 75% by GE On-Site Power and
25% by Plug Power, which is dedicated to marketing, selling, installing, and
servicing Plug Power residential fuel cell systems on a worldwide basis (other
than in the states of Illinois, Indiana, Michigan and Ohio). See "Business--
Distribution and Marketing".
In connection with the formation of GE Fuel Cell Systems, we issued 2,250,000
shares of our common stock to GE On-Site Power, of which 750,000 shares vested
immediately. We have capitalized the fair value of these vested shares
($3.8 million) under the caption "Distribution and other agreements, net" in
our financial statements. The remaining 1,500,000 shares vested in August 1999
and will be capitalized at their fair value of $16.5 million. Such amounts will
be amortized ratably through 2009, the term of the distribution agreement.
We also issued a warrant to GE On-Site Power to purchase 3,000,000 additional
shares of common stock at a price of $12.50 per share. GE On-Site Power has
committed to exercise this warrant immediately before the closing of this
offering for a total exercise price of $37.5 million in cash.
General Electric has agreed to provide capital to GE Fuel Cell Systems, in
the form of loans, to fund GE Fuel Cell Systems' commitment to purchase 485
pre-commercial systems during the period
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ending December 31, 2000. General Electric has also agreed to provide
additional capital, in the form of a loan not to exceed $8.0 million, to fund
GE Fuel Cell Systems' ongoing operations.
Southern California Gas Company
In April 1999, Southern California Gas Company purchased 1,000,000 shares of
common stock for $6.7 million and agreed to spend $840,000 for market research
and services related to distributed power generation technologies, including
PEM fuel cell systems. In the event Southern California Gas does not expend
these amounts by April 2002, up to 111,851 previously issued shares may be
returned. Additionally, Southern California Gas received warrants to purchase
an additional 350,000 shares of common stock at an exercise price of $8.50 per
share. Southern California Gas has committed to exercise these warrants
immediately before the closing of this offering for a total exercise price of
$3.0 million in cash.
Private Investors
In February 1999, two investors, including Michael J. Cudahy, a director of
Plug Power, purchased 1,500,000 shares of common stock for a total of $10.0
million. In addition, Mr. Cudahy received a warrant to purchase 400,000 shares
of common stock at a price of $8.50 per share. Mr. Cudahy has committed to
exercise this warrant immediately prior to the closing of this offering for a
total exercise price of $3.4 million in cash. In April 1999 an unrelated
investor purchased 299,850 common shares for $2.0 million.
Line of Credit
In September 1999, we obtained a commitment letter for a $6.0 million line of
credit from KeyBank, National Association. The line of credit will bear
interest at the prime rate in effect from time to time, will mature upon the
earlier of the closing of this offering or November 30, 1999, and will be
collateralized by an assignment of our right to call capital from Mechanical
Technology and Edison Development.
Year 2000 Readiness Disclosure
The statements in the following section include "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act of 1998. The protections of this Act do not apply to claims
under the anti-fraud provisions of the federal securities laws.
Introduction
The Year 2000 issue relates to the various problems that may result from the
improper processing of dates and date-sensitive calculations by computers and
other machinery as the year 2000 is approached and reached. These problems
arise from hardware and software unable to distinguish dates in the "2000s"
from dates in the "1900s" and from other sources such as the use of special
codes and conventions in software that make use of date fields. These problems
could result in a system failure or miscalculations causing disruptions of
operations, including a temporary inability to process transactions, send
invoices or engage in other normal business activities. The Year 2000 issue may
pose additional problems due to the fact that Year 2000 is a leap year and some
computers and programs may fail to recognize the extra day.
Our State of Readiness
We have completed a review and evaluation of the potential impact that the
change in the date to the Year 2000 will have on our computer systems. As a
result of this review, we have determined that all of our major computer
systems are able to recognize and appropriately process dates
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commencing in the Year 2000. Our computer systems are based upon commercial
personal computer-based software packages. All such software packages have been
examined for their compliance and appropriate upgrades are being purchased and
installed. Existing personal computer systems that are not Year 2000 compliant
are scheduled for replacement prior to October 1999. We have also completed a
review and assessment to identify all other computer-related systems and time
dependent processes and have determined that all of our business critical
systems have been verified to be Year 2000 compliant. New systems acquired
during 1999 have also been reviewed to verify that they are Year 2000
compliant.
Cost to Address Year 2000 Issues
Our historical costs to assess our Year 2000 readiness have been negligible.
We are not currently able to estimate the final aggregate cost of addressing
the Year 2000 issue because funds may be required as a result of future
findings. The majority of the costs required to complete our Year 2000
compliance process will be incurred as part of our normal capital asset
acquisition program and would have been incurred without consideration of Year
2000 issues. We do not expect these costs to have an adverse effect on our
business and financial results.
Risks Presented by Year 2000 Issues
Computer systems are also used to operate and monitor our fuel cell systems.
However, due to the early stage of commercialization of our fuel cell systems,
any potential failures of our test and evaluation systems related to the Year
2000 are not expected to have a material impact on our product development or
commercialization schedule. During mid-1999, all key suppliers received a copy
of our Year 2000 compliance questionnaire. To date approximately 40% have
replied that they are or will be compliant prior to Year 2000. We are re-
contacting suppliers that have not yet responded. We plan to have responses
from all key suppliers by October 1999. We ask all new suppliers to confirm
their Year 2000 compliance. We are contacting all suppliers of equipment and
services that may be date- and time-sensitive to verify that their products and
equipment will meet with Year 2000 standards. We are unable to fully assess the
state of Year 2000 readiness of our suppliers and customers. Given our current
development state and our pilot scale production volumes, we do not anticipate
that Year 2000 related difficulties in third parties will have a material
impact on our business activities or prospects.
Our Contingency Plans
We do not have, but we will continue to evaluate the need for, a contingency
plan for business risks that might result from Year 2000-related events. As we
progress with our Year 2000 readiness plan and identify specific risk areas, we
intend to implement appropriate remedial actions and contingency plans.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS 131), "Disclosure about Segments
of an Enterprise and Related Information." SFAS 131 establishes new standards
for the way companies report information about operating segments in annual
financial statements. The disclosures prescribed by SFAS 131 are effective for
the year ended December 31, 1998. We do not believe we operate in more than
one segment.
Quantitative and Qualitative Disclosures About Market Risk
We invest our excess cash in interest-bearing, investment-grade securities
that we hold for the duration of the term of the respective instrument. We do
not utilize derivative financial instruments,
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derivative commodity instruments or other market risk sensitive instruments,
positions or transactions in any material fashion. Accordingly, we believe
that, while the investment-grade securities we hold are subject to changes in
the financial standing of the issuer of such securities, we are not subject to
any material risks arising from changes in interest rates, foreign currency
exchange rates, commodity prices, equity prices or other market changes that
affect market risk sensitive instruments.
Forward-looking Statements
This prospectus contains forward-looking statements. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. You should
read statements that contain these words carefully because they discuss our
future expectations, contain projections of our future results of operations or
of our financial condition or state other "forward-looking" information. We
believe that it is important to communicate our future expectations to our
investors. However, there may be events in the future that we are not able to
accurately predict or control and that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties, and actual results may differ materially from those discussed as
a result of various factors, including product development delays, changing
environmental and governmental regulations, the ability to attract and retain
employees and business partners, future levels of government funding,
competition from other manufacturers of fuel cell systems and from other
existing and advanced power technologies, evolving markets for generating
electricity and power, the ability to provide the capital required for product
development, operations and marketing, and Year 2000 readiness. These factors
should be considered carefully and readers should not place undue reliance on
our forward-looking statements. Before you invest in our common stock, you
should be aware that the occurrence of the events described in the "Risk
Factors" section and elsewhere is this prospectus could harm our business,
operating results and financial condition.
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BUSINESS
Overview
We are a leading designer and developer of on-site, electricity generation
systems utilizing proton exchange membrane (PEM) fuel cells for residential
applications. Our goal is to become the first mass market producer of
residential fuel cell systems by selling 100,000 of our systems per year by
2003. The continued growth in demand for electric power, coupled with the
ongoing deregulation of the electric industry, is creating a market opportunity
for a variety of distributed, or on-site, generation technologies. We believe
that the electricity our residential fuel cell systems will provide to homes
can be less expensive, more reliable, more efficiently produced and
environmentally cleaner than the electricity provided by the existing electric
utility grid and other power generation technologies. We intend to leverage our
strategic alliances with General Electric Company and other leading energy
companies, as well as with selected product component suppliers, to achieve
leadership in residential fuel cell system design, manufacturing, and sales.
Our Product
Our residential fuel cell system will be an appliance, initially about the
size of a refrigerator, that will produce electricity through a clean,
efficient process without combustion. Our system will receive fuel from a
home's existing natural gas line or propane tank, convert the fuel into a
hydrogen-rich stream, and then combine it with oxygen from the air in a
chemical reaction that produces electric power. Our initial residential systems
will be designed to supply 7 kW of baseload power, 10 kW of peak power, and
15 kW of surge load capacity, which will provide the full electricity needs of
a home, although the home can remain connected to the electric grid for back-up
purposes. We plan to bring our first residential fuel cell systems to market in
2001, and, by 2003, we expect to offer different model sizes designed to meet
the specific power needs of various market segments.
Our Investors
We were formed in June 1997 as a joint venture to further the development of
fuel cells for electric power generation in residential and other applications.
To date, our current stockholders in the aggregate have invested $45.9 million
in cash and $34.5 million in real estate, in-process research and development,
distribution and other agreements, and other in-kind contributions. Certain of
our current stockholders have committed to invest an additional $84.9 million
in cash upon the exercise of outstanding warrants and purchase rights
immediately before the closing of this offering. Our current stockholders
include:
. GE On-Site Power, Inc., a subsidiary of General Electric Company that
operates within General Electric's GE Power Systems business, one of the
world's leading suppliers of power generation technology, energy
services, and energy management systems;
. Edison Development Corporation, a subsidiary of DTE Energy Company, a
diversified energy company involved in the development and management of
energy-related businesses and services and the parent company of Detroit
Edison, Michigan's largest electric utility;
. Southern California Gas Company, a subsidiary of Sempra Energy and the
nation's largest regulated natural gas distribution utility in terms of
customers served; and
. Mechanical Technology Incorporated, a manufacturer of advanced test and
measurement products for commercial and military customers and an early
developer of fuel cell technology.
Since inception, we have been awarded approximately $40.0 million in federal
and state government contracts related to PEM fuel cell research. Substantially
all of these government contracts relate to PEM fuel cell research and
development with a focus on automotive applications. We believe most of the
technology developed under these government contracts is transferable to
residential fuel cell applications.
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Our Alliance with General Electric Company
General Electric has selected Plug Power to be its exclusive supplier of fuel
cell systems for residential and commercial applications under 35 kilowatts
(kW). In February 1999, we entered into an agreement with GE On-Site Power to
create GE Fuel Cell Systems, LLC, a joint venture owned 75% by GE On-Site Power
and 25% by Plug Power, which is dedicated to marketing, selling, installing and
servicing Plug Power fuel cell systems. Except for distribution rights we
granted to Edison Development for the states of Illinois, Indiana, Michigan,
and Ohio, GE Fuel Cell Systems is the exclusive global distributor and servicer
of our systems. We believe that our strength in fuel cell system design and
development, coupled with General Electric's brand name, worldwide sales and
distribution network, service capabilities, and commitment to the
commercialization of our fuel cell technology, will allow us to bring the first
and best residential fuel cell system to market and, by doing so, establish the
industry standard for this new product.
Product Development
We plan to achieve mass market distribution of our residential fuel cell
systems by 2003, which we define as manufacturing and selling 100,000 units or
more in a single year. To date, we have achieved the following major milestones
along our product development and commercialization schedule:
<TABLE>
<CAPTION>
Date Milestone
---- ---------
<C> <S>
June 1998 Powered a three-bedroom home with a hydrogen-fueled
residential fuel cell system
November 1998 Demonstrated a methanol-fueled residential fuel cell system
December 1998 Selected to design and manufacture 80 test and evaluation
residential fuel cell systems for the State of New York for
installation at various test sites over the next two years
December 1998 Demonstrated a natural gas-fueled residential fuel cell
system
February 1999 Entered into agreement with GE On-Site Power to distribute
and service our residential fuel cell systems
June 1999 Began construction of a state-of-the-art, 51,000 square foot
manufacturing facility in Latham, New York
June 1999 Hired our 250th employee, up from 22 employees at inception
August 1999 Powered a three-bedroom home with a residential fuel cell
system connected to its existing natural gas pipeline
September 1999 Filed our 50th patent application relating to fuel cell
technology, system designs and manufacturing processes
</TABLE>
Changes in the Power Industry
Industrialized societies are dependent upon reliable, on-demand electric
power. Worldwide, electricity consumption has grown rapidly in response to
economic development. Uses for electricity have grown as all segments of
society have taken advantage of its general availability, reliability and
convenience, particularly as movement towards service-based economies increases
the reliance on computers and other electronics. According to the United States
Department of Energy, electricity consumption in the United States has grown
tenfold during the second half of the century, from approximately 300 million
kilowatt-hours in 1949 to more than three billion kilowatt-hours in 1997.
Demand for electricity is expected to continue to grow as the economies of
the United States and other industrialized nations expand. At the same time,
developing nations will need additional
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electricity and, in some cases, basic energy infrastructure to improve their
standards of living. The Department of Energy reports that developing nations
account for approximately 85% of the world population, but only 46% of the
world's fossil fuel electricity consumption. Nearly two billion people in the
world, approximately 35% of the global population, still do not have
electricity.
Historically, demand growth has been met by expansion of the existing
infrastructure, including additional investments in centralized generating
plants, high-voltage transmission lines and distribution wires. Reliance upon
this infrastructure has been and continues to be problematic for a number of
reasons. First, according to the Department of Energy, capacity reserve margins
have decreased from 33% in 1982 to 15% in 1997, indicating the increased
potential for power outages during peak periods. Second, some areas of the
country are experiencing capacity constraints and weather-related outages due
to the nature of the existing transmission and distribution system. Finally,
there is difficulty in finding suitable locations for additional generating
plants and transmission towers, because of environmental concerns regarding
emissions from generating plants and local zoning laws.
Utility deregulation is creating new challenges and opportunities in the
electric power industry in the United States and internationally. Due in part
to regulatory changes designed to encourage competition, vertically integrated
utilities are being separated into their generation, transmission and
distribution components. New entrants have become significant participants in
the generation of electricity as the industry moves toward open competition. In
the United States, regulatory organizations at the federal, state and local
level are revising how electric service is provided. Customers in many states
have or will soon have the chance to choose their electricity provider.
Internationally, in countries such as the United Kingdom where deregulation of
the electric industry has already occurred, industrial and commercial customers
have been the primary beneficiaries of increased competition, while residential
consumers have generally not benefited.
The evolving competitive industry environment, coupled with consumer demand
for more reliable, more accessible and more competitively priced sources of
electric power, is driving traditional energy providers to develop new
strategies and seek new technologies for electricity generation, transmission
and distribution.
Plug Power's Solution
We believe our residential fuel cell systems will enable electric utilities
and other energy suppliers to meet increasing residential electricity demand in
a cost-effective, reliable, efficient and environmentally friendly manner while
avoiding the costs and problems associated with installing and maintaining
traditional generation, transmission, and distribution infrastructure. We
believe residential consumers who acquire or utilize our systems will benefit
from potential cost savings, as well as from high reliability and efficiency.
Benefits to Energy Providers
We believe our systems will offer the following benefits to natural gas and
propane distributors, rural electric cooperatives, electric utilities, and
other energy providers:
. Lower Capital Costs and Decreased Investment Risk. Our residential fuel
cell systems will be installed on-site and will supply power directly to
a home's electric system. Consequently, electric utilities can employ
our fuel cell systems to decrease capital expenditures by deferring or
eliminating the expansion, repair or replacement of generation,
transmission and distribution assets.
. Better Utilization of Existing Fuel Distribution Infrastructure. Use of
our natural gas- and propane-fueled systems will increase consumption of
these fuels over the course of the year, enabling distributors of these
fuels to better utilize their existing assets and mitigate the
seasonality of their businesses.
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. Environmental Benefits. Energy providers are facing increasing
governmental pressures to provide environmentally clean power generation
systems. Fuel cell systems generate electricity through a chemical
process that produces water, useable heat, some carbon dioxide and
negligible levels of other pollutants as by-products. By contrast,
conventional power plants burn fossil fuels to create electricity,
emitting sulfur and nitrogen oxides, relatively higher levels of carbon
dioxide, particulate matter, unburned hydrocarbons and heat pollution.
Benefits to Residential Consumers
We believe our systems will offer the following benefits to residential
consumers:
. Potential Savings. Due to our system's high energy efficiency and on-
site location, we expect that consumers who purchase our system
directly, or who utilize a system purchased by an energy provider, will
be able to obtain electricity at or below residential grid rates in many
regions.
. Better Reliability. Our residential fuel cell system will generate
electricity at the home. As a result, it will not be as susceptible to
weather-related or capacity-driven outages, which are inherent problems
for traditional central generation and/or transmission and distribution
systems.
. Higher Efficiency. Fuel cells convert fuel directly into electricity
through an on-site chemical reaction. By contrast, a typical central
generation combustion process requires a series of steps, each of which
results in energy losses. As a result, fuel cells can deliver
electricity to a home more efficiently than the grid.
. Co-Generation Potential. Our systems will produce heat as a by-product.
In the future, we plan to modify our basic system to use that excess
heat to supplement traditional residential hot water and space heating
systems, thereby significantly increasing total system efficiency and
providing expected cost savings for consumers.
Our Strategy
Our business strategy focuses on combining existing fuel cell technology with
improvements in system integration, component design, and manufacturing
processes to achieve the low-cost manufacturing capability necessary to bring
our product to the mass market. The key components of this strategy are:
. Focus on residential applications. We have selected the residential
market as our primary focus because we believe it will be the first mass
market in which fuel cell products will be economically viable. We also
chose the residential market because of its large size, industry trends
favoring distributed generation, and the range of benefits our fuel cell
systems can provide to energy providers and consumers. We believe we can
achieve manufacturing cost reductions that will make our systems
commercially viable by the end of 2001.
. Develop low-cost manufacturing capability and processes. We have focused
our efforts on utilizing technology and designs that are conducive to
low-cost mass manufacturing. Our strategy is to create a network of
selected suppliers who, with our help, can design and develop subsystems
and components that meet our cost, performance and quality
specifications. Based on our commercialization schedule, we believe that
we can purchase our components in larger volumes from these suppliers
beginning in 2000, which should further lower costs. Internally, we will
focus on overall system design, component and subsystem integration,
final assembly and quality control. We have nearly completed
construction of a 51,000 square foot manufacturing facility that will
enable us to develop our
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manufacturing capabilities and implement more efficient manufacturing
processes as we move toward the commercialization stage.
. Utilize General Electric's product development expertise and purchasing
capabilities. Under our product development agreement with General
Electric, we will consult with appliance manufacturing and plant design
experts from General Electric to complete the design of our first
commercial system. To enhance our ability to meet General Electric's
quality control standards, we will also purchase technical support
services from General Electric in the areas of engineering, testing,
manufacturing and quality control services. We believe this
collaboration will provide us with the engineering, testing and
analytical resources to develop a superior product more rapidly. We will
also be able to utilize General Electric's purchasing power to lower our
component costs.
. Leverage our strategic alliance with General Electric to achieve market
leadership. We believe our strategic alliance with General Electric
gives us a substantial competitive advantage by providing an immediate
worldwide marketing, distribution and servicing capability. GE Fuel Cell
Systems is developing a global network of qualified resellers who will
distribute our systems to consumers, co-branded with both the General
Electric and Plug Power brand names. We believe that this co-branding
strategy will give us immediate recognition in the market and speed
consumer acceptance of our systems. Once in the market, GE Fuel Cell
Systems' coordination of the installation, servicing and maintenance of
our systems will also be an important factor in developing consumer
confidence in a new, high-technology product. As a result, we expect to
achieve our goals of being the first company to bring a residential fuel
cell system to market and to become the market leader.
. Acquire or license complementary technologies. Our goal is to
manufacture the best residential fuel cell system as quickly as
possible, whether we develop components and subsystems internally or
obtain them from third party suppliers. Accordingly, we regularly review
strategic opportunities to acquire or license technologies that can
advance the development of low-cost system components and subsystems.
. Capitalize on our experience in the residential market to develop other
fuel cell applications, including automotive applications. We believe
that the fuel cell technology, system designs and manufacturing
processes that we develop and acquire during the course of
commercializing our initial residential systems, as well as the
experience gained under government contracts, can be leveraged to
develop other fuel cell applications, including combined heat and power
applications, emergency back-up systems and automotive applications. We
have a team of engineers dedicated to the study and development of the
technical criteria for automotive applications, such as rapid start-up,
light weight, quick response and low cost, and to the development of
fuel cell systems for automotive applications. We do not anticipate
commercial production of automotive applications until at least 2006 and
expect that revenues from automotive applications will be less than 5%
of our total revenues annually through 2006.
Product Development and Commercialization Process
We are implementing our product development plan in four phases. Our cash
requirements during this time period will depend on numerous factors, including
the progress of our product commercialization activities, and the pace at which
we hire and train our production staff, develop and expand our manufacturing
capacity and expand our research and development activities. We believe that
our current cash balances, the proceeds from the exercise of warrants and other
purchase rights immediately before the closing of this offering, and the net
proceeds from this offering will provide us with sufficient capital to fund
operations through 2001.
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. Phase 1--Research, Development and Engineering. Our 56,000 square foot
research and development facility, one of the largest fuel cell
development laboratories in the world, contains over 70 test stations
where we conduct design optimization and verification testing, rapid-
aging testing, failure mode and effects analysis, multiple technology
evaluations, and endurance testing in our effort to accelerate the
development and commercialization of our fuel cell systems. Since our
inception, we have shown considerable progress in our product
development, including demonstrating laboratory systems running on
methanol and natural gas and powering a three-bedroom home with a
residential fuel cell system fueled from the home's existing natural gas
line. Through the end of 1999, we will focus on developing and testing
residential fuel cell systems, both in the laboratory and at selected
test sites, to obtain data that can help us advance the design and
construction of low-cost systems. We will also be selecting suppliers to
provide components and subsystems for our pre-commercial and commercial
systems on a long-term basis. During 1999, we expect to produce
approximately 50 natural gas-fueled test and evaluation systems built to
varying specifications in order to test different system design
elements. These systems will be evaluated in our laboratories and at
selected test sites. Based on the data we obtain from these field
trials, we will determine the final design of our pre-commercial
product.
. Phase 2--Pre-Commercial Testing. In early 2000, we expect to begin
small-scale production of our pre-commercial systems. GE Fuel Cell
Systems has committed to purchase 485 of these systems and is expected
to place them with its local market distribution partners. All of these
partners will be expected to participate in field trials and evaluations
designed to test system design and performance, as well as customer
preferences. We intend to use this data to optimize product design and
speed commercialization and mass market acceptance. During this period
we also expect to complete development of a propane-fueled system.
. Phase 3--Manufacturing and Commercialization. In 2001, we intend to
begin producing our first commercial fuel cell systems for residential
use. These systems will include any necessary modifications identified
during pre-commercial testing. During this period, we also intend to
expand our manufacturing capabilities, beginning large scale commercial
production while continuing to refine our low-cost manufacturing
processes. By 2003, we believe we will be manufacturing over 100,000
systems per year.
. Phase 4--Next Generation Models. In 2003, when we expect to have
achieved mass market production of our basic systems, we intend to
produce new models offering enhanced features, including models with co-
generation capabilities. In July 1999, we entered into a Collaboration
Agreement with Joh. Vaillant GmbH u. Co. to develop a residential
combined heat and power system for commercial introduction in Europe.
Vaillant is a leading European heating technology company and offers its
customers a complete range of products for central heating and hot
water. The Collaboration Agreement is contingent upon the successful
negotiation and execution of supply and distribution arrangements, as
well as product development arrangements, among Plug Power, Vaillant,
and GE Fuel Cell Systems.
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Manufacturing
Our goal is to mass manufacture reliable and safe residential fuel cell
systems at the lowest cost. We have made, and expect to continue to make,
technological improvements that reduce the cost to produce our systems. We are
focusing our efforts on overall system design, component and subsystem
integration, assembly, and quality control processes. We have also begun to
establish a manufacturing infrastructure by hiring assembly and related support
staff, installing a new management information system, and developing our
manufacturing processes, including defining work centers and related
responsibilities. In November 1999, we expect to complete construction of our
new 51,000 square foot manufacturing facility, adjacent to our development
laboratories, that will allow us to begin large-scale manufacturing of our pre-
commercial and initial commercial systems.
We plan to utilize third-party suppliers who, with our assistance, can
design, develop and/or manufacture subsystems and components that achieve our
cost and reliability targets. We plan to perform significant quality testing
before we integrate any third-party subsystems and components into our final
assembled fuel cell system. We will also take advantage of General Electric's
volume purchasing capabilities to procure low-cost parts and components. As we
move toward the commercialization stage we will begin to shift our focus from
research and development to high volume production.
Based on our commercialization plan, we anticipate that our existing
facilities and our new manufacturing plant will provide sufficient capacity
through 2001, and that we will need to develop or build additional capacity in
order to achieve mass market production by 2003.
Distribution and Marketing
Plug Power will serve as GE Fuel Cell Systems' exclusive worldwide supplier
of fuel cell systems designed for residential and commercial applications under
35kW. We believe that most residential applications and many small commercial
applications require less than 35kW. GE Fuel Cell Systems will have the
exclusive worldwide rights to market, distribute, install and service our
systems (other than in the states of Illinois, Indiana, Michigan and Ohio, in
which Edison Development will be our exclusive distributor). Under this
arrangement, we will sell our systems directly to GE Fuel Cell Systems, which,
in turn, will utilize General Electric's worldwide sales and distribution
network to identify qualified resellers who can distribute and service these
systems. Plug Power systems sold through GE Fuel Cell Systems will be co-
branded with both the General Electric and Plug Power names and trademarks, and
may also carry the brand of the local reseller.
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<PAGE>
The following chart summarizes how we expect GE Fuel Cell Systems to
distribute our residential fuel cell systems to consumers:
[A chart appears with a graphic depiction of the Plug Power and GE Fuel Cell
Systems distribution with Plug Power at the top of the chart;
GE Fuel Cell Systems, LLC (Distributor) on the next level; Natural Gas
Distributors, Propane Distributors, Rural Electric Cooperatives, Electric
Utilities and New Market Entrants listed as Resellers on the next level;
and on the final level a box captioned "Markets" under which are listed (i)
Early Target Markets (2001-2002) of Homes serviced by rural electric
cooperatives, Homes in urban and suburban load packets, High-consumption
households, Owners and builders of remote homes and Dissatisfied utility
customers, and (ii) Mass Markets (2003 and beyond) of Homes utilizing natural
gas, New homes and Homes in countries with inadequate or no existing electric
power infrastructure. Each of these boxes is connected by downward arrows to
the next level.]
Targeted Resellers
We expect that GE Fuel Cell Systems' resellers will have, on a regional and
local basis, pre-existing customer bases, billing and service capabilities,
brand recognition, market credibility, and regulatory expertise. Through the
use of these qualified resellers, we believe that GE Fuel Cell Systems will be
able to quickly penetrate multiple markets, avoid costly investment in sales
and support resources, leverage its sales organization, and accelerate the
technology acceptance process.
Potential resellers include the following:
. Natural Gas Distributors. By marketing our natural gas-fueled
residential fuel cell systems within their distribution territories, we
believe natural gas distributors can increase overall gas consumption
and pipeline utilization, enabling them to develop stronger customer
relationships, mitigate the seasonality of their business and enhance
their overall revenue stream.
. Propane Distributors. Propane distributors also should be able to
leverage their existing infrastructure to increase revenue and mitigate
seasonality. Since propane is generally
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<PAGE>
delivered by truck to a widespread customer base, the potential for
increasing the number of customers serviced and/or the amount of propane
distributed per delivery route should decrease distributors' marginal
service costs.
. Rural Electric Cooperatives. Generally, rural electric cooperatives
serve a geographically dispersed customer base. We expect that our on-
site, residential fuel cell systems will enable these cooperatives to
meet their service obligations to customers without incurring the
substantial cost of extending, maintaining or replacing electricity
distribution lines.
. Electric Utilities. Electric utilities can selectively install on-site
fuel cell systems to meet increased electricity demand in remote areas
or in urban and suburban areas referred to as "load pockets," which
suffer from frequent capacity-driven outages. By doing so, they can
reduce the costs associated with installing and operating new
infrastructure or modifying or repairing existing infrastructure.
. New Market Entrants. The ongoing deregulation of the electric utility
industry and the accompanying introduction of consumer choice are
spawning new market entrants into the retail electric market, including
gas and power marketers, unregulated affiliates of utilities, appliance
distributors, and energy service companies. As these new market entrants
seek to achieve a market presence, we expect that the relatively low
capital cost and ease of installation of our fuel cell systems will make
this distributed form of electricity supply particularly attractive.
Potential resellers will be required to purchase fuel cell systems only from
GE Fuel Cell Systems and to commit to minimum purchase requirements. To date,
GE Fuel Cell Systems has entered into memoranda of understanding with
potential resellers, including NJR Energy Holdings Corporation, an affiliate
of New Jersey Natural Gas Company, and Flint Energies, a Georgia-based rural
electric cooperative. We expect GE Fuel Cell Systems to enter into similar
arrangements with selected resellers around the world.
GE Fuel Cell Systems will focus on creating brand and product awareness at
the consumer level through media advertising, trade shows and other mass
marketing channels. Resellers are expected to augment this effort through
local advertising, mass mailings, catalog sales, educational seminars,
promotional pricing for systems or fuel, and bundled service offerings.
Resellers may also work with building contractors, financial institutions and
other intermediaries to create cost-effective programs to reach consumers.
Targeted Early Markets
Together with GE Fuel Cell Systems, we have conducted a preliminary
evaluation of target markets and potential customers, taking into account such
factors as average household electricity usage, ability to pay, power
availability and quality, availability of fuel, the prices of electricity and
natural gas, penetration of competing distributed generation technologies, new
capacity requirements and the cost of new capacity additions. Based on this
evaluation, we intend to target the following market segments during 2001 and
2002 for our first commercial fuel cell systems:
. Homes served by rural electric cooperatives. A rural electric
cooperative may choose to install fuel cell systems in homes rather than
incurring the cost to extend, maintain or replace existing power
distribution lines.
. Homes in urban and suburban load pockets. Electric utilities serving
urban and suburban load pockets may install our systems in selected
homes to lessen the frequency of capacity-driven outages.
. High-consumption households. Many high-consumption households place
importance on power quality, particularly with their increased use of
home computers and other electronics. Our systems, which are designed to
independently power the home while
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<PAGE>
maintaining a grid connection as backup, should provide a compelling
solution to power quality and reliability concerns.
. Owners and builders of remote homes. Building contractors and homeowners
often have the flexibility to choose how power will be provided to the
home. For many of these homes in remote areas, fuel cell systems can be
a cost effective and reliable alternative to new distribution
infrastructure, backup generators, or other alternative power sources.
. Dissatisfied utility customers. Some homeowners are dissatisfied with
the reliability and expense of the electricity and service provided by
the local utility company. We believe these homeowners will be willing
to try an easy-to-install alternative that could provide added
reliability without requiring them to disconnect from the grid
altogether.
Mass Markets
After introducing our first commercial systems in 2001 to our targeted early
markets, we believe that we will gain the experience and capabilities necessary
to lower the cost of our systems, expand our manufacturing capacity and,
through GE Fuel Cell Systems, to extend our sales efforts to the mass market
beginning in 2003. Our targeted mass market segments will include:
. Homes utilizing natural gas. According to the National Gas Supply
Association, more than half of all homes in the United States and over
60% of newly constructed homes in the United States use natural gas for
heating and appliances. In areas with existing natural gas lines, the
cost of electricity from our natural gas-fueled residential fuel cell
systems may compare favorably to the cost of electricity from the grid.
. New homes. According to the United States Department of Housing and
Urban Development, 1.2 million single family houses were constructed in
the United States in 1998. Our residential fuel cell systems will offer
contractors and homeowners the opportunity to build developments or
individual homes powered by fuel cells rather than by the electric grid.
. Homes in countries with inadequate or no existing electric power
infrastructure. According to the World Bank, there are nearly two
billion people worldwide without electricity. In addition, many
countries have existing centralized electric power infrastructures that
are unreliable and outdated. Many of these developing countries do not
have the means to build or upgrade large, central power generation
plants and accompanying transmission and distribution networks to serve
a broad customer base. These countries may selectively purchase and
deploy fuel cell systems to supply electricity where it is most needed
as an alternative to major capital investment.
Installation, Servicing and Maintenance
GE Fuel Cell Systems has committed to provide complete product support for
Plug Power systems through its own service structure, reseller service network,
and contracts with third party service providers. We believe potential third
party service providers will include companies with existing national service
infrastructures, as well as regional companies with strong reputations and
service capabilities. Selected providers will be required to meet General
Electric's quality standards and customer needs of timeliness, quality and
cost-effectiveness.
GE Fuel Cell Systems' service program is expected to be closely coordinated
with the introduction of Plug Power's fuel cell systems, so that a sufficient
level of installation, maintenance, and customer support service will be
available in all areas where our systems are sold. We also expect that GE Fuel
Cell Systems will provide the warranty service for our products according to
terms to be mutually agreed upon by Plug Power and GE Fuel Cell Systems. We
will review GE Fuel Cell Systems' service plan and suggest modifications based
on the pace of product development and field test results. We expect that GE
Fuel Cell Systems' service plan will be completed and the requisite service
contracts in place prior to the release of our commercial units in 2001.
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<PAGE>
Fuel Cell Technology and Fuel Cell Systems
A fuel cell is a device that combines hydrogen, derived from a fuel such as
natural gas, propane, methanol or gasoline, and oxygen from the air to produce
electric power without combustion. Plug Power fuel cells consist principally of
two electrodes, the anode and the cathode, separated by a polymer electrolyte
membrane. Each of the electrodes is coated on one side with a platinum-based
catalyst. Hydrogen fuel is fed into the anode and air enters through the
cathode. Induced by the platinum catalyst, the hydrogen molecule splits into
two protons and two electrons. The electrons from the hydrogen molecule are
conducted around the membrane creating an electric current. Protons from the
hydrogen molecule are transported through the polymer electrolyte membrane and
combine at the cathode with the electrons and oxygen from the air to form water
and produce heat.
The following diagram illustrates how fuel cells work:
[A Diagram appears with a graphic depiction demonstrating the process by
which hydrocarbon fuels are passed through a PEM membrane in order to produce
electricity, water and heat and the following words appear in the diagram:
HOW FUEL CELLS WORK; Fuel cells extract hydrogen ions from hydrocarbon fuels and
combine them with oxygen to generate power...; Hydrogen molecules; Electrons;
Protons; Electricity; PEM Membrane; Electricity is generated via an
electrochemical process versus traditional combustion...; Oxygen (from air);
Water; Heat; The output from the process includes electricity, water and heat.]
To obtain the desired level of electric power, individual fuel cells are
combined into a fuel cell stack. Increasing the number of fuel cells in a stack
increases the voltage, while increasing the surface area of each fuel cell
increases the current. Our initial residential systems will provide 7kW of
baseload power, 10kW of peak power and 15kW of surge load capacity.
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We plan to design our fuel cell systems to last approximately 15 to 20 years,
with major component maintenance and replacements scheduled to occur every four
to seven years. Items such as air filters will require annual replacement. The
chart below sets forth a brief description of our systems' components and
subsystems:
<TABLE>
<CAPTION>
Component or Subsystem Description
---------------------- -----------
<C> <S>
Fuel reformer (processor) Converts or reforms the specified
hydrocarbon fuel, such as natural gas,
propane, methanol or gasoline, into a
hydrogen-rich stream for use in the fuel
cell stack. Design may differ based upon the
type of fuel used.
Fuel cell stack Produces electricity in a chemical reaction
by combining hydrogen with oxygen.
Power conditioner (inverter) Converts the direct current, or DC,
electricity created by the fuel cell stack
into alternating current, or AC, electricity
for use in the home. Also designed to handle
voltage spikes, as well as distortions
caused by the concurrent use of multiple
appliances. Design may differ based upon the
country in which it will be used.
Fuel supply subsystem Connects the fuel supply to the fuel
reformer and filters out unwanted sulfur and
other fuel contaminants.
Air supply subsystem Supplies filtered air to both the fuel
reformer and the fuel cell stack.
Water management loop Supplies humidification water to the fuel
cell stack to prevent the system from drying
out and reaction water to the fuel reformer
to facilitate the conversion of the fuel to
hydrogen.
Thermal management system Regulates the operating temperature of both
the fuel reformer and the fuel cell stack to
ensure optimum performance.
Microprocessor-based control unit Monitors system parameters and provides
control signals to the various subsystems to
maintain efficient operation. Also signals
need for service or maintenance.
Battery Powers the system from initial start until
the fuel cell stack warms up to appropriate
temperature and also provides 3 kilowatt-
hours of back-up power. Recharges while
system is in use.
</TABLE>
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The following diagram illustrates how a Plug Power fuel cell system produces
electricity:
[A Chart appears showing the components of the residential fuel cell system,
and the following words appear: Natural Gas; Air; Fuel Processor; Hydrogen; Fuel
Cell Stack; Controller; DC Electricity; DC AC Inverter; 120/240 VAC Current;
Heat and Water].
Proprietary Rights
Fuel cell technology has existed since the 19th century, and PEM fuel cells
were first developed in the 1950s. Consequently, we believe that neither we nor
our competitors can achieve a significant proprietary position on the basic
technologies used in fuel cell systems. However, we believe the design and
integration of the system and system components, as well as some of the low-
cost manufacturing processes that we have developed, can be protected.
Accordingly, our overall intellectual property development and protection
strategy has the following components:
. Maximize protection of our internally developed processes and
designs. Our goal is to encourage employees to develop promising ideas
with potential business impact and then protect these ideas as patents
or trade secrets. To date, we have three issued patents and 47 patents
pending. These patents cover, among other things, fuel cell components
that reduce manufacturing part count, fuel cell system designs that lend
themselves to mass manufacturing, improvements to fuel cell system
efficiency, reliability, and longer system life, and control strategies,
such as added safety protections and operation under extreme conditions.
Each of our employees has agreed that all inventions made or conceived
while an employee of Plug Power which are related to or result from work
or research that Plug Power performs will remain the sole and exclusive
property of Plug Power, whether patented or not.
. Monitor relevant patents issued for their impact on the development of
our systems. We actively monitor issued patents and other patent actions
that may impact the development of fuel cell systems. We also seek to
ensure that the components manufactured for us by third parties do not
infringe on patents covered by others. Our experts in the various
technical fields assess these inventions for possible interference with
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<PAGE>
Plug Power technology. Based on our assessments to date, we do not
believe that patents issued to other parties will prevent us from
reaching our strategic goals.
. Purchase selected intellectual property rights. We regularly review
strategic opportunities to acquire or license technologies that can
advance the development of low cost system components and subsystems.
Competition
There are a number of companies located in the United States, Canada and
abroad that are developing PEM fuel cell technology. Ballard Power Systems
Inc., a publicly traded company located in Vancouver, British Columbia, has
been developing PEM fuel cell technology since the mid-1980s and has attracted
substantial funding from a number of partners, including DaimlerChrysler AG
and Ford Motor Company. A number of major automotive and manufacturing
companies also have in-house PEM fuel cell development efforts. To the extent
publicly disclosed, the primary efforts of many of these companies, including
Ballard and International Fuel Cells Corporation, a subsidiary of United
Technologies Corporation, appear to have been directed toward the development
of fuel cell systems for automotive and large stationary power applications.
Although we believe approximately 10 companies have established residential
fuel cell system development programs, we believe they are still in the
research and development stage and have not yet developed the product
manufacturing and distribution infrastructure necessary to reach
commercialization.
We also compete with companies that are developing other types of fuel
cells. There are four types of fuel cells other than PEM fuel cells that are
generally considered to have viable commercial applications: phosphoric acid
fuel cells, molten carbonate fuel cells, solid oxide fuel cells and alkaline
fuel cells. Each of these fuel cells differs in the component materials, as
well as in its overall operating temperature. While all fuel cell types have
environmental and efficiency advantages over traditional power sources, we
believe that PEM fuel cells can be manufactured less expensively and are more
efficient and more practical in small-scale applications.
Our systems will also compete with other distributed generation
technologies, including microturbines and reciprocating engines, available at
prices competitive with existing forms of power generation. We believe that
our fuel cell systems will have a competitive advantage in that they can be
more easily scaled to residential size and will be more efficient in handling
the load profile of residential customers. We also believe that they will be
quieter, environmentally cleaner, more efficient, and less expensive to
install, service and maintain. Our systems will also compete with solar and
wind-powered systems.
Once we begin selling our systems, we intend to compete primarily on the
basis of cost, reliability, efficiency and environmental considerations.
Government Regulation
We do not believe that we will be subject to existing federal and state
regulatory commissions governing traditional electric utilities and other
regulated entities. We do believe that our product and its installation will
be subject to oversight and regulation at the local level in accordance with
state and local ordinances relating to building codes, safety, pipeline
connections and related matters. Such regulation may depend, in part, upon
whether a system is placed outside or inside a home. At this time, we do not
know which jurisdictions, if any, will impose regulations upon our product or
installation. We also do not know the extent to which any existing or new
regulations may impact our ability to distribute, install and service our
product. Once our product reaches the commercialization stage and we begin
distributing our systems to our target early markets, federal, state or local
government entities or competitors may seek to impose regulations. We intend
to encourage the standardization of industry codes to avoid having to comply
with differing regulations on a state-by-state or locality-by-locality basis.
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Facilities
Our principal executive offices are located in Latham, New York. At our 36
acre campus, we own a 56,000 square foot research and development center and a
32,000 square foot office building that we are currently leasing to Mechanical
Technology until December 1999, and are in the process of constructing a 51,000
square foot manufacturing facility. We own all of our facilities and believe
that they are sufficient to accommodate our anticipated growth through at least
2001.
Employees
As of September 30, 1999, we had a total staff of approximately 280,
including approximately 230 full-time employees, of which approximately 120
were engineers, scientists, and other degreed professionals. We consider our
relations with our employees to be good.
Legal Proceedings
We may from time to time be involved in legal proceedings in the ordinary
course of our business. We are not currently involved in any pending legal
proceedings that, either individually or taken as a whole, could harm our
business, prospects, results of operations, or financial condition.
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MANAGEMENT
Executive Officers, Key Employees and Directors
Our executive officers, directors, director-nominees, and key employees,
their positions and their ages as of September 30, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Executive Officers and
Directors
Gary Mittleman.......... 46 President, Chief Executive Officer and Director
William H. Largent...... 44 Chief Financial Officer and Treasurer
Gregory A. Silvestri.... 39 Senior Vice President--Operations
Louis R. Tomson......... 59 Senior Vice President--Corporate Development
Dr. William P. Acker.... 38 Vice President of Technology and Product Development
Dr. Manmohan Dhar....... 52 Vice President and Chief Engineer of the Residential Program
Michael J. Cudahy....... 75 Director
Anthony F. Earley, Jr... 49 Director
Larry G. Garberding..... 60 Director
George C. McNamee....... 52 Chairman
Dr. Walter L. Robb...... 71 Director
Robert L. Nardelli...... 51 Director-nominee
Key Employees
Dr. Glenn A. Eisman..... 48 Chief Technology Officer
Dr. William D. Ernst.... 60 Vice President and Chief Scientist
Russel H. Marvin........ 32 Vice President of Component Engineering and Design
Ana-Maria Galeano....... 31 General Counsel and Corporate Secretary
</TABLE>
Gary Mittleman has served as President and Chief Executive Officer since June
1997 and as a director since August 1999. From October 1993 to June 1997, Mr.
Mittleman was the President of Edison Development Corporation, a wholly owned
subsidiary of DTE Energy Company, where he directed business development
efforts. Mr. Mittleman previously served as Manager of Corporate Strategy at
Ameritech, a telecommunications company. Prior to that he was employed at Booz
Allen & Hamilton, a consulting firm, in its commercial practice area and at
American Can Company. Mr. Mittleman received his Bachelor of Arts degree in
Mathematics and Master of Science degree in Mechanical and Aerospace
Engineering from the University of Rochester and a Master of Business
Administration degree, with honors, from the University of Chicago. Mr.
Mittleman is a trustee of the Albany Institute of History and Art and a trustee
of the Eastern New York State Chapter of the Nature Conservancy.
William H. Largent has served as Chief Financial Officer and Treasurer since
May 1999. From May 1997 to May 1999, Mr. Largent served as Senior Vice
President, Operations and Chief Financial Officer of Applied Innovation Inc., a
leading provider of mediation and data communications products for the
management of telecommunications providers' customer service networks. From
1994 to April 1997, Mr. Largent served as the Executive Vice President and
Chief Financial Officer of Metatec Corporation, an information services company
engaged in optical disc manufacturing and distribution, software development
and network services. Mr. Largent also served as a director of Metatec from
1990 until 1997. From 1990 to 1993, Mr. Largent was President of Liebert
Capital Management Corporation, a private investment management and consulting
company. Mr. Largent is a director of Applied Innovation, Inc. and until July
1999, was also a director AmeriLink Corporation, a company (subsequently merged
into Tandy Corp.) that designs, constructs, installs and maintains cabling
systems for transmission of audio, video and data on a national basis. Mr.
Largent, a certified public accountant, received his Bachelor of Science degree
in accounting from Franklin University.
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<PAGE>
Gregory A. Silvestri has served as Senior Vice President--Operations since
June 1999. In that capacity, Mr. Silvestri manages the full range of
manufacturing activities, develops the strategy and structures alliances with
key component suppliers, and manages the sales and marketing interactions with
Plug Power's distribution partners. From May 1991 to May 1999, Mr. Silvestri
served in a number of senior general management positions responsible for North
American and Asia-Pacific operations for Norton Company, an operating unit of
Saint-Gobain Corporation that supplies engineered materials to a variety of
industries. Prior to that time, Mr. Silvestri served as an Engagement Manager
within the Industrial Practice Group of McKinsey & Company. Mr. Silvestri
received his Bachelor of Science and Engineering degree in Chemical Engineering
from Princeton University and a Masters in Business Administration degree, with
honors, from the University of Virginia.
Louis R. Tomson has served as Senior Vice President--Corporate Development
since January 1999. In that capacity, Mr. Tomson manages business development,
government relations and legal affairs. From January 1995 to January 1999, Mr.
Tomson was Deputy Secretary and subsequently First Deputy Secretary to Governor
George E. Pataki of the State of New York. Mr. Tomson was also the Governor's
Chief Policy Maker for energy and communications and served as the Governor's
liaison to New York's Public Service Commission and to New York's more than 60
public authorities. From 1992 to December 1994, Mr. Tomson was a partner in the
law firm of Plunkett & Jaffe in New York, New York. Mr. Tomson currently serves
as the Chairman of the New York State Thruway Authority. Mr. Tomson received a
Bachelor of Arts degree from Columbia College and a Bachelor of Law degree from
Columbia Law School.
Dr. William P. Acker has served as Vice President of Technology and Product
Development since October 1997. In that capacity, Dr. Acker manages the
development of Plug Power's fuel cell products as well as the ongoing
development of next generation fuel cell technology. From 1990 to October 1997,
Dr. Acker served in several positions for Texaco, including Global Manager for
Engineering and Product Testing. Dr. Acker received a Bachelor of Science
degree from Rensselaer Polytechnic Institute and a Master of Science, Master of
Philosophy and Ph.D. in Applied Physics and Engineering from Yale University.
Dr. Manmohan Dhar has served as Vice President and Chief Engineer of the
Residential Program since November 1998. In that capacity, Dr. Dhar is
responsible for managing the development of low-cost, highly reliable fuel cell
systems for residential electric power generation. From June 1997 to November
1998, Dr. Dhar served as our Director of Residential Programs. From 1978 to
June 1997, Dr. Dhar worked in various positions at Mechanical Technology
Incorporated, including as Chief Engineer for its Stirling Space Power Program,
an effort to develop a 12.5 kW power generation system as a backup power source
for Space Station Freedom, and, from 1993 to 1997, as a key member of
Mechanical Technology's fuel cell development efforts. Dr. Dhar has a Ph.D. in
Systems Dynamics from Purdue University, and a Master of Science degree in
Machine Design from the Indian Institute of Technology.
Michael J. Cudahy has served as a member of the Board of Directors since
February 1999. Mr. Cudahy co-founded and, prior to its sale to General Electric
Company in 1998, served from 1965 to November 1998 as Chairman of the Board,
and from 1965 to November 1997 as Chief Executive Officer, of Marquette Medical
Systems, Inc., a developer and manufacturer of medical equipment and integrated
systems for patient monitoring and diagnostic cardiology applications. Mr.
Cudahy currently serves as a Special Advisor to GE Marquette Medical Systems,
Inc. and as a director of Molecular OptoElectronics Corp., a developer and
manufacturer of optoelectronic technologies relating to information systems.
Anthony F. Earley, Jr. has served as a member of the Board of Directors since
June 1997. Mr. Earley has served as a director of DTE Energy Company since
1994, as Chairman of the Board and Chief Executive Officer of DTE Energy
Company and its subsidiary, The Detroit Edison
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Company, since 1998, and as President and Chief Operating Officer of DTE Energy
and Detroit Edison since 1994. From 1989 to 1994, Mr. Earley served as the
President and Chief Operating Officer of Long Island Lighting Company. Mr.
Earley currently serves as a director of Comerica Bank and Mutual of America
Capital Management Corporation. Mr. Earley received a Bachelor of Science
degree in physics, a Master of Science degree in engineering, and a Juris
Doctorate from the University of Notre Dame.
Larry G. Garberding has served as a member of the Board of Directors since
June 1997. Mr. Garberding has served as a director of DTE Energy Company since
1990 and as Executive Vice President and Chief Financial Officer of DTE Energy
and its subsidiary, The Detroit Edison Company, since 1995. Mr. Garberding
received a Bachelor of Science degree in industrial administration from Iowa
State University. Mr. Garberding is extensively involved with the United Way of
Southern Michigan, is a director/trustee of the Detroit Medical Center and the
Detroit Symphony Orchestra Hall, and is a Chairman of the Board of ArtServe
Michigan.
George C. McNamee has served as Chairman of the Board of Directors since June
1997. Mr. McNamee has served as Chairman since 1984 and as Co-Chief Executive
Officer since 1993 of First Albany Companies, Inc., a publicly traded holding
company the principal subsidiaries of which are First Albany Corporation, a
specialty investment banking firm and an underwriter of this offering, and
First Albany Asset Management. Mr McNamee previously served as President of
First Albany Companies from 1975 to 1989. Mr. McNamee has served as a director
of Mechanical Technology Incorporated since 1996 and as Chief Executive Officer
since 1998, and previously served as Chairman of the Board from 1996 to 1998.
Mr. McNamee also serves as a director of MapInfo Corporation, a maker of
mapping software products, application development tools, and data products,
and the META Group, Inc., a company that provides market assessments for
clients in the information technology industry. Mr. McNamee is a member of the
Board of Directors of the New York Stock Exchange, the New York State Science
and Technology Foundation, and the New York Conservation Education Fund. Mr.
McNamee received his Bachelor of Arts degree from Yale University.
Dr. Walter L. Robb has served as a member of the Board of Directors of Plug
Power since June 1997. He has been a member of the Board of Directors of
Mechanical Technology since January, 1997. Since 1993, Dr. Robb has served as
President of Vantage Management, Inc., a management consulting firm. Prior to
1993, Dr. Robb served as the Senior Vice President for Corporate Research and
Development at General Electric Company. In that capacity, Dr. Robb directed
the GE R & D Center, one of the world's largest and most diversified industrial
laboratories, and served on General Electric's Corporate Executive Council. He
serves on the Board of Directors of Cree Research, Inc., a developer and
manufacturer of semiconductor materials and electronic devices, Celgene
Corporation, a specialty pharmaceutical company engaged in the development and
commercialization of human pharmaceuticals, and Neopath, Inc., a developer and
marketer of visual intelligence technology designed to increase accuracy in
medical testing.
Robert L. Nardelli has been nominated and has agreed to serve as a member of
the Board of Directors effective upon the closing of the offering. Since 1995,
Mr. Nardelli has served as President and Chief Executive Officer of GE Power
Systems, a $7.5 billion division of General Electric Company headquartered in
Schenectady, New York and is a Senior Vice President of General Electric
Company and a member of the Board of Directors of GE Capital Corporation.
Previously, Mr. Nardelli served from 1992 to 1995 as President and Chief
Executive Officer of GE Transportation Systems. From 1991 to 1992, Mr. Nardelli
served as President and Chief Executive Officer of CAMCO, Inc., General
Electric's Canadian appliance manufacturing company, and from 1988 to 1991, he
served as an Executive Vice President and General Manager at Case Corporation,
a designer, manufacturer and distributor of farm and construction equipment.
Mr. Nardelli received a
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Bachelor of Science degree in business from Western Illinois University and a
Master of Business Administration degree from the University of Louisville.
Dr. Glenn A. Eisman has served as Chief Technology Officer since November
1998. In that capacity, Dr. Eisman manages the development of fuel cell
membranes and electrodes and other related technology. From June 1998 to
November 1998, Dr. Eisman served as our Director of Technology. From 1984 to
June 1998, Dr. Eisman held various technical positions at The Dow Chemical
Company where, from 1984 to 1989, he directed and conducted research pertaining
to all aspects of PEM fuel cell development efforts, including polymer
materials science, catalysts, coatings technology and electrochemical
techniques. From 1980 to 1983, Dr. Eisman was the Robert A. Welch Research
Fellow in Materials Science and Engineering at the University of Texas-Austin.
Dr. Eisman received a Bachelor of Science in Chemistry degree from Temple
University and a Ph.D. in Physical Inorganic Chemistry from Northeastern
University.
Dr. William D. Ernst has served as Vice President and Chief Scientist since
June 1997. In that capacity, Dr. Ernst is responsible for advancing our
scientific, competitive and intellectual property position within the fuel cell
industry and serves as Principal Investigator for government-sponsored
programs. From 1989 to June 1997, Dr. Ernst held various positions at
Mechanical Technology Incorporated, including Program Director for its
automotive fuel cell development program and Manager of Power Systems, in which
capacity he initiated their fuel cell development program and directed all fuel
cell programs and technical development activities. Dr. Ernst received a Master
of Science in Engineering degree from the Massachusetts Institute of Technology
and a Ph.D. in Aeronautical Engineering from Rensselaer Polytechnic Institute.
Russel H. Marvin has served as Vice President of Component Engineering and
Design since November 1998. In that capacity Mr. Marvin manages Plug Power's
design for manufacturing efforts to bring the residential product to market.
From January 1998 to November 1998, Mr. Marvin served as our Vice President of
Engineering and Manufacturing. From 1994 to January 1998, Mr. Marvin served as
the Director of Engineering for two different divisions of Axiohm Transaction
Solutions, Inc., a manufacturer and marketer of transaction printers. Mr.
Marvin served from 1991 to 1994 as a Project Leader for Eastman Kodak Co.'s
Clinical Products Division, a maker of blood analysers, and from 1989 to 1991
as a Senior Mechanical Engineer for NCR Corp.'s printer division. Mr. Marvin
received a Bachelor of Science degree from Clarkson University and a Master of
Science degree from Rensselaer Polytechnic Institute.
Ana-Maria Galeano has served as General Counsel and Corporate Secretary since
April 1998. In that capacity, Ms. Galeano advises the company on legal issues
in such areas as corporate law, contracts, strategic alliances and intellectual
property. From September 1993 to April 1998, Ms. Galeano served as an attorney
at the law firm of Whiteman, Osterman & Hanna in Albany, New York, where she
participated in the formation of Plug Power. Ms. Galeano received a Bachelor of
Arts degree from the State University of New York at Binghamton and a Juris
Doctorate from Brooklyn Law School.
Board Composition
Effective upon the closing of this offering, the number of our directors will
be fixed at nine. Initially we will have seven directors, with the two
vacancies to be filled with independent directors selected by the Board of
Directors. Effective upon the closing of the offering, Mr. Robert L. Nardelli,
a director-nominee, will be elected to our Board of Directors for an initial
term of three years pursuant to our agreement with General Electric. Our Board
of Directors will be divided into three classes, each of whose members will
serve for a staggered three-year term. Our Board of Directors will consist of
three Class I directors, Messrs. Mittleman, Robb and Earley, whose term of
office will continue until the 2000 annual meeting of stockholders, three Class
II directors, Messrs. McNamee and Cudahy and one of the
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two independent directors to be selected following the offering, whose term of
office will continue until the 2001 annual meeting of stockholders, and three
Class III directors, Messrs. Garberding and Nardelli and one of the two
independent directors to be selected after the offering, whose term of office
will continue until the 2002 annual meeting of stockholders. At each annual
meeting of stockholders, a class of directors will be elected for a three-year
term to succeed the directors of the same class whose terms are then expiring.
Vacancies on our Board of Directors may be filled solely by the Board of
Directors.
There are no family relationships among any of our directors or executive
officers.
Board Committees
Effective upon the closing of this offering, our Board of Directors will
establish an Audit Committee and a Compensation Committee. The members of the
Audit Committee, which will include Mr. Cudahy, an independent director, and
one of the independent directors to be selected after the offering, will be
responsible for recommending to the Board of Directors the engagement of our
outside auditors and reviewing our accounting controls and the results and
scope of audits and other services provided by our auditors. The Compensation
Committee, which will be made up of Messrs. McNamee and Earley, will be
responsible for reviewing and recommending to the Board of Directors the amount
and type of non-stock compensation to be paid to senior management and
establishing and reviewing general policies relating to compensation and
benefits of employees. The administration of our stock option plan will be
conducted by the entire Board of Directors.
Director Compensation
Directors who are employees receive no additional compensation for their
services as directors. Non-employee directors do not currently receive any cash
compensation for their service as directors, although the Board of Directors
may in the future determine to pay such a fee. Non-employee directors are
eligible to participate in our 1999 Stock Option and Incentive Plan at the
discretion of the full Board of Directors. During 1998, options to purchase an
aggregate of 20,000 shares were granted to Messrs. McNamee and Robb as
compensation for their services as directors.
Executive Compensation
The following table sets forth the total compensation paid in the year ended
December 31, 1998 to Messrs. Mittleman, Acker and Dhar, who were the only Plug
Power executive officers whose aggregate compensation exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
-------------
Number
of Securities
Annual Compensation Underlying All
--------------------- Options Other
Name Salary($) Bonus($) Granted(#) Compensation(1)
---- ---------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
Gary Mittleman.............. $ 152,885 $ 45,000 100,000 $6,115
President and Chief
Executive Officer
Dr. William P. Acker........ 112,316 -- 55,000 2,877
Vice President of
Product Development
and Commercialization
Dr. Manmohan Dhar........... 103,269 -- 30,000 2,692
Vice President and Chief
Engineer of the Residential
Program
</TABLE>
- --------
(1) Amounts shown in this column represent the dollar value of matching
contributions made by Plug Power under our 401(k) Savings and Retirement
Plan.
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<PAGE>
Option Grants In Last Fiscal Year
The following table sets forth information regarding stock options granted
during 1998 to our executive officers listed in the Summary Compensation Table.
During 1998, we granted options to purchase an aggregate of 597,650 shares of
common stock to employees. The exercise price per share for these options was
equal to the fair market value of the common stock as of the grant date as
determined by the Board of Directors.
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Number of Percent of Total Stock Price
Securities Options Appreciation
Name Underlying Granted to Exercise for Option Term(2)
- ---- Options Employees in Price Expiration ---------------------
Granted(1) Fiscal Year ($/Share) Date 5%($) 10%($)
---------- ---------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gary Mittleman.......... 100,000 16.7% $5.00 7/16/08 $ 314,447 $ 796,871
Dr. William P. Acker.... 55,000 9.2% 1.00 2/27/08 34,589 87,656
Dr. Manmohan Dhar....... 20,000 3.3% 1.00 2/27/08 12,578 31,875
10,000 1.7% 1.00 6/29/08 6,289 15,937
</TABLE>
- --------
(1) All options were granted under our 1997 stock option plan and have a ten
year term. Of the options shown in this table, 20% vest after completion
of 12 months of continuous employment service and an additional 20% vest
at each 12 month anniversary over the four year period following the date
of grant. Vested options become immediately exercisable upon a sale of the
company or an initial public offering; otherwise, all vested options
become exercisable on July 1, 2000.
(2) Potential realizable value is based on the assumption that our common
stock appreciates at the annual rate shown, compounded annually, from the
date of grant until expiration of the ten-year term. These numbers are
calculated based on Securities and Exchange Commission requirements and do
not reflect our projection or estimate of future stock price growth.
Potential realizable values are computed by multiplying the number of
shares of common stock subject to a given option by the fair market value
on the date of grant, as determined by our Board of Directors, assuming
that the aggregate stock value derived from that calculation compounds at
the annual 5% or 10% rate shown in the table for the entire ten-year term
of the option and subtracting from that result the aggregate option
exercise price. At an assumed initial public offering price of $14.00 per
share, the potential realizable value at the assumed annual rates of stock
price appreciation will be higher than the values shown above. Mr.
Mittleman's options to purchase 100,000 shares of common stock will have a
potential realizable value of $1,780,452 and $3,131,239 at assumed annual
rates of stock price appreciation of 5% and 10%, respectively. Dr. Acker's
options to purchase 55,000 shares of common stock will have a potential
realizable value of $1,199,249 and $1,942,182 at assumed annual rates of
stock price appreciation of 5% and 10%, respectively. Dr. Dhar's options
to purchase 20,000 shares of common stock will have a potential realizable
value of $436,090 and $706,248 at assumed annual rates of stock price
appreciation of 5% and 10%, respectively. Dr. Dhar's options to purchase
10,000 shares of common stock will have a potential realizable value of
$218,045 and $353,124 at assumed annual rates of stock price appreciation
of 5% and 10%, respectively.
Fiscal Year-End Option Values
The following table sets forth information concerning the number and value of
unexercised options to purchase common stock held as of December 31, 1998 by
our executive officers listed in the Summary Compensation Table. There was no
public trading market for our common stock as of December 31, 1998.
Accordingly, the values of the unexercised in-the-money options have been
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<PAGE>
calculated on the basis of an assumed initial public offering price of $14.00
per share less the applicable exercise price multiplied by the number of shares
that may be acquired on exercise. None of the executive officers listed in the
Summary Compensation Table exercised any stock options in 1998.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- In-The-Money Options
End (#) at Fiscal Year-End (1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gary Mittleman.............. -- 600,000 -- $7,400,000
Dr. William P. Acker........ -- 90,000 -- 1,170,000
Dr. Manmohan Dhar........... -- 50,000 -- 650,000
</TABLE>
- --------
(1) There was no public market for the common stock on December 31, 1998. The
value of exercisable and unexercisable in-the-money options at December 31,
1998 has been calculated using an assumed initial public offering price of
$14.00 per share.
Stock Option Plans
Effective July 1, 1997, we established a stock option plan to provide
employees, consultants, and members of the Board the ability to acquire an
ownership interest in Plug Power. Options for employees generally vest 20% per
year and expire ten years after issuance. Options granted to members of the
Board vest 50% upon grant and 25% per year thereafter. Options granted to
consultants vest one-third on the expiration of the consultant's initial
contract term, with an additional one-third vesting on each anniversary
thereafter. At September 30, 1999, there were a total of 3,377,189 options
granted under this plan. Although no further options will be granted under this
plan, the options previously granted will continue to vest in accordance with
this plan and vested options will be exercisable for shares of common stock
upon completion of the offering.
Our Board of Directors and stockholders have adopted the 1999 Stock Option
and Incentive Plan, which allows for the issuance of up to 2,561,002 shares of
common stock and other awards. The number of shares of common stock available
for issuance under our plan will be increased by the amount of any forfeitures
under the 1999 Stock Option and Incentive Plan and under the 1997 Stock Option
Plan. The number of shares of common stock under our plan will further increase
on June 30 and December 31 of each year by an amount equal to 16.4% of all
shares of stock issued by us during the previous six months. This offering will
result in an increase of 984,000 shares of stock available for issuance under
our plan. The 1999 Stock Option and Incentive Plan permits us to:
. grant incentive stock options;
. grant non-qualified stock options;
. grant stock appreciation rights;
. issue or sell common stock with vesting or other restrictions, or
without restrictions;
. grant rights to receive common stock in the future with or without
vesting;
. grant common stock upon the attainment of specified performance goals;
and
. grant dividend rights in respect of common stock.
These grants may be made to officers, employees, non-employee directors,
consultants, advisors and other key persons of Plug Power.
The 1999 Stock Option and Incentive Plan is administered by our Board of
Directors or a committee designated by our Board of Directors consisting solely
of two or more independent directors. Subject to the provisions of the plan,
the Board or the committee may select the individuals eligible to receive
awards, determine or modify the terms and conditions of the awards granted,
accelerate the vesting schedule of any award and generally administer and
interpret the plan.
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The exercise price of options granted under the 1999 Stock Option and
Incentive Plan is determined by the Board or committee. Under present law,
incentive stock options and options intended to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code of 1986 may not
be granted at an exercise price less than the fair market value of the common
stock on the date of grant, or less than 110% of the fair market value in the
case of incentive stock options granted to optionees holding more than 10% of
the voting power. Non-qualified stock options may be granted at prices which
are no less than 85% of the fair market value of the underlying shares on the
date granted. Options are typically subject to vesting schedules, terminate ten
years from the date of grant, may be exercised for specified periods after the
termination of the optionee's employment or other service relationship with us,
and are generally non-transferable. Upon the exercise of options, the option
exercise price must be paid in full:
. in cash or by certified or bank check or other instrument acceptable to
the committee;
. in the sole discretion of the committee, by delivery of shares of common
stock that have been owned by the optionee free of restrictions for at
least six months;
. by promissory note if the loan of these funds to the optionee has been
authorized by the Board of Directors and the optionee pays so much of
the exercise price as represents the par value of the common stock
acquired in a form other than a promissory note; and
. by a broker under irrevocable instructions to the broker selling the
underlying shares from the optionee.
Upon certain events, including a merger, reorganization or consolidation, the
sale of all or substantially all of our assets or all of our outstanding
capital stock or a liquidation or other similar transaction, all outstanding
awards issued under the 1999 Stock Option and Incentive Plan will become fully
vested and exercisable upon the closing of the transaction. The 1999 Stock
Option and Incentive Plan and all awards issued under the plan will terminate
upon any of the transactions described above, unless Plug Power and the other
parties to such transactions have agreed otherwise. All participants under the
1999 Stock Option and Incentive Plan will be permitted, for a period of time to
be determined by the committee, to exercise before any termination all awards
held by them which are then exercisable or will become exercisable upon the
closing of the transaction.
1999 Employee Stock Purchase Plan
We have adopted the Plug Power 1999 Employee Stock Purchase Plan under which
employees will be eligible to purchase shares of our common stock at a discount
through periodic payroll deductions. The plan is intended to meet the
requirements of Section 423 of the Internal Revenue Code. After the initial
period, purchases will occur at the end of six month offering periods at a
purchase price equal to 85% of the market value of our common stock at either
the beginning of the offering period or the end of the offering period,
whichever is lower. The first offering period under the plan will begin on
January 1, 2000 and will end on April 30, 2000. Participants may elect to have
from 1% to 10% of their pay withheld for purchase of common stock at the end of
the offering period, up to a maximum of $12,500 within any offering period. We
have reserved 1,000,000 shares of common stock for issuance under this plan.
Employment Agreements
We have entered into the following agreements with our senior management:
Gary Mittleman, our President and Chief Executive Officer, will receive 100%
of his base salary, continuation of employee benefits and vesting of stock
options for twelve months if we terminate his employment for any reason other
than failure to perform, gross negligence and/or fraud. For 1999, Mr.
Mittleman's base salary is $205,000.
Dr. Manmohan Dhar, our Vice President and Chief Engineer of the Residential
Program, will receive 100% of his base pay for twelve months if he voluntarily
terminates his employment or if we terminate his employment for any reason
other than gross misconduct, negligence, theft, dishonesty, or fraud.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mechanical Technology Incorporated and Edison Development Corporation formed
Plug Power in June 1997. In exchange for 4,750,000 shares of common stock each
in Plug Power, Mechanical Technology contributed to Plug Power $4.75 million of
in-process research and development and other assets and Edison Development
contributed $4.75 million in cash.
In June 1997, Plug Power and Edison Development Corporation entered into a
distribution agreement which provides Edison Development with the exclusive
right to distribute fuel cell systems of 2 kilowatts and higher to end-users
for stationary applications in the states of Illinois, Indiana, Michigan and
Ohio. The agreement expires in January 2010. In exchange for commitments to
purchase pre-commercial fuel cell systems and meet minimum sales obligations
during commercial production, we agreed to amend the distribution agreement to
permit Edison Development to, among other things, sell fuel cell systems to
resellers.
In June 1997, we granted to Edison Development options to purchase 200,000
shares of common stock at an exercise price of $1.00 per share. In June 1998,
we granted Edison Development an additional option to purchase 30,000 shares of
common stock at an exercise price of $5.00 per share.
On June 27, 1997, we entered into a management services agreement with
Mechanical Technology to obtain services relating to the management of Plug
Power and lease office space for a period of one year. The management services
agreement terminated in June 1998. At the expiration of this agreement, we
extended the existing facilities lease through September 30, 1998. In June
1998, we entered into a new facilities lease with Mechanical Technology which
commenced on October 1, 1998, and had a term of ten years with an option to
extend for an additional five years. We paid rent to Mechanical Technology of
$79,000 for the period from June 27, 1997 to December 31, 1997, $378,000 for
the year ended December 31, 1998, and $215,000 for the six months ended June
30, 1999. As part of the new facilities lease, Mechanical Technology reimbursed
Plug Power $2.0 million for improvements made to the facilities.
Our limited liability company agreement gave us the right to call upon Edison
Development for additional contributions up to an aggregate of $4.25 million
beginning on June 27, 1998, subject to achieving defined milestones relating to
technology development and system production, and gave Mechanical Technology
the right to match the contribution within a stated period to preserve its
percentage ownership in Plug Power. We made such calls on Edison Development in
April 1998 for $2.25 million and in June 1998 for $2.0 million, and Mechanical
Technology matched these contributions by making in-kind contributions to us of
a below-market lease valued at $2.0 million and research (non cash) credits
valued at $2.25 million, as described below. In exchange for such contributions
we issued 4,250,000 shares of our common stock to each of Mechanical Technology
and Edison Development.
In April 1998, Mechanical Technology purchased 2,000,000 shares of Plug Power
common stock in exchange for a below-market lease for office and manufacturing
facilities valued at $2.0 million. In April and June 1998, Mechanical
Technology paid $191,250 for two one-year options which entitled Mechanical
Technology to acquire a total of 2,250,000 shares of Plug Power at a price of
$1.00 per share. In March 1999, we agreed that Mechanical Technology had earned
research (non-cash) credits valued at $2.25 million which were used by
Mechanical Technology to exercise their option to acquire the 2,250,000 shares,
and the $191,250 was returned to Mechanical Technology in accordance with the
terms of the option agreements. The research credits were earned by Mechanical
Technology by assisting Plug Power in obtaining government grants and research
contracts.
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<PAGE>
After receiving these $4.25 million contributions from Mechanical Technology
and Edison Development, the limited liability company agreement required us to
seek additional financing from Mechanical Technology and Edison Development,
allowing them to maintain their ownership percentage, before seeking financing
from new investors. In accordance with the agreement, in August 1998 we offered
Mechanical Technology and Edison Development the opportunity to contribute
additional funds. Mechanical Technology and Edison Development each committed
to contribute an additional $5.0 million to Plug Power.
Pursuant to this committment, in August 1998 Mechanical Technology purchased
200,000 shares of Plug Power common stock at a price of $5.00 per share in
exchange for a contribution to capital of a $500,000 short-term loan and
accounts receivable (totaling $500,000) owed by Plug Power to Mechanical
Technology for management services under our management services agreement and
rent. Between October 1998 and February 1999, Mechanical Technology purchased
800,000 additional shares of Plug Power at a price of $5.00 per share for $4.0
million in cash pursuant to its $5.0 million commitment. To match these
contributions, in August 1998 Edison Development purchased 200,000 shares of
Plug Power common stock at a price of $5.00 per share in exchange for a
contribution to capital of two $500,000 short-term loans. Between October 1998
and February 1999, Edison Development purchased 800,000 shares of Plug Power
common stock at a price of $5.00 per share for $4.0 million in cash.
In January 1999, we entered into an agreement with Mechanical Technology and
Edison Development, pursuant to which we have the right to call upon Edison
Development and Mechanical Technology to contribute $7.5 million each in 1999
and $15.0 million each in 2000 in exchange for which each will receive common
stock valued at $7.50 per share. The agreement terminates on the earlier of
December 31, 2000 or upon an initial public offering of our shares at a price
greater than $7.50 per share. An amendment to the agreement permits Mechanical
Technology and Edison Development to contribute any funds not previously called
by us on the termination date in exchange for shares at a price of $7.50 per
share. Mechanical Technology and Edison Development committed to contribute
$22.5 million each in exchange for an aggregate of 6,000,000 shares of common
stock prior to the closing of this offering. In September 1999 Mechanical
Technology and Edison Development contributed $2.0 million each pursuant to
these agreements. Accordingly, Mechanical Technology and Edison Development
will each contribute $20.5 million immediately before this offering.
In June 1999, we entered into an agreement with Mechanical Technology to
acquire its 36 acre office facilities in Latham, New York, including all land
and buildings, in exchange for 704,315 shares of Plug Power common stock valued
at $6.67 per share or a total of $4.7 million and the assumption of
approximately $6.2 million in debt. In accordance with the terms of our limited
liability company agreement, Edison Development purchased 704,315 shares of
Plug Power common stock at $6.67 per share for $4.7 million in cash.
After giving effect to the offering and the additional investments
contemplated, Mechanical Technology will beneficially own approximately 32.5%
of Plug Power's outstanding common stock. FAC/Equities, a co-manager of this
offering, is a division of First Albany Corporation, whose parent, First Albany
Companies, Inc., owns approximately 34.0% of the outstanding common stock of
Mechanical Technology. George C. McNamee, the Chairman and Co-Chief Executive
Officer of First Albany Companies, the Chairman and Co-Chief Executive Officer
of First Albany Corporation and the Chief Executive Officer and a director of
Mechanical Technology, is currently the Chairman of the Board of Directors of
Plug Power and will be the Chairman of the Board of Directors of Plug Power
upon completion of the offering. In addition, Dr. Walter L. Robb, a director of
Mechanical Technology, is a director of Plug Power and will be a director of
Plug Power upon completion of this offering.
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After giving effect to the offering, Edison Development will beneficially own
approximately 32.8% of Plug Power's outstanding common stock. Anthony F.
Earley, Jr., the Chairman, Chief Executive Officer, President and Chief
Operating Officer of DTE Energy Company and its subsidiary, The Detroit Edison
Company, is a director of Plug Power and will be a director of Plug Power upon
completion of the offering. Detroit Edison is the parent company of Edison
Development. In addition, Larry G. Garberding, a director of DTE Energy and the
Executive Vice President and Chief Financial Officer of DTE Energy and Detroit
Edison, is also director of Plug Power and will be a director of Plug Power
upon completion of the offering.
In February 1999, we granted a warrant to Mr. Michael Cudahy, a director of
Plug Power, to purchase up to 400,000 shares of common stock at an exercise
price of $8.50 per share and sold Mr. Cudahy 1,440,000 shares of common stock
for a purchase price of $9,600,000. Mr. Cudahy committed to exercise his
warrant to purchase 400,000 shares before the closing of this offering for a
total purchase price of $3,400,000.
In February 1999, we also entered into an agreement with GE On-Site Power to
create GE Fuel Cell Systems, a joint venture owned 75% by GE On-Site Power and
25% by Plug Power, which is dedicated to marketing, selling, installing, and
servicing Plug Power residential fuel cell systems on a worldwide basis (other
than in the states of Illinois, Indiana, Michigan and Ohio). In connection with
the formation of GE Fuel Cell Systems and the execution of our distribution
agreement, we issued 2,250,000 shares of our common stock to GE On-Site Power,
of which 750,000 shares vested immediately. We have capitalized the fair value
of these shares ($3.8 million) under the caption "Distribution and Other
Agreements" in the financial statements. Before this agreement was amended, as
described below, the remaining 1,500,000 shares were to vest ratably over the
next four years.
We also issued a warrant to GE On-Site Power to purchase 3,000,000 additional
shares of common stock at a price of $12.50 per share. GE On-Site Power has
committed to exercise this warrant immediately before the closing of this
offering for a total exercise price of $37.5 million in cash.
General Electric has agreed to provide capital to GE Fuel Cell Systems, in
the form of loans, to fund GE Fuel Cell Systems' commitment to purchase 485
pre-commercial systems during the period ending December 31, 2000. General
Electric has also agreed to provide additional capital, in the form of a loan
not to exceed $8.0 million, to fund GE Fuel Cell Systems' ongoing operations.
In August 1999, we amended our agreement with GE On-Site Power to vest all
remaining shares. These shares will be capitalized at a value of $16.5 million,
the fair value of the shares at the time. In addition, we have agreed to
purchase $12.0 million of technical support services from General Electric
during the next three years. We also agreed with GE On-Site Power to use our
best efforts to cause Robert L. Nardelli, President and Chief Executive Officer
of GE On-Site Power, to be elected to our Board of Directors for an initial
term of three years. Mr. Nardelli has been elected as a Class III Director
effective upon the closing of this offering, with a term expiring in 2002.
As of September 30, 1999, we had granted options to purchase 3,377,189 shares
of common stock under our 1997 stock option plan to our officers, directors,
employees, consultants and advisors. We have reserved for issuance up to
2,561,002 additional options under our 1999 stock option plan and 1,000,000
shares of common stock for issuance under our 1999 employee stock purchase plan
under which employees will be eligible to purchase shares of common stock at a
discount through periodic payroll deductions.
54
<PAGE>
We have granted GE On-Site Power the right, on one occasion at any time after
the second anniversary of this offering, to require us to register up to
3,000,000 shares of our common stock under the Securities Act. In addition,
upon the closing of this offering, we will grant all of our eight current
stockholders the right to include their shares of common stock in any of the
first three registration statements we may file under the Securities Act.
We believe that each of the transactions described above was entered into on
terms no less favorable to Plug Power than could be obtained with non-
affiliated parties. For all future transactions, we have adopted a conflict of
interest policy whereby all material transactions between Plug Power and our
officers, directors and other affiliates must (i) be approved by a majority of
the members of the Board of Directors, including a majority of the
disinterested members and (ii) be on terms no less favorable to us than could
be obtained from unaffiliated third parties. In addition, any loans to our
officers, directors and other affiliates must be for bona fide business
purposes only.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership
of our common stock on a pro forma basis to reflect the issuance of shares to
current stockholders immediately prior to the closing of this offering and on a
pro forma, as adjusted basis to reflect the sale of the common stock offered
hereby, by:
. all persons known by us to own beneficially 5% or more of the common
stock;
. each of our directors;
. the executive officers listed in the Summary Compensation Table; and
. all directors and executive officers as a group.
Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares of common stock beneficially owned
by the stockholder. The address of Mechanical Technology Incorporated is 968
Albany-Shaker Road, Latham, NY 12110. The address of Edison Development
Corporation is c/o DTE Energy Company, 2000 Second Avenue, 644 WCB, Detroit,
Michigan 48226. The address of GE On-Site Power, Inc. is c/o GE Power Systems,
One River Road, Schenectady, New York 12345. The address of Michael Cudahy is
10850 West Park Place, Suite 980, Milwaukee, Wisconsin 53224. The address of
all other listed stockholders is c/o Plug Power Inc., 968 Albany-Shaker Road,
Latham, New York 12110.
The number of shares beneficially owned by each stockholder is determined
under rules issued by the Securities and Exchange Commission and includes
voting or investment power with respect to securities. Under these rules,
beneficial ownership includes any shares as to which the individual or entity
has sole or shared voting power or investment power and includes any shares as
to which the individual or entity has the right to acquire beneficial ownership
within 60 days after September 30, 1999 through the exercise of any warrant,
stock option or other right. The inclusion in this prospectus of such shares,
however, does not constitute an admission that the named stockholder is a
direct or indirect beneficial owner of such shares. The number of shares of
common stock outstanding used in calculating the percentage for each listed
person includes the shares of common stock underlying options held by such
person that are exercisable within 60 days of September 30, 1999, but excludes
shares of common stock underlying options held by any other person. Percentage
of beneficial ownership is based on 36,208,480 shares of common stock
outstanding as of September 30, 1999 on a pro forma basis.
<TABLE>
<CAPTION>
Shares Beneficially Owned
-------------------------------------------
Prior to the Offering After the Offering
-------------------------------------------
Name of Beneficial Owners Number Percent Number Percent
------------------------- ------------- --------------------- -------
<S> <C> <C> <C> <C>
DTE Energy Company(1)........................ 13,926,815 38.2% 13,926,815 32.8%
Mechanical Technology Incorporated(2)........ 13,704,315 37.8 13,704,315 32.5
General Electric Company(3).................. 5,250,000 14.5 5,250,000 12.4
Michael J. Cudahy(4)......................... 1,840,000 5.1 1,840,000 4.4
Gary Mittleman(5)............................ 380,000 1.0 380,000 *
Dr. William P. Acker(5)...................... 57,000 * 57,000 *
Dr. Manmohan Dhar(5)......................... 49,000 * 49,000 *
Anthony F. Earley, Jr.(6) ................... 13,926,815 38.2 13,926,815 32.8
Larry G. Garberding(6)....................... 13,926,815 38.2 13,926,815 32.8
George C. McNamee(7)......................... 13,811,815 38.0 13,811,815 32.6
Dr. Walter L. Robb(5)........................ 57,500 * 57,500 *
Robert L. Nardelli(8)........................ 5,250,000 14.5 5,250,000 12.4
All executive officers, directors, and
director-nominees as a group (12
persons)(9)................................. 35,372,130 95.4 35,372,130 82.1
</TABLE>
- --------
* Represents less than 1% of the outstanding shares of common stock
56
<PAGE>
(1) Includes 13,926,815 shares owned of record by Edison Development
Corporation, an indirect wholly-owned subsidiary of DTE Energy Company, of
which 2,733,333 are shares of common stock that will be acquired upon the
exercise of certain purchase rights immediately prior to the closing of
this offering and 222,500 are shares of common stock that are issuable
upon the exercise of outstanding options that are exercisable within 60
days of September 30, 1999.
(2) Includes 2,733,333 shares of common stock to be acquired upon the exercise
of certain purchase rights immediately before the closing of this
offering.
(3) Includes 5,250,000 shares of common stock owned of record by GE On-Site
Power, Inc., an indirect wholly-owned subsidiary of General Electric that
operates within its GE Power Systems business, of which 3,000,000 are
shares of common stock that will be acquired upon the exercise of a
warrant immediately before the closing of this offering.
(4) Includes 400,000 shares of common stock to be acquired upon the exercise
of a warrant immediately before the closing of this offering.
(5) All shares shown represent shares of common stock issuable upon exercise
of outstanding options that are exercisable within 60 days of September
30, 1999.
(6) Includes 13,926,815 shares owned of record by Edison Development
Corporation, an indirect wholly-owned subsidiary of DTE Energy Company, of
which 2,733,333 are shares of common stock that will be acquired upon the
exercise of certain purchase rights immediately before the closing of this
offering and 222,500 are shares of common stock that are issuable upon the
exercise of outstanding options that are exercisable within 60 days of
September 30, 1999. Messrs. Earley and Garberding, who are directors and
executive officers of DTE Energy, may be deemed the beneficial owners of
these shares. Each of Messrs. Early and Garberding disclaim beneficial
ownership of these shares.
(7) Includes 13,704,815 shares of common stock owned of record by Mechanical
Technology, of which 2,733,333 are shares of common stock to be acquired
upon the exercise of certain purchase rights in connection with the
closing of this offering. Mr. McNamee, a director and Chief Executive
Officer of Mechanical Technology, may be deemed the beneficial owner of
these shares. Mr. McNamee disclaims beneficial ownership of these shares.
Also includes 107,500 shares of common stock issuable upon exercise of
outstanding options held by Mr. McNamee that are exercisable within 60
days of September 30, 1999.
(8) Includes 5,250,000 shares of common stock owned of record by GE On-Site
Power, Inc., an indirect wholly-owned subsidiary of General Electric that
operates within its GE Power Systems business, of which 3,000,000 are
shares of common stock that will be acquired upon the exercise of a
warrant immediately before the closing of this offering. Mr. Nardelli, a
Senior Vice President of General Electric and the President and Chief
Executive Officer of GE Power Systems, disclaims beneficial ownership of
these shares.
(9) Includes 873,500 shares of common stock issuable upon exercise of
outstanding options held by the executive officers, directors and director-
nominees as a group that are exercisable within 60 days of September 30,
1999.
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Authorized and Outstanding Capital Stock
As of September 30, 1999 there were 36,208,480 shares of common stock issued
and outstanding after giving effect to the issuance of 9,216,666 shares of
common stock upon the exercise of purchase rights and warrants by current
stockholders immediately before the closing of this offering. Following the
offering, our authorized capital stock will consist of 95,000,000 shares of
common stock, of which 42,208,480 will be issued and outstanding, and 5,000,000
shares of undesignated preferred stock issuable in one or more series
designated by our Board of Directors, of which no shares will be issued and
outstanding. In addition, as of September 30, 1999, there were outstanding
stock options to purchase 3,377,189 shares of common stock. Of the issued and
outstanding common stock, 111,851 shares are subject to forfeiture by the
holder. At September 30, 1999, there were eight holders of record of our common
stock.
Common Stock
Voting Rights
The holders of our common stock have one vote per share. Holders of our
common stock are not entitled to vote cumulatively for the election of
directors. Generally, all matters to be voted on by stockholders must be
approved by a majority, or, in the case of election of directors, by a
plurality, of the votes entitled to be cast at a meeting at which a quorum is
present by all shares of common stock present in person or represented by
proxy, voting together as a single class, subject to any voting rights granted
to holders of any then outstanding preferred stock.
Dividends
Holders of common stock will share ratably in any dividends declared by our
Board of Directors, subject to the preferential rights of any preferred stock
then outstanding. Dividends consisting of shares of common stock may be paid to
holders of shares of common stock.
Other Rights
On liquidation, dissolution or winding up of Plug Power, all holders of
common stock are entitled to share ratably in any assets available for
distribution to holders of shares of common stock. No shares of common stock
are subject to redemption or have preemptive rights to purchase additional
shares of common stock.
Preferred Stock
Our certificate of incorporation provides that shares of preferred stock may
be issued from time to time in one or more series. Our Board of Directors is
authorized to fix the voting rights, if any, designations, powers, preferences,
qualifications, limitations and restrictions thereof, applicable to the shares
of each series. Our Board of Directors may, without stockholder approval, issue
preferred stock with voting and other rights that could adversely affect the
voting power and other rights of the holders of the common stock and could have
anti-takeover effects. We have no present plans to issue any shares of
preferred stock. The ability of our Board of Directors to issue preferred stock
without stockholder approval could have the effect of delaying, deferring or
preventing a change of control of Plug Power or the removal of existing
management.
58
<PAGE>
Indemnification Matters
Our certificate of incorporation contains a provision permitted by Delaware
law that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, including breaches involving
negligence or gross negligence in business combinations, unless the director
has breached his or her duty of loyalty, failed to act in good faith, engaged
in intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation
Law or obtained an improper personal benefit. This provision does not alter a
director's liability under the federal securities laws and does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty. Our by-laws provide that directors and officers shall
be, and in the discretion of our board of directors non-officer employees may
be, indemnified by Plug Power to the fullest extent authorized by Delaware law,
as it now exists or may in the future be amended, against all expenses and
liabilities reasonably incurred in connection with service for or on behalf of
Plug Power. Our by-laws also provide that the right of directors and officers
to indemnification shall be a contract right and shall not be exclusive of any
other right now possessed or hereafter acquired under any by-law, agreement,
vote of stockholders or otherwise. We also have directors' and officers'
insurance against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Plug Power as
described above, we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. At present, there is no
pending material litigation or proceeding involving any director, officer,
employee or agent of Plug Power in which indemnification will be required or
permitted.
Amendment of the Certificate of Incorporation
Any amendment to our certificate of incorporation must first be approved by a
majority of our Board of Directors and, if required by law, thereafter approved
by a majority of the outstanding shares entitled to vote with respect to such
amendment, except that any amendment to the provisions relating to stockholder
action, directors, limitation of liability and the amendment of our certificate
of incorporation must be approved by a super-majority of the outstanding shares
entitled to vote with respect to such amendment.
By-law Provisions
Our by-laws provide that a special meeting of stockholders may be called only
by the Chairman, the President or our Board of Directors unless otherwise
required by law. Our by-laws provide that only those matters included in the
notice of the special meeting may be considered or acted upon at that special
meeting unless otherwise provided by law. In addition, our by-laws include
advance notice and informational requirements and time limitations on any
director nomination or any new proposal which a stockholder wishes to make at
an annual meeting of stockholders.
Ability to Adopt Stockholder Rights Plan
Our Board of Directors may in the future resolve to issue shares of preferred
stock or rights to acquire such shares in order to implement a stockholder
rights plan. A stockholder rights plan typically creates voting or other
impediments to discourage persons seeking to gain control of Plug Power by
means of a merger, tender offer, proxy contest or otherwise if our Board of
Directors determines that such change in control is not in the best interests
of Plug Power and our stockholders. Our Board of Directors has no present
intention of adopting a stockholder rights plan and is not aware of any attempt
to effect a change in control of Plug Power.
59
<PAGE>
Statutory Business Combination Provision
Following the offering, we will be subject to Section 203 of the Delaware
General Corporation Law, which prohibits a publicly-held Delaware corporation
from consummating a "business combination," except under certain circumstances,
with an "interested stockholder" for a period of three years after the date
such person became an "interested stockholder" unless:
. before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination;
. upon the closing of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding shares held
by directors who are also officers of the corporation and shares held by
employee stock plans; or
. following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders
by the affirmative vote of the holders of 66 2/3% of the outstanding
voting stock of the corporation not owned by the interested stockholder.
The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three
years, owned, 15% or more of a corporation's outstanding voting stock. The term
"business combination" includes mergers, asset sales and other similar
transactions resulting in a financial benefit to an interested stockholder.
Section 203 makes it more difficult for an "interested stockholder" to effect
various business combinations with a corporation for a three-year period. A
Delaware corporation may "opt out" of Section 203 with an express provision in
its original certificate of incorporation or an express provision its
certificate of incorporation or by-laws resulting from an amendment approved by
holders of a least a majority of the outstanding voting stock. Neither our
certificate of incorporation nor our by-laws contains any such exclusion.
Trading on the Nasdaq National Market System
We have applied to have our common stock approved for quotation on the Nasdaq
National Market under the symbol "PLUG".
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be the American
Stock Transfer & Trust Company.
60
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock,
and no prediction can be made as to the effect, if any, that sales of common
stock or the availability of common stock for sale will have on the market
price of our common stock prevailing from time to time. Nonetheless,
substantial sales of common stock in the public market following this offering,
or the perception that sales could occur, could lower the market price of our
common stock or make it difficult for us to raise additional equity capital in
the future.
Following this offering, there will be 42,208,480 shares of our common stock
outstanding on a fully diluted basis. Of these shares, the 6,000,000 shares
which are being sold in this offering generally will be freely transferable
without restriction or further registration under the Securities Act, except
that any shares held by our "affiliates" as is defined in Rule 144 under the
Securities Act may be sold only in compliance with the limitations described
below.
The remaining 36,208,480 shares of common stock which will be outstanding
after the offering will be "restricted securities" as defined in Rule 144, and
may be sold in the future without registration under the Securities Act subject
to compliance with the provisions of Rule 144 or any other applicable exemption
under the Securities Act.
In connection with this offering, our existing officers, directors, and
stockholders, who hold all of the currently outstanding shares of common stock
and will own an aggregate of 36,208,480 shares of common stock after this
offering, have agreed with the underwriters that, subject to exceptions, they
will not sell or dispose of any of their shares for 180 days after the date of
this prospectus. Goldman, Sachs & Co. may, in its sole discretion and at any
time without notice, release all or any portion of the shares subject to such
restrictions. Subject to these lock-up agreements, the shares of common stock
outstanding upon the closing of the offering will be available for sale in the
public market as follows:
<TABLE>
<CAPTION>
Approximate
Number of Shares Description
---------------- ------------------------------------------------------------
<C> <S>
After the date of this prospectus, freely tradeable shares
6,000,000 sold in the offering.
25,049,850 After 180 days from the date of this prospectus, the lock-up
period will expire and these shares will be saleable under
Rule 144 (subject, in some cases, to volume limitations).
</TABLE>
In general, under Rule 144, as currently in effect, a person or persons whose
shares are required to be aggregated, including an affiliate of ours, and who
has beneficially owned shares for at least one year is entitled to sell, within
any three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of common stock, which is expected to be 422,085 shares upon the
completion of this offering, or the average weekly trading volume of the common
stock during the four calendar weeks preceding the date on which notice of such
sale is filed, subject to certain restrictions. In addition, a person who is
not deemed to have been an affiliate of ours at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years would be entitled to sell such shares under Rule 144(k)
without regard to the requirements described above. To the extent that shares
were acquired from an affiliate of ours, such person's holding period for the
purpose of effecting a sale under Rule 144 commences on the date of transfer
from the affiliate.
We have agreed not to sell or otherwise dispose of any shares of common stock
during the 180-day period following the date of this prospectus, except we may
issue, and grant options to purchase, shares of common stock under the 1999
stock option plan and our employee stock purchase plan.
61
<PAGE>
We have granted GE On-Site Power the right, on one occasion at any time after
the second anniversary of this offering, to require us to register up to
3,000,000 shares of our common stock under the Securities Act. In addition,
upon the closing of this offering, we will grant all of our eight current
stockholders the right to include their shares of common stock in any of the
first three registration statements we may file under the Securities Act.
We intend to file a registration statement on Form S-8 with respect to the
aggregate of shares of common stock issuable under our stock option plans and
our employee stock purchase plan promptly following the consummation of this
offering. Shares issued upon the exercise of stock options after the effective
date of the Form S-8 resgistration statement will be eligible for resale in the
public market without restriction, subject to Rule 144 limitations applicable
to affiliates and the lock-up agreements described above.
VALIDITY OF COMMON STOCK
The validity of the shares of common stock offered hereby will be passed upon
for Plug Power by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Various
legal matters related to the sale of the common stock offered hereby will be
passed upon for the underwriters by Ropes & Gray, Boston, Massachusetts.
EXPERTS
The financial statements as of December 31, 1997 and 1998, the period from
June 27, 1997 (date of inception) to December 31, 1997, and for the year ended
December 31, 1998, included in this prospectus have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including the exhibits and schedules thereto) under the
Securities Act and the rules and regulations thereunder, for the registration
of the common stock offered hereby. This prospectus is part of the registration
statement. This prospectus does not contain all the information included in the
registration statement because we have omitted certain parts of the
registration statement as permitted by the Securities and Exchange Commission's
rules and regulations. For further information about us and our common stock,
you should refer to the registration statement. Statements contained in this
prospectus as to any contract, agreement or other document referred to are not
necessarily complete. Where the contract or other document is an exhibit to the
registration statement, each statement is qualified by the provisions of that
exhibit.
You can inspect and copy all or any portion of the registration statements or
any reports, statements or other information we file at the public reference
facility maintained by the Securities and Exchange Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices
at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information
about the operation of the public reference rooms. Copies of all or any portion
of the registration statement can be obtained from the Public Reference Section
of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, the registration statement is
publicly available through the Securities and Exchange Commission's site on the
Internet's World Wide Web, located at http://www.sec.gov.
62
<PAGE>
We will also file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You can also
request copies of these documents, for a copying fee, by writing to the
Securities and Exchange Commission. We intend to furnish to our stockholders
annual reports containing audited financial statements for each fiscal year.
63
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of independent accountants......................................... F-2
Balance sheets as of December 31, 1997 and 1998 and June 30, 1999
(unaudited).............................................................. F-3
Statements of operations for the period from June 27, 1997 (date of
inception) to December 31, 1997, the year ended December 31, 1998, the
six months ended June 30, 1998 (unaudited), the six months ended June 30,
1999 (unaudited), and cumulative amounts from inception (unaudited)...... F-4
Statements of stockholders' equity for the period from June 27, 1997 (date
of inception) to December 31, 1997, the year ended December 31, 1998 and
the six months ended June 30, 1999 (unaudited)........................... F-5
Statements of cash flows for the period from June 27, 1997 (date of
inception) to December 31, 1997, the year ended December 31, 1998, the
six months ended June 30, 1998 (unaudited), the six months ended June 30,
1999, and cumulative amounts from inception (unaudited).................. F-6
Notes to financial statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Members and Holders of Membership Interests
In our opinion, the accompanying balance sheets and the related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Plug Power, LLC (a development
stage enterprise), at December 31, 1997 and 1998, and the results of its
operations and its cash flows for the period from June 27, 1997 (date of
inception) to December 31, 1997, and for the year ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Albany, New York
April 9, 1999
F-2
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
Balance Sheets
<TABLE>
<CAPTION>
December 31, December 31, June 30,
1997 1998 1999
------------ ------------ -----------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents, principally
commercial paper..................... $3,080,181 $ 3,993,122 $17,242,734
Accounts receivable................... 803,557 599,955 1,016,402
Other current assets.................. 33,550 14,647 81,614
Due from investor..................... -- 685,306 --
---------- ----------- -----------
Total current assets................ 3,917,288 5,293,030 18,340,750
Property, plant and equipment, net...... 737,613 2,753,492 8,142,513
Distribution and other agreements, net.. -- -- 3,593,750
Other assets............................ 191,665 46,913 --
---------- ----------- -----------
Total assets........................ $4,846,566 $ 8,093,435 $30,077,013
========== =========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable...................... $ 434,795 $ 568,007 $ 3,233,998
Accrued expenses...................... 797,864 1,746,239 1,439,454
Due to investor....................... 17,247 286,492 7,610
Current portion of capital lease
obligation........................... -- -- 90,173
---------- ----------- -----------
Total current liabilities........... 1,249,906 2,600,738 4,771,235
Capital lease obligation.............. -- -- 155,397
---------- ----------- -----------
Total liabilities................... 1,249,906 2,600,738 4,926,632
---------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Class A membership interest; no par
value, authorized 18,000,000,
25,000,000 and 40,000,000 in 1997,
1998 and 1999, respectively; issued
and outstanding; 9,500,000,
17,150,000 and 26,458,480 in 1997,
1998 and 1999, respectively.......... -- -- --
Class B membership interests; no par
value, authorized 3,000,000, none
issued............................... -- -- --
Paid-in capital....................... 9,500,000 21,012,000 60,107,964
Class A membership interests
subscribed........................... -- -- (4,697,782)
Deficit accumulated during the
development stage.................... (5,903,340) (15,519,303) (30,259,801)
---------- ----------- -----------
Total stockholders' equity.......... 3,596,660 5,492,697 25,150,381
---------- ----------- -----------
Total liabilities and stockholders'
equity............................. $4,846,566 $ 8,093,435 $30,077,013
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
Statements of Operations
For the period from June 27, 1997 (date of inception) to December 31, 1997,
the year ended December 31, 1998, the six months ended June 30, 1998,
the six months ended June 30, 1999, and cumulative amounts from inception
<TABLE>
<CAPTION>
Cumulative
December 31, December 31, June 30, June 30, Amounts from
1997 1998 1998 1999 Inception
------------ ------------ ----------- ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Contract revenue........ $ 1,193,530 $ 6,541,040 $ 2,548,653 $ 3,695,535 $ 11,430,105
Cost of contract
revenue................ 1,226,443 8,863,845 3,438,301 5,117,834 15,208,122
----------- ----------- ----------- ------------ ------------
Loss on contracts....... (32,913) (2,322,805) (889,648) (1,422,299) (3,778,017)
In-process research and
development............ 4,042,640 -- -- -- 4,042,640
Research and development
expense................ 1,300,877 4,632,729 2,153,775 7,780,246 13,713,852
General and
administrative
expense................ 630,033 2,753,645 1,328,256 5,755,986 9,139,664
----------- ----------- ----------- ------------ ------------
Operating loss......... (6,006,463) (9,709,179) (4,371,679) (14,958,531) (30,674,173)
Other income,
principally interest... 103,123 93,216 41,472 218,033 414,372
----------- ----------- ----------- ------------ ------------
Net loss............... $(5,903,340) $(9,615,963) $(4,330,207) $(14,740,498) $(30,259,801)
=========== =========== =========== ============ ============
Loss per membership
interest:
Basic and diluted...... $ (0.62) $ (0.71) $ (0.40) $ (0.69)
=========== =========== =========== ============
Weighted average number
of membership interests
outstanding:........... 9,500,000 13,616,986 10,864,641 21,299,034
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
Statements of Stockholders' Equity
For the period from June 27, 1997 (date of inception) to December 31, 1997,
the year ended December 31, 1998, and the six months ended June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Class A Additional Membership During the Total
Membership Paid-in Interests Development Stockholders'
Interests Capital Subscribed Stage Equity
---------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, June 27, 1997.. -- $ -- $ -- $ -- $ --
Capital contributions... 9,500,000 9,500,000 9,500,000
Net loss................ (5,903,340) (5,903,340)
---------- ----------- ----------- ------------ -----------
Balance, December 31,
1997................... 9,500,000 9,500,000 (5,903,340) 3,596,660
Capital contributions... 7,650,000 13,250,000 13,250,000
Deferred rent expense... (2,000,000) (2,000,000)
Amortization of deferred
rent expense........... 50,000 50,000
Compensatory options.... 212,000 212,000
Net loss................ (9,615,963) (9,615,963)
---------- ----------- ----------- ------------ -----------
Balance, December 31,
1998................... 17,150,000 21,012,000 (15,519,303) 5,492,697
Capital contributions... 4,858,480 31,065,564 (4,697,782) 26,367,782
Stock based
compensation........... 4,450,000 6,000,000 6,000,000
Amortization of deferred
rent expense........... 100,000 100,000
Write-off deferred rent
expense................ 1,850,000 1,850,000
Compensatory options.... 80,400 80,400
Net loss................ (14,740,498) (14,740,498)
---------- ----------- ----------- ------------ -----------
Balance, June 30, 1999.. 26,458,480 $60,107,964 $(4,697,782) $(30,259,801) $25,150,381
========== =========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
Statements of Cash Flows
For the period from June 27, 1997 (date of inception) to December 31, 1997,
the year ended December 31, 1998, the six months ended June 30, 1998,
the six months ended June 30, 1999 and cumulative amounts from inception
<TABLE>
<CAPTION>
Cumulative
December 31, December 31, June 30, June 30, Amounts from
1997 1998 1998 1999 Inception
------------ ------------ ----------- ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net loss........................ $(5,903,340) $(9,615,963) $(4,330,207) $(14,740,498) $(30,259,801)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization.. 187,708 499,142 187,673 380,467 1,067,317
In-process research and
development................... 4,042,640 -- -- -- 4,042,640
Amortization of deferred rent.. -- 50,000 -- 100,000 150,000
Write-off of deferred rent..... -- -- -- 1,850,000 1,850,000
In-kind services............... -- 500,000 -- -- 500,000
Stock based compensation....... -- -- -- 2,406,250 2,406,250
Compensatory options........... -- 212,000 106,000 80,400 292,400
Increases (decreases) in
operating assets:
Accounts receivable............ (803,557) 203,602 (267,915) (416,447) (1,016,402)
Other current assets........... (33,550) 18,903 (26,703) (66,967) (81,614)
Change in due from/due to
investor...................... 17,247 (416,061) (367,759) 406,424 7,610
Accounts payable and accrued
expenses...................... 1,184,551 1,081,587 1,066,239 2,359,206 4,625,344
Other assets................... -- -- -- 21,914 21,914
----------- ----------- ----------- ------------ ------------
Net cash used in operating
activities................... (1,308,301) (7,466,790) (3,632,672) (7,619,251) (16,394,342)
----------- ----------- ----------- ------------ ------------
Cash Flows From Investing
Activities:
Purchase of property, plant and
equipment...................... (361,518) (2,370,269) (1,876,440) (5,498,919) (8,230,706)
----------- ----------- ----------- ------------ ------------
Cash used in investing
activities................... (361,518) (2,370,269) (1,876,440) (5,498,919) (8,230,706)
----------- ----------- ----------- ------------ ------------
Cash Flows From Financing
Activities:
Contributed capital............. 4,750,000 10,750,000 4,250,000 26,367,782 41,867,782
----------- ----------- ----------- ------------ ------------
Cash provided by financing
activities................... 4,750,000 10,750,000 4,250,000 26,367,782 41,867,782
----------- ----------- ----------- ------------ ------------
Increase (decrease) in cash...... 3,080,181 912,941 (1,259,112) 13,249,612 17,242,734
Cash and cash equivalents,
beginning....................... -- 3,080,181 3,080,181 3,993,122 --
----------- ----------- ----------- ------------ ------------
Cash and cash equivalents,
ending.......................... $ 3,080,181 $ 3,993,122 $ 1,821,069 $ 17,242,734 $ 17,242,734
=========== =========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 and 1999 amounts are unaudited
1. Nature of Operations
Plug Power, LLC (Company), was formed as a joint venture between Edison
Development Corporation (EDC) and Mechanical Technology Incorporated (MTI) on
June 27, 1997. The Company is a development stage enterprise formed to
research, develop, manufacture and distribute fuel cells for electric power
generation.
The unaudited interim financial statements reflect all adjustments which are,
in the opinion of management, necessary for a fair statement of the results for
the interim periods presented.
2. Significant Accounting Policies
Use of estimates:
The financial statements of the Company have been prepared in conformity with
generally accepted accounting principles which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents:
Cash and cash equivalents include cash on hand and short term investments
with original maturities of three months or less.
Inventories:
Inventories are stated at lower of cost (first-in, first-out) or market.
Property, plant and equipment, and long-lived assets:
Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over their estimated useful lives ranging from 2 to 10
years.
The Company reviews long-lived assets and identifiable intangible assets for
impairment whenever any events or changes in circumstances indicate that the
carrying amount of these assets may not be recoverable.
Revenue recognition:
The Company's contract revenue is derived from revenues earned under
contracts principally with government agencies. Such contracts require the
Company to deliver research and tangible developments in fuel cell technology
and system design and prototype fuel cell systems for test and evaluation by
the government agency. Revenues are recognized in proportion to the costs
incurred. Total estimated cost to complete a contract in excess of the awarded
contract amounts are charged to operations during the period such costs are
estimated. While the Company's accounting for these contract costs are subject
to audit by the sponsoring agency, in the opinion of management, no material
adjustments are expected as a result of such audits.
The Company generally is required to absorb from 25% to 50% of the total
costs incurred on government contracts. At June 30, 1999 the Company has been
awarded approximately $40 million of such government contracts.
F-7
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
2. Significant Accounting Policies, continued
At December 31, 1998 and at June 30, 1999, $25,688 of retainage was owed to
the Company and is included in accounts receivable.
Recent Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information"(SFAS 131). SFAS 131 establishes new
standards for the way companies report information about operating segments in
annual financial statements. The disclosures prescribed by SFAS 131 are
effective for the year ended December 31, 1998. We do not believe we operate in
more than one segment.
3. Inventories
Inventories at December 31, 1997 and 1998, and June 30, 1999 consist of
unbilled work-in-progress on research contracts of $20,911 and $14,647, and
$53,087 respectively, and are included in other current assets.
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 1997 and 1998 and June 30, 1999
consisted of the following:
<TABLE>
<CAPTION>
December 31, December 31
1997 1998 June 30, 1999
------------ ----------- -------------
<S> <C> <C> <C>
Leasehold improvements.. $ 36,778 $ 97,889 $ 97,889
Machinery and
equipment.............. 817,643 3,104,887 5,562,223
Construction in
progress............... 3,287,153
--------- ---------- ----------
854,421 3,202,776 8,947,265
Less accumulated
depreciation........... (116,808) (449,284) (804,752)
--------- ---------- ----------
Property, plant and
equipment, net......... $ 737,613 $2,753,492 $8,142,513
========= ========== ==========
</TABLE>
Depreciation and amortization expense was approximately $29,375 for the
period from June 27, 1997 (date of inception) to December 31, 1997, $332,476
for the year ended December 31, 1998, and $104,340 and $355,468 for the six
months ended June 30, 1998 and 1999, respectively.
As of June 30, 1999, the Company has committed to approximately $4 million of
additional capital expenditures. The Company also leased equipment under a
capital lease transaction subsequent to December 31, 1998 with a net book value
at June 30, 1999 of $248,110 which is included in machinery and equipment.
Future minimum non-cancelable lease payments are as follows:
<TABLE>
<CAPTION>
1999.............................................................. $ 58,921
<S> <C>
2000.............................................................. 93,022
2001.............................................................. 93,022
2002.............................................................. 34,068
2003.............................................................. 5,368
---------
284,401
Less amounts representing interest................................ (38,831)
---------
$ 245,570
=========
</TABLE>
F-8
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
5. Loss Per Membership Interest
Loss per membership interest for the Company is as follows:
<TABLE>
<CAPTION>
June 27, 1997 Six Months Six Months
to Year ended Ended Ended
December 31, December 31, June 30, June 30,
1997 1998 1998 1999
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Numerator:
Net loss............... $(5,903,340) $(9,615,963) $(4,330,207) $(14,740,498)
Denominator:
Weighted average
membership interests
outstanding........... 9,500,000 13,616,986 10,864,661 21,299,034
</TABLE>
No options, warrants, or contingently issuable membership interests were
included in the calculation of diluted loss per membership interest because
their impact would have been anti-dilutive.
6. Income Taxes
The Company's income taxes or credits resulting from earnings or losses were
payable by, or accrued to, its members. Therefore, no provision has been made
for income taxes in these financial statements.
7. Stockholders' Equity
The Company has two classes of membership interests, Class A voting and
Class B non voting interests. All Class B membership interests will be
converted to Class A membership interests on the earlier of (1) the date on
which the Company (or its successor) files a registration statement for the
public sale of interests in the Company (or shares of a successor), under the
Securities Act of 1933; or (2) approval by a majority of the Class A
membership interests, of (a) a sale, lease, assignment, transfer or other
conveyance of all or substantially all of the assets of the Company, or (b) a
merger, combination or dissolution of the Company. At December 31, 1998 and
June 30, 1999, 3,000,000 Class B membership interests were reserved for
issuance under the membership option plan. At June 30, 1999, 9,750,000 Class A
membership interests are reserved for warrant exercises and capital calls.
Subsequent to June 30, 1999, an additional 1,300,000 Class B membership
interests were authorized for issuance, for a total of 4,300,000
In exchange for EDC's initial cash contribution of $4,750,000, the Company
issued 4,750,000 Class A membership interests in the Company. MTI made noncash
contributions of $4,750,000 consisting of in-process research and development
($4,042,640), and certain net assets, in exchange for 4,750,000 Class A
membership interests. The valuation of these noncash contributions was based
on the estimated fair value of the component assets. The estimated fair value
of the in-process research and development was determined using the cost
valuation approach.
During the year ended December 31, 1998, EDC and MTI made additional total
contributions of $13,250,000 in exchange for 7,650,000 Class A membership
interests. EDC contributed $7,750,000 in cash for 4,950,000 Class A membership
interests. MTI contributed $3,000,000 in cash, $2,000,000 of deferred rent
related to a below market lease for office and manufacturing facilities, and
$500,000 of in-kind services ($5,500,000 in total) for 2,700,000 Class A
membership interests. In 1998, MTI purchased options for $191,250, which
entitled MTI to acquire 2,250,000 Class A membership interests by June, 1999
for $2,250,000.
F-9
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
7. Stockholders' Equity, continued
According to the joint venture agreement, MTI may earn non-cash credits which
will be applied toward the purchase price of Class A membership interests under
option. MTI can earn these credits based on the Company obtaining certain
defined levels of research contracts. In March 1999, all parties to the
agreement mutually agreed that MTI had earned $2,250,000 of non-cash credit
which were used to acquire 2,250,000 Class A membership interests.
Accordingly, these interests were issued in March 1999, a charge to
operations of $2,250,000 was recorded under the caption "General and
Administrative Expense," and $191,250 was returned to MTI in accordance with
the terms of the option agreement.
A summary of equity transactions from inception through June 30, 1999 is as
follows:
<TABLE>
<CAPTION>
Number of Price per Total Paid
Date Shares Share Cash Non-cash in Capital
---- ---------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
June, 1997.............. 4,750,000 $1.00 $ 4,750,000 $ $ 4,750,000
June, 1997.............. 4,750,000 1.00 4,750,000 4,750,000
---------- ----------- ----------- -----------
December 31, 1997....... 9,500,000 4,750,000 4,750,000 9,500,000
April and June, 1998.... 4,250,000 1.00 4,250,000 4,250,000
June, 1998.............. 2,000,000 1.00 2,000,000 2,000,000
August, 1998............ 300,000 5.00 1,500,000 1,500,000
August, 1998............ 100,000 5.00 500,000 500,000
October, November, and
December, 1998......... 1,000,000 5.00 5,000,000 5,000,000
Adjustments(a).......... (1,738,000) (1,738,000)
---------- ----------- ----------- -----------
December 31, 1998....... 17,150,000 15,500,000 5,512,000 21,012,000
January and February,
1999................... 600,000 5.00 3,000,000 3,000,000
February, 1999.......... 2,250,000 5.00 11,250,000 11,250,000
February, 1999.......... 1,500,000 6.67 10,000,000 10,000,000
March, 1999(b).......... 2,250,000 1.00 2,250,000 2,250,000
April and June,
1999(c)................ 2,004,165 6.67 13,367,782 13,367,782
June, 1999.............. 704,315 6.67 4,697,782 4,697,782
Adjustments(a).......... (5,469,600) (5,469,600)
---------- ----------- ----------- -----------
June 30, 1999........... 26,458,480 $41,867,782 $18,240,182 $60,107,964
========== =========== =========== ===========
</TABLE>
- --------
(a) Represents adjustments for compensatory employee options, deferred rent,
and in 1999, unvested shares issued.
(b) Represents exercise of April, 1998 option.
(c) Excludes $840,000 of in-kind marketing services not yet provided.
8. Related Party Transactions
On June 27, 1997, the Company entered into a distribution agreement with the
EDC. Under the agreement, EDC was appointed the Company's exclusive independent
distributor in Michigan, Ohio, Indiana and Illinois to promote and assist in
the sale of products developed by the Company, subject to certain terms and
conditions.
F-10
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
8. Related Party Transactions, continued
On June 27, 1997, the Company entered into a management services agreement
with MTI to obtain certain services and lease certain facilities for a period
of one year. At the expiration of this agreement, the Company extended the
existing facilities lease through September 30, 1998. In June 1998, the Company
entered into a new facilities lease which commenced on October 1, 1998, and had
a term of ten years with an option for an additional five years. Rental expense
was $79,000 for the period from June 27, 1997 (date of inception) to December
31, 1997, and $378,000 for the year ended December 31, 1998. Rental expense was
$256,000 and $215,000 for the six months ended June 30, 1998 and 1999,
respectively. The total amount due MTI was $17,247, $286,492 and $7,610 at
December 31, 1997, December 31, 1998 and June 30, 1999, respectively.
As part of the new facilities lease, MTI agreed to reimburse the Company up
to $2.0 million for improvements made to the Company's facilities. At December
31, 1998, $685,306 in Company expenditures had not yet been reimbursed by MTI,
and is included in due from investor. Subsequent to June 30, 1999, the lease
and the management agreement with MTI were terminated in connection with MTI's
contribution of its real estate to the Company in exchange for Class A
membership interests (see Note 10).
9. Employee Benefit Plans
Membership Option Plan:
Effective July 1, 1997, the Company established a Membership Option Plan (the
Plan) to provide employees an option to purchase Class B membership interests.
Employee options generally vest 20% per year and expire ten years after
issuance. Options granted to the Board of Managers vest 50% upon grant and 25%
per year thereafter. Options granted to consultants vest one-third on
expiration of the consultant's initial contract term with an additional one-
third vesting on each anniversary thereafter. Except as discussed below, no
options can be exercised prior to July 1, 2000. All options granted shall
become immediately vested and exercisable in the event of the sale of all or
substantially all of the Company's assets, or in the event of the sale of all
or substantially all of the Company's Class A Membership interests. All vested
options shall become immediately exercisable in the event the Company's Class A
membership interests become publicly traded. At June 30, 1999, there are
3,000,000 interests authorized for issuance under the Plan. Subsequent to June
30, 1999, an additional 1,300,000 interests were authorized for issuance, for a
total of 4,300,000.
The following table summarizes information about the membership options
outstanding under the Plan at December 31, 1998:
<TABLE>
<CAPTION>
Outstanding
---------------------------- ---
Average Weighted
Remaining Average
Life Exercise
Exercise Price Interests (Years) Price
-------------- --------- --------- --------
<S> <C> <C> <C> <C>
$ 1.00...................................... 1,435,200 8.9 $1.00
$ 5.00...................................... 240,000 9.8 5.00
---------
1,675,200 9.1 1.57
=========
</TABLE>
F-11
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
9. Employee Benefit Plans, continued
The following table summarizes information about the membership options
outstanding under the Plan at June 30, 1999:
<TABLE>
<CAPTION>
Outstanding
----------------------------
Average Weighted
Remaining Average
Life Exercise
Exercise Price Interests (Years) Price
-------------- --------- --------- --------
<S> <C> <C> <C>
$ 1.00.......................................... 1,435,200 8.4 $1.00
$ 5.00.......................................... 583,039 9.6 5.00
$ 6.67.......................................... 591,500 10.0 6.67
---------
2,609,739 9.0 3.18
=========
</TABLE>
The following table summarizes activity of the Plan:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Interests Price
Under Per
Option Activity Option Interest
--------------- --------- --------
<S> <C> <C>
Balance, June 27, 1997................................... -- $--
Granted at fair value.................................... 1,132,500 1.00
Forfeited or terminated.................................. (18,500) 1.00
---------
Balance December 31, 1997................................ 1,114,000 1.00
Granted below fair value................................. 197,000 1.00
Granted at fair value.................................... 460,650 3.09
Forfeited or terminated.................................. (96,450) 1.03
---------
Balance December 31, 1998................................ 1,675,200 1.57
---------
Granted at fair value.................................... 934,539 6.06
---------
Balance at June 30, 1999................................. 2,609,739 3.12
=========
</TABLE>
Accounting for Stock Based Compensation:
The per share weighted average fair value of the options granted during 1997,
1998 and 1999 was $0.26, $0.58 and $1.45, respectively, using the minimum value
method of valuing stock options under Statement of Financial Accounting
Standard No. 123 (SFAS No.123) "Accounting for Stock-Based Compensation".
The dividend yield was assumed to be $0 for all periods. The risk free
interest rate ranged from 5.8% to 6.1% in 1997 and 4.5% to 5.6% in 1998, and
5.1% to 5.7% in 1999. An expected life of five years was assumed. The Company
applies Accounting Principles Board Opinion No. 25 in accounting for the Plan
and does not record compensation cost for options granted at fair value.
During 1998 the Company awarded 197,000 options to key employees for which
issuance was contingent upon the attainment of specified performance
objectives. Of those awarded, 51,500 were forfeited. The difference between the
fair value of the membership interests at the measurement date and the exercise
price of the options was $582,000, and will be charged to expense over the four
F-12
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
9. Employee Benefit Plans, continued
year vesting period of the options. The charge to operations was $212,000 and
$80,400 for the year ended December 31, 1998 and for the six months ended June
30, 1999, respectively.
Had the Company determined compensation cost based on fair value in
accordance with SFAS 123, the Company's net loss would have increased to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
Six Months
June 27, 1997 Year ended Ended
to December 31, December 31, June 30,
1997 1998 1999
--------------- ------------ -------------
<S> <C> <C> <C>
Net loss, as reported............. $ (5,903,340) $ (9,615,963) $ (14,740,498)
Proforma net loss................. (6,000,628) (9,775,441) (14,853,309)
Proforma loss per membership in-
terest, basic and
diluted.......................... (0.63) (0.72) (0.70)
</TABLE>
401(k) Savings & Retirement Plan:
The Company offers a 401(k) Savings & Retirement Plan to eligible employees
meeting certain age and service requirements. This plan permits participants
to contribute up to 15% of their salary, up to the maximum allowable by the
Internal Revenue Service regulations. Participants are immediately vested in
their voluntary contributions plus actual earnings thereon. Participants are
vested in the Company's matching contribution based on the years of service
completed. Participants are fully vested upon completion of four years of
service. The Company's expense for this plan was $23,000 for the period from
June 27, 1997 (date of inception) to December 31, 1997 and $95,000 for the
year ended December 31, 1998. The Company's expense for this plan was $34,000
and $90,000 for the six months ended June 30, 1998 and 1999, respectively.
10. Subsequent Events (Unaudited)
Capital Call:
Effective January 26, 1999, the Company entered into an agreement with MTI
and EDC. The agreement provides that the Company has the right to call upon
MTI and EDC to make capital contributions (Capital Call), at any time through
December 31, 2000, if the Company determines that it requires additional
funds, as follows:
. The agreement requires both MTI and EDC to each fund capital calls of up
to $7.5 million in 1999 and $15 million in 2000 (Capital Commitment).
. In exchange for such Capital Commitment, MTI and EDC will receive Class
A membership interests from the Company at $7.50 per interest.
. MTI and EDC will share the Capital Commitment equally.
. The Company's Board of Managers will determine when there is a
requirement for additional funds.
. MTI and EDC shall have sixty days from the date of such determination to
tender their payment to the Company.
The agreement will terminate on the earlier of i) December 31, 2000 or ii)
an initial public offering of shares by the Company at a price of greater than
$7.50 per share (Termination Date).
F-13
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
10. Subsequent Events (Unaudited), continued
Under an amendment to the agreement, the Company has also agreed to permit MTI
and EDC to make capital contributions on the Termination Date, whether or not
such funds have been called, to the extent of their Capital Commitment. Such
contributions will be made at a fixed price of $7.50 per Class A membership
interest.
If the Company makes a Capital Call and either MTI or EDC fail to make the
required capital contribution (Defaulting Member), then such Defaulting Member
shall permanently forfeit the right to receive the interests it is entitled to
under the agreement (Defaulted Interests). Additionally, to the extent of
outstanding Capital Commitments, the Defaulting Member shall forfeit the right
to receive additional interests equal to two times the Defaulted Interests. The
non-defaulting Member may then elect to fund the Defaulting Member's share of
the Capital Call in exchange for membership interests at the fixed price of
$7.50 per interest.
Subsequent to June 30, 1999, the Company made a capital call on EDC and MTI
in the amount of $4,000,005, representing 266,667 Class A membership interests
each at $7.50 per share.
GE On-Site Power:
In February 1999, the Company entered into an agreement with GE On-Site
Power, Inc. (a wholly owned subsidiary of General Electric Co.) to create GE
Fuel Cell Systems, L.L.C. (GEFCS) a limited liability company created to market
and distribute fuel cell systems world-wide. GE On-Site Power, Inc. owns 75% of
the new entity and the Company owns 25% of the new entity.
As part of the agreement, the Company will work closely with General
Electric's Corporate Research and Development Center for product development
and manufacturing support. GEFCS will market, sell, install and service fuel
cells systems, designed and manufactured by the Company, world-wide (with the
exception of EDC's exclusive four state territory of Michigan, Ohio, Indiana
and Illinois) for residential and small business power applications up to 35kW.
In addition, the Company entered into a ten year distribution agreement with
GEFCS that requires GEFCS purchase from the Company a specified number of pre-
commercial units by December 31, 2000.
In accordance with the terms of the agreement, General Electric will provide
capital, in the form of loans, to fund the purchase of pre-commercial units
during the period ending December 31, 2000. General Electric will also provide
additional capital, in the form of a loan not to exceed $8.0 million, to fund
the operations of GEFCS. The Company has agreed to purchase a minimum of $12.0
million of technical support services over a three year period.
In connection with the formation of GEFCS, the Company issued 2,250,000 Class
A membership interests to GE On-Site Power, Inc. Of these, 750,000 interests
vested immediately and the remaining 1,500,000 shares vested in August 1999.
The Company has capitalized the fair value of the 750,000 shares ($3,750,000)
under the caption "Distribution and other agreements" in the June 30, 1999
financial statements. The remaining shares will be capitalized at the fair
value in August 1999 ($16.5 million). Such amount will be amortized ratably
through 2009, the term of the distribution agreement.
F-14
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
10. Subsequent Events (Unaudited), continued
The Company contributed $2,500 to GEFCS for a 25% interest. The Company
accounts for its interest in GEFCS on the equity method of accounting. The
Company's original investment has been written down to zero based on the
Company's pro-rata share of losses of GEFCS through June 30, 1999.
The Company also issued warrants to purchase 3,000,000 additional Class A
membership interests at $12.50 per interest. These warrants expire the later of
i) December 31, 2000, ii) twelve months after an initial public offering of
shares, by the Company, at a price less than $12.50 per share, or iii) an
initial public offering of shares, by the Company, at a price of at least
$12.50 per share.
Other Financing Transactions:
During the first quarter of 1999 MTI and EDC each purchased 300,000 Class A
membership interests for $1.5 million each.
In February 1999, two investors purchased 1,500,000 Class A membership
interests for $10.0 million. In addition, one of the investors received a
warrant to purchase 400,000 Class A membership interests at a price of $8.50
per interest. These warrants expire at the earliest of i) December 31, 2001,
ii) an initial public offering of the Company, at a price of at least $8.50 per
share, or iii) eighteen months after an initial public offering of shares by
the Company at a price less than $8.50 per share.
In April 1999 an investor purchased 299,850 Class A membership interests for
$2.0 million.
In April 1999, an investor purchased 1,000,000 Class A membership interests
for $6.7 million. In connection with the purchase agreement, the investor is
required to spend an aggregate of $840,000 for market research and related
services on behalf of the Company. In the event such amounts are not expended
by April, 2002, up to 111,851 of the previously issued interests may be
returned to the Company. The Company will account for these services by
recording a charge to earnings and a credit to paid-in capital as these
services are rendered. As of June 30, 1999, no services had been provided.
Additionally, the investor received warrants to purchase an additional 350,000
Class A membership interests at an exercise price of $8.50 per interest. These
warrants terminate on the earliest of i) December 31, 2001, ii) an initial
public offering of shares, by the Company, at a price of at least $8.50 per
share, or iii) twelve months after an initial public offering of shares, by the
Company, at a price less than $8.50 per share.
On June 23, 1999, EDC purchased 704,315 interests of the Company's Class A
membership interests for $4,697,782. Also, the Company entered into a purchase
agreement with MTI to acquire approximately 36 acres of land, two commercial
buildings and a residential building located in Latham, New York in exchange
for 704,315 Class A membership interests.
As part of the transaction, the Company assumed a $6.2 million letter of
credit to KeyBank National Association. In connection with the agreement, the
Company was required to escrow $6.2 million. The KeyBank debt was issued for
the express purpose of servicing debt related to $6.2 million of Industrial
Development Revenue (IDR) Bonds issued by the Town of Colonie Industrial
Development Agency.
F-15
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
10. Subsequent Events (Unaudited), continued
The transaction closed on July 7, 1999, and a receivable for membership
interests of $4,697,782 is recorded as membership interests subscribed as of
June 30, 1999. Simultaneous with the July closing, the Company agreed to lease
back to MTI certain office and manufacturing space on a short-term basis.
In connection with the transaction with MTI, the Company has written off
deferred rent expense in the amount of $1,850,000 relating to a 10-year
facilities lease associated with the property.
Option Remeasurement:
Subsequent to June 30, 1999, the Company modified the terms of an employee's
option. The impact of this modification will result in a charge to earnings of
between $680,000 and $800,000 in the fourth quarter of 1999.
Line of Credit:
In September 1999, the Company obtained a commitment letter for a $6.0
million line of credit from KeyBank, N.A. The line of credit will bear interest
at the prime rate in effect from time to time, will mature upon the earlier of
the closing of the offering or November 30, 1999, and will be collateralized by
an assignment of our right to call capital from Mechanical Technology and
Edison Development.
Initial Public Offering:
The Company is currently undertaking an initial public offering. In the event
that the public offering becomes effective, the Company will be converted from
a limited liability corporation to a C corporation with one class of common
stock and authorization to issue preferred stock. In connection with this
conversion, the Company would then be subject to state and federal income taxes
and would account for income taxes under SFAS 109, "Accounting for Income
Taxes". In addition, it is expected that the Company will revise its employee
membership interest plan and implement an employee stock purchase plan.
F-16
<PAGE>
UNDERWRITING
Plug Power and the underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., Hambrecht &
Quist LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and FAC/Equities,
a division of First Albany Corporation, are the representatives of the
underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co.........................................
Hambrecht & Quist LLC.......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................
FAC/Equities, a division of First Albany Corporation........
---------
Total..................................................... 6,000,000
=========
</TABLE>
----------------
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 900,000
shares from Plug Power to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set
forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by Plug Power. Such amounts are
shown assuming both no exercise and full exercise of the underwriters' option
to purchase additional shares.
<TABLE>
<CAPTION>
Paid by Plug Power
------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share.......................................... $ $
Total.............................................. $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share from
the initial offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms.
Plug Power, its directors, officers and persons owning its common stock have
agreed with the underwriters not to dispose of or hedge any of their common
stock or securities convertible into or exchangeable for shares of common stock
during the period from the date of this prospectus continuing through the date
180 days after the date of this prospectus, except with the prior written
consent of the representatives. This agreement does not apply to gifts or
transfers to affiliates or transactions under any existing employee benefit
plans. Please see "Shares Eligible for Future Sale" for a discussion of various
transfer restrictions.
At Plug Power's request, the underwriters have reserved up to 300,000 shares
of the common stock offered hereby for sale, at the initial public offering
price, to employees, customers and other friends of Plug Power through a
directed share program. The number of shares available for sale to
U-1
<PAGE>
the general public will be reduced to the extent these persons purchase the
reserved shares. There can be no assurance that any of the reserved shares will
be so purchased. Any reserved shares not so purchased will be offered by the
underwriters to the general public on the same basis as other shares offered
hereby.
Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated among Plug Power and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be Plug Power's historical performance, estimates of the
business potential and earnings prospects of Plug Power, an assessment of Plug
Power's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.
Application has been made for quotation of the common stock on the Nasdaq
National Market under the symbol of "PLUG".
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed five
percent of the total number of shares offered.
Plug Power estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$820,000.
Because of the relationships between First Albany Corporation and Plug Power,
the offering is being conducted in accordance with Rule 2720 of the National
Association of Securities Dealers. See "Certain Relationships and Related
Transactions". That rule requires that the initial public offering price can be
no higher than that recommended by a "qualified independent underwriter", as
defined by the NASD. Goldman, Sachs & Co. has served in that capacity and
performed due diligence investigations and reviewed and participated in the
preparation of the registration statement of which this prospectus forms a
part. Goldman, Sachs & Co. has received $10,000 from Plug Power as compensation
for such role.
Plug Power has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
U-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Historical Financial Data....................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 29
Management............................................................... 44
Certain Relationships and Related Transactions........................... 52
Principal Stockholders................................................... 56
Description of Capital Stock............................................. 58
Shares Eligible For Future Sale.......................................... 61
Validity of Common Stock................................................. 62
Experts.................................................................. 62
Where You Can Find More Information...................................... 62
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>
---------------
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as an underwriter and with respect to an unsold allotment or
subscription.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6,000,000 Shares
Common Stock
---------------
PROSPECTUS
---------------
Goldman, Sachs & Co.
Hambrecht & Quist
Merrill Lynch & Co.
FAC/Equities
Representatives of the Underwriters
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses payable by us in
connection with the offering (excluding underwriting discounts and
commissions):
<TABLE>
<CAPTION>
Nature of Expense Amount
----------------- --------
<S> <C>
SEC Registration Fee.................................................. $ 32,610
NASD Filing Fee....................................................... 12,230
Nasdaq National Market Listing Fee.................................... 66,875
Accounting Fees and Expenses.......................................... 180,000
Legal Fees and Expenses............................................... 310,000
Printing Expenses..................................................... 130,000
Blue Sky Qualification Fees and Expenses.............................. 35,000
Transfer Agent's Fee.................................................. 4,000
Miscellaneous......................................................... 49,285
--------
TOTAL............................................................... $820,000
========
</TABLE>
The amounts set forth above, except for the Securities and Exchange
Commission and National Association of Securities Dealers, Inc. fees, are in
each case estimated.
Item 14. Indemnification of Directors and Officers
In accordance with Section 145 of the Delaware General Corporation Law,
Article VII of our amended and restated certificate of incorporation provides
that no director of Plug Power shall be personally liable to Plug Power or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of the director's duty of loyalty to
Plug Power or its stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) in
respect of unlawful dividend payments or stock redemptions or repurchases, or
(4) for any transaction from which the director derived an improper personal
benefit. In addition, our amended and restated certificate of incorporation
provides that if the Delaware General Corporation Law is amended to authorize
the further elimination or limitation of the liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.
Article V of our amended and restated by-laws provides for indemnification by
Plug Power of its officers and certain non-officer employees under certain
circumstances against expenses, including attorneys fees, judgments, fines and
amounts paid in settlement, reasonably incurred in connection with the defense
or settlement of any threatened, pending or completed legal proceeding in which
any such person is involved by reason of the fact that such person is or was an
officer or employee of the registrant if such person acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of Plug Power, and, with respect to criminal actions or proceedings,
if such person had no reasonable cause to believe his or her conduct was
unlawful.
Item 15. Recent Sales of Unregistered Securities
Since its formation in June 1997, Plug Power has issued the following
securities that were not registered under the Securities Act of 1933, as
amended (the "Securities Act"). The shares of capital
II-1
<PAGE>
stock and other securities issued in the following transactions were offered
and sold in reliance upon the following exemptions: (i) in the case of the
transactions described in (a) below, Section 4(2) of the Securities Act or
Regulation D promulgated thereunder relative to sales by an issuer not
involving a public offering; and (ii) in the case of the transactions described
in (b) below, Section 3(b) of the Securities Act and Rule 701 promulgated
thereunder relative to sales pursuant to certain compensatory benefits plans.
(a) Issuance of Capital Stock:
(i) In June 1997, Plug Power sold 4,750,000 shares of its common stock
for an aggregate purchase price of $4,750,000 to Edison Development.
(ii) In June 1997, Plug Power sold 4,750,000 shares of its common stock
for an aggregate purchase price of $4,750,000 to Mechanical
Technology.
(iii) In April 1998, Plug Power sold 2,250,000 shares of its common
stock for an aggregate purchase price of $2,250,000 to Edison
Development Corporation.
(iv) In April 1998, Plug Power sold options to purchase an aggregate of
250,000 shares of its common stock at an exercise price of $1.00
per share to Mechanical Technology for a purchase price of $21,250.
(v) In June 1998, Plug Power sold 2,000,000 shares of its common stock
for an aggregate purchase price of $2,000,000 to Edison Development.
(vi) In June 1998, Plug Power sold 2,000,000 shares of its common stock
in consideration of a below-market real estate leasehold interest
to Mechanical Technology.
(vii) In June 1998, Plug Power sold options to purchase an aggregate of
2,000,000 shares of its common stock at an exercise price of $1.00
per share to Mechanical Technology for a purchase price of
$170,000.
(viii) In August 1998, Plug Power sold 200,000 shares of its common
stock for an aggregate purchase price of $1,000,000 to Edison
Development.
(ix) In August 1998, Plug Power sold 200,000 shares of its common stock
for an aggregate purchase price of $1,000,000 to Mechanical
Technology.
(x) In October 1998, Plug Power sold 200,000 shares of its common stock
for an aggregate purchase price of $1,000,000 to Edison Development.
(xi) In October 1998, Plug Power sold 200,000 shares of its common stock
for an aggregate purchase price of $1,000,000 to Mechanical
Technology.
(xii) In November 1998, Plug Power sold 200,000 shares of its common
stock for an aggregate purchase price of $1,000,000 to Edison
Development.
(xiii) In November 1998, Plug Power sold 200,000 shares of its common
stock for an aggregate purchase price of $1,000,000 to Mechanical
Technology.
(xiv) In December 1998, Plug Power sold 100,000 shares of its common
stock for an aggregate purchase price of $500,000 to Edison
Development.
(xv) In December 1998, Plug Power sold 100,000 shares of its common
stock for an aggregate purchase price of $500,000 to Mechanical
Technology.
(xvi) In January 1999, Plug Power sold 100,000 shares of Plug Power's
common stock for an aggregate purchase price of $500,000 to Edison
Development.
(xvii) In January 1999, Plug Power sold 100,000 shares of Plug Power's
common stock for an aggregate purchase price of $500,000 to
Mechanical Technology.
II-2
<PAGE>
(xviii) In January 1999, pursuant to an Equity Contribution and Warrant
Agreement, Plug Power granted each of Mechanical Technology and
Edison Development warrants to purchase up to 3,000,000 shares
of Plug Power's common stock at an exercise price of $7.50 per
share.
(xix) In February 1999, Plug Power sold 200,000 shares of Plug Power's
common stock for an aggregate purchase price of $1,000,000 to
Edison Development.
(xx) In February 1999, Plug Power sold 200,000 shares of Plug Power's
common stock for an aggregate purchase price of $1,000,000 to
Mechanical Technology.
(xxi) In February 1999, Plug Power sold 2,250,000 shares of Plug Power's
common stock to GE On-Site Power, Inc. in consideration of Plug
Power's receipt of a 25% interest in GE Fuel Systems, LLC.
(xxii) In February 1999, Plug Power sold 1,440,000 shares of Plug
Power's common stock for an aggregate purchase price of
$9,600,000 to Michael Cudahy.
(xxiii) In February 1999, Plug Power granted warrants to purchase an
aggregate of 400,000 shares of Plug Power's common stock to
Michael Cudahy at an exercise price of $8.50 per share.
(xxiv) In February 1999, Plug Power sold 60,000 shares of Plug Power's
common stock for an aggregate purchase price of $400,000 to Kevin
Lindsey.
(xxv) In February 1999, Plug Power granted a warrant to purchase up to
3,000,000 shares of Plug Power's common stock to GE On-Site Power,
Inc. at an exercise price of $12.50 per share.
(xxvi) In March 1999, Plug Power issued 2,250,000 shares of Plug Power's
common stock to Mechanical Technology upon the exercise of its
outstanding options in consideration of the application by
Mechanical Technology of certain non-cash research credits
towards the exercise price.
(xxvii) In April 1999, Plug Power sold 299,850 shares of Plug Power's
common stock for an aggregate purchase price of $2,000,000 to
Antaeus Enterprises, Inc.
(xxviii) In April 1999, Plug Power sold 1,000,000 shares of Plug Power's
common stock for an aggregate purchase price of $6,670,000 to
Southern California Gas Company.
(xxix) In April 1999, Plug Power granted warrants to purchase an
aggregate of 350,000 shares of Plug Power's common stock to
Southern California Gas Company at an exercise price of $8.50 per
share.
(xxx) In June 1999, Plug Power sold 704,315 shares of Plug Power's
common stock for an aggregate purchase price of $4,697,782 to
Edison Development.
(xxxi) In June 1999, Plug Power sold 704,315 shares of Plug Power's
common stock in consideration of the net asset value of certain
real estate to Mechanical Technology.
(xxxii) In September 1999, Plug Power sold 266,667 shares of Plug Power's
common stock at an exercise price of $7.50 per share.
(xxxiii) In September 1999, Plug Power sold 266,667 shares of Plug
Power's common stock at an exercise price of $7.50 per share.
(b) Grants of Stock Options (i) As of September 30, 1999, options to purchase
3,377,189 shares of common stock were outstanding under Plug Power's
Membership Option Plan of which options to purchase 1,220,782 shares are
exercisable within 60 days of such date. None of the outstanding options
have been exercised. All such options were granted between June 1997 and
July 1999 to officers, directors, employees, consultants and advisors of
Plug Power.
II-3
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit Page
Number Description No.
------- --------------------------------------------------------------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement.
*2.1 Agreement and Plan of Merger by and between Plug Power and Plug
Power, LLC, a Delaware limited liability company, dated as of
August 16, 1999 (excluding schedules, which Plug Power agrees
to furnish supplementally to the Commission upon request).
.3.1 Certificate of Incorporation of Plug Power.
3.2 Form of Amended and Restated Certificate of Incorporation of
Plug Power (to be filed immediately prior to the consummation
of the offering referred to in the Registration Statement).
.3.3 Form of By-laws of Plug Power.
3.4 Amended and Restated By-laws of Plug Power (to be filed
immediately prior to the consummation of the Offering Referred
to in the Registration Statement).
4.1 Specimen certificate for shares of common stock, $.01 par
value, of Plug Power.
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of
the securities being offered.
+10.1 Amended and Restated Limited Liability Company Agreement of GE
Fuel Cell Systems, LLC, dated February 3, 1999, between GE On-
Site Power, Inc. and Plug Power, LLC.
.10.2 Contribution Agreement, dated as of February 3, 1999, by and
between GE On-Site Power, Inc. and Plug Power, LLC.
+10.3 Trademark and Trade Name Agreement, dated as of February 2,
1999, between General Electric Company and GE Fuel Cell
Systems, LLC.
+10.4 Trademark Agreement, dated as of February 2, 1999, between Plug
Power LLC and GE Fuel Cell Systems, LLC.
+10.5 Distributor Agreement, dated as of February 2, 1999, between GE
Fuel Cell Systems, LLC and Plug Power, LLC.
.10.6 Side letter agreement, dated February 3, 1999, between General
Electric Company and Plug Power LLC.
.10.7 Mandatory Capital Contribution Agreement, dated as of January
26, 1999, between Edison Development Corporation, Mechanical
Technology Incorporated and Plug Power, LLC and amendments
thereto, dated August 25, 1999 and August 26, 1999.
.10.8 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Michael J. Cudahy.
.10.9 Warrant Agreement, dated as of February 16, 1999, between Plug
Power, LLC and Michael J. Cudahy and amendment thereto, dated
July 26, 1999.
.10.10 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Kevin Lindsey.
.10.11 LLC Interest Purchase Agreement, dated as of April 1, 1999,
between Plug Power, LLC and Antaeus Enterprises, Inc.
.10.12 LLC Interest Purchase Agreement, dated as of April 9, 1999,
between Plug Power, LLC and Southern California Gas Company.
.10.13 Warrant Agreement, dated as of April 9, 1999, between Plug
Power, LLC and Southern California Gas Company and amendment
thereto, dated August 26, 1999.
+10.14 Agreement, dated as of June 26, 1997, between the New York
State Energy Research and Development Authority and Plug Power
LLC, and amendments thereto dated as of December 17, 1997 and
March 30, 1999.
+10.15 Agreement, dated as of January 25, 1999, between the New York
State Energy Research and Development Authority and Plug Power
LLC.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page
Number Description No.
------- --------------------------------------------------------------- ----
<C> <S> <C>
+10.16 Agreement, dated as of September 30, 1997, between Plug Power
LLC and the U.S. Department of Energy.
+10.17 Cooperative Agreement, dated as of September 30, 1998, between
the National Institute of Standards and Technology and Plug
Power, LLC, and amendment thereto dated May 10, 1999.
.10.18 Joint venture agreement, dated as of June 14, 1999 between Plug
Power, LLC, Polyfuel, Inc., and SRI International.
+10.19 Cooperative Research and Development Agreement, dated as of
February 12, 1999, between Plug Power, LLC and U.S. Army Benet
Laboratories.
+10.20 Nonexclusive License Agreement, dated as of April 30, 1993,
between Mechanical Technology Incorporated and the Regents of
the University of California.
+10.21 Development Collaboration Agreement, dated as of July 30, 1999,
by and between Joh. Vaillant GMBH. U. CO. and Plug Power, LLC.
.10.22 Agreement of Sale, dated as of June 23, 1999, between
Mechanical Technology, Incorporated and Plug Power LLC.
.10.23 Assignment and Assumption Agreement, dated as of July 1, 1999,
between the Town of Colonie Industrial Development Agency,
Mechanical Technology, Incorporated, Plug Power, LLC, KeyBank,
N.A., and First Albany Corporation.
.10.24 Replacement Reimbursement Agreement, dated as of July 1, 1999,
between Plug Power, LLC and KeyBank, N.A.
*10.25 1997 Membership Option Plan.
.10.26 Trust Indenture, dated as of December 1, 1998, between the Town
of Colonie Industrial Development Agency and Manufacturers and
Traders Trust Company, as trustee.
+10.27 Distribution Agreement, dated as of June 27, 1997, between Plug
Power, LLC and Edison Development Corporation.
.10.28 Agreement, dated as of June 27, 1999, between Plug Power, LLC
and Gary Mittleman.
.10.29 Agreement, dated as of June 8, 1999, between Plug Power, LLC
and Louis R. Tomson.
.10.30 Agreement, dated as of August 6, 1999, between Plug Power, LLC
and Gregory A. Silvestri.
.10.31 Agreement, dated as of August 12, 1999, between Plug Power, LLC
and William H. Largent.
.10.32 Agreement, dated as of August 20, 1999, between Plug Power, LLC
and Dr. Manmohan Dhar.
*10.33 1999 Stock Option and Incentive Plan
*10.34 Employee Stock Purchase Plan
+10.35 Agreement, dated as of August 27, 1999, by Plug Power, LLC,
Plug Power Inc., GE On-Site Power, Inc., GE Power Systems
Business of General Electric Company, and GE Fuel Cell Systems,
L.L.C.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
hereto)
23.2 Consent of PricewaterhouseCoopers LLP.
.24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule.
.99.1 Consent of Robert L. Nardelli.
</TABLE>
- --------
* To be filed by amendment to this registration statement.
+ Confidential treatment requested.
. Previously filed.
II-5
<PAGE>
(b) Financial Statement Schedules
All schedules have been omitted because they are not required or because the
required information is given in the Financial Statements or Notes to those
statements.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement (File No.
333-86089) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Latham, State of New York, on September 30, 1999.
Plug Power Inc.
By: /s/ Gary Mittleman
-----------------------------------
Gary Mittleman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gary Mittleman President, Chief Executive September 30, 1999
______________________________________ Officer and Director
Gary Mittleman (Principal Executive
Officer)
/s/ William H. Largent Chief Financial Officer September 30, 1999
______________________________________ (Principal Financial
William H. Largent Officer and Principal
Accounting Officer)
* Director September 30, 1999
______________________________________
Michael J. Cudahy
* Director September 30, 1999
______________________________________
Anthony F. Earley, Jr.
* Director September 30, 1999
______________________________________
Larry G. Garberding
* Director September 30, 1999
______________________________________
George C. McNamee
* Director September 30, 1999
______________________________________
Walter L. Robb
</TABLE>
/s/ Ana-Maria Galeano
*By: _____________________
Ana-Maria Galeano,
Attorney-in-Fact
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
*2.1 Agreement and Plan of Merger by and between Plug Power and Plug Power,
LLC, a Delaware limited liability company, dated as of August 16, 1999
(excluding schedules, which Plug Power agrees to furnish
supplementally to the Commission upon request).
.3.1 Certificate of Incorporation of Plug Power.
3.2 Form of Amended and Restated Certificate of Incorporation of Plug
Power (to be filed immediately prior to the consummation of the
offering referred to in the Registration Statement).
.3.3 By-laws of Plug Power.
3.4 Form of Amended and Restated By-laws of Plug Power (to be filed
immediately prior to the consummation of the Offering Referred to in
the Registration Statement).
4.1 Specimen certificate for shares of common stock, $.01 par value, of
Plug Power.
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
securities being offered.
+10.1 Amended and Restated Limited Liability Company Agreement of GE Fuel
Cell Systems, LLC, dated February 3, 1999, between GE On-Site Power,
Inc. and Plug Power, LLC.
.10.2 Contribution Agreement, dated as of February 3, 1999, by and between
GE On-Site Power, Inc. and Plug Power, LLC.
+10.3 Trademark and Trade Name Agreement, dated as of February 2, 1999,
between General Electric Company and GE Fuel Cell Systems, LLC.
+10.4 Trademark Agreement, dated as of February 2, 1999, between Plug Power
LLC and GE Fuel Cell Systems, LLC.
+10.5 Distributor Agreement, dated as of February 2, 1999, between GE Fuel
Cell Systems, LLC and Plug Power, LLC.
.10.6 Side letter agreement, dated February 3, 1999, between General
Electric Company and Plug Power LLC.
.10.7 Mandatory Capital Contribution Agreement, dated as of January 26,
1999, between Edison Development Corporation, Mechanical Technology
Incorporated and Plug Power, LLC and amendments thereto, dated August
25, 1999 and August 26, 1999.
.10.8 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Michael J. Cudahy.
.10.9 Warrant Agreement, dated as of February 16, 1999, between Plug Power,
LLC and Michael J. Cudahy and amendment thereto, dated July 26, 1999.
.10.10 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Kevin Lindsey.
.10.11 LLC Interest Purchase Agreement, dated as of April 1, 1999, between
Plug Power, LLC and Antaeus Enterprises, Inc.
.10.12 LLC Interest Purchase Agreement, dated as of April 9, 1999, between
Plug Power, LLC and Southern California Gas Company.
.10.13 Warrant Agreement, dated as of April 9, 1999, between Plug Power, LLC
and Southern California Gas Company and amendment thereto, dated
August 26, 1999.
+10.14 Agreement, dated as of June 26, 1997, between the New York State
Energy Research and Development Authority and Plug Power LLC, and
amendments thereto dated as of December 17, 1997 and March 30, 1999.
+10.15 Agreement, dated as of January 25, 1999, between the New York State
Energy Research and Development Authority and Plug Power LLC.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------------------------------------
<C> <S>
+10.16 Agreement, dated as of September 30, 1997, between Plug Power LLC and
the U.S. Department of Energy.
+10.17 Cooperative Agreement, dated as of September 30, 1998, between the
National Institute of Standards and Technology and Plug Power, LLC,
and amendment thereto dated May 10, 1999.
.10.18 Joint venture agreement, dated as of June 14, 1999 between Plug Power,
LLC, Polyfuel, Inc., and SRI International.
+10.19 Cooperative Research and Development Agreement, dated as of February
12, 1999, between Plug Power, LLC and U.S. Army Benet Laboratories.
+10.20 Nonexclusive License Agreement, dated as of April 30, 1993, between
Mechanical Technology Incorporated and the Regents of the University
of California.
+10.21 Development Collaboration Agreement, dated as of July 30, 1999, by and
between Joh. Vaillant GMBH. U. CO. and Plug Power, LLC.
.10.22 Agreement of Sale, dated as of June 23, 1999, between Mechanical
Technology, Incorporated and Plug Power LLC.
.10.23 Assignment and Assumption Agreement, dated as of July 1, 1999, between
the Town of Colonie Industrial Development Agency, Mechanical
Technology, Incorporated, Plug Power, LLC, KeyBank, N.A., and First
Albany Corporation.
.10.24 Replacement Reimbursement Agreement, dated as of July 1, 1999, between
Plug Power, LLC and KeyBank, N.A.
*10.25 1997 Membership Option Plan.
.10.26 Trust Indenture, dated as of December 1, 1998, between the Town of
Colonie Industrial Development Agency and Manufacturers and Traders
Trust Company, as trustee.
+10.27 Distribution Agreement, dated as of June 27, 1997, between Plug Power,
LLC and Edison Development Corporation.
.10.28 Agreement, dated as of June 27, 1999, between Plug Power, LLC and
Gary Mittleman.
.10.29 Agreement, dated as of June 8, 1999, between Plug Power, LLC and
Louis R. Tomson.
.10.30 Agreement, dated as of August 6, 1999, between Plug Power, LLC and
Gregory A. Silvestri.
.10.31 Agreement, dated as of August 12, 1999, between Plug Power, LLC and
William H. Largent.
.10.32 Agreement, dated as of August 20, 1999, between Plug Power, LLC and
Dr. Manmohan Dhar.
*10.33 1999 Stock Option and Incentive Plan
*10.34 Employee Stock Purchase Plan
+10.35 Agreement, dated as of August 27, 1999, by Plug Power, LLC, Plug Power
Inc., GE On-Site Power, Inc., GE Power Systems Business of General
Electric Company, and GE Fuel Cell Systems, L.L.C.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
hereto)
23.2 Consent of PricewaterhouseCoopers LLP.
.24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule.
.99.1 Consent of Robert L. Nardelli.
</TABLE>
- --------
* To be filed by amendment to this registration statement.
+ Confidential treatment requested.
. Previously filed.
<PAGE>
EXHIBIT 1.1
Plug Power Inc.
Common Stock
(par value $0.01 per share)
--------------
UNDERWRITING AGREEMENT
----------------------
_________________ , 1999
Goldman, Sachs & Co.,
Hambrecht & Quist LLC,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
First Albany Corporation,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Plug Power Inc., a Delaware corporation (the "Company"), proposes, subject
to the terms and conditions stated herein, to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of ........ shares
(the "Firm Shares") and, at the election of the Underwriters, up to .........
additional shares (the "Optional Shares") of Common Stock, par value $0.01 per
share ("Stock") of the Company (the Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof being collectively
called the "Shares").
It is understood and agreed by all parties that immediately prior to the
First Time of Delivery (as hereinafter defined), Plug Power, LLC, a Delaware
limited liability company (the "LLC"), will be merged with and into the Company
(the "Merger") on the terms and conditions set forth in that certain Agreement
and Plan of Merger dated ......... .., 1999, by and between the Company and the
LLC (the "Merger Agreement"). It is also understood and agreed by all parties
that immediately prior to the Merger, each of the members of the LLC listed in
Schedule II hereto shall purchase from the LLC, and the LLC shall sell to each
such member, pursuant to the exercise of contractual rights and warrants held by
such member, the number of units of membership interest in the LLC set forth
opposite such member's name therein for the purchase price per share set forth
therein (the "Private Placement").
The Company and the Underwriters, in accordance with the requirements of
Rule 2720 ("Rule 2720") of the National Association of Securities Dealers, Inc.
(the "NASD") and subject to the terms and conditions stated herein, also hereby
confirm the engagement of the services of Goldman, Sachs & Co. (the "Independent
Underwriter") as a "qualified independent underwriter" within the meaning of
Section 2(l) of Rule 2720 in connection with the offering and sale of the
Shares.
1. The Company represents and warrants to, and agrees with, each of the
Underwriters and the Independent Underwriter that:
(a) A registration statement on Form S-1 (File No. 333-86089) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission
<PAGE>
(the "Commission"); the Initial Registration Statement and any post-
effective amendment thereto, each in the form heretofore delivered to you,
and, excluding exhibits thereto, to you for each of the other Underwriters,
have been declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended (the "Act"), which became effective
upon filing, no other document with respect to the Initial Registration
Statement has heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Initial Registration Statement, any
post-effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus
included in the Initial Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act is hereinafter called a "Preliminary Prospectus"; the various
parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including the information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in accordance
with Section 6(a) hereof and deemed by virtue of Rule 430A under the Act to
be part of the Initial Registration Statement at the time it was declared
effective, each as amended at the time such part of the Initial
Registration Statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective, are
hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder (other than, in the case of the Preliminary
Prospectus contained in the Initial Registration Statement, with respect to
the omission of the number of shares and price range information and the
other information based thereon) and did not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. or by the Independent Underwriter expressly for use
therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances under
which they are made) not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Goldman, Sachs & Co. or by
the Independent Underwriter expressly for use therein;
(d) Neither the Company nor the LLC has sustained since the date of
the latest audited financial statements included in the Prospectus any loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus or would not be reasonably likely to have
a Material Adverse Effect (as defined below); and, since the respective
dates as of which information is given in the Registration Statement and
the
-2-
<PAGE>
Prospectus, there has not been any change in the capital stock (other
than pursuant to the Merger or the Private Placement as contemplated in the
Prospectus) or long-term debt of the Company or the LLC or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
the LLC, considered as one entity, otherwise than as set forth or
contemplated in the Prospectus;
(e) The Company and the LLC have good title in fee simple to all real
property and good title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect the
value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and the LLC; and any real
property and buildings held under lease by the Company and the LLC are held
by them under leases which are valid, subsisting and enforceable against
the Company and the LLC and, to the Company's and the LLC's knowledge, the
other parties thereto, with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and the LLC;
(f) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power to own its properties and conduct its business as
described in the Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, except where
the failure to be so qualified would not be reasonably likely to have a
material adverse effect on the business, financial position, stockholders'
equity or results of operations of the Company and the LLC, considered as
one entity (a " Material Adverse Effect"); and the LLC has been duly
organized and is validly existing as a limited liability company in good
standing under the laws of the State of Delaware, with the power to own its
properties and conduct its business as described in the Prospectus, and has
been duly qualified for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such qualification,,
except where the failure to be so qualified would not be reasonably likely
to have a Material Adverse Effect;
(g) As of the First Time of Delivery, after giving effect to the
Merger and the Private Placement, the Company will have an authorized
capitalization as set forth in the Prospectus, and all of the issued and
outstanding shares of capital stock of the Company will have been duly and
validly authorized and issued, will be fully paid and non-assessable and
will conform in all material respects to the description of the Stock
contained in the Prospectus;
(h) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued and fully paid and non-assessable and will conform
in all material respects to the description of the Stock contained in the
Prospectus;
(i) The issue and sale of the Shares by the Company hereunder and the
compliance by the Company and the LLC with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated
(including, without limitation, the Merger and the Private Placement) will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the
Company or the LLC is a party or by which the Company or the LLC is bound
or to which any of the property or assets of the Company or the LLC is
subject, nor will such action result in any violation of the provisions of
the Certificate of Incorporation or By-laws of the Company, the Limited
Liability Company Agreement of Plug Power, LLC dated as of June 27, 1997,
as amended (the "LLC Agreement"), or any statute or any order, rule or
regulation of any court or
-3-
<PAGE>
governmental agency or body having jurisdiction over the Company or the LLC
or any of their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company and the LLC of the transactions contemplated by
this Agreement, except the registration under the Act of the Shares and
such consents, approvals, authorizations, registrations or qualifications
as may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters;
(j) The Company is not in violation of its Certificate of
Incorporation or By-laws, the LLC is not in violation of the LLC Agreement,
and neither the Company nor the LLC is in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease
or other agreement or instrument to which it is a party or by which it or
any of its properties may be bound;
(k) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, and under the caption "Underwriting"
[OTHERS?], insofar as they purport to describe the provisions of the laws
and documents referred to therein, are accurate summaries in all material
respects;
(l) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or the LLC is a party
or of which any property of the Company or the LLC is the subject which, if
determined adversely to the Company or the LLC, would individually or in
the aggregate have a Material Adverse Effect; and, to the best of the
Company's and the LLC's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(m) Neither the Company nor the LLC has any subsidiaries;
(n) Other than as set forth in the Prospectus, the Company and the LLC
own or have the right to use pursuant to license, sublicense, agreement, or
permission all patents, patent applications, trademarks, service marks,
trade names, copyrights, trade secrets, confidential information,
proprietary rights and processes ("Intellectual Property") necessary and
material for the operation of the business of the Company and the LLC as
described in the Prospectus (the "Company Intellectual Property") and have
taken all steps reasonably necessary to secure assignments of such
Intellectual Property from their employees and contractors; to the
knowledge of the Company and the LLC, none of the Company Intellectual
Property has been obtained or is being used by the Company or the LLC in
violation of any contractual or fiduciary obligation binding on the
Company, the LLC or any of their respective directors, executive officers,
employees or consultants; and the Company and the LLC have taken and will
maintain reasonable measures to prevent the unauthorized dissemination or
publication of the Company Intellectual Property.
To the Company's and the LLC's knowledge, neither the Company nor the LLC
has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property of third parties, and the
Company and the LLC have not received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement, misappropriation,
or violation (including any claim that the Company or the LLC must license
or refrain from using any Intellectual Property of any third party) which,
if the subject of any unfavorable decision, ruling or finding would,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect;
To the Company's and the LLC's knowledge, there are no legal or
governmental proceedings pending relating to the Company Intellectual
Property other than the prosecution by the Company and the LLC of their
patent applications before the United States Patent Office and appropriate
foreign government agencies, and no proceedings are threatened or
contemplated by governmental authorities or others relating to the Company
Intellectual Property;
-4-
<PAGE>
(o) The LLC has been, and as of the First Time of Delivery the Company
will have been, duly admitted as a Member of GE Fuel Cell Systems, L.L.C.
("GEFCS"), a Delaware limited liability company operating under that
certain Amended and Restated Limited Liability Company Agreement of GE Fuel
Cell Systems, L.L.C., dated February 3, 1999, by and among GE On-Site
Power, Inc., a Delaware corporation, and the LLC (the "GEFCS Agreement");
and, the LLC holds, and as of the First Time of Delivery the Company will
hold, a 25% Membership Interest (as defined in the GEFCS Agreement), free
and clear of all liens, encumbrances, equities or claims;
(p) The Merger Agreement is in full force and effect, has been duly
authorized, executed and delivered by the Company and the LLC, and is valid
and binding on the Company and the LLC in accordance with its terms, with
neither party in default thereunder;
(q) Except for obligations or liabilities incurred in connection with
its incorporation and except in connection with the Private Placement or
the transactions contemplated by this Agreement and the Merger Agreement
(including the assumption of the liabilities of the LLC pursuant to the
Merger), the Company has not incurred, directly or indirectly, any
obligations or liabilities or engaged in any business activities of any
type or kind whatsoever or entered into any agreements or arrangements with
any person;
(r) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company", as such term is
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(s) Neither the Company nor the LLC, nor any of their respective
affiliates, does business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075, Florida
Statutes;
(t) To the Company's and the LLC's knowledge, PricewaterhouseCoopers
LLP, who have certified certain financial statements of the Company, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder; and
(u) Each of the Company and the LLC has reviewed its operations and
that of any third parties with which the Company or the LLC has a material
relationship to evaluate the extent to which the business or operations of
the Company or the LLC will be affected by the Year 2000 Problem. As a
result of such review, the Company and the LLC have no reason to believe,
and each does not believe, that the Year 2000 Problem will have a Material
Adverse Effect or result in any material loss or interference with the
Company's or the LLC's business or operations. The "Year 2000 Problem" as
used herein means any significant risk that computer hardware or software
used in the receipt, transmission, processing, manipulation, storage,
retrieval, retransmission or other utilization of data or in the operation
of mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at least
as effectively as in the case of dates or time periods occurring prior to
January 1, 2000.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $........................, the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto and
(b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Shares as provided below, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the purchase price
per share set forth in clause (a) of this Section 2, that portion of the number
of Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction, the numerator of which is the
maximum number of Optional Shares which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
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The Company hereby grants to the Underwriters the right to purchase at
their election up to ............ Optional Shares, at the purchase price per
share set forth in the paragraph above, for the purpose of covering sales of
shares in excess of the number of Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 consecutive calendar days beginning the day after
the date of this Agreement, setting forth the aggregate number of Optional
Shares to be purchased and the date on which such Optional Shares are to be
delivered, as determined by you but in no event earlier than the First Time of
Delivery (as defined in Section 4 hereof) or, unless you and the Company
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Company hereby confirms its engagement of the services of the
Independent Underwriter as, and the Independent Underwriter hereby confirms
its agreement with the Company to render services as, a "qualified
independent underwriter" within the meaning of Section 2(o) of Rule 2720
with respect to the offering and sale of the Shares.
(b) The Independent Underwriter hereby represents and warrants to, and
agrees with, the Company and the Underwriters that with respect to the
offering and sale of the Shares as described in the Prospectus:
(i) The Independent Underwriter constitutes a "qualified independent
underwriter" within the meaning of Section 2(o) of Rule 2720;
(ii) The Independent Underwriter has participated in the preparation
of the Registration Statement and the Prospectus and has exercised the
usual standards of "due diligence" in respect thereto;
(iii) The Independent Underwriter has undertaken the legal
responsibilities and liabilities of an underwriter under the Act
specifically including those inherent in Section 11 thereof;
(iv) Based upon (A) a review of the Company (after giving effect to
the Merger and the Private Placement), including an examination of the
Registration Statement, information regarding the earnings, assets, capital
structure and growth rate of the Company and other pertinent financial and
statistical data, (B) inquiries of and conferences with the management of
the Company and its counsel and independent public accountants regarding
the business and operations of the Company, (C) consideration of the
prospects for the industry in which the Company competes, estimates of the
business potential of the Company, assessments of its management, the
general condition of the securities markets, market prices of the capital
stock and debt securities of, and financial and operating data concerning,
companies believed by the Independent Underwriter to be comparable to the
Company and the demand for securities of comparable companies similar to
the Shares, and (D) such other studies, analyses and investigations as the
Independent Underwriter has deemed appropriate, and assuming that the
offering and sale of the Shares is made as contemplated herein and in the
Prospectus, the Independent Underwriter recommends, as of the date of the
execution and delivery of this Agreement, that the initial public offering
price for each share be not more than $... 1/4; and
(v) Subject to the provisions of Section 8 hereof, the Independent
Underwriter will furnish to the Underwriters at the First Time of Delivery
a letter, dated the First Time of Delivery, in form and substance
satisfactory to the Underwriters, to the effect of clauses (i) through (iv)
above.
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(c) The Independent Underwriter hereby agrees with the Company and the
Underwriters that, as part of its services hereunder, in the event of any
amendment or supplement to the Prospectus, the Independent Underwriter will
render services as a "qualified independent underwriter" within the meaning
of Section 2(l) of Rule 2720 with respect to the offering and sale of the
Shares as described in the Prospectus as so amended or supplemented that
are substantially the same as those services being rendered with respect to
the offering and sale of the Shares as described in the Prospectus
(including those described in subsection (b) above).
(d) The Company, the Underwriters and the Independent Underwriter agree
to comply in all material respects with all of the requirements of Rule
2720 applicable to them in connection with the offering and sale of the
Shares. The Company agrees to cooperate with the Underwriters and the
Independent Underwriter to enable the Underwriters to comply with Rule 2720
and the Independent Underwriter to perform the services contemplated by
this Agreement.
(e) As compensation for the services of the Independent Underwriter
hereunder, the Company agrees to pay the Independent Underwriter $10,000 at
the First Time of Delivery. In addition, the Company agrees promptly to
reimburse the Independent Underwriter for all out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred in
connection with this Agreement and the services to be rendered hereunder.
5. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in
such names as Goldman, Sachs & Co. may request upon at least forty-eight
hours' prior notice to the Company, shall be delivered by or on behalf of
the Company to Goldman, Sachs & Co., through the facilities of the
Depository Trust Company, ("DTC") for the account of such Underwriter,
against payment by or on behalf of such Underwriter of the purchase price
therefor by wire transfer of Federal (same-day) funds to the account
specified by the Company to Goldman, Sachs & Co. at least forty-eight hours
in advance. The Company will cause the certificates representing the Shares
to be made available for checking and packaging at least twenty-four hours
prior to the Time of Delivery (as defined below) with respect thereto at
the office of DTC or its designated custodian (the "Designated Office").
The time and date of such delivery and payment shall be, with respect to
the Firm Shares, 9:30 a.m., New York City time, on ............., 1999 or
such other time and date as Goldman, Sachs & Co. and the Company may agree
upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New
York time, on the date specified by Goldman, Sachs & Co. in the written
notice given by Goldman, Sachs & Co. of the Underwriters' election to
purchase such Optional Shares, or such other time and date as Goldman,
Sachs & Co. and the Company may agree upon in writing. Such time and date
for delivery of the Firm Shares is herein called the "First Time of
Delivery", such time and date for delivery of the Optional Shares, if not
the First Time of Delivery, is herein called the "Second Time of Delivery",
and each such time and date for delivery is herein called a "Time of
Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 8 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 8(k) hereof, will be delivered at the
offices of Ropes & Gray, One International Place, Boston, MA 02110-2624
(the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at such Time of Delivery. A meeting will be held at
the Closing Location at 4:00 p.m., New York City time, on the New York
Business Day next preceding such Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the
purposes of this Section 5, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
6. The Company agrees with each of the Underwriters and with the
Independent Underwriter:
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(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you and the Independent Underwriter, promptly
after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you and the Independent Underwriter with copies thereof; to
advise you and the Independent Underwriter, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of
any order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification,
promptly to use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 A.M. New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters and the Independent Underwriter with copies of the
Prospectus in New York City in such quantities as you and the Independent
Underwriter may reasonably request, and, if the delivery of a prospectus is
required at any time prior to the expiration of nine months after the time
of issue of the Prospectus in connection with the offering or sale of the
Shares and if at such time any event shall have occurred as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be necessary during
such period to amend or supplement the Prospectus in order to comply with
the Act, to notify you and upon your request to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many copies
as you may from time to time reasonably request of an amended Prospectus or
a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is required
to deliver a prospectus in connection with sales of any of the Shares at
any time nine months or more after the time of issue of the Prospectus,
upon your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an amended
or supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations thereunder (including, at the option of the Company,
Rule 158);
(e) Except in connection with the Merger and the Private Placement as
contemplated by the Prospectus, during the period beginning from the date
hereof and continuing to and including
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the date 180 days after the date of the Prospectus, not to offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder any
securities of the Company or the LLC that are substantially similar to the
Shares, including but not limited to any membership interest in the LLC or
any securities that are convertible into or exchangeable for, or that
represent the right to receive, such membership interests, Stock or any
such substantially similar securities (other than pursuant to employee
stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Agreement), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement), to make
available to its stockholders consolidated summary financial information of
the Company and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional non-confidential information
concerning the business and financial condition of the Company as you may
from time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National
Market System ("NASDAQ");
(j) To file with the Commission such information on Form 10-Q or Form
10-K as may be required by Rule 463 under the Act; and
(k) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
7. The Company covenants and agrees with the several Underwriters and the
Independent Underwriter that the Company will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Shares under the Act and
all other expenses in connection with the preparation, printing and filing of
the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters, the Independent Underwriter and dealers; (ii) the
cost of printing or producing any Agreement among Underwriters, this Agreement,
the Blue Sky Memorandum, closing documents (including any compilations thereof)
and any other documents in connection with the offering, purchase, sale and
delivery of the Shares; (iii) all expenses in connection with the qualification
of the Shares for offering and sale under state securities laws as provided in
Section 6(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) all fees and expenses in connection with listing
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the Shares on the NASDAQ; (v) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Shares; (vi) the cost of preparing stock certificates;
(vii) the cost and charges of any transfer agent or registrar; and (viii) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section. It
is understood, however, that, except as specifically provided in this Section,
and Sections 10 and 13 hereof, the Underwriters will pay all of their own costs
and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Shares by them, and any advertising expenses connected with
any offers they may make.
8. The respective obligations of the Underwriters and the Independent
Underwriter hereunder, as to the Shares to be delivered at each Time of
Delivery, shall be subject, in their discretion, to the condition that all
representations and warranties and other statements of the Company herein are,
at and as of such Time of Delivery, true and correct, the condition that the
Company shall have performed all of its obligations hereunder theretofore to be
performed, the condition (in the case of the Underwriters) that the Independent
Underwriter shall have furnished to the Underwriters the letter referred to in
clause (v) of Section 4(b) hereof and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
6(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Ropes & Gray, counsel for the Underwriters, shall have furnished
to you such written opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated such Time of Delivery, with respect
to the matters covered in paragraphs (i), (ii), (vi), and (xi) of
subsection (c) below as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) Goodwin, Procter & Hoar, LLP, counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached
as Annex II(b) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and exists as a
corporation in good standing under the laws of the State of Delaware, with
corporate power to conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the shares issued in the Merger and the Private
Placement and the Shares being delivered at such Time of Delivery) have
been duly and validly authorized and, when issued and delivered in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable; and the Shares will conform in all material respects to the
description of the Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws of
[list jurisdictions];
(iv) The Merger Agreement has been duly authorized, executed and
delivered by the Company and the LLC; the Merger has been consummated in
accordance with the Merger Agreement; and the Certificate of Merger
relating thereto has been filed with the Secretary of State of Delaware and
the Merger has become effective under Delaware law;
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(v) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or the LLC is a party or of which any property
of the Company or the LLC is the subject which, if determined adversely to
the Company or the LLC, would individually or in the aggregate have a
Material Adverse Effect; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(vi) This Agreement has been duly authorized, executed and delivered
by the Company and the LLC;
(vii) The issue and sale of the Shares being delivered at such
Time of Delivery by the Company and the compliance by the Company with all
of the provisions of this Agreement and the consummation of the
transactions herein contemplated (including, without limitation, the Merger
and the Private Placement) will not result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument filed as an exhibit to the Registration Statement or identified
by counsel to the Underwriters and specified on a schedule to such opinion,
nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company, the LLC Agreement
or any statute or any order, rule or regulation known to such counsel of
any court or governmental agency or body having jurisdiction over the
Company, the LLC or any of their properties;
(viii) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Shares or the consummation by the
Company of the transactions contemplated by this Agreement (including,
without limitation, the Merger and the Private Placement), except the
registration under the Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(ix) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, and under the caption "Underwriting"
(but only with respect to the description of this Agreement set forth
therein) [OTHERS?], insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate summaries in all
material respects;
(x) The Company is not an "investment company", as such term is
defined in the Investment Company Act; and
(xi) Each of the Registration Statement and the Prospectus and
any further amendments and supplements thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
appears on its face to be appropriately responsive to the requirements of
the Act and the rules and regulations thereunder, although they do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus,
except for those referred to in the opinion in subsection (ii) of this
Section 8(c); such counsel have participated in the preparation of the
Registration Statement and Prospectus and have participated in discussions
with the Representatives, counsel for the Underwriters, and representatives
of the Company and its accountants, and that on the basis of the
information gained in the course of the performance of the services
referred to above, considered in the light of such counsel's understanding
of the applicable law and the experience such counsel has gained through
their practice under the Securities Act and the Exchange Act, nothing that
came to such counsel's attention in the course of such review has caused
them to believe that the
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Registration Statement or any further amendment thereto made by the Company
prior to such Time of Delivery contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or that, as of its
date, the Prospectus or any further amendment or supplement thereto made by
the Company prior to such Time of Delivery contained any untrue statement
of a material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading or that, as of such
Time of Delivery, either the Registration Statement or the Prospectus or
any further amendment or supplement thereto made by the Company prior to
such Time of Delivery contains an untrue statement of a material fact or
omits to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading; and
such counsel does not know of any amendment to the Registration Statement
required to be filed or know of any contracts or other documents of a
character required to be filed as an exhibit to the Registration Statement
or required to be described in the Registration Statement or the Prospectus
which are not filed or described as required.
In rendering such opinion, such counsel may state that (i) they express no
opinion as to laws other than the internal laws of The Commonwealth of
Massachusetts, the General Corporation Law and the Limited Liability Company Act
of the State of Delaware, and the federal laws of the United States of America,
(ii) that the limitations inherent in the independent verification of factual
matters and the character of determinations involved in the registration process
are such that such counsel shall not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus except for those referred to in the opinion in
subsection (ix) of this Section 8(c), and (iii) that they make no statement as
to the financial statements, other financial data and related schedules
contained in the Registration Statement or the Prospectus.
(d) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery,
PricewaterhouseCoopers LLP shall have furnished to you a letter or letters,
dated the respective dates of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto (the
executed copy of the letter delivered prior to the execution of this
Agreement is attached as Annex I(a) hereto and a draft of the form of
letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(e) (i) Neither the Company nor the LLC shall have sustained since
the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus there
shall not have been any change in the capital stock or long-term debt of
the Company or the LLC or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and the LLC, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause (i)
or (ii), is in the judgment of the Representatives so material and adverse
as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of
Delivery on the terms and in the manner contemplated in the Prospectus;
(f) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no
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such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the Company's debt securities;
(g) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on NASDAQ; (ii) a
suspension or material limitation in trading in the Company's securities on
NASDAQ; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York or Massachusetts State authorities;
or (iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency or
war, if the effect of any such event specified in this clause (iv) in the
judgment of the Representatives makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(h) The Shares to be sold at such Time of Delivery shall have been
duly listed for quotation on NASDAQ;
(i) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each securityholder of the Company
listed on Schedule III hereto, substantially to the effect set forth in
Subsection 6(e) hereof in form and substance satisfactory to you;
(j) The Company shall have complied with the provisions of Section
6(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(k) The Company shall have furnished or caused to be furnished to you
at such Time of Delivery certificates of officers of the Company reasonably
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to
the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth
in subsections (a) and (e) of this Section and as to such other matters as
you may reasonably request;
(l) The Merger shall have been consummated as contemplated by the
Prospectus; and
(m) The Private Placement shall have been consummated and the Company
shall have received the proceeds therefrom as contemplated by the
Prospectus.
9. The Independent Underwriter hereby consents to the references to
it as set forth under the caption "Underwriting" in the Prospectus and in any
amendment or supplement thereto made in accordance with Section 6(a) hereof.
10. (a) The Company and the LLC will jointly and severally indemnify
and hold harmless each Underwriter and the Independent Underwriter against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter or the Independent Underwriter, as the case may be, may become
subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter or the
Independent Underwriter, as the case may be, for any legal or other
expenses reasonably incurred by such Underwriter or the Independent
Underwriter, as the case may be, in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company and the LLC shall not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Goldman, Sachs & Co. or
the Independent Underwriter expressly for use therein or constitutes a
reference to the Independent Underwriter consented to by it pursuant to
Section 9 hereof.
-13-
<PAGE>
(b) Each Underwriter will indemnify and hold harmless the Company and
the Independent Underwriter, as the case may be, against any losses,
claims, damages or liabilities to which the Company and the Independent
Underwriter, as the case may be, may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and
will reimburse the Company and the Independent Underwriter, as the case may
be, for any legal or other expenses reasonably incurred by the Company and
the Independent Underwriter, as the case may be, in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) The Independent Underwriter will indemnify and hold harmless the
Company and each Underwriter against any losses, claims, damages or
liabilities to which the Company or such Underwriter, as the case may be,
may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by the Independent Underwriter expressly for use
therein or constitutes a reference to the Independent Underwriter consented
to by it pursuant to Section 9 hereof; and will reimburse the Company or
each Underwriter, as the case may be, for any legal or other expenses
reasonably incurred by the Company or each Underwriter, as the case may be,
in connection with investigating or defending any such action or claim as
such expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under such subsection
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified
party, effect the settlement or compromise of, or consent to the entry of
any judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to
such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act,
by or on behalf of any indemnified party.
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<PAGE>
(e) If the indemnification provided for in this Section 10 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then
each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by each party to this
agreement from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice
required under subsection (d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of each party to this agreement in connection with
the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the LLC, the Underwriters and the Independent Underwriter shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Shares purchased under this Agreement (before deducting
expenses) received by the Company, the total underwriting discount and
commissions payable to the Underwriters as set forth in the table on the
cover page of the Prospectus and the fee payable to the Independent
Underwriter pursuant to the first sentence of Section 4(e) hereof,
respectively, bear to the sum of the total proceeds from the sale of the
Shares (before deducting expenses) in the offering and the fee payable to
the Independent Underwriter pursuant to the first sentence of Section 4(e)
hereof. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or either the
Underwriters or the Independent Underwriter on the other and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the
Underwriters and the Independent Underwriter agree that it would not be
just and equitable if contributions pursuant to this subsection (e) were
determined by pro rata allocation (even if the Underwriters and the
Independent Underwriter were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (e). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to above in this
subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), no Underwriter nor the Independent
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public, and the Independent
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by the
Underwriters and distributed to the public were offered to the public,
exceeds the amount of any damages which such Underwriter or the Independent
Underwriter, as the case may be, have otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (e) to contribute are several
in proportion to their respective underwriting obligations and not joint.
(f) The obligations of the Company and the LLC under this Section 10
shall be in addition to any liability which the Company or the LLC may
otherwise have and shall extend, upon the same terms and conditions, to
each person, if any, who controls any Underwriter or the Independent
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability
which the respective Underwriters may otherwise have and shall extend, upon
the same terms and conditions, to each officer and director of the Company
(including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company) and to
each person, if any, who controls the Company or the Independent
Underwriter within the meaning of the Act; and the obligations of the
Independent Underwriter under this Section 10 shall be in addition to any
liability which the Independent Underwriter may otherwise have and shall
extend, upon the same terms and conditions, to each
-15-
<PAGE>
officer and director of the Company (including any person who, with his or
her consent, is named in the Registration Statement as about to become a
director of the Company) and to each person, if any, who controls the
Company or any Underwriter within the meaning of the Act.
11. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery,
you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange
for the purchase of such Shares, then the Company shall be entitled to a
further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In
the event that, within the respective prescribed periods, you notify the
Company that you have so arranged for the purchase of such Shares, or the
Company notifies you that it has so arranged for the purchase of such
Shares, you or the Company shall have the right to postpone such Time of
Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and
the Company agrees to file promptly any amendments to the Registration
Statement or the Prospectus which in your opinion may thereby be made
necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such
person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company
as provided in subsection (a) above, the aggregate number of such Shares
which remains unpurchased does not exceed one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Company shall have the right to require each non-defaulting Underwriter to
purchase the number of Shares which such Underwriter agreed to purchase
hereunder at such Time of Delivery and, in addition, to require each non-
defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the
Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company
as provided in subsection (a) above, the aggregate number of such Shares
which remains unpurchased exceeds one-eleventh of the aggregate number of
all the Shares to be purchased at such Time of Delivery, or if the Company
shall not exercise the right described in subsection (b) above to require
non-defaulting Underwriters to purchase Shares of a defaulting Underwriter
or Underwriters, then this Agreement (or, with respect to the Second Time
of Delivery, the obligations of the Underwriters to purchase and of the
Company to sell the Optional Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company or
the LLC, except for the expenses to be borne by the Company and the
Underwriters as provided in Section 7 hereof and the indemnity and
contribution agreements in Section 10 hereof; but nothing herein shall
relieve a defaulting Underwriter from liability for its default.
12. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the LLC, the several Underwriters and the
Independent Underwriter, as set forth in this Agreement or made by or on behalf
of them, respectively, pursuant to this Agreement, shall remain in full force
and effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter, the Independent Underwriter or
any controlling person of any Underwriter, the Independent Underwriter the
Company, or the LLC, or any officer or director or controlling person of the
Company or the LLC, and shall survive delivery of and payment for the Shares.
Anything herein to the contrary notwithstanding, the indemnity agreement of
the Company and the LLC in subsection (a) of Section 10 hereof, the
representations and warranties in subsections (b) and (c) of Section 1 hereof
and any representation or warranty as to the accuracy of the Registration
Statement or the Prospectus contained in any certificate furnished by the
Company pursuant to Section 8 hereof, insofar as they may constitute a basis for
indemnification for liabilities (other than payment by the Company of expenses
-16-
<PAGE>
incurred or paid in the successful defense of any action, suit or proceeding)
arising under the Act, shall not extend to the extent of any interest therein of
a controlling person or partner of an Underwriter or the Independent Underwriter
who is a director, officer or controlling person of the Company or the LLC when
the Registration Statement has become effective or who, with his or her consent,
is named in the Registration Statement as about to become a director of the
Company, except in each case to the extent that an interest of such character
shall have been determined by a court of appropriate jurisdiction as not against
public policy as expressed in the Act. Unless in the opinion of counsel for the
Company or the LLC the matter has been settled by controlling precedent, the
Company or the LLC, as the case may be, will, if a claim for such
indemnification is asserted, submit to a court of appropriate jurisdiction the
question of whether such interest is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
13. If this Agreement shall be terminated pursuant to Section 11 hereof,
the Company and the LLC shall not then be under any liability to any Underwriter
or the Independent Underwriter except as provided in the second sentence of
Section 4(e) hereof and Sections 7 and 10 hereof; but, if for any other reason,
any Shares are not delivered by or on behalf of the Company as provided herein,
the Company and the LLC will jointly and severally reimburse the Underwriters
through you for all out-of-pocket expenses approved in writing by you, including
fees and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of the Shares not so
delivered, but the Company and the LLC shall then be under no further liability
to any Underwriter or the Independent Underwriter in respect of the Shares not
so delivered except as provided in the second sentence of Section 4(e) hereof
and Sections 7 and 10 hereof.
14. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 9th Floor, New York, New York 10005, Attention: Registration
Department; if to the Independent Underwriter shall be delivered or sent by
mail, letter or facsimile transmission to the name and address of Independent
Underwriter; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 10(d) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof.
15. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Independent Underwriter, the Company, the LLC and, to
the extent provided in Sections 10 and 12 hereof, the officers and directors of
the Company and each person who controls the Company, the LLC, the Independent
Underwriter, any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
16. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
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<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us seven counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters and the Independent Underwriter, this
letter and such acceptance hereof shall constitute a binding agreement among
each of the Underwriters, the Independent Underwriter and the Company. It is
understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters (U.S. Version), the form of which shall be submitted to the Company
for examination upon request, but without warranty on your part as to the
authority of the signers thereof.
Very truly yours,
Plug Power Inc.
By: _____________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Hambrecht & Quist LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
First Albany Corporation
By:_______________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
Goldman, Sachs & Co., as Independent Underwriter
By:_______________________________________
Name:
Title:
The undersigned joins this Agreement solely for purposes of Sections 10,
12, 13 and 15 of the Agreement.
Plug Power, LLC
By:_______________________________
Name:
Title:
-18-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
- ----------------------------------------------------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co.................................. xxxxxx xxxxx
Hambrecht & Quist LLC................................ xxxxxx xxxxx
Merrill Lynch, Pierce, Fenner & Smith Incorporated... xxxxxx xxxxx
First Albany Corporation............................. xxxxxx xxxxx
--------------- ------------------
Total............................
xxxxxx xxxxx
=============== ==================
--------------- ------------------
</TABLE>
<PAGE>
SCHEDULE II
Private Placement
<PAGE>
SCHEDULE III
Securityholders Subject to Lock-up Agreements
<PAGE>
ANNEX I
FORM OF ANNEX I DESCRIPTION OF COMFORT LETTER
FOR REGISTRATION STATEMENTS ON FORM S-1
Pursuant to Section 8(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters and the Independent Underwriter to the
effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts and/or condensed
financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been furnished to the representatives
of the Underwriters or the Independent Underwriter, as the case may be (the
"Representatives") and are attached hereto;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon copies of which have been
furnished to the Representatives and are attached hereto, and on the basis
of specified procedures including inquiries of officials of the Company who
have responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects with
the applicable accounting requirements of the Act and the related published
rules and regulations, nothing came to their attention that cause them to
believe that the unaudited condensed consolidated financial statements do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus agrees
with the corresponding amounts (after restatements where applicable) in the
audited consolidated financial statements for such five fiscal years which
were included or incorporated by reference in the Company's Annual Reports
on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial
<PAGE>
statements and other information referred to below, a reading of the latest
available interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries since
the date of the latest audited financial statements included in the
Prospectus, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other inquiries
and procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived any unaudited condensed
financial statements referred to in clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest financial statements
included in the Prospectus) or any increase in the consolidated long-
term debt of the Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in the Prospectus,
except in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are described
in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in clause (E) there were any decreases in consolidated net revenues
or operating profit or the total or per share amounts of
<PAGE>
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding
length specified by the Representatives, except in each case for
decreases or increases which the Prospectus discloses have occurred or
may occur or which are described in such letter;
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and (vi)
above, they have carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards, with
respect to certain amounts, percentages and financial information specified by
the Representatives, which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus, or in Part II
of, or in exhibits and schedules to, the Registration Statement specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
<PAGE>
EXHIBIT 3.2
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PLUG POWER INC.
PLUG POWER INC., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Plug Power Inc. The date of the filing
of its original Certificate of Incorporation with the Secretary of State of the
State of Delaware was August 13, 1999 (the "Original Certificate of
Incorporation").
2. This Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Original Certificate of
Incorporation of the Corporation filed with the Secretary of State of the State
of Delaware on August 13, 1999, and (i) was duly adopted by the Board of
Directors in accordance with the provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware (the "DGCL"), (ii) was declared
by the Board of Directors to be advisable and in the best interests of the
Corporation and was directed by the Board of Directors to be submitted to and be
considered by the stockholders of the Corporation entitled to vote thereon for
approval by the affirmative vote of such stockholders in accordance with Section
242 of the DGCL and (iii) was duly adopted by the stockholders, with the holders
of a majority of the outstanding shares of the Company's common stock, par value
$.01 per share (the "Common Stock"), adopting this Amended and Restated
Certificate of Incorporation in accordance with the provisions of Section 242 of
the DGCL and the terms of the Original Certificate of Incorporation, such
holders being all of the holders of the Corporation's shares of Common Stock
entitled to vote thereon.
3. The text of the Original Certificate of Incorporation is hereby
amended and restated in its entirety to provide as herein set forth in full.
ARTICLE I
---------
The name of the Corporation is Plug Power Inc.
<PAGE>
ARTICLE II
----------
The address of the Corporation's registered office in the State of Delaware
is c/o The Corporation Trust Company, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
-----------
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the DGCL.
ARTICLE IV
----------
The total number of shares of capital stock which the Corporation shall
have authority to issue is one hundred million (100,000,000) shares, of which
(a) ninety-five million (95,000,000) shares shall be Common Stock, and (b) five
million (5,000,000) shares shall be undesignated preferred stock, par value $.01
per share (the "Undesignated Preferred Stock").
Except as otherwise restricted by this Amended and Restated Certificate of
Incorporation, the Corporation is authorized to issue, from time to time, all or
any portion of the capital stock of the Corporation which may have been
authorized but not issued, to such person or persons and for such lawful
consideration as it may deem appropriate, and generally in its absolute
discretion to determine the terms and manner of any disposition of such
authorized but unissued capital stock.
Any and all such shares issued for which the full consideration has been
paid or delivered shall be deemed fully paid shares of capital stock, and the
holder of such shares shall not be liable for any further call or assessment or
any other payment thereon.
The number of authorized shares of the class of Undesignated Preferred
Stock may from time to time be increased or decreased (but not below the number
of shares outstanding) by the affirmative vote of the holders of a majority of
the shares of Common Stock entitled to vote, without a vote of the holders of
the Undesignated Preferred Stock.
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below in, this Article
IV.
A. COMMON STOCK
------------
1. Designation; Ranking. A total of ninety-five million shares of the
--------------------
Corporation's common stock shall be designated as Common Stock.
2
<PAGE>
2. Voting.
------
(a) Election of Directors. The holders of Common Stock shall be
---------------------
entitled to elect all of the Directors of the Corporation. Such Directors
shall be the candidates receiving the highest number of affirmative votes
entitled to be cast (with each holder entitled to cast one vote for or
against each candidate with respect to each share held by such holder),
with votes cast against such candidates and votes withheld having no legal
effect. The election of such Directors shall occur at the annual meeting
of holders of capital stock or at any special meeting called and held in
accordance with the by-laws of the Corporation. If a person elected in
accordance with the foregoing provisions should cease to be a Director for
any reason, the vacancy shall only be filled by the vote or written consent
of holders of the outstanding shares entitled to vote for such Directors,
in the manner and on the basis specified above.
(b) Other Voting. The holder of each share of Common Stock shall be
------------
entitled to one vote for each such share as determined on the record date
for the vote or consent of stockholders upon any items submitted to a vote
of stockholders.
3. Dividends. The holders of Common Stock shall be entitled to receive
---------
dividends out of funds legally available therefor at such times and in such
amounts as the Board of Directors may determine in its sole discretion.
4. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Corporation, after the payment or provision for payment of all debts and
liabilities of the Corporation and all preferential amounts to which the holders
of Undesignated Preferred Stock are entitled with respect to the distribution of
assets in liquidation, the holders of Common Stock shall be entitled to share
ratably in the remaining assets of the Corporation available for distribution.
B. UNDESIGNATED PREFERRED STOCK
----------------------------
1. Authority to Issue. The total number of shares of Undesignated
------------------
Preferred Stock which the Corporation shall have authority to issue is five
million (5,000,000) shares. Subject to any limitations prescribed by law, the
Board of Directors or any authorized committee thereof is expressly authorized
to provide for the issuance of the shares of Undesignated Preferred Stock in one
or more series of such stock, and by filing a certificate pursuant to applicable
law of the State of Delaware, to establish or change from time to time the
number of shares to be included in each such series, and to fix the
designations, powers, preferences and the relative, participating, optional or
other special rights of the shares of each series and any qualifications,
limitations and restrictions thereof. Any action by the Board of Directors or
any authorized committee thereof under this Article B shall require the
affirmative vote of a majority of the Directors then in office or a majority of
the members of such committee.
3
<PAGE>
2. Powers, Preferences, Rights, Qualifications, Limitations and
------------------------------------------------------------
Restriction of Each Series of Undesignated Preferred Stock. The Board of
- ----------------------------------------------------------
Directors or any authorized committee thereof shall have the right to determine
or fix one or more of the following with respect to each series of Undesignated
Preferred Stock to the fullest extent permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting rights and powers, full or limited, if any, of the
shares of such series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption
of such shares, and if so entitled, the amount of such fund and the manner
of its application, including the price or prices at which such shares may
be redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation and, if so convertible or exchangeable, the conversion price or
prices, or the rate or rates of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(h) The consideration for which the shares of such series shall be
issued;
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Undesignated
Preferred Stock (or series thereof) and whether such shares may be reissued
as shares of the same or any other class or series of stock; and
4
<PAGE>
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any
authorized committee thereof may deem advisable.
ARTICLE V
STOCKHOLDER ACTION
------------------
Any action required or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders and
may not be taken or effected by a written consent of stockholders in lieu
thereof.
ARTICLE VI
DIRECTORS
---------
1. General. The business and affairs of the Corporation shall be managed
-------
by or under the direction of the Board of Directors except as otherwise provided
herein or required by law.
2. Election of Directors. Election of Directors need not be by written
---------------------
ballot unless the By-laws of the Corporation shall so provide.
3. Terms of Directors. The number of Directors of the Corporation shall
------------------
be fixed by resolution duly adopted from time to time by the Board of Directors.
The Directors, other than those who may be elected by the holders of any series
of Undesignated Preferred Stock of the Corporation, shall be classified, with
respect to the term for which they severally hold office, into three classes, as
nearly equal in number as possible. The initial Class I Directors of the
Corporation shall be Gary Mittleman, Walter L. Robb and Anthony F. Earley; the
initial Class II Directors of the Corporation shall be George C. McNamee, and
Michael J. Cudahy; and the initial Class III Directors of the Corporation shall
be Larry G. Garberding and Robert L. Nardelli. The initial Class I Directors
shall serve for a term expiring at the annual meeting of stockholders to be held
in 2000, the initial Class II Directors shall serve for a term expiring at the
annual meeting of stockholders to be held in 2001, and the initial Class III
Directors shall serve for a term expiring at the annual meeting of stockholders
to be held in 2002. At each annual meeting of stockholders, the successor or
successors of the class of Directors whose term expires at that meeting shall be
elected by a plurality of the votes cast at such meeting and shall hold office
for a term expiring at the annual meeting of stockholders held in the third year
following the year of their election. The Directors elected to each class shall
hold office until their successors are duly elected and qualified or until their
earlier resignation or removal.
5
<PAGE>
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this Amended and Restated Certificate of Incorporation, the
holders of any one or more series of Undesignated Preferred Stock shall have the
right, voting separately as a series or together with holders of other such
series, to elect Directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Amended and Restated
Certificate of Incorporation and any certificate of designations applicable
thereto, and such Directors so elected shall not be divided into classes
pursuant to this Article VI.3.
During any period when the holders of any series of Undesignated Preferred
Stock have the right to elect additional Directors as provided for or fixed
pursuant to the provisions of Article IV hereof, then upon commencement and for
the duration of the period during which such right continues: (i) the then
otherwise total authorized number of Directors of the Corporation shall
automatically be increased by such specified number of Directors, and the
holders of such Undesignated Preferred Stock shall be entitled to elect the
additional Directors so provided for or fixed pursuant to said provisions, and
(ii) each such additional Director shall serve until such Director's successor
shall have been duly elected and qualified, or until such Director's right to
hold such office terminates pursuant to said provisions, whichever occurs
earlier, subject to such Director's earlier death, disqualification, resignation
or removal. Except as otherwise provided by the Board of Directors in the
resolution or resolutions establishing such series, whenever the holders of any
series of Undesignated Preferred Stock having such right to elect additional
Directors are divested of such right pursuant to the provisions of such stock,
the terms of office of all such additional Directors elected by the holders of
such stock, or elected to fill any vacancies resulting from the death,
resignation, disqualification or removal of such additional Directors, shall
automatically terminate and the total and authorized number of Directors of the
Corporation shall be reduced accordingly.
4. Vacancies. Subject to the rights, if any, of the holders of any
---------
series of Undesignated Preferred Stock to elect Directors and to fill vacancies
in the Board of Directors relating thereto, any and all vacancies in the Board
of Directors, however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death, resignation,
disqualification or removal of a Director, shall be filled solely by the
affirmative vote of a majority of the remaining Directors then in office, even
if less than a quorum of the Board of Directors. Any Director appointed in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of Directors in which the new directorship was
created or the vacancy occurred and until such Director's successor shall have
been duly elected and qualified or until his or her earlier resignation or
removal. Subject to the rights, if any, of the holders of any series of
Undesignated Preferred Stock to elect Directors, when the number of Directors is
increased or decreased, the Board of Directors shall determine the class or
classes to which the increased or decreased number of Directors shall be
apportioned; provided, however, that no decrease in the number of Directors
-----------------
shall shorten the term of any incumbent Director. In the event of a vacancy in
the Board of Directors, the remaining Directors, except as otherwise provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.
6
<PAGE>
5. Removal. Subject to the rights, if any, of any series of Undesignated
-------
Preferred Stock to elect Directors and to remove any Director whom the holders
of any such stock have the right to elect, any Director (including persons
elected by Directors to fill vacancies in the Board of Directors) may be removed
from office (i) only with cause and (ii) only by the affirmative vote of at
least two-thirds of the total votes which would be eligible to be cast by
stockholders in the election of such Director. At least thirty (30) days prior
to any meeting of stockholders at which it is proposed that any Director be
removed from office, written notice of such proposed removal shall be sent to
the Director whose removal will be considered at the meeting. For purposes of
this Amended and Restated Certificate of Incorporation, "cause," with respect to
the removal of any Director shall mean only (i) conviction of a felony, (ii)
declaration of unsound mind by order of court, (iii) gross dereliction of duty,
(iv) commission of any action involving moral turpitude, or (v) commission of an
action which constitutes intentional misconduct or a knowing violation of law if
such action in either event results both in an improper substantial personal
benefit and a material injury to the Corporation.
ARTICLE VII
LIMITATION OF LIABILITY
-----------------------
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (a) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the DGCL or (d) for any transaction
from which the Director derived an improper personal benefit. If the DGCL is
amended after the effective date of this Amended and Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
--------------------
1. Amendment by Directors. Except as otherwise provided by law, the By-
----------------------
laws of the Corporation may be amended or repealed by the Board of Directors by
the affirmative vote of a majority of the Directors then in office.
7
<PAGE>
2. Amendment by Stockholders. The By-laws of the Corporation may be
-------------------------
amended or repealed at any annual meeting of stockholders, or special meeting of
stockholders called for such purpose as provided in the By-laws, by the
affirmative vote of at least two-thirds of the total votes eligible to be cast
on such amendment or repeal by holders of voting stock, voting together as a
single class; provided, however, that if the Board of Directors recommends that
stockholders approve such amendment or repeal at such meeting of stockholders,
such amendment or repeal shall only require the affirmative vote of a majority
of the total votes eligible to be cast on such amendment or repeal by holders of
voting stock, voting together as a single class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
-----------------------------------------
The Corporation reserves the right to amend or repeal this Amended and
Restated Certificate of Incorporation in the manner now or hereafter prescribed
by statute and this Amended and Restated Certificate of Incorporation, and all
rights conferred upon stockholders herein, are granted subject to this
reservation. No amendment or repeal of this Amended and Restated Certificate of
Incorporation shall be made unless the same is first approved by the Board of
Directors pursuant to a resolution adopted by the Board of Directors in
accordance with Section 242 of the DGCL, and, if required by law, thereafter
approved by the stockholders. Whenever any vote of the holders of voting stock
is required, and in addition to any other vote of holders of voting stock that
is required by this Amended and Restated Certificate of Incorporation or by law,
the affirmative vote of a majority of the total votes eligible to be cast by
holders of voting stock with respect to such amendment or repeal, voting
together as a single class, at a duly constituted meeting of stockholders called
expressly for such purpose shall be required to amend or repeal any provisions
of this Amended and Restated Certificate of Incorporation; provided, however,
-------- -------
that the affirmative vote of not less than 80% of the total votes eligible to be
cast by holders of voting stock, voting together as a single class, shall be
required to amend or repeal any of the provisions of Article V, Article VI,
Article VII or Article IX of this Amended and Restated Certificate of
Incorporation.
8
<PAGE>
THIS AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is executed as of
this ____ day of _____, 1999.
PLUG POWER INC.
By:
-----------------------------------
Name:
Title:
9
<PAGE>
EXHIBIT 3.4
FORM OF
AMENDED AND RESTATED
BY-LAWS
OF
PLUG POWER INC.
ARTICLE I
---------
Stockholders
------------
SECTION 1. Annual Meeting. The annual meeting of stockholders shall be
--------------
held at the hour, date and place within or without the United States which is
fixed by the majority of the Board of Directors, the Chairman of the Board, if
one is elected, or the President, which time, date and place may subsequently be
changed at any time by vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the Corporation's last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special meeting shall have, for the purposes of these By-laws or otherwise, all
the force and effect of an annual meeting. Any and all references hereafter in
these By-laws to an annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
SECTION 2. Matters to be Considered at Annual Meetings. At any annual
-------------------------------------------
meeting of stockholders or any special meeting in lieu of annual meeting of
stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before such Annual Meeting. To be considered as properly brought before an
Annual Meeting, business must be: (a) specified in the notice of meeting, (b)
otherwise properly brought before the meeting by, or at the direction of, the
Board of Directors, or (c) otherwise properly brought before the meeting by any
holder of record (both as of the time notice of such proposal is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation entitled to vote
at such Annual Meeting who complies with the requirements set forth in this
Section 2.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall: (a) give timely notice as required by this Section 2 to the
Secretary of the Corporation and (b) be present at such meeting, either in
person or by a representative. For the first Annual Meeting following the
initial public offering of common stock of the Corporation, a stockholder's
notice shall be timely if delivered to, or mailed to and received by, the
Corporation at its principal executive office not later than the close of
business on the later of (a) the 75th day prior to the scheduled date of such
Annual Meeting or (b) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made or sent by the
Corporation. For all subsequent
<PAGE>
Annual Meetings, a stockholder's notice shall be timely if delivered to, or
mailed to and received by, the Corporation at its principal executive office not
less than 75 days nor more than 120 days prior to the anniversary date of the
immediately preceding Annual Meeting (the "Anniversary Date"); provided,
--------
however, that in the event the Annual Meeting is scheduled to be held on a date
- -------
more than 30 days before the Anniversary Date or more than 60 days after the
Anniversary Date, a stockholder's notice shall be timely if delivered to, or
mailed to and received by, the Corporation at its principal executive office not
later than the close of business on the later of (a) the 75th day prior to the
scheduled date of such Annual Meeting or (b) the 15th day following the day on
which public announcement of the date of such Annual Meeting is first made by
the Corporation.
For purposes of these By-laws, "public announcement" shall mean: (a)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (b) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (c) a letter or report sent to stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A stockholder's notice to the Secretary shall set forth as to each matter
proposed to be brought before an Annual Meeting: (a) a brief description of the
business the stockholder desires to bring before such Annual Meeting and the
reasons for conducting such business at such Annual Meeting, (b) the name and
address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (c) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business, (d) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation registered in such stockholder's name on such
books, and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners, (e) the names and addresses of
other stockholders known by the stockholder proposing such business to support
such proposal, and the class and number of shares of the Corporation's capital
stock beneficially owned by such other stockholders, and (f) any material
interest of the stockholder proposing to bring such business before such meeting
(or any other stockholders known to be supporting such proposal) in such
proposal.
If the Board of Directors or a designated committee thereof determines that
any stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2 or that the information provided in a stockholder's
notice does not satisfy the information requirements of this Section 2 in any
material respect, such proposal shall not be presented for action at the Annual
Meeting in question. If neither the Board of Directors nor such committee makes
a determination as to the validity of any stockholder proposal in the manner set
forth above, the presiding officer of the Annual Meeting shall determine whether
the stockholder proposal was made in accordance with the terms of this Section
2. If the presiding officer determines that any stockholder proposal was not
made in a timely fashion in accordance with the provisions of this Section 2 or
that the information provided in a
2
<PAGE>
stockholder's notice does not satisfy the information requirements of this
Section 2 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
stockholder proposal was made in accordance with the requirements of this
Section 2, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such proposal.
Notwithstanding the foregoing provisions of this By-law, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this Section 2, and nothing
in this Section 2 shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
SECTION 3. Special Meetings. Except as otherwise required by law and
----------------
subject to the rights, if any, of the holders of any series of preferred stock,
special meetings of the stockholders of the Corporation may be called only by
the Chairman of the Board, if one is elected, the Chief Executive Officer, or
the Board of Directors pursuant to a resolution approved by the affirmative vote
of a majority of the directors then in office.
SECTION 4. Matters to be Considered at Special Meetings. Only those
--------------------------------------------
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law.
SECTION 5. Notice of Meetings; Adjournments. A written notice of each
--------------------------------
Annual Meeting stating the hour, date and place of such Annual Meeting shall be
given by the Secretary or an Assistant Secretary (or other person authorized by
these By-laws or by law) not less than 10 days nor more than 60 days before the
Annual Meeting, to each stockholder entitled to vote thereat and to each
stockholder who, by law or under the Certificate of Incorporation of the
Corporation (as the same may hereafter be amended and/or restated, the
"Certificate") or under these By-laws, is entitled to such notice, by delivering
such notice to him or by mailing it, postage prepaid, addressed to such
stockholder at the address of such stockholder as it appears on the
Corporation's stock transfer books. Such notice shall be deemed to be given
when hand delivered to such address or deposited in the mail so addressed, with
postage prepaid.
Notice of all special meetings of stockholders shall be given in the same
manner as provided for Annual Meetings, except that the written notice of all
special meetings shall state the purpose or purposes for which the meeting has
been called.
Notice of an Annual Meeting or special meeting of stockholders need not be
given to a stockholder if a written waiver of notice is signed before or after
such meeting by such stockholder or if such stockholder attends such meeting,
unless such attendance was for the
3
<PAGE>
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting was not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any Annual Meeting or
special meeting of stockholders need be specified in any written waiver of
notice.
The Board of Directors may postpone and reschedule any previously scheduled
Annual Meeting or special meeting of stockholders and any record date with
respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to Section 2 of this
Article I or Section 3 of Article II hereof or otherwise. In no event shall
the public announcement of an adjournment, postponement or rescheduling of any
previously scheduled meeting of stockholders commence a new time period for the
giving of a stockholder's notice under Section 2 of Article I and Section 3 of
Article II of these By-laws.
When any meeting is convened, the presiding officer may adjourn the meeting
if (a) no quorum is present for the transaction of business, (b) the Board of
Directors determines that adjournment is necessary or appropriate to enable the
stockholders to consider fully information which the Board of Directors
determines has not been made sufficiently or timely available to stockholders,
or (c) the Board of Directors determines that adjournment is otherwise in the
best interests of the Corporation. When any Annual Meeting or special meeting
of stockholders is adjourned to another hour, date or place, notice need not be
given of the adjourned meeting other than an announcement at the meeting at
which the adjournment is taken of the hour, date and place to which the meeting
is adjourned; provided, however, that if the adjournment is for more than 30
-------- -------
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote thereat and each stockholder who, by law or under the
Certificate or these By-laws, is entitled to such notice.
SECTION 6. Quorum. The holders of shares of voting stock representing a
------
majority of the voting power of the outstanding shares of voting stock issued,
outstanding and entitled to vote at a meeting of stockholders, represented in
person or by proxy at such meeting, shall constitute a quorum; but if less than
a quorum is present at a meeting, the holders of voting stock representing a
majority of the voting power present at the meeting or the presiding officer may
adjourn the meeting from time to time, and the meeting may be held as adjourned
without further notice, except as provided in Section 5 of this Article I. At
such adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The stockholders present at a duly constituted meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 7. Voting and Proxies. Stockholders shall have one vote for each
------------------
share of stock entitled to vote owned by them of record according to the books
of the Corporation, unless otherwise provided by law or by the Certificate.
Stockholders may vote either in person
4
<PAGE>
or by written proxy, but no proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. Proxies shall be
filed with the Secretary of the meeting before being voted. Except as otherwise
limited therein or as otherwise provided by law, proxies shall entitle the
persons authorized thereby to vote at any adjournment of such meeting, but they
shall not be valid after final adjournment of such meeting. A proxy with respect
to stock held in the name of two or more persons shall be valid if executed by
or on behalf of any one of them unless at or prior to the exercise of the proxy
the Corporation receives a specific written notice to the contrary from any one
of them. A proxy purporting to be executed by or on behalf of a stockholder
shall be deemed valid, and the burden of proving invalidity shall rest on the
challenger.
SECTION 8. Action at Meeting. When a quorum is present, any matter before
-----------------
any meeting of stockholders shall be decided by the vote of a majority of the
voting power of shares of voting stock present in person or represented by proxy
at such meeting and entitled to vote on such matter, except where a larger vote
is required by law, by the Certificate or by these By-laws. Any election of
directors by stockholders shall be determined by a plurality of the votes cast,
except where a larger vote is required by law, by the Certificate or by these
By-laws. The Corporation shall not directly or indirectly vote any shares of
its own stock that belong to the Corporation; provided, however, that the
Corporation may vote shares which it holds in a fiduciary capacity to the extent
permitted by law.
SECTION 9. Stockholder Lists. The Secretary or an Assistant Secretary (or
-----------------
the Corporation's transfer agent or other person authorized by these By-laws or
by law) shall prepare and make, at least 10 days before every Annual Meeting or
special meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the hour, date and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 10. Presiding Officer. The Chairman of the Board, if one is
-----------------
elected, or if not elected or in his or her absence, the President, shall
preside at all Annual Meetings or special meetings of stockholders and shall
have the power, among other things, to adjourn such meeting at any time and from
time to time, subject to Sections 5 and 6 of this Article I. The order of
business and all other matters of procedure at any meeting of the stockholders
shall be determined by the presiding officer.
5
<PAGE>
SECTION 11. Voting Procedures and Inspectors of Elections. The
---------------------------------------------
Corporation shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at
a meeting of stockholders, the presiding officer shall appoint one or more
inspectors to act at the meeting. Any inspector may, but need not, be an
officer, employee or agent of the Corporation. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall perform such duties as are
required by the General Corporation Law of the State of Delaware, as amended
from time to time (the "DGCL"), including the counting of all votes and ballots.
The inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors. The presiding
officer may review all determinations made by the inspectors, and in so doing
the presiding officer shall be entitled to exercise his or her sole judgment and
discretion and he or she shall not be bound by any determinations made by the
inspectors. All determinations by the inspectors and, if applicable, the
presiding officer, shall be subject to further review by any court of competent
jurisdiction.
ARTICLE II
----------
Directors
---------
SECTION 1. Powers. The business and affairs of the Corporation shall be
------
managed by or under the direction of the Board of Directors except as otherwise
provided by the Certificate or required by law.
SECTION 2. Number and Terms. The number of directors of the Corporation
----------------
shall be fixed by resolution duly adopted from time to time by the Board of
Directors. The directors shall hold office in the manner provided in the
Certificate.
SECTION 3. Director Nominations. Nominations of candidates for election
--------------------
as directors of the Corporation at any Annual Meeting may be made only (a) by,
or at the direction of, a majority of the Board of Directors or (b) by any
holder of record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the Corporation entitled to
vote at such Annual Meeting who complies with the timing, informational and
other requirements set forth in this Section 3. Any stockholder who has
complied with the timing, informational and other requirements set forth in this
Section 3 and who seeks to make such a nomination, or his, her or its
representative, must be present in person at the Annual Meeting. Only persons
nominated in accordance with the procedures set forth in this Section 3 shall be
eligible for election as directors at an Annual Meeting.
6
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Nominations, other than those made by, or at the direction of, the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Section 3. For the first Annual Meeting
following the initial public offering of common stock of the Corporation, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (a) the 75th day prior to the scheduled date of such
Annual Meeting or (b) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made or sent by the
Corporation. For all subsequent Annual Meetings, a stockholder's notice shall
be timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not less than 75 days nor more than 120 days prior to
the Anniversary Date; provided, however, that in the event the Annual Meeting is
-------- --------
scheduled to be held on a date more than 30 days before the Anniversary Date or
more than 60 days after the Anniversary Date, a stockholder's notice shall be
timely if delivered to, or mailed and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(a) the 75th day prior to the scheduled date of such Annual Meeting or (b) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made by the Corporation.
A stockholder's notice to the Secretary shall set forth as to each person
whom the stockholder proposes to nominate for election or re-election as a
director: (a) the name, age, business address and residence address of such
person, (b) the principal occupation or employment of such person, (c) the class
and number of shares of the Corporation's capital stock which are beneficially
owned by such person on the date of such stockholder notice, and (d) the consent
of each nominee to serve as a director if elected. A stockholder's notice to
the Secretary shall further set forth as to the stockholder giving such notice:
(a) the name and address, as they appear on the Corporation's stock transfer
books, of such stockholder and of the beneficial owners (if any) of the
Corporation's capital stock registered in such stockholder's name and the name
and address of other stockholders known by such stockholder to be supporting
such nominee(s), (b) the class and number of shares of the Corporation's capital
stock which are held of record, beneficially owned or represented by proxy by
such stockholder and by any other stockholders known by such stockholder to be
supporting such nominee(s) on the record date for the Annual Meeting in question
(if such date shall then have been made publicly available) and on the date of
such stockholder's notice, and (c) a description of all arrangements or
understandings between such stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder.
If the Board of Directors or a designated committee thereof determines that
any stockholder nomination was not made in accordance with the terms of this
Section 3 or that the information provided in a stockholder's notice does not
satisfy the informational requirements of this Section 3 in any material
respect, then such nomination shall not be considered at the Annual Meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this
7
<PAGE>
Section 3, the presiding officer of the Annual Meeting shall determine whether a
nomination was made in accordance with such provisions. If the presiding officer
determines that any stockholder nomination was not made in a timely fashion in
accordance with the terms of this Section 3 or that the information provided in
a stockholder's notice does not satisfy the informational requirements of this
Section 3 in any material respect, then such nomination shall not be considered
at the Annual Meeting in question. If the Board of Directors, a designated
committee thereof or the presiding officer determines that a nomination was made
in accordance with the terms of this Section 3, the presiding officer shall so
declare at the Annual Meeting and ballots shall be provided for use at the
meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second sentence of the
second paragraph of this Section 3, in the event that the number of directors to
be elected to the Board of Directors of the Corporation is increased and there
is no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least 75
days prior to the Anniversary Date, a stockholder's notice required by this
Section 3 shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if such notice shall be delivered
to, or mailed to and received by, the Corporation at its principal executive
office not later than the close of business on the 15th day following the day on
which such public announcement is first made by the Corporation.
No person shall be elected by the stockholders as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. Election of directors at an Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as directors at
the Annual Meeting in accordance with the procedures set forth in this Section
shall be provided for use at the Annual Meeting.
SECTION 4. Qualification. No director need be a stockholder of the
-------------
Corporation.
SECTION 5. Vacancies. Subject to the rights, if any, of the holders of
---------
any series of preferred stock to elect directors and to fill vacancies in the
Board of Directors relating thereto, any and all vacancies in the Board of
Directors, however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death, resignation,
disqualification or removal of a director, shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
if less than a quorum of the Board of Directors. Any director appointed in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been duly elected and qualified or until his or her earlier resignation or
removal. Subject to the rights, if any, of the holders of any series of
preferred stock to elect directors, when the number of directors is increased or
decreased, the Board of Directors shall determine the class or classes to which
the
8
<PAGE>
increased or decreased number of directors shall be apportioned; provided,
--------
however, that no decrease in the number of directors shall shorten the term of
- -------
any incumbent director. In the event of a vacancy in the Board of Directors, the
remaining directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
SECTION 6. Removal. Directors may be removed from office in the manner
-------
provided in the Certificate.
SECTION 7. Resignation. A director may resign at any time by giving
-----------
written notice to the Chairman of the Board, if one is elected, the President or
the Secretary. A resignation shall be effective upon receipt, unless the
resignation otherwise provides.
SECTION 8. Regular Meetings. The regular annual meeting of the Board of
----------------
Directors shall be held, without notice other than this Section 8, on the same
date and at the same place as the Annual Meeting following the close of such
meeting of stockholders. Other regular meetings of the Board of Directors may
be held at such hour, date and place as the Board of Directors may by resolution
from time to time determine without notice other than such resolution.
SECTION 9. Special Meetings. Special meetings of the Board of Directors
-----------------
may be called, orally or in writing, by or at the request of a majority of the
directors, the Chairman of the Board, if one is elected, or the Chief Executive
Officer. The person calling any such special meeting of the Board of Directors
may fix the hour, date and place thereof.
SECTION 10. Notice of Meetings. Notice of the hour, date and place of all
------------------
special meetings of the Board of Directors shall be given to each director by
the Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the President or such other officer designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting
of the Board of Directors shall be given to each director in person, by
telephone, or by facsimile, telex, telecopy, telegram, or other written form of
electronic communication, sent to his or her business or home address, at least
24 hours in advance of the meeting, or by written notice mailed to his or her
business or home address, at least 48 hours in advance of the meeting. Such
notice shall be deemed to be delivered when hand delivered to such address, read
to such director by telephone, deposited in the mail so addressed, with postage
thereon prepaid if mailed, dispatched or transmitted if faxed, telexed or
telecopied, or when delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any
notice of the hour, date or place of any meeting adjourned for less than 30 days
or of the business to be transacted thereat, other than an
9
<PAGE>
announcement at the meeting at which such adjournment is taken of the hour, date
and place to which the meeting is adjourned.
A written waiver of notice signed before or after a meeting by a director
and filed with the records of the meeting shall be deemed to be equivalent to
notice of the meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because such meeting is not lawfully called or
convened. Except as otherwise required by law, by the Certificate or by these
By-laws, neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 11. Quorum. At any meeting of the Board of Directors, a majority
------
of the directors then in office shall constitute a quorum for the transaction of
business, but if less than a quorum is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time, and the meeting may
be held as adjourned without further notice, except as provided in Section 10 of
this Article II. Any business which might have been transacted at the meeting
as originally noticed may be transacted at such adjourned meeting at which a
quorum is present.
SECTION 12. Action at Meeting. At any meeting of the Board of Directors
-----------------
at which a quorum is present, a majority of the directors present may take any
action on behalf of the Board of Directors, unless otherwise required by law, by
the Certificate or by these By-laws.
SECTION 13. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors consent thereto in writing. Such written
consent shall be filed with the records of the meetings of the Board of
Directors and shall be treated for all purposes as a vote at a meeting of the
Board of Directors.
SECTION 14. Manner of Participation. Directors may participate in
-----------------------
meetings of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all directors participating in the
meeting can hear each other, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for purposes of
these By-laws.
SECTION 15. Committees. The Board of Directors, by vote of a majority of
----------
the directors then in office, may elect from its number one or more committees,
including, without limitation, an Executive Committee, a Compensation Committee,
a Stock Option Committee and an Audit Committee, and may delegate thereto some
or all of its powers except those which by law, by the Certificate or by these
By-laws may not be delegated. Except as the Board of Directors may otherwise
determine, any such committee may make rules for the conduct of its business,
but unless otherwise provided by the Board of Directors or in such
10
<PAGE>
rules, its business shall be conducted so far as possible in the same manner as
is provided by these By-laws for the Board of Directors. All members of such
committees shall hold such offices at the pleasure of the Board of Directors.
The Board of Directors may abolish any such committee at any time. Any committee
to which the Board of Directors delegates any of its powers or duties shall keep
records of its meetings and shall report its action to the Board of Directors.
The Board of Directors shall have power to rescind any action of any committee,
to the extent permitted by law, but no such rescission shall have retroactive
effect.
SECTION 16. Compensation of Directors. Directors shall receive such
-------------------------
compensation for their services as shall be determined by a majority of the
Board of Directors; provided that directors who are serving the Corporation as
--------
employees and who receive compensation for their services as such, shall not
receive any salary or other compensation for their services as directors of the
Corporation.
ARTICLE III
-----------
Officers
--------
SECTION 1. Enumeration. The officers of the Corporation shall consist of
-----------
a President, a Treasurer, a Secretary and such other officers, including,
without limitation, a Chairman of the Board, a Chief Executive Officer and one
or more Vice Presidents (including Executive Vice Presidents or Senior Vice
Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant
Secretaries, as the Board of Directors may determine.
SECTION 2. Election. At the regular annual meeting of the Board following
--------
the Annual Meeting of stockholders, the Board of Directors shall elect the
President, the Treasurer and the Secretary. Other officers may be elected by
the Board of Directors at such regular annual meeting of the Board of Directors
or at any other regular or special meeting.
SECTION 3. Qualification. No officer need be a stockholder or a director.
-------------
Any person may occupy more than one office of the Corporation at any time. Any
officer may be required by the Board of Directors to give bond for the faithful
performance of his or her duties in such amount and with such sureties as the
Board of Directors may determine.
SECTION 4. Tenure. Except as otherwise provided by the Certificate or by
------
these By-laws, each of the officers of the Corporation shall hold office until
the regular annual meeting of the Board of Directors following the next Annual
Meeting of stockholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
11
<PAGE>
SECTION 5. Resignation. Any officer may resign by delivering his or her
-----------
written resignation to the Corporation addressed to the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 6. Removal. Except as otherwise provided by law, the Board of
-------
Directors may remove any officer with or without cause by the affirmative vote
of a majority of the Directors then in office.
SECTION 7. Absence or Disability. In the event of the absence or
---------------------
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies. Any vacancy in any office may be filled for the
---------
unexpired portion of the term by the Board of Directors.
SECTION 9. Chairman of the Board. The Chairman of the Board, if one is
---------------------
elected, shall preside, when present, at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board shall have such other powers
and shall perform such other duties as the Board of Directors may from time to
time designate.
SECTION 10. Chief Executive Officer. The Chief Executive Officer, if one
-----------------------
is elected, shall, subject to the direction of the Board of Directors, have
general supervision and control of the Corporation's business. If there is no
Chairman of the Board or if he or she is absent, the Chief Executive Officer
shall preside, when present, at all meetings of stockholders and of the Board of
Directors. The Chief Executive Officer shall have such other powers and perform
such other duties as the Board of Directors may from time to time designate.
SECTION 11. President. The President shall generally have such powers and
---------
shall perform such duties as the Board of Directors may from time to time
designate. However, if no Chief Executive Officer is elected, the President
shall have general supervision and control of the Corporation's business. If
there is neither a Chairman of the Board nor a Chief Executive Officer or if
both such officers are absent, the President shall preside, when present, at all
meetings of stockholders and of the Board of Directors.
SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice
---------------------------------------------
President (including any Executive Vice President or Senior Vice President) and
any Assistant Vice President shall have such powers and shall perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
SECTION 13. Treasurer and Assistant Treasurers. The Treasurer shall,
----------------------------------
subject to the direction of the Board of Directors and except as the Board of
Directors or the Chief Executive Officer may otherwise provide, have general
charge of the financial affairs of the Corporation
12
<PAGE>
and shall cause to be kept accurate books of account. The Treasurer shall have
custody of all funds, securities, and valuable documents of the Corporation. He
or she shall have such other duties and powers as may be designated from time to
time by the Board of Directors or the Chief Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 14. Secretary and Assistant Secretaries. The Secretary shall
-----------------------------------
record all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose.
In his or her absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however, be kept by any transfer or other agent of
the Corporation). The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his or her signature or that of an Assistant Secretary. The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the absence
of the Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 15. Other Powers and Duties. Subject to these By-laws and to such
-----------------------
limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors or the Chief Executive
Officer.
ARTICLE IV
----------
Capital Stock
-------------
SECTION 1. Certificates of Stock. Each stockholder shall be entitled to a
---------------------
certificate of the capital stock of the Corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the Chairman of the Board of Directors, the President or a Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary. The Corporation seal and the signatures by the
Corporation's officers, the transfer agent or the registrar may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent or registrar before such
13
<PAGE>
certificate is issued, it may be issued by the Corporation with the same effect
as if he or she were such officer, transfer agent or registrar at the time of
its issue. Every certificate for shares of stock which are subject to any
restriction on transfer and every certificate issued when the Corporation is
authorized to issue more than one class or series of stock shall contain such
legend with respect thereto as is required by law.
SECTION 2. Transfers. Subject to any restrictions on transfer and unless
---------
otherwise provided by the Board of Directors, shares of stock may be transferred
only on the books of the Corporation by the surrender to the Corporation or its
transfer agent of the certificate theretofore properly endorsed or accompanied
by a written assignment or power of attorney properly executed, with transfer
stamps (if necessary) affixed, and with such proof of the authenticity of
signature as the Corporation or its transfer agent may reasonably require.
SECTION 3. Record Holders. Except as may otherwise be required by law, by
--------------
the Certificate or by these By-laws, the Corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to vote with
respect thereto, regardless of any transfer, pledge or other disposition of such
stock, until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the Corporation of his
or her post office address and any changes thereto.
SECTION 4. Record Date. In order that the Corporation may determine
-----------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date: (a) in the case of determination of stockholders entitled to vote at any
meeting of stockholders, shall, unless otherwise required by law, not be more
than sixty nor less than ten days before the date of such meeting and (b) in the
case of any other action, shall not be more than sixty days prior to such other
action. If no record date is fixed: (a) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held and (b) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 5. Replacement of Certificates. In case of the alleged loss,
---------------------------
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
14
<PAGE>
ARTICLE V
---------
Indemnification
---------------
SECTION 1. Definitions. For purposes of this Article:
-----------
(a) "Director" means any person who serves or has served the Corporation as
a director on the Board of Directors of the Corporation;
(b) "Officer" means any person who serves or has served the Corporation as
an officer appointed by the Board of Directors of the Corporation;
(c) "Employee" means any person who serves or has served as an employee of
the Corporation, but who is not or was not a Director or Officer;
(d) "Proceeding" means any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution mechanism, inquiry, investigation,
administrative hearing or other proceeding, whether civil, criminal,
administrative, arbitrative or investigative;
(e) "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of expert witnesses, private investigators and
professional advisors (including, without limitation, accountants and investment
bankers), travel expenses, duplicating costs, printing and binding costs, costs
of preparation of demonstrative evidence and other courtroom presentation aids
and devices, costs incurred in connection with document review, organization,
imaging and computerization, telephone charges, postage, delivery service fees,
and all other disbursements, costs or expenses of the type customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, being or preparing to be a witness in, settling or otherwise
participating in, a Proceeding;
(f) "Corporate Status" describes the status of a person who (i) in the
case of a Director, is or was a director of the Corporation and is or was acting
in such capacity, (ii) in the case of an Officer, is or was an officer, employee
or agent of the Corporation or is or was a director, officer, employee, trustee
or agent of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such Officer is or was serving at the
request of the Corporation, and (iii) in the case of an Employee, is or was an
employee of the Corporation or is or was a director, officer, employee or agent
of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such Employee is or was serving at the request of
the Corporation.
(g) "Disinterested Director" means, with respect to each Proceeding in
respect of which indemnification is sought hereunder, a Director of the
Corporation who is not and was not a party to such Proceeding; and
15
<PAGE>
(h) "Subsidiary" shall mean any corporation, partnership, limited liability
company, joint venture, trust or other entity of which the Corporation owns
(either directly or through or together with another Subsidiary of the
Corporation) either (i) a general partner, managing member or other similar
interest or (ii) (A) 50% or more of the voting power of the voting capital
equity interests of such corporation, partnership, limited liability company,
joint venture or other entity, or (B) 50% or more of the outstanding voting
capital stock or other voting equity interests of such corporation, partnership,
limited liability company, joint venture or other entity.
SECTION 2. Indemnification of Directors. Subject to the operation of
----------------------------
Section 4 of this Article V, each Director shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the DGCL, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment) against any and all Expenses, judgments,
penalties, fines and amounts reasonably paid in settlement that are incurred by
such Director or on such Director's behalf in connection with any threatened,
pending or completed Proceeding or any claim, issue or matter therein, which
such Director is, or is threatened to be made, a party to or participant in by
reason of such Director's Corporate Status, if such Director acted in good faith
and in a manner such Director or Officer reasonably believed to be in or not
opposed to the best interests of the Corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The rights of indemnification provided by this Section 2 shall
continue as to a Director after he or she has ceased to be a Director and shall
inure to the benefit of his or her heirs, executors, administrators and personal
representatives. Notwithstanding the foregoing, the Corporation shall indemnify
any Director seeking indemnification in connection with a Proceeding initiated
by such Director only if such Proceeding was authorized by the Board of
Directors of the Corporation, unless such Proceeding was brought to enforce a
Director's rights to Indemnification under these By-laws.
SECTION 3. Indemnification of Officers and Employees. Subject to the
-----------------------------------------
operation of Section 4 of this Article V, each Employee may, in the discretion
of the Board of Directors of the Corporation, be indemnified by the Corporation
to the fullest extent authorized by the DGCL, as the same exists or may
hereafter be amended, against any or all Expenses, judgments, penalties, fines
and amounts reasonably paid in settlement that are incurred by such Officer or
Employee or on such Officer's or Employee's behalf in connection with any
threatened, pending or completed Proceeding, or any claim, issue or matter
therein, which such Officer or Employee is, or is threatened to be made, a party
to or participant in by reason of such Officer or Employee's Corporate Status,
if such Officer or Employee acted in good faith and in a manner such Officer or
Employee reasonably believed to be in or not opposed to the best interests of
the Corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. The rights of indemnification
provided by this Section 3 shall continue as to an Officer or Employee after he
or she has
16
<PAGE>
ceased to be an Officer or Employee and shall inure to the benefit of his or her
heirs, personal representatives, executors and administrators. Notwithstanding
the foregoing, the Corporation may indemnify any Officer or Employee seeking
indemnification in connection with a Proceeding initiated by such Officer or
Employee only if such Proceeding was authorized by the Board of Directors of the
Corporation.
SECTION 4. Good Faith. No indemnification shall be provided pursuant to
----------
this Article V to a Director, to an Officer or to an Employee with respect to a
matter as to which such person shall have been finally adjudicated in any
Proceeding (i) not to have acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation and, (ii) with respect to any criminal Proceeding, to have had
reasonable cause to believe his or her conduct was unlawful. In the event that
a Proceeding is compromised or settled prior to final adjudication so as to
impose any liability or obligation upon a Director, an Officer or an Employee,
no indemnification shall be provided pursuant to this Article V to said
Director, Officer or Employee with respect to a matter if there be a reasonable
good faith determination that with respect to such matter such person did not
act in good faith and in a manner such person reasonably believed to be in, or
not opposed to, the best interests of the Corporation, and, with respect to any
criminal Proceeding, had no reasonable cause to believe his or her conduct was
unlawful.
SECTION 5. Advancement of Expenses to Directors Prior to Final
---------------------------------------------------
Disposition. The Corporation shall advance all Expenses incurred by or on
- -----------
behalf of any Director in connection with any Proceeding in which such Director
is involved by reason of such Director's Corporate Status within ten (10) days
after the receipt by the Corporation of a written statement from such Director
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the Expenses incurred by such Director and shall be preceded
or accompanied by an undertaking by or on behalf of such Director to repay any
Expenses so advanced if it shall ultimately be determined that such Director is
not entitled to be indemnified against such Expenses.
SECTION 6. Advancement of Expenses to Officers and Employees Prior to
----------------------------------------------------------
Final Disposition. The Corporation may, at the discretion of the Board of
- -----------------
Directors of the Corporation, advance any or all Expenses incurred by or on
behalf of any Officer or Employee in connection with any Proceeding in which
such Officer or Employee is involved by reason of such Officer's or Employee's
Corporate Status upon the receipt by the Corporation of a statement or
statements from such Officer or Employee requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by such Officer or Employee and shall be preceded or accompanied by an
undertaking by or on behalf of such Officer or Employee to repay any Expenses so
advanced if it shall ultimately be determined that such Officer or Employee is
not entitled to be indemnified against such Expenses.
17
<PAGE>
SECTION 7. Contractual Nature of Rights. The foregoing provisions of this
----------------------------
Article V shall be deemed to be a contract between the Corporation and each
Director who serves in such capacity at any time while this Article V is in
effect, and any repeal or modification thereof shall not affect any rights or
obligations then existing with respect to any state of facts then or theretofore
existing or any Proceeding theretofore or thereafter brought based in whole or
in part upon any such state of facts. If a claim for indemnification or
advancement of Expenses hereunder by a Director is not paid in full by the
Corporation within 10 days after receipt by the Corporation of documentation of
Expenses and the required undertaking, such Director (if applicable) may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim, and if successful in whole or in part, such Director (if
applicable) shall also be entitled to be paid the expenses of prosecuting such
claim. The failure of the Corporation (including its Board of Directors or any
committee thereof, independent legal counsel, or stockholders) to make a
determination concerning the permissibility of such indemnification or
advancement of Expenses, under this Article V shall not be a defense to the
action and shall not create a presumption that such indemnification or
advancement is not permissible.
SECTION 8. Non-Exclusivity of Rights. The rights to indemnification and
-------------------------
advancement of Expenses set forth in this Article V shall not be exclusive of
any other right which any Director, Officer or Employee may have or hereafter
acquire under any statute, provision of the Certificate or these By-laws,
agreement, vote of stockholders or Disinterested Directors or otherwise.
SECTION 9. Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any Director, Officer or Employee against any
liability of any character asserted against or incurred by the Corporation or
any such Director, Officer or Employee, or arising out of any such person's
Corporate Status, whether or not the Corporation would have the power to
indemnify such person against such liability under the DGCL or the provisions of
this Article V.
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
SECTION 1. Fiscal Year. Except as otherwise determined by the Board of
-----------
Directors, the fiscal year of the Corporation shall end on the last day of
December of each year.
SECTION 2. Seal. The Board of Directors shall have power to adopt and
----
alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers,
------------------------
contracts, bonds, notes and other obligations to be entered into by the
Corporation in the ordinary course of its
18
<PAGE>
business without director action may be executed on behalf of the Corporation by
the Chairman of the Board, if one is elected, the President or the Treasurer or
any other officer, employee or agent of the Corporation as the Board of
Directors or Executive Committee may authorize.
SECTION 4. Voting of Securities. Unless the Board of Directors otherwise
--------------------
provides, the Chairman of the Board, if one is elected, the President or the
Treasurer may waive notice of and act on behalf of this Corporation, or appoint
another person or persons to act as proxy or attorney in fact for this
Corporation with or without discretionary power and/or power of substitution, at
any meeting of stockholders or shareholders of any other corporation or
organization, any of whose securities are held by this Corporation.
SECTION 5. Resident Agent. The Board of Directors may appoint a resident
--------------
agent upon whom legal process may be served in any action or proceeding against
the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the
-----------------
Certificate, By-laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock transfer books, which
shall contain the names of all stockholders, their record addresses and the
amount of stock held by each, may be kept outside the State of Delaware and
shall be kept at the principal office of the Corporation, at the office of its
counsel or at an office of its transfer agent or at such other place or places
as may be designated from time to time by the Board of Directors.
SECTION 7. Certificate. All references in these By-laws to the
-----------
Certificate shall be deemed to refer to the Certificate of Incorporation of the
Corporation, as amended and in effect from time to time.
SECTION 8. Amendment of By-laws.
--------------------
(a) Amendment by Directors. Except as provided otherwise by law, these
----------------------
By-laws may be amended or repealed by the Board of Directors by the affirmative
vote of a majority of the Directors then in office.
(b) Amendment by Stockholders. These By-laws may be amended or repealed
-------------------------
at any annual meeting of stockholders, or special meeting of stockholders called
for such purpose, by the affirmative vote of at least two-thirds of the total
votes eligible to be cast on such amendment or repeal by holders of voting
stock, voting together as a single class; provided, however, that if the Board
-------- -------
of Directors recommends that stockholders approve such amendment or repeal at
such meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
Adopted ______________ ____, 1999 and Effective as of ______________ ____, 1999
19
<PAGE>
EXHIBIT 4.1
================================================================================
=========================================================================
COMMON STOCK COMMON STOCK
PLUG POWER INC.
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR CERTAIN
IN BOSTON, MA OR NEW YORK, NY DEFINITIONS
CUSIP 72919P 10 3
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK PAR VALUE $.01 PER
SHARE OF PLUG POWER INC., transferable on the books of the Corporation by the
holder hereof in person or by duly authorized Attorney, upon surrender of this
Certificate, properly endorsed. This Certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
<PAGE>
[Signature of President and Chief [Signature of Secretary]
Executive Officer]
President and Chief Executive Officer Corporate Secretary
COUNTERSIGNED AND REGISTERED:
American Stock Transfer & Trust Company
TRANSFER AGENT AND REGISTRAR
By [Signature of Authorized Officer]
AUTHORIZED SIGNATURE
================================================================================
============================================================================
PLUG POWER INC.
The Corporation has more than one class of stock authorized to be issued. The
Corporation will furnish without charge to each stockholder upon request a copy
of the full text of the powers, designations, preferences and relative,
participating, optional or other rights of the shares of each class of stock
(and any series thereof) authorized to be issued by the Corporation and the
qualifications, limitations or restrictions of such preferences and/or rights,
all as set forth in the Certificate of Incorporation and amendments thereto
filed with the Secretary of State of the State of Delaware.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ---- Custodian -----
TEN ENT -- as tenants by the entireties (Cust) Minor
JT TEN -- as joint tenants with rights Under Uniform Gifts to Minor
of survivorship and not as Act ----------------
tenants in common
</TABLE>
<PAGE>
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ________________________________________ hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OR ASSIGNEE
___________________________
________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________
________________________________________________________
________________________________________________________ Shares
of the Capital Stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint
________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ___________
______________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER, AND MUST
BE GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE
17 Ad-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934 WHICH MAY
INCLUDE A COMMERCIAL BANK, TRUST COMPANY OR SAVINGS ASSOCIATION,
CREDIT UNION OR MEMBER OF THE AMERICAN STOCK EXCHANGE, NEW YORK
STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR MIDWEST STOCK EXCHANGE
<PAGE>
Exhibit 5.1
October 1, 1999
Plug Power Inc.
968 Albany-Shaker Road
Latham, New York 12110
Ladies and Gentlemen:
We have acted as counsel to Plug Power Inc., a Delaware corporation (the
"Company"), in connection with the offer and sale by the Company of up to
6,900,000 shares of common stock, par value $.01 per share ("Common Stock"), of
the Company (the "Shares"). The Shares include an overallotment option of up to
900,000 shares of Common Stock. This opinion is being delivered in connection
with the Company's Registration Statement on Form S-1 (No. 333-86089) (the
"Registration Statement") relating to the registration of the offering and sale
of the Shares under the Securities Act of 1933, as amended (the "Securities
Act"). All of the Shares are to be sold by the Company to the several
underwriters (the "Underwriters") of which Goldman, Sachs & Co., Hambrecht &
Quist, Merrill Lynch & Co., and FAC/Equities are the representatives (the
"Representatives") pursuant to an Underwriting Agreement (the "Underwriting
Agreement") to be entered into between the Company and the Representatives of
the Underwriters.
In connection with rendering this opinion, we have examined the form of the
proposed Underwriting Agreement being filed as an Exhibit to the Registration
Statement; the Certificate of Incorporation and By-laws of the Company, each as
amended to date; such records of the corporate proceedings of the Company as we
deemed material; and such other certificates, receipts, records and documents as
we considered necessary for the purpose of this opinion. In our examination, we
have assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as certified,
photostatic or facsimile copies, the authenticity of the originals of such
copies and the authenticity of telephonic confirmations of public materials. As
to facts material to our opinion, we have relied upon certificates or telephonic
confirmations of public officials and certificates, documents, statements and
other information of the Company or representatives or officers thereof.
We are attorneys admitted to practice in The Commonwealth of Massachusetts.
We express no opinion concerning the laws of any jurisdictions other than the
laws of the United States of America, the laws of The Commonwealth of
Massachusetts and the General Corporation Law of the State of Delaware (the
"DGCL").
Based upon the foregoing, we are of the opinion that when (i) the
Underwriting Agreement is completed (including the insertion therein of pricing
terms) and executed and delivered by the Company and on the behalf of the
Underwriters, and (ii) the Shares are sold to the Underwriters and paid pursuant
to the terms of the Underwriting Agreement, the Shares will be duly
<PAGE>
authorized, validly issued and fully paid and non-assessable by the Company
under the DGCL.
The foregoing assumes that all requisite steps will be taken to comply with
the requirements of the Securities Act and applicable requirements of state laws
regulating the offer and sale of securities.
We hereby consent to being named as counsel to the Company in the
Registration Statement, to the references therein to our firm under the caption
"Legal Matters" and to the inclusion of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
GOODWIN, PROCTER & HOAR LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 (File
No. 333-86089) of our reports dated April 9, 1999 relating to the financial
statements of Plug Power, LLC (a development stage enterprise), which appear
in such Registration Statement. We also consent to the references to us under
the headings "Experts" and "Selected Historical Financial Data" in such
Registration Statement.
PricewaterhouseCoopers LLP
Albany, New York
October 1, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLUG POWER'S
BALANCE SHEETS AND STATEMENTS OF OPERATIONS, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> JUN-27-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 JUN-30-1999
<CASH> 3,080,181 3,993,122 17,242,734
<SECURITIES> 0 0 0
<RECEIVABLES> 803,557 1,285,261 1,016,402
<ALLOWANCES> 0 0 0
<INVENTORY> 20,911 14,647 53,087
<CURRENT-ASSETS> 3,917,288 5,293,030 18,340,750
<PP&E> 854,421 3,202,776 8,947,265
<DEPRECIATION> (116,808) (449,284) (804,752)
<TOTAL-ASSETS> 4,846,566 8,093,435 30,077,013
<CURRENT-LIABILITIES> 1,249,906 2,600,738 4,771,235
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 9,500,000 21,012,000 55,410,182
<TOTAL-LIABILITY-AND-EQUITY> 4,846,566 8,093,435 30,077,013
<SALES> 0 0 0
<TOTAL-REVENUES> 1,193,530 6,541,040 3,695,535
<CGS> 0 0 0
<TOTAL-COSTS> 1,226,443 8,863,845 5,117,834
<OTHER-EXPENSES> 5,973,550 7,386,374 13,536,232
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> (5,903,340) (9,615,963) (14,740,498)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (5,903,340) (9,615,963) (14,740,498)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (5,903,340) (9,615,963) (14,740,498)
<EPS-BASIC> (0.62) (0.71) (0.69)
<EPS-DILUTED> (0.62) (0.71) (0.69)
</TABLE>
