<PAGE>
As filed with the Securities and Exchange Commission on August 27, 1999
Registration Statement No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
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 (I.R.S. Employer
(State or Other Industrial Identification No.)
Jurisdiction Classification Code
of Incorporation or Number)
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. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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- --------------------------------------------------------------------------------
<CAPTION>
Proposed Maximum Amount of
Title of Each Class of Aggregate Registration
Securities to be Registered Offering Price(1) Fee
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value per share.......... $117,300,000 $32,610
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- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
----------------
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 August , 1999.
Shares
Plug Power Inc.
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.
Prior to 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 $ and $ . 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 shares of common
stock, the underwriters have the option to purchase up to an additional
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>
[INSIDE FRONT COVER]
<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 was formed in June 1997 as a Delaware limited liability company.
Immediately prior to 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 herein for periods prior to
the merger mean our issued and outstanding membership interests.
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 system will be designed to
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
kilowatts (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,
3
<PAGE>
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. 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.
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 of 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.
4
<PAGE>
. 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.
. 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. 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.
Additional Equity Financing at Time of Offering
Immediately prior to the closing of this offering and in addition to the
shares of common stock offered hereby, certain current stockholders will
exercise rights to purchase 9,750,000 shares of common stock for a total
purchase price of $88.9 million in cash, or an average price of $9.12 per
share, as follows:
. Mechanical Technology Incorporated and Edison Development Corporation (a
wholly owned subsidiary of DTE Energy Company) will each exercise
contractual rights acquired in January 1999 to purchase 3,000,000 shares
of common stock at a price of $7.50 per share for a total purchase price
of $45.0 million.
. GE On-Site Power, Inc. will exercise outstanding warrants acquired in
February 1999 to purchase 3,000,000 shares of common stock at a price of
$12.50 per share for a total purchase price of $37.5 million.
. Two additional stockholders will exercise outstanding warrants acquired
in February and April 1999 to purchase an aggregate of 750,000 shares of
common stock at a price of $8.50 per share for a total purchase price of
$6.4 million.
5
<PAGE>
The Offering
<TABLE>
<C> <S>
Shares offered by Plug Power........................ shares
Common stock to be outstanding after this offering.. shares(1)
Estimated net proceeds to Plug Power................ $
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 26,458,480 shares outstanding as of August 2,
1999, plus 9,750,000 shares of common stock to be issued to certain current
stockholders immediately prior to the closing of this offering as described
above under "--Additional Equity Financing at Time of Offering", plus
shares of common stock to be issued in this offering. This number excludes:
. shares of common stock issuable pursuant to the overallotment
option granted to the underwriters;
. 3,346,789 shares of common stock issuable upon exercise of stock options
outstanding as of August 2, 1999, at a weighted average exercise price
of $4.91 per share;
. 2,591,402 shares of common stock available for future grant under our
stock option plan as of August 2, 1999 (plus an additional shares
of common stock to become available for future grant under our 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 prior to
this offering. 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 and trademarks 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 9,750,000 shares
to be issued upon the exercise of outstanding warrants and other
purchase rights immediately prior to the closing of this offering and to
the assumption of $6,000,000 of debt in July 1999 in connection with the
purchase of real estate from Mechanical Technology 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 shares of common stock in this
offering, at an assumed initial public offering price of $ per
share, after deducting the estimated underwriting discounts and
commissions and our estimated offering expenses of $ million.
<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------------
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 21,350
======= ======= ============ =============
</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
Working capital.............................. 13,570 102,445
Total assets................................. 30,077 129,650
Long-term obligations........................ 155 6,155
Total shareholders' equity................... 25,150 118,723
</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. 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 at least 2003. 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
A mass market may never develop for our systems, or may develop more slowly
than we anticipate. Fuel cells 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;
. the future costs of natural gas, propane and other fuels used by our
systems;
8
<PAGE>
. 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 to purchase $12.0 million of technical support services from
General Electric during the next three years. This agreement expires in 2009,
although GE Fuel Cell Systems may terminate the agreement earlier if, among
other reasons, we fail to do any of the following:
. produce competitive fuel cell systems;
. meet 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".
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. These
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<PAGE>
milestones relate to technology and design improvements as well as to dates for
achieving development goals. To gauge our progress, we operate test and
evaluation fuel cell systems under actual residential conditions. 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. 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.
Failure to secure such relationships could harm our business, prospects,
results of operations, or financial condition.
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. 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 using other types of fuel cells.
Some of our competitors are much larger than we are and 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".
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".
10
<PAGE>
Our business may become subject to future 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 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, may 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. In the event 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 business,
prospects, results of operations, or financial condition could be harmed.
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 immediately prior to 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 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. Difficulties in effectively
managing the budgeting, forecasting and other process control issues presented
by such a rapid expansion could harm our business, prospects, results of
operations or financial condition.
11
<PAGE>
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 local resellers and our ability to manufacture
products that meet local 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, that could harm our
business, prospects, results of operations, or financial condition.
We may not be able to protect important intellectual property
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 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.
12
<PAGE>
Our existing stockholders will control all matters requiring a stockholder vote
Upon the completion of this offering, our principal stockholders, Edison
Development, Mechanical Technology, GE On-Site Power and Southern California
Gas Company, will retain approximately % 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".
We may be 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.
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".
Our stock price is likely to be highly 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.
13
<PAGE>
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 immediate and
substantial dilution in the net tangible book value per share of the common
stock from the price you paid. 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".
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 shares of common
stock outstanding. Of these shares, the shares sold in this offering will
be freely tradeable. Of the remaining shares, are subject to 180-day
lock-up agreements. At least shares will generally 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 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 August 2,
1999, options to purchase 3,346,789 shares of common stock were issued and
outstanding, of which options to purchase 1,210,180 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".
14
<PAGE>
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".
We do not intend to pay dividends
We have never declared or paid any cash dividends on shares of our common
stock. We currently intend to retain our earnings, if any, for future growth
and, therefore, do not anticipate paying any dividends in the foreseeable
future. See "Dividend Policy".
15
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of our common stock in
this offering will be $ million, at an assumed initial public offering
price of $ per share, after deducting the estimated underwriting discounts
and commissions and our estimated offering expenses. We will also receive
proceeds of $88.9 million from the issuance of 9,750,000 shares of common stock
upon the exercise of outstanding warrants and other purchase rights immediately
prior to the closing of this offering. We estimate that our total net proceeds
of $ million will be used as follows:
. approximately $20 million will be used for manufacturing equipment,
facilities and other capital expenditures in support of
commercialization activities during 1999 and 2000;
. approximately $ million will be used for general corporate purposes,
including working capital, funds for operations, research and product
development, market development, capital expenditures after the year
2000 and potential acquisitions.
Until allocated for specific 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 9,750,000 shares
of common stock upon the exercise of outstanding warrants and other
purchase rights immediately prior to the closing of this offering and
the assumption of $6.0 million of debt in July 1999 in connection with
the purchase of real estate from Mechanical Technology 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 shares of common stock in this
offering at an assumed initial public offering price of $ per
share, after deducting the estimated underwriting discounts and
commissions and our estimated offering expenses.
<TABLE>
<CAPTION>
As of June 30, 1999
--------------------------------
Pro Forma,
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Capital lease obligations...................... $ 246 $ 246 $ 246
Note payable................................... -- 6,000 6,000
-------- -------- -----
Total debt.................................... 246 6,246 6,246
-------- -------- -----
Stockholders' equity:
Class A membership interest, no par value,
40,000 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
shares issued and outstanding, pro forma, as
adjusted.................................... 362
Paid-in capital................................ 60,108 148,621
Deficit accumulated during the development
stage......................................... (30,260) (30,260)
-------- -------- -----
Total stockholders' equity .................... 25,150 118,723
-------- -------- -----
Total capitalization......................... $ 25,396 $124,969 $
======== ======== =====
</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 issuance of 9,750,000 shares of common stock upon the exercise of
outstanding warrants and purchase rights immediately prior to the closing of
this offering. After giving effect to the sale of the shares of common
stock offered hereby at an assumed initial public offering price of $ 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 approximately $ , or
approximately $ per pro forma share of common stock. This represents an
immediate increase in pro forma net tangible book value of $ per share to
our existing stockholders and an immediate dilution of $ per share to new
investors in this offering. If the initial public offering price is higher or
lower than $ 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..................... $
Pro forma net tangible book value per share before this offering.. $
Increase per share attributable to this offering..................
-----
Pro forma net tangible book value per share after this offering.....
-----
Dilution per share to new investors................................. $
=====
</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 $ . 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 % to % 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 % to % 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 % $148,982,964 % $4.11
New investors.............
---------- ----- ------------ -----
Total................... 100.0% $ 100.0%
========== ===== ============ =====
</TABLE>
The table excludes:
. shares that may be issued by us pursuant to the underwriters' over-
allotment option;
. 3,346,789 shares of common stock issuable upon exercise of stock options
outstanding at August 2, 1999 at a weighted average exercise price of
$4.91 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>
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 21,350
======= ======= ============ =============
<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 prior to 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 herein 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. To date, our existing stockholders in the aggregate have
invested $41.9 million in cash and $18.0 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 $88.9 million in cash immediately prior to 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 inception, 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 are scheduled
to commence 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 pre-commercial systems to be higher than
their sales price. 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 prior to the merger, which will occur
immediately prior to 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
immediately prior to 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 for the
period from inception,
22
<PAGE>
the deferred tax asset generated, primarily from 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 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.
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 prior to the merger, which will occur
immediately prior to 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 for the period from 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 capital 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 prior to the
closing of this offering, and the net proceeds from this offering will provide
us with sufficient capital to fund operations through at least December 31,
2001.
We have financed our operations to date primarily through the sale of equity
which has provided us cash of $41.9 million through June 30, 1999. 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 $6.0 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 $6.0 million letter of credit issued by KeyBank National Association for the
express purpose of servicing $6.0 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 certain 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 has made aggregate cash
contributions of $4.5 million plus non-cash contributions of $9.5 million while
Edison Development has 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 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.
Mechanical Technology and Edison Development have committed to contribute the
full $45.0 million immediately prior to the closing of this offering in
exchange for an aggregate of 6,000,000 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 exchange for receiving a 25% interest in GE Fuel Cell Systems and entering
into a 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 vested shares ($3.8 million) under the
caption "Distribution and other agreements, net" in the 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 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 prior to 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.
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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 PEM fuel cell systems on behalf of Plug Power. In the
event Southern California Gas does not expend these amounts by April 2002, a
portion of the 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 prior to the closing of
this offering for a total exercise price of $3.0 million in cash.
Private Investors
In February 1999, two investors purchased 1,500,000 shares of common stock
for a total of $10.0 million. In addition, one of the investors received a
warrant to purchase 400,000 shares of common stock at a price of $8.50 per
share. This investor 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.
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.
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 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.
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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 5% have
replied that they are or will be compliant by mid-1999. 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, "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.
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, 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
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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 system will be designed to
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 existing stockholders have invested $41.9 million in cash and
$18.0 million in real estate, in-process research and development and other in-
kind contributions. Our investors have committed to invest an additional $88.9
million in cash upon the exercise of outstanding warrants and purchase rights
immediately prior to 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.
We have been awarded approximately $40.0 million in federal and state
government grants related to PEM fuel cell research.
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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
August 1999 Filed our 40th patent application relating to fuel cell
technology, design 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 electricity and, in some cases, basic
energy infrastructure to improve their standards of living.
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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 acquire or utilize our
system 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 further 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 manufacturing capabilities and implement more
efficient manufacturing processes as we move toward the
commercialization stage.
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. 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. We believe that the fuel cell technology, system
design and manufacturing processes that we develop and acquire during
the course of commercializing our residential systems can be leveraged
to develop other fuel cell applications, including combined heat and
power, automotive, marine, and emergency back-up systems.
Product Development and Commercialization Process
We are implementing our product development and commercialization plan in
four phases:
. 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
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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.
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.
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<PAGE>
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. In return, 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). 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.
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.
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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 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.
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<PAGE>
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 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.
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<PAGE>
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.
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.
[A schematic diagram of a fuel cell depicting two conductive plates with a
membrane
electrode assembly in between and the flow of electricity created from the
chemical reaction]
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. When commercialized, a single Plug Power residential
fuel cell system will provide up to 7kW of baseload power, 10kW of peak power
and 15kW of surge load capacity.
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 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.
</TABLE>
38
<PAGE>
<TABLE>
<C> <S>
Power conditioner 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>
The following diagram illustrates how a Plug Power fuel cell system produces
electricity:
[A schematic diagram depicting the major components of our fuel cell system]
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 certain low-cost
manufacturing processes, 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 been granted three patents and have
more than 40 patents pending.
. 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
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.
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<PAGE>
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
certain 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.
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
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<PAGE>
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 August 1999, we had a total staff of 271, including 228 full-time
employees, of which approximately 120 were engineers, scientists, and other
degreed professionals. We consider 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.
41
<PAGE>
MANAGEMENT
Executive Officers, Key Employees and Directors
Our executive officers, directors, director-nominees, and key employees,
their positions and their ages as of August 15, 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.... 37 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 1998, 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 products for the semiconductor industry.
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 1989 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
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<PAGE>
and Chief Executive Officer of DTE Energy Company and its subsidiary, The
Detroit Edison 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 of First Albany Companies, Inc. since
1984 and as Co-Chief Executive Officer since 1993 and previously served as
President 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 State Science and Technology Foundation, and is Chairman of the
Regional Firms Advisory Committee to the Board of the New York Stock Exchange.
Dr. Walter L. Robb has served as a member of the Board of Directors since
June 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 Research and
Development 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. Dr. Robb also serves on the Advisory Council of the Critical
Technology Institute and on the Council of the National Academy of Engineering.
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 Bachelor of Science degree in business from Western
Illinois University and a Master of Business Administration degree from
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
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<PAGE>
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 and 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, whose term of office will
continue until the 2000 annual meeting of stockholders, three Class II
directors, whose term of office will continue until the 2001 annual meeting of
stockholders, and three Class III directors, 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.
There are no family relationships among any of our directors or executive
officers.
45
<PAGE>
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, all of whom will be independent directors, 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 members of the
Compensation Committee 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 $6,115
President and Chief
Executive Officer
Dr. William P. Acker........ 112,316 -- 55,000 2,877
Vice President of
Product Development
and Commercialization
Dr. Manmohan Dhar........... 103,269 -- 30,000 2,692
Vice President and Chief
Engineer of the Residential
Program
</TABLE>
- --------
(1) Amounts shown in this column represent the dollar value of matching
contributions made by Plug Power under our 401(k) Savings and Retirement
Plan.
46
<PAGE>
Option Grants In Last Fiscal Year
The following table sets forth information regarding stock options granted
during 1998 to our executive officers listed in the Summary Compensation Table.
During 1998, we granted options to purchase an aggregate of 597,650 shares of
common stock to employees. The exercise price per share for these options was
equal to the fair market value of the common stock as of the grant date as
determined by the Board of Directors.
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Number of Percent of Total Stock Price
Securities Options Appreciation
Name Underlying Granted to Exercise for Option Term(2)
- ---- Options Employees in Price Expiration ---------------------
Granted(1) Fiscal Year ($/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 31,445 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 the 1998 amended and restated Membership
Option Plan and will be assumed under the 1999 Stock Option and Grant 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 $ 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 $ and $ 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 $ and $ 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 $ and $ 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 $ and $ at assumed annual
rates of stock price appreciation of 5% and 10%, respectively.
47
<PAGE>
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
calculated on the basis of an assumed initial public offering price of $
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 -- $
Dr. William P. Acker........ -- 90,000 --
Dr. Manmohan Dhar........... -- 50,000 --
</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
$ per share.
1999 Stock Option and Incentive Plan
Our board of directors and stockholders have adopted the 1999 Stock Option
and Incentive Plan, which allows for the issuance of up to 5,938,191 shares of
common stock and other awards. The number of shares of common stock under our
plan will 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 additional shares of stock reserved 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 Grant 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.
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
48
<PAGE>
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 less than 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. 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 the effective date of this
offering and will end on December 31, 1999. 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 terminates
his employment with us or if we terminate his employment for any reason other
than gross misconduct, negligence, theft, dishonesty, or fraud.
49
<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 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 certain services and lease certain facilities
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 has a term of ten years with an option 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.
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 certain defined milestones,
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 May 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.
The research credits were earned by Mechanical Technology by assisting Plug
Power in obtaining government grants and research contracts.
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 September 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
50
<PAGE>
capital of a $500,000 short-term loan and certain accounts receivable (totaling
$500,000) owed by Plug Power to Mechanical Technology for certain management
services 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 September 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 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. 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 have committed to
contribute $22.5 million each in exchange for an aggregate of 6,000,000 shares
of common stock immediately prior to the closing of 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 $6.0 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 % 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% 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.
After giving effect to the offering, Edison Development will beneficially own
approximately % 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 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 exchange for
receiving a 25% interest in GE Fuel Cell Systems and entering into a
distribution agreement, we issued 2,250,000 shares of our common stock to GE
On-Site Power, of which 750,000 shares vested
51
<PAGE>
immediately. We have capitalized the fair value of these shares ($3.8 million)
under the caption "Distribution and Other Agreements" in the financial
statements. 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 prior to 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.
In addition, 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, we have granted all of our 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.
52
<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 August 2, 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 August 2, 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 August 2, 1999.
<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)........................ 13,925,315 38.2% %
Mechanical Technology Incorporated(2)........ 13,704,315 37.8
General Electric Company(3).................. 5,250,000 14.5
Michael J. Cudahy(4)......................... 1,840,000 5.0
Gary Mittleman(5)............................ 380,000 1.0
Dr. William P. Acker(5)...................... 57,000 *
Dr. Manmohan Dhar(5)......................... 49,000 *
Anthony F. Earley, Jr.(6) ................... 13,925,315 38.2
Larry G. Garberding(6)....................... 13,925,315 38.2
George C. McNamee(7)......................... 13,811,315 38.0
Dr. Walter L. Robb(5)........................ 57,000 *
Robert L. Nardelli(8)........................ 5,250,000 14.5
All executive officers, directors, and
director-nominees as a group (eight
persons).................................... 2,490,000 6.4
</TABLE>
- --------
* Represents less than 1% of the outstanding shares of common stock
53
<PAGE>
(1) Includes 13,925,315 shares owned of record by Edison Development
Corporation, an indirect wholly-owned subsidiary of DTE Energy Company, of
which 3,000,000 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 221,000 are shares of common stock that are issuable
upon the exercise of outstanding options that are exercisable within 60
days of August 2, 1999.
(2) Includes 3,000,000 shares of common stock to be acquired upon the exercise
of certain purchase rights in connection with 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 prior to the closing of this offering.
(4) Includes 300,000 shares of common stock issuable upon exercise of
outstanding options that are exercisable within 60 days of August 2, 1999.
(5) All shares shown represent shares of common stock issuable upon exercise
of outstanding options that are exercisable within 60 days of August 2,
1999.
(6) Includes 13,925,315 shares owned of record by Edison Development
Corporation, an indirect wholly-owned subsidiary of DTE Energy Company, of
which 3,000,000 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 221,000 are shares of common stock that are issuable
upon the exercise of outstanding options that are exercisable within 60
days of August 2, 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 13,704,315 shares of common stock owned of record by Mechanical
Technology, of which 3,000,000 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 107,000 shares of common stock issuable upon exercise of
outstanding options held by Mr. McNamee that are exercisable within 60
days of August 2, 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 prior to 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.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Authorized and Outstanding Capital Stock
As of August 2, 1999 there were 36,208,480 shares of common stock issued and
outstanding after giving effect to the issuance of 9,750,000 shares of common
stock upon the exercise of purchase rights and warrants by current stockholders
immediately prior to the closing of this offering. Following the offering, our
authorized capital stock will consist of 95,000,000 shares of common stock, of
which 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 August 2, 1999, there were outstanding stock options for repurchase of
3,346,789 shares of 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.
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
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<PAGE>
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 thereafter approved by a majority, and
in some instances 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.
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;
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<PAGE>
. 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 .
57
<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 shares of our common stock
outstanding on a fully diluted basis. Of these shares, the 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
sold in the offering.
36,208,480 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),
Rule 144(k), or under a registration statement to register
for resale shares of common stock issued upon the exercise of
stock options.
</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 approximately 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.
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<PAGE>
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 and Incentive Plan and our 1999 Employee Stock Purchase Plan.
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, we
have granted all of our 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 1999 Stock Option and
Incentive Plan and our 1999 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
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<PAGE>
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.
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.
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<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 21,349,707
=========== =========== =========== ============
</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 principally from partial cost
reimbursement government contracts which provide for the recovery of a
percentage of direct and indirect costs, subject to audit. Total estimated cost
to complete a contract in excess of the funded contract amounts are charged to
operations during the period such costs are estimated. 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 government contracts which have cost
sharing requirements.
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 21,349,707
</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.
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.
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.
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 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
F-10
<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
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>
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>
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
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
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.
F-12
<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)
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). 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.
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.
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
GE On-Site Power, continued:
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 exchange for the Company's 25% interest in 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 through 2009, the term of the distribution agreement.
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, a portion of the previously issued interests may be returned to
the Company. 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.
Other Financing Transactions, continued:
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.
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
As part of the transaction, the Company assumed a $6.0 million letter of
credit to KeyBank National Association. In connection with the agreement, the
Company was required to escrow $6 million. The KeyBank debt was issued for the
express purpose of servicing debt related to $6 million of Industrial
Development Revenue (IDR) Bonds issued by the Town of Colonie Industrial
Development Agency.
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.
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-15
<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.....................................................
====
</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
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 beneficially owning more than
% of 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 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 $ .
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............................................................... 42
Certain Relationships and Related Transactions........................... 50
Principal Stockholders................................................... 53
Description of Capital Stock............................................. 55
Shares Eligible For Future Sale.......................................... 58
Validity of Common Stock................................................. 59
Experts.................................................................. 59
Where You Can Find More Information...................................... 59
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
Plug Power Inc.
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........................................... *
Legal Fees and Expenses................................................ *
Printing Expenses...................................................... *
Blue Sky Qualification Fees and Expenses............................... *
Transfer Agent's Fee................................................... *
Miscellaneous.......................................................... *
-------
TOTAL................................................................
=======
</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.
* To be completed by amendment.
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.
(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.
(b) Grants of Stock Options (i) As of August 2, 1999, options to purchase
3,346,789 shares of common stock were outstanding under Plug Power's 1999
Stock Option Plan of which options to purchase 1,210,180 shares are
exercisable within 60 days of such date. None of the outstanding options
had 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 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 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 amendment dated
July , 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.
*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.
*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 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 Installment Sale Agreement, dated as of July 1, 1999, between
the Town of Colonie Industrial Development Agency and Plug
Power LLC.
*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, 1999, 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
*11.1 Computation of Income per common share
*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.
(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.
II-5
<PAGE>
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 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Latham, State of New
York, on August 27, 1999.
Plug Power Inc.
By: /s/ Gary Mittleman
-----------------------------------
Gary Mittleman
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints each of Gary Mittleman and Ana-Maria Galeano
such person's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or to any
other registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act), and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that any said attorney-in-fact and agent, or any
substitute or substitutes of any of them, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this 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 August 27, 1999
______________________________________ Officer and Director
Gary Mittleman (Principal Executive
Officer)
/s/ William H. Largent Chief Financial Officer August 27, 1999
______________________________________ (Principal Financial
William H. Largent Officer and Principal
Accounting Officer)
/s/ Michael J. Cudahy Director August 27, 1999
______________________________________
Michael J. Cudahy
/s/ Anthony F. Earley, Jr. Director August 27, 1999
______________________________________
Anthony F. Earley, Jr.
/s/ Larry G. Garberding Director August 27, 1999
______________________________________
Larry G. Garberding
/s/ George C. McNamee Director August 27, 1999
______________________________________
George C. McNamee
/s/ Walter L. Robb Director August 27, 1999
______________________________________
Walter L. Robb
</TABLE>
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 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 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 amendment dated July , 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.
*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.
*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.
*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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------------------------------------
<C> <S>
*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 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 Installment Sale Agreement, dated as of July 1, 1999, between the Town
of Colonie Industrial Development Agency and Plug Power LLC.
*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, 1999, 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
*11.1 Computation of Income per common share
*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.
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
PLUG POWER INC.
1. The name of the corporation is Plug Power Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 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.
3. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is 3,000 shares of Common Stock. The par value of each of
share is $.01.
5. The name and mailing address of the incorporator is as follows:
Name Mailing Address
---- ---------------
Robert P. Whalen, Jr. Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
The powers of the incorporator shall terminate upon the filing of this
Certificate of Incorporation.
6. The name and mailing address of each person who is to serve as a
director until the first annual meeting of the stockholders or until a successor
is elected and qualified, is as follows:
Name Mailing Address
---- ---------------
Gary Mittleman 968 Albany-Shaker Road
Latham, NY 12110
<PAGE>
7. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend, or
repeal the by-laws of the corporation.
8. Elections of directors need not be by written ballot unless the by-
laws of the corporation shall so provide.
9. 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 (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. No amendment or repeal of this Section shall adversely affect
the rights and protection afforded to a director of the corporation under this
Section for acts or omissions occurring prior to such amendment or repeal.
10. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
11. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
2
<PAGE>
THE UNDERSIGNED incorporator, for the purpose of forming a corporation
pursuant to the General Corporation Law of the State of Delaware, does hereby
make this certificate, hereby declaring and certifying that it is his free act
and deed and the facts herein stated are true, and accordingly he has hereunto
set his hand this 13th day of August, 1999.
/s/ Robert P. Whalen, Jr.
----------------------------------------
By: Robert P. Whalen, Jr.
Incorporator
3
<PAGE>
Exhibit 3.3
BY-LAWS
of
PLUG POWER INC.
ARTICLE I
---------
Stockholders
------------
Section 1. Annual Meeting. The Annual Meeting of Stockholders shall be
--------------
held each year at the place, date and time determined by the Board of Directors.
The purposes for which the annual meeting is to be held, in addition to those
prescribed by law, by the Certificate of Incorporation or by these By-laws, may
be specified by the Board of Directors or the Chief Executive Officer and
President. If no annual meeting has been held on the date fixed above, 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.
Section 2. Special Meetings. Special meetings of the stockholders may be
----------------
called at any time by the Chief Executive Officer and President or the Board of
Directors.
Section 3. Notice of Meetings. A written notice stating the place, date
------------------
and hour of the Annual Meeting of Stockholders shall be given by the Secretary
(or other person authorized by these By-laws or by law) not less than ten, nor
more than sixty, days before the meeting to each stockholder entitled to vote
thereat, and to each stockholder who, under the Certificate of Incorporation or
under these By-laws, is entitled to such notice, by delivering such notice to
him or by mailing it, postage prepaid, and addressed to such stockholder at his
address as it appears in the records of the Corporation. Notice need not be
given to a stockholder if a written waiver of notice is executed before or after
the meeting by such stockholder, if communication with such stockholder is
unlawful, or if such stockholder attends the meeting in question, unless such
attendance was for the 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.
Notice of Special Meetings shall be given in the same manner as provided
for Annual Meetings, except that the written notice of Special Meetings shall
state clearly and briefly the purpose or purposes for which the meeting is
called. Only such purposes shall be considered or dealt with at Special
Meetings.
Neither the business to be transacted at, nor the purpose of, any regular
or special meeting of the stockholders need be specified in the written waiver
of notice.
<PAGE>
If a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place are announced at the
meeting at which the adjournment is taken, except that if the adjournment is for
more than thirty 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 at the meeting.
Section 4. Quorum. The holders of a majority in interest of all stock
------
issued, outstanding and entitled to vote at a meeting shall constitute a quorum.
Any meeting may be adjourned from time to time by a majority of the votes
properly cast upon the question, whether or not a quorum is present.
Section 5. 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 of
Incorporation. Stockholders may vote either in person 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, or of any adjournment thereof. Except as otherwise
limited therein, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting. A proxy purporting to be executed by, or on
behalf of, a stockholder shall be deemed valid unless challenged at or prior to
its exercise, and the burden of proving invalidity shall rest on the challenger.
Section 6. Action at Meeting. When a quorum is present, any matter before
-----------------
the meeting shall be decided by vote of the holders of a majority of the shares
of stock voting on such matter except where a larger vote is required by law, by
the Certificate of Incorporation or by these By-laws. Any election by
stockholders shall be determined by a plurality of the votes cast, except where
a larger vote is required by law, by the Certificate of Incorporation or by
these By-laws. No ballot shall be required for any election. The Corporation
shall not directly or indirectly vote any share of its own stock; provided,
however, that the Corporation may vote shares which it holds in a fiduciary
capacity to the extent permitted by law.
Section 7. Action Without a Meeting. Any action required or permitted by
------------------------
law to be taken at any annual or special meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
all outstanding shares of stock entitled to vote thereon.
Section 8. Stockholder Lists. The Secretary (or the corporation's
-----------------
transfer agent or other person authorized by these By-laws or by law) shall
prepare and make, at least ten days before every 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 ten 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 time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2
<PAGE>
ARTICLE II
----------
Directors
---------
Section 1. Powers. The business of the Corporation shall be managed by or
------
under the direction of a Board of Directors that may exercise all the powers of
the Corporation except as otherwise provided by law, by the Certificate of
Incorporation or by these By-laws. 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 until the vacancy is filled.
Section 2. Number; Election and Qualification. The number of Directors
----------------------------------
shall be not less than one (1) nor more than seven (7). At each Annual Meeting,
the stockholders shall fix the number of Directors, and shall elect not more
than the number so designated. No Director need be a stockholder.
Section 3. Vacancies; Reduction of Board. Any vacancy in the Board of
-----------------------------
Directors, however occurring, including a vacancy resulting from the enlargement
of the Board of Directors, may be filled by the stockholders or by the Directors
then in office or by a sole remaining Director. In lieu of filling any such
vacancy, the stockholders or Board of Directors may reduce the number of
Directors, but not to a number less than the minimum number required by Section
2 of this Article II. When one or more Directors shall resign from the Board of
Directors, effective at a future date, a majority of the Directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective.
Section 4. Enlargement of the Board. The Board of Directors may be
------------------------
enlarged by the stockholders at any meeting or by vote of a majority of the
Directors then in office.
Section 5. Tenure. Except as otherwise provided by law, by the
------
Certificate of Incorporation or by these By-laws, Directors shall hold office
for one year or until their successors are elected and qualified or until their
earlier resignation or removal. Any Director may resign by delivering his
written resignation to the Corporation. 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. A Director may be removed from office with or without
-------
cause by vote of the holders of a majority of the shares of stock entitled to
vote in the election of Directors.
3
<PAGE>
Section 7. Meetings. The regular Annual Meeting of the Board of Directors
--------
shall be held immediately after the close of the Annual Meeting of the
Stockholders. No notice shall be required for this meeting. Other regular
meetings of the Board of Directors may be held without notice at such time, date
and place as the Board of Directors may from time to time determine. Special
meetings of the Board of Directors may be called, orally or in writing, by the
Chief Executive Officer and President designating the time, date and place
thereof. Any matter of business which may properly come before the Board of
Directors may be transacted at either a regular or special meeting thereof.
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.
Section 8. Notice of Meetings. Notice of the time, date and place of all
------------------
special meetings of the Board of Directors shall be given to each Director by
the Secretary or Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chief Executive Officer and
President. Notice shall be given to each Director in person or by telephone or
by telegram sent to his business or home address at least twenty-four hours in
advance of the meeting, or by written notice mailed to be business or home
address at least forty-eight hours in advance of the meeting. Notice need not
be given to any Director if a written waiver of notice is executed by him before
or after the meeting, or if communications with such Director is unlawful, or if
all of the Directors are present at the meeting. A notice or waiver of notice
of a meeting of the Board of Directors need not specify the purpose of the
meeting.
Section 9. Quorum. At any meeting of the Board of Directors, a majority
------
of the Directors then in office shall constitute a quorum. Less than a quorum
may adjourn any meeting from time to time and the meeting may be held as
adjourned without further notice.
Section 10. 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 a larger number is required
by law, by the Certificate of Incorporation or by these By-laws.
Section 11. 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, and the
writing or writings are filed with the minutes of the Board of Directors. Such
consent shall be treated as a vote of the Board of Directors for all purposes.
Section 12. 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 an Executive Committee and an Audit Committee, and may delegate
thereto some or all of its powers except those which by law, by the Certificate
of Incorporation, or by these By-laws may not be delegated. Except as the Board
of Directors may otherwise determine, any such
4
<PAGE>
committee may make rules for the conduct of its business, but unless otherwise
provided by the Board of Directors or in such 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, but no such
rescission shall have retroactive effect.
ARTICLE III
-----------
Officers
--------
Section 1. Enumeration. The officers of the Corporation shall consist of
-----------
a Chief Executive Officer and President, a Secretary, a Treasurer, and such
other officers, including one or more Vice-Presidents, Assistant Secretaries,
and Assistant Treasurers, as the Board of Directors may determine.
Section 2. Election. At its Annual Meeting, the Board of Directors shall
--------
elect the Chief Executive Officer and President, the Secretary, and the
Treasurer. Other officers may be chosen by the Board of Directors at such
meeting or any other meeting.
Section 3. Qualification. No officer need be a stockholder. No officer
-------------
need be 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 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 of
------
Incorporation or by these By-laws, each of the officers of the Corporation shall
hold his office for one year or until his successor is elected and qualified or
until his earlier resignation or removal. Any officer may resign by delivering
his written resignation to the Corporation, 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 5. Removal. The Board of Directors may remove any officer with or
-------
without cause by a vote of a majority of the entire number of Directors then in
office; provided, that if an officer is to be removed for cause, he may only be
removed after reasonable notice and an opportunity to be heard by the Board of
Directors.
Section 6. Vacancies. Any vacancy in any office may be filled for the
---------
unexpired portion of the term by the Board of Directors.
5
<PAGE>
Section 7. Chief Executive Officer and President. The Chief Executive
-------------------------------------
Officer and President shall be the chief executive officer of the corporation
and shall, subject to the direction of the Board of Directors, have general
supervision and control of its business. Unless otherwise provided by the Board
of Directors, he shall preside, when present, at all meetings of stockholders
and of the Board of Directors.
Section 8. Vice-Presidents. Any Vice-President shall have such powers and
---------------
shall perform such duties as the Board of Directors may from time to time
designate.
Section 9. Treasurer and Assistant Treasurers. The Treasurer shall,
----------------------------------
subject to the direction of the Board of Directors, have general charge of the
financial affairs of the Company and shall cause to be kept accurate books of
account. He shall have custody of all funds, securities, and valuable documents
of the Corporation, except as the Board of Directors may otherwise provide.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors may from time to time designate.
Section 10. 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 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). He shall have custody of the seal of the Corporation, and he,
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 signature.
He 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 and President.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors may from time to time designate.
Section 11. 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.
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
6
<PAGE>
Board of Directors. Such certificate shall bear the Corporation seal and shall
be signed by the Chief Executive Officer and President or a Vice-President and
by the Treasurer or the Secretary. The Corporation seal and the signatures by
Corporation officers may be facsimile if the certificate is manually
countersigned by an authorized person on behalf of a transfer agent or registrar
other than the Corporation or its employee. 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 certificate is issued, it may be issued by the Corporation with the
same effect as if he 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, 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 therefor 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 of Incorporation 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
post office address.
Section 4. Record Date. In order that the Corporation may determine the
-----------
stockholders entitled to receive notice of or to vote at any meeting of
stockholders or any adjournments thereof, or to express consent to corporate
action in writing without a meeting, 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, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. In such case, only stockholders of record on such record date
shall be so entitled, notwithstanding any transfer of stock on the books of the
Corporation after the record date.
If no record date is fixed: (i) the record date for determining
stockholders entitled to receive 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
7
<PAGE>
business on the day next preceding the day on which the meeting is held; (ii)
the record date for determining stockholders entitled to express consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is necessary, shall be the day on which the first written consent
is expressed; and (iii) 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.
ARTICLE V
---------
Indemnification of Directors, Officers and Others
-------------------------------------------------
Section 1. Indemnifiable Events; Extent of Indemnification.
-----------------------------------------------
A. The Corporation shall indemnify, to the fullest extent permitted by
the General Corporation Law of the State of Delaware (as presently in effect or
as hereafter amended):
(1) any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action or suit by or in the right of the Company) by reason of the fact
that he is or was a Director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such suit, action or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Corporation and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(2) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of
the fact that he is or was a Director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director or officer
of another corporation, partnership, joint venture,
8
<PAGE>
trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to
the Corporation unless, and only to the extent that, the Court of Chancery
of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(3) To the extent that a Director or officer of the Corporation has
been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in paragraphs (1) and (2), or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
B. The Board of Directors, in its discretion, may authorize the
Corporation to indemnify:
(1) Any person who was or is a party or is threatened to be made a
party to any threatened pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the Corporation) by reason of the fact that he
is or was an employee or agent of the Corporation, or is or was serving at
the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(2) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of
the fact that he is or was an employee or agent of the Corporation, or is
or was serving at the request of the Corporation as an employee or agent of
another corporation, partnership, joint venture,
9
<PAGE>
trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to
the Corporation unless, and only to the extent that, the Court of Chancery
of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnify for such expenses which the
Court of Chancery or such other court shall deem proper.
Section 2. Determination of Entitlement. Any indemnification hereunder
----------------------------
(unless required by law or ordered by a court) shall be made by the Company only
as authorized in the specific case upon a determination that indemnification of
the Director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Section 1 of this
Article V. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders of the
Corporation.
Section 3. Advance Payments. Expenses incurred in defending a civil or
----------------
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding, only as authorized by
the Board of Directors in the specific case (including by one or more Directors
who may be parties to such action, suit or proceeding), upon receipt of an
undertaking by or on behalf of the Director, officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article V.
Section 4. Non-Exclusive Nature of Indemnification. The indemnification
---------------------------------------
provided herein shall not be deemed exclusive of any other rights to which any
person, whether or not entitled to be indemnified hereunder, may be entitled
under any statute, by-law, agreement, vote of stockholders or Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. Each
person who is or becomes a Director or officer as aforesaid shall be deemed to
have served or to have continued to serve in such capacity in reliance upon the
indemnity provided for in this Article V.
Section 5. Insurance. The Corporation may purchase and maintain insurance
---------
on behalf of any person who is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability
10
<PAGE>
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of the General
Corporation Law of the State of Delaware (as presently in effect or hereafter
amended), the Certificate of Incorporation of the Corporation or these By-laws.
Section 6. No Duplicate Payments. The Corporation's indemnification under
---------------------
Section 1 of this Article V of any person who is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall be reduced by any
amounts such person receives as indemnification (i) under any policy of
insurance purchased and maintained on his behalf by the Corporation, (ii) from
such other corporation, partnership, joint venture, trust or other enterprise,
or (iii) under any other applicable indemnification provision.
Section 7. Amendment. This Article V may be amended only so as to have a
---------
prospective effect. Any amendment to this Article V which would result in any
person having a more limited entitlement to indemnification may be approved only
by the stockholders.
ARTICLE VI
----------
Transactions with Related Parties
---------------------------------
Section 1. Transactions Not Void. No contract or transaction between the
---------------------
Corporation and one or more of its Directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its Directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the Director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof,
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors, or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes
of a majority of the disinterested Directors, even though the disinterested
Directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the shareholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the shareholders; or
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<PAGE>
(3) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of Directors,
a committee thereof, or the shareholders.
Section 2. Quorum. Common or interested Directors may be counted in
------
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
Section 3. Limitation. Nothing herein contained shall protect or purport
----------
to protect any Director or officer of the Corporation against any liability to
the Corporation or its security holders to which he would otherwise be subject
by reason of his willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
ARTICLE VII
-----------
Miscellaneous Provisions
------------------------
Section 1. Fiscal Year. The fiscal year of the Corporation shall end on
-----------
December 31 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 business without Director action may
be executed on behalf of the Corporation by the Chief Executive Officer and
President or the Treasurer.
Section 4. Voting of Securities. Unless the Board of Directors otherwise
--------------------
provides, the Chief Executive Officer and 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 of Incorporation, By-laws and records of all meetings of the
incorporators, stockholders and the Board of Directors and the stock and
transfer records, which shall contain the names of all stockholders, their
record addresses and the amount of stock held by each, shall be kept at the
principal office of the Corporation, at the office of its counsel, or at an
office of its transfer agent.
12
<PAGE>
Section 7. Certificate of Incorporation. All references in these By-laws
----------------------------
to the Certificate of Incorporation shall be deemed to refer to the Certificate
of Incorporation of the Corporation, as amended and in effect from time to time.
Section 8. Amendments. These By-laws may be altered, amended or repealed
by the vote of a majority in interest of the stockholders of the Corporation at
any regular or special meeting thereof; or by the vote of a majority of the
Board of Directors at any regular or special meeting thereof, without any action
on the part of the stockholders, unless otherwise provided herein; provided,
that (i) the Board of Directors may not amend or repeal this Section 8 nor may
it amend or repeal any other provision of these By-laws to the extent such
amendment or repeal requires action by the stockholders, and (ii) any amendment
or repeal of these By-laws by the Board of Directors and any provision to these
By-laws adopted by the Board of Directors may be amended or repealed by the
stockholders.
13
<PAGE>
EXHIBIT 10.28
AGREEMENT
The Board of Managers of Plug Power, LLC and Gary Mittleman ("you") agree as
follows:
You are hereby extended an offer of employment in the position of President &
CEO of Plug Power, LLC, at an annual salary of $150,000. Should you accept this
offer you will receive the following:
You will be eligible for the benefits provided employees of Plug Power.
Your relocation will be covered to the extent described in the attached booklet.
This will include reasonable expenses incurred in searching for a home, moving
expenses for household goods and personal effects, interim living for up to 12
months, and the broker commission on the sale of your current home.
An annual incentive plan will be designed for 1997 to provide a bonus target of
30 percent with an upside potential of 50 percent of base pay paid in 1997. The
performance measures and targets will be determined jointly and approved by the
Board of Managers. You will be provided an annual review of performance against
previously established goals, an annual joint setting of new goals and an annual
review of your salary, bonus and option compensation.
You will be granted 500,000 incentive options of Class B membership interests
pursuant to an incentive stock option plan at a purchase price of one dollar
($1.00) per share subject to the following:
. 20 percent of the options will vest immediately
. 20 percent of the options will vest each year after the grant
. Options even if vested are not exercisable until the sooner of three
years or the Common Stock, currently Class A, of Plug Power is
registered for public offering with the Securities and Exchange
Commission.
. Options will terminate on the earliest of the following:
. The date you cease to be an employee of Plug Power except as the
Board of Managers may otherwise determine based on the nature of
the separation.
. Ten years from the Date of Grant.
. The option price shall be payable in cash or as may be authorized by the
Board of Managers.
<PAGE>
The official plan language, which must satisfy all Internal Revenue Service and
ERISA related rules, will be developed and approved by the Board of Managers as
soon as practicable. The Company makes no promises that its Common Stock will
ever be registered and publicly offered.
If within two years of your employment you are terminated for any reason other
than cause, you will receive an amount equivalent to one year's base salary and
will continue to be eligible for company paid health care for up to one year.
Board of Managers of Plug Power
/s/ signature illegible /s/ Anthony F. Early Jr.
- ----------------------------------- -----------------------------------
/s/ George C. McNamee /s/ Larry G. Garberding
- ----------------------------------- -----------------------------------
/s/ Walter L. Robb /s/ signature illegible
- ----------------------------------- -----------------------------------
June 27, 1997
- ------------------------------
Date
I accept this Agreement described herein and agree to its terms.
/s/ Gary Mittleman June 27, 1997
- --------------------------------------------------------------------------------
Gary Mittleman Date
<PAGE>
[PLUG POWER LOGO APPEARS HERE]
ADDENDUM "A"
to
Employment Agreement
WHEREAS the Board of Managers (the "Board") of Plug Power, L.L.C. ("Plug
Power") and Gary Mittleman ("Mittleman") entered into an employment agreement
dated as of June 26, 1997 ("Employment Agreement") setting forth certain
employment terms, including salary, bonus and stock option terms, and
WHEREAS, in consideration of Mr. Mittleman's continued service as President
and CEO of Plug Power, the Board desires to modify the Employment Agreement as
set forth below:
NOW THEREFORE, be it resolved that:
A. Mr. Mittleman's annual salary shall be $180,000, effective February 1,
1999.
B. In the event that Mr. Mittleman is terminated for any reason other than
failure to perform, gross negligence and/or fraud, Mr. Mittleman will
remain an employee of Plug Power for a period of twelve (12) months
from the date of termination, during which time, Mr. Mittleman would:
(i) continue to receive salary equivalent to then current rate and
continue to be eligible for Plug Power paid health care; and
(ii) vest in those stock options which would have normally vested
during such twelve (12) month period.
Options will be exercised according to the rules of the Plug Power
Employee Stock Option Plan unless at the end of the twelve (12) month
period the stock is not publicly traded, in which case Mr. Mittleman
would be given an additional twelve (12) months to exercise his stock
options.
C. All other terms and conditions of the Employment Agreement remain in
full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this modification to the
Employment Agreement as of the 14 day of January, 1999.
--
/s/ George C. McNamee
----------------------------------------
George C. McNamee
on behalf of the Board of Directors
of Plug Power, L.L.C.
<PAGE>
EXHIBIT 10.29
Plug Power
968 Albany-Shaker Rd., Latham, NY 12110
Gary Mittleman
President and Chief Executive Officer
June 7, 1999
Lou Tomson
58 Countryman Road
Voorheesville, NY 12186
Re: Employment Agreement
--------------------
Dear Lou:
In consideration of your continued employment at-will at Plug Power, LLC
("Plug Power") as Senior Vice President, you are entitled solely to the
following benefits in the event that you are terminated from Plug Power for any
reason other than gross misconduct, negligence, failure to perform job functions
in a manner satisfactory to the President and CEO, theft, dishonesty, or fraud:
1) twelve (12) months salary continuation at a salary level of 50% of your base
pay on the date of termination, and
2) continuation of your employee benefits and vesting in stock options for
twelve (12) months following your termination date as if you were an employee
of Plug Power.
These benefits will also be granted in the event that you are terminated
from Plug Power for any physical or psychological disability which precludes you
from performing your essential job functions with or without reasonable
accommodation.
Please sign in the space provided below if you agree to the foregoing
terms.
Sincerely,
/s/ Gary Mittleman
Gary Mittleman
President & CEO
I acknowledge and accept this Employment Agreement
/s/ Lou Tomson June 8, 1999
- ---------------------------- --------------------------
Name Date
<PAGE>
EXHIBIT 10.30
[Letterhead]
August 3, 1999
Gregory A. Silvestri
15 Cinnamon Lane
Clifton Park, New York 12065
Re: Employment Agreement
--------------------
Dear Greg:
In consideration of your employment at-will at Plug Power, LLC ("Plug
Power") as Senior Vice President of Operations, you are entitled solely to the
following benefits in the event that you are terminated from Plug Power for any
reason other than gross misconduct, negligence, theft, dishonesty, or fraud:
1) twelve (12) months salary continuation at a salary level of 50% of your base
pay on the date of termination, and
2) continuation of your employee benefits and vesting in stock options for
twelve (12) months following your termination date as if you were an employee
of Plug Power.
Please sign in the space provided below if you agree to the foregoing
terms.
Sincerely,
/s/ Gary Mittleman
Gary Mittleman
President & CEO
I acknowledge and accept this Employment Agreement
/s/ Gregory A. Silvestri August 6, 1999
- ------------------------------- ----------------------
Name Date
<PAGE>
EXHIBIT 10.31
[Letterhead]
August 12, 1999
William H. Largent
1249 Crooked Tree Court
Westerville, OH 43081
Re: Employment Agreement
--------------------
Dear Bill:
In consideration of your employment at-will at Plug Power, LLC ("Plug
Power") as Chief Financial Officer, you are entitled solely to the
following benefits in the event that you are terminated from Plug Power for any
reason other than gross misconduct, negligence, failure to perform job functions
in a manner satisfactory to the President and CEO, theft, dishonesty, or fraud:
1) twelve (12) months salary continuation at a salary level of 50% of your base
pay on the date of termination, and
2) continuation of your employee benefits and vesting in stock options for
twelve (12) months following your termination date as if you were an employee
of Plug Power.
Please sign in the space provided below if you agree to the foregoing
terms.
Sincerely,
/s/ Gary Mittleman
Gary Mittleman
President & CEO
This letter serves as an amendment to my letter offering employment at Plug
Power dated May 11, 1999, regarding the items mentioned in this letter dated
August 12, 1999
I acknowledge and accept this Employment Agreement
/s/ William H. Largent 8-12-99
- ------------------------------- ----------------------
Name Date
<PAGE>
Exhibit 10.32
AGREEMENT
Dr. Manmohan Dhar
3556 Lydius Street
Schenectady, New York 12303
Re: Employment Agreement
--------------------
Dear Manmohan:
As we discussed, we have agreed to amend and restate your employment
agreement dated June 2, 1997 as follows:
In consideration of your employment at-will at Plug Power, LLC ("Plug
Power") as Vice President and Chief Engineer - Residential Program, you are
entiteld solely to receive twelve (12) months salary continuation at a salary
level equal to your then-currnet base pay upon the occurrence of the following
events:
1) you terminate your employment at Plug Power; or
2) you are terminated from Plug Power for any reason other than gross
misconduct, negligence, theft, dishonesty, or fraud.
This agreement supersedes all previous agreements and constitutes the sole
and entire agreement between Plug Power and yourself regarding the subject
matter hereof.
Please sign in the space provided below if you agree to the foregoing
terms.
Sincerely,
/s/ Gary Mittleman
Gary Mittleman
I acknowledge and accept this Employment Agreement
Manmohan Dhar August 20, 1999
- ------------------------------- --------------------------
Name Date
<PAGE>
Exhibit 99.1
Pursuant to Rule 438 of the Securities Act of 1933, I Robert Nardelli, hereby
consent to being named as nominee for Director in the Registration Statement on
Form S-1 being filed by Plug Power Inc. on or about August 27, 1999, and any
amendments thereto.
By: /s/ Robert L. Nardelli
----------------------------------
Robert L. Nardelli
Date: August 26, 1999
