-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ICInXHSzq9CbRcWxi7EZS6NgHL4VD8wW3czn6XQZZEkPnD3nTXEFM0gjvMB5FY6c lB0ZIGo++rC71uImSIsibg== 0001021408-00-001353.txt : 20000331 0001021408-00-001353.hdr.sgml : 20000331 ACCESSION NUMBER: 0001021408-00-001353 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLUG POWER INC CENTRAL INDEX KEY: 0001093691 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 223672377 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-27527 FILM NUMBER: 588612 BUSINESS ADDRESS: STREET 1: 968 ALBANY-SHAKER ROAD CITY: LATHAM STATE: NY ZIP: 12110 BUSINESS PHONE: 5187827700 MAIL ADDRESS: STREET 1: 968 ALBANY-SHAKER ROAD CITY: LATHAM STATE: NY ZIP: 12110 10-K405 1 FORM 10-K 405 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from to COMMISSION FILE NUMBER: 0-27527 PLUG POWER INC. (Exact name of registrant as specified in its charter) Delaware 22-3672377 -------- ---------- (State or other jurisdiction (I.R.S. Identification Number) of incorporation or organization)
968 ALBANY-SHAKER ROAD, LATHAM, NEW YORK 12110 (Address of principal executive offices, including zip code) (518) 782-7700 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common stock, par value $.01 per share. Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or an amendment to this Form 10-K. [X] As of March 22, 2000, 43,096,393 shares of the Registrant's Common Stock were issued and outstanding. The aggregate market value of the voting stock of the Registrant held by non-affiliates of the Registrant, based upon the closing sale price of $109.25 on the Nasdaq National Market on March 22, 2000, was $923,914,483. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement relating to the Registrant's Annual Meeting of stockholders to be held on May 24, 2000 are incorporated by reference into Part III of this report to the extent described therein. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART I Item 1. Business Overview We are a designer and developer of on-site electricity generation systems utilizing proton exchange membrane (PEM) fuel cells for residential applications. Our residential fuel cell system will be an appliance, initially about the size of a refrigerator, that will produce electricity through a clean, efficient process without combustion. Our system will receive fuel from a home's existing natural gas line or propane tank, convert the fuel into a hydrogen-rich stream, and then combine it with oxygen from the air in a chemical reaction that produces electric power. Our initial residential systems will be designed to supply 7 kW of baseload power, 10 kW of peak power, and 15 kW of surge load capacity, which will provide the full electricity needs of a home, although the home can remain connected to the electric grid for back-up purposes. We plan to bring our first residential fuel cell systems to market in 2001, and, by 2003, we expect to offer different model sizes designed to meet the specific power needs of various market segments. We were formed in June 1997 as a joint venture between Mechanical Technology Incorporated and Edison Development Corporation to further the development of fuel cells for electric power generation in residential and other applications. At formation, Mechanical Technology contributed its fuel cell business, including 22 people, intellectual property, equipment, facilities and government contracts and grants related to automotive fuel cell research, while Edison Development contributed cash, expertise in distributed generation and the marketplace presence to distribute and sell fuel cell systems for residential applications. In November 1999, we completed an initial public offering of 6,782,900 shares of common stock, including 782,900 shares pursuant to the underwriters' exercise of their over-allotment option, (the "Offering") at an offering price of $15.00 per share. Fuel Cells 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 are conducted around the membrane creating an electric current and the 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. To obtain the desired level of electric power, individual fuel cells are combined into a fuel cell stack. Increasing the number of fuel cells in a stack increases the voltage, while increasing the surface area of each fuel cell increases the current. Our initial residential systems will provide 7kW of baseload power, 10kW of peak power and 15kW of surge load capacity. The components and subsystems of our fuel cell systems include a fuel reformer or processor, a fuel cell stack, a power conditioner or inverter, a fuel supply subsystem, an air supply subsystem, a water management loop, a thermal loop, a thermal management system, a microprocessor-based control unit and a battery. 2 Product Development and Commercialization To date, we have achieved the following major milestones along our product development and commercialization schedule:
Date Milestone ---- --------- 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 an agreement with GE MicroGen, Inc. (formerly, GE On-Site Power) to distribute and service our residential fuel cell systems 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 December 1999.. Completed 52nd fuel cell system. Of these systems, 37 have been built to run on natural gas and 15 to operate on simulated fuel. February 2000.. Acquired intellectual property and assets related to fuel processor development from Gastec. February 2000.. Completed construction of a state-of-the-art, 50,000 square foot manufacturing facility in Latham, New York March 2000..... Entered into a joint development agreement with Joh. Vaillant GmbH u. Co. to develop a combined furnace, hot water heater and fuel cell system. March 2000..... Acquired an ownership interest in Advanced Energy Systems power electronics technology. March 2000..... Filed our 63rd patent application relating to fuel cell technology, system designs and manufacturing processes
We are implementing our product development plan in four phases. Our cash requirements during this time period will depend on numerous factors, including the progress of our product commercialization activities, and the pace at which we hire and train our production staff, develop and expand our manufacturing capacity and expand our research and development activities. We believe that our current cash balances will provide us with sufficient capital to fund operations through the end of the first half of 2001. . Phase 1--Research, Development and Engineering. Our 50,000 square foot research and development facility contains over 90 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. In 1999, we focused 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 are selecting suppliers to provide components and subsystems for our pre- commercial and commercial systems on a long-term basis. During 1999, we produced 52 test and evaluation systems built to run on natural gas and simulated natural gas reformate to test different system design elements. These systems are 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 year 2000, we expect to begin small- scale production of our pre-commercial systems. GE Fuel Cell Systems, LLC, a joint venture owned 75% by GE MicroGen, Inc. (formerly GE On-Site Power) and 25% by Plug Power, has committed to purchase 485 of these systems and is expected to place them with its local market distribution partners. All of these partners 3 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 manufacturing processes. . 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 March 2000, we entered into a joint development agreement with Joh. Vaillant GmbH u. Co. and GE MicroGen to develop a combined furnace, hot water heater and fuel cell system that will provide both heat and electricity for the home. Vaillant is a leading European heating technology company and offers its customers a complete range of products for central heating and hot water. Manufacturing Our goal is to mass manufacture reliable and safe residential fuel cell systems at affordable cost for mass market consumption. 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 February 2000, we completed construction of our 50,000 square foot manufacturing facility, adjacent to our development laboratories, that will allow us to begin 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. As we move toward the commercialization stage we will begin to shift our focus from research and development to high volume production. Based on our commercialization plan, we anticipate that our existing facilities and our new manufacturing plant will provide sufficient capacity through 2001, and that we will need to develop or build additional capacity in order to achieve mass market production by 2003. Distribution and Marketing In February 1999, we entered into an agreement with GE MicroGen, Inc. (formerly GE On-Site Power) to create GE Fuel Cell Systems, LLC, a joint venture owned 75% by GE MicroGen and 25% by Plug Power, which is dedicated to marketing, selling, installing and servicing Plug Power fuel cell systems. Plug Power will serve as GE Fuel Cell Systems' exclusive worldwide supplier of fuel cell systems designed for residential and commercial applications under 35kW. We believe that most residential applications and many small commercial applications require less than 35kW. GE Fuel Cell Systems will have the exclusive worldwide rights to market, distribute, install and service our systems (other than in the states of Illinois, Indiana, Michigan and Ohio, in which Edison Development will be our exclusive distributor). Under this arrangement, we will sell our systems directly to GE Fuel Cell Systems, which, in turn, will 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. 4 Potential GE Fuel Cell Systems' resellers include natural gas distributors, propane distributors, rural electric cooperatives, electric utilities and new market entrants such as gas and power marketers, unregulated affiliates of utilities, appliance distributors and energy service companies. Potential reseller agreements will be aimed at requiring distributors 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. 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, homes in urban and suburban load pockets, high- consumption households, owners and builders of remote homes and dissatisfied utility customers. 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 estimated price of our systems to consumers to approximately $3,000 to $5,000, subject to market demand, expanding our manufacturing capacity and, through GE Fuel Cell Systems, extending our sales efforts. Our targeted mass market segments will include: homes utilizing natural gas, new homes and homes in countries with inadequate or no existing electric power infrastructure. Installation, Servicing and Maintenance 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. 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. 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 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. Proprietary Rights Fuel cell technology has existed since the 19th century, and PEM fuel cells were first developed in the 1950s. Consequently, we believe that neither we nor our competitors can achieve a significant proprietary position on the basic technologies used in fuel cell systems. However, we believe the design and integration of the system and system components, as well as some of the low-cost manufacturing processes that we have developed, can be protected. To date, we have 10 issued patents and 53 patents pending. These patents cover, among other things, fuel cell components that reduce manufacturing part count, fuel cell system designs that lend themselves to mass manufacturing, improvements to fuel cell system efficiency, reliability, and longer system life, and control strategies, such as added safety protections and operation under extreme conditions. Each of our employees has 5 agreed that all inventions made or conceived while an employee of Plug Power which are related to or result from work or research that Plug Power performs will remain the sole and exclusive property of Plug Power, whether patented or not. 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, including International Fuel Cells Corporation, a subsidiary of United Technologies Corporation. In addition, we believe approximately 10 companies have established residential fuel cell system development programs. 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. 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. 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. Employees As of December 31, 1999, we had a total staff of approximately 315, including approximately 295 full-time employees, of which approximately 175 were engineers, scientists, and other degreed professionals. We consider our relations with our employees to be good. Risk Factors This Annual Report on Form 10-K 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 6 predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including the risks described below. 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 December 31, 1999, we had an accumulated deficit of $49.0 million. We have not achieved profitability and expect to continue to incur net losses until we can produce sufficient revenues to cover our costs. We expect the cost to produce our pre-commercial systems to be higher than their sales price under the terms of our distribution arrangements with GE Fuel Cell Systems and Edison Development. Furthermore, even if we achieve our objective of bringing our first commercial product to market in 2001, we anticipate that we will continue to incur losses until we can cost-effectively produce and sell our residential fuel cell systems to the mass market, which we do not expect to occur until after 2002. Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future. 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. A mass market for residential fuel cell systems may never develop or may take longer to develop than we anticipate Fuel cell systems for residential use represent an emerging market, and we do not know whether our targeted distributors and resellers will want to purchase them or whether end-users will want to use them. If a mass market fails to develop or develops more slowly than we anticipate, we may be unable to recover the losses we will have incurred to develop our product and may be unable to achieve profitability. The development of a mass market for our systems may be impacted by many factors 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; 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 recently completed construction of our 50,000 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 7 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. We are heavily dependent on our relationship with GE Fuel Cell Systems and General Electric's commitment to develop the residential fuel cell market Substantially all of our revenue for the foreseeable future will be derived from sales of our products to GE Fuel Cell Systems. We have granted to GE Fuel Cell Systems exclusive worldwide rights to market, distribute, install and service Plug Power fuel cell systems designed for residential and commercial applications under 35 kW (other than the states of Illinois, Indiana, Michigan and Ohio, in which Edison Development has exclusive distribution rights). Under our distribution agreement, we will sell our systems directly to GE Fuel Cell Systems, which, in turn, will seek to sell them to selected resellers. We are also obligated under an amendment to our agreement to purchase $12.0 million of technical support services from General Electric during the next three years. Our distribution agreement expires in 2009, although General Electric may terminate the agreement earlier if, among other reasons, we fail to do any of the following: remain in material compliance with the development schedule toward a January 1, 2001 product release; produce competitive commercial fuel cell systems; meet commercial production and cost requirements; produce systems that comply with regulatory requirements; or obtain all necessary approvals and certifications for our systems. Our ability to sell our systems to the mass market is heavily dependent upon General Electric's worldwide sales and distribution network and service capabilities. Even though we own a minority interest in GE Fuel Cell Systems, we cannot control its operations or business decisions. Any change in our relationship with General Electric, whether as a result of market, economic, or competitive pressures, including any decision by General Electric to alter its commitment to our fuel cell technology in favor of other fuel cell technologies, to develop fuel cell systems targeted at different markets than ours or to focus on different energy product solutions could harm our potential earnings by depriving us of the benefits of General Electric's worldwide sales and distribution network and service capabilities. We may not meet our product development and commercialization milestones We have established internal product development and commercialization milestones and dates for achieving development goals related to technology and design improvements. We use these internal milestones to assess our progress toward developing a commercially viable residential fuel cell system. For example, we established a milestone date of June 1998 for powering a home with a hydrogen-fueled residential fuel cell system and established a milestone date of October 1998 for demonstrating a methanol-fueled system and a natural gas-fueled system. While we successfully powered a three-bedroom home in June 1998 using a hydrogen-fueled system, our demonstration of the methanol-fueled system did not occur until November 1998 and our demonstration of the natural gas-fueled system did not occur until December 1998, in each case due to our increased focus during that period on growing our work force and expanding our physical plant and scope of operations. Neither of these delays, nor any other missed milestone, has had any material impact on our commercialization schedule to date. While we have been aggressive in setting our internal milestones and have been generally successful in meeting them, if we do experience delays in meeting our development goals or if our systems exhibit technical defects or are unable to meet cost or performance goals, including power output, useful life and reliability, our commercialization schedule could be delayed beyond 2001. In such event, potential purchasers of our initial commercial systems may choose alternative technologies and any delays could allow potential competitors to gain market advantages. We cannot guarantee that we will successfully achieve our milestones in the future. 8 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 suppliers of our key components, we do not know when or whether we will secure relationships with suppliers of all required components and subsystems for our fuel cell systems, or whether such relationships will be on terms that will allow us to achieve our objectives. Our business, prospects, results of operations, or financial condition could be harmed if we fail to secure relationships with entities who will supply the required components for our systems. Once we establish relationships with third party suppliers, we will rely on them to provide components for our fuel cell systems. A supplier's failure to develop and supply components in a timely manner, or to supply components that meet our quality, quantity or cost requirements, or our inability to obtain substitute sources of these components on a timely basis or on terms acceptable to us, could harm our ability to manufacture our fuel cell systems. In addition, to the extent the processes that our suppliers use to manufacture components are proprietary, we may be unable to obtain comparable components from alternative suppliers. We face intense competition and may be unable to compete successfully The markets for electricity are intensely competitive. There are many companies engaged in all areas of traditional and alternative electric power generation in the United States, Canada and abroad, including, among others, major electric, oil, chemical, natural gas, and specialized electronics firms, as well as universities, research institutions and foreign government-sponsored companies. These firms are engaged in forms of power generation such as solar and wind power, reciprocating diesel engines and microturbines as well as grid- supplied electricity. Many of these entities have substantially greater financial, research and development, manufacturing and marketing resources than we do. There are a number of companies located in the United States, Canada, and abroad that are developing PEM fuel cell technology. We also compete with companies that are developing applications, residential and otherwise, using other types of fuel cells. Some of our competitors are much larger than we are. If these larger competitors decide to focus on the development of residential fuel cell systems, they have the manufacturing, marketing, and sales capabilities to complete research, development and commercialization of a commercially viable residential fuel cell system more quickly and effectively than we can. 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. Our business may become subject to future government regulation which may impact our ability to market our product We do not believe that our product will be subject to existing federal and state regulations governing traditional electric utilities and other regulated entities. We do believe that our product and its installation will be subject to oversight and regulation at the local level in accordance with state and local ordinances relating to building codes, safety, pipeline connections and related matters. Such regulation may depend, in part, upon whether a fuel cell system is placed outside or inside a home. At this time, we do not know which jurisdictions, if any, will impose regulations upon our product. We also do not know the extent to which any existing or new regulations may impact our ability to distribute, install and service our product. Once our product reaches the 9 commercialization stage and we begin distributing our systems to our target early markets, federal, state or local government entities or competitors may seek to impose regulations. Any new government regulation of our product, whether at the federal, state or local level, including any regulations relating to installation and servicing of our products, may increase our costs and the price of our systems, and may have a negative impact on our revenue and profitability, and therefore, harm our business, prospects, results of operations, or financial condition. Utility companies could place barriers on our entry into the marketplace Utility companies commonly charge fees to industrial customers for disconnecting from the grid, for using less electricity, or for having the capacity to use power from the grid for back-up purposes. Though these fees are not currently charged to residential users, it is possible that utility companies could in the future charge similar fees to residential customers. The imposition of such fees could increase the cost to residential customers of using our systems and could make our systems less desirable, thereby harming our revenue and profitability. Alternatives to our technology could render our systems obsolete prior to commercialization Our system is one of a number of alternative energy products being developed today as supplements to the electric grid that have potential residential applications, including microturbines, solar power and wind power, and other types of fuel cell technologies. Improvements are also being made to the existing electric transmission system. Technological advances in alternative energy products, improvements in the electric grid or other fuel cell technologies may render our systems obsolete. The hydrocarbon fuels on which our systems rely may not be readily available or available on a cost-effective basis Our systems' ability to produce electricity depends on the availability of natural gas and propane. If these fuels are not readily available to the mass market, or if their prices are such that electricity produced by our systems costs more than electricity provided through the grid, our systems would be less attractive to potential users. Our residential fuel cell systems use flammable fuels which are inherently dangerous substances Our residential fuel cell systems will utilize natural gas or propane in a catalytic reaction which produces less heat than a typical gas furnace. While our fuel cell system does not use these fuels in a combustion process, natural gas and propane are flammable fuels that could leak in a home and combust if ignited by another source. These dangers are present in any home appliance that uses natural gas or propane, such as a gas furnace, stove or dryer. Since our fuel cell systems are a new product, any accidents involving our systems or other fuel cell-based products could impede demand for our products. We may be unable to raise additional capital to complete our product development and commercialization plans Our product development and commercialization schedule could be delayed if we are unable to fund our research and development activities or the development of our manufacturing capabilities. We believe it is likely we will need to raise additional funds to achieve full commercialization of our product. We do not know whether we will be able to secure additional funding, or funding on terms acceptable to us, to pursue our commercialization plans through the mass market stage. 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 had 315 at the end of 10 1999. Such rapid expansion is likely to place a significant strain on our senior management team and other resources. Our business, prospects, results of operations or financial condition could be harmed if we encounter difficulties in effectively managing the budgeting, forecasting and other process control issues presented by such a rapid expansion. We face risks associated with our plans to market, distribute and service our products internationally We intend to market, distribute, and service our residential fuel cell systems internationally through GE Fuel Cell Systems. We have limited experience developing, and no experience manufacturing, our products to comply with the commercial and legal requirements of international markets. Our success in those markets will depend, in part, on GE Fuel Systems' ability to secure relationships with foreign resellers and our ability to manufacture products that meet foreign regulatory and commercial requirements. In addition, our planned international operations are subject to other inherent risks, including potential difficulties in enforcing contractual obligations and intellectual property rights in foreign countries and fluctuations in currency exchange rates. We may not be able to protect important intellectual property PEM fuel cell technology was first developed in the 1950s and we do not believe we can achieve a significant proprietary position on the basic technologies used in fuel cell systems. However, our ability to compete effectively against other fuel cell companies will depend, in part, on our ability to protect our proprietary technology, systems designs and manufacturing processes. We do not know whether any of our pending patent applications will issue or, in the case of patents issued or to be issued, that the claims allowed are or will be sufficiently broad to protect our technology or processes. Even if all of 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 allow our competitors to limit or eliminate any competitive advantages we may have and prevent us from being the first company to commercialize residential fuel cell systems, thereby harming our business prospects. 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. 11 Our future plans could be harmed if we are unable to attract or retain key personnel We have attracted a highly skilled management team and specialized workforce, including scientists, engineers, researchers, and manufacturing and marketing professionals. Based on our planned expansion, we will require a significant increase in the number of our employees and outside contractors. Our future success, therefore, will depend, in part, on attracting and retaining additional qualified management and technical personnel. We do not know whether we will be successful in hiring or retaining qualified personnel. Our inability to hire qualified personnel on a timely basis, or the departure of key employees, could harm our expansion and commercialization plans. Item 2. Properties 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, a 32,000 square foot office building and a 50,000 square foot manufacturing facility and believe that these facilities are sufficient to accommodate our anticipated growth through 2001. Item 3. Legal Proceedings On January 25, 2000, DCT, Inc. filed a complaint against Plug Power, The Detroit Edison Company and Edison Development Corporation, alleging that these entities misappropriated from DCT business and technical trade secrets, ideas, know-how and strategies relating to fuel cell systems and breached certain contractual obligations owed to DCT. We believe the allegations made against us are without merit and we intend to vigorously contest the litigation. Discovery is currently underway. Due to the early stage of this litigation, we cannot determine whether any loss will result from the ultimate outcome. Item 4. Submission of Matters to a Vote of Security Holders A) On October 28, 1999, Plug Power, LLC, as the sole stockholder of Plug Power Inc., by unanimous written consent in lieu of a special meeting, approved and adopted an amendment and restatement of our Certificate of Incorporation. B) On October 28, 1999, Plug Power, LLC, as the sole stockholder of Plug Power Inc., by unanimous written consent in lieu of a special meeting, approved and adopted the merger of Plug Power Inc. with its parent corporation, Plug Power, LLC, with Plug Power Inc. surviving the merger and otherwise upon the terms and conditions of an Agreement and Plan of Merger. 12 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Market Information. Our Common Stock is traded on the Nasdaq National Market under the symbol "PLUG." As of December 31, 1999, there were 315 shareholders of record. The following table sets forth high and low last reported sale prices for the Common Stock for each fiscal quarter since the effective date of the Offering, October 28, 1999, through March 22, 2000.
Closing sales prices -------------- High Low ------- ------ 1999 4th Quarter (from October 28, 1999).......................... $ 34.50 $15.00 2000 1st Quarter (through March 22, 2000)......................... $149.75 $25.75
Dividend Policy. We have never declared or paid cash dividends on the Common Stock. Any future determination as to the payment of dividends will depend upon capital requirements and limitations imposed by our credit agreements, if any, and such other factors as our board of directors may consider. Recent Sales of Unregistered Securities. During the period covered by this report on Form 10-K, we issued and sold unregistered securities as follows: In January 1999, we sold 100,000 shares of Common Stock for an aggregate purchase price of $500,000 to Edison Development Corporation. In January 1999, we sold 100,000 shares of Common Stock for an aggregate purchase price of $500,000 to Mechanical Technology Incorporated. In January 1999, we granted to each of Mechanical Technology and Edison Development warrants to purchase up to 3 million shares of Common Stock at an exercise price of $7.50 per share. Each of Mechanical Technology and Edison Development exercised their warrants in full for a purchase price of $22.5 million each. In February 1999, we sold 200,000 shares of Common Stock for an aggregate purchase price of $1.0 million to Edison Development. In February 1999, we sold 200,000 shares of Common Stock for an aggregate purchase price of $1.0 million to Mechanical Technology. In February 1999, we granted a warrant to Mr. Michael Cudahy, a director of Plug Power, to purchase up to 400,000 shares of Common Stock at an exercise price of $8.50 per share and sold to Mr. Cudahy 1,440,000 shares of Common Stock for $9.6 million. In November 1999, Mr. Cudahy exercised his warrant in full for a total purchase price of $3.4 million. In February 1999, we sold 60,000 shares of Common Stock for an aggregate purchase price of $400,000 to Kevin Lindsey. In February 1999, we issued to GE MicroGen, a subsidiary of General Electric Company, 2,250,000 shares of Common Stock in consideration of a 25% interest in GE Fuel Systems, LLC, a joint venture owned by GE MicroGen and Plug Power. In February 1999, we issued a warrant to GE MicroGen to purchase 3 million shares of Common Stock at a price of $12.50 per share. In November 1999, GE MicroGen exercised its warrant in full for a total purchase price of $37.5 million. 13 In March 1999, we issued 2,250,000 shares of Common Stock to Mechanical Technology upon the exercise of outstanding options in consideration of the transfer of non-cash research credits. In April 1999, we sold 299,850 shares of Common Stock for an aggregate purchase price of $2.0 million to Antaeus Enterprises, Inc. In April 1999, we sold 1,000,000 shares of Common Stock for an aggregate purchase price of $6.67 million to Southern California Gas Company. In April 1999, we granted warrants to purchase an aggregate of 350,000 shares of Common Stock to Southern California Gas Company at an exercise price of $8.50 per share. In November 1999, Southern California Gas Company exercised its warrants in full for a purchase price of $2.975 million. In June 1999, we issued to Mechanical Technology 704,315 shares of Common Stock in exchange for Mechanical Technology's 36-acre office facility in Latham, New York. In June 1999, we sold to Edison Development 704,315 shares of Common Stock at $6.67 per share for $4.7 million. In September 1999, we sold 266,667 shares of Common Stock for an aggregate purchase price of $2,000,000 to Mechanical Technology. In September 1999, we sold 266,667 shares of Common Stock for an aggregate purchase price of $2,000,000 to Edison Development. The sales and issuances of these securities were exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act on the basis that the transactions did not involve a public offering. From January 1, 1999 through December 31, 1999, we granted stock options to purchase an aggregate of 2,047,039 shares of Common Stock with exercise prices ranging from $5.00 to $15.00 per share, under our stock option plans. The sales and issuances of these securities were exempt from registration under the Securities Act pursuant to Rule 701 promulgated thereunder on the basis that these options were offered and sold either pursuant to a written compensatory benefit plan or pursuant to written contracts relating to compensation, as provided by Rule 701. Use of Proceeds. The effective date of the Securities Act registration statement for which the use of proceeds information is being disclosed was October 28, 1999, and the Commission file number assigned to the registration statement is 333-86089. The use of proceeds of our initial public offering has not changed from our quarterly report on Form 10-Q for the three month period ended September 30, 1999. 14 Item 6. Selected Financial Data The following table sets forth selected financial data and other operating information of the Company. The selected income statement and balance sheet data for 1999, 1998 and 1997 as set forth below are derived from the audited financial statements of the Company. The information is only a summary and you should read it in conjunction with the Company's audited financial statements and related notes and other financial information included herein and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Year Ended For the period ------------------------- June 27, 1997 to December 31, December 31, December 31, 1999 1998 1997 ------------ ------------ ---------------- (in thousands, except per share data) Income Statement Data: Contract revenue................... $ 11,000 $ 6,541 $ 1,194 Cost of contract revenue........... 15,498 8,864 1,226 -------- ------- ------- Loss on contracts.................. (4,498) (2,323) (32) In-process research and development....................... -- -- 4,043 Research and development expense... 20,506 4,633 1,301 General and administrative expense........................... 9,927 2,753 630 Interest expense................... 190 -- -- -------- ------- ------- Operating loss................... (35,121) (9,709) (6,006) Interest income.................... 3,124 93 103 -------- ------- ------- Loss before equity in losses of affiliate....................... (31,997) (9,616) (5,903) Equity in losses of affiliate...... (1,472) -- -- -------- ------- ------- Net loss......................... $(33,469) $(9,616) $(5,903) ======== ======= ======= Loss per share: Basic and diluted................ $ (1.27) $ (0.71) $ (0.62) ======== ======= ======= Weighted average number of common shares outstanding................ 26,283 13,617 9,500 ======== ======= ======= Balance Sheet Data (at end of the period): Working capital.................... $169,212 $ 2,692 $ 2,667 Total assets....................... 216,126 8,093 4,846 Curent portion of long-term obligations....................... 553 -- -- Long-term obligations.............. 6,517 -- Stockholders' equity............... 201,407 5,493 3,597
15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our accompanying Financial Statements and Notes thereto included within this Annual Report on Form 10-K. In addition to historical information, this Annual Report on Form 10-K and the following discussion 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 Item I-- Business under the caption "Risk Factors." Overview Plug Power is a 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. We are a development stage company and expect to bring our first commercial product to market in 2001. Since inception, we have devoted substantially all of our resources toward the development of the PEM fuel cell systems and have derived substantially all of our revenue from government research and development contracts. Through December 31, 1999, our stockholders in the aggregate had contributed $223.8 million in cash, including $93.0 million in net proceeds from our initial public offering of common stock, which closed on November 3, 1999 and $25.5 million in other contributions, consisting of in-process research and development, real estate, other in-kind contributions and a 25% interest in GE Fuel Cell Systems. Since our inception in June 1997, we have formed strategic alliances with suppliers of key components, developed distributor and customer relationships, and entered into development and demonstration programs with electric utilities, government agencies and other energy providers. In 1999, we produced 52 test and evaluation systems which were 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 after we begin commercial production. From inception through December 31, 1999, we incurred losses of $49.0 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 achieve or sustain product revenues or profitability. Recent Developments Initial Public Offering: In November 1999, the Company completed an initial public offering of 6,782,900 shares of common stock (the "Initial Public Offering") which includes additional shares purchased pursuant to exercise of the underwriters overallotment option. We received proceeds of $93.0 million, which was net of $8.7 million of expenses and underwriting discounts relating to the issuance and distribution of the securities. In connection with the Initial Public Offering, we converted from a limited liability company to a C corporation. 16 Purchase of Assets: On February 18, 2000, we acquired from Gastec, a leading developer of fuel processor technology located in the Netherlands, intellectual property and assets related to fuel processor development for systems ranging up to 100kW in size. We paid $15 million in cash for the assets. Equity Investments: On March 15, 2000, we acquired 28% of the outstanding shares of common stock of Advanced Energy Systems, Inc., a supplier of power electronic inverters for fuel cell systems. We paid approximately $1.5 million in cash and 7,000 shares of our common stock for the shares. In connection with the transaction, we received an exclusive, worldwide, royalty-free license to use all of Advanced Energy's intellectual property for power electronic inverters for any fuel cell application. Development Agreements: On March 15, 2000, we entered into a joint development agreement with GE MicroGen and Joh. Vaillant GmbH u. Co., a leading European heating technology company, to develop a combined furnace, hot water heater and fuel cell system that will provide both heat and electricity for the home. Results of Operations Comparison of the Year Ended December 31, 1999 and December 31, 1998. Revenues. Our revenues during this period were derived primarily 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. Total revenues increased to $11.0 million for the year ended December 31, 1999 from $6.5 million for the year ended December 31, 1998. The increase is the result of government contract activity in 1999 that was not in place in 1998, combined with the contract revenue from the delivery of PEM fuel cells and related engineering and testing support services for other customers. As a result, we will report losses on these contracts as well as any future government contracts awarded. We expect to begin manufacturing pre-commercial residential fuel cell systems during 2000. 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 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 $15.5 million for the year ended December 31, 1999, as compared to $8.9 million for the year ended December 31, 1998. The increase in contract costs was related to the additional government grant activity, combined with the additional staff and related support costs necessary to earn the additional contract revenue. The result was a loss on contracts of $4.5 million for the year ended December 31, 1999 compared to a loss on contracts of $2.3 million for the year ended December 31, 1998. We expect the cost to produce our initial systems to be higher than their sales price under the terms of our arrangements with our two distributors, GE Fuel Cell Systems and Edison Development. We expect to continue to experience costs in excess of product sales until we achieve higher production levels, which we do not expect to occur until after 2002. 17 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 to $20.5 million for the year ended December 31, 1999 from $4.6 million for the year ended December 31, 1998. 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 order to bring our residential PEM fuel cell systems to the marketplace by 2001. Interest Expense. Interest expense of $189,586 consists of interest on a long-term obligation related to a real estate purchase agreement with Mechanical Technology (see "Liquidity and Capital Resources--Capital Contributions") and interest paid on capital lease obligations. 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 to $9.9 million for the year ended December 31, 1999 from $2.8 million for the year ended December 31, 1998. The increase was in part due to a $2.3 million charge for non-cash stock-based compensation, a $1.9 million charge for the write-off of deferred rent, both further explained below, an $800,000 charge to earnings for the modification of a stock option agreement and an increase in compensation, benefits and related costs in support of the Company's overall growth. 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 us 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 year ended December 31, 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 Mechanical Technology. 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 10-year lease agreement with Mechanical Technology at favorable lease rates. See "Liquidity and Capital Resources--Capital Contributions." Other Income. Other income consists of interest income earned on our cash and cash equivalents. Other income increased to $3.1 million for the year ended December 31, 1999 from $93,000 for the year ended December 31, 1998. The increase was due to interest earned on higher balances of cash and cash equivalents available during the fourth quarter of 1999 as a result of our initial public offering of common stock and the exercise of warrants and stock purchase commitments by our existing stockholders. See "Liquidity and Capital Resources." Equity in losses of affiliate. Equity in losses of affiliate of ($1.5) million is our proportionate share of the losses of GE Fuel Cell Systems ($440,500) and goodwill amortization ($1,031,250) for the year ended December 31, 1999, which we account for under the equity method of accounting. See "Liquidity and Capital Resources--GE Fuel Cell Systems." Income Taxes. No benefit for federal and state income taxes has been reported in the financial statements because we were taxed as a partnership prior to November 3, 1999 and the federal and state income tax benefits 18 of our losses were recorded by our stockholders. Effective on November 3, 1999, we merged into a C corporation and began accounting for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." The deferred tax asset generated from our net operating loss for the period from November 3, 1999 through December 31, 1999 has been offset by a full valuation allowance. Comparison of the Year Ended December 31, 1998 and the Period from June 27, 1997 (Date of Inception) to December 31, 1997 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 to $6.5 million for the year ended December 31, 1998 from $1.2 million for the period from inception through December 31, 1997. 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 $8.9 million for the year ended December 31, 1998 as compared to $1.2 million for the period from inception through December 31, 1997. 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 period from inception to 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 to $4.6 million for the year ended December 31, 1998 from $1.3 million in the period from inception through December 31, 1997, 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. Two unaffiliated parties, Edison Development and Mechanical Technology, negotiated at arm's length to form Plug Power and determined that the total value of the in-process research and development, fixed assets, and trained workforce contributed by Mechanical Technology was $4.8 million. Accordingly, we have allocated the investment as follows (in thousands): In-process research and development.............................. $4,043 Fixed assets..................................................... 357 Trained workforce................................................ 350
The in-process research and development contributed by Mechanical Technology upon our formation related exclusively to the development of PEM fuel cells and fuel cell systems. This project was the only one in process when it was contributed and was in its early stages of development. The Mechanical Technology contribution included research and test results related to the validation of initial plate and flow field designs, as well as cooling and humidification schemes and initial designs regarding systems integration. This initial work provided the framework to facilitate our continuing efforts to commercialize the 19 technology. At the time of Mechanical Technology's contribution, neither the cost nor the time required to complete this project and its successful commercialization was known. We have produced and are currently demonstrating a number of test and evaluation systems and are continuing our efforts to decrease the cost of our system's components and subsystems, improve its overall reliability and efficiency, and ensure its safety. We must complete substantial additional research and development on our fuel cell systems and secure relationships with suppliers of our required components and subsystems before we will have a commercially viable product. The amount allocated to the in-process research and development contributed to us by Mechanical Technology represents its estimated fair value based on the negotiations of the two parties and is consistent with its value under the cost valuation approach. Under the cost valuation approach, value is measured by quantifying the cost of replacing the future service capability of the acquired property without considering the amount of economic benefits that can be achieved, or the time period over which they might continue. The contributed in-process research and development was early development stage property, which did not and currently does not have commercial viability or any alternative future use and which will require substantial additional expenditures to commercialize. Accordingly, we charged the assigned value to operations at the time of 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 to $2.8 million for the year ended December 31, 1998 from $630,000 for the period from inception through December 31, 1997. 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 of interest income earned on our cash and cash equivalents. Other income was $93,000 for the year ended December 31, 1998 and $103,000 for the period from inception through December 31, 1997. Income Taxes. No benefit for federal and state income taxes is reported in the financial statements, since before the merger, which occurred immediately before the closing of the Initial Public 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 account for income taxes in accordance with SFAS 109. Liquidity and Capital Resources Summary Our cash requirements depend on numerous factors, including completion of our product development activities, ability to commercialize our residential fuel cell systems, market acceptance of our systems and other factors. We expect to devote substantial capital resources to continue our development programs directed at commercializing our fuel cell systems for worldwide residential use, to hire and train our production staff, develop and expand our manufacturing capacity, begin production activities and expand our research and development activities. We anticipate incurring substantial additional losses over at least the next several years and believe that our current cash balances will provide us with sufficient capital to fund operations through 2001. We have financed our operations through December 31, 1999, primarily from the sale of equity, which has provided us cash of $223.7 million. As of December 31, 1999, we had cash and cash equivalents totaling $171.5 million. As a result of our purchase of real estate from Mechanical Technology, we have escrowed $5.8 million in cash to collateralize the debt assumed on the purchase. Since inception, net cash used in operating activities has been $32.5 million and cash used in investing activities has been $13.5 million. For the reasons stated above, we expect that our cash requirements will increase in future periods. 20 Initial Public Offering In November 1999, the Company completed an initial public offering of 6,782,900 shares of common stock (the "Initial Public Offering") which includes additional shares purchased pursuant to exercise of the underwriters' overallotment option. We received proceeds of $93.0 million, which was net of $8.7 million of expenses and underwriting discounts relating to the issuance and distribution of the securities. Capital Contributions 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 government contracts for research and development of PEM fuel cell systems, 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 January 1999, we entered into an agreement with Mechanical Technology and Edison Development pursuant to which we had the right to require Edison Development and Mechanical Technology to make capital contributions of $22.5 million each, an aggregate of $45 million, through December 31, 2000. The agreement terminated upon the Initial Public Offering and permitted Mechanical Technology and Edison Development to contribute any funds not previously called by us in exchange for shares at a price of $7.50 per share. In September 1999, we made a capital call of $4.0 million, and Mechanical Technology and Edison Development each contributed $2.0 million in cash in exchange for 266,667 shares of common stock. Both Mechanical Technology and Edison Development contributed the remaining $41.0 million immediately prior to the Initial Public Offering in exchange for an aggregate of 5,466,666 shares of common stock. 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 including a newly constructed production facility. As part of the real estate transaction with Mechanical Technology, we assumed a $6.2 million letter of credit issued by KeyBank National Association for the express purpose of servicing $6.2 million of debt related to Industrial Development Revenue Bonds issued by the Town of Colonie Industrial Development Agency. As consideration for the purchase, we issued 704,315 shares of common stock to Mechanical Technology, valued at $6.67 per share. The transaction closed in July 1999 and a receivable for membership interests of $4.7 million was recorded as shares subscribed as of June 30, 1999. In connection with this transaction, we wrote off deferred rent expense in the amount of $1.9 million during the first six months of 1999. This deferred rent expense related to a 10-year facilities lease, at a favorable lease rate, on one of the purchased buildings. In connection with the July 1999 closing, we agreed to lease some of the office and manufacturing space back to Mechanical Technology on a short-term basis. Also 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. As of December 31, 1999, Mechanical Technology had made aggregate cash contributions of $27.0 million plus non-cash contributions of $14.2 million, while Edison Development had made aggregate cash contributions of $41.2 million. GE Fuel Cell Systems In February 1999, we entered into an agreement with GE MicroGen, Inc. (formerly GE On-Site Power) to create GE Fuel Cell Systems, a joint venture owned 75% by GE MicroGen 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." 21 In connection with the formation of GE Fuel Cell Systems, we issued 2,250,000 shares of our common stock to GE MicroGen, Inc. in exchange for a 25% interest in GE Fuel Cell Systems. Of these, 750,000 shares vested immediately and the remaining 1,500,000 shares vested in August 1999. As of the date of issuance of such shares, we capitalized $11.3 million, the fair value of the shares issued, under the caption "Investment in affiliate" in our financial statements. We also issued a warrant to GE MicroGen to purchase 3,000,000 additional shares of common stock at a price of $12.50 per share which was exercised by GE MicroGen immediately prior to the Initial Public 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. Southern California Gas Company In April 1999, Southern California Gas Company purchased 1,000,000 shares of common stock for $6.7 million and agreed to spend $840,000 for market research and services related to distributed power generation technologies, including PEM fuel cell systems. In the event Southern California Gas does not expend these amounts by April 2002, up to 111,851 previously issued shares may be returned. Additionally, Southern California Gas received warrants to purchase an additional 350,000 shares of common stock at an exercise price of $8.50 per share which was exercised by Southern California Gas immediately prior to the Initial Public Offering, for a total exercise price of $3.0 million in cash. Private Investors In February 1999, two investors, including Michael J. Cudahy, a director of Plug Power, purchased 1,500,000 shares of common stock for a total of $10.0 million. In addition, Mr. Cudahy received a warrant to purchase 400,000 shares of common stock at a price of $8.50 per share which was exercised by Mr. Cudahy immediately prior to our initial public 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. Grant Agreement The Company was awarded and received $1.0 million under a government grant. The grant is for the express purpose of promoting employment. Terms of the grant require the Company to meet certain employment criteria, as defined, over a five year period. If the Company fails to meet the specified criteria, the Company shall repay the unearned portion of the grant. Impact of Year 2000 In late 1999, we 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 and concluded that all of our major computer systems were able to recognize and appropriately process dates commencing in the Year 2000. As a result of those planning and implementation efforts, the Company experienced no significant disruptions in mission critical information technology and non- information technology systems and believes those systems successfully responded to the Year 2000 date change. Our historical cost to assess our Year 2000 readiness has been negligible. The Company is not aware of any material problems resulting from Year 2000 issues, either with its internal systems, or the products and services of third parties. We will continue to monitor our mission critical computer applications and those of our suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. 22 Item 7A. Quantitative and Qualitative Disclosures about Market Risk Not applicable. Item 8. Financial Statements and Supplementary Data The index to the Financial Statements of the Company is included in Item 14, and the financial statements follow the signature page to this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 23 PART III Item 10. Directors and Executive Officers of the Registrant (a) Directors Incorporated herein by reference is the information appearing under the caption "Information Regarding Directors" in the Company's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders. (b) Executive Officers Incorporated herein by reference is the information appearing under the caption "Executive Officers" in the Company's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders. Item 11. Executive Compensation Incorporated herein by reference is the information appearing under the caption "Executive Compensation" in the Company's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management Incorporated herein by reference is the information appearing under the caption "Principal Stockholders" in the Company's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders. Item 13. Certain Relationships and Related Transactions Incorporated herein by reference is the information appearing under the caption "Certain Relationships and Related Transactions" in the Company's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders. 24 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 14(a)(1) Financial Statements The financial statements and notes are listed in the Index to Financial Statements on page F-1 of this report. 14(a)(2) Financial Statement Schedules None of the schedules for which provision is made in the applicable accounting regulations under the Securities Exchange Act of 1934, as amended, are required. 14(a)(3) Exhibits Exhibits are as set forth in the "Index to Exhibits" which immediately precedes the Notes to the Financial Statements and the exhibits filed. 14(b) Reports on Form 8-K On November 16, 1999, we filed a Form 8-K with the Securities and Exchange Commission to report the receipt of correspondence threatening litigation by DCT, Inc. 14(c) Exhibits Exhibits are as set forth in the "Index to Exhibits" which immediately precedes the Notes to the Financial Statements and the exhibits filed. 14(d) Other Financial Statements Not applicable. 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PLUG POWER INC. /s/ Gary Mittleman Date: March 29, 2000 By: _________________________________ Gary Mittleman, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Gary Mittleman President, Chief Executive March 29, 2000 ____________________________________ Officer and Director Gary Mittleman (Principal Executive Officer) /s/ William H. Largent Chief Financial Officer March 29, 2000 ____________________________________ (Principal Financial William H. Largent Officer and Accounting Officer) /s/ Michael J. Cudahy Director March 29, 2000 ____________________________________ Michael J. Cudahy /s/ Anthony F. Earley, Jr. Director March 29, 2000 ____________________________________ Anthony F. Earley, Jr. /s/ Larry G. Garberding Director March 29, 2000 ____________________________________ Larry G. Garberding /s/ George C. McNamee Director March 29, 2000 ____________________________________ George C. McNamee /s/ Robert L. Nardelli Director March 29, 2000 ____________________________________ Robert L. Nardelli /s/ Walter L. Robb Director March 29, 2000 ____________________________________ Walter L. Robb /s/ John M. Shalikashvili Director March 29, 2000 ____________________________________ John M. Shalikashvili
26 List of Exhibits Certain exhibits indicated below are incorporated by reference to documents of Plug Power on file with the Commission. Each exhibit marked by an asterisk (*) was previously filed as an exhibit to Plug Power's Registration Statement on Form S-1 (No. 333-86089) and the number in parentheses following the description of the exhibit refers to the exhibit number in the Form S-1. Exhibits nos. 10.25, 10.28, 10.29, 10.30, 10.31, 10.32, 10.33 and 10.34 represent the management contracts or compensation plans filed pursuant to Item 14(c) of the Form 10-K.
Exhibit Number Description ------- ----------- 2.1* Agreement and Plan of Merger by and between Plug Power and Plug Power, LLC, a Delaware limited liability company, dated as of October 7, 1999. (2.1) 3.1 Amended and Restated Certificate of Incorporation of Plug Power. 3.2 Amended and Restated By-laws of Plug Power. 4.1* Specimen certificate for shares of common stock, $.01 par value, of Plug Power.(4.1) 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.(10.1) 10.2* Contribution Agreement, dated as of February 3, 1999, by and between GE On-Site Power, Inc. and Plug Power, LLC.(10.2) 10.3* Trademark and Trade Name Agreement, dated as of February 2, 1999, between General Electric Company and GE Fuel Cell Systems, LLC.(10.3) 10.4* Trademark Agreement, dated as of February 2, 1999, between Plug Power LLC and GE Fuel Cell Systems, LLC.(10.4) 10.5* Distributor Agreement, dated as of February 2, 1999, between GE Fuel Cell Systems, LLC and Plug Power, LLC.(10.5) 10.6* Side letter agreement, dated February 3, 1999, between General Electric Company and Plug Power LLC.(10.6) 10.7* Mandatory Capital Contribution Agreement, dated as of January 26, 1999, between Edison Development Corporation, Mechanical Technology Incorporated and Plug Power, LLC and amendments thereto, dated August 25, 1999 and August 26, 1999.(10.7) 10.8* LLC Interest Purchase Agreement, dated as of February 16, 1999, between Plug Power, LLC and Michael J. Cudahy.(10.8) 10.9* Warrant Agreement, dated as of February 16, 1999, between Plug Power, LLC and Michael J. Cudahy and amendment thereto, dated July 26, 1999.(10.9) 10.10* LLC Interest Purchase Agreement, dated as of February 16, 1999, between Plug Power, LLC and Kevin Lindsey.(10.10) 10.11* LLC Interest Purchase Agreement, dated as of April 1, 1999, between Plug Power, LLC and Antaeus Enterprises, Inc.(10.11) 10.12* LLC Interest Purchase Agreement, dated as of April 9, 1999, between Plug Power, LLC and Southern California Gas Company.(10.12) 10.13* Warrant Agreement, dated as of April 9, 1999, between Plug Power, LLC and Southern California Gas Company and amendment thereto, dated August 26, 1999.(10.13) 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.(10.14) 10.15* Agreement, dated as of January 25, 1999, between the New York State Energy Research and Development Authority and Plug Power LLC.(10.15)
Exhibit Number Description Page No. ------- ----------- -------- 10.16* Agreement, dated as of September 30, 1997, between Plug Power LLC and the U.S. Department of Energy.(10.16) 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.(10.17) 10.18* Joint venture agreement, dated as of June 14, 1999 between Plug Power, LLC, Polyfuel, Inc., and SRI International.(10.18) 10.19* Cooperative Research and Development Agreement, dated as of February 12, 1999, between Plug Power, LLC and U.S. Army Benet Laboratories.(10.19) 10.20* Nonexclusive License Agreement, dated as of April 30, 1993, between Mechanical Technology Incorporated and the Regents of the University of California.(10.20) 10.21* Development Collaboration Agreement, dated as of July 30, 1999, by and between Joh. Vaillant GmbH. u. CO. and Plug Power, LLC.(10.21) 10.22* Agreement of Sale, dated as of June 23, 1999, between Mechanical Technology, Incorporated and Plug Power LLC.(10.22) 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.(10.23) 10.24* Replacement Reimbursement Agreement, dated as of July 1, 1999, between Plug Power, LLC and KeyBank, N.A.(10.24) 10.25* 1997 Membership Option Plan and amendment thereto dated September 27, 1999.(10.25) 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.(10.26) 10.27* Distribution Agreement, dated as of June 27, 1997, between Plug Power, LLC and Edison Development Corporation and amendment thereto dated September 27, 1999.(10.27) 10.28* Agreement, dated as of June 27, 1999, between Plug Power, LLC and Gary Mittleman.(10.28) 10.29* Agreement, dated as of June 8, 1999, between Plug Power, LLC and Louis R. Tomson.(10.29) 10.30* Agreement, dated as of August 6, 1999, between Plug Power, LLC and Gregory A. Silvestri.(10.30) 10.31* Agreement, dated as of August 12, 1999, between Plug Power, LLC and William H. Largent.(10.31) 10.32* Agreement, dated as of August 20, 1999, between Plug Power, LLC and Dr. Manmohan Dhar.(10.32) 10.33* 1999 Stock Option and Incentive Plan.(10.33) 10.34* Employee Stock Purchase Plan(10.34) 10.35* Agreement, dated as of August 27, 1999, by Plug Power, LLC, Plug Power Inc., GE On-Site Power, Inc., GE Power Systems Business of General Electric Company, and GE Fuel Cell Systems, L.L.C.(10.35) 10.36 Registration Rights Agreement between the Registrant and the stockholders of the Registrant.
10.37 Registration Rights Agreement between Plug Power, L.L.C. and GE On-Site Power, Inc. 21.1 Schedule of Subsidiaries of the Company 23.1 Consent of PricewaterhouseCoopers LLP 27.1 Financial Data Schedule.
- -------- * Previously filed. PLUG POWER INC. (A Development Stage Enterprise) INDEX TO FINANCIAL STATEMENTS
Page ---- Report of independent accountants....................................... F-2 Balance sheets as of December 31, 1999 and 1998......................... F-3 Statements of operations for the years ended December 31, 1999 and 1998 and for the period from June 27, 1997 (date of inception) to December 31, 1997, and cumulative amounts from inception........................ F-4 Statements of stockholders' equity for the years ended December 31, 1999 and 1998 and the period from June 27, 1997 (date of inception) to December 31, 1997...................................................... F-5 Statements of cash flows for the years ended December 31, 1999 and 1998 and the period from June 27, 1997 (date of inception) to December 31, 1997 and cumulative amounts from inception............................. F-6 Notes to financial statements........................................... F-7
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders In our opinion, the accompanying balance sheets and the related statements of operations, stockholders' equity and cash flows present fairly, in all material respects, the financial position of Plug Power Inc. (a development stage enterprise) at December 31, 1999 and 1998, and the results of its operations and its cash flows for the years ended December 31, 1999 and 1998 and for the period from June 27, 1997 (date of inception) to December 31, 1997, in conformity with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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 February 8, 2000 F-2 PLUG POWER INC. (A Development Stage Enterprise) BALANCE SHEETS
December 31, -------------------------- 1999 1998 ------------ ------------ ASSETS ------ Current assets: Cash and cash equivalents, principally commercial paper........................................... $171,496,286 $ 3,993,122 Restricted cash.................................. 275,000 -- Accounts receivable.............................. 5,212,943 599,955 Inventory........................................ 304,711 14,647 Other current assets............................. 124,380 -- Due from investor................................ -- 685,306 ------------ ------------ Total current assets........................... 177,413,320 5,293,030 Restricted cash.................................... 5,600,274 -- Property, plant and equipment, net................. 23,333,791 2,753,492 Investment in affiliate............................ 9,778,250 -- Other assets....................................... -- 46,913 ------------ ------------ Total assets................................... $216,125,635 $ 8,093,435 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable................................. $ 4,644,496 $ 568,007 Acrrued expenses................................. 3,004,126 1,746,239 Deferred grant revenue........................... 200,000 -- Due to investor.................................. -- 286,492 Current portion of capital lease obligation and long-term debt.................................. 353,175 -- ------------ ------------ Total current liabilities...................... 8,201,797 2,600,738 Long-term debt................................... 5,600,274 -- Deferred grant revenue........................... 800,000 -- Capital lease obligation......................... 117,030 -- ------------ ------------ Total liabilities.............................. 14,719,101 2,600,738 ------------ ------------ Commitments and contingencies Stockholders' equity: Preferred stock, $0.01 par value per share; 5,000,000 shares authorized; none issued and outstanding..................................... -- -- Common stock, $0.01 par value per share; 95,000,000 shares authorized; 43,015,508 shares issued and outstanding, December 31, 1999 and 17,150,000 December 31, 1998.................... 430,155 171,500 Paid-in capital.................................. 249,964,994 20,840,500 Deficit accumulated during the development stage........................................... (48,988,615) (15,519,303) ------------ ------------ Total stockholders' equity..................... 201,406,534 5,492,697 ------------ ------------ Total liabilities and stockholders' equity..... $216,125,635 $ 8,093,435 ============ ============
F-3 PLUG POWER INC. (A Development Stage Enterprise) STATEMENTS OF OPERATIONS For the years ended December 31, 1999 and 1998, the period from June 27, 1997 (date of inception) to December 31, 1997, and cumulative amounts from inception
Cumulative December 31, December December Amounts from 1999 31, 1998 31, 1997 Inception ------------ ----------- ----------- ------------ Contract revenue........ $ 11,000,344 $ 6,541,040 $ 1,193,530 $ 18,734,914 Cost of contract revenue................ 15,497,837 8,863,845 1,226,443 25,588,125 ------------ ----------- ----------- ------------ Loss on contracts....... (4,497,493) (2,322,805) (32,913) (6,853,211) In-process research and development............ -- -- 4,042,640 4,042,640 Research and development expense................ 20,506,156 4,632,729 1,300,877 26,439,762 General and administrative expense................ 9,928,282 2,753,645 630,033 13,311,960 Interest expense........ 189,586 -- -- 189,586 ------------ ----------- ----------- ------------ Operating loss........ (35,121,517) (9,709,179) (6,006,463) (50,837,159) Interest income......... 3,123,955 93,216 103,123 3,320,294 ------------ ----------- ----------- ------------ Loss before equity in losses of affiliate.. (31,997,562) (9,615,963) (5,903,340) (47,516,865) Equity in losses of affiliate.............. (1,471,750) -- -- (1,471,750) ------------ ----------- ----------- ------------ Net loss.............. $(33,469,312) $(9,615,963) $(5,903,340) $(48,988,615) ============ =========== =========== ============ Loss per share: Basic and diluted..... $ (1.27) $ (0.71) $ (0.62) ============ =========== =========== Weighted average number of common shares outstanding............ 26,282,705 13,616,986 9,500,000 ============ =========== ===========
F-4 PLUG POWER INC. (A Development Stage Enterprise) STATEMENTS OF STOCKHOLDERS' EQUITY For the years ended December 31, 1999 and 1998, and the period from June 27, 1997 (date of inception) to December 31, 1997
Deficit Accumulated Common stock Additional During the Total ------------------- Paid-in Development Stockholders' Shares Amount Capital Stage Equity ---------- -------- ------------ ------------ ------------- Balance, June 27, 1997.. -- $ -- $ -- $ -- $ -- Capital contributions... 9,500,000 95,000 9,405,000 9,500,000 Net loss................ (5,903,340) (5,903,340) ---------- -------- ------------ ------------ ------------ Balance, December 31, 1997................... 9,500,000 95,000 9,405,000 (5,903,340) 3,596,660 Capital contributions... 7,650,000 76,500 13,173,500 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................... 17,150,000 171,500 20,840,500 (15,519,303) 5,492,697 Initial public offering--net.......... 6,782,900 67,829 92,904,049 92,971,878 Capital contributions... 19,058,480 190,585 119,749,979 119,940,564 Stock issued for equity in affiliate........... 11,250,000 11,250,000 Stock based compensation........... 2,250,000 2,250,000 Amortization of deferred rent expense........... 100,000 100,000 Write-off deferred rent expense................ 1,850,000 1,850,000 Compensatory stock options................ 978,800 978,800 Stock option exercises.. 24,128 241 41,666 41,907 Net loss................ (33,469,312) (33,469,312) ---------- -------- ------------ ------------ ------------ Balance, December 31, 1999................... 43,015,508 $430,155 $249,964,994 $(48,988,615) $201,406,534 ========== ======== ============ ============ ============
F-5 PLUG POWER INC. (A Development Stage Enterprise) STATEMENTS OF CASH FLOWS For the years ended December 31, 1999 and 1998, the period from June 27, 1997 (date of inception) to December 31, 1997, and cumulative amounts from inception
Cumulative December 31, December December Amounts from 1999 31, 1998 31, 1997 Inception ------------ ----------- ----------- ------------ Cash Flows From Operating Activities: Net loss................ $(33,469,312) $(9,615,963) $(5,903,340) $(48,988,615) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization......... 1,352,186 499,142 187,708 2,039,036 In-process research and development...... -- -- 4,042,640 4,042,640 Equity in losses of affiliate............ 1,471,750 -- -- 1,471,750 Amortization of deferred rent........ 100,000 50,000 -- 150,000 Write-off of deferred rent................. 1,850,000 -- -- 1,850,000 In-kind services...... -- 500,000 -- 500,000 Stock based compensation......... 2,250,000 -- -- 2,250,000 Compensatory options.. 978,800 212,000 -- 1,190,800 Changes in assets and liabilities: Accounts receivable... (4,612,988) 203,602 (803,557) (5,212,943) Inventory............. (290,064) 18,903 (33,550) (304,711) Due from investor..... 685,306 (685,306) -- -- Other assets.......... (102,466) -- -- (102,466) Accounts payable and accrued expenses..... 5,334,376 1,081,587 1,184,551 7,600,514 Deferred grant revenue.............. 1,000,000 -- -- 1,000,000 Due to investor....... (286,492) 269,245 17,247 -- ------------ ----------- ----------- ------------ Net cash used in operating activities......... (23,738,904) (7,466,790) (1,308,301) (32,513,995) ------------ ----------- ----------- ------------ Cash Flows From Investing Activities: Purchase of property, plant and equipment.... (10,788,262) (2,370,269) (361,518) (13,520,049) ------------ ----------- ----------- ------------ Cash used in investing activities......... (10,788,262) (2,370,269) (361,518) (13,520,049) ------------ ----------- ----------- ------------ Cash Flows From Financing Activities: Contributed capital... 115,242,782 10,750,000 4,750,000 130,742,782 Proceeds from initial public offering, net.................. 94,611,455 -- -- 94,611,455 Stock issuance costs.. (1,639,577) -- -- (1,639,577) Proceeds from stock option exercises..... 41,907 -- -- 41,907 Cash placed in escrow............... (5,875,274) -- -- (5,875,274) Principal payments on capital lease obligations.......... (65,963) -- -- (65,963) Principal payments on long-term debt....... (285,000) -- -- (285,000) ------------ ----------- ----------- ------------ Net cash provided by financing activities......... 202,030,330 10,750,000 4,750,000 217,530,330 ------------ ----------- ----------- ------------ Increase in cash and cash equivalents....... 167,503,164 912,941 3,080,181 171,496,286 Cash and cash equivalents, beginning of period.............. 3,993,122 3,080,181 -- -- ------------ ----------- ----------- ------------ Cash and cash equivalents, end of period................. $171,496,286 $ 3,993,122 $ 3,080,181 $171,496,286 ============ =========== =========== ============
F-6 PLUG POWER INC. (A Development Stage Enterprise) NOTES TO FINANCIAL STATEMENTS 1. Nature of Operations Plug Power Inc. (the Company), was originally formed as a joint venture between Edison Development Corporation (EDC) and Mechanical Technology Incorporated (MTI) in the State of Delaware on June 27, 1997 and succeeded by merger of all of the assets, liabilities and equity of Plug Power, L.L.C. in November 1999. The Company is a development stage enterprise formed to research, develop, manufacture and distribute fuel cells for electric power generation. 2. Initial Public Offering In November 1999, the Company completed an initial public offering of 6,782,900 shares of common stock, including 782,900 shares pursuant to the underwriters' exercise of their over-allotment option (the Initial Public Offering). The Company received proceeds of $93.0 million, which was net of $8.7 million of expenses and underwriting discounts relating to the issuance and distribution of the securities. In connection with this offering, the Company was converted to a C corporation from a limited liability corporation. The financial statements and related footnotes have been restated to present the Company as a C corporation for all periods presented. 3. 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 includes cash on hand and short term investments with original maturities of three months or less. The Company has restricted cash in the amount of $5,875,274 which the Company was required to place in escrow to collateralize debt related to its purchase of real estate. The escrowed amount is recorded under the balance sheet captions Restricted cash. Inventory: Inventory is stated at lower of cost (first-in, first-out) or market, and consists of raw materials not yet issued to research projects. 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 20 years. The Company reviews long-lived assets for impairment whenever any events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. F-7 PLUG POWER INC. (A Development Stage Enterprise) NOTES TO FINANCIAL STATEMENTS--(Continued) Revenue recognition: The Company's contract revenue is derived from cost reimbursement government contracts which generally require the Company to absorb from 25% to 50% of the total costs incurred. Such contracts require the Company to deliver research and tangible developments in fuel cell technology and system design and prototype fuel cell systems for test and evaluation by the government agency. Revenues are recognized in proportion to the costs incurred. Included in accounts receivable are billed and unbilled work-in-progress on cost reimbursed government contracts. Total estimated cost to complete a contract in excess of the awarded contract amounts are charged to operations during the period such costs are estimated. While the Company's accounting for these contract costs are subject to audit by the sponsoring agency, in the opinion of management, no material adjustments are expected as a result of such audits. At December 31, 1999, the Company had been awarded approximately $40 million of such government contracts to be earned in the future periods. Deferred revenue: The Company's deferred grant revenue consists of a government grant received to promote employment. The agreement requires that the Company meet certain employment criteria, as defined, over a five year period. If the Company fails to meet the specified criteria, the Company shall repay the unearned portion of the grant. 4. Property, Plant and Equipment Property, plant and equipment at December 31, 1999 and 1998 consists of the following:
December December 31, 31, 1999 1998 ----------- ------------ Land.............................................. $ 90,000 $ -- Buildings......................................... 14,757,080 -- Construction in progress.......................... 58,373 -- Leasehold improvements............................ 2,768,190 97,889 Machinery and equipment........................... 7,436,619 3,104,887 ----------- ---------- 25,110,262 3,202,776 Less accumulated depreciation and amortization.... (1,776,471) (449,284) ----------- ---------- Property, plant and equipment, net................ $23,333,791 $2,753,492 =========== ==========
Depreciation expense was approximately $1,327,187 for the year ended December 31, 1999, $332,476 for the year ended December 31, 1998, and $29,375 for the period from June 27, 1997 (date of inception) to December 31, 1997. 5. Debt In connection with the Company's purchase of real estate in July, 1999, the Company assumed a $6.2 million letter of credit issued by KeyBank National Association for the express purpose of servicing $6.2 million of debt related to Industrial Development Revenue Bonds issued by the Town of Colonie Industrial Development Agency in favor of the acquired property. The debt matures in 2013 and accrues interest at a variable rate of interest which was approximately 6% at December 31, 1999. Simultaneous with the assumption, the Company was required to escrow $6.2 million to collateralize the debt. The escrowed amount is recorded under the balance sheet captions Restricted cash. Principal payments due on long-term debt are: 2000, $275,000; 2001, $290,000; 2002, $310,000; 2003 $325,000; 2004 and thereafter, $4,675,275. Interest paid in 1999 was $189,586. F-8 PLUG POWER INC. (A Development Stage Enterprise) NOTES TO FINANCIAL STATEMENTS--(Continued) 6. Income Taxes The Company was a Limited Liability Company (LLC) until its merger into Plug Power Inc. effective November 3, 1999. For the LLC period the Company was treated as a partnership for federal and state income tax purposes and accordingly the Company's income taxes or credits resulting from earnings or losses were payable by, or accrued to its members. Therefore, no provision was made for income taxes for financial statements prior to November 3, 1999. The amount of LLC losses for the period January 1, 1999 to November 2, 1999 was approximately $28.0 million. Effective November 3, 1999, the Company is taxed as a corporation for Federal and State income tax purposes and the effect of deferred taxes recognized as a result of the change in tax status of the Company have been included in operations. Deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates. There was no current income tax expense in 1999. The significant components of deferred income tax expense (benefit) for the year ended December 31, 1999 was as follows:
December 31, 1999 ------------ Deferred tax expense recognized as a result of change in tax status...................................................... $ 1,739,000 Deferred tax benefit......................................... (491,000) Net operating loss carryforward.............................. (1,695,000) Valuation allowance.......................................... 447,000 ----------- $ -- ===========
The Company's effective income tax rate differed from the Federal statutory rate as follows:
December 31, 1999 ------------ Federal statutory tax rate...................................... (35)% Effect of LLC losses............................................ 33 Effect of change in tax status.................................. 2 Other, net ..................................................... (1) Change in valuation allowances.................................. 1 --- -- % ===
The deferred tax assets and liabilities as of December 31, 1999 consist of the following tax effects relating to temporary differences and carryforwards:
December 31, 1999 ------------ Deferred tax assets (liabilities): Inventory valuation............................................ $ 30,000 Non-employee stock option...................................... 334,000 Other reserves and accruals.................................... 314,000 Net operating loss............................................. 1,695,000 Property, plant and equipment.................................. (1,926,000) ----------- 447,000 Valuation allowance............................................ (447,000) ----------- $ -- ===========
F-9 PLUG POWER INC. (A Development Stage Enterprise) NOTES TO FINANCIAL STATEMENTS--(Continued) The valuation allowance at the year end December 31, 1999 is approximately $447,000. During the year ended December 31, 1999, the valuation allowance increased by approximately $447,000. At December 31, 1999, the Company has unused Federal and State net operating loss carryforwards of approximately $4.2 million. The federal net operating loss carryforwards if unused will begin to expire during the year ended December 31, 2019. 7. Loss Per Share Loss per share for the Company is as follows:
For the period June 27, 1997 Year Ended Year Ended to December 31, December December 31, 1999 31, 1998 1997 ------------ ----------- -------------- Numerator: Net loss....................... $(33,469,312) $(9,615,963) $(5,903,340) Denominator: Weighted average number of common shares outstanding..... 26,282,782 13,616,986 9,500,000
No options or warrants outstanding were included in the calculation of diluted loss per share because their impact would have been anti-dilutive. The calculation also excludes 111,851 contingently returnable shares in 1999. 8. Stockholders' Equity The Company has one class of common stock, par value $.01. Each share of the Company's common stock is entitled to one vote on all matters submitted to stockholders. At the inception of the Company, in exchange for EDC's initial cash contribution of $4,750,000, the Company issued 4,750,000 shares. 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 shares. The amount allocated to the in-process research and development contributed to the Company by MTI represents its estimated fair value based on the negotiations of two parties and is consistent with its value under the cost valuation approach. Under the cost valuation approach, value is measured by quantifying the cost of replacing the future service capability of the acquired property without considering the amount of economic benefits that can be achieved, or the time period over which they might continue. Contributed in-process research and development was early development stage property, which did not and currently does not have commercial viability or any alternative future use and which will require substantial additional expenditures to commercialize. Accordingly, the assigned value was charged to operations at the time the Company was formed. During the year ended December 31, 1998, EDC and MTI made additional total contributions of $13,250,000 in exchange for 7,650,000 shares. EDC contributed $7,750,000 in cash for 4,950,000 shares. 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 shares. In 1998, MTI purchased options for $191,250, which entitled MTI to acquire 2,250,000 shares by June, 1999 for $2,250,000. F-10 PLUG POWER INC. (A Development Stage Enterprise) NOTES TO FINANCIAL STATEMENTS--(Continued) According to the joint venture agreement, MTI could earn non-cash credits which will be applied toward the purchase price of shares under option. MTI could 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 shares. Accordingly, these shares 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. In January 1999, the Company entered into an agreement with MTI and EDC pursuant to which, the Company had the right to require MTI and EDC to contribute $7.5 million each in 1999 and $15.0 million each in 2000 in exchange and for which each would receive common stock valued at $7.50 per share. The agreement also permitted MTI and EDC to contribute any funds not previously called by the Company on the termination date of the agreement (the earlier of December 31, 2000 or upon an initial public offering of the Company's shares at a price greater than $7.50 per share) in exchange for shares at a price of $7.50 per share. During January and February of 1999 MTI and EDC each purchased 300,000 shares of common stock for $1.5 million each. In September 1999, the Company made a capital call of $4.0 million, and MTI and EDC each contributed $2.0 million in cash in exchange for 266,667 shares of common stock. In November 1999, MTI and EDC contributed the remaining $41.0 million in exchange for an aggregate of 5,466,666 shares of common stock. On June 23, 1999, EDC purchased 704,315 shares of the Company's common stock 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 shares of common stock. In February 1999, two investors purchased 1,500,000 shares of common stock for $10.0 million. In addition, one of the investors received a warrant to purchase 400,000 shares at a price of $8.50 per share. These warrants were exercised at the time of the initial public offering. In April 1999 an investor purchased 299,850 shares of common stock for $2.0 million. In April 1999, an investor purchased 1,000,000 shares of common stock for $6.7 million. In connection with the purchase agreement, the investor is required to spend an aggregate of $840,000 for market research and related services on behalf of the Company. In the event such amounts are not expended by April, 2002, up to 111,851 of the previously issued shares may be returned to the Company. The Company will account for these services by recording a charge to earnings and a credit to paid-in capital as these services are rendered. As of December 31, 1999, no services had been provided. Additionally, the investor received warrants to purchase an additional 350,000 shares of common stock at an exercise price of $8.50 per share. These warrants were exercised at the time of the initial public offering. F-11 PLUG POWER INC. (A Development Stage Enterprise) NOTES TO FINANCIAL STATEMENTS--(Continued) 9. Employee Benefit Plans Stock Option Plans (the Plans): Effective July 1, 1997, the Company established a stock option plan to provide employees, consultants, and members of the Board of Directors the ability to acquire an ownership interest in the Company. Options for employees generally vest 20% per year and expire ten years after issuance. Options granted to members of the Board vest 50% upon grant and 25% per year thereafter. Options granted to consultants vest one-third on the expiration of the consultant's initial contract term, with an additional one-third vesting on each anniversary thereafter. At December 31, 1999, there were a total of 3,395,215 options granted and outstanding under this plan. Although no further options will be granted under this plan, the options previously granted will continue to vest in accordance with this plan and vested options will be exercisable for shares of common stock. In August 1999, our Board of Directors and stockholders adopted the 1999 Stock Option and Incentive Plan. At December 31, 1999 there were 285,500 options granted and outstanding, and an additional 3,409,251 options available to be issued under the plan. Additionally, the number of shares of common stock available for issuance under the plan will increase by the amount of any forfeitures under the 1999 Stock Option and Incentive Plan and under the 1997 Stock Option Plan. The number of shares of common stock under the plan will further increase January 1 and July 1 of each year by an amount equal to 16.4% of any net increase in the total number of shares of stock outstanding. The 1999 Stock Option and Incentive Plan permits the Company 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. To date, options granted under this plan generally vest 20% per year and expire ten years after issuance. These grants may be made to officers, employees, non-employee directors, consultants, advisors and other key persons of the Company. The following table summarizes information about the stock options outstanding under the Plans at December 31, 1999:
Outstanding ---------------------------- Weighted Average Average Remaining Exercise Exercise price Shares Life Price -------------- --------- --------- -------- $1.00........................................... 1,413,400 8.1 $ 1.00 $5.00........................................... 575,275 9.0 $ 5.00 $6.67........................................... 584,040 9.2 $ 6.67 $11.00.......................................... 775,200 9.6 $11.00 $15.00.......................................... 332,800 9.8 $15.00 --------- --- ------ 3,680,715 9.0 $ 5.90
F-12 PLUG POWER INC. (A Development Stage Enterprise) NOTES TO FINANCIAL STATEMENTS--(Continued) The following table summarizes activity under the Plan:
Weighted Number of Average Shares Exercise Subject Price to Option per Share --------- --------- Option Activity 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 at fair value................................... 460,650 3.09 Granted below fair value................................ 197,000 1.00 Forfeited or terminated................................. (96,450) 1.03 --------- Balance December 31, 1998............................... 1,675,200 1.57 Granted at fair value................................... 2,047,039 9.39 Forfeited or terminated................................. (17,396) 7.24 Exercised............................................... (24,128) 1.74 --------- Balance December 31, 1999............................... 3,680,715 $5.90 =========
At December 31, 1999, 3,409,251 shares of common stock were reserved for issuance under future stock option exercises. Accounting for Stock Based Compensation: The per share weighted average fair value of the options granted during 1999, 1998 and 1997 was $7.19, $0.58 and $0.26, respectively, using the minimum value method of valuing stock options, for the options granted prior to the Company's initial public offering and the Black-Scholes pricing model subsequent to the offering. The dividend yield was assumed to be zero for all periods. The risk free interest rate ranged from 5.1% to 6.3% in 1999, 4.5% to 5.6% in 1998 and 5.8% to 6.1% in 1997. An expected life of 5 years was assumed for each year. Expected volatility of 114% was used in determining fair value under the Black-Scholes pricing model and was excluded using the minimum value method. The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting for its stock options plans and does not record compensation cost for options granted at fair value. Had the Company determined compensation cost based on fair value in accordance with Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation," net loss would have increased to the pro forma amounts indicated below:
June 27, Year ended Year ended 1997 to December 31, December December 31, 1999 31, 1998 1997 ------------ ----------- ------------ Net loss, as reported.............. $(33,469,312) $(9,615,963) $(5,903,340) Proforma net loss.................. (34,716,991) (9,775,441) (6,000,628) Proforma loss per share, basic and diluted........................... $ (1.32) $ (0.72) $ (0.71)
F-13 PLUG POWER INC. (A Development Stage Enterprise) NOTES TO FINANCIAL STATEMENTS--(Continued) 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 options 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 $126,800 and $212,000 for the years ended December 31, 1999 and 1998 respectively. Additionally in 1999 the Company modified the terms of certain stock options. The impact of this modification resulted in a charge to earnings of $800,000 in 1999. 1999 Employee Stock Purchase Plan: In 1999, the Company adopted the 1999 Employee Stock Purchase Plan (the Plan) under which employees will be eligible to purchase shares of the Company's common stock at a discount through periodic payroll deductions. The Plan is intended to meet the requirements of Section 423 of the Internal Revenue Code. After the initial period, purchases will occur at the end of six month offering periods at a purchase price equal to 85% of the market value of the Company's common stock at either the beginning of the offering period or the end of the offering period, whichever is lower. The first offering period under the plan will begin on January 1, 2000 and will end on April 30, 2000. Participants may elect to have from 1% to 10% of their pay withheld for purchase of common stock at the end of the offering period, up to a maximum of $12,500 within any offering period. The Company has reserved 1,000,000 shares of common stock for issuance under the Plan. At December 31, 1999, the Company had not issued any shares under the Plan. 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 $224,000 and $95,000 for years ended December 31, 1999 and 1998, respectively, and $23,000 for the period from June 27, 1997 (date of inception) to December 31, 1997. 10. 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 $231,000 and $378,000 for the years ended December 31, 1999 and 1998, respectively. Rental expense was $79,000 for the period from June 27, 1997 (date of inception) to December 31, 1997. The total amount due MTI was $0 and $286,492 at December 31, 1999 and 1998, respectively. As part of the new facilities lease, MTI agreed to reimburse the Company up to $2.0 million for improvements made to the Company's facilities. At December 31, 1998, $685,306 in Company expenditures had not been reimbursed by MTI, and is included in due from investor. This lease and the management agreement with MTI have been terminated. F-14 PLUG POWER INC. (A Development Stage Enterprise) NOTES TO FINANCIAL STATEMENTS--(Continued) In 1999, 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 shares of common stock. 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. Simultaneous with the closing, the Company agreed to lease back to MTI certain office and manufacturing space on a short-term basis through November, 1999. 11. Investment in affiliate In February 1999, the Company entered into an agreement with GE MicroGen, Inc. (formerly 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 MicroGen, Inc. owns 75% of GEFCS and the Company owns 25% of GEFCS. In connection with the formation of GEFCS, the Company issued 2,250,000 shares of common stock to GE MicroGen valued at $11,250,000. The Company accounts for its interest in GEFCS on the equity method of accounting and adjusts its investment by its proportionate share of income or losses under the caption "Equity in losses of affiliate". From inception through December 31, 1999, GEFCS had no revenue and an operating and net loss of approximately $1,762,000. At December 31, 1999 the difference between the amount at which the investment is carried and the amount of the underlying equity in net assets of GEFCS is $9,778,250. Such amount is being amortized on a straight line basis over a ten year period. For the year ended December 31, 1999, equity in losses of affiliate was $1,471,750 including goodwill amortization of $1,031,250. The Company also issued warrants to GE MicroGen to purchase 3 million shares at $12.50 per share. These warrants were exercised for a total purchase price of $37.5 million. As part of the agreement, the Company will work closely with General Electric's Corporate Research and Development Center for product development and manufacturing support. GEFCS will market, sell, install and service fuel cells systems, designed and manufactured by the Company, world-wide (with the exception of EDC's exclusive four state territory of Michigan, Ohio, Indiana and Illinois) for residential and small business power applications up to 35kW. In addition, the Company entered into a ten year distribution agreement with GEFCS that requires GEFCS purchase from the Company a specified number of pre- commercial units by December 31, 2000. In accordance with the terms of the agreement, General Electric will provide capital, in the form of loans, to fund the purchase of pre-commercial units during the period ending December 31, 2000. General Electric will also provide additional capital, in the form of a loan not to exceed $8.0 million, to fund the operations of GEFCS. The Company has agreed to purchase at least $11.5 million of additional technical support services over a three year period. 12. Commitments and contingencies Litigation: The Company has disclosed on a Form 8-K filed January 25, 2000 with the Securities and Exchange Commission that a legal complaint was filed against the Company, The Detroit Edison Company and EDC alleging the entities misappropriated business and technical trade secrets, ideas, know-how and strategies relating to fuel cell systems and breached certain contractual obligations owed to DCT, Inc. The Company believes the allegations made against it are without merit and intends to vigorously contest the litigation, but the ultimate outcome is of course uncertain.Due to the early stage of this litigation, we cannot determine whether any loss will result from the ultimate outcome. F-15 PLUG POWER INC. (A Development Stage Enterprise) NOTES TO FINANCIAL STATEMENTS--(Continued) Concentrations of credit risk: The Company has cash deposits in excess of federally insured limits. The amount of such deposits is approximately $5.7 million at December 31, 1999. Capital leases: The Company leased certain equipment under capital lease transactions during the year with an original cost of $291,443, which had a net book value at December 31, 1999 of $195,205 and which is included in machinery and equipment. Future minimum non-cancelable lease payments are as follows: 2000.............................................................. $ 93,022 2001.............................................................. 93,022 2002.............................................................. 34,068 2003.............................................................. 5,368 --------- 225,480 Less amounts representing interest................................ (30,275) --------- $ 195,205 =========
13. Subsequent events (unaudited) Purchase of assets: On February 18, 2000, the Company signed a definitive agreement with Gastec, a leading developer of fuel processor technology, located in the Netherlands, to acquire certain intellectual property and assets related to fuel processor development for systems ranging up to 100kW in size for $15 million in cash. Equity investments: On March 15, 2000, the Company acquired 28% of the aggregate shares of common stock of Advanced Energy Systems, Inc., a supplier of power electronic inverters for fuel cell systems for approximately $1.5 million in cash and 7,000 shares of the Company's common stock. In connection with the transaction, the Company received an exclusive, worldwide, royalty-free license to use all of Advanced Energy's intellectual property for power electronic inverters for any fuel cell application. Development agreements: On March 15, 2000, the Company finalized a joint development agreement with GE MicroGen and Joh. Vaillant GmbH u. Co. to develop a combined furnace, hot water heater, and fuel cell system that will provide both heat and electricity for the home. F-16 EX-3.1 2 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF PLUG POWER INC. PLUG POWER INC., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The name of the Corporation is Plug Power Inc. The date of the filing of its original Certificate of Incorporation (the "Original Certificate") with the Secretary of State of the State of Delaware was August 13, 1999. 2. This Amended and Restated Certificate of Incorporation amends, restates and integrates the provisions of the Original Certificate, and (i) was duly adopted by the Board of Directors in accordance with the provisions of Sections 242 and 245 of the Delaware General Corporation Law (the "DGCL"), (ii) was declared by the Board of Directors of the Corporation (the "Board of Directors") to be advisable and in the best interests of the Corporation and was directed by the Board of Directors to be submitted to and be considered by the stockholders of the Corporation entitled to vote thereon for approval by the affirmative vote of such stockholders in accordance with Section 242 of the DGCL and (iii) was duly adopted by the stockholders, with the holders of a majority of the outstanding shares of the Company's common stock, par value $.01 per share (the "Common Stock"), adopting this Amended and Restated Certificate of Incorporation in accordance with the provisions of Section 242 of the DGCL and the terms of the Original Certificate. 3. The text of the Original Certificate is hereby amended and restated in its entirety to provide as herein set forth in full. ARTICLE I The name of the Corporation is Plug Power Inc. ARTICLE II The address of the Corporation's registered office in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL. 1 ARTICLE IV CAPITAL STOCK The total number of shares of capital stock which the Corporation shall have authority to issue is One Hundred Million (100,000,000) shares, of which (i) Ninety-Five Million (95,000,000) shares shall be Common Stock, par value $.01 per share, and (ii) Five Million (5,000,000) shares shall be undesignated preferred stock, par value $.01 per share (the "Undesignated Preferred Stock"). Except as otherwise restricted by this Amended and Restated Certificate of Incorporation, the Board of Directors may, at any time and from time to time, if all of the shares of capital stock which the Corporation is authorized by this Amended and Restated Certificate of Incorporation to issue have not been issued, subscribed for, or otherwise committed to be issued, issue or take subscriptions for additional shares of its capital stock up to the amount authorized in this Amended and Restated Certificate of Incorporation to such person or persons and for such lawful consideration as it may deem appropriate, and generally in its absolute discretion to determine the terms and the manner of disposition of such authorized but unissued capital stock. Any and all such shares issued for which the full consideration has been paid or delivered shall be deemed fully paid shares of capital stock, and the holder of such shares shall not be liable for any further call or assessment or any other payment thereon. The number of authorized shares of the class of Undesignated Preferred Stock may from time to time be increased or decreased (but not below the number of shares outstanding) by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote, without a vote of the holders of the Undesignated Preferred Stock (except as otherwise provided in any certificate of designation of any series of Undesignated Preferred Stock). The designations, powers, preferences and rights of, and the qualifications, limitations and restrictions upon, each class or series of stock shall be determined in accordance with, or as set forth below in, this Article IV. A. Common Stock Subject to all the rights, powers and preferences of the Undesignated Preferred Stock, and except as provided by law or in this Article IV (or in any certificate of designation of any series of Undesignated Preferred Stock); (a) the holders of the Common Stock shall have the exclusive right to vote for the election of Directors and on all other matters requiring stockholder action, each share being entitled to one vote; (b) dividends may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Corporation legally available for the payment of dividends, but only when and as declared by the Board of Directors or any authorized committee thereof; and (c) upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock. B. Preferred Stock 1. Authority to Issue. The total number of shares of Undesignated Preferred Stock which the Corporation shall have authority to issue is Five Million (5,000,000) shares. Subject to any limitations prescribed by law, the Board of Directors or any authorized committee thereof is expressly authorized to provide for the issuance of the shares of Undesignated Preferred Stock in one or more series of such stock, and by filing a certificate pursuant to applicable law of the State of Delaware, to establish or change from time to time the number of shares to be included in each such series, and to fix the designations, powers, preferences and the relative, 2 participating, optional or other special rights of the shares of each series and any qualifications, limitations and restrictions thereof. 2. Powers, Preferences, Rights, Qualifications, Limitations and Restriction of Each Series of Undesignated Preferred Stock. The Board of Directors or any authorized committee thereof shall have the right to determine or fix one or more of the following with respect to each series of Undesignated Preferred Stock to the fullest extent permitted by law: (a) The distinctive serial designation and the number of shares constituting such series; (b) The dividend rates or the amount of dividends to be paid on the shares of such series, whether dividends shall be cumulative and, if so, from which date or dates, the payment date or dates for dividends, and the participating and other rights, if any, with respect to dividends; (c) The voting rights and powers, full or limited, if any, of the shares of such series; (d) Whether the shares of such series shall be redeemable and, if so, the price or prices at which, and the terms and conditions on which, such shares may be redeemed; (e) The amount or amounts payable upon the shares of such series and any preferences applicable thereto in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation; (f) Whether the shares of such series shall be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares, and if so entitled, the amount of such fund and the manner of its application, including the price or prices at which such shares may be redeemed or purchased through the application of such fund; (g) Whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation and, if so convertible or exchangeable, the conversion price or prices, or the rate or rates of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange; (h) The consideration for which the shares of such series shall be issued; (i) Whether the shares of such series which are redeemed or converted shall have the status of authorized but unissued shares of Undesignated Preferred Stock (or series thereof) and whether such shares may be reissued as shares of the same or any other class or series of stock; and (j) Such other powers, preferences, rights, qualifications, limitations and restrictions thereof as the Board of Directors or any authorized committee thereof may deem advisable. ARTICLE V STOCKHOLDER ACTION 1. Action without Meeting. Except as otherwise provided herein, any action required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders and may not be taken or effected by a written consent of stockholders in lieu thereof. 2. Special Meetings. Except as otherwise required by law and subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock, special meetings of the stockholders of the Corporation may be called only by the President, the Chief Executive Officer, the Chairman of the Board, if one is elected, or the Board of Directors pursuant to a resolution approved by the affirmative vote of a majority of the directors then in office. 3 ARTICLE VI DIRECTORS 1. General. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors except as otherwise provided herein or required by law. 2. Election of Directors. Election of Directors need not be by written ballot unless the By-laws of the Corporation shall so provide. 3. Terms of Directors. The number of Directors of the Corporation shall be fixed solely by resolution duly adopted from time to time by the Board of Directors. The Directors, other than those who may be elected by the holders of any series of Undesignated Preferred Stock, shall be classified, with respect to the term for which they severally hold office, into three classes, as nearly equal in number as possible. The initial Class I Directors of the Corporation shall be Gary Mittleman, Walter L. Robb and Anthony F. Earley, Jr.; the initial Class II Directors of the Corporation shall be George C. McNamee and Michael J. Cudahy; and the initial Class III Directors of the Corporation shall be General John M. Shalikashvili, Larry G. Garberding and Robert L. Nardelli. The initial Class I Directors shall serve for a term expiring at the annual meeting of stockholders to be held in 2000, the initial Class II Directors shall serve for a term expiring at the annual meeting of stockholders to be held in 2001, and the initial Class III Directors shall serve for a term expiring at the annual meeting of stockholders to be held in 2002. At each annual meeting of stockholders, the successor or successors of the class of Directors whose term expires at that meeting shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of Directors, except where a larger vote is required by law, by this Amended and Restated Certificate of Incorporation or the By-laws, and shall hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. The Directors elected to each class shall hold office until their successors are duly elected and qualified or until their earlier resignation or removal. 4. Notwithstanding the foregoing, whenever, pursuant to the provisions of Article IV of this Amended and Restated Certificate of Incorporation, the holders of any one or more series of Undesignated Preferred Stock shall have the right, voting separately as a series or together with holders of other such series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Amended and Restated Certificate of Incorporation and any certificate of designation applicable thereto, and such Directors so elected shall not be divided into classes pursuant to this Article VI.3. 5. Vacancies. Subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock to elect Directors and to fill vacancies in the Board of Directors relating thereto, any and all vacancies in the Board of Directors, however occurring, including, without limitation, by reason of an increase in size of the Board of Directors, or the death, resignation, disqualification or removal of a Director, shall be filled solely by the affirmative vote of a majority of the remaining Directors then in office, even if less than a quorum of the Board of Directors. Any Director appointed in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new directorship was created or the vacancy occurred and until such Director's successor shall have been duly elected and qualified or until his or her earlier resignation or removal. Subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock to elect Directors, when the number of Directors is increased or decreased, the Board of Directors shall determine the class or classes to which the increased or decreased number of Directors shall be apportioned; provided, however, that no decrease in the number of Directors shall shorten the term of any incumbent Director. In the event of a vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, may exercise the powers of the full Board of Directors until the vacancy is filled. 6. Removal. Subject to the rights, if any, of any series of Undesignated Preferred Stock to elect Directors and to remove any Director whom the holders of any such stock have the right to elect, any Director (including persons elected by Directors to fill vacancies in the Board of Directors) may be removed from office (i) only 4 with cause and (ii) only by the affirmative vote of the holders of two-thirds of the shares then entitled to vote at an election of Directors. At least thirty (30) days prior to any meeting of stockholders at which it is proposed that any Director be removed from office, written notice of such proposed removal shall be sent to the Director whose removal will be considered at the meeting. ARTICLE VII LIMITATION OF LIABILITY A Director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except for liability (a) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL or (d) for any transaction from which the Director derived an improper personal benefit. If the DGCL is amended after the effective date of this Amended and Restated Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any repeal or modification of this Article VII by either of (i) the stockholders of the Corporation or (ii) an amendment to the DGCL, shall not adversely affect any right or protection existing at the time of such repeal or modification with respect to any acts or omissions occurring before such repeal or modification of a person serving as a Director at the time of such repeal or modification. ARTICLE VIII AMENDMENT OF BY-LAWS 1. Amendment by Directors. Except as otherwise provided by law, the By-laws of the Corporation may be amended or repealed by the Board of Directors by the affirmative vote of a majority of the Directors then in office. 2. Amendment by Stockholders. The By-laws of the Corporation may be amended or repealed at any annual meeting of stockholders, or special meeting of stockholders called for such purpose as provided in the By-laws, by the affirmative vote of at least two-thirds of the shares present in person or represented by proxy at such meeting and entitled to vote on such amendment or repeal, voting together as a single class; provided, however, that if the Board of Directors recommends that stockholders approve such amendment or repeal at such meeting of stockholders, such amendment or repeal shall only require the affirmative vote of the majority of the shares present in person or represented by proxy at such meeting and entitled to vote on such amendment or repeal, voting together as a single class. ARTICLE IX AMENDMENT OF CERTIFICATE OF INCORPORATION The Corporation reserves the right to amend or repeal this Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed by statute and this Amended and Restated Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation. No amendment or repeal of this Amended and Restated Certificate of Incorporation shall be made unless the same is first approved by the Board of Directors pursuant to a resolution adopted by the Board of Directors in accordance with Section 242 of the DGCL, and, except as otherwise provided by law, thereafter approved by the stockholders. Whenever any vote of the holders of voting stock is required to amend or repeal any provision of this Amended and Restated Certificate of Incorporation, and in addition to any other vote of holders of voting stock that is required by this Amended and Restated Certificate of Incorporation or by law, such amendment or 5 repeal shall require the affirmative vote of the majority of the outstanding shares entitled to vote on such amendment or repeal, and the affirmative vote of the majority of the outstanding shares of each class entitled to vote thereon as a class, at a duly constituted meeting of stockholders called expressly for such purpose; provided, however, that the affirmative vote of not less than 80% of the outstanding shares entitled to vote on such amendment or repeal, and the affirmative vote of not less than 80% of the outstanding shares of each class entitled to vote thereon as a class, shall be required to amend or repeal any provision of Article V, Article VI, Article VII or Article IX of this Amended and Restated Certificate of Incorporation. THIS AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is executed as of this 28th day of October, 1999. PLUG POWER INC. By: /s/ Gary Mittleman __________________ Name: Gary Mittleman Title: Chief Executive Officer and President 6 EX-3.2 3 AMENDED AND RESTATED BY LAWS OF PLUG POWER Exhibit 3.2 AMENDED AND RESTATED BY-LAWS OF PLUG POWER INC. (the "Corporation") ARTICLE I --------- Stockholders ------------ SECTION 1. Annual Meeting. The annual meeting of stockholders (any such meeting being referred to in these By-laws as an "Annual Meeting") shall be held at the hour, date and place within or without the United States which is fixed by the majority of the Board of Directors, the Chairman of the Board, if one is elected, or the President, which time, date and place may subsequently be changed at any time by vote of the Board of Directors. If no Annual Meeting has been held for a period of thirteen months after the Corporation's last Annual Meeting, a special meeting in lieu thereof may be held, and such special meeting shall have, for the purposes of these By-laws or otherwise, all the force and effect of an Annual Meeting. Any and all references hereafter in these By-laws to an Annual Meeting or Annual Meetings also shall be deemed to refer to any special meeting(s) in lieu thereof. SECTION 2. Special Meetings. Except as otherwise required by law and subject to the rights, if any, of the holders of any series of preferred stock, special meetings of the stockholders of the Corporation may be called only by the President, the Chief Executive Officer, the Chairman of the Board, if one is elected, or the Board of Directors pursuant to a resolution approved by the affirmative vote of a majority of the directors then in office. SECTION 3. Notice of Stockholder Business and Nominations. (a) Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an Annual Meeting (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this By-law, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this By-law. (2) For nominations or other business to be properly brought before an Annual Meeting by a stockholder pursuant to clause (c) of paragraph (a)(1) of this By-law, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, such other business must be a proper matter for stockholder action, and such stockholder be present at such meeting, either in person or by representative. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's Annual Meeting; provided, however, that in the event that the date of the Annual Meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to such Annual Meeting and not later than the close of business on the later of the 90th day prior to such Annual Meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Notwithstanding anything to the contrary provided herein, for the first Annual Meeting following the initial public offering of common stock of the Corporation, a stockholder's notice shall be timely if delivered to, or mailed to and received by, the Corporation at its principal executive office not later than the close of business on the later of the 90th day prior to the scheduled date of such Annual Meeting or the 10th day following the day on which public announcement of the date of such Annual Meeting is first made or sent by the Corporation. In no event shall the public announcement of an adjournment of an Annual Meeting commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting, any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, and the names and addresses of other stockholders known by the stockholder proposing such business to support such proposal, and the class and number of shares of the Corporation's capital stock beneficially owned by such other stockholders; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. 2 (3) Notwithstanding anything in the second sentence of paragraph (a)(2) of this By-law to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least 100 days prior to the first anniversary of the preceding year's Annual Meeting, a stockholder's notice required by this By-law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. (b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this By-law, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this By-law. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation's notice of meeting, if the stockholder's notice required by paragraph (a)(2) of this By-law shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above. (c) General. (1) Only such persons who are nominated in accordance with the procedures set forth in this By-law shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this By-law. If the Board of Directors or a designated committee thereof determines that any stockholder proposal or nomination was not made in a timely fashion in accordance with the provisions of this By-law or that the information provided in a stockholder's notice does not satisfy the information requirements of this By-law in any material respect, such proposal or nomination shall not be presented for action at the Annual Meeting in question. If neither the Board of Directors nor such committee makes a determination as to the 3 validity of any stockholder proposal or nomination in the manner set forth above, the presiding officer of the Annual Meeting shall determine whether the stockholder proposal or nomination was made in accordance with the terms of this By-law. If the presiding officer determines that any stockholder proposal or nomination was not made in a timely fashion in accordance with the provisions of this By-law or that the information provided in a stockholder's notice does not satisfy the information requirements of this By-law in any material respect, such proposal or nomination shall not be presented for action at the Annual Meeting in question. If the Board of Directors, a designated committee thereof or the presiding officer determines that a stockholder proposal or nomination was made in accordance with the requirements of this By-law, the presiding officer shall so declare at the Annual Meeting and ballots shall be provided for use at the meeting with respect to such proposal or nomination. (2) For purposes of this By-law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission (including, without limitation, a Form 8-K) pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this By-law, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this By-law. Nothing in this By-law shall be deemed to affect any rights of (i) stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) the holders of any series of preferred stock to elect directors under specified circumstances. SECTION 4. Matters to be Considered at Special Meetings. Only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders of the Corporation, unless otherwise provided by law. SECTION 5. Notice of Meetings; Adjournments. A written notice of each Annual Meeting stating the hour, date and place of such Annual Meeting shall be given by the Secretary or an Assistant Secretary (or other person authorized by these By-laws or by law) not less than 10 days nor more than 60 days before the Annual Meeting, to each stockholder entitled to vote thereat and to each stockholder who, by law or under the Certificate of Incorporation of the Corporation (as the same may hereafter be amended and/or restated, the "Certificate") or under these By-laws, is entitled to such notice, by delivering such notice to him or by mailing it, postage prepaid, addressed to such stockholder at the address of such stockholder as it appears on the Corporation's stock transfer books. Such notice shall be deemed to be given when hand delivered to such address or deposited in the mail so addressed, with postage prepaid. 4 Notice of all special meetings of stockholders shall be given in the same manner as provided for Annual Meetings, except that the written notice of all special meetings shall state the purpose or purposes for which the meeting has been called. Notice of an Annual Meeting or special meeting of stockholders need not be given to a stockholder if a written waiver of notice is signed before or after such meeting by such stockholder or if such stockholder attends such meeting, unless such attendance was for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any Annual Meeting or special meeting of stockholders need be specified in any written waiver of notice. The Board of Directors may postpone and reschedule any previously scheduled Annual Meeting or special meeting of stockholders and any record date with respect thereto, regardless of whether any notice or public disclosure with respect to any such meeting has been sent or made pursuant to Section 3 of this Article I of these By-laws or otherwise. In no event shall the public announcement of an adjournment, postponement or rescheduling of any previously scheduled meeting of stockholders commence a new time period for the giving of a stockholder's notice under Section 3 of this Article I of these By-laws. When any meeting is convened, the presiding officer may adjourn the meeting if (a) no quorum is present for the transaction of business, (b) the Board of Directors determines that adjournment is necessary or appropriate to enable the stockholders to consider fully information which the Board of Directors determines has not been made sufficiently or timely available to stockholders, or (c) the Board of Directors determines that adjournment is otherwise in the best interests of the Corporation. When any Annual Meeting or special meeting of stockholders is adjourned to another hour, date or place, notice need not be given of the adjourned meeting other than an announcement at the meeting at which the adjournment is taken of the hour, date and place to which the meeting is adjourned; provided, however, that if the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote thereat and each stockholder who, by law or under the Certificate or these By-laws, is entitled to such notice. SECTION 6. Quorum. A majority of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at any meeting of stockholders. If less than a quorum is present at a meeting, the holders of voting stock representing a majority of the voting power present at the meeting or the presiding officer may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice, except as provided in Section 5 of this Article I. At such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally noticed. The stockholders present at a duly constituted meeting may continue to 5 transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. SECTION 7. Voting and Proxies. Stockholders shall have one vote for each share of stock entitled to vote owned by them of record according to the books of the Corporation, unless otherwise provided by law or by the Certificate. Stockholders may vote either in person or by written proxy, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Proxies shall be filed with the Secretary of the meeting before being voted. Except as otherwise limited therein or as otherwise provided by law, proxies shall entitle the persons authorized thereby to vote at any adjournment of such meeting, but they shall not be valid after final adjournment of such meeting. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by or on behalf of any one of them unless at or prior to the exercise of the proxy the Corporation receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid, and the burden of proving invalidity shall rest on the challenger. SECTION 8. Action at Meeting. When a quorum is present, any matter before any meeting of stockholders shall be decided by the affirmative vote of the majority of shares present in person or represented by proxy at such meeting and entitled to vote on such matter, except where a larger vote is required by law, by the Certificate or by these By-laws. Any election by stockholders shall be determined by a plurality of the votes (of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors), except where a larger vote is required by law, by the Certificate or by these By-laws. The Corporation shall not directly or indirectly vote any shares of its own stock; provided, however, that the Corporation may vote shares which it holds in a fiduciary capacity to the extent permitted by law. SECTION 9. Stockholder Lists. The Secretary or an Assistant Secretary (or the Corporation's transfer agent or other person authorized by these By-laws or by law) shall prepare and make, at least 10 days before every Annual Meeting or special meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the hour, date and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 10. Presiding Officer. The Chairman of the Board, if one is elected, or if not elected or in his or her absence, the President, shall preside at all Annual Meetings or 6 special meetings of stockholders and shall have the power, among other things, to adjourn such meeting at any time and from time to time, subject to Sections 5 and 6 of this Article I. The order of business and all other matters of procedure at any meeting of the stockholders shall be determined by the presiding officer. SECTION 11. Voting Procedures and Inspectors of Elections. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the presiding officer shall appoint one or more inspectors to act at the meeting. Any inspector may, but need not, be an officer, employee or agent of the Corporation. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall perform such duties as are required by the General Corporation Law of the State of Delaware, as amended from time to time (the "DGCL"), including the counting of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. The presiding officer may review all determinations made by the inspectors, and in so doing the presiding officer shall be entitled to exercise his or her sole judgment and discretion and he or she shall not be bound by any determinations made by the inspectors. All determinations by the inspectors and, if applicable, the presiding officer, shall be subject to further review by any court of competent jurisdiction. ARTICLE II ---------- Directors --------- SECTION 1. Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors except as otherwise provided by the Certificate or required by law. SECTION 2. Number and Terms. The number of directors of the Corporation shall be fixed by resolution duly adopted from time to time by the Board of Directors. The directors shall hold office in the manner provided in the Certificate. SECTION 3. Qualification. No director need be a stockholder of the Corporation. SECTION 4. Vacancies. Subject to the rights, if any, of the holders of any series of preferred stock to elect directors and to fill vacancies in the Board of Directors relating thereto, any and all vacancies in the Board of Directors, however occurring, including, without limitation, by reason of an increase in size of the Board of Directors, or the death, resignation, disqualification or removal of a director, shall be filled solely by the affirmative vote of a 7 majority of the remaining directors then in office, even if less than a quorum of the Board of Directors. Any director appointed in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been duly elected and qualified or until his or her earlier resignation or removal. Subject to the rights, if any, of the holders of any series of preferred stock to elect directors, when the number of directors is increased or decreased, the Board of Directors shall determine the class or classes to which the increased or decreased number of directors shall be apportioned; provided, however, that no decrease in the number of directors shall shorten the term of any incumbent director. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board of Directors until the vacancy is filled. SECTION 5. Removal. Directors may be removed from office in the manner provided in the Certificate. SECTION 6. Resignation. A director may resign at any time by giving written notice to the Chairman of the Board, if one is elected, the President or the Secretary. A resignation shall be effective upon receipt, unless the resignation otherwise provides. SECTION 7. Regular Meetings. The regular annual meeting of the Board of Directors shall be held, without notice other than this Section 7, on the same date and at the same place as the Annual Meeting following the close of such meeting of stockholders. Other regular meetings of the Board of Directors may be held at such hour, date and place as the Board of Directors may by resolution from time to time determine without notice other than such resolution. SECTION 8. Special Meetings. Special meetings of the Board of Directors may be called, orally or in writing, by or at the request of a majority of the directors, the Chairman of the Board, if one is elected, or the President. The person calling any such special meeting of the Board of Directors may fix the hour, date and place thereof. SECTION 9. Notice of Meetings. Notice of the hour, date and place of all special meetings of the Board of Directors shall be given to each director by the Secretary or an Assistant Secretary, or in case of the death, absence, incapacity or refusal of such persons, by the Chairman of the Board, if one is elected, or the President or such other officer designated by the Chairman of the Board, if one is elected, or the President. Notice of any special meeting of the Board of Directors shall be given to each director in person, by telephone, or by facsimile, telex, telecopy, telegram, or other written form of electronic communication, sent to his or her business or home address, at least 24 hours in advance of the meeting, or by written notice mailed to his or her business or home address, at least 48 hours in advance of the meeting. Such notice shall be deemed to be delivered when hand delivered to such address, read to such director by telephone, deposited in the mail so addressed, with postage thereon 8 prepaid if mailed, dispatched or transmitted if faxed, telexed or telecopied, or when delivered to the telegraph company if sent by telegram. When any Board of Directors meeting, either regular or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the hour, date or place of any meeting adjourned for less than 30 days or of the business to be transacted thereat, other than an announcement at the meeting at which such adjournment is taken of the hour, date and place to which the meeting is adjourned. A written waiver of notice signed before or after a meeting by a director and filed with the records of the meeting shall be deemed to be equivalent to notice of the meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because such meeting is not lawfully called or convened. Except as otherwise required by law, by the Certificate or by these By-laws, neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. SECTION 10. Quorum. At any meeting of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business, but if less than a quorum is present at a meeting, a majority of the directors present may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice, except as provided in Section 9 of this Article II. Any business which might have been transacted at the meeting as originally noticed may be transacted at such adjourned meeting at which a quorum is present. SECTION 11. Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, a majority of the directors present may take any action on behalf of the Board of Directors, unless otherwise required by law, by the Certificate or by these By-laws. SECTION 12. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing. Such written consent shall be filed with the records of the meetings of the Board of Directors and shall be treated for all purposes as a vote at a meeting of the Board of Directors. SECTION 13. Manner of Participation. Directors may participate in meetings of the Board of Directors by means of conference telephone or similar communications equipment by means of which all directors participating in the meeting can hear each other, and participation in a meeting in accordance herewith shall constitute presence in person at such meeting for purposes of these By-laws. 9 SECTION 14. Committees. The Board of Directors, by vote of a majority of the directors then in office, may elect from its number one or more committees, including, without limitation, an Executive Committee, a Compensation Committee, a Stock Option Committee and an Audit Committee, and may delegate thereto some or all of its powers except those which by law, by the Certificate or by these By-laws may not be delegated. Except as the Board of Directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Board of Directors or in such rules, its business shall be conducted so far as possible in the same manner as is provided by these By-laws for the Board of Directors. All members of such committees shall hold such offices at the pleasure of the Board of Directors. The Board of Directors may abolish any such committee at any time. Any committee to which the Board of Directors delegates any of its powers or duties shall keep records of its meetings and shall report its action to the Board of Directors. The Board of Directors shall have power to rescind any action of any committee, to the extent permitted by law, but no such rescission shall have retroactive effect. SECTION 15. Compensation of Directors. Directors shall receive such compensation for their services as shall be determined by a majority of the Board of Directors provided that directors who are serving the Corporation as employees and who receive compensation for their services as such, shall not receive any salary or other compensation for their services as directors of the Corporation. ARTICLE III ----------- Officers -------- SECTION 1. Enumeration. The officers of the Corporation shall consist of a President, a Treasurer, a Secretary and such other officers, including, without limitation, a Chairman of the Board of Directors, a Chief Executive Officer and one or more Vice Presidents (including Executive Vice Presidents or Senior Vice Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries, as the Board of Directors may determine. SECTION 2. Election. At the regular annual meeting of the Board of Directors following the Annual Meeting, the Board of Directors shall elect the President, the Treasurer and the Secretary. Other officers may be elected by the Board of Directors at such regular annual meeting of the Board of Directors or at any other regular or special meeting. SECTION 3. Qualification. No officer need be a stockholder or a director. Any person may occupy more than one office of the Corporation at any time. Any officer may be required by the Board of Directors to give bond for the faithful performance of his or her duties in such amount and with such sureties as the Board of Directors may determine. 10 SECTION 4. Tenure. Except as otherwise provided by the Certificate or by these By-laws, each of the officers of the Corporation shall hold office until the regular annual meeting of the Board of Directors following the next Annual Meeting and until his or her successor is elected and qualified or until his or her earlier resignation or removal. SECTION 5. Resignation. Any officer may resign by delivering his or her written resignation to the Corporation addressed to the President or the Secretary, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. SECTION 6. Removal. Except as otherwise provided by law, the Board of Directors may remove any officer with or without cause by the affirmative vote of a majority of the Directors then in office. SECTION 7. Absence or Disability. In the event of the absence or disability of any officer, the Board of Directors may designate another officer to act temporarily in place of such absent or disabled officer. SECTION 8. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors. SECTION 9. President. The President shall, subject to the direction of the Board of Directors, have general supervision and control of the Corporation's business. If there is no Chairman of the Board or if he or she is absent, the President shall preside, when present, at all meetings of stockholders and of the Board of Directors. The President shall have such other powers and perform such other duties as the Board of Directors may from time to time designate. SECTION 10. Chairman of the Board. The Chairman of the Board, if one is elected, shall preside, when present, at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board shall have such other powers and shall perform such other duties as the Board of Directors may from time to time designate. SECTION 11. Chief Executive Officer. The Chief Executive Officer, if one is elected, shall have such powers and shall perform such duties as the Board of Directors may from time to time designate. SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice President (including any Executive Vice President or Senior Vice President) and any Assistant Vice President shall have such powers and shall perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate. 11 SECTION 13. Treasurer and Assistant Treasurers. The Treasurer shall, subject to the direction of the Board of Directors and except as the Board of Directors or the Chief Executive Officer may otherwise provide, have general charge of the financial affairs of the Corporation and shall cause to be kept accurate books of account. The Treasurer shall have custody of all funds, securities, and valuable documents of the Corporation. He or she shall have such other duties and powers as may be designated from time to time by the Board of Directors or the Chief Executive Officer. Any Assistant Treasurer shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate. SECTION 14. Secretary and Assistant Secretaries. The Secretary shall record all the proceedings of the meetings of the stockholders and the Board of Directors (including committees of the Board) in books kept for that purpose. In his or her absence from any such meeting, a temporary secretary chosen at the meeting shall record the proceedings thereof. The Secretary shall have charge of the stock ledger (which may, however, be kept by any transfer or other agent of the Corporation). The Secretary shall have custody of the seal of the Corporation, and the Secretary, or an Assistant Secretary, shall have authority to affix it to any instrument requiring it, and, when so affixed, the seal may be attested by his or her signature or that of an Assistant Secretary. The Secretary shall have such other duties and powers as may be designated from time to time by the Board of Directors or the Chief Executive Officer. In the absence of the Secretary, any Assistant Secretary may perform his or her duties and responsibilities. Any Assistant Secretary shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate. SECTION 15. Other Powers and Duties. Subject to these By-laws and to such limitations as the Board of Directors may from time to time prescribe, the officers of the Corporation shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be conferred by the Board of Directors or the Chief Executive Officer. ARTICLE IV ---------- Capital Stock ------------- SECTION 1. Certificates of Stock. Each stockholder shall be entitled to a certificate of the capital stock of the Corporation in such form as may from time to time be prescribed by the Board of Directors. Such certificate shall be signed by the Chairman of the Board of Directors, the President or a Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. The Corporation seal and the signatures by the 12 Corporation's officers, the transfer agent or the registrar may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the time of its issue. Every certificate for shares of stock which are subject to any restriction on transfer and every certificate issued when the Corporation is authorized to issue more than one class or series of stock shall contain such legend with respect thereto as is required by law. SECTION 2. Transfers. Subject to any restrictions on transfer and unless otherwise provided by the Board of Directors, shares of stock may be transferred only on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate theretofore properly endorsed or accompanied by a written assignment or power of attorney properly executed, with transfer stamps (if necessary) affixed, and with such proof of the authenticity of signature as the Corporation or its transfer agent may reasonably require. SECTION 3. Record Holders. Except as may otherwise be required by law, by the Certificate or by these By-laws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the Corporation in accordance with the requirements of these By-laws. It shall be the duty of each stockholder to notify the Corporation of his or her post office address and any changes thereto. SECTION 4. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date: (a) in the case of determination of stockholders entitled to vote at any meeting of stockholders, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting and (b) in the case of any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held and (ii) 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. 13 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 --------------- SECTION 1. Definitions. For purposes of this Article: ----------- (a) "Director" means any person who serves or has served the Corporation as a director on the Board of Directors of the Corporation; (b) "Officer" means any person who serves or has served the Corporation as an officer appointed by the Board of Directors of the Corporation; (c) "Non-Officer Employee" means any person who serves or has served as an employee of the Corporation, but who is not or was not a Director or Officer; (d) "Proceeding" means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, inquiry, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative, arbitrative or investigative; (e) "Expenses" means all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of expert witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), travel expenses, duplicating costs, printing and binding costs, costs of preparation of demonstrative evidence and other courtroom presentation aids and devices, costs incurred in connection with document review, organization, imaging and computerization, telephone charges, postage, delivery service fees, and all other disbursements, costs or expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, settling or otherwise participating in, a Proceeding; (f) "Corporate Status" describes the status of a person who (i) in the case of a Director, is or was a director of the Corporation and is or was acting in such capacity, (ii) in the case of an Officer, is or was an officer, employee, trustee or agent of the Corporation or is or was a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such Officer is or was serving at the request of the Corporation, and (iii) in the case of a Non-Officer Employee, is or was an employee of the Corporation or is or was a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such Non-Officer Employee is or was serving at the request of the Corporation. For purposes of 14 subsection (ii) of this Section 1(f), an officer or director of the Corporation who is serving as a director, partner, trustee, officer, employee or agent of a Subsidiary shall be deemed to be serving at the request of the Corporation; (g) "Disinterested Director" means, with respect to each Proceeding in respect of which indemnification is sought hereunder, a Director of the Corporation who is not and was not a party to such Proceeding; and (h) "Subsidiary" shall mean any corporation, partnership, limited liability company, joint venture, trust or other entity of which the Corporation owns (either directly or through or together with another Subsidiary of the Corporation) either (i) a general partner, managing member or other similar interest or (ii) (A) 50% or more of the voting power of the voting capital equity interests of such corporation, partnership, limited liability company, joint venture or other entity, or (B) 50% or more of the outstanding voting capital stock or other voting equity interests of such corporation, partnership, limited liability company, joint venture or other entity. SECTION 2. Indemnification of Directors and Officers. Subject to the operation of Section 4 of this Article V, each Director and Officer shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment) against any and all Expenses, judgments, penalties, fines and amounts reasonably paid in settlement that are incurred by such Director or Officer or on such Director's or Officer's behalf in connection with any threatened, pending or completed Proceeding or any claim, issue or matter therein, which such Director or Officer is, or is threatened to be made, a party to or participant in by reason of such Director's or Officer's Corporate Status, if such Director or Officer acted in good faith and in a manner such Director or Officer reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The rights of indemnification provided by this Section 2 shall continue as to a Director or Officer after he or she has ceased to be a Director or Officer and shall inure to the benefit of his or her heirs, executors, administrators and personal representatives. Notwithstanding the foregoing, the Corporation shall indemnify any Director or Officer seeking indemnification in connection with a Proceeding initiated by such Director or Officer only if such Proceeding was authorized by the Board of Directors of the Corporation, unless such Proceeding was brought to enforce an Officer or Director's rights to Indemnification under these by-laws. SECTION 3. Indemnification of Non-Officer Employees. Subject to the operation of Section 4 of this Article V, each Non-Officer Employee may, in the discretion of the Board of Directors of the Corporation, be indemnified by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against any or all Expenses, 15 judgments, penalties, fines and amounts reasonably paid in settlement that are incurred by such Non-Officer Employee or on such Non-Officer Employee's behalf in connection with any threatened, pending or completed Proceeding, or any claim, issue or matter therein, which such Non-Officer Employee is, or is threatened to be made, a party to or participant in by reason of such Non-Officer Employee's Corporate Status, if such Non-Officer Employee acted in good faith and in a manner such Non-Officer Employee reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The rights of indemnification provided by this Section 3 shall exist as to a Non-Officer Employee after he or she has ceased to be a Non-Officer Employee and shall inure to the benefit of his or her heirs, personal representatives, executors and administrators. Notwithstanding the foregoing, the Corporation may indemnify any Non-Officer Employee seeking indemnification in connection with a Proceeding initiated by such Non-Officer Employee only if such Proceeding was authorized by the Board of Directors of the Corporation. SECTION 4. Good Faith. Unless ordered by a court, no indemnification shall be provided pursuant to this Article V to a Director, to an Officer or to a Non-Officer Employee unless a determination shall have been made that such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal Proceeding, such person had no reasonable cause to believe his or her conduct was unlawful. Such determination shall be made by (a) a majority vote of the Disinterested Directors, even though less than a quorum of the Board of Directors, (b) a committee comprised of Disinterested Directors, such committee having been designated by a majority vote of the Disinterested Directors (even though less than a quorum), (c) if there are no such Disinterested Directors, or if a majority of Disinterested Directors so directs, by independent legal counsel in a written opinion, or (d) by the stockholders of the Corporation. SECTION 5. Advancement of Expenses to Directors Prior to Final Disposition. The Corporation shall advance all Expenses incurred by or on behalf of any Director in connection with any Proceeding in which such Director is involved by reason of such Director's Corporate Status within ten (10) days after the receipt by the Corporation of a written statement from such Director requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Director and shall be preceded or accompanied by an undertaking by or on behalf of such Director to repay any Expenses so advanced if it shall ultimately be determined that such Director is not entitled to be indemnified against such Expenses. SECTION 6. Advancement of Expenses to Officers and Non-Officer Employees Prior to Final Disposition. 16 (a) Advancement to Officers. The Corporation may, at the discretion of the Board of Directors of the Corporation, advance any or all Expenses incurred by or on behalf of any Officer in connection with any Proceeding in which such is involved by reason of such Officer's Corporate Status upon the receipt by the Corporation of a statement or statements from such Officer requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Officer and shall be preceded or accompanied by an undertaking by or on behalf of such to repay any Expenses so advanced if it shall ultimately be determined that such Officer is not entitled to be indemnified against such Expenses. (b) Advancement to Non-Officer Employees. The Corporation may, at the discretion of the Board of Directors or of any Officer who is authorized to act on behalf of the Corporation, advance any or all Expenses incurred by or on behalf of any Non-Officer Employee in connection with any Proceeding in which such Non-Officer Employee is involved by reason of such Non-Officer Employee's Corporate Status upon the receipt by the Corporation of a statement or statements from such Non-Officer Employee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Non-Officer Employee and shall be preceded or accompanied by an undertaking by or on behalf of such Non-Officer Employee to repay any Expenses so advanced if it shall ultimately be determined that such Non-Officer Employee is not entitled to be indemnified against such Expenses. SECTION 7. Contractual Nature of Rights. The foregoing provisions of this Article V shall be deemed to be a contract between the Corporation and each Director and Officer entitled to the benefits hereof at any time while this Article V is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any Proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts. If a claim for indemnification or advancement of Expenses hereunder by a Director or Officer is not paid in full by the Corporation within (a) 60 days after receipt by the Corporation's of a written claim for indemnification, or (b) in the case of a Director, 10 days after receipt by the Corporation of documentation of Expenses and the required undertaking, such Director or Officer may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, such Director or Officer shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of such indemnification or, in the case of a Director, advancement of Expenses, under this Article V shall not be a defense to the action and shall not create a presumption that such indemnification or advancement is not permissible. SECTION 8. Non-Exclusivity of Rights. The rights to indemnification and advancement of Expenses set forth in this Article V shall not be exclusive of any other right 17 which any Director, Officer, or Non-Officer Employee may have or hereafter acquire under any statute, provision of the Certificate or these By- laws, agreement, vote of stockholders or Disinterested Directors or otherwise. SECTION 9. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, Officer or Non-Officer Employee against any liability of any character asserted against or incurred by the Corporation or any such Director, Officer or Non-Officer Employee, or arising out of any such person's Corporate Status, whether or not the Corporation would have the power to indemnify such person against such liability under the DGCL or the provisions of this Article V. ARTICLE VI ---------- Miscellaneous Provisions ------------------------ SECTION 1. Fiscal Year. Except as otherwise determined by the Board of Directors, the fiscal year of the Corporation shall end on the last day of December of each year. SECTION 2. Seal. The Board of Directors shall have power to adopt and alter the seal of the Corporation. SECTION 3. Execution of Instruments. All deeds, leases, transfers, contracts, bonds, notes and other obligations to be entered into by the Corporation in the ordinary course of its business without director action may be executed on behalf of the Corporation by the Chairman of the Board, if one is elected, the President or the Treasurer or any other officer, employee or agent of the Corporation as the Board of Directors or Executive Committee may authorize. SECTION 4. Voting of Securities. Unless the Board of Directors otherwise provides, the Chairman of the Board, if one is elected, the President or the Treasurer may waive notice of and act on behalf of this Corporation, or appoint another person or persons to act as proxy or attorney in fact for this Corporation with or without discretionary power and/or power of substitution, at any meeting of stockholders or shareholders of any other corporation or organization, any of whose securities are held by this Corporation. SECTION 5. Resident Agent. The Board of Directors may appoint a resident agent upon whom legal process may be served in any action or proceeding against the Corporation. SECTION 6. Corporate Records. The original or attested copies of the Certificate, By-laws and records of all meetings of the incorporators, stockholders and the Board of Directors and the stock transfer books, which shall contain the names of all stockholders, their record addresses and the amount of stock held by each, may be kept outside the State of Delaware and shall be kept at the principal office of the Corporation, at the office of its counsel or at an office of its 18 transfer agent or at such other place or places as may be designated from time to time by the Board of Directors. SECTION 7. Certificate. All references in these By-laws to the Certificate shall be deemed to refer to the Amended and Restated Certificate of Incorporation of the Corporation, as amended and in effect from time to time. SECTION 8. Amendment of By-laws. (a) Amendment by Directors. Except as provided otherwise by law, these By- laws may be amended or repealed by the Board of Directors by the affirmative vote of a majority of the Directors then in office. (b) Amendment by Stockholders. These By-laws may be amended or repealed at any Annual Meeting, or special meeting of stockholders called for such purpose, by the affirmative vote of at least two-thirds of the shares present in person or represented by proxy at such meeting and entitled to vote on such amendment or repeal, voting together as a single class; provided, however, that if the Board of Directors recommends that stockholders approve such amendment or repeal at such meeting of stockholders, such amendment or repeal shall only require the affirmative vote of the majority of the shares present in person or represented by proxy at such meeting and entitled to vote on such amendment or repeal, voting together as a single class. Notwithstanding the foregoing, stockholder approval shall not be required unless mandated by the Certificate, these By- laws, or other applicable law. Adopted August 16, 1999 and effective as of August 16, 1999. 19 EX-10.36 4 REGISTRATION RIGHTS AGREEMENT Exhibit 10.36 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is entered into as of November 3, 1999 by and among Plug Power Inc., a Delaware corporation (the "Company"), and each of the parties executing a signature page hereto (each a "Holder" and collectively the "Holders"). WHEREAS, the Holders are the owners of the number of shares of the common stock, par value $.01 per share, of the Company (the "Common Stock") set forth opposite their respective names on Exhibit A attached hereto (collectively, the "Shares"). NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Definitions. As used in this Agreement, the following terms have the following meanings: "Commission" means the Securities and Exchange Commission. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute, and the rules and regulations of the Commission promulgated thereunder. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and by all other amendments and supplements to the prospectus, including post- effective amendments, and in each case including all material incorporated by reference or deemed to be incorporated by reference in such prospectus. "Registrable Securities" means the Shares and any shares of Common Stock issued or issuable with respect to the Shares by reason of a stock dividend or stock split, recapitalization or similar transaction, but excludes (i) Shares the sale of which is covered by a Registration Statement that has been declared effective under the Securities Act, (ii) Shares eligible for sale by a Holder pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the Securities Act, including a sale pursuant to the provisions of Rule 144(k), but only if all of the Registrable Securities held by such Holder can be sold without any volume limitations, and (iii) Shares sold pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the Securities Act, including a sale pursuant to the provisions of Rule 144(k). "Registration Statement" means any registration statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor statute, and the rules and regulations of the Commission promulgated thereunder. 1 Section 2. Piggyback Registration (a) If at any time or times after the date hereof while any Registrable Securities are outstanding the Company proposes to register under the Securities Act any shares of Common Stock (other than (i) a registration on Form S-8 or any successor form or in connection with any employee or director welfare, benefit or compensation plan, (ii) a registration on Form S-4 or any successor form or in connection with an exchange offer, (iii) a registration in connection with a securities or rights offering exclusively to the Company's security holders, (iv) a registration in connection with an offering solely to employees of the Company or its affiliates, (v) a registration relating to a transaction pursuant to Rule 145 or any other similar rule of the Commission under the Securities Act or (vi) a shelf registration), then the Company will give written notice of such proposed registration to the Holders at least twenty (20) days before the filing of any Registration Statement with respect thereto. If within ten (10) days after such notice is given, the Company receives a written request from any Holder for the inclusion in such Registration Statement of some or all of the Registrable Securities held by such Holder (which request will specify the number of Registrable Securities intended to be disposed of by such Holder and the intended method of distribution therefore), the Company will (subject to the provisions of paragraphs (b) and (c) of this Section 2) include such Registrable Securities in such Registration Statement. The Company may withdraw a Registration Statement filed under this Section 2 at any time prior to the time it becomes effective, provided that the Company will give prompt notice of such withdrawal to the Holders which requested to be included in such Registration Statement. Each Holder shall have the right to request inclusion of such Holder's Registrable Securities in up to three Registration Statements pursuant to this Section 2(a). The rights of the Holders under this Section 2(a) will terminate on the date on which the third Registration Statement to which such rights apply is declared effective by the Commission. (b) In connection with any registration under this Section 2 involving an underwriting (an "Underwritten Offering"), the Company will not be required to include a Holder's Registrable Securities in such Underwritten Offering unless such Holder accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by the Company. If the managing underwriter(s) of an Underwritten Offering advises the Company that the number of securities to be sold in such Underwritten Offering, including by Persons other than the Company (including the Holders) (collectively, the "Selling Stockholders"), is greater than the number which can be offered without adversely affecting such Underwritten Offering, including, without limitation, the price range or probability of success of such Underwritten Offering, then the Company will include in such Underwritten Offering in the following priority: (i) first, all shares the Company proposes to sell and (ii) second, that number of shares of Common Stock proposed to be sold by (A) the Selling Stockholders (including Registrable Securities proposed to be sold by the Holders) and (B) any holders of Common Stock exercising piggyback registration rights under the Registration Rights Agreement dated as of November 3, 1999 between the Company and GE On-Site Power, Inc. which, in the opinion of such managing underwriter(s), can be sold without adversely affecting such Underwritten Offering, including, without limitation, the price range or probability of success of such Underwritten Offering, which shares shall be allocated among the Selling Stockholders (including the Holders requesting registration) and such other holders on a pro rata basis according to the relationship that the number of shares requested to be included by each Selling Stockholder (including the Registrable Securities requested to be included in each Holder) and each such other holder in such Underwritten Offering bears to the total number of shares requested to be registered by all Selling Stockholders (including the total number of Registrable Securities requested to be registered by all Holders) and such other holders. (c) Each Holder hereby agrees that such Holder may not participate in any Underwritten Offering unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in the underwriting arrangements applicable to such Underwritten Offering and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of the underwriting arrangements for such Underwritten Offering. 2 Section 3. Registration Procedures. (a) The Company will notify each Holder whose Registrable Securities are included in a Registration Statement of the effectiveness of such Registration Statement and will furnish to each such Holder, without charge, such number of conformed copies of such Registration Statement and any post-effective amendment thereto and such number of copies of the Prospectus (including each preliminary Prospectus) and any amendments or supplements thereto, as such Holder may reasonably request in order to facilitate the sale of such Holder's Registrable Securities. (b) The Company will promptly notify each Holder requesting registration of, and confirm in writing, any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus related threreto or for additional information. In addition, the Company will promptly notify each such Holder of, and confirm in writing, the filing of the Registration Statement, any Prospectus supplement related thereto or any post-effective amendment to the Registration Statement and the effectiveness of any post- effective amendment. (c) The Company will use commercially reasonable efforts to register or qualify the Registrable Securities covered by any Registration Statement under such other securities or "blue sky" laws of such states of the United States as any Holder requesting registration reasonably requests; provided, however, that the Company will not be required (i) to qualify as a foreign corporation to do business in any jurisdiction in which it is not then qualified, (ii) to file any general consent to service of process, or (iii) to subject itself to taxation in any jurisdiction where it would not otherwise be subject to taxation. (d) At any time when a Prospectus relating to the Registration Statement is required to be delivered under the Securities Act, the Company will promptly notify each Holder holding Registrable Securities covered by such Registration Statement of the happening of any event as a result of which the Prospectus included in the Registration Statement includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. In such event, the Company will promptly prepare and file with the Commission and furnish to each such Holder a reasonable number of copies of a supplement or amendment to such Prospectus so that, as thereafter deliverable to the purchasers of Registrable Securities, such Prospectus will not contain any untrue statements of a material fact of omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Section 4. Registration Expenses. The Company will bear all expenses incurred in connection with the registration of the Registrable Securities pursuant to Section 2 of this Agreement; provided, however, that the Holders will be responsible and will pay for (i) any brokerage or underwriting discounts and commissions and taxes of any kind (including, without limitation, transfer taxes) with respect to any disposition, sale or transfer of Registrable Securities, (ii) any fees or expenses of any counsel, accountants or other persons retained or employed by the Holders and (iii) out-of-pocket expenses of the Holders and their agents, including, without limitation, any travel costs. 3 Section 5. Indemnification and Contribution. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless, to the full extent permitted by law, each Holder, its officers, directors, employees and agents and each Person, if any, which controls such Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, (Collectively, "Controlling Persons"), from and against all losses, claims, damages, liabilities and expenses (including without limitation any legal or other fees and expenses reasonably incurred by any Holder or any such Controlling Person in connection with defending or investigating any action or claim in respect thereof) (collectively, "Damages") to which any of them may become subject under the Securities Act or otherwise, insofar as such Damages arise out of or are based upon (i) any untrue or alleged untrue statement of material fact contained in any Registration Statement (including any related preliminary or final Prospectus) pursuant to which Registrable Securities of such Holder were registered under the Securities Act, (ii) any omission or alleged omission to state therein a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (ii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, "Violations"), except insofar as and to the extent that such Violation arose out of or was based upon information regarding such Holder or its plan of distribution which was furnished to the Company by such Holder for use therin, provided, further that the Company will not be liable to any person who participates as an underwriter in the offering or sale of Registrable Securities or any Controlling person of such underwriter, in any such case to the extent that any such Damages arise out of or are based upon (A) an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement (including any related preliminary or final Prospectus) in reliance upon and in conformity with information furnished to the Company for use in connection with the Registration Statement or the Prospectus contained therein by such underwriter or Controlling Person or (B) the failure of such underwriter or Controlling Person to send or give a copy of the final Prospectus furnished to it by the Company at or prior to the time such action is required by the Securities Act to the person claiming an untrue statement or alleged untrue statement or omission or alleged omission if such statement or omission was corrected in such final prospectus. The obligations of the Company under this Section 5(a) shall survive the completion of any offering of Registrable Securities pursuant to Registration Statement under this Agreement or otherwise and shall survive the termination of this Agreement. (b) Indemnification by the Holders. Each Holder agrees to indemnify and hold harmless, to the full extent permitted by law, the Company, its directors, officers, employees and agents and each Controlling Person of the Company, from and against any and all Damages to which any of them may become subject under the Securities Act or otherwise to the extent such Damages arise out of or are based upon any Violation, in each case to the extent that such Violation occurs as a result of (i) any untrue statement or alleged untrue statement of material fact contained in any Registration Statement (including any related preliminary or final Prospectus), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, no misleading, if and to the extent that such statement or omission arose out of or was based upon information regarding such Holder or its plan of distribution which was furnished to the Company by such Holder for use therein, or (ii) the failure by such Holder to deliver or cause to be delivered to any purchaser of the shares covered by the Registration Statement the Prospectus contained in the Registration Statement (as amended or supplemented, if applicable) furnished by the Company to such Holder. Notwithstanding the foregoing, (A) in no event will a Holder have any obligation under this Section 5(b) for amounts the Company pays in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld) and (B) the total amount for which a Holder shall be liable under this Section 5(b) shall not in any event exceed the aggregate net proceeds received by such Holder from the sale of the Holder's Registrable Securities in such registration. The obligations of the Holders under this Section 5(b) shall survive the completion of any offering of Registrable Securities pursuant to a Registration Statement under this Agreement or otherwise and shall survive the termination of this Agreement. 4 (c) Contribution. To the extent that the indemnification provided for in paragraph (a) or (b) of this Section 5 is held by a court of competent jurisdiction to be unavailable to an indemnified party in respect of any Damages, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, will contribute to the amount paid or payable by such indemnified party as a result of such Damages (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand, and each Holder on the other, from the offering of the Registrable Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Holders, on the other, in connection with the statements or omissions which resulted in such Damages, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Holders on the other hand will be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that in no event shall the obligation of any indemnifying party to contribute under this Section 5(c) exceed the amount that such indemnifying party would have been obligated to pay by way of indemnification if the indemnification provided for under paragraph (a) or (b) of this Section 5 had been available under the circumstances. If indemnification is available under paragraph (a) or (b) of this Section 5, the indemnifying parties will indemnify each indemnified party to the full extent provided in such paragraphs without regard to the relative benefits to or relative fault of said indemnifying party or indemnified party to any other equitable consideration provided of in this Section 5(c) The Company and each Holder agrees that it would not be just or equitable if contribution pursuant to this Section 5(c) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to herein. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation. (d) Notice. Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action (including any governmental action), such indemnified party shall, if a claim in respect thereof is to made against any indemnifying party under this Section 5, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the indemnified party, as the case may be; provided however, that an indemnified party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the indemnified party and the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The Company shall pay reasonable fees for only one separate legal counsel for the Holders. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the indemnified party under this Section 5, except to the extent that the indemnifying party is prejudiced in its ability to defend such action. 5 Section 6. Market Stand-off. Each Holder whose Registrable Securities are covered by a Registration Statement filed pursuant to Section 2 hereof agrees, if requested by the Company in the case of a nonunderwritten offering (a "Nonunderwritten Offering" and, together with an Underwritten Offering, an "Offering") or if requested by the managing underwriter(s) in an Underwritten Offering, not to effect any public sale or distribution of any of any securities of the Company of any class included in such Offering, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act (except as part of such Offering), during the 15-day period prior to, and during the 180-day period (or such longer period as may be required by the managing underwriter(s)) beginning on, the date of pricing of each Offering, to the extent timely notified in writing by the Company or the managing underwriter(s). Section 7. Covenants of Holders. Each Holder will (a) furnish to the Company such information regarding such Holder and such Holder's intended method of distribution of the Registrable Securities as the Company may from time to time reasonably request in writing in order to comply with the Securities Act and the provisions of this Agreement, (b) to the extent required by the Securities Act, deliver or cause delivery of the Prospectus contained in the Registration Statement to any purchaser of such Holder's Registrable Securities covered by the Registration Statement, (c) promptly notify the Company of any sale of Registrable Securities by such Holder and (d) notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by the Holder to the Company or of the occurrence of any event, in either case as a result of which any Prospectus contains or would contain an untrue statement of a material fact regarding the Holder or the Holder's intended method of distribution of the Registrable Securities or omits or would omit to state any material fact regarding the Holder or the Holder's intended method of distribution of the Registrable Securities required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly furnish to the Company any additional information required to correct and update any previously furnished information or required so that the Prospectus will not contain, with respect to the Holder or the Holder's intended method of distribution of the Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Section 8. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement, including this Section 8(a), may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof will not be effective, unless the Company has obtained the written consent of the Holders of a majority in interest of the Registrable Securities then outstanding; provided, however, that any such amendment, modification, supplement or waiver which materially adversely affects the rights of any Holder shall require the prior written consent of such Holder. (b) Notices. Except as set forth below, all notices and other communications provided for or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or sent by facsimile, registered or certified mail (return receipt requested), postage prepaid or courier or overnight delivery service to the Company at the following address and to each Holder at the address set forth below such Holder's signature to this Agreement (or at such other address for any party as shall be specified by like notice, provided that notices of a change of address shall be effective only upon receipt thereof), and further provided that in case of directions to amend the Registration Statement pursuant to Section 7, a Holder must confirm such notice in writing by overnight express delivery with confirmation of receipt; If to the Company:Plug Power Inc. 968 Albany-Shaker Road Latham, New York 12110 Attention: General Counsel Facsimile No.: 518-782-7914 6 In addition to the manner of notice permitted above, notices given pursuant to Sections 1 and 6 hereof may be effected telephonically and confirmed in writing thereafter in the manner described above. (c) Successors and Assigns. This Agreement will inure to the benefit of and be binding upon the successors of each of the parties. No Holder may assign any of its rights hereunder without the prior written consent of the Company and any attempted assignment by any Holder without such consent will be void of no effect and will terminate all obligations of the Company hereunder with respect to such Holder. (d) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed will be deemed to be an original and all of which taken together will constitute one and the same agreement. (e) Headings. The headings in this Agreement are for convenience of reference only and will not limit or otherwise affect the meaning hereof. (f) Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of law. (g) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein will not be in any way impaired thereby, it being intended that all of the rights and privileges of the Holders will be enforceable to the fullest extent permitted by law. (h) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and is intended to be the complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter, including such agreements and understandings contained in the Limited Liability Company Agreement of Plug Power, LLC dated as of June 27, 1997, as amended to date. (i) Rule 144. The Company will file with the Commission in a timely manner all reports and other documents required under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for purposes of meeting the public information provisions of Rule 144. [Remainder of Page Intentionally Left Blank] 7 IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly executed as of the date first set forth above. PLUG POWER INC. /s/ Gary Mittleman ------------------------------------- Gary Mittleman President and Chief Executive Officer 8 Registration Rights Agreement Holder Signature Page EDISON DEVELOPMENT CORPORATION /s/ Larry G. Garberding ------------------------------------- Name: Larry G. Garberding Title: Address for Notice: 2000 Second Avenue ------------------------------------- Detroit, MI ------------------------------------- 48226 ------------------------------------- MECHANICAL TECHNOLOGY INCORPORATED /s/ Cynthia A. Schever ------------------------------------- Name: Cynthia A. Schever Title: Address for Notice: 325 Washington Avenue Extension ------------------------------------- Albany, NY ------------------------------------- 12205 ------------------------------------- /s/ Michael J. Cudahy ------------------------------------- Michael J. Cudahy Address for Notice: 10850 West Park Place ------------------------------------- Suite 980 ------------------------------------- Milwaukee, WI 53224 ------------------------------------- 9 ANTAEUS ENTERPRISES, INC. /s/ John B. Beinecke ------------------------------------- Name: John B. Beinecke Title: Address for Notice: 99 Park Avenue ------------------------------------- Suite 2200 ------------------------------------- New York, NY 10016 ------------------------------------- ANTAEUS RETIREMENT BENEFITS PLAN /s/ John B. Beinecke ------------------------------------- Name: John B. Beinecke Title: Address for Notice: 99 Park Avenue ------------------------------------- Suite 2200 ------------------------------------- New York, NY 10016 ------------------------------------- /s/ Jeffrey L. Lindsay ------------------------------------- Jeffrey L. Lindsay Address for Notice: 5024 N. Hollywood Avenue ------------------------------------- Whitefish Bay, WI ------------------------------------- 53217 ------------------------------------- 10 RENEE M. LINDSAY 1999 GIFT TRUST /s/ Jeffrey L. Lindsay ------------------------------------- Michael Lindsay ________________________ , as Trustee Address for Notice: 5024 N. Hollywood Avenue ------------------------------------- Whitefish Bay, WI ------------------------------------- 53217 ------------------------------------- DAWN T. LINDSAY 1999 GIFT TRUST /s/ Jeffrey L. Lindsay ------------------------------------- Michael Lindsay ________________________ , as Trustee Title: Address for Notice: 5024 N. Hollywood Avenue ------------------------------------- Whitefish Bay, WI ------------------------------------- 53217 ------------------------------------- SOUTHERN CALIFORNIA GAS COMPANY /s/ Lee M. Stewart ------------------------------------- Address for Notice: c/o Sempra Energy ------------------------------------- 101 Ash Street ------------------------------------- San Diego, CA 92101 ------------------------------------- 11 EXHIBIT A
Number of Holder Shares - ------ ---------- Edison Development Corporation....................................... 13,704,315 Mechanical Technology Incorporated................................... 13,704,315 Michael J. Cudahy.................................................... 1,840,000 Southern California Gas Company...................................... 1,350,000 Antaeus Enterprises, Inc............................................. 296,850 Antaeus Retirement Benefits Plan..................................... 3,000 Jeffrey L. Lindsay................................................... 30,000 Renee M. Lindsay 1999 Gift Trust..................................... 15,000 Dawn T. Lindsay 1999 Gift Trust...................................... 15,000
12 EX-10.37 5 REGISTRATION RIGHTS AGREEMENT PLUG POWER + GEOSP EXHIBIT 10.37 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of November 3, 1999 between Plug Power Inc., a Delaware corporation ("Plug Power"), and GE On-Site Power, Inc., a Delaware corporation ("GEOSP"). WHEREAS: As of the date hereof and immediately prior to the closing of Plug Power's initial public offering, Plug Power, LLC, a Delaware limited liability company ("LLC"), merged with and into Plug Power and all of LLC's outstanding Class A membership interests were converted on a one-for-one basis into shares of common stock, par value $.01 per share, of Plug Power ("Common Stock"); GEOSP currently owns an aggregate of 5,250,000 shares of Common Stock (the "Shares"); To induce GEOSP to execute and deliver the agreement dated as of August 27, 1999 by and among GEOSP, LLC, GE Power Systems business of General Electric Company and GE Fuel Cell Systems, L.L.C., Plug Power has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "1933 Act"), and applicable state securities laws; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Plug Power and GEOSP hereby agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Cutback Registration" means any Demand Registration or Piggyback Registration to be effected as an underwritten offering in which the managing underwriter(s) with respect thereto advises that a limit be placed on the number of shares of Registrable Securities which may be included in such registration because, in such underwriter(s)' judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution. "Investor" means GEOSP and any transferee or assignee thereof who agrees to become bound by the provisions of this Agreement in accordance with Section 9 hereof. "Investor Registration Rights Agreement" means the Registration Rights Agreement dated as of November 3, 1999 by and among Plug Power, Edison Development Corporation, Mechanical Technology Incorporated, Michael J. Cudahy, Southern California Gas Company, Anteaus Enterprises, Inc., Anteaus Retirement Benefits Plan, Jeffrey L. Lindsay, Renee M. Lindsay 1999 Gift Trust and Dawn T. Lindsay 1999 Gift Trust. "register," "registered," and "registration" refer to a registration effected by preparing and filing a Registration Statement or Registration Statements in compliance with the 1933 Act and the declaration or ordering of effectiveness of such Registration Statement by the United States Securities and Exchange Commission (the "SEC"). "Registration Period" means, with regard to any Investor and the shares of Registrable Securities then held by such Investor, that period beginning on November 3, 2001 and ending on the date on which such shares of Registrable Securities may be publicly sold (without restriction as to the number of shares that may be sold) pursuant to Rule 144 of the SEC under the 1933 Act. It is understood and agreed that the termination of the Registration Period applicable to one or more Investors shall not necessarily result in the termination of the Registration Period applicable to other Investors. 1 "Registrable Securities" means (A) the Shares and (B) any Common Stock issued or issuable with respect to Registrable Securities by reason of a stock dividend or stock split or in connection with a confirmation of shares, recapitalization, merger, consolidation or other reorganization. "Registration Statement" means a registration statement of Plug Power under the 1933 Act. 2. Registration. a. Demand Registration. (i) If, on any one occasion during the Registration Period, either (A) Investors holding at least 50% of the Registrable Securities then outstanding or (B) GEOSP, propose to dispose of all or part of their shares of the Registrable Securities, then such Investors or GESOP may request Plug Power in writing to effect such registration under the 1933 Act, stating the number of shares of Registrable Securities to be disposed of and the intended method(s) of disposition of such shares. Holders of Registrable Securities which request registration pursuant to this Section 2(a)(i) are referred to herein as the "Initiating Holders". In the event that a Demand Registration becomes a Cutback Registration, each Investor and GEOSP shall be permitted to withdraw all, but not less than all, of their respective shares of Registrable Securities from the Registration Statement relating to such Demand Registration by giving written notice to Plug Power at least 5 days before the expected effective date of such Registration Statement. In the event that each Investor and GEOSP withdraws all of its shares of Registrable Securities from a Demand Registration pursuant to the preceding sentence such that no shares of Registrable Securities are included in such Demand Registration, such Demand Registration shall not count as the one Demand Registration to which the Investors and GEOSP are entitled under this Section 2(a) (but shall count as the first and only Demand Registration for which Plug Power is to bear expenses pursuant to Section 5 hereof) and such parties shall continue to be entitled to request one Demand Registration pursuant to this Section 2(a). (ii) Upon receipt of a request pursuant to Section 2(a)(i) above, Plug Power shall give prompt written notice thereof to all other Investors who hold Registrable Securities. Upon receipt of such request, Plug Power shall use its best efforts to promptly effect the registration under the 1933 Act of all shares of Registrable Securities specified in the requests of the Initiating Holders and the written requests (stating the number of shares of Registrable Securities to be disposed of and the intended method of disposition of such shares) of other holders of shares of Registrable Securities given within 20 days after receipt of such notice from Plug Power, all to the extent requisite to permit the disposition (in accordance with the intended methods of disposition) of the Registrable Securities to be registered; provided that in no event will Plug Power be obligated to (A) register a number of shares of Registrable Securities pursuant to this Section 2(a) in excess of (x) 3,000,000 (as appropriately adjusted for stock splits, stock dividends, mergers, recapitalizations and similar transactions) less (y) the aggregate number of shares of Registrable Securities included in Registration Statements pursuant to Section 2(c) below (the "Registration Limit") or (B) effect more than one registration pursuant to this Section 2(a). In the event that the aggregate number of shares of Registrable Securities for which registration is requested in accordance with this Section 2(a) exceeds the Registration Limit, such aggregate number will be reduced to the Registration Limit and will be allocated among the holders requesting registration on a pro rata basis in proportion to the number of Registrable Securities requested to be registered by such holders. (iii) Notwithstanding the foregoing, Plug Power may postpone taking action with respect to a Demand Registration for a reasonable period of time after receipt of the request (not exceeding 60 days) if, in the good faith opinion of Plug Power's Board of Directors, effecting the registration would adversely affect a material financing, acquisition, disposition of assets or stock, merger or other comparable transaction or would require Plug Power to make public disclosure of information the public disclosure of which would have a material adverse effect upon Plug Power; provided that Plug Power shall not delay such action pursuant to this sentence more than twice in any twelve (12) month period. The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided to and approved by GEOSP and its counsel prior to its filing or other submission, such approval not to be unreasonably withheld. 2 b. Underwritten Offering. If any offering pursuant to a Registration Statement pursuant to Section 2(a) hereof involves an underwritten offering, GEOSP shall have the right to select one legal counsel and an investment banker or bankers and manager or managers to administer its interest in the offering, which investment banker or bankers or manager or managers shall be reasonably satisfactory to Plug Power. c. Piggy-Back Registrations. If at any time after the date hereof and prior to the expiration of the Registration Period Plug Power proposes to file with the SEC a Registration Statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities (other than on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans) Plug Power shall send to GEOSP written notice of such proposed filing and, if within twenty (20) days after receipt of such notice, GEOSP shall so request in writing, Plug Power shall include in such Registration Statement all or any part of the Registrable Securities GEOSP requests to be registered, except that if any underwritten public offering for the account of Plug Power is a Cutback Registration, then Plug Power shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which GEOSP has requested inclusion hereunder; provided, that no portion of the equity securities which Plug Power is offering for its own account shall be excluded. Any exclusion of Registrable Securities shall be made pro rata among the Investors seeking to include Registrable Securities, in proportion to the number of Registrable Securities sought to be included by such Investors; provided, however, that Plug Power shall not exclude any Registrable Securities unless Plug Power has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities; and provided, further, however, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the right hereunder or under the Investor Registration Rights Agreement to include such securities in the Registration Statement. No right to registration of Registrable Securities under this Section 2(c) shall be construed to limit any registration required under Section 2(a) hereof. The obligations of Plug Power under this Section 2(c) may be waived by GEOSP. If an offering in connection with which GEOSP is entitled to registration under this Section 2(c) is an underwritten offering, then GEOSP shall, unless otherwise agreed by Plug Power, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same terms and conditions as other shares of Common Stock included in such underwritten offering. GEOSP and each Investor shall have the right to request inclusion of their Registrable Securities in up to three Registration Statements (excluding for purposes of determining such number of Registration Statements any Disqualified Registration Statement (as defined below)) pursuant to this Section 2(c). The rights of GEOSP and each other holder of Registrable Securities under this Section 2(c) will terminate on the date on which the third Registration Statement (excluding any Disqualified Registration Statement) to which such rights apply has been declared effective by the SEC. The term "Disqualified Registration Statement" means any Registration Statement with respect to which Registrable Securities are requested to be included pursuant to this Section 2(c) where the aggregate number of shares of Registrable Securities actually included in such Registration Statement is reduced pursuant to a Cutback Registration to a number of shares which is less than the lower of (x) 750,000 or (y) 80% of the aggregate number of shares of Registrable Securities requested to be included in such Registration Statement. d. Eligibility for Form S-3. Plug Power shall file all reports required to be filed by Plug Power with the SEC in a timely manner so as to establish eligibility for the use of Form S-3. In the event that Form S-3 is not available for sale by GEOSP of the Registrable Securities, Plug Power shall register the sale on another appropriate form reasonably acceptable to GEOSP. e. Cutback Registration. (i) If a Demand Registration becomes a Cutback Registration, Plug Power will include in any such registration to the extent of the number which the managing underwriter of such offering advises Plug Power can be sold in such offering (i) first, Registrable Securities requested to be included in such registration by 3 GEOSP and (ii) second, other securities of Plug Power proposed to be included in such registration, allocated among the holders thereof in accordance with the priorities then existing among Plug Power and the holders of such other securities; and any securities so excluded shall be withdrawn from and shall not be included in such Demand Registration. (ii) If a Piggyback Registration becomes a Cutback Registration, Plug Power will include in such registration to the extent of the amount of the securities which the managing underwriter advises Plug Power can be sold in such offering: (A) if such registration as initially proposed by Plug Power was solely a primary registration of its securities, (x) first, the securities proposed by Plug Power to be sold for its own account, (y) second, any Registrable Securities requested to be included in such registration by GEOSP and any other securities of Plug Power proposed to be included in such registration by the holders thereof pursuant to the Investor Registration Rights Agreement, allocated among GEOSP and such holders on a pro rata basis in proportion to the number of Registrable Securities requested to be registered by each, and (z) third, any other securities of Plug Power proposed to be included in such registration, allocated among the holders thereof in accordance with the priorities then existing among Plug Power and such holders; and (B) if such registration as initially proposed by Plug Power was in whole or in part requested by holders of securities of Plug Power, other than holders of Registrable Securities in their capacities as such, pursuant to a Demand Registration, (x) first, such securities held by the holders initiating such registration and, if applicable, any securities proposed by Plug Power to be sold for its own account, allocated in accordance with the priorities then existing among Plug Power any such holders, (y) second, any Registrable Securities requested to be included in such registration by GEOSP and any other securities of Plug Power proposed to be included in such registration by the holders thereof pursuant to the Investor Registration Rights Agreement, allocated among GEOSP and such holders on a pro rata basis in proportion to the number of Registrable Securities requested to be registered by each, and (z) third, any other securities of Plug Power proposed to be included in such registration, allocated among the holders thereof in accordance with the priorities then existing among Plug Power and such holders; and any securities so excluded shall be withdrawn from and shall not be included in such Piggyback Registration. 3. Obligations of the Company. In connection with the registration of the Registrable Securities, Plug Power shall have the following obligations: a. Plug Power shall prepare promptly, and file with the SEC as required by Section 2(a), a Registration Statement with respect to the number of Registrable Securities specified as provided in Section 2(a), and thereafter shall use its best efforts to cause such Registration Statement relating to Registrable Securities to become effective as soon as possible after such filing, and keep the Registration Statement effective at all times until the earlier of (i) which is 180 days after the effective date of the Registration Statement, or (ii) the date on which all Investors with Registrable Securities included in the Registration Statement have sold such Registrable Securities, which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. Each Investor shall give notice to Plug Power when it has sold all of its Registrable Securities. b. Plug Power shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective for as long as such Registration Statement is required to remain effective pursuant to this Agreement and, during such period, comply with the 4 provisions of the 1933 Act with respect to the disposition of all Registrable Securities of Plug Power covered by the Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in the Registration Statement. c. Plug Power shall furnish to GEOSP and its legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by Plug Power, one copy of the Registration Statement and any amendment thereto, each preliminary prospectus and prospectus and each amendment or supplement thereto, and (ii) such number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as GEOSP may reasonably request in order to facilitate the disposition of the Registrable Securities owned by GEOSP. d. In the case of the Registration Statement referred to in Section 2(a), Plug Power shall furnish to the counsel of GEOSP each letter written by or on behalf of Plug Power to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which Plug Power has sought confidential treatment). e. Plug Power shall use reasonable efforts to (i) register and qualify the Registrable Securities covered by the Registration Statement under such other securities or "blue sky" laws of such jurisdictions in the United States as GEOSP reasonably requests (or obtain exemption therefrom), (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the period in which Plug Power is required to keep the Registration Statement effective (iii) take such other actions as may be necessary to maintain such registrations and qualifications (or obtain exemptions therefrom) in effect at all times during the period in which Plug Power is required to keep the Registration Statement effective, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that Plug Power shall not be required in connection therewith or as a condition thereto to (a) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (b) subject itself to general taxation in any such jurisdiction, or (c) file a general consent to service of process in any such jurisdiction. f. In the event GEOSP selects underwriters for the offering, Plug Power shall enter into and perform its obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the underwriters of such offering. Plug Power shall not be required to provide such Underwriter with rights of first refusal with respect to any subsequent offerings, including debt and equity financing, or any requirements with respect to mergers, acquisitions or other business combinations. g. As promptly as practicable after becoming aware of such event, Plug Power shall notify GEOSP of the happening of any event, of which Plug Power has knowledge, as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and shall promptly (under the circumstances) prepare a supplement or amendment to the Registration Statement to correct such untrue statement or omission, and deliver such number of copies of such supplement or amendment to GEOSP as it may reasonably request. h. Plug Power shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, and, if such an order is issued, shall use its best efforts to obtain the withdrawal of such order at the earliest possible moment and to notify GEOSP (or, in the event of an underwritten offering, the managing underwriters) of the issuance of such order and the resolution thereof. 5 i. Plug Power shall permit a single firm of counsel, designated as selling stockholders' counsel by GEOSP, to review the Registration Statement and all amendments and supplements thereto a reasonable period of time prior to their filing with the SEC, and not file any document in a form to which such counsel reasonably objects. j. Plug Power shall make generally available to its security holders as soon as practicable, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of Plug Power's fiscal quarter next following the effective date of the Registration Statement, which requirement will be deemed to be satisfied if Plug Power timely files complete and accurate information on Forms 10-Q, 10-K and 8-K under the 1934 Act. k. At the request of GEOSP, Plug Power shall furnish, on the date that Registrable Securities are delivered to an underwriter, if any, for sale in connection with the Registration Statement (i) if required by an underwriter, a "comfort" letter, dated such date, from Plug Power's independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, and (ii) an opinion, dated as of such date, from counsel representing Plug Power for purposes of such Registration Statement and the underwriting agreement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the underwriters and GEOSP. l. Plug Power shall make available for inspection by (i) GEOSP, (ii) any underwriter participating in any disposition pursuant to the Registration Statement, (iii) one firm of attorneys and one firm of accountants or other agents retained by GEOSP, and (iv) one firm of attorneys retained by all such underwriters (collectively, the "Inspectors") all pertinent financial and other records, and pertinent corporate documents and properties of Plug Power (collectively, the "Records"), as shall be reasonably deemed necessary by each Inspector to enable each Inspector to exercise its due diligence responsibility, and cause Plug Power's officers, directors and employees to supply all information which any Inspector may reasonably request for purposes of such due diligence; provided, however, that each Inspector shall hold in confidence and shall not make any disclosure (except to GEOSP and to other Inspectors) of any Record or other information which Plug Power determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement, (b) the release of such Records is ordered pursuant to a subpoena or other order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement. Plug Power shall not be required to disclose any confidential information in such Records to any Inspector until and unless such Inspector shall have entered into confidentiality agreements (in form and substance satisfactory to Plug Power) with Plug Power with respect thereto, substantially in the form of this Section 3(l). GEOSP agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to Plug Power and allow Plug Power, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. m. Plug Power shall hold in confidence and not make any disclosure of information concerning GEOSP provided to Plug Power unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement. Plug Power agrees that it shall, upon learning that disclosure of such information concerning GEOSP is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to GEOSP and allow GEOSP, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. 6 n. Plug Power shall either (i) cause all the Registrable Securities covered by the Registration Statement to be listed on the New York Stock Exchange or the American Stock Exchange and on each additional national securities exchange on which securities of the same class or series issued by Plug Power are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange and Plug Power meets the objective listing criteria of such exchange, or (ii) secure designation and quotation of all the Registrable Securities covered by the Registration Statement on the Nasdaq National Market or Nasdaq SmallCap Market, if the designation and quotation of such Registrable Securities is then permitted under the rules of the Nasdaq National Market or Nasdaq SmallCap Market, as the case may be, and Plug Power meets the objective listing criteria of the Nasdaq National Market or Nasdaq SmallCap Market, as the case may be. o. Plug Power shall provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities, and shall provide CUSIP numbers for the Registrable Securities, not later than the effective date of the Registration Statement. p. Plug Power shall cooperate with GEOSP and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the managing underwriter or underwriters, if any, or GEOSP may reasonably request and registered in such names as the managing underwriter or underwriters, if any, or GEOSP may request. No later than the effective date of any Registration Statement registering the resale of Registrable Securities, Plug Power shall deliver to its transfer agent instructions, accompanied by any reasonably required opinion of counsel, that permit sales of legended securities in a timely fashion that complies with then mandated securities settlement procedures for regular way market transactions. q. Plug Power shall take all other reasonable actions necessary to expedite and facilitate disposition by GEOSP of Registrable Securities pursuant to the Registration Statement. 4. Obligations of Geosp. In connection with the registration of the Registrable Securities, GEOSP shall have the following obligations: a. It shall be a condition precedent to the obligations of Plug Power to complete the registration pursuant to this Agreement and to make payments under Section 2(c) hereof with respect to the Registrable Securities of GEOSP that GEOSP shall furnish to Plug Power such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as Plug Power may reasonably request. At least five (5) days prior to the first anticipated filing date of the Registration Statement, Plug Power shall notify GEOSP in writing of the information Plug Power requires from GEOSP if it elects to have any of its Registrable Securities included in the Registration Statement. GEOSP agrees to notify Plug Power as promptly as practicable of any inaccuracy or change in information previously furnished by GEOSP to Plug Power or of the occurrence of any event in either case as a result of which any prospectus relating to the registration contains or would contain an untrue statement of a material fact regarding GEOSP or GEOSP's intended method of distribution of the Registrable Securities or omits or would omit to state any material fact regarding GEOSP or GEOSP's intended method of distribution of the Registrable Securities required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly to furnish to Plug Power any additional information required to correct and update any previously furnished information or required so that the prospectus shall not contain, with respect to GEOSP or the distribution of the Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. b. GEOSP by its acceptance of the Registrable Securities agrees to cooperate with Plug Power as reasonably requested by Plug Power in connection with the preparation and filing of the Registration Statement 7 hereunder, unless GEOSP has notified Plug Power in writing of its election to exclude all of its Registrable Securities from the Registration Statement. c. In the event GEOSP determines to engage the services of an underwriter, GEOSP agrees to enter into and perform its obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the managing underwriter of such offering and take such other actions as are reasonably required in order to expedite or facilitate the disposition of the Registrable Securities, unless GEOSP has notified Plug Power in writing of GEOSP's election to exclude all of its Registrable Securities from the Registration Statement. d. GEOSP agrees that, upon receipt of any notice from Plug Power of the happening of any event of the kind described in Section 3(g) or 3(h), GEOSP will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until GEOSP's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(g) or 3(h) and, if so directed by Plug Power, GEOSP shall deliver to Plug Power (at the expense of Plug Power) or destroy (and deliver to Plug Power a certificate of destruction) all copies in GEOSP's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. e. An Investor may not participate in any underwritten registration hereunder unless such Investor (i) agrees to sell its Registrable Securities on the basis provided in any underwriting arrangements approved by such Investor, (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, and (iii) agrees to pay its pro rata share of all underwriting discounts and commissions. 5. Expenses of Registration. All reasonable expenses (other than underwriting fees, discounts, selling concessions and commissions) incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, the fees and disbursements of counsel for Plug Power, the fees and disbursements of one counsel for GEOSP, and the costs incident to an underwritten offering shall be borne by Plug Power, subject to Section 3(f) hereof. 6. Indemnification. In the event any Registrable Securities are included in a Registration Statement under this Agreement: a. To the extent permitted by law, Plug Power will indemnify, hold harmless and defend (i) each Investor who has Registrable Securities included in the Registration Statement, (ii) the directors, officers and each person who controls such Investor within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"), if any, and (iii) any underwriter (as defined in the 1933 Act) for such Investor; and the directors, officers and each person who controls any such underwriter within the meaning of the 1933 Act or the 1934 Act, if any, (each, an "Indemnified Person"), against any losses, claims, damages, liabilities or expenses (joint or several) (collectively, "Claims") to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or the omission or alleged omission to state a material fact therein required to be stated or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if Plug Power files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, or (iii) any violation or alleged violation by Plug Power of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the 8 offer or sale of the Registrable Securities pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject to the restrictions set forth in Section 6(d) with respect to the number of legal counsel, Plug Power shall reimburse GEOSP and each such underwriter or controlling person, promptly as such expenses are incurred and are due and payable, for any legal fees or other expenses reasonably incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to Plug Power by any Indemnified Person or underwriter for such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available to GEOSP by Plug Power pursuant to Section 3(c) hereof; (ii) with respect to any preliminary prospectus, shall not inure to the benefit of any such person from whom the person asserting any such Claim purchased the Registrable Securities that are the subject thereof (or to the benefit of any person controlling such person) if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected in the prospectus, as then amended or supplemented, if such prospectus was timely made available by Plug Power pursuant to Section 3(c) hereof; (iii) shall not be available to the extent such Claim is based on a failure of GEOSP to deliver or to cause to be delivered the prospectus made available by Plug Power; and (iv) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of Plug Power, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by GEOSP pursuant to Section 9. b. In connection with any Registration Statement in which an Investor is participating, such Investor, severally and not jointly, agrees to indemnify, hold harmless and defend, to the same extent and in the same manner set forth in Section 6(a), Plug Power, each of its directors, each of its officers who signs the Registration Statement, each person, if any, who controls Plug Power within the meaning of the 1933 Act or the 1934 Act, any underwriter and any other stockholder selling securities pursuant to the Registration Statement or any of its directors or officers or any person who controls such stockholder or underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and together with an indemnified Person, an "Indemnified Party"), against any Claim to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out of or is based upon any Violation, in each case to the extent (and only to the extent) that such violation occurs in reliance upon and in conformity with written information furnished to Plug Power by such Investor expressly for use in connection with such Registration Statement; and such Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld; provided, further, however, that such Investor shall be liable under this Section 6(b) for only that amount of a Claim as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by such Investor pursuant to Section 9. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any preliminary prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented. c. Plug Power shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in any distribution, to the same extent as provided above, with respect to information such persons so furnished in writing by such persons expressly for inclusion in the Registration Statement. d. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action (including any governmental action), such Indemnified Person or Indemnified 9 Party shall, if a Claim in respect thereof is to made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. Plug Power shall pay reasonable fees for only one separate legal counsel for GEOSP, and such legal counsel shall be selected by GEOSP; provided, that legal fees of such firm shall be reasonable. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable. 7. Contribution. To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6, (ii) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of such fraudulent misrepresentation, and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities. 8. Reports under the 1934 Act. With a view to making available to holders of Registrable Securities the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit GEOSP to sell securities of Plug Power to the public without registration ("Rule 144"), Plug Power agrees to: a. make and keep public information available, as those terms are understood and defined in Rule 144; b. file with the SEC in a timely manner all reports and other documents required of Plug Power under the 1933 Act and the 1934 Act so long as Plug Power remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and c. furnish to GEOSP so long as it owns Registrable Securities, promptly upon request, (i) a written statement by Plug Power as to whether it has complied with the current public information and reporting requirements of Rule 144, the 1933 Act and the 1934 Act and (ii) such other information as may be reasonably requested to permit GEOSP to sell such securities pursuant to Rule 144 without registration. 9. Assignment of Registration Rights. The rights to have Plug Power register Registrable Securities pursuant to this Agreement shall be automatically assignable by GEOSP to any transferee of all or any portion of Registrable Securities if: (i) GEOSP agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to Plug Power within a reasonable time after such assignment, (ii) Plug Power is, promptly following such 10 transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act and applicable state securities laws, (iv) at or before the time Plug Power receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with Plug Power to be bound by all of the obligations of GEOSP contained herein, and (v) in the event the assignment occurs subsequent to the date of effectiveness of the Registration Statement required to be filed pursuant to Section 2(a)(i), the transferee agrees to pay all reasonable expenses of amending or supplementing such Registration Statement to reflect such assignment. Until the requirements of this Section 9 have been satisfied with respect to any transfer or assignment, such transfer or assignment, as the case may be, will not be effective and the proposed transferee or assignee will not be entitled to any benefits of or rights under this Agreement. 10. Amendment of Registration Rights. Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of Plug Power and GEOSP. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon GEOSP and Plug Power. 11. Miscellaneous. a. A person or entity is deemed to be a holder of Registrable Securities whenever such person or entity owns of record such Registrable Securities. If Plug Power receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, Plug Power shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities. b. Notices. Any notices required or permitted to be given under the terms of this Agreement shall be in writing and shall be deemed given (a) when delivered personally, (b) five days after deposit, postage prepaid, if mailed by registered or certified mail, return receipt requested, or (c) upon transmission if transmitted by telex or facsimile (with an electronic confirmation thereof to the transmitter). The addresses for such communications shall be: If to Plug Power: Plug Power Inc. 968 Albany-Shaker Road Latham, New York 12110 Attn: Mr. Gary Mittleman Goodwin, Procter & Hoar LLP Exchange Place Telecopy: (518) 782-7884 Boston, Massachusetts 02109 Attn: Robert P. Whalen, Jr., P.C. Telecopy: (617) 523-1231 With a copy to: If to GEOSP: GE On-Site Power, Inc. 968 Albany-Shaker Road, Building 1 Latham, New York 12110 Attn: Mr. Barry Glickman Telecopy: (518) 785-2831 With a copy to: Long Aldridge & Norman LLP One Peachtree Center, Suite 5300 Atlanta, Georgia 30308 Jonathan H. Short, Esq. Telecopy: (404) 527-4198
11 Each party shall provide notice to the other party of any change in address. c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. d. This Agreement shall be enforced, governed by and construed in accordance with the laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof. e. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof. f. Subject to the requirements of Section 9 hereof, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. g. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. h. This Agreement may be executed in two or more identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. PLUG POWER INC. By: /s/ Gary Mittleman ------------------------------------- Gary Mittleman President and Chief Executive Officer GE ON-SITE POWER, INC. By: /s/ Barry Glickman ------------------------------------- Name: Barry Glickman ------------------------------------- Its: President ------------------------------------- 12 EX-21.1 6 SCHEDULE OF SUBSIDIARIES Exhibit 21.1 Schedule of Subsidiaries As of December 31, 1999 Name State of Incorporation Plug Power Holding Inc. Delaware EX-23.1 7 CONSENT OF PRICEWATERHOUSECOOPERS LLP. Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-90275 and No. 333-90277) of Plug Power, Inc. of our report dated February 8, 2000 relating to the financial statements, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP Albany, New York March 29, 2000 EX-27.1 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLUG POWER'S BALANCE SHEETS AND STATEMENTS OF OPERATIONS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 171,496,286 0 5,212,943 0 304,711 177,413,320 25,110,262 (1,776,471) 216,125,635 8,201,797 0 0 0 430,155 200,976,379 216,125,635 0 11,000,344 0 15,497,837 28,782,233 0 189,586 (33,469,312) 0 (33,469,312) 0 0 0 (33,469,312) (1.27) (1.27)
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